GRUPO ELEKTRA, S.A.B. DE C.V.

Transcription

1 OFFERING CIRCULAR GRUPO ELEKTRA, S.A.B. DE C.V. Medium-Term Note Programme Due from 360 Days to 10 Years from the Date of Issue We may from time to time issue medium-term notes (the "Notes") under the programme (the "Programme") described in this offering circular (the "Offering Circular"). All Notes having the same interest payment dates, issue price and maturity date, bearing interest at the same rate and the terms of which are otherwise identical constitute a "Series." The Notes will have the following characteristics: The Notes may be issued in any currency. The Notes will have maturities of not less than 360 days nor more than 10 years. The maximum principal amount of all Notes from time to time outstanding under the Programme will not exceed $250,000,000 (or its equivalent in other currencies calculate ed as described in the Programme Agreement (as defined below)). The Notes may be issued at their nominal amount or at a premium over or discount to their nominal amount and/or may bear interest at a fixed rate or floating rate. The Notes will be issued in either registered or bearer form. The Notes will be fully, unconditionally and jointly and severally guaranteed by certain of our existing and future subsidiaries (the "Guarantors" and each a "Guarantor") ). See "Summary Guarantors" and "Terms and Conditions." The Notes may be issued as unsecured Notes or as secured Notes. Any terms and conditions that differ from those contained herein which are applicable to a particular Series of Notes, including the interest rate, if any, applicable to such Series, will be set forth in a pricing supplement relating to such Series (a "Pricing Supplement"). The applicable Pricing Supplement relating to a particular Series of Notes may specify other terms and conditions which shall, to the extent so specified, replace or modify the terms and conditions set forth in this Offering Circular with respect to such Series of Notes. Notes issued under the Programme may at any time, but are not required to, be listed on one or more stock exchanges. Application has been made for this Offering Circular to be approved by the Irish Stock Exchange. We may apply for any Series of Notes to be issued under the Programme to be admitted to the Official List of the Irish Stock Exchange and trading on its Global Exchange Market, as set forth in the applicable Pricing Supplement. This Offering Circular constitutes "Base Listing Particulars" for the purpose of any such listing and trading. THE NOTES HAVE NOT BEEN AND WILL NOT BE REGISTERED WITH THE REGISTRO NACIONAL DE VALORES (THE "NATIONAL SECURITIES REGISTRY") MAINTAINED BY THE COMISION NACIONAL BANCARIA Y DE VALORES (THE NATIONAL BANKING AND SECURITIES COMMISSION, OR "CNBV"), AND MAY NOT BE OFFERED OR SOLD PUBLICLY, OR OTHERWISE BE THE SUBJECT OF BROKERAGE ACTIVITIES, IN MEXICO, EXCEPT PURSUANT TO A PRIVATE PLACEMENT EXEMPTION SET FORTH UNDER ARTICLE 8 OF THE LEY DEL MERCADO DE VALORES, AS AMENDED (THE "MEXICAN SECURITIES MARKET LAW," OR "LMV"). AS REQUIRED UNDER THE LMV, WE WILL NOTIFY THE CNBV OF THE ISSUANCE OF THE NOTES INCLUDING THE PRINCIPAL CHARACTERISTICS OF THE NOTES AND THE OFFERING OF THE NOTES OUTSIDE OF MEXICO. SUCH NOTICE WILL BE DELIVERED TO THE CNBV TO COMPLY WITH A LEGAL REQUIREMENT AND FOR INFORMATION PURPOSES ONLY, AND THE DELIVERY TO AND THE RECEIPT BY THE CNBV OF SUCH NOTICE, DOES NOT CONSTITUTE OR IMPLY ANY CERTIFICATION AS TO THE INVESTMENT QUALITY OF THE NOTES, THE SOLVENCY, LIQUIDITY OR CREDIT QUALITY OF THE ISSUER OR THE GUARANTORS OR THE ACCURACY OR COMPLETENESS OF THE INFORMATION PROVIDED IN THIS OFFERING CIRCULAR. THE INFORMATION CONTAINED IN THIS OFFERING CIRCULAR IS EXCLUSIVELY THE RESPONSIBILITY OF THE ISSUER AND THE GUARANTORS AND HAS NOT BEEN REVIEWED OR AUTHORIZED BY THE CNBV. IN MAKING AN INVESTMENT DECISION, ALL INVESTORS, INCLUDING ANY MEXICAN INVESTORS WHO MAY ACQUIRE NOTES FROM TIME TO TIME, MUST RELY ON THEIR OWN REVIEW AND EXAMINATION OF THE ISSUER AND THE GUARANTORS. The Notes have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the "Securities Act"). The Notes may not be offered or sold within the United States or to U.S. persons, except to qualified institutional buyers in reliance on the exemption from registration provided by Rule 144A under the Securities Act and to certain non-u.s. persons in offshore transactions in reliance on Regulation S under the Securities Act. Prospective purchasers that are qualified institutional buyers are hereby notified that the seller may be relying on the exemption from the provisions of Section 5 of the Securities Act provided by Rule 144A. For a description of certain restrictions on transfers of the Notes, see "Selling Restrictions." Arranger and Dealer The date of this Offering Circular is March 12, 2013

2 TABLE OF CONTENTS IMPORTANT NOTICE...1 DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS...3 PRESENTATION OF CERTAIN FINANCIAL AND OTHER INFORMATION...4 SUMMARY OF THE PROGRAMME...6 FORM OF PRICING SUPPLEMENT...9 SUMMARY...12 SUMMARY FINANCIAL INFORMATION...21 RISK FACTORS...28 USE OF PROCEEDS...48 EXCHANGE RATES...49 SELECTED FINANCIAL INFORMATION...50 OPERATING AND FINANCIAL REVIEW...56 OUR BUSINESS...67 DIRECTORS AND SENIOR MANAGEMENT PRINCIPAL SHAREHOLDERS RELATED PARTY TRANSACTIONS TERMS AND CONDITIONS SELLING RESTRICTIONS TAXATION SUBSCRIPTION AND SALE AVAILABLE INFORMATION LISTING AND GENERAL INFORMATION SUMMARY OF CERTAIN DIFFERENCES BETWEEN MFRS AND U.S. GAAP/IFRS INDEX TO CONSOLIDATED FINANCIAL STATEMENTS... F-1 Page

3 IMPORTANT NOTICE In this Offering Circular, unless otherwise specified or the context otherwise requires, all references to "Grupo Elektra," the "Company," the "Issuer," "we," "us," "our" and words of similar import mean Grupo Elektra, S.A.B. de C.V. together with its consolidated subsidiaries. The information contained in this Offering Circular relating to the Issuer, the Guarantors and their subsidiaries and affiliates has been obtained from the Issuer and the Guarantors, which have confirmed to the Dealers (as defined herein) that this Offering Circular does not contain any untrue statement of a material fact or omits to state any material fact necessary to make the statements herein, in the light of the circumstances under which they are made, not misleading. None of the Dealers or the Trustee has independently verified the information contained herein. Accordingly, no representation, warranty or undertaking, express or implied, is made and no responsibility or liability is accepted by the Dealers or the Trustee as to the accuracy or completeness of this Offering Circular or any supplement hereto. The Issuer has appointed Banco Espírito Santo de Investimento, S.A., Sucursal en España ("Espirito Santo Investment Bank") as dealer for the Notes issued under the Programme (Espirito Santo Investment Bank, together with any other dealer at any time appointed by the Issuer as dealer for Notes issued under the Programme, the "Dealers"), and has authorized and requested the Dealers to circulate this Offering Circular in connection therewith. This Offering Circular is not intended to provide the basis of any credit, taxation, legal, investment or other evaluation and should not be considered as a recommendation by the Issuer, any of the Guarantors or any of the Dealers that any recipient of this Offering Circular should purchase any of the Notes. Each recipient contemplating the purchase of any of the Notes is advised to consult its own tax adviser, attorney and business adviser as to tax, legal, business and related matters concerning the purchase of Notes and to make, and shall be deemed to have made, its own independent investigation in relation to the Programme, the Notes and the financial condition and affairs of, and its own appraisal of the creditworthiness of, the Issuer and each of the Guarantors. None of the Issuer, any of the Guarantors, the Trustee or any of the Dealers makes any comment about the treatment for taxation purposes of payments or receipts in respect of the Notes to or by a holder of Notes or the legality of the purchase of Notes by an investor under applicable investment or similar laws. None of the Dealers or the Trustee accepts any responsibility, express or implied, for updating this Offering Circular. Neither the delivery of this Offering Circular by any Dealer nor the offering, sale or delivery of any Notes shall, in any circumstances, create any implication that the information contained herein is true subsequent to the date hereof or the date upon which this Offering Circular has been most recently amended or supplemented or that there has been no adverse change in the financial situation of the Issuer or any of the Guarantors since the date hereof or, as the case may be, the date upon which this Offering Circular has been most recently amended or supplemented or that any other information supplied in connection with the Programme is correct at any time subsequent to the date on which it is supplied or, if different, the date indicated in the document containing the same. No person has been authorized to give any information or to make any representation not contained in this Offering Circular or any supplement hereto, and if given or made, such information or representation must not be relied upon as having been authorized. This Offering Circular does not, and is not intended to, constitute or contain an offer or invitation to any person to subscribe for or purchase the Notes. This Offering Circular does not obligate the Issuer to accept any offer to subscribe for or purchase the Notes. The distribution of this Offering Circular and the offering, sale and delivery of the Notes in certain jurisdictions is restricted by law. Any persons into whose possession this Offering Circular or any Notes come are required by the Issuer, each of the Guarantors and the Dealers to inform themselves of, and to observe, any such restrictions. In particular, such persons are required to comply with the restrictions on offers or sales of Notes and on distribution of this Offering Circular and other information in relation to the Notes set out under "Selling Restrictions" below. No person or entity shall have authority to make any offer or invitation to subscribe for or purchase Notes in any jurisdiction in which such offer or invitation is not authorized. Unless otherwise noted, market data and other information used throughout this Offering Circular are based on our estimates, which are derived from our review of internal surveys and independent industry publications, government publications, and reports by market research firms or other published independent sources. Although we believe our sources, including our estimates, are reliable, we have not independently verified the information and cannot guarantee its accuracy or completeness. Any information contained in this Offering Circular that has been sourced from a third party has been accurately reproduced and as far as the Issuer or the Guarantors are aware or able to ascertain from information published by such third parties, no facts have been omitted which would render the reproduced information inaccurate or misleading. Any information that is identified with its source in this Offering Circular is third-party information. 1

4 NOTICE TO PROSPECTIVE INVESTORS IN THE EUROPEAN ECONOMIC AREA This Offering Circular has been prepared on the basis that, except to the extent sub-paragraph (ii) below may apply, any offer of Notes in any Member State of the European Economic Area which has implemented the Prospectus Directive (2003/71/EC) (each, a "Relevant Member State") will be made pursuant to an exemption under the Prospectus Directive, as implemented in that Relevant Member State, from the requirement to publish a prospectus for offers of Notes. Accordingly, any person making or intending to make an offer in that Relevant Member State of Notes which are the subject of a placement contemplated in this Offering Circular as completed by final terms in relation to the offer of those Notes may only do so (i) in circumstances in which no obligation arises for the Issuer, any Guarantor or any Dealer to publish a prospectus pursuant to Article 3 of the Prospectus Directive or supplement a prospectus pursuant to Article 16 of the Prospectus Directive, in each case, in relation to such offer, or (ii) if a prospectus for such offer has been approved by the competent authority in that Relevant Member State or, where appropriate, approved in another Relevant Member State and notified to the competent authority in that Relevant Member State and (in either case) published, all in accordance with the Prospectus Directive, provided that any such prospectus has subsequently been completed by final terms which specify that offers may be made other than pursuant to Article 3(2) of the Prospectus Directive in that Relevant Member State and such offer is made in the period beginning and ending on the dates specified for such purpose in such prospectus or final terms, as applicable. Except to the extent sub-paragraph (ii) above may apply, neither the Issuer nor any Guarantor or Dealer have authorized, nor do they authorize, the making of any offer of Notes in circumstances in which an obligation arises for the Issuer, any Guarantor or any Dealer to publish or supplement a prospectus for such offer. The summary of the Programme included under "Summary of the Programme" must be read as an introduction to this Offering Circular and any decision to invest in the Notes should be based on a consideration of the Offering Circular as a whole. Following the implementation of the relevant provisions of the Prospectus Directive (Directive 2003/71/EC) in each Member State of the European Economic Area no civil liability will attach to the Responsible Persons in any such Member State solely on the basis of such summary, including any translation thereof, unless it is misleading, inaccurate or inconsistent when read together with the other parts of this Offering Circular. Where a claim relating to the information contained in this Offering Circular is brought before a court in a Member State of the European Economic Area, the plaintiff may, under the national legislation of the Member State where the claim is brought, be required to bear the costs of translating the Offering Circular before the legal proceedings are initiated. NOTICE TO PROSPECTIVE INVESTORS IN THE UNITED KINGDOM This document is only being distributed to and is only directed at (i) persons who are outside the United Kingdom or (ii) to investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the "Order") or (iii) high net worth entities, and other persons to whom it may lawfully be communicated, falling within Article 49(2)(a) to (d) of the Order (all such persons together being referred to as "relevant persons"). The Notes are only available to, and any invitation, offer or agreement to subscribe, purchase or otherwise acquire such Notes will be engaged in only with, relevant persons. Any person who is not a relevant person should not act or rely on this document or any of its contents. NOTICE TO PROSPECTIVE INVESTORS IN MEXICO The Notes have not been and will not be registered with the National Securities Registry maintained by the CNBV, and may not be offered or sold publicly, or otherwise be the subject of brokerage activities, in Mexico, except pursuant to a private placement exemption set forth under Article 8 of LMV. As required under the LMV, we will notify the CNBV of the issuance of the Notes including the principal characteristics of the Notes and the offering of the Notes outside of Mexico. Such notice will be delivered to the CNBV to comply with a legal requirement and for information purposes only, and the delivery to and the receipt by the CNBV of such notice, does not constitute or imply any certification as to the investment quality of the Notes, our solvency, liquidity or credit quality or the accuracy or completeness of the information provided in this Offering Circular. The information contained in this Offering Circular is exclusively the responsibility of the Company and the Guarantors and has not been reviewed or authorized by the CNBV. In making an investment decision, all investors, including any Mexican investors who may acquire Notes from time to time, must rely on their own review and examination of the Company and the Guarantors. 2

5 DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS This Offering Circular includes forward-looking statements. These forward-looking statements include, without limitation, those regarding our future financial position and results of operations, our strategy, plans, objectives, goals and targets, future developments in the markets in which we participate or are seeking to participate or anticipated regulatory changes in the markets in which we operate or intend to operate. In some cases, forward-looking statements can be identified by terminology such as "aim," "anticipate," "believe," "continue," "could," "estimate," "expect," "forecast," "guidance," "intend," "may," "plan," "potential," "predict," "project," "should" or "will" or the negative of such terms or other comparable terminology. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. We caution potential investors that forwardlooking statements are not guarantees of future performance and are based on numerous assumptions and that our actual results of operations, including our financial condition and liquidity, may differ materially from (and be more negative than) those made in, or suggested by, the forward-looking statements contained in this Offering Circular. In addition, even if our results of operations, including our financial condition and liquidity and the development of the industries in which we operate, are consistent with the forward-looking statements contained in this Offering Circular, those results or developments may not be indicative of results or developments in subsequent periods. Important factors that could cause these differences include, but are not limited to: risks related to our plans and objectives for future operations and expansion or consolidation; risks related to our ability to integrate successfully operations that we may acquire or develop in the future, including the risk that any such integration could be more difficult, time-consuming or costly than expected; risks related to our competitive position; risks related to our business, strategy, expectations about growth in demand for our products and services and business operations, financial condition and results of operations; our access to funding sources, and the cost of the funding; changes in regulatory, administrative or economic conditions affecting the specialty retail, consumer financing and financial services markets; risks associated with our regulated subsidiaries, including regulatory, credit, market and any other risks related to financing activities and the consumer finance, retail banking, cash advance, insurance and pension fund markets generally; variations in loan default rates by our clients, as well as in our recording of provisions for doubtful loans; risks associated with market demand for and liquidity of the Notes; foreign currency exchange fluctuations relative to the U.S. dollar against the peso; and risks related to Mexico's social, political or economic environment. Potential investors should read the sections of this Offering Circular entitled "Risk Factors," "Operating and Financial Review" and "Our Business" for a more complete discussion of the factors that could affect our future performance and the markets in which we operate. In light of these risks, uncertainties and assumptions, the forward-looking events described in this Offering Circular may not occur. We undertake no obligation to update or revise any forward-looking statement, whether as a result of new information or future events or developments. 3

6 PRESENTATION OF CERTAIN FINANCIAL AND OTHER INFORMATION In this Offering Circular, all references to "$" and "U.S. dollars" refer to the lawful currency of the United States of America (the "United States" or the "U.S."). All references to "Ps." or "pesos" refer to the lawful currency of the United Mexican States ("Mexico"). This Offering Circular contains our audited consolidated financial statements as of and for the years ended December 31, 2011, 2010 and 2009, including the notes thereto, and our unaudited consolidated financial statements as of and for the nine months ended September 30, 2012 and Our consolidated financial statements as of and for the years ended December 31, 2011, 2010 and 2009 have been audited by our independent auditors, Castillo Miranda y Compañía, S.C. ("Castillo"). Castillo is a member of BDO International Limited and is registered with the Colegio de Contadores Públicos de México, A.C. (the Association of Public Accountants of Mexico, or "CCPM"). Our audited consolidated financial statements, which are stated in pesos, have been prepared in accordance with the Normas de Información Financiera (the Mexican Financial Reporting Standards, or "MFRS"), as issued by the Consejo Mexicano de las Normas de Información Financiera, A.C. (the Mexican Board of the Financial Reporting Standards, or "CINIF"), which differ in certain significant respects from accounting principles generally accepted in the United States ("U.S. GAAP"), and International Financing Reporting Standards ("IFRS"), as adopted by the International Accounting Standards Board (the "IASB"). Pursuant to the General Provisions Applicable to Securities Issuers and Other Participants in the Securities Market (Disposiciones de Carácter General Aplicables a las Emisoras de Valores y a Otros Participantes del Mercado de Valores), beginning with the year ending December 31, 2012, Mexican companies with securities listed on the BMV are required to prepare and present financial information in accordance with IFRS. Accordingly, our annual consolidated financial statements as of and for the year ended December 31, 2012 will be our first annual financial statements prepared in accordance with IFRS. Our transition date to IFRS is January 1, 2011, and therefore, the year ended December 31, 2011 will be the comparative period established by IFRS 1, First Time Adoption of International Financial Reporting Standards. In accordance with IFRS 1, we have applied applicable mandatory exceptions and certain optional exemptions to the retroactive application of IFRS. See Note 14 to our unaudited consolidated financial statements as of and for the nine months ended September 30, 2012 and 2011, beginning on page F-2 for further information about our transition to IFRS, including the mandatory exceptions and voluntary exemptions that we have applied. CNBV rules require that interim financial information published during the year of adoption also be presented under IFRS. Accordingly, our unaudited consolidated financial statements as of and for the nine months ended September 30, 2012 and 2011, which are stated in pesos, have been prepared in accordance with IFRS, as adopted by the IASB. See Note 14 to our unaudited consolidated financial statements as of and for the nine months ended September 30, 2012 and 2011 for a reconciliation to IFRS of our shareholders' equity as of and for the year ended December 31, 2010 and of our consolidated net income and shareholders' equity as of and for the year ended December 31, 2011 and the nine months ended September 30, Except as described above, we are not providing any reconciliation to U.S. GAAP or IFRS of our consolidated financial statements or other financial information in this Offering Circular. There is no assurance that a reconciliation would not identify material quantitative differences between our consolidated financial statements and other financial information as prepared on the basis of IFRS or U.S. GAAP and such financial statements or information prepared on the basis of U.S. GAAP or IFRS. See "Summary of Certain Differences between MFRS and U.S. GAAP/IFRS." This Offering Circular also contains audited stand-alone financial statements of our subsidiary Advance America, Cash Advance Centers, Inc. ("Advance America"), as of and for the years ended December 31, 2010 and 2011, prepared in accordance with U.S. GAAP, which are provided for information purposes only. Advance America's consolidated financial statements as of and for the years ended December 31, 2011 and 2010 have been audited by PricewaterhouseCoopers LLP. We acquired Advance America on April 23, 2012, after which Advance America's operations have been consolidated into our financial statements. Therefore, financial information derived from our unaudited consolidated financial statements as of and for the nine months ended September 30, 2012 and 2011 includes the results of operations of Advance America since April 23, U.S. dollar amounts presented in this Offering Circular have been translated from peso amounts solely for your convenience. Unless otherwise indicated, the exchange rate used in converting pesos into U.S. dollars for amounts derived from the balance sheet and cash flow statement as of and for the years ended December 31, 2011, 2010 and 2009 was determined by reference to the period end exchange rate of Ps , Ps and Ps per U.S. dollar, respectively. Unless otherwise indicated, the exchange rate used in converting pesos into U.S. dollars for amounts derived from the income statement for the years ended December 31, 2011, 2010 and 2009 was determined by reference to the average of the daily exchange rate of Ps , Ps and 4

7 Ps per U.S. dollar, respectively. Unless otherwise indicated, the exchange rate used in converting pesos into U.S. dollars for amounts derived from the balance sheet and cash flow statement as of and for the nine months ended September 30, 2012 and 2011 was determined by reference to the period end exchange rate of Ps and Ps per U.S. dollar, respectively. Unless otherwise indicated, the exchange rate used in converting pesos into U.S. dollars for amounts derived from the income statement for the nine months ended September 30, 2012 and 2011 was determined by reference to the average of the daily exchange rate of Ps and Ps per U.S. dollar, respectively. These translations should not be construed as a representation that the peso amounts represent, or have been or could be converted into, U.S. dollars at that or any other rate. The exchange rates are the exchange rates published by the Banco de México in the Official Gazette as the rate for the payment of obligations denominated in non-mexican currency payable in Mexico. For additional information see "Exchange Rates." No representation is being made that the peso or dollar amounts shown in this Offering Circular could have been or could be converted into U.S. dollars or pesos at the rates shown in this Offering Circular or at any other rate. Special Note Regarding Non-GAAP Financial Measures A body of generally accepted accounting principles is commonly referred to as "GAAP." For this purpose, a non-gaap financial measure is generally defined as one that purports to measure historical or future financial performance, financial position or cash flows, but excludes or includes amounts that would not be so adjusted in the most comparable GAAP measure. We disclose in this Offering Circular certain non-gaap financial measures, including EBITDA. In this Offering Circular we present "EBITDA" for our consolidated financial information and Advance America's stand alone financial information. EBITDA is not a recognized term or measure of financial performance under MFRS, IFRS or U.S. GAAP and does not purport to be and should not be considered as an alternative to operating income or net income, as determined on a consolidated basis in accordance with MFRS, IFRS or U.S. GAAP, as an indicator of operating performance or as net resources generated by operating activities as a measure of liquidity. EBITDA has material limitations that impair its value as a measure of our overall profitability since it does not address certain financial figures. Our calculation of EBITDA may differ from EBITDA calculated by other companies. However, we include EBITDA because we believe that it enhances the understanding of our financial performance and our ability to satisfy principal and interest obligations with respect to our indebtedness as well as to fund capital expenditures and working capital requirements. We present EBITDA in our consolidated financial statements prepared in accordance with MFRS as operating income plus depreciation and amortization. We present EBITDA in our consolidated financial statements prepared in accordance with MFRS as operating income plus (i) depreciation and amortization and (ii) other (expense) income, net. In each case, for purposes of calculating EBITDA, operating income includes net interest income of our financial institutions. EBITDA for Advance America's stand alone financial statements is presented as net income plus (i) income taxes, (ii) depreciation and amortization and (iii) interest expense, net. Our calculation of EBITDA does not include any adjustments to exclude the impact of unusual or nonrecurring events, restructuring or other one-time charges or discontinued operations. For a reconciliation of EBITDA to operating income, see "Summary Financial Information." 5

8 SUMMARY OF THE PROGRAMME The following summary of the Programme is only an introduction to this Offering Circular and any decision to invest in the Notes should be based on a consideration of the Offering Circular as a whole. 1. Issuer: Grupo Elektra, S.A.B. de C.V. 2. Description: Medium-Term Note Programme. 3. Guarantors: Certain of our existing and future subsidiaries, excluding those subsidiaries, such as Banco Azteca, which operate in the regulated industries of banking, insurance, brokerage and pension funds, and therefore are restricted by law from providing such guarantees. See "Summary Guarantors" and "Terms and Conditions." 4. Arranger: Espirito Santo Investment Bank. 5. Dealer: Espirito Santo Investment Bank. 6. Trustee and New York Paying Agent: 7. Principal Paying Agent, Calculation Agent, Registrar and Transfer Agent: 8. Irish Paying Agent and Listing Agent: The Bank of New York Mellon. The Bank of New York Mellon, London Branch. The Bank of New York Mellon SA/NV, Dublin Branch. 9. Amount of the Programme: We may issue Notes from time to time under the Programme, provided that the aggregate principal amount outstanding thereof at any time will not exceed $250,000,000 (or its equivalent in other currencies calculated as described in the programme agreement dated March 12, 2013 (such programme agreement, as amended and/or supplemented and/or restated from time to time, the "Programme Agreement"), by and among the Issuer, the Guarantors and the Dealer). The amount of the Programme may be increased from time to time. 10. Currency: Subject to any applicable or regulatory restrictions, Notes may be issued in any currency specified in the applicable Pricing Supplement (the "Specified Currency"). 11. Form and Delivery: The Notes may be issued in bearer or fully registered form as a global note, without coupons or receipts ("Global Note"), or as definitive Notes ("Definitive Notes"), with Coupons (if in bearer form) attached thereto (except in the case of Zero Coupon Notes) and, in the case of bearer Definitive Notes repayable in installments, with Receipts at the time of issue attached thereto, in the denominations specified in the applicable Pricing Supplement. Interests in a Global Note may be exchanged for Definitive Notes in registered or bearer form only on the terms and conditions specified in the relevant Global Note. 12. Maturity of the Notes: The Notes will have maturities of not less than 360 days nor more than 10 years. 13. Issue Price: The Notes may be issued (i) at a discount and not bear interest (zero coupon), (ii) at a discount and bear interest, payable on the interest payment dates specified in the applicable Pricing Supplement, (iii) at par and bear 6

9 interest payable on the interest payment dates specified in the applicable Pricing Supplement or (iv) at a premium and bear interest payable on the interest payment dates specified in the applicable Pricing Supplement. 14. Ranking of the Notes: If the Pricing Supplement specifies that the Notes are unsecured Notes, the Notes will constitute direct, unsecured and unsubordinated obligations of the Issuer and will rank pari passu with all other unsecured and unsubordinated indebtedness of the Issuer, including any guarantees given by the Issuer, other than obligations preferred by mandatory law. If the Pricing Supplement specifies that the Notes are secured Notes, the Notes will constitute direct and unsubordinated obligations of the Issuer that are secured by the collateral identified in the Pricing Supplement (the "Collateral"). 15. Ranking of the Guarantees: The Notes will benefit from the guarantees of each of the Guarantors (the "Guarantees"), which will constitute full, unconditional, joint and several, direct, unsecured and unsubordinated obligations of the Guarantors and will rank pari passu with all other unsecured and unsubordinated obligations of the Guarantors, other than obligations preferred by mandatory law. 16. Redemption: Issuer Call. If the terms of a particular Note and the applicable Pricing Supplement so provide, such Note shall be redeemable at the option of the Issuer, on the date or dates, and on such terms, as are specified in such Note and in such Pricing Supplement. Noteholder Put. If the terms of a particular Note and the applicable Pricing Supplement so provide, such Note shall be redeemable at the option of the holder of such Note, on the date or dates, and on such terms, as are specified in such Note and in such Pricing Supplement. 17. Denomination: Notes will be issued in such denominations as may be specified in the applicable Pricing Supplement save that the minimum denomination of each Note will be such as may be allowed or required from time to time by the relevant governmental authority or any laws, regulations or listing rules applicable to the relevant Specified Currency. 18. Withholding Tax: All payments under the Notes and the Guarantee will be subject to Mexican withholding taxes, except as stated in the Notes. See "Taxation." 19. Additional Amounts: The Issuer, or as the case may be, the Guarantors will pay such amounts as may be necessary in order to ensure that the net amounts received by the holders of Notes after any withholding or deduction for or on account of any present or future taxes or duties of whatever nature imposed or levied by Mexico or any authority in Mexico shall equal the respective amounts of principal and interest which would have been received in respect of the Notes in the absence of such withholding or deduction, subject to certain exceptions. See "Terms and Conditions." 20. Events of Default: The Notes contain certain events of default, including the failure by the Issuer to pay any principal of or interest on the Notes (which in the case of failure to pay any installment of interest continues for a period of 3 days). See "Terms and Conditions." 21. Listing: Notes issued under the Programme may at any time, but are not required to, be listed on one or more stock exchanges. Application has been made for this Offering Circular to be approved by the Irish Stock Exchange. We may apply for any Series of Notes to be issued under the Programme to be admitted to the Official List of the Irish Stock Exchange and trading on its Global Exchange Market, as set forth in the applicable Pricing Supplement. This Offering Circular constitutes "Base Listing Particulars" for the purpose of any such listing and trading. 7

10 22. Rating: The Notes issued under the Programme may, but are not required to be, rated. Except as stated in a Pricing Supplement, Notes issued under the Programme will not be rated. 23. Selling Restrictions: The Notes have not been and will not be registered under the Securities Act. The Notes may not be offered or sold within the United States or to U.S. persons, except to qualified institutional buyers in reliance on the exemption from registration provided by Rule 144A under the Securities Act and to certain non-u.s. persons in offshore transactions in reliance on Regulation S under the Securities Act. Prospective purchasers that are qualified institutional buyers are hereby notified that the seller may be relying on the exemption from the provisions of Section 5 of the Securities Act provided by Rule 144A. For a description of certain restrictions on transfers of the Notes, see "Selling Restrictions." 24. Governing Law: England and Wales. 8

11 FORM OF PRICING SUPPLEMENT 1. Series Number: 2. Tranche Number: (If fungible with an existing Series, details of that Series, including the date on which the Notes become fungible) 3. Specified Currency or Currencies: 4. Principal Amount: 5. Form: [Global Note in registered form exchangeable for Definitive Notes in limited circumstances] [Global Note in bearer form exchangeable for Definitive Notes in limited circumstances] [Registered Notes] [Bearer Notes] 6. Issue Price: [ ]% of the Principal Amount 7. Interest Rate: [If the Interest Rate is a Floating Rate, a Floating Rate Annex is to be attached to the Pricing Supplement setting forth the interest rate formula and other terms relating to such Floating Rate, and in such event, such Annex is to be referenced here with the notation "See attached Floating Rate Annex."] 8. Day Count Fraction: 9. Floating Rate Interest calculation for a period of other than a full year: For a period of other than a full year: [ ] In the case of an incomplete month: [ ] 10. Interest Payment Dates: 11. Record Dates: 12. Issue Date: The Issue Date must: (a) (b) be a day on which commercial banks and foreign exchange markets are open for business and carrying out transactions in London, Mexico City and any Additional Business Centre specified in the applicable Pricing Supplement and the city where each of the Agents is located; a day on which Euroclear and Clearstream, Luxembourg (as defined below) are open for business; and 9

12 (c) either (1) in relation to any sum payable in a Specified Currency other than euro, a day on which commercial banks and foreign exchange markets are open for business and carrying out transactions in the principal financial centre of the country of the relevant Specified Currency or (2) in relation to any sum payable in euro, a day on which the TARGET System is open. 13. Settlement Date: 14. Maturity Date: 15. Name of Dealer or Dealers: 16. Name of Relevant Lead Dealer: 17. Use of Proceeds: 18. Redemption/Payment Basis: 19. Denomination of Notes: Notes (including Notes denominated in Sterling) in respect of which the issue proceeds are to be accepted by the Issuer in the United Kingdom or whose issue otherwise constitutes a contravention of section 19 of the Financial Services and Markets Act 2000 and which must be redeemed before the first anniversary of the date issue must have a minimum denomination of 100,000 (or its equivalent in other currencies). 20. Zero Coupon Notes: [Yes/No] [If the Notes are Zero Coupon Notes, a Zero Coupon Annex is to be attached to the Pricing Supplement setting forth the terms applicable thereto, and in such event, such Annex is to be referenced here with the notation "See attached Zero Coupon Annex."] 21. Additional Selling Restrictions (if any): 22. Paying Agents: 23. Specified Principal Amount for the purposes of Condition 5(a): 24. ISIN: 25. Issuer Call Applicable: [Yes/No] Noteholder Put Applicable: [Yes/No] [If Issuer Call and/or Noteholder Put is applicable, an Optional Redemption Annex is to be attached to the Pricing Supplement setting forth the terms applicable thereto, and in such event, such Annex is to be referenced here with the notation "See attached Optional Redemption Annex."] 10

13 26. Notes Secured: [Yes/No] [If Notes are secured a Security Annex is to be attached to the Pricing Supplement setting forth the terms applicable thereto, and in such event, such Annex is to be referenced here with the notation "See attached Security Annex" and a description of the security documents referred to as "Security Documents" should be included.] 27. Other Terms and Conditions: [Yes/No] 28. Additional events (if any) in which the Global Note may be exchanged in whole for Definitive Notes and (if applicable) Coupons: 29. Additional Events of Default: [Yes/No] [If there are other terms and conditions, an Other Terms and Conditions of Notes Annex to Pricing Supplement is to be attached to the Pricing Supplement setting forth such other terms and conditions, and in such event, such Annex is to be referenced here with the notation "See attached Other Terms and Conditions of Notes Annex to Pricing Supplement."] [If there are other additional exchange events, an Additional Exchange Events Annex is to be attached to the Pricing Supplement setting forth such other events, and in such event, such Annex is to be referenced here with the notation "See attached Additional Exchange Events Annex."] [If there are additional Events of Default, an Additional Events of Default Annex is to be attached to the Pricing Supplement setting forth such additional Events of Default, and in such event, such Annex is to be referenced here with the notation "See attached Additional Events of Default Annex."] 30. Delivery: Delivery [against/free of] payment. 31. Listing information: 11

14 SUMMARY This summary highlights selected information described in greater detail elsewhere in this document. It does not contain all of the information that may be important to you. This Offering Circular describes the terms of the Notes that we are offering, as well as information regarding our business and detailed financial information. You should read the entire Offering Circular carefully, including the risk factors and financial statements, before making an investment decision. Overview We are one of the largest specialty retailing, consumer finance and banking services companies in Mexico in terms of number of stores, branches and revenues. We also operate in Argentina, Brazil, El Salvador, Guatemala, Honduras, Panama and Peru. In April 2012, we began operating in the United States after our acquisition of Advance America, a leading non-bank provider of cash advance services in the United States. We operate in two business segments: retail and financial services. Our retail products are sold principally through Elektra and Salinas y Rocha stores, which offer brand-name consumer electronics, household appliances, motorcycles, computers, furniture, mobile phones, tires and vehicle batteries. In addition to selling retail products, we offer retail customer services such as electronic money transfers, extended product warranties and mobile phone air time. As of September 30, 2012, we operated 1,023 retail stores in Mexico and 230 retail stores in seven other Latin American countries. An integral part of our overall business strategy has been to provide consumer financial services to our customers, which makes our retail products and services more accessible to them. We believe our consumer financing offerings increase the potential customer base for our retail segment and strengthen our existing customers' loyalty and purchasing power, thereby increasing overall sales and profitability. For the nine months ended September 30, 2012, our retail operations accounted for 36% of our total consolidated revenues and 48% of our total consolidated EBITDA. For the same period in 2011, our retail operations accounted for 48% of our total consolidated revenues and 59% of our total consolidated EBITDA. Our financial services segment is mainly comprised of our subsidiary Banco Azteca, S. A., Institución de Banca Múltiple ("Banco Azteca") and other subsidiaries of Grupo Elektra that operate banks under the Banco Azteca brand name. Since April 2012, our financial services segment is also comprised of our subsidiary Advance America, a leading non-bank provider of cash advance services in the United States. In addition, our financial services segment includes the operation of Afore Azteca, S.A. de C.V. ("Afore Azteca"), Seguros Azteca, S.A. de C.V. ("Seguros Azteca"), Seguros Azteca Daños, S.A. de C.V. ("Seguros Azteca Daños") and Punto Casa de Bolsa, S.A. de C.V. ("Punto Casa de Bolsa"). For the nine months ended September 30, 2012, our financial services operations accounted for 64% of our total consolidated revenues and 52% of our total consolidated EBITDA. In Mexico, Banco Azteca has branches in all of our 1,023 retail stores and 2,108 independent branches. We also operate banks under the Banco Azteca brand name in 204 of our retail stores and 372 independent locations in Central and South America, except in Argentina, where we do not have a bank. Banco Azteca provides consumer credit, personal loans, commercial credit, payroll loans, auto loans, working capital loans, group loans, credit card accounts and other consumer and commercial finance services. During the nine months ended September 30, 2012 through our financial services segment, we provided financing for 67% of our retail sales and provided over Ps.13,305 million ($1,035 million) of secured and unsecured commercial credit to more than 35 corporate customers. Afore Azteca engages in pension fund administration. Seguros Azteca provides life and health insurance products, Seguros Azteca Daños provides casualty insurance products under the Seguros Azteca brand name and Punto Casa de Bolsa is a brokerage firm that offers fixed income and equity instruments and other financial products to its client base. Banco Azteca banks, Afore Azteca, Seguros Azteca, Seguros Azteca Daños and Punto Casa de Bolsa are subject to banking regulations, pension fund regulations, insurance regulations, and brokerage regulations, respectively. In the United States, Advance America is the largest non-bank provider of cash advance services, as measured by number of stores, with 2,409 centers in 29 states. Advance America also has 32 centers in the United Kingdom and 18 centers in Canada that have ceased all operations as part of our strategy to focus on the Americas. Advance America is subject to a variety of federal, state and local regulations on cash advance services in the United States. For the nine months ended September 30, 2012, Advance America, which was consolidated into our financial statements effective April 23, 2012, accounted for approximately 8% of our total consolidated revenues and 7% of our total consolidated EBITDA. We also hold, through subsidiaries and affiliates, strategic minority investments in TV Azteca, S. A. B. de C. V. ("TV Azteca"), the second largest producer of Spanish language television content in the world, and Grupo Iusacell, S.A. de C.V. ("Iusacell"), one of the largest mobile telephone companies in Mexico. 12

15 Our Corporate Structure The following chart shows our organizational structure including our main subsidiaries and affiliates (strategic investments), and where they operate: The following table provides an overview of the products and services that may be offered by Grupo Elektra at its points of sale: Retail Segment Financial Services Segment Products Services Latin America United States Consumer electronics Money transfers Consumer credit Cash advance services Household appliances Extended warranties Personal loans Furniture Mobile phone airtime Pawnshop loans Mobile phones Motorcycles (Italika) Tires Vehicle batteries Computers Savings accounts Time deposits Debit cards Credit cards Insurance Pension funds Credit reports Leasing Small business loans Corporate loans Bill pay services Group loans Cash concentration/disbursement services 13

16 Business Strengths Retail Segment Leading Market Position As of September 30, 2012, we had a total of 1,198 Elektra stores, of which 968 were located throughout Mexico, and 55 Salinas y Rocha stores, all of which were located throughout Mexico. We have one of the largest distribution networks in the Mexican consumer electronics, household appliances, furniture and motorcycle markets, as measured by number of retail stores. Our extensive store network allows us to have direct and frequent access to our customer base. We also believe that we have established a leading market position for our branded consumer electronics, branded household appliances, branded motorcycles and money transfers throughout Mexico. Outside Mexico, our international Elektra store network competes against local and international retailers in the seven other Latin American countries where we have established operations. We also believe that for most of our customers, our stores are the most convenient source of many household goods and our pricing and commercial terms are consistent with our customers' income levels and consumption patterns. Differentiated Shopping Experience We offer our customers a differentiated shopping experience through: Comprehensive Product Offering Delivered at a Compelling Value. We offer a wide variety of products to our customers including, among other things, electronics, furniture and household appliances. At our stores, our customers can fulfill all their household needs at highly competitive prices. Our marketing department makes pricing analyses of various market participants in order to assure that we have the most competitive prices in the market. The value of our products coupled with our financing options give our customers the possibility to finance the purchase of 75% of the products offered in our stores for as low as $8 per week. For $25 per week, our customers can finance the purchase of 98% of our store offerings. This allows our customers to purchase goods that they might not otherwise be able to afford. Integrated Consumer-Targeted Banking Services. Synergies between the financial services business and the retail business are fundamental to our margins, asset turnover and profitability. Consumer credit services are offered through Banco Azteca, with the aim of providing clients with financing options that allow them to acquire our products at an affordable weekly cost. Through Banco Azteca, we build a long-term relationship with our customers that translates into millions of people visiting and returning to branches inside our stores on a weekly basis to make credit payments. This approach allows families to get acquainted with our merchandise offerings and better know how to fulfill future household needs through purchases at the store. In addition, Banco Azteca allows customers to effectively purchase goods and services by providing credit, which in turn allows the retail segment to use its liquidity to increase product offerings and improve operations. Banco Azteca pays the retail business in cash for the goods sold on credit. It also manages collections while the retail business remains focused on merchandise solutions, customer service and expansion. Outstanding Customer Service. We train all of our sales personnel to successfully provide expert advice to all of our clients and enhance their shopping experience, particularly for products with advanced technology. Strong International Presence with Compelling Growth Prospects We have leveraged our expertise in the retail and financial services businesses to expand into other Latin American countries that have demographics similar to Mexico's. In 1997, we began to operate stores outside of Mexico and as of September 30, 2012, we operated 230 Elektra points of sale in Argentina, Brazil, Guatemala, Honduras, Panama and Peru. For the nine months ended September 30, 2012, our international operations (excluding Advance America) represented approximately 14% of our consolidated revenues and we expect to further increase our international operations through acquisitions and the opening of new points of sale both in countries in which we currently operate and in countries where we currently have no presence. Strong Brand Recognition with High Consumer Loyalty We believe our brands are well positioned in the minds of consumers, which drives repeat business. In addition, we believe that our credit consumer sales or installment sales program helps win the early loyalty of young Latin American consumers by giving them the opportunity to increase their quality of life. We believe that we will retain the loyalty of these young consumers as they mature because of the broad range of competitively-priced products and services for all age groups that we offer through Elektra and Salinas y Rocha. 14

17 In addition, we have a strong and growing market share with our own brand, ekt, through which we sell electronics, computers, cell phones, white goods and appliances, and have also launched a new dining room line, bedrooms and other furniture, all of which are provided to us by world-class manufacturers. As of September 30, 2012, ekt had 11% market share of the offered stock keeping units (SKUs) of the product lines offered in Mexico. Under our own Italika brand we have become the largest motorcycle assembler and distributor in Mexico with more than 50% market share. Advanced Distribution and Technology Capabilities With real-time inventory control sales monitoring systems at most of our stores in Mexico and the rest of Latin America, and through the use of our own satellite and/or fiber optics systems linking all of our stores with our headquarters in Mexico City, we utilize advanced retail technology comparable to that of other leading retailers worldwide. We operate SAP Retail, a system supported by a cutting-edge technology that allows us to implement an integrated planning process to optimize the administration of our products and services. Our distribution network incorporates up-to-date technology and distribution logistics that enable us to effectively manage our network of stores. Proven and Experienced Management Team Our management has demonstrated its ability to successfully implement our strategy and to manage our expansion, both in Mexico and the rest of Latin America. Our senior management has extensive experience in retail operations, systems, new-product introduction and distribution earned through our 61 years of operation. In addition, senior management has trained and developed management talent at various levels to help fulfill future Grupo Elektra management needs. Established Relationships with Major Suppliers Throughout the years we have established solid relationships with our major merchandise suppliers, which give us a strong purchasing power that allows us to offer quality products at prices which provide us a competitive selling advantage over other retailers. In addition, although we purchase a significant portion of our total inventory from a limited number of vendors (as most specialty retailers do), during the nine months ended September 30, 2012, the largest vendor accounted for only 11% of our purchases and approximately 67% of our purchases of electronics, appliances and cell phones were supplied by 10 vendors. Financial Services Segment Leading Market Position in the Bank-Store Segment and Integrated Consumer-Targeted Banking Services Within the bank-store segment (which is currently Banco Azteca's core segment of operations) as of September 30, 2012, Banco Azteca was the largest bank in Mexico, as measured by branches, assets, total loan portfolio and deposits, with more than twice as many branches as our next largest competitor and approximately four times its assets, total loan portfolio and deposits. As mentioned above, synergies between the financial services business and the retail business are fundamental to our margins, asset turnover and profitability. In Mexico, Banco Azteca has branches in all of our 1,023 retail stores and 2,108 independent branches. We also operate banks under the Banco Azteca brand name in 204 of our retail stores and 372 independent locations in Central and South America, except in Argentina, where we do not have a bank. The Elektra stores allow Banco Azteca to increase its consumer loan portfolio by selling most of their goods and services through credit. We believe that the trust we have built over more than six decades of operations in the retail segment, our ample distribution network of more than 3,700 points of sale, and the significant number of daily visitors to our stores, bring an unparalleled business opportunity to our financial services segment. Low Levels of Past Due Loans With significant credit experience, knowledge of the target market and thorough risk analysis, we are able to offer credit to a wide range of customers, including those who may not have proof of income. Our loan portfolio has solid performance ratios. For Banco Azteca Mexico, the percentage of loans that were 90 days past due was 4.6% as of December 31, 2011 and 5.1% as of September 30, For Grupo Elektra's consolidated loan portfolio, the percentage of loans that were 90 days past due was 5.5% as of the year ended December 31, 2011 and 5.9% as of the nine months ended September 30, Low Cost and Alternative Sources of Funding For the years ended December 31, 2010 and 2011, and for the nine months ended September 30, 2012, the average cost of funding for all of Banco Azteca's products was, respectively, 2.93%, 2.50% and 2.31%; that is, 15

18 respectively, 198, 232 and 246 basis points below the Mexican average interbank interest rate (tasa de interés interbancaria de equilibrio or "TIIE") for the same period. Such low cost of funding allows us to obtain very significant margins on the fees and rates we charge for our loans. Strong Presence and Growth Opportunities in the United States through our Subsidiary Advance America In April 2012, we acquired Advance America, a leading non-bank provider of cash advance services in the United States that serves middle-income working individuals who typically live paycheck to paycheck and often face unexpected expenses or periodic financial difficulties. For the year ended December 31, 2011, Advance America generated approximately $625.9 million in revenues and gross profits of approximately $181.2 million. The acquisition of Advance America also provides great potential for growth to our financial services segment, mainly due to the following reasons: Diversified National Presence. Advance America is the largest non-bank provider of cash advance services in the United States, as measured by number of stores. With 2,409 branches in 29 states as of September 30, 2012, Advance America had twice as many locations as its next largest competitor. This geographic diversification helps mitigate the risk and possible financial impact of unfavorable legislative changes in the economic environment of a particular region and allows us to take advantage of competitive opportunities in those markets. For the nine months ended September 30, 2012, Ohio, Florida, California, and Texas, which accounted for approximately 12.2%, 11.9%, 11.3% and 10.6%, respectively, of Advance America's total revenues, were the only states that accounted for more than 10% of Advance America's total revenues. Customer Satisfaction. Advance America's cash advance services are cost-competitive and easy to understand. Rates and fees are posted on the walls and the advance process is simple, reliable, and transparent for customers. Periodic surveys are conducted with customers to measure their satisfaction with Advance America. In the most recent survey conducted in April 2012, approximately 96% of surveyed customers rated Advance America's customer service as good or excellent. Unsatisfied Demand. We believe that there is a large unsatisfied demand for short-term consumer credit in the United States, fostered by the limited access to and relatively high cost of other forms of short-term consumer credit. A study by the National Bureau of Economic Research published in March 2011 showed that 47% of American households responded that they either probably or certainly could not raise $2,000 within a 30-day period to cope with a financial emergency. Opportunities for Launching New Products. Advance America's large and widespread distribution network and its recognized brand name can be leveraged to offer alternative products. Over the last several years, Advance America began to offer prepaid debit cards, money transfer services and tax services as an agent for third-party vendors, as well as gold buying services. We believe there are opportunities to expand core services and to offer new products such as installment loans, title loans, prepaid debit cards, etc. Opportunities for Reaching Other Markets. We believe there is great potential for growth by expanding Advance America's customer base to population segments that are currently underserved. Opportunities for Synergies. Advance America's distribution network can also be used to create synergies with our other existing businesses, such as our retail customer electronic money transfer services. Business Strategy We have a strong strategic focus on growth, seeking to further expand our sales and profitability by capitalizing on our position as a leading distributor of consumer electronics, basic household goods, furniture, motorcycles, mobile phones and services in Mexico and the rest of Latin America and by leveraging our distribution network and customer base to offer new financial services, reach new markets and launch new ventures. We continue to focus on low- and middle-income demographic segments of the population as our target customers. We will also continue to pursue our international expansion as we believe we can replicate our success in Mexico in those countries we have identified as attractive business opportunities. As of September 30, 2012, international operations represented approximately 22% of our consolidated revenues. We employ a conservative strategy in applying our retail and financial business expertise and expansion strategies to markets that have similar demographics to those of Mexico. In April 2012, we began operating in the United States after our acquisition of Advance America, a leading non-bank provider of cash advance services in the United States. We are also currently exploring the possibility of expanding our points of sales in the countries in which we already have a presence. During 2013, we plan to increase the network of our money transfer services brand, Dinero Express, by adding agents in Latin America. 16

19 Retail Segment Key elements of our strategy in the retail segment include: Focus on Our Target Consumer Our target market is the low- and middle-income segments of the populations of Mexico and the other Latin American countries where we operate. In particular, we target young customers, who are establishing new households and are relying on Elektra for their furniture, consumer electronics, appliances, mobile phones and household appliances. According to the Instituto Nacional de Estadística y Geografía (the National Institute for Statistics and Geography, or "INEGI"), the Mexican middle class, which we have served for the past 61 years, is made up of approximately 76 million Mexicans, and comprises the majority of the population in Mexico. Leverage on Our Scalable Infrastructure We believe that with 1,023 stores as of September 30, 2012, we have reached the size and market exposure necessary to establish our leadership in the specialty retail sector in Mexico. Our objective is to replicate that success in the other Latin American countries where we have a presence. The pillars of our growth strategy are: Utilize Our Extensive Store Network. We will continue to leverage our extensive store network with the introduction of new products and services. We develop products and services that we believe will best capitalize on our current retail and consumer finance competencies, while providing benefits to customers and increasing traffic in our stores. Continue to Realize Synergies with the Financial Services Segment. We target the low- and middle-income demographic segments of the population. The typical monthly income of our target customer limits his or her ability to shop for durable goods without consumer credit financing. Therefore, we will continuously pursue synergies between our retail and our financial services segments. Invest in Technology. We will continue to develop information and merchandise management systems that allow us to achieve an even more efficient management of our high-volume operations and take full advantage of the satellite and fiber optics communications network that links most of our stores. Focus on Key Product Lines and Own Brands. We will continue to take advantage of the significant growth of the mobile phones market in Mexico. We will also continue to expand the presence in the market of our ekt brand, through which we sell electronics, computers, cell phones, white goods and appliances, a dining room line, bedrooms and other furniture. Empower our Employees. We will continue to emphasize the individual responsibility of our employees while providing them with extensive training in our corporate standards of excellence. We will also continue to motivate our employees with career advancement opportunities, cash bonuses, incentive programs and public recognition. We firmly believe that our workforce is an essential element in the future success of our business. Drive Profitability by Continually Enhancing our Product Offerings We believe that our most important growth potential resides in four business lines: furniture, motorcycles, mobile phones and our own brand products. Furniture. Through our own brand "ekt," we have just launched a new line of furniture: bedrooms, dining rooms and computer desks. With this brand, we expect to increase market share since we plan to offer the best quality and design at the best price points currently available in Mexico. Motorcycles. We believe there is great potential for our motorcycle business in Mexico and throughout the rest of Latin America due to an insufficient supply of public transportation and growth of cities. Under our own Italika brand we have become the largest motorcycle assembler and distributor in Mexico with 50% market share. We have captured more than half of the motorcycle market in Mexico, and already sold our one-millionth motorcycle. Given our extensive brand recognition and affordable prices, we believe that we can profit from a growing transportation need in the region. Mobile Phones. The wireless telecommunication services industry is a multibillion dollar business in Mexico. Yet, Mexico holds Latin America's lowest mobile phone penetration rate. We believe that Mexico will continue to follow the trends of other countries with similar income levels. Thus, this industry will continue to experience significant growth. We have become one of the largest distributors of mobile phones, equipment and services in Mexico, as measured by points of sale and market share. This has been accomplished by taking advantage of the Elektra Movil concept, which consists of having a site at the 17

20 stores specializing in mobile phones, services and personal orientation, as a store-within-a-store. The concept offers handsets, equipment and airtime from all of the leading carriers such as Iusacell, Unefon and Movistar. In addition we are the leaders in Mexico in offering unlocked mobile phones to our customers. Store Brand Products. We offer quality consumer electronics, computers, white goods, cell phones, furniture and household appliances under our proprietary brand "ekt." Given current demographic and economic trends, we believe there will be a fast-growing demand for quality electronic products and household appliances at affordable prices throughout Mexico and the rest of Latin America. Enhance Our Customer Loyalty We want to attract young Latin American consumers with affordable products at Elektra and Salinas y Rocha and, as they mature and their preferences and incomes change, retain their loyalty through the entire store network. In addition to providing credit to support the purchasing habits of our target market, we have developed loyalty programs like "Cliente Amigo," which rewards frequent users of our money transfer services and encourages future use of such services. Financial Services Segment Key elements of our strategy in the financial services segment include: Continue Providing our Financial Services to an Underserved Target Customer Base Our financial services business in Latin America will continue to target the segment of the population that has low consumer credit penetration and therefore presents an important growth opportunity for our business. Our target market ranges from the low- to middle-income segments of the populations of Mexico and the other Latin American countries where we operate, which we estimate to be the majority of the population in these countries. The low average monthly income limits our target customer's ability to shop for durable goods without financing. Mexico's relatively low consumer credit penetration and a low ratio of loans to deposits indicate ample scope for significant expansion of credit. Despite intense loan growth since 1994, banking penetration in Mexico remains low compared to other Latin American countries and the rest of the world. Such low penetration is largely driven by the large fraction of the Mexican population that remains without access to financial services. The unbanked segment, which is primarily composed of the low- and middle-income segments of the Mexican population, represents a significant growth opportunity for us to continue catering to these segments. Continue Expanding Our Activities in the Group and Personal Loans Segment We will continue to expand our lending activity in the group loans segment, which we carry out through "Micronegocio Azteca," a group loan business mainly targeting on entrepreneurial and head of household women. Additionally, through our personal loans segment we offer short-term loans to individuals with diverse personal purposes. These two businesses have been our fastest growing businesses in our financial services segment in Latin America. We believe the main drivers of such growth have been our wide credit experience, technological operative platform, personalized client services and social scope of the project. We intend to continue expanding businesses by increasing the number of points of sale and our credit portfolio. Enhance and Seize the Growth Potential of Our United States Operation In April 2012, we began operating in the United States after our acquisition of Advance America, a leading non-bank provider of cash advance services in the United States. A principal component of Advance America's strategy has been to be a leading provider of cash advance services in each market where it operates. We intend to maintain Advance America's operations throughout the United States and to improve perstore profitability by focusing on improved store operations, expanding our customer base by, for instance, targeting underserved markets, providing a wider variety of financial service offerings from our existing point of sale locations and expanding our online cash advance business. We also intend to realize potential synergies between our cash advance business and other existing businesses, such as the money transfer business. We believe that by focusing Advance America's business in the United States we will increase profitability and improve margins. In line with that strategy, we have ceased all operations in the United Kingdom and Canada, which have been historically unprofitable. Guarantors The Notes issued under the Programme will be fully, unconditionally and jointly and severally guaranteed by certain of our existing and future subsidiaries, excluding those subsidiaries, such as Banco Azteca, which operate 18

21 in the regulated industries of banking, insurance, brokerage and pension funds, and therefore are restricted by law from providing such guarantees (see "Terms and Conditions"). Therefore, not all of our subsidiaries are Guarantors. However, our financial information (including our financial statements included herein) is presented on a consolidated basis and includes both the Guarantors and our non-guarantor subsidiaries. As our non-guarantor subsidiaries represent over 25% of our total consolidated EBITDA as of and for the year ended December 31, 2011, the audited consolidated financial information may be of limited use in assessing the financial position of the Guarantors. As of and for the year ended December 31, 2011, Grupo Elektra, S.A.B. de C.V. (on a non-consolidated basis), together with the Guarantors, accounted for approximately 86% of our total consolidated net assets of Ps.66,895 million ($4,785 million) and 63% of our total consolidated EBITDA of Ps.8,285 million ($667 million), as indicated in the table below (Ps. in millions). Year Ended December 31, 2011 Grupo Elektra, S.A.B. de C.V. (1) Guarantor Group (2)(3)(4) Non-Guarantor Group Consolidated Total (Ps. in millions) Net Assets 29,700 27,933 9,262 66,895 % of Consolidated Net Assets 44% 42% 14% 100% EBITDA 285 4,977 3,023 8,285 % of Consolidated EBITDA 3% 60% 37% 100% (1) Although it has no revenues, for the year ended December 31, 2011, on a non-consolidated basis Grupo Elektra, S.A.B. de C.V. accounted for 3% of our consolidated EBITDA. The EBITDA of Grupo Elektra, S.A.B. de C.V. is attributable to depreciation and amortization and a credit to selling, general and administrative expenses as a result of the provision of services to certain of its financial services subsidiaries. (2) On April 23, 2012 we acquired Advance America, as of which date we began consolidating Advance America's operations into our financial statements. Therefore, although Advance America (including its subsidiaries) is one of the Guarantors, financial information derived from our audited consolidated financial statements as of and for the year ended December 31, 2011 and 2010 included herein does not include that of Advance America. For the nine months ended September 30, 2012, Advance America, which was consolidated into our financial statements effective April 23, 2012, accounted for approximately 8% of our total consolidated revenues and 7% of our total consolidated EBITDA. Because these percentages reflect the consolidation of Advance America only from April 23, 2012, we expect that they will increase in 2013 and future periods. (3) Elektra del Milenio, S.A. de C.V. ("Elektra Milenio") is a Guarantor whose net assets of Ps.23,141 million ($1,655 million) and EBITDA of Ps.5,472 million ($440 million) represented, respectively, 35% of our total consolidated net assets and 66% of our total consolidated EBITDA, as of and for the year ended December 31, Elektra Milenio is a corporation with variable capital (sociedad anómina de capital variable) organized under the laws of Mexico. Elektra Milenio's deed of incorporation was executed on March 17, 1978, and was registered with the Public Registry of Mexico City on November 28, 1978 under the commercial file Section: Commerce, Book 3, Volume 1,063, Page 351, Section 446. Elektra Milenio's deed of incorporation will expire on January 1, The headquarters of Elektra Milenio are located at Av. FFCC de Río Frío N 419 BW, Col. Fraccionamiento Industrial del Moral, Delegación Iztapalapa, C.P , Mexico City, Mexico. Elektra Milenio owns and manages our retail operations in Mexico through our Elektra stores. (4) A Guarantor accounting for 1.6% of our consolidated revenues has securitized the right to receive present and future commissions charged to customers for electronic money transfer services. For more information, see Note 9(a) to our audited consolidated financial statements as of and for the year ended December 31, 2011 and For certain risk factors related to the guarantees, see "Risk Factors Risks Related to the Notes." Company Information Grupo Elektra is a sociedad anónima bursátil de capital variable, publicly traded variable capital corporation organized under the laws of Mexico. Our deed of incorporation was executed on December 30, 1959, and was registered with the Registro Público de Comercio (the "Public Registry") of Mexico City on March 4, 1960 under the commercial file, Book 3, Volume 183, Page 288, Number 183. Our deed of incorporation will expire in Our principal offices are located at Av. FFCC de Río Frío N 419 CJ, Col. Fraccionamiento Industrial del Moral Delegación, Iztapalapa, C.P , Mexico City, Mexico. Our telephone number is +52 (55) Our website is located at Information contained on, or accessible through, our websites, is not incorporated by reference herein and shall not be considered part of this Offering Circular. 19

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23 SUMMARY FINANCIAL INFORMATION The following tables present our summary financial information as of the dates and for the periods indicated. Our consolidated financial information as of and for the years ended December 31, 2011, 2010 and 2009 has been derived from our audited consolidated financial statements, and our consolidated financial information as of and for the nine months ended September 30, 2012 and 2011 has been derived from our unaudited consolidated financial statements. Our consolidated financial statements as of and for the years ended December 31, 2011, 2010 and 2009 have been audited by our independent auditors, Castillo. Castillo is a member of BDO International Limited and is registered with the CCPM. Our audited consolidated financial statements, which are stated in pesos, have been prepared in accordance with MFRS, as issued by the CINIF, which differ in certain significant respects from U.S. GAAP, and IFRS, as adopted by the IASB. Pursuant to the General Provisions Applicable to Securities Issuers and Other Participants in the Securities Market (Disposiciones de Carácter General Aplicables a las Emisoras de Valores y a Otros Participantes del Mercado de Valores), beginning with the year ending December 31, 2012, Mexican companies with securities listed on the BMV are required to prepare and present financial information in accordance with IFRS. Accordingly, our annual consolidated financial statements as of and for the year ended December 31, 2012 will be our first annual financial statements prepared in accordance with IFRS. Our transition date to IFRS is January 1, 2011, and therefore, the year ended December 31, 2011 will be the comparative period established by IFRS 1, First Time Adoption of International Financial Reporting Standards. In accordance with IFRS 1, we have applied applicable mandatory exceptions and certain optional exemptions to the retroactive application of IFRS. See Note 14 to our unaudited consolidated financial statements as of and for the nine months ended September 30, 2012 and 2011, beginning on page F-2 for further information about our transition to IFRS, including the mandatory exceptions and voluntary exemptions that we have applied. CNBV rules require that interim financial information published during the year of adoption also be presented under IFRS. Accordingly, our unaudited consolidated financial statements as of and for the nine months ended September 30, 2012 and 2011, which are stated in pesos, have been prepared in accordance with IFRS, as adopted by the IASB. See Note 14 to our unaudited consolidated financial statements as of and for the nine months ended September 30, 2012 and 2011 for a reconciliation to IFRS of our shareholders' equity as of and for the year ended December 31, 2010 and of our consolidated net income and shareholders' equity as of and for the year ended December 31, 2011 and the nine months ended September 30, Except as described above, we are not providing any reconciliation to U.S. GAAP or IFRS of our consolidated financial statements or other financial information in this Offering Circular. There is no assurance that a reconciliation would not identify material quantitative differences between our consolidated financial statements and other financial information as prepared on the basis of IFRS or U.S. GAAP and such financial statements or information prepared on the basis of U.S. GAAP or IFRS. See "Summary of Certain Differences between MFRS and U.S. GAAP/IFRS." The following tables also present summary stand-alone financial information of our subsidiary Advance America as of the dates and for the periods indicated, which is provided for information purposes only. The standalone financial information of Advance America as of and for the years ended December 31, 2011 and 2010 provided herein has been derived from Advance America's stand-alone audited financial statements, prepared in accordance with U.S. GAAP. Advance America's consolidated financial statements as of and for the years ended December 31, 2011 and 2010 have been audited by PricewaterhouseCoopers LLP. We acquired Advance America on April 23, 2012, after which Advance America's operations have been consolidated into our financial statements. Therefore, financial information derived from our unaudited consolidated financial statements as of and for the nine months ended September 30, 2012 and 2011 includes the results of operations of Advance America since April 23, The summary financial information included herein is qualified in its entirety and should be read together with the financial statements included in this Offering Circular, and their related notes, as well as the sections entitled "Selected Financial Information" and "Operating and Financial Review," each included elsewhere in this Offering Circular. 21

24 The following tables present summary consolidated financial information of Grupo Elektra as of and for the periods indicated: Nine Months Ended September 30 Year Ended December (1) 2009 IFRS Unaudited (2) MFRS Audited (3) (Ps.) ($) (Ps.) (Ps.) ($) (Ps.) (Ps.) (in millions, except as otherwise indicated) Consolidated Income Statement: Income (4)... 50,401 3,806 36,330 52,019 4,185 43,690 41,313 Costs (4)... 21,015 1,587 16,344 24,297 1,955 20,612 20,746 Gross income... 29,386 2,219 19,986 27,722 2,230 23,078 20,567 Selling, administration and promotion expenses... (19,978) (1,509) (13,708) (19,436) (1,564) (16,301) (14,931) Depreciation and amortization... (1,619) (122) (1,293) (1,760) (142) (2,054) (1,989) Other (expense) income, net (5)... (14) (1) (31) Operating income... 7, ,954 6, ,724 3,647 Other (expense) income, net (5) (394) (32) 395 (406) Comprehensive financial income (expense), net... (37,962) (2,867) 22,021 37,295 3,001 (5,530) 3,840 Participation in net income (loss) of associated companies (247) Income before income tax... (30,104) (2,273) 26,728 43,480 3, ,322 Income tax... 8, (7,508) (13,402) (1,078) 366 (1,980) Loss on discontinued operations (6) (397) Consolidated net income... (21,478) (1,622) 19,220 30,078 2, ,945 Consolidated Balance Sheet: (7) Assets: Current: Cash, marketable financial instruments and repos... 48,862 3,802-52,381 3,747 47,936 48,818 Loan portfolio and securitization of portfolio, net... 45,313 3,526-27,839 1,992 17,277 21,989 Derivative financial instruments... 7, , Inventories... 6, , ,143 4,134 Other current assets (8)... 11, , ,150 6,411 Total current assets ,548 9,302-99,113 7,090 76,506 81,427 Non-current: Investments in securities , ,133 14,484 Loan portfolio... 15,715 1,223-11, ,563 - Derivative financial instruments ,043 3,008 9,268 13,495 Property, furniture, equipment and investment in stores, net... 6, , ,941 6,534 Investment in associates... 2, , ,592 1,893 Intangible assets (9)... 7, , Other non-current assets (10)... 1, , Total non-current assets... 33,986 2,644-78,395 5,608 43,449 37,803 Total Assets ,533 11, ,508 12, , ,230 Liabilities: Short-term liabilities: Short-term with financial cost... 72,494 5,641-67,693 4,843 63,778 60,098 Short-term without financial cost... 13,465 1,048-12, ,003 10,035 Total short-term liabilities... 85,959 6,688-80,609 5,767 73,781 70,133 Long-term liabilities: Long-term debt... 14,604 1,136-11, ,769 4,384 Deferred taxes... 8, ,387 1,244 5,037 6,496 Other long-term liabilities (11)... 1, , Total long-term liabilities... 24,469 1,904-30,004 2,146 9,592 11,676 Total liabilities ,428 8, ,613 7,913 88,373 81,808 Total stockholders' equity... 43,106 3,354-66,895 4,786 36,582 37,422 Total liabilities and stockholders' equity ,533 11, ,508 12, , ,230 Consolidated Cash Flow: Net cash from/used in: Operating activities... (4,271) (332) (1,598) ,035 19,595 Investing activities... 4, (3,092) 1, (1,164) (87) Financing activities ,992 2, (754) (1,512) 22

25 Retail Segment: Income... 17,981 1,358 17,611 25,274 2,034 23,395 21,524 Operating income... 3, ,755 3, ,260 2,768 Depreciation and amortization... (978) (74) (926) (1,269) (102) (1,398) (1,327) Total assets... 53,934 4, ,304 7,247 52,307 51,284 Total liabilities... 19,015 1,480-13, ,294 6,906 Financial Services Segment: Income (4)... 32,420 2,448 18,719 26,745 2,152 20,295 19,789 Operating income... 4, ,199 2, , Depreciation and amortization... (641) (48) (367) (491) (40) (655) (662) Total assets... 99,600 7,750-76,204 5,451 67,648 67,946 Total liabilities... 1, , ,125 1,161 23

26 Twelve Months Ended September 30 Year Ended December IFRS Unaudited (2) MFRS Audited (3) (Ps.) ($) (Ps.) (Ps.) ($) (Ps.) (Ps.) (in millions, except as otherwise indicated) Other Consolidated Data: Consolidated EBITDA (12)... 12, ,613 8, ,776 5,636 Interest expense... 1, ,228 1, ,122 1,136 EBITDA (12) / interest expense Total debt... 20,823 1,620 16,329 14,853 1,063 9,419 8,067 Total debt / EBITDA (12) Reconciliation of Consolidated EBITDA: Operating income... 9, ,166 6, ,724 3,647 (+) Depreciation and amortization... 2, ,852 1, ,054 1,989 (+) Other (expense) income, net (5) (405) Consolidated EBITDA (12)... 12, ,613 8, ,776 5,636 Other Data Relating to the Retail Segment: EBITDA (12)... 5, ,077 5, ,658 4,095 Interest expense... 1, ,228 1, ,122 1,136 EBITDA (12) / interest expense Total debt... 19,015 1,480 14,824 13, ,294 6,906 Total debt / EBITDA (12) Reconciliation of EBITDA of the Retail Segment: Operating income... 4, ,081 3, ,260 2,768 (+) Depreciation and amortization... 1, ,336 1, ,398 1,327 (+) Other (expense) income, net (5) (340) EBITDA of the retail segment (12)... 5, ,077 5, ,658 4,095 (1) For comparison purposes, all amounts shown herein as of and for the year ended December 31, 2010 have been derived from our audited consolidated financial statements as of and for the years ended December 31, 2011 and 2010 which reflect certain accounting changes discussed herein (see notes 4 and 7 below) that are not reflected in our audited consolidated financial statements as of and for the years ended December 31, 2010 and (2) On April 23, 2012 we acquired Advance America, after which date Advance America's operations have been consolidated into our financial statements. Therefore, financial information derived from our unaudited consolidated financial statements as of and for the nine months ended September 30, 2012 and 2011 includes the results of operations of Advance America since April 23, (3) For a reconciliation to IFRS of our shareholders' equity as of and for the year ended December 31, 2010 and of our consolidated net income and shareholders' equity as of and for the year ended December 31, 2011 and the nine months ended September 30, 2011, see Note 14 to our unaudited consolidated financial statements as of and for the nine months ended September 30, 2012 and 2011, beginning on page F-2. (4) Costs in our consolidated financial statements as of and for the years ended December 31, 2010 and 2009 include amounts corresponding to interest payment discounts on loans that are part of the "Pago Puntual" program (see "Our Business Description of Financial Services Business Our Financial Services Business in Latin America Account Collection Procedure"). However, beginning with our consolidated financial statements as of and for the years ended December 31, 2011 and 2010, we calculate loan income net of Pago Puntual discounts and therefore, we no longer include these discount amounts in costs. As a result, the methodologies used to calculate the income and costs line items in our consolidated financial statements as of and for the years ended December 31, 2010 and 2009 are different from the methodologies used to calculate the same line items in our consolidated financial statements as of and for the years ended December 31, 2011 and The income and costs line items presented above for the year ended December 31, 2010 derive from our consolidated financial statements as of and for the years ended December 31, 2011 and 2010 and not our consolidated financial statements as of and for the years ended December 31, 2010 and For comparison purposes, we have modified the income and costs line items for the year ended December 31, 2009 presented above from those presented in our consolidated audited financial statements as of and for the years ended December 31, 2010 and 2009 to conform to this modified accounting methodology. These figures have been derived from our internal unaudited financial data. (5) Under MFRS, the line item "other (expense) income, net" is not included in the calculation of operating income, whereas under IFRS it is included. (6) During the fourth quarter of 2009, we suspended our sale of automobiles. 24

27 (7) Beginning with our audited consolidated financial statements as of and for the years ended December 31, 2011 and 2010, certain of our derivative financial instruments (equity swaps) as well as investments in securities that constitute the collateral related thereto have been reclassified from current assets to non-current assets. This change was made because, although Grupo Elektra has a contractual right of early termination, its intention was to hold such instruments until maturity in 2013 (see Note 10(b) to our audited consolidated financial statements as of and for the years ended December 31, 2011 and 2010). As a result, financial information on (i) cash, marketable financial instruments and repos, (ii) derivative financial instruments (current), (iii) total current assets, (iv) investments in securities, (v) derivative financial instruments (noncurrent) and (vi) total non-current assets presented above for the year ended December 31, 2010 conform to the same financial information in our audited consolidated financial statements as of and for the years ended December 31, 2011 and 2010 but not our audited consolidated financial statements as of and for the years ended December 31, 2010 and For comparison purposes, such financial information for the year ended December 31, 2009 presented above has been modified from that presented in our consolidated audited financial statements as of and for the years ended December 31, 2010 and 2009 to conform to this reclassification. This financial information has been derived from our internal unaudited financial data. (8) Amounts listed for "other current assets" as of December 31, 2009, 2010 and 2011 are the sum of the following line items on our balance sheet: (i) value added tax recoverable, (ii) related parties, (iii) other accounts receivable and (iv) rents and prepayments. (9) The amount listed for "intangible assets" as of December 31, 2009 is the sum of goodwill and certain other intangible assets the amount of which has been derived from internal unaudited financial data and not from our audited consolidated financial statements. The amounts listed for "intangible assets" as of December 31, 2010 and 2011 are the sum of the following line items on our balance sheet: (i) goodwill and (ii) licenses and software (see Note 2(l) to our audited consolidated financial statements as of and for the years ended December 31, 2011 and 2010). (10) The amount listed for "other non-current assets" as of December 31, 2009, is the sum of other assets and certain other noncurrent assets, the amount of which has been derived from internal unaudited financial data and not from our audited consolidated financial statements. The amounts listed for "other non-current assets" as of December 31, 2010 and 2011 are the sum of the following line items on our balance sheet: (i) related parties (non-current) and (ii) guarantee deposits, placement expenses and other (see Note 2(l) to our audited consolidated financial statements as of and for the years ended December 31, 2011 and 2010). (11) The amounts listed for "other long-term liabilities" as of December 31, 2009, 2010 and 2011 are the sum of the following line items on our balance sheet: (i) derivative financial instruments, (ii) deferred credits on warranty sales, (iii) employee benefits and (iv) other liabilities. (12) EBITDA is not a recognized term or measure of financial performance under MFRS, IFRS or U.S. GAAP and does not purport to be and should not be considered as an alternative to operating income or net income, as determined on a consolidated basis in accordance with MFRS, IFRS or U.S. GAAP, as an indicator of operating performance or as net resources generated by operating activities as a measure of liquidity. We present EBITDA in our consolidated financial statements prepared in accordance with MFRS as operating income plus depreciation and amortization. We present EBITDA in our consolidated financial statements prepared in accordance with MFRS as operating income plus (i) depreciation and amortization and (ii) other (expense) income, net. In each case, for purposes of calculating EBITDA operating income includes net interest income of our financial institutions. 25

28 The following tables present summary stand-alone financial information of Advance America as of and for the periods indicated: Year Ended December U.S. GAAP Audited (in thousands of $, except as otherwise indicated) Consolidated Income Statement: Revenues: fees and interest charged to customers , ,856 Center expenses: Salaries and related payroll costs , ,465 Provision of doubtful accounts , ,911 Occupancy costs... 87,457 82,790 Center depreciation expense... 9,806 8,147 Advertising expense... 20,898 21,371 Other center expenses... 43,124 41,964 Total center expenses , ,648 Center gross profit , ,208 Corporate and other expenses (income): General administrative expenses... 62,527 61,317 Legal settlements... 18, Corporate depreciation and amortization expense... 2,306 2,999 Interest expense... 4,858 4,561 Interest income... (74) (43) (Gain)/loss on disposal of property and equipment Loss on impairment of assets ,852 Total corporate and other expenses (income)... 89,292 75,868 Income before income taxes... 65, ,340 Income tax expense... 30,048 37,717 Income before income of consolidated variable interest entity... 35,763 67,623 Income of consolidated variable interest entity Net income... 35,763 67,623 Consolidated Balance Sheet: Cash and cash equivalents... 26,948 35,292 Advances and fees receivable, net , ,560 Goodwill , ,416 Total assets , ,924 Total debt , ,793 Total stockholders' equity , ,629 Consolidated Cash Flow: Cash flow provided by operating activities , ,741 Cash flow used in investing activities... (99,333) (154,817) Cash flow used in financing activities... (45,836) (18,415) Other Financial and Statistical Data: Number of centers open at end of period... 2,352 2,584 Number of customers served all credit products (in thousands)... 1,310 1,347 Number of cash advances originated (in thousands) (1)... 10,027 10,561 Aggregate principal amount of cash advances originated (1)... 3,710,133 3,965,225 Average amount of each cash advance originated (in $) (1) Average charge to customers for providing and processing a cash advance (in $) (1) Average duration of a cash advance (in days) (1)(2) Average number of lines of credit outstanding during the period (in thousands) (3) Average amount of aggregate principal on lines of credit outstanding during the period (3)... 3, Average principal amount on each line of credit outstanding during the period (in $) (3) Number of installment loans originated (in thousands) (4) Aggregate principal amount of installment loans originated (4)... 27,375 35,484 Average principal amount of each installment loan originated (in $) (4)

29 Year Ended December U.S. GAAP Audited ($) ($) (in thousands) Other Data Relating to Advance America: EBITDA (5)... 85, ,373 Interest expense... 4,858 4,561 EBITDA (5) / interest expense Total debt / EBITDA (5) (1) Excludes lines of credit and installment loans. (2) Excludes the effect of extended payment plans. (3) In Virginia, Advance America began offering lines of credit in November 2008, ceased offering new lines of credit to customers in February 2010, and stopped providing advances on existing lines of credit in September (4) The installment loan activity for 2009 reflects loans originated by Advance America as the lender in Illinois only. For 2010, the installment loan activity reflects loans Advance America originated as the lender in Illinois and Colorado. For 2011, the installment loan activity reflects loans Advance America originated as the lender in Illinois, Colorado, South Carolina, Tennessee, and Wisconsin. (5) EBITDA is not a recognized term or measure of financial performance under IFRS or U.S. GAAP and does not purport to be and should not be considered as an alternative to operating income or net income, as determined on a consolidated basis in accordance with IFRS or U.S. GAAP, as an indicator of operating performance or as net resources generated by operating activities as a measure of liquidity. For the years ended December 31, 2010 and 2011, Advance America has calculated EBITDA by adding income taxes, depreciation and amortization and interest expense, net, to net income. 27

30 RISK FACTORS Following are certain risks associated with our business and the investment in our securities. The risks and uncertainties described below are not the only risks that we face but represent some of the risks that our management considers important. Should any of the following risks materialize, they may materially and adversely affect our operations, financial condition or operating results, and our ability to repay the Notes, in whole or in part. Should the foregoing happen, the trading price of the Notes may diminish and investors may lose their investment in whole or in part. Risks Related to Our Business Our business is highly dependent on the Mexican economy. Economic developments in Mexico may adversely affect our business and results of operations. We are a Mexican corporation, and the majority of our subsidiaries are also Mexican corporations. For the years ended December 31, 2010 and 2011 and the nine months ended September 30, 2012, our operations in Mexico accounted for 86%, 85% and 78%, respectively, of our total consolidated revenues of Ps.43,690 million ($3,457 million), Ps.52,019 million ($4,185 million) and Ps.50,401 million ($3,806 million), respectively, and 94%, 92% and 84%, respectively, of our total consolidated EBITDA of Ps.6,776 million ($536 million), Ps.8,285 million ($667 million) and Ps.9,408 million ($710 million), respectively. As a result, our business may be significantly affected by the general condition of the Mexican economy, by the depreciation of the peso, by inflation and high interest rates in Mexico, or by political developments in Mexico. Declines in growth, high rates of inflation and high interest rates in Mexico have a generally adverse effect on our operations. In the event that inflation in Mexico returns to high levels while economic growth slows, our business, results of operations and financial condition will be affected. In addition, high interest rates and economic instability could increase our costs of financing. As a consequence of the global recession and economic slowdown during 2008, the Mexican economy entered into a recession. According to Banco de México, Mexico's GDP contracted 6.5% from December 31, 2008 to December 31, 2009, and 12-month accumulated inflation was 6.5% as of December 31, As a consequence, according to INEGI, the Mexican consumer confidence index decreased to 80.1 points at the end of 2009, with a corresponding impact on consumption. The global deterioration of economic conditions led to reductions in available capital and liquidity, reductions in equity and currency values, extreme volatility in credit, equity and fixed income markets and general economic uncertainly in Mexico and around the world. As a result, consumer purchasing power decreased and demand for furniture, consumer electronics and household appliances also was adversely affected. According to Banco de México, Mexico's year-to-year growth in GDP from December 31, 2010 to December 31, 2011 was 3.9% and inflation for the 12 months ended December 31, 2010 and 2011 was 4.4%% and 3.8%, respectively. Similarly, according to INEGI, the Mexican Consumer Confidence Index as of December 31, 2011 decreased to 90.8 points from 91.2 points as of December 31, However, any economic downturns in the future could result in a decrease in our revenues and profit. The political situation in Mexico could negatively affect our operating results. In Mexico, political instability has been a determining factor in business investment. Significant changes in laws, public policies and/or regulations could affect Mexico's political and economic situation, which could in turn adversely affect our business. Any change in the current consumer protection or consumer finance regulatory policies could have a significant effect on Mexican retailers and consumer finance services providers, including us, variations in interest rates, demand for our products and services, market conditions, and the prices of and returns on Mexican securities. See " Risk Related to Our Financial Services Business Risks Related to Our Financial Services Business in Mexico and the Rest of Latin America Future Mexican government restrictions on interest rates and banking fees may affect Banco Azteca's liquidity and profitability." Mexico held presidential and congressional elections on July 1, 2012; the presidential candidate of the political party Partido Revolucionario Intsitucional ("PRI"), Enrique Peña Nieto, won the election. On December 1, 2012 he took office as the President of Mexico. The transition of power was peaceful and orderly, and macroeconomic variables remained stable; it is expected that they will continue to remain stable in similar levels with a neutral effect on the Mexican economy and the Company. Although the PRI does not have majority control over the Congress, national leaders of the three main political parties in Mexico (PRI, Partido Acción Nacional and Partido de la Revolución Democrática) and the President Enrique Peña Nieto signed the so-called "Pacto por México" in order to reach an agreement regarding the implementation of political and economic reforms, which is in turn expected to have a positive effect on the Mexican economy. It is also possible, however, that political forces may not fulfill the commitments under the agreement, which could have a material adverse effect on the Mexican economy. 28

31 Social and political instability in or affecting Mexico could adversely affect our business, financial condition and result of operations, as well as market conditions and prices of our securities. These and other future developments in the Mexican political or social environment may cause disruptions to our business operations and decreases in our sales and net income. Depreciation of the peso or currencies of the jurisdictions where we operate relative to the U.S. dollar could adversely affect our financial condition, our ability to repay debt and other obligations and results of operations. Our sales volume may decrease following a significant devaluation or depreciation of the peso or currencies of the jurisdictions where we operate. Fluctuations in the exchange rates of currencies in other jurisdictions where we operate may also affect our money transfer operations in such jurisdictions because, among other reasons, the fees that we charge on money transfers are denominated in U.S. dollars and therefore, changes in the U.S. dollar/peso exchange may affect our revenues which are accounted for in pesos. Although the value of the peso and other such currencies relative to the U.S. dollar has stabilized in recent years, it is possible that such currencies will depreciate in value relative to the U.S. dollar in the future. As of September 30, 2012, we had $584 million of indebtedness denominated in U.S. dollars (see "Operating and Financial Review Management Overview Indebtedness"). Declines in the value of the peso relative to the U.S. dollar will increase the interest and repayment costs in pesos of our existing U.S. dollardenominated indebtedness and the indebtedness incurred in this offering and increase the cost in pesos of our other non-peso-denominated expenditures. Such declines could also cause us to recognize foreign exchange losses and could adversely affect our ability to meet our interest and principal obligations under our indebtedness. Since substantially all of our revenue is denominated in pesos, the increased costs are not offset by any exchange-related increase in revenue. Furthermore, a severe devaluation or depreciation of the peso may also result in disruption of the international foreign exchange markets and may limit our ability to transfer or to convert pesos into U.S. dollars and other currencies for the purpose of making timely payments of interest and principal on our indebtedness. While the Mexican government does not currently restrict, and for many years has not restricted, the right or ability of Mexican or foreign persons or entities to convert pesos into U.S. dollars or to transfer other currencies out of Mexico, the government could institute restrictive exchange rate policies in the future. To the extent that there are currency fluctuations, they are likely to continue to have an effect on our financial condition, results of operations and cash flows in future periods. Due to the significant economic relationship between Mexico and the U.S., the value of the peso has been subject to significant fluctuations with respect to the U.S. dollar in the past and may be subject to significant fluctuations in the future. Any future devaluations of the peso could adversely affect our results of operations. Fluctuations in interest rates and inflation may adversely affect our business. Any negative fluctuation in interest rates could have an adverse effect on our financial condition because the amount of interest we owe may increase with regard to our present liabilities and indebtedness or any liabilities and indebtedness incurred in the future. See "Operating and Financial Review Management Overview Indebtedness." Inflation in Mexico has historically been higher than that of more developed economies. According to Banco de México, annual inflation was 3.6%, 4.4% and 3.8% for the years ended December 31, 2009, 2010 and 2011, respectively; for the nine months ended September 30, 2012, annualized inflation was 4.8%. Any significant increase in the inflation rate in Mexico or the other countries where we operate could adversely affect our financial condition and results of operations because inflation can adversely affect consumer purchasing power. If the Mexican government imposes exchange controls and restrictions, we may not be able to service our debt in U.S. dollars. In the past, the Mexican economy has experienced balance of payment deficits and shortages in foreign exchange reserves. There can be no assurance that the Mexican government will not institute a restrictive exchange control policy in the future. Any such restrictive exchange control policy could prevent or restrict access to U.S. dollars and limit our ability to service its debt. Moreover, we cannot predict what impact a restrictive exchange control policy would have on the Mexican economy generally. 29

32 Fluctuations in the United States economy or the global economy in general may adversely affect Mexico's economy and our business. Mexico's economy, as well as the economies of the other countries in which we operate, are vulnerable to global market downturns and economic slowdowns. Moreover, Mexico's economy is largely influenced by the economic conditions in the U.S. as a result of various factors, including the volume of commercial transactions under North America Free Trade Agreement ("NAFTA") and the level of U.S. investments in Mexico. Therefore, events and conditions that affect the U.S. economy can also affect our business, results of operations and financial condition, both indirectly and directly (see " Our recent acquisition of Advance America exposes us to new challenges and risks in a highly and diversely regulated environment."). The global economy, including Mexico and the United States, was materially and adversely affected by a significant lack of liquidity, loss of confidence in the financial sector, disruption in the credit markets, reduced business activity, rising unemployment, decline in interest rates and erosion of consumer confidence during the recent global recession. This situation has had a direct adverse effect on the purchasing power of our customers in Mexico and other countries. The macroeconomic environment in which we operate is beyond our control, and the future economic environment may continue to be less favorable than in recent years. Our level of revenues depends to a significant extent on our stores' ability to maintain high sales volumes, efficient inventory and distribution levels and strict control systems, which in turn depend on the continued recuperation of the Mexican and global economy. There is no assurance that such recuperation will continue or the current economic conditions will ameliorate. The risks associated with current and potential changes in the Mexican and United States economies are significant and could have a material adverse effect on our business and results of operations. Financial problems or an increase in risk related to investment in emerging economies could limit foreign investment in Mexico and adversely affect the Mexican economy. Mexico has historically experienced uneven periods of economic growth and has recently been adversely affected by the recent global economic crisis that started in the late-2000s. Although Mexico, the U.S. and other governments have taken steps to increase liquidity in the financial markets, there can be no assurance that such measures will lead to sustained growth of the overall business environment in which we operate and we cannot predict the impact any future economic downturn could have on our results of operations and financial condition. However, consumer demand generally decreases during economic downturns. Our international operations expose us to numerous risks. Our international operations increase the complexity of our organization, our administrative costs, and the regulatory risks we face and, therefore, could destabilize our business, prospects, results of operations, and financial condition. We operate in various foreign countries, including Argentina, Brazil, El Salvador, Guatemala, Honduras, Panama, the United States and Peru. We intend to pursue any beneficial commercial opportunities that may arise in these and other countries, particularly in Latin America. In the nine months ended September 30, 2012, our net revenues from operations in countries other than Mexico represented approximately 22% of our total net revenues. We are subject to the risks inherent in conducting business across national boundaries, any one of which could negatively impact our business. These risks include: economic downturns; currency exchange rate fluctuations; changes in governmental policy; international developments; acts of war or terrorism; political instability; import-export quotas; changes in local labor conditions; changes in tax and other laws and regulations; expropriation and nationalization of our assets in a particular jurisdiction; and protectionist government policies, including immigration policy. Accordingly, the governmental actions, political developments, regulatory and legal changes or administrative practices of foreign countries in which we operate could have a significant impact on us. We cannot 30

33 assure you that changes in the governmental policies of these countries will not adversely affect our business, results of operations, financial condition and prospects. In addition, we are exploring opportunities to expand our business into new geographic markets where we currently have no operational experience. Extending our business to new markets may present us with challenges and issues we have not yet encountered, including substantial additional regulatory oversight. If we are not able to adapt our business to the challenges of any new market, our results of operations, financial condition and prospects could be adversely affected. Our recent acquisition of Advance America exposes us to new challenges and risks in a highly and diversely regulated environment. On April , we acquired Advance America, a leading non-bank provider of cash advance services in the United States (see Note 3 to our unaudited consolidated financial statements for the nine months ended September 30, 2012 and 2011, and "Our Business Description of Financial Services Business Our Financial Services Business in the United States"). As a result, events and conditions that affect the U.S. economy directly affect our business, results of operations and financial condition. Advance America operates in 29 states in the U.S. and is subject to a variety of federal, state and local regulations on cash advance services. Changes in such regulations or their interpretation by governmental authorities could affect the way we do business and may force us to terminate or modify Advance America's operations in the U.S., which in turn could have a material adverse effect on our business, prospects, results of operations, and financial condition. The purchase price for Advance America, which included the purchase price for the outstanding shares and the repayment of Advance America's debt, amounted to approximately $755 million. Although we expect that the realization of benefits related to the acquisition may offset the acquisition cost over time, no assurances can be made that this net benefit will be achieved in the near term, or at all, which could adversely affect our financial condition and results of operations. See " Risks Related to Our Financial Services Business Risks Related to Our Financial Services Business in the United States." Our ability to maintain or expand our business may be adversely affected. Our ability to maintain or expand our business depends on a number of factors, some of which are beyond our control, including: the prevailing laws and regulatory environment of each jurisdiction in which we operate or seek to operate, which are subject to change at any time; our ability to obtain and maintain any regulatory approvals, government permits, or licenses that may be required; our ability to identify, implement, and manage new products and services that are compatible with our business; the degree of competition in existing markets; our ability to maintain current customers and attract new customers; our ability to compete for expansion opportunities in suitable locations; our ability to recruit, train, and retain qualified personnel; our ability to adapt our infrastructure and systems to accommodate new or replacement products and services; and our ability to maintain adequate financing for our expansion plans. We cannot assure you that our systems, procedures, controls, and existing personnel will be adequate to support new or replacement products and services. In addition, our international operations increase the complexity of our organization, our administrative costs, and the regulatory risks we face and, therefore, could destabilize our business, prospects, results of operations, and financial condition. Current and future litigation, regulatory proceedings, and other legal proceedings against us and our officers and directors could have a material adverse effect on our business, prospects, results of operations, and financial condition. Our businesses are subject to lawsuits, regulatory proceedings, and other legal proceedings, including government investigations, that could (i) generate adverse publicity, (ii) cause us to incur substantial expenditures, 31

34 and (iii) significantly impair our business and/or force us to cease doing business in one or more states. For additional information, see "Business Legal Proceedings." Moreover, our officers and directors may be named in these lawsuits or subject to these matters. The indemnification agreements of some of our subsidiaries provide that certain of our officers and directors are entitled to have us indemnify them for damages and advance expenses incurred in defending against these lawsuits and proceedings, including governmental enforcement investigations and proceedings. Accordingly, we may also incur significant expenditures in connection with matters involving our officers and directors. Any of these lawsuits, regulatory proceedings, or other legal matters could have a material adverse effect on our business, prospects, results of operations, and financial condition. Risks Related to Our Retail Business The loss of our market share to competitors may adversely affect our performance. We face intense competition in each of our product categories. The Latin American retail markets are highly fragmented, encompassing large store chains, department stores, household appliance and consumer electronics stores, discount warehouse clubs and a broad range of smaller independent specialty stores targeting high,- middle- and lower-income levels. We compete with other specialty stores, consumer electronics and appliance stores and department stores, some of which are national and international in scope and may have greater resources than we possess in that specific area. Some U.S. retail chains have also entered into strategic alliances with our competitors in certain local markets in Mexico, with the aim of opening new stores in those markets. In addition, free trade agreements such as NAFTA and other such alliances that Mexico or the other countries in which we operate may enter into in the future may result in increased competition from the U.S. and European retailers that are already in or may enter into the markets in which we operate. We also compete, to a certain extent, with informal or "black" markets and street vendors. Any increase in the existing competition, the consolidation of the retail sector or the entry of new and more sophisticated competitors into our current or future markets could impact our business activities and, accordingly, have an adverse effect on our margins, results of operations, financial condition and prospects. Moreover, price competition in the retail industry is intense. We are subject to increasing pressure to reduce our prices as the industry continues to consolidate and more of our competitors are able to benefit from their economies of scale to offer lower prices. Banco Azteca also faces pressure on the pricing of the credit it extends to our customers as part of its consumer credit service. We may be unable to increase or maintain our current gross margins, and the decrease of such margins would have a negative effect on our business. The success of our retail business depends to a great extent on our ability to continue providing consumer financing to our customers. Synergies between the financial services business and the retail business are fundamental to our margins, asset turnover and profitability (see "Business Business Strengths Retail Segment Differentiated Shopping Experience Integrated Consumer-Targeted Banking Services. Synergies" and "Business Description of Financial Services Business Our Financial Services Business in Latin America"). Banco Azteca allows customers to effectively purchase goods and services by providing credit, which in turn allows the retail segment to use its liquidity to increase product offerings and improve operations. During 2010 and 2011, and the nine months ended September 30, 2012, we financed 60%, 60% and 67%, respectively, of our retail sales. Our inability to continue providing consumer financing to our customers through Banco Azteca could impact our business activities and, accordingly, have an adverse effect on our margins, results of operations, financial condition and prospects (see " Risks Related to Our Financial Services Business Risks Related to Our Financial Services Business in Mexico and the Rest of Latin America"). We may have difficulty acquiring an adequate supply of high-quality, low-cost merchandise. Our future success largely depends on our ability to secure a sufficient volume of merchandise for our stores at an attractive cost. Historically, we have been able to acquire high-quality merchandise at a low cost, but such merchandise may not be available in the future at all or in amounts sufficient to satisfy the demand from our customers. We do not rely heavily on any one supplier of merchandise for our stores. However, we purchase a substantial portion of our product inventories from: Loncin Imports and Exports, Sony de México, Unefon, Samsung Electronics, Mabe, Pegaso PCS, Whirlpool México, Hewlett Packard México, LG Electronics de México and Panasonic de México; together, merchandise supplied by these companies represented 13% of our consolidated net revenues for the nine months ending September 30, Our business operations may be disrupted if we are unable to secure an adequate supply of merchandise at reasonable prices. 32

35 Our future success depends on our ability to distribute our products to our stores in a timely and costefficient manner. Our success depends on our ability to distribute our products to our stores on a timely and cost-efficient basis. Our 10 distribution centers in Mexico and distribution centers in other countries where we operate receive inventory deliveries from our suppliers for processing and subsequent distribution to our stores and warehouses. The orderly operation of our receipt and distribution of inventory requires the effective management of our distribution centers and an adherence to our logistics guidelines. Our operations exert pressure on our inventory receiving and distribution systems, which could be affected by one or more of the following factors: the upgrade and expansion of our existing distribution centers and the installation of new distribution centers to accommodate our growth; any disruptions on the operation or our ability to improve or upgrade our information technology infrastructure and management information systems, in particular our supply chain management software system; disruptions in the delivery processes; and natural disasters or casualties, such as fires, explosions, hurricanes, tornadoes, floods or earthquakes, which may affect our inventory receipt and distribution processes. We often engage in a variety of transactions with companies owned by our controlling shareholders, which may cause conflicts of interest. We regularly engage in a variety of transactions with TV Azteca, Movil@ccess, Iusacell, Unefon, Banco Azteca, Afore Azteca, Seguros Azteca and other entities owned or controlled by Ricardo B. Salinas Pliego and our other controlling shareholders. See "Principal Shareholders" and "Related Party Transactions." For example, advertising through the facilities of TV Azteca is an important element of our marketing strategy. Any impairment of our ability to obtain advertising on attractive conditions may have a material adverse effect on our business, results of operations or financial condition. Except as otherwise disclosed herein, we are not aware of any material conflicts of interest between the private interests of the members of our administration, management, supervisory bodies and their duties to Grupo Elektra. Transactions with affiliates may create the potential for conflicts of interest. To guard against these potential conflicts of interest, we have established an audit committee of our Board of Directors to provide an independent review of transactions with affiliates to determine whether these transactions are related to our business and are consummated on terms that are at least as favorable to us as terms that would be obtainable in a similar transaction entered into on an arm's-length basis with an unrelated third party. In addition to what is required by the LMV, our internal policy requires the Audit Committee to review and make recommendations to the Board on any proposed transaction that is (1) with one or more of our affiliates and valued at 1% or more of our consolidated assets, based on figures for the immediately preceding quarter and (2) with one or more of our regulated affiliates if the value of the transaction exceeds $1,000,000. The Board has also approved a Related Party Transaction Policy that establishes restrictions and approvals that must be obtained before engaging in a transaction with any affiliate, and provides for internal and external controls and sanctions in the event it is breached. Nevertheless, conflicts of interest may arise and have a negative effect on our results of operations. While we intend to continue to transact business with related parties on an arm's-length basis, we cannot assure you that such transactions will be unaffected by conflicts of interest between such parties and us. We may not be able to finance our working capital needs. We use non-committed short-term credit lines from Mexican banks. Termination of such lines by these lenders would require us to refinance these short-term loans. We cannot assure you that such refinancing can be arranged on favorable conditions, or otherwise, on short notice. Our operating results are likely to fluctuate in future periods and, therefore, are difficult to predict. Our annual and quarterly results may experience significant fluctuations due to various factors that are beyond our control, including the seasonal nature of our business. Historically, the demand for our products and services tends to increase during the second and fourth quarters of the year as a result of the increase in consumer spending associated with Mothers' Day and the Christmas holiday season. Our quarterly operating results are not indicative of our results for a full year. 33

36 Our leases may be terminated, not renewed or renewed under less advantageous conditions. Approximately 90% of our stores are located in leased facilities under lease agreements that have a duration ranging from three to ten years. We have not experienced any material problems with respect to renewing our lease agreements, but we cannot assure you that we will be able to renew all lease agreements in the future. However, we do not consider the termination or non-renewal of lease agreements to be a significant risk given that we may replace any leased facility with other property located in the same area. Our business depends on the success of new products and services. The success of our operations and our profitability depends on the success of new products and services offered at our stores, and how well our customers will respond to them. All of our new products and services are first analyzed in a detailed process of market research and pilot-tests. However, we cannot guarantee that the new products and services will be successful once they are offered at our stores, or that they will be successful in the future. If our competitors in the retail and consumer financing sectors are able to anticipate the market trends better than we are, our market share could decrease. Our offer of mobile phone products and services in our stores depends on our suppliers. The success of the mobile phone business line offered at our stores depends on product availability and the logistics of the companies that supply their products and services at our stores. The absence of these companies' products and services at our stores could diminish traffic within our stores and could also reduce our competitive advantage as the largest national distributor of mobile products and services. Therefore, our performance and our operations may be adversely affected if the mobile phone companies' supply systems are disrupted for any reason. income. Our agreements with money transmitters constitute the main source of our U.S. dollar denominated Our U.S. dollar denominated revenue derives from our non-exclusive services agreements with Western Union, BTS, Dolex, MoneyGram, RIA, Sigue, Orlandi Valuta, Vigo, Xoom and certain related agreements. We cannot assure you that we will be able to renew these agreements or that if we are able to renew them, that such renewals will be on favorable terms. Failure to renew these agreements and to secure new or additional sources of U.S. dollar denominated revenues may have an adverse effect on our results of operations. The payment of commissions on domestic money transfer service depends on the Mexican economy. The payment of commissions on our domestic money transfer service is dependent upon the economic cycles in Mexico, which are in turn significantly influenced by the United States economy. Any slowdown in the Mexican economy could directly affect the demand for money transfers in our target market to make money transfers. Thus, any negative change in the Mexican economy could have an adverse effect on the number of transfers and revenue of domestic money transfer service. We may face a loss in current market share in our money transfer business. There are several competitors in the domestic and international electronic money transfer business. Increased competition or aggressive plans of current competitors to increase their market share in the electronic money transfers business could cause us to experience a decrease in demand for our local and international electronic money transfer services, which may result in an adverse effect on our revenues. In addition, we could experience a decrease in demand for our electronic money transfer service due to the existence of alternate methods of transferring money. The Mexican government exercises significant influence over the economy. The Mexican government has exercised, and continues to exercise, significant influence over the Mexican economy. Economic plans of the Mexican government in the past often have not fully achieved their objectives, and we cannot assure you that current and future economic plans of the Mexican government will achieve our stated goals. Similarly, we cannot determine what effect these plans or their implementation will have on the Mexican economy or on our business. Future Mexican governmental actions could have a significant effect on Mexican companies, including us, and market conditions. The approval of a money transfer law or regulation may have an adverse effect on our financial performance. Mexican law presently does not limit the commission a merchant may charge a consumer in a money transfer service nor does it have any usury laws. There have been, however, proposals since 2001 to amend the Código de Comercio (the "Commercial Code") and the Código Penal Federal (the "Criminal Code") to impose 34

37 limits on these commissions and to treat the charging of excessive commissions as a crime. We cannot assure you that in the future the Mexican Government will not impose prohibitions or limitations regarding such commissions. In the event these limitations are imposed, they could have a material adverse effect on our financial performance. Risks Related to Our Financial Services Business Risks Related to Our Financial Services Business in Mexico and the Rest of Latin America We face uncertainties in connection with our banking activities. Banco Azteca was created in 2002 to provide limited banking services such as taking deposits and extending consumer credit. Since November 2003, Banco Azteca has been a full-service bank providing consumer finance and deposit services to the general public, including our retail customers and those who previously obtained financing directly from us through Elektrafin and deposit services through our arrangement with Banca Santander México, S.A. The performance of Banco Azteca and its ability to successfully offer consumer financing services is directly related to the ability of Banco Azteca to attract deposits. However, Banco Azteca may find it difficult to market its services to members of its targeted demographic of lower- and middle-income clients who do not yet bank with Banco Azteca and who generally do not bank with other institutions. Accordingly, Banco Azteca may require additional capital investments in the future. In addition, Banco Azteca's client portfolio is comprised of individuals with limited or no previous credit history who may be more likely to default on their repayment obligations during periods of economic difficulty. The operations and activities of Banco Azteca are subject to the legal regime applicable to the Mexican banking industry, the accounting requirements prescribed by the CNBV and various other laws and regulations not otherwise applicable to our business operations. Such laws, regulations and requirements may impose restrictions upon Banco Azteca's operations and activities and the activities of Grupo Elektra in general. Any future change in the legal regime applicable to Banco Azteca could subject it to additional restrictions and affect its business operations and financial results. For more information on the legal regime applicable to Banco Azteca, see "Our Business Regulation Regulation Affecting Banco Azteca." We cannot assure you that our banking activities will be successful or profitable. In addition, we cannot guarantee that the results of Banco Azteca will not have an adverse effect on our consolidated results of operations. Banco Azteca faces competition from other banks and financial institutions. Banco Azteca targets the lower-middle class segment of the Mexican population, which has historically been underserved by the traditional banking system. However, Banco Azteca has faced and will continue to face strong competition in Mexico from banking institutions associated with Banco Azteca's competitors in the retail market, which serve the same segment of the population as Banco Azteca, such as Banco Ahorro Famsa, S.A., Institución de Banca Múltiple the consumer financing subsidiary of Grupo Famsa, S. A. B. de C. V., Bancoppel, S. A., Institución de Banca Múltiple, the consumer financing subsidiary of Coppel, and Banco Wal-Mart de México Adelante, S. A., Institución de Banca Múltiple, the consumer financing subsidiary of Wal-Mart. Furthermore, competition in the banking industry for clients among the lower-middle class segment may increase significantly as a result of the introduction of new banking and other financial products, such as credit cards and personal loans that target the lower-middle class or as a result of changes in regulations applicable to financial institutions, which could enable new participants focusing on Banco Azteca's target market to enter the banking industry more easily. Any increase in competition could affect our market position if our competitors are able to offer financing terms more attractive than ours. In the future, new competitors, including microfinance financial institutions, may emerge, and existing competitors may in the future engage in more aggressive efforts to attract Banco Azteca's customers, which may adversely affect the volume and profitability of Banco Azteca's operations. Changes in the Mexican banking regulatory framework may affect the results of Banco Azteca. Like the rest of the Mexican banks, Banco Azteca is subject to comprehensive regulation and supervision by Mexican regulatory authorities, such as Banco de México, the CNBV and the Ministry of Finance and Public Credit. These regulatory authorities have broad powers to adopt regulations and other requirements affecting or restricting virtually all aspects of Banco Azteca's capitalization, organization and operations, including the authority to regulate the interest rates and fees that it is allowed to charge and the other terms and conditions of its consumer lending transactions. Moreover, Mexican financial regulatory authorities possess significant power to enforce applicable regulatory requirements in the event of Banco Azteca's failure to comply with them, including by imposing fines, requiring the contribution of new capital, inhibiting Banco Azteca from paying dividends to us or paying bonuses to employees, and restricting or revoking licenses or permits to operate its business. In the event Banco Azteca encounters significant financial problems or becomes insolvent or in danger of becoming insolvent, Mexican banking authorities would have the power to take over Banco Azteca's management and operations. 35

38 Mexican banking and financial services laws and regulations are subject to continuing review and changes, and any such future changes may have an adverse impact on, among other things, Banco Azteca's ability to grant and collect on loans, transfer non-performing loans and otherwise extend credit on terms and conditions and at interest rates that are adequately profitable, which could materially and adversely affect Banco Azteca's and our consolidated results of operations and financial position. The revocations of Banco Azteca's license or government approvals to operate its business, or the imposition of any restrictions on Banco Azteca's ability to grant consumer loans, may in turn affect the sales volumes of our retail stores, which rely on the consumer financing supplied by Banco Azteca, and therefore affect our results of operations and financial position. Banco Azteca is subject to the risk of nationalization or expropriation. Banco Azteca, like other Mexican banks, is subject to the risk of nationalization or expropriation by Mexican authorities as occurred in This means that the federal government could acquire ownership and/or control of Banco Azteca. In such an event, we would be entitled to compensation as a result of such governmental action, but there is no assurance that the amount of compensation we ultimately receive would represent the full market value of our investment in Banco Azteca. Further, we no longer would be entitled to the dividend and other capital distributions that may be paid by Banco Azteca. In addition, such governmental action would compel us to cease our bank financing activities and resume our pre-2003 installment sales financing options (as was done through Elektrafin prior to Banco Azteca's organization), which could have an adverse impact on our overall business model and profitability. Future Mexican government restrictions on interest rates and banking fees may affect Banco Azteca's liquidity and profitability. Our Mexican consumer finance operations implemented through Banco Azteca are subject to the legal regime applicable to the Mexican banking industry in general, including the Ley de Protección y Defensa al Usuario de Servicios Financieros (the "Banking Regulation"). Currently the Banking Regulation does not impose any limit on interest rates or banking fees, subject to certain exemptions, that a bank may charge. However, the possibility of imposing such limits has been and continues to be debated by the Mexican Congress and Mexican banking authorities. In the future, the Mexican banking authorities could impose restrictions on the interest rates or fees charged by banks or impose additional interest rate or fees information disclosure requirements. A substantial portion of Banco Azteca's revenues and operating cash flow is generated by the consumer credit services it offers, and any such limitations or additional information requirements could impact Banco Azteca's competitiveness and have a material adverse effect on our financial performance. Any change in the Mexican laws applicable to Banco Azteca, including the imposition of credit approval requirements, could have an adverse effect on our financial condition and results of operations. The consumer protection laws and their enforcement in the other Latin American countries where we do business are comparable to Mexican law. A change in the regulatory environment in Mexico, or in the other countries where we operate, or the imposition of authorization requirements, could have a material adverse effect on our operations and our financial performance. Guidelines for loan classification and loan loss reserves in Mexico may be less stringent than those in other countries. Mexican banking regulations require Banco Azteca to classify each loan or type of loan (other than loans to the Mexican government, Banco de México, Instituto de Protección al Ahorro Bancario ("IPAB") and certain international organizations) according to a risk assessment that is based on specified criteria, to establish corresponding reserves and, in the case of some non-performing assets, to write off certain loans. The criteria to establish reserves include both qualitative and quantitative factors. Mexican regulations relating to loan classification and determination of loan loss reserves are generally different or less stringent than those applicable to banks in the United States. Banco Azteca may be required or deem it necessary to increase its loan loss reserves in the future. Increasing loan loss reserves for Banco Azteca could materially and adversely affect Banco Azteca and our results of operations and financial position. Banco Azteca may be unable to effectively control the level of non-performing or poor credit quality loans or have insufficient loan loss reserves to cover future loan losses. Non-performing or low credit quality loans can negatively impact Banco Azteca and our results of operations. We cannot assure you that we will be able to effectively control and reduce the level of the impaired loans in Banco Azteca's total loan portfolio. In particular, the amount of Banco Azteca's non-performing loans may increase in the future as a result of growth in Banco Azteca's total loan portfolio, including as a result of loan 36

39 portfolios that Banco Azteca may acquire from time to time or otherwise, or factors beyond our control, such as the impact of macroeconomic trends, political events affecting Mexico or changes to accounting principles or other laws or regulations applicable to us or events affecting our target customers. In addition, Banco Azteca's current loan loss reserves may not be adequate to cover an increase in the amount of non-performing loans or any future deterioration in the overall credit quality of Banco Azteca's total loan portfolio. As a result, if the quality of Banco Azteca's total loan portfolio deteriorates we may be required to increase our loan loss reserves, which may adversely affect Banco Azteca and our financial condition and results of operations. Moreover, there is no precise method for predicting loan and credit losses, and we cannot assure you that our loan loss reserves will be sufficient to cover actual losses. If we are unable to control or reduce the level of Banco Azteca's non-performing or poor credit quality loans, Banco Azteca and our financial condition and results of operations could be materially and adversely affected. Mexican banks such as Banco Azteca, are subject to strict capitalization requirements. Mexican banks are required to maintain certain net capital amounts (capital neto) relative to market risk, risk-weighted assets incurred in its operation, and operations risk, which may not be less than the capital required in respect of each type of risk. If Banco Azteca were to not comply with these requirements, two risk scenarios could arise: (i) pursuant to articles 134 bis and 134 bis 1 of the Mexican Law of Credit Institutions, the CNBV could impose a minimum corrective measure, or (ii) pursuant to numeral V of article 28 of the Mexican Law of Credit Institutions, and under certain circumstances, the CNBV could revoke the authorization granted to Banco Azteca to operate as a banking institution. The imposition of either scenario, and the consequences therefrom, could adversely affect Banco Azteca's and our financial condition and results of operation. Banco Azteca may not be able to detect money laundering and other illegal or improper activities fully or on a timely basis, which could expose Banco Azteca to additional liability and harm our business. Banco Azteca is required to comply with applicable anti-money laundering laws and other regulations in Mexico. These laws and regulations require Banco Azteca, among other things, to adopt and enforce "know your customer" policies and procedures and to report suspicious and large transactions to the applicable regulatory authorities. While we have adopted policies and procedures aimed at detecting and preventing the use of our banking network for money laundering activities, such policies and procedures have in some cases only been recently adopted and may not completely eliminate instances where Banco Azteca may be used by other parties to engage in money laundering and other illegal or improper activities. To the extent Banco Azteca fails to fully comply with applicable laws and regulations, the relevant government agencies to which we report have the power and authority to impose fines and other penalties on Banco Azteca, including revoking Banco Azteca's license to engage in commercial banking activities. In addition, Banco Azteca's and our business and reputation could suffer if we fail to detect and prevent customers who engage in money laundering or illegal or improper purposes. Failure to successfully implement and continue to upgrade Banco Azteca's credit risk management system could materially and adversely affect Banco Azteca's business operations and prospects. One of the principal types of risks inherent to Banco Azteca's business is credit risk. We may not be able to, on a timely basis, upgrade Banco Azteca's credit risk management system. For example, an important part of Banco Azteca's credit risk management system is to employ an internal credit rating system to assess the particular risk profile of a client. As this process involves detailed analyses of the client or credit risk, taking into account both quantitative and qualitative factors, it is subject to human error. In exercising their judgment, our employees may not always be able to assign an accurate credit rating to a client or credit risk, which may result in Banco Azteca's exposure to higher credit risks than indicated by its risk rating system. We may not be able to timely detect these risks before they occur, or due to limited resources or tools available to us, our employees may not be able to effectively implement them, which may increase Banco Azteca's credit risk. Failure to implement effectively, consistently follow or continuously refine Banco Azteca's credit risk management system may result in a higher risk exposure for us, which could materially and adversely affect our results of operations and financial position. Reductions in Banco Azteca's credit ratings would increase its cost of borrowing funds and affect its ability to raise new funds, attract deposits or renew maturing debt more difficult. The credit ratings of Banco Azteca are an important component of its liquidity profile. Among other factors, Banco Azteca's credit ratings are based on the financial strength, credit quality and concentrations in its total loan portfolio, the level and volatility of its earnings, its capital adequacy, the quality of management, the liquidity of its balance sheet, the availability of a significant base of core retail and commercial deposits, and its ability to access funding sources. Changes in Banco Azteca's credit ratings could increase its cost of borrowing funds or extending maturing debt or its ability to access the capital markets. The ability of Banco Azteca to compete successfully in the marketplace for deposits depends on various factors, including its financial stability as reflected 37

40 by its credit ratings. A downgrade in Banco Azteca's credit rating may adversely affect perception of its financial stability and its ability to raise deposits. Changes in insurance and pension regulations could adversely affect our regulated subsidiaries. Certain of our subsidiaries are engaged in the insurance business and are thus subject to comprehensive regulation and supervision by Mexican regulatory authorities. These regulatory authorities have broad powers to adopt regulations and other requirements that would significantly affect the organization or operations of these entities. Areas subject to regulation or regulatory oversight include: (i) terms of the minimum subscribed capital requirements of insurance companies; (ii) registration requirements for insurance products; (iii) valuation of the risk reserves of the insurances companies regarding life and damages insurances; (iv) the authorized methods and disclosure requirements for the investments of the insurance companies; (v) accounting systems standards; and (vi) external auditor registration. Moreover, Mexican insurance regulatory authorities possess significant powers to enforce applicable regulatory requirements in the event our insurance subsidiaries fail to comply with them. Mexican insurances laws and regulations are subject to continuing review and changes, and any such changes in the future may have an adverse impact on, among other things, our insurance subsidiaries' ability to successfully register and launch new insurance products in the market, which may have an adverse effect on their respective financial conditions. We also have a subsidiary engaged in the pension fund administration business. Mexican law currently allows employees to choose the financial institution that will administer their mandatory pension fund contributions. In the event that regulations are changed such that employees are no longer free to choose their pension fund administrators, our pension fund administration subsidiary may be adversely affected. Risks Related to Our Financial Services Business in the United States In the United States, we carry out our operations in the financial services segment through our subsidiary, Advance America, which we acquired in April Advance America is a leading non-bank provider of cash advance services in the United States, and the largest non-bank provider of cash advance services in the United States, as measured by number of stores. See Note 4 to our unaudited consolidated financial statements for the nine months ended September 30, 2012 and 2011, and "Our Business Description of Financial Services Business Our Financial Services Business in the United States." Advance America's business is regulated under federal law and is subject to federal and state unfair and deceptive practices statutes. Our failure to comply with these regulations and statutes could have a material adverse effect on our business, prospects, results of operations, and financial condition. Although states have historically provided the primary regulatory framework under which we offer advances, certain federal laws also affect our business. See "Our Business Regulation Regulations Affecting Advance America Federal Regulation in the United States." We must comply with a variety of other federal laws and regulations, such as the Truth-in-Lending Act ("TILA"), the Equal Credit Opportunity Act ("ECOA"), the Fair Credit Reporting Act ("FCRA"), the Fair Debt Collection Practices Act ("FDCPA"), the Gramm-Leach-Bliley Act ("GLBA"), the Bank Secrecy Act, the Money Laundering Control Act of 1986, the Money Laundering Suppression Act of 1994, and the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act (the "PATRIOT Act"), and the regulations promulgated under each statute. Among other things, these laws require disclosure of the principal terms of each transaction to every customer, prohibit misleading advertising, protect against discriminatory lending practices, and proscribe unfair credit practices. Our marketing efforts and the representations we make about our advances also are subject to federal and state unfair and deceptive practices statutes. In addition, our marketing efforts and statements we make about our products and services are subject to federal and state unfair and deceptive practices statutes. The Federal Trade Commission ("FTC") and the Consumer Financial Protection Bureau ("CFPB") enforce the Federal Trade Commission Act and the state attorneys general and private plaintiffs enforce analogous state statutes. Any failure to comply with any of these federal laws and regulations could have a material adverse effect on our business, prospects, results of operations, and financial condition. The Consumer Financial Protection Bureau has not yet issued regulations governing the cash advance industry, which regulations, when issued, could have a material adverse effect on our business. In July 2010, Congress enacted the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act"), which authorized the creation of the CFPB to regulate a variety of consumer finance transactions. The CFPB has regulatory, supervisory, and enforcement powers over non-bank providers of consumer 38

41 financial products and services, like Advance America. The CFPB has explicit supervisory authority to: (i) examine and require registration of providers of consumer financial products and services, including providers of consumer loans such as Advance America; (ii) adopt rules describing specified acts and practices as being "unfair," "deceptive," or "abusive," and hence unlawful; and (iii) impose recordkeeping obligations. The CFPB also has rulemaking authority with respect to several federal consumer financial protection laws, including many of the statutes listed above. We do not currently know the nature and extent of the rules the CFPB will consider for consumer loan products and services such as those offered by Advance America or the timeframe in which the CFPB may consider such rules. The CFPB may promulgate regulations that would affect the consumer credit products that Advance America offers and have a material adverse effect on our business, prospects, results of operations, and financial condition. Failure to comply with applicable regulations could subject us to regulatory enforcement action that could result in civil, monetary, or other penalties and could have a material adverse effect on our business, prospects, results of operations, and financial condition. A federal law that imposes a cap on our fees and interest would likely eliminate our ability to continue our current operations. Various anti-cash advance legislation has been proposed or introduced in the U.S. Congress. Federal and state legislators continue to receive pressure from consumer advocates and other industry opposition groups to adopt such legislation. In 2008 and 2009, bills were introduced in the U.S. Congress that would have placed a cap of 36% on the effective annual percentage rate ("APR") on all consumer loan transactions. Another bill would have placed a 15-cents-per-dollar borrowed ($0.15/$1.00) cap on fees for cash advances and would have implemented other consumer protections. Other bills have been introduced that would have limited to six the number of cash advances a customer would be permitted to receive in any 12-month period. Any federal legislation or regulation that places restrictions on cash advances and similar services could have a material adverse effect on our business, prospects, results of operations, and financial condition. Any federal law that would impose a 36% APR limit or prohibit or severely restrict cash advance services would likely eliminate our ability to continue our current operations. Advance America's industry is highly regulated under state law. Changes in state laws and regulations, or our failure to comply with existing laws and regulations, could have a material adverse effect on our business, prospects, results of operations, and financial condition. Advance America's business is regulated under a variety of enabling state statutes, including cash advance, deferred presentment, check cashing, money transmission, small loan, and credit services organization ("CSO") and credit access business ("CAB") laws, all of which are subject to change and which may impose significant costs, limitations or prohibitions on the way we conduct or expand Advance America's business. See "Our Business Regulation Regulations Affecting Advance America State Regulation in the United States." In some states, referenda initiatives have been proposed that allow voters to limit or prohibit our ability to conduct Advance America's business in a profitable manner. As of September 30, 2012, Advance America operated in 29 states. In recent years, legislation has been introduced or adopted in some states that prohibits or severely restricts Advance America's products and services. Such new or modified legislation could have a material adverse effect on our results of operations. For example, in Colorado, legislation enacted in August 2010 permits a multiple installment loan product. Further, legislation permitting cash advances in Arizona expired in July 2010, and, as a result, Advance America ceased operations in Arizona. During the first quarter of 2010, laws that implemented a statewide database went into effect in Kentucky, South Carolina, and Washington. A similar law in Wisconsin took effect in January In Montana, a law became effective in January 2011, which caused Advance America to cease operations in that state. In January 2012, a law was enacted in Mississippi, which, among other things, modified certain aspects of Advance America's cash advance product in that state and extended the statute's sunset provision through In January 2013, a law is scheduled to take effect in Delaware that will implement a statewide database. Laws prohibiting cash advances and similar products and services or making them less profitable, or even unprofitable, could be passed in any other state at any time or existing enabling laws could expire or be amended, any of which could have a material adverse effect on our business, prospects, results of operations, and financial condition. For instance, an Illinois law enacted in March 2011 created a longer-term product with multiple installments, applicable fees, and a statewide database reporting requirement. Advance America began offering products conforming to this new legislation in June Although this law has had a negative effect on Advance America's revenue and profitability in Illinois, we currently believe that operations in Illinois will remain economically viable. From time to time, we may also choose to operate in a location even if applicable legislation or regulations cause us to lose money on our operation in that location. For example, Advance America currently operates at a loss in Colorado, Illinois and Washington, and we may decide to exit these states entirely if we 39

42 determine that the laws and regulations do not permit profitable operations. Any similar actions or events could have a material adverse effect on our business, prospects, results of operations, and financial condition. Statutes authorizing cash advance and similar products and services typically provide the state agencies that regulate banks and financial institutions with significant regulatory powers to administer and enforce the law. In most states, we are required to apply for a license, file periodic written reports regarding business operations, and undergo comprehensive state examinations to ensure that we comply with applicable laws. Under statutory authority, state regulators have broad discretionary power and may impose new licensing requirements, interpret or enforce existing regulatory requirements in different ways or issue new administrative rules, even if not contained in state statutes, that affects the way Advance America does business and may force us to terminate or modify Advance America's operations, which in turn could have a material adverse effect on our business, prospects, results of operations, and financial condition. In some cases, we rely on the interpretations of state attorneys general and the staff of state regulatory bodies with respect to the laws and regulations of their respective jurisdictions. These staff interpretations generally are not binding legal authority and may be subject to challenge in administrative or judicial proceedings. Additionally, as the staff of state regulatory bodies change, it is possible that their interpretations of applicable laws and regulations also may change to the detriment of our business. As a result, our reliance on staff interpretations could have a material adverse effect on our business, results of operations, and financial condition. Additionally, state attorneys general, banking regulators and state and local courts scrutinize cash advances and other alternative financial products and services and may take actions that require us to modify, suspend or cease Advance America's operations in their respective jurisdictions, which in turn could have a material adverse effect on our business, prospects, results of operations, and financial condition. See "Our Business Legal Proceedings." For example, in October 2011, a municipal court in Elyria, Ohio ruled that a third-party lender that offers a product similar to Advance America's products could not collect certain fees and interest. In December 2012, that decision was affirmed by the Ninth District Court of Appeals in Ohio. This decision could have an adverse effect on Advance America's operations in four counties in Ohio. Further, if the Ohio Supreme Court affirms the case, it could have a material adverse effect on Advance America's operations throughout the State of Ohio. Advance America's industry is subject to various local rules and regulations. Changes in these local regulations could have a material adverse effect on our business, prospects, results of operations, and financial condition. In addition to state and federal laws and regulations, our business can be subject to various local rules and regulations such as local zoning regulations. Any actions taken in the future by local zoning boards or other local governing bodies to require special use permits for, or impose other restrictions on providers of cash advance and similar services could have a material adverse effect on our business, results of operations, and financial condition. For example, in the state of Texas, municipal ordinances enacted in Austin, Dallas and San Antonio have had an adverse effect on the profitability of Advance America's product offerings in these cities and a similar municipal ordinance has been proposed in Houston. The provision for doubtful accounts may increase and net income may decrease if we are unable to collect customers' personal checks or Automated Clearing House ("ACH") authorizations. We may not be able to collect customers' checks or ACH authorizations because of nonsufficient funds in the customers' bank accounts, closed accounts, stop-payment orders or a variety of other reasons, including laws that prevent us from doing so. For the nine months ended September 30, 2012 and the year ended December 31, 2011, Advance America deposited customer checks or presented an ACH authorization for approximately 6.4% and 6.7%, respectively, of all the customer checks and ACHs received, and was unable to collect approximately 60% and 63%, respectively, of these deposited customer checks or presented ACHs. Total charge-offs, net of recoveries, for the nine months ended September 30, 2012 and the year ended December 31, 2011 were approximately $84 million and $106.8 million, respectively. If the number of customer checks that we deposit or ACHs that we present increases or the percentage of the customers' checks or ACHs that we charge-off increases, our provision for doubtful accounts will increase, which will negatively affect earnings. Unauthorized disclosure of sensitive or confidential customer data could expose us to protracted and costly litigation and penalties and cause us to lose customers. To conduct our Advance America business, we are required to manage, use, and store large amounts of personally identifiable information, consisting primarily of confidential personal and financial data regarding our Advance America customers. We also depend on our IT networks and systems, and those of third parties, to process, store, and transmit this information. As a result, we are subject to numerous U.S. and foreign laws and regulations 40

43 designed to protect this information, such as the European Union Directive on Data Protection, Canadian federal and provincial laws, and various U.S. federal and state laws governing the protection of financial or other individually identifiable information. Security breaches involving our files and infrastructure could lead to unauthorized disclosure of confidential information, as well as shutdowns or disruptions of our systems. If any person, including our employees or those of third-party vendors, negligently disregards or intentionally breaches our established controls with respect to such data or otherwise mismanages or misappropriates that data, we could be subject to costly litigation, monetary damages, fines, and/or criminal prosecution. Unauthorized disclosure of sensitive or confidential customer data by any person, whether through systems failure, unauthorized access to our IT systems, fraud, misappropriation, or negligence, could result in negative publicity, damage to our reputation, and a loss of customers. Any unauthorized disclosure of personally identifiable information could subject us to liability under data privacy laws and adversely affect our business prospects, results of operations, and financial condition. Media reports and public perception of cash advances and similar loans as being predatory or abusive could materially adversely affect our business, prospects, results of operations, and financial condition. Consumer advocacy groups, certain media reports, and many regulators and elected officials advocate for governmental and regulatory action to prohibit or severely restrict our Advance America products and services. The consumer groups and media reports typically focus on the cost to a consumer and characterize our products and services as predatory or abusive toward consumers. If this negative characterization of advances becomes widely accepted by consumers, demand for our products and services could significantly decrease, which could materially adversely affect our business, results of operations, and financial condition. Negative perception of our products and services could also result in increased regulatory scrutiny and litigation, encourage restrictive local zoning rules, make it more difficult to obtain government approvals necessary to open new centers and cause industry trade groups, such as the CFSA, to promote policies that cause our business to be less profitable. In addition, media coverage and public statements that assert some form of corporate wrongdoing can lower morale, make it more difficult for us to attract and retain qualified personnel and directors, divert management attention, and increase expenses. These trends could materially adversely affect our business, prospects, results of operations, and financial condition. Our inability to effectively, efficiently, and profitably introduce or manage new products or alternative methods for conducting Advance America's business could have a material adverse effect on our business, prospects, results of operations, and financial condition. In 2007, Advance America began selling money orders and providing money transfer services. It also began offering prepaid debit cards in 2007 as an agent of a bank regulated by the Office of the Comptroller of the Currency (the "OCC"). In 2009, it began offering cash advances pursuant to the Ohio Second Mortgage Act. Advance America has regularly offered new or modified products and services. In 2011, it began offering installment products in five states. Also, it modified cash advances in Wisconsin in conformance with new legislation. We intend to introduce additional products and services in the future and to modify existing ones (see "Our Business Business Strategies Financial Services Segment"). In order to do so, we may need to comply with additional regulatory and licensing requirements. Each modification, new product or service and alternative method of conducting business is subject to risk and uncertainty and requires significant investment in time and capital, including additional marketing expenses, legal costs, and other incremental start-up costs. We can provide no assurance that we will be able to successfully introduce any new products or services or do so in a timely or profitable manner. We also may fail to modify or test adequately our point-of-sale system, collection procedures, customer contracts, monitoring, and other operations prior to offering a new product. Any failure to offer new products or services could result in fines, suspensions, or legal actions against us and could have a material adverse effect on our business, prospects, results of operations, and financial condition. Furthermore, we cannot predict the demand or loss experience for new products or services, nor do we know if we will be able to offer these new products or services in an efficient manner or on a profitable basis. Our failure to do so, or low customer demand for any of these new services or products, could have a material adverse effect on our business, prospects, results of operations, and financial condition. Advance America currently lacks product and business diversification; as a result, our revenues and earnings may be disproportionately negatively impacted by external factors and may be more susceptible to fluctuations than more diversified companies. Advance America's primary business activity is offering cash advance services. Its current lack of product and business diversification could inhibit our opportunities for growth, reduce our revenues and profits, and make us 41

44 more susceptible to earnings fluctuations than many of our competitors who are more diversified and provide other services such as pawn lending, title lending, or other similar services. External factors, such as changes in laws and regulations, new entrants, and enhanced competition, could also make it more difficult for us to operate as profitably as a more diversified company could operate. Any internal or external change in Advance America's industry could result in a decline in our revenues and earnings, which could have a material adverse effect on our business, prospects, results of operations, and financial condition. The concentration of Advance America's revenues in certain states could adversely affect us. Advance America operated centers in 29 states during fiscal years 2011 and 2012, and its five largest states (measured by total revenues) accounted for approximately 53% of Advance America's total revenues during the nine months ended September 30, While we believe we have a diverse geographic presence, for the near term we expect that a significant portion of our Advance America revenues will continue to be generated from certain states, largely due to the currently prevailing economic, demographic, regulatory, competitive, and other conditions in those states. For example, during the nine months ended September 30, 2012, each of California, Florida, Ohio and Texas accounted for more than 10% of Advance America's total revenues. Changes to any of these conditions in the markets in which we operate could lead to a reduction in demand for our products and services, a decline in our revenues, or an increase in our provision for doubtful accounts that could result in a deterioration of our financial condition. For example, regulatory changes occurring in Arizona, Colorado, and Washington caused Advance America to close or consolidate its centers in those states in the last two years. In prior years, regulatory changes in Ohio and New Hampshire, and actions by state regulators, such as those in Pennsylvania and Arkansas, have also caused Advance America to close or consolidate centers. Regulatory changes in any one of Advance America's larger states may have a material adverse effect on our business, prospects, results of operations, and financial condition. Competition in the cash advance industry could cause us to lose market share or reduce our interest and fees, possibly resulting in a decline in our revenues and earnings. The cash advance industry has low barriers to entry and is highly fragmented and very competitive. We believe that the market may become even more competitive as the industry matures and/or consolidates. We compete primarily with services provided by traditional financial institutions, such as overdraft protection, and with other cash advance providers, small loan providers, credit unions, short-term consumer lenders, other financial service entities, and other retail businesses that offer consumer loans or other products and services that are similar to ours. We also compete with companies offering cash advances and short-term loans over the internet as well as by phone. Some of these competitors have larger local or regional customer bases, more locations, and substantially greater financial, marketing, and other resources than we have. As a result of increased competition, we could lose market share or we may need to reduce our interest and fees, possibly resulting in a decline in our revenues and earnings. If our estimates of losses are not adequate, Advance America's provision for doubtful accounts would increase. This could result in a decline in our future earnings, which could have a material adverse effect on our business, prospects, results of operations, and financial condition. Advance America maintains an allowance for doubtful accounts for estimated losses. It also maintains an accrual for third-party lender losses for loans and certain related fees that are not paid by the customers for all loans that are processed by Advance America for the third-party lender in Texas. To estimate the appropriate allowance for doubtful accounts and accrual for third-party lender losses, we consider total amounts outstanding, historical charge-offs, our current collection patterns, and the current economic trends in the markets we serve. At September 30, 2012, the total of Advance America's allowance for doubtful accounts and accrual for third-party lender losses was $52.4 million. If our actual losses are greater than our allowance for doubtful accounts and accrual for third-party lender losses, our provision for doubtful accounts would increase. This could result in a decline in our future earnings, which could have a material adverse effect on our business, prospects, results of operations, and financial condition. The extent to which Advance America's customers use extended payment plans may have a material adverse effect on our business, prospects, results of operations, and financial condition. Customers of Advance America who cannot timely repay their advances are allowed to qualify for extended payment plans. The ability of a customer to defer payment increases the average duration of a cash advance, which may in turn affect our revenues, return on investment, loss experience, and provision for doubtful accounts. If more customers use extended payment plans, our results of operations and financial condition may be negatively affected. 42

45 Advance America depends on cash management services from banks to operate its business. Advance America depends on banks and cash management services to operate its business. Certain banks have notified us and other companies in the cash advance and check-cashing industries that they will no longer maintain bank accounts for these companies due to reputational risks, potential money-laundering concerns and increased compliance costs of servicing money services businesses and other cash intensive industries. If one of our larger depository banks requests that we close our bank accounts or puts other restrictions on how we use their services, we could face higher costs of managing our cash and limitations on our ability to maintain or expand our business, both of which could have a material adverse effect on our business, prospects, results of operations, and financial condition. Advance America uses an electronic check conversion process to electronically present most of our past due checks to the customers' bank accounts. This process uses either the ACH or the VISA Point-of-Sale ("VISA POS") network. We depend on our banks to settle our ACH transactions and on VISA and certain participating financial institutions to operate the VISA POS system. If our banks decide to no longer process our ACH transactions due to increased credit risk or other reasons, or if a financial institution were to exit the VISA POS payment network or if VISA stopped supporting this network, our ability to collect on past due accounts could be adversely affected and our cost of collections could increase. Advance America has a limited number of third-party lenders in connection with offering certain of its cash advance services. In Texas, where Advance America operates as a CSO and CAB, and with respect to our online business, we facilitate loans made to our customers by unrelated third-party lenders. There are a limited number of lenders that make these types of cash advances and we compete with others in our industry for their services. If we lose the services of our current third-party lenders, or these lenders lose their ability or become unwilling to make cash advances, and we are unable to find replacement third-party lenders, we may be forced to modify or discontinue our operations as a CSO or CAB in Texas and our online business, which could have a material adverse effect on our results of operations and financial condition. Advance America's business is seasonal in nature, which may cause its revenues, collection rates, and earnings to fluctuate. Advance America's business is seasonal due to the impact of fluctuating demand for its products and services and fluctuating collection rates throughout the year. Demand has historically been highest in the third and fourth quarters of each year, corresponding to the back-to-school and holiday seasons, and lowest in the first quarter of each year, corresponding to customers' receipt of income tax refunds. Typically, Advance America's provision for doubtful accounts and allowance for doubtful accounts have been lowest as a percentage of revenues in the first quarter of each year, corresponding to customers' receipt of income tax refunds, and have increased as a percentage of revenues for the remainder of each year. This seasonality requires Advance America's cash flows to be managed over the course of the year. If Advance America's revenues or collections were to fall substantially below what would be normally expected during certain periods, it could have a material adverse effect on our business, prospects, results of operations, and financial condition. Because Advance America maintains a significant supply of cash in its centers, it may be subject to cash shortages due to employee and third-party theft and errors. Advance America also may be subject to liability as a result of crimes at its centers. Because Advance America's business requires maintaining a significant supply of cash in each of its centers, it is subject to the risk of cash shortages resulting from employee and third-party theft and errors. Although various programs have been implemented to reduce these risks, maintain insurance coverage for theft, and provide security for employees and facilities, we can provide no assurance that employee and third-party theft and errors will not occur. Cash shortages from employee and third-party theft and errors were approximately $0.78 million (0.26% of total revenues of Advance America) in the nine months ended September 30, 2012, $1.0 million (0.16% of total revenues of Advance America) in 2011, and $1.3 million (0.22% of total revenues of Advance America) in The extent of these cash shortages could increase as we expand the nature and scope of our products and services. Theft and errors could lead to cash shortages and could adversely affect our business, prospects, results of operations, and financial condition. It is also possible that crimes such as armed robberies may be committed at our Advance America centers. We could experience liability or adverse publicity arising from such crimes. For example, we may be liable if an employee, customer, or bystander suffers bodily injury, emotional distress, or death. Any such event may have a material adverse effect on our business, prospects, results of operations, and financial condition. 43

46 Any disruption in the availability of our information systems could adversely affect operations at our Advance America centers. We rely upon Advance America's information systems to manage and operate its centers and business. Each center is part of an information network that is designed to permit maintaining adequate cash inventory, reconcile cash balances on a daily basis, and report revenues and expenses to the headquarters. Back-up systems and security measures could fail to prevent a disruption in Advance America's information systems. Any disruption in such information systems could adversely affect our business, prospects, results of operations, and financial condition. Regular turnover among Advance America's managers and employees at its centers makes it difficult to operate centers and increases costs of operations, which could have an adverse effect on our business, prospects, results of operations, and financial condition. As of September 30, 2012, the turnover rate for the prior 12 months among Advance America's center managers was approximately 24.6% and among other center employees was approximately 62.4%. According to internal surveys, approximately 35.1% of combined turnover has occurred in the first six months following the hire date of center managers and employees. This turnover increases the cost of operations and makes it difficult to operate centers. According to internal surveys, the average tenure of Advance America's center managers has been 4.4 years and 1.8 years for other center employees. If we are unable to retain Advance America's employees in the future, our business, prospects, results of operations, and financial condition could be adversely affected. Advance America has a significant amount of goodwill which is subject to periodic review and testing for impairment. A significant portion of Advance America's total assets at September 30, 2012 is comprised of goodwill. Under IFRS, goodwill is subject to periodic review and testing or assessments to determine if it is impaired. These tests require projections of future cash flows. Unfavorable trends in Advance America's industry and unfavorable events or disruptions to our operations can affect these projections and estimates. Significant impairment charges, although not affecting cash flow, could have a material adverse impact on our operating results and financial position. Risks Related to the Notes We depend, to a material extent, upon revenue generation and dividends and other funds distributions from our subsidiaries to fund our operations and meet our payment obligations, including with respect to the Notes. Our subsidiaries are separate and distinct legal entities from us. Any payment of dividends, distributions, loans or advances by our subsidiaries may be limited by law. Payment of dividends by our subsidiaries will also be contingent upon our subsidiaries' earnings and business considerations. Additionally, any right that we or the Guarantors may have to receive any assets of any of our subsidiaries as an equity holder of those subsidiaries, upon their liquidation or reorganization, will be effectively subordinated to the claims of such subsidiaries' deposits and creditors, including trade creditors and holders of debt of those subsidiaries. Payments by our subsidiaries may also be subject to legal restrictions on repatriation of earnings or currency exchange. We cannot assure you that our subsidiaries will be able to distribute dividends or make other distributions. In the event our subsidiaries cease to make such payments, we may experience a material adverse effect on our financial condition and on our ability to make payments on our debts, including the Notes. Payment of the Notes may not be made or may be limited if we or one or more of the Guarantors are declared bankrupt. If we or any of the Guarantors are declared bankrupt by a Mexican court or are subject to a reorganization or concurso mercantil proceeding in a Mexican court, our or the relevant Guarantor's, as the case may be, obligations under the Notes: except in the case of secured Notes, would be converted into pesos at the exchange rate prevailing at the time of a declaration of bankruptcy or reorganization or concurso mercantil and from pesos into inflation indexed units at the exchange rate prevailing at that time and would not be adjusted to take into account any devaluation of the peso to the U.S. dollar after such conversion; would be dependent upon the outcome of the bankruptcy or reorganization proceedings and payment, if any, would occur at the time claims of all of our or the relevant Guarantor's, as the case may be, unsecured creditors are satisfied and to the extent funds are sufficient; 44

47 would cease to accrue interest against us or the relevant Guarantor, as the case may be, except that in the case of secured Notes, interest may accrue up to the value of the collateral; and would be subject to certain statutory preferences including tax, social security and labor claims and, except that in the case of secured Notes, claims of secured creditors. Certain of our subsidiaries, including Banco Azteca, are not Guarantors, and our obligations with respect to the Notes will be effectively subordinated to all liabilities of such non-guarantor subsidiaries. Not all of our subsidiaries are Guarantors (see "Summary Guarantors"). However, our financial information (including our financial statements included herein) is presented on a consolidated basis. As our nonguarantor subsidiaries represent over 25% of our total consolidated EBITDA as of and for the year ended December 31, 2011, the audited consolidated financial information may be of limited use in assessing the financial position of the Guarantors. Any right that we or the Guarantors may have to receive any assets of any of the non-guarantor subsidiaries as an equity holder of those subsidiaries, upon their liquidation or reorganization, will be effectively subordinated to the claims of such subsidiaries' deposits and creditors, including trade creditors and holders of debt of those subsidiaries. As of September 30, 2012, our non-guarantor subsidiaries, including Banco Azteca, taken together had Ps.1,767 million ($137 million) of consolidated total indebtedness, excluding deposits. The guarantees may not be enforceable against the Guarantors. The guarantees provide a basis for a direct claim against the Guarantors; however, it is possible that the guarantees may not be enforceable against the Guarantors under the applicable laws of each respective Guarantor's country of incorporation. While the laws of Mexico, Argentina, Brazil, Canada, El Salvador, England and Wales, Guatemala, Honduras, Hungary, Luxembourg, Panama, Peru, Singapore, Spain and the United States do not prohibit the giving of guarantees and, as a result, do not prevent the guarantees of the Notes from being valid, binding and enforceable against the Guarantors, in the event that a Guarantor becomes subject to a reorganization or concurso mercantil proceeding or to bankruptcy, the relevant guarantee may be deemed to have been a fraudulent transfer and declared void, based upon the Guarantor being deemed not to have received fair consideration or a direct benefit in exchange for such guarantee. Investors should refer to the "Use of Proceeds" section of the Pricing Supplement applicable to the relevant Series of Notes in order to analyze and determine by themselves if the guaranteeing subsidiary will receive a fair consideration for guaranteeing our obligations under such Notes. In addition, the laws of the jurisdiction of incorporation of certain of the Guarantors limit the enforceability of guarantees to a prescribed percentage varying from 20% to 100% of shareholders' equity and/or assets. The laws of Honduras, for example, limit the enforceability of guarantees provided by entities incorporated in Honduras to 20% of such entity's capitalization. Moreover, in the event that the guarantees are declared void or unenforceable, any right that we or the other Guarantors may have to receive any assets of any of the Guarantors which guarantee has been declared void or unenforceable as an equity holder of those subsidiaries, upon their liquidation or reorganization, will be effectively subordinated to the claims of such subsidiaries' deposits and creditors, including trade creditors and holders of debt of those subsidiaries, and, in general, such Guarantors which guarantee has been declared void or unenforceable will become non-guarantor subsidiaries (see " Certain of our subsidiaries, including Banco Azteca, are not Guarantors, and our obligations with respect to the Notes will be effectively subordinated to all liabilities of these non-guarantor subsidiaries."). Our leverage and debt service obligations could adversely affect our business. As of September 30, 2012, we had Ps.11,432 million ($890 million) of peso-denominated indebtedness and Ps.7,509 million ($584 million) of U.S. dollar-denominated indebtedness. We may not be able to generate enough cash to pay the principal, interest and other amounts due under our existing indebtedness, and there is no assurance that market conditions will permit us to refinance our existing indebtedness or the Notes offered hereby at maturity. Our leverage could have negative consequences, including: requiring the dedication of a substantial portion of its cash flow from operations to service indebtedness, thereby reducing the amount of cash flow available for other purposes, including capital expenditures, marketing efforts, future growth plans and distributions payable to its shareholders; limiting its ability to obtain additional financing or to refinance its existing indebtedness; placing it at a possible competitive disadvantage relative to less leveraged competitors and competitors with greater access to capital resources; 45

48 Notes. increasing its vulnerability to downturns in its business or the Mexican economy generally; and limiting its ability to make cash distributions to its shareholders. Developments in other emerging market countries may affect the prices for our securities, including the The market value of securities of Mexican companies is, to varying degrees, affected by economic and market conditions in other emerging market countries. Although economic conditions in such countries may differ significantly from economic conditions in Mexico, investors' reactions to developments in any of these other countries may have an adverse effect on the market value of securities of Mexican issuers like us. In recent years, for example, prices of Mexican debt and equity securities declined significantly as a result of developments in Russia, Asia and Brazil. We cannot assure you that the market value of our securities, including the Notes, would not be adversely affected by events elsewhere, especially in emerging market countries. Service of process must be effected in person. In connection with the issuance of the Notes, TMF Corporate Services Limited has been appointed, designated and empowered as agent for service of process to be notified of any legal action related to the issuance of the Notes. This type of notification must be made in person to be valid under Mexican law. Notice of legal action by mail does not constitute personal notification under Mexican law. Therefore, if any notification of legal action is made by mail or other means, other than in person, a final judgment rendered in the legal action may not be enforced in the courts of Mexico. Payment of judgments may be made in pesos. Under the Ley Monetaria de los Estados Unidos Mexicanos (the "Mexican Monetary Law"), in the event that any proceedings are brought in Mexico seeking performance of our obligations under the Notes we may discharge our obligations denominated in any currency, other than pesos, by paying pesos converted at the prevailing exchange rate on the date payment is made. This rate is currently determined by Banco de México and published in the Official Gazette. If payment is made in Mexico and we elect to make payments due on the Notes in pesos in accordance with the Mexican Monetary Law, the amounts paid may be converted by the payee into the U.S. dollars or any other currency and, if converted, such amounts may not be sufficient at such time to purchase U.S. dollars or any other currency equal to the amount of the principal, interest or additional amounts due on the Notes. As a result, there may be a shortfall for judgments obtained in Mexico. No separate action exists or is enforceable in Mexico for compensation of any shortfall. It may be difficult to enforce civil liabilities against us, each Guarantor or our or each Guarantor's directors, officers and controlling persons. We are a publicly traded variable capital corporation (sociedad anónima bursátil de capital variable) and all our subsidiaries, except for NCA Holdings Limited, National Cash Advance Limited, Cash Mart (Southend) Limited, Cash For Cheques Limited, The Gold Mine UK Ltd, Cheque Convertors Limited, Brightfield Securities Limited and Golden G Limited (all of which are scheduled for dissolution in 2013), are companies that are headquartered, managed and operated outside of the United Kingdom. In addition, most of our and each Guarantor's directors, officers and controlling persons reside in Mexico. Furthermore, a majority of our assets are located in Mexico. As a result, it may not be possible for investors to effect service of process within the United Kingdom or in any other jurisdiction outside of Mexico upon us or our directors or officers. Our subsidiaries outside of Mexico and the United Kingdom are located in Argentina, Brazil, Canada, El Salvador, Guatemala, Honduras, Hungary, Luxembourg, Panama, Peru, Singapore, Spain and the United States, and it may not be possible for investors to effect service of process upon these subsidiaries or their directors or officers outside of their respective jurisdictions. Moreover, we have been advised by our Mexican counsel, Nader, Hayaux & Goebel, S. C., that there is doubt as to the enforceability in Mexican courts of civil liabilities under the laws of any jurisdiction outside of Mexico, including any judgment predicated solely upon the laws of England and Wales. We may not be able to pay indebtedness due upon the occurrence of a change of control event. Certain of our indebtedness requires that we make anticipated payments thereunder upon the occurrence of a change of control event. Additionally, the particular terms and conditions applicable to a Series of Notes set forth in the applicable Pricing Supplement relating to such Series may require that we repurchase the Notes upon the occurrence of a change of control event. A change of control could result in non-compliance under our existing or future debt or the existing or future debt, if the debt matured and were payable. The source of funds for any payment will be our available cash or cash generated from other sources, including borrowings, sales of assets or 46

49 sales of equity. However, we cannot guarantee that we will have sufficient funds to pay all of the debts that may be due and payable at that time. We may not be able to repurchase a Series of Notes upon the occurrence of a change of control event because we may not have sufficient financial resources to purchase all of the Notes that are tendered. There can be no assurance that sufficient funds will be available when necessary to make the required repurchase of the Notes. Our failure to repurchase the Notes upon the occurrence of a change of control event would cause a default under the relevant trust deed and agency agreement governing the Notes. The laws of England and Wales may not be recognized in a judicial proceeding in Mexico. Although the choice of the laws of England and Wales governing the Notes would be recognized by the competent courts of Mexico, in the case of a dispute before a Mexican court, the Mexican court would only recognize the substantive laws of England and Wales and would apply the laws of Mexico with respect to procedural matters. The application of any foreign law in Mexico is subject to Mexican procedural rules of evidence. Further, a Mexican court may refuse to apply and/or to enforce provisions governed by the laws of England and Wales if the respective provision is contrary to the public policy (órden público) of Mexico. 47

50 USE OF PROCEEDS Unless otherwise stated in the Pricing Supplement related to a Series of Notes, we expect to use the net proceeds from the sale of Notes for working capital and general corporate purposes. 48

51 EXCHANGE RATES Mexico has a free market for foreign exchange, and the Mexican government allows the peso to float freely against the U.S. dollar. There can be no assurance that the Mexican government will maintain its current policies with regard to the peso or that the peso will not depreciate or appreciate significantly in the future. The following table sets forth, for the periods indicated, the period-end and average exchange rate published by Banco de México expressed in pesos per U.S. dollar. The rates shown below are in nominal pesos that have not been restated in constant currency units. No representation is made that the peso amounts referred to in this Offering Circular could have been or could be converted into U.S. dollars at any particular rate or at all. Exchange Rate (1) Period End Average (2) Year Ended December Nine Months Ended September 30, September 30, September 30, Months Ended September 30, September 30, Monthly March, April, May, June, July, August, September, October, November, December, January, February, (1) The exchange rates are the exchange rates published by the Banco de México in the Official Gazette as the rate for the payment of obligations denominated in non-mexican currency payable in Mexico. The exchange rate is determined by Banco de México on banking days, by an average of quotations of the exchange market of wholesale operations to be settled on the second banking day of its determination. Banco de México announces the F/X exchange rate after 12 noon Mexico City time on each banking day. Each listed exchange rate is published by Banco de México in the Official Gazette of the Federation on the next banking day of its determination as a reference to settle operations the second working day following the settlement date. (2) The average rate means the average of the daily exchange rate during the relevant period. 49

52 SELECTED FINANCIAL INFORMATION Selected Financial Information The following tables present our selected financial information as of the dates and for the periods indicated. The selected financial information as of and for the years ended December 31, 2011, 2010 and 2009 has been derived from our audited consolidated financial statements and our selected financial information as of and for the nine months ended September 30, 2012 and 2011 has been derived from our unaudited consolidated financial statements. See our consolidated financial statements beginning on page F-1. Our consolidated financial statements as of and for the years ended December 31, 2011, 2010 and 2009 have been audited by our independent auditors, Castillo. Castillo is a member of BDO International Limited and is registered with the CCPM. Our audited consolidated financial statements, which are stated in pesos, have been prepared in accordance with MFRS, as issued by the CINIF, which differ in certain significant respects from U.S. GAAP, and IFRS, as adopted by the IASB. Pursuant to the General Provisions Applicable to Securities Issuers and Other Participants in the Securities Market (Disposiciones de Carácter General Aplicables a las Emisoras de Valores y a Otros Participantes del Mercado de Valores), beginning with the year ending December 31, 2012, Mexican companies with securities listed on the BMV are required to prepare and present financial information in accordance with IFRS. Accordingly, our annual consolidated financial statements as of and for the year ended December 31, 2012 will be our first annual financial statements prepared in accordance with IFRS. Our transition date to IFRS is January 1, 2011, and therefore, the year ended December 31, 2011 will be the comparative period established by IFRS 1, First Time Adoption of International Financial Reporting Standards. In accordance with IFRS 1, we have applied applicable mandatory exceptions and certain optional exemptions to the retroactive application of IFRS. See Note 14 to our unaudited consolidated financial statements as of and for the nine months ended September 30, 2012 and 2011, beginning on page F-2 for further information about our transition to IFRS, including the mandatory exceptions and voluntary exemptions that we have applied. CNBV rules require that interim financial information published during the year of adoption also be presented under IFRS. Accordingly, our unaudited consolidated financial statements as of and for the nine months ended September 30, 2012 and 2011, which are stated in pesos, have been prepared in accordance with IFRS, as adopted by the IASB. See Note 14 to our unaudited consolidated financial statements as of and for the nine months ended September 30, 2012 and 2011 for a reconciliation to IFRS of our shareholders' equity as of and for the year ended December 31, 2010 and of our consolidated net income and shareholders' equity as of and for the year ended December 31, 2011 and the nine months ended September 30, Except as described above, we are not providing any reconciliation to U.S. GAAP or IFRS of our consolidated financial statements or other financial information in this Offering Circular. There is no assurance that a reconciliation would not identify material quantitative differences between our consolidated financial statements and other financial information as prepared on the basis of IFRS or U.S. GAAP and such financial statements or information prepared on the basis of U.S. GAAP or IFRS. See "Summary of Certain Differences between MFRS and U.S. GAAP/IFRS." The following tables also present selected stand-alone financial information of our subsidiary Advance America as of the dates and for the periods indicated, which is provided for information purposes only. The standalone financial information of Advance America as of and for the years ended December 31, 2011 and 2010 provided herein has been derived from Advance America's stand-alone audited financial statements, prepared in accordance with U.S. GAAP. See Advance America's stand-alone audited financial statements beginning on page F Advance America's consolidated financial statements as of and for the years ended December 31, 2011 and 2010 have been audited by PricewaterhouseCoopers LLP. We acquired Advance America on April 23, 2012, after which Advance America's operations have been consolidated into our financial statements. Therefore, financial information derived from our unaudited consolidated financial statements as of and for the nine months ended September 30, 2012 and 2011 includes the results of operations of Advance America since April 23, The selected financial information included herein is qualified in its entirety and should be read together with the financial statements included in this Offering Circular, and their related notes, as well as the sections entitled "Summary Financial Information" and "Operating and Financial Review," each included elsewhere in this Offering Circular. 50

53 The following tables present selected consolidated financial information of Grupo Elektra as of and for the periods indicated: Nine Months Ended September 30 Year Ended December (1) 2009 IFRS Unaudited (2) MFRS Audited (3) (Ps.) ($) (Ps.) (Ps.) ($) (Ps.) (Ps.) (in millions, except as otherwise indicated) Consolidated Income Statement: Income (4)... 50,401 3,806 36,330 52,019 4,185 43,690 41,313 Costs (4)... 21,015 1,587 16,344 24,297 1,955 20,612 20,746 Gross income... 29,386 2,219 19,986 27,722 2,230 23,078 20,567 Selling, administration and promotion expenses... (19,978) (1,509) (13,708) (19,436) (1,564) (16,301) (14,931) Depreciation and amortization... (1,619) (122) (1,293) (1,760) (142) (2,054) (1,989) Other (expense) income, net (5)... (14) (1) (31) Operating income... 7, ,954 6, ,724 3,647 Other (expense) income, net (5) (394) (32) 395 (406) Comprehensive financial income (expense), net... (37,962) (2,867) 22,021 37,295 3,001 (5,530) 3,840 Participation in net income (loss) of associated companies (247) Income before income tax... (30,104) (2,273) 26,728 43,480 3, ,322 Income tax... 8, (7,508) (13,402) (1,078) 366 (1,980) Loss on discontinued operations (6) (397) Consolidated net income... (21,478) (1,622) 19,220 30,078 2, ,945 Consolidated Balance Sheet: (7) Assets: Current: Cash, marketable financial instruments and repos... 48,862 3,802-52,381 3,747 47,936 48,818 Loan portfolio and securitization of portfolio, net... 45,313 3,526-27,839 1,992 17,277 21,989 Derivative financial instruments... 7, , Inventories... 6, , ,143 4,134 Other current assets (8)... 11, , ,150 6,411 Total current assets ,548 9,302-99,113 7,090 76,506 81,427 Non-current: Investments in securities , ,133 14,484 Loan portfolio... 15,715 1,223-11, ,563 - Derivative financial instruments ,043 3,008 9,268 13,495 Property, furniture, equipment and investment in stores, net... 6, , ,941 6,534 Investment in associates... 2, , ,592 1,893 Intangible assets (9)... 7, , Other non-current assets (10)... 1, , Total non-current assets... 33,986 2,644-78,395 5,608 43,449 37,803 Total Assets ,533 11, ,508 12, , ,230 Liabilities: Short-term liabilities: Short-term with financial cost... 72,494 5,641-67,693 4,843 63,778 60,098 Short-term without financial cost... 13,465 1,048-12, ,003 10,035 Total short-term liabilities... 85,959 6,688-80,609 5,767 73,781 70,133 Long-term liabilities: Long-term debt... 14,604 1,136-11, ,769 4,384 Deferred taxes... 8, ,387 1,244 5,037 6,496 Other long-term liabilities (11)... 1, , Total long-term liabilities... 24,469 1,904-30,004 2,146 9,592 11,676 Total liabilities ,428 8, ,613 7,913 88,373 81,808 Total stockholders' equity... 43,106 3,354-66,895 4,786 36,582 37,422 Total liabilities and stockholders' equity ,533 11, ,508 12, , ,230 Consolidated Cash Flow: Net cash from/used in: Operating activities... (4,271) (332) (1,598) ,035 19,595 Investing activities... 4, (3,092) 1, (1,164) (87) Financing activities ,992 2, (754) (1,512) 51

54 Retail Segment: Income... 17,981 1,358 17,611 25,274 2,034 23,395 21,524 Operating income... 3, ,755 3, ,260 2,768 Depreciation and amortization... (978) (74) (926) (1,269) (102) (1,398) (1,327) Total assets... 53,934 4, ,304 7,247 52,307 51,284 Total liabilities... 19,015 1,480-13, ,294 6,906 Financial Services Segment: Income (4)... 32,420 2,448 18,719 26,745 2,152 20,295 19,789 Operating income... 4, ,199 2, , Depreciation and amortization... (641) (48) (367) (491) (40) (655) (662) Total assets... 99,600 7,750-76,204 5,451 67,648 67,946 Total liabilities... 1, , ,125 1,161 (1) For comparison purposes, all amounts shown herein as of and for the year ended December 31, 2010 have been derived from our audited consolidated financial statements as of and for the years ended December 31, 2011 and 2010 which reflect certain accounting changes discussed herein (see notes 4 and 7 below) that are not reflected in our audited consolidated financial statements as of and for the years ended December 31, 2010 and (2) On April 23, 2012 we acquired Advance America, after which date Advance America's operations have been consolidated into our financial statements. Therefore, financial information derived from our unaudited consolidated financial statements as of and for the nine months ended September 30, 2012 and 2011 includes the results of operations of Advance America since April 23, (3) For a reconciliation to IFRS of our shareholders' equity as of and for the year ended December 31, 2010 and of our consolidated net income and shareholders' equity as of and for the year ended December 31, 2011 and the nine months ended September 30, 2011, see Note 14 to our unaudited consolidated financial statements as of and for the nine months ended September 30, 2012 and 2011, beginning on page F-2. (4) Costs in our consolidated financial statements as of and for the years ended December 31, 2010 and 2009 include amounts corresponding to interest payment discounts on loans that are part of the "Pago Puntual" program (see "Our Business Description of Financial Services Business Our Financial Services Business in Latin America Account Collection Procedure"). However, beginning with our consolidated financial statements as of and for the years ended December 31, 2011 and 2010, we calculate loan income net of Pago Puntual discounts and therefore, we no longer include these discount amounts in costs. As a result, the methodologies used to calculate the income and costs line items in our consolidated financial statements as of and for the years ended December 31, 2010 and 2009 are different from the methodologies used to calculate the same line items in our consolidated financial statements as of and for the years ended December 31, 2011 and The income and costs line items presented above for the year ended December 31, 2010 derive from our consolidated financial statements as of and for the years ended December 31, 2011 and 2010 and not our consolidated financial statements as of and for the years ended December 31, 2010 and For comparison purposes, we have modified the income and costs line items for the year ended December 31, 2009 presented above from those presented in our consolidated audited financial statements as of and for the years ended December 31, 2010 and 2009 to conform to this modified accounting methodology. These figures have been derived from our internal unaudited financial data. (5) Under MFRS, the line item "other (expense) income, net" is not included in the calculation of operating income, whereas under IFRS it is included. (6) During the fourth quarter of 2009, we suspended our sale of automobiles. (7) Beginning with our audited consolidated financial statements as of and for the years ended December 31, 2011 and 2010, certain of our derivative financial instruments (equity swaps) as well as investments in securities that constitute the collateral related thereto have been reclassified from current assets to non-current assets. This change was made because, although Grupo Elektra has a contractual right of early termination, its intention was to hold such instruments until maturity in 2013 (see Note 10(b) to our audited consolidated financial statements as of and for the years ended December 31, 2011 and 2010). As a result, financial information on (i) cash, marketable financial instruments and repos, (ii) derivative financial instruments (current), (iii) total current assets, (iv) investments in securities, (v) derivative financial instruments (noncurrent) and (vi) total non-current assets presented above for the year ended December 31, 2010 conform to the same financial information in our audited consolidated financial statements as of and for the years ended December 31, 2011 and 2010 but not our audited consolidated financial statements as of and for the years ended December 31, 2010 and For comparison purposes, such financial information for the year ended December 31, 2009 presented above has been modified from that presented in our consolidated audited financial statements as of and for the years ended December 31, 2010 and 2009 to conform to this reclassification. This financial information has been derived from our internal unaudited financial data. (8) Amounts listed for "other current assets" as of December 31, 2009, 2010 and 2011 are the sum of the following line items on our balance sheet: (i) value added tax recoverable, (ii) related parties, (iii) other accounts receivable and (iv) rents and prepayments. 52

55 (9) The amount listed for "intangible assets" as of December 31, 2009 is the sum of goodwill and certain other intangible assets the amount of which has been derived from internal unaudited financial data and not from our audited consolidated financial statements. The amounts listed for "intangible assets" as of December 31, 2010 and 2011 are the sum of the following line items on our balance sheet: (i) goodwill and (ii) licenses and software (see Note 2(l) to our audited consolidated financial statements as of and for the years ended December 31, 2011 and 2010). (10) The amount listed for "other non-current assets" as of December 31, 2009, is the sum of other assets and certain other noncurrent assets, the amount of which has been derived from internal unaudited financial data and not from our audited consolidated financial statements. The amounts listed for "other non-current assets" as of December 31, 2010 and 2011 are the sum of the following line items on our balance sheet: (i) related parties (non-current) and (ii) guarantee deposits, placement expenses and other (see Note 2(l) to our audited consolidated financial statements as of and for the years ended December 31, 2011 and 2010). (11) The amounts listed for "other long-term liabilities" as of December 31, 2009, 2010 and 2011 are the sum of the following line items on our balance sheet: (i) derivative financial instruments, (ii) deferred credits on warranty sales, (iii) employee benefits and (iv) other liabilities. 53

56 The following tables present selected stand-alone financial information of Advance America as of and for the periods indicated: Year Ended December U.S. GAAP Audited (in thousands of $, except as otherwise indicated) Consolidated Income Statement: Revenues: fees and interest charged to customers , ,856 Center expenses: Salaries and related payroll costs , ,465 Provision of doubtful accounts , ,911 Occupancy costs... 87,457 82,790 Center depreciation expense... 9,806 8,147 Advertising expense... 20,898 21,371 Other center expenses... 43,124 41,964 Total center expenses , ,648 Center gross profit , ,208 Corporate and other expenses (income): General administrative expenses... 62,527 61,317 Legal settlements... 18, Corporate depreciation and amortization expense... 2,306 2,999 Interest expense... 4,858 4,561 Interest income... (74) (43) (Gain)/loss on disposal of property and equipment Loss on impairment of assets ,852 Total corporate and other expenses (income)... 89,292 75,868 Income before income taxes... 65, ,340 Income tax expense... 30,048 37,717 Income before income of consolidated variable interest entity... 35,763 67,623 Income of consolidated variable interest entity Net income... 35,763 67,623 Consolidated Balance Sheet: Cash and cash equivalents... 26,948 35,292 Advances and fees receivable, net , ,560 Goodwill , ,416 Total assets , ,924 Total debt , ,793 Total stockholders' equity , ,629 Consolidated Cash Flow: Cash flow provided by operating activities , ,741 Cash flow used in investing activities... (99,333) (154,817) Cash flow used in financing activities... (45,836) (18,415) Other Financial and Statistical Data: Number of centers open at end of period... 2,352 2,584 Number of customers served all credit products (in thousands)... 1,310 1,347 Number of cash advances originated (in thousands) (1)... 10,027 10,561 Aggregate principal amount of cash advances originated (1)... 3,710,133 3,965,225 Average amount of each cash advance originated (in $) (1) Average charge to customers for providing and processing a cash advance (in $) (1) Average duration of a cash advance (in days) (1)(2) Average number of lines of credit outstanding during the period (in thousands) (3) Average amount of aggregate principal on lines of credit outstanding during the period (3)... 3, Average principal amount on each line of credit outstanding during the period (in $) (3) Number of installment loans originated (in thousands) (4) Aggregate principal amount of installment loans originated (4)... 27,375 35,484 Average principal amount of each installment loan originated (in $) (4)

57 (1) Excludes lines of credit and installment loans. (2) Excludes the effect of extended payment plans. (3) In Virginia, Advance America began offering lines of credit in November 2008, ceased offering new lines of credit to customers in February 2010, and stopped providing advances on existing lines of credit in September (4) The installment loan activity for 2009 reflects loans originated by Advance America as the lender in Illinois only. For 2010, the installment loan activity reflects loans Advance America originated as the lender in Illinois and Colorado. For 2011, the installment loan activity reflects loans Advance America originated as the lender in Illinois, Colorado, South Carolina, Tennessee, and Wisconsin. 55

58 Operating and Financial Results by Business Segment Retail Segment OPERATING AND FINANCIAL REVIEW We have two business segments, the retail segment and the financial services segment. Our retail segment includes the financial results derived from the sale of products such as consumer electronics, furniture, home appliances, computers, motorcycles, mobile phone products and services, transportation equipment such as vehicle batteries and tires, and consumer services such as electronic money transfers and extended warranties. Our retail segment mainly operates through two store chains: Elektra in Mexico and Central and South America, and Salinas y Rocha in Mexico. Financial Services Segment Our financial services segment includes the results of our Latin American financial services operations, which are conducted under the Azteca brand, with Banco Azteca in Mexico being the flagship brand. This segment currently operates in Mexico, Brazil, El Salvador, Guatemala, Honduras, Panama and Peru. This segment also includes financial results derived from the operations of the following business units: Seguros Azteca, Seguros Azteca Daños, Afore Azteca and Punto Casa de Bolsa, as well as credit operations that continue to operate under the "Elektrafin" program in Argentina. The financial services segment offers products and services such as consumer credit, personal loans, commercial credit, payroll loans, auto loans, working capital loans, credit card accounts and other consumer finance services; casualty, health and life insurance products; pension fund administration services; and full-service broker. Our financial services segment also includes the results of our financial services operations in the United States, carried out through our subsidiary, Advance America, which we acquired in April Advance America is a leading non-bank provider of cash advance services in the United States, and the largest non-bank provider of cash advance services in the United States, as measured by number of stores. The following table sets forth certain financial data by business segment: Nine Months Ended September 30 Year Ended December IFRS Unaudited MFRS Audited (in millions and, except as otherwise indicated, in Ps.) Retail segment: Income... 17,981 $1,358 17,611 25,274 $2,034 23,395 21,524 Operating income... 3,550 $268 2,755 3,885 $313 3,260 2,768 Depreciation and amortization... (978) $(74) (926) (1,269) $(102) (1,398) (1,327) Total assets... 53,934 $4, ,304 $7,247 52,307 51,284 Financial services segment: (1) Latin America: (2) Income... 28,466 $2,149 18,719 26,745 $2,152 20,295 19,789 Operating income... 3,748 $283 2,199 2,640 $212 1, Depreciation and amortization $ $ Total assets (3)... 88,108 $6,856-76,204 $5,451 67,648 67,946 United States: Income... 3,953 $ Operating income $ Depreciation and amortization... (185) $(14) Total assets (3)... 11,491 $ Consolidated: (1) Income... 50,401 $3,806 36,330 52,019 $4,185 43,690 41,313 Operating income... 7,775 $587 4,954 6,525 $525 4,724 3,647 Depreciation and amortization... (1,619) $(122) (1,293) (1,760) $(142) (2,054) (1,989) Total assets...153,533 $11, ,508 $12, , ,230 (1) On April 23, 2012 we acquired Advance America, after which date Advance America's operations have been consolidated into our financial statements. Therefore, financial information derived from our unaudited consolidated financial statements as of and for the nine months ended September 30, 2012 and 2011 includes the results of operations of Advance America since April 23, (2) The amounts listed for our financial services operation in Latin America as of and for the nine months ended September 30, 2012 (other that the amounts listed for our total assets as of such date), have been obtained by deducting, from our financial services 56

59 segment results, the results of our United States operation. See Note 12 to our unaudited consolidated financial statements as of and for the nine months ended September 30, 2012 and Prior to April 23, 2012, all of our financial services operations were conducted in Latin America only. (3) The amounts listed for our total assets in Latin America as of September 30, 2012, have been derived from our internal unaudited financial data. For further information see Note 12 to our unaudited consolidated financial statements as of and for the nine months ended September 30, 2012 and 2011 and Note 15 to our audited consolidated financial statements as of and for the years ended December 31, 2011, 2010 and Information on Trends Signs of a global economic slowdown began to emerge in 2007 and 2008, leading to an economic recession in In the second quarter of 2009, the Mexican government implemented various measures to combat the H1N1 influenza virus or "swine flu" epidemic, which caused a panicked response in the national economy that cost the country close to 1.0% of GDP. Combined with an adverse global economic environment, the Mexican economy experienced a total GDP decrease of approximately 6.5% in 2009, according to Banco de México. The export sector was not immune from these challenges, and also experienced an adverse effect from the dramatic decrease in foreign sales, although the exchange rate between the Mexican peso and U.S. dollar acted as a buffer that reduced the effect of this decrease was a year of economic recovery for Mexico GDP increased 5%, compared to a 6.5% drop in 2009 with the exception of the construction sector (0.0% change) and private investment (a 0.7% increase). This was driven by the recovery of the U.S. economy, which grew by 2.8% and had a positive effect on the export of Mexican goods. Despite insecurity in the country, direct foreign investment rose to approximately $20 billion, and foreign investors purchased approximately $22.3 billion of Mexican government bonds. The exchange rate appreciated by 5.5% during 2010 (from Ps to Ps per $1.00). Inflation remained moderate during 2010, at 4.4%. The CETES 28-day rate dropped by 1% (from 5.4% in 2009 to 4.4% in 2010) and consumer and mortgage credit started to grow in year-to-year terms. In 2011, even as the world economy experienced various financial difficulties (including the European debt crisis and sluggish economic growth in the United States), the Mexican economy remained relatively stable. Mexico's external accounts are balanced, inflation is stable and financing is available for the private sector and government. Consumer prices in Mexico have remained stable throughout 2011 and the first nine months of 2012, and so families have been able to maintain their purchasing power. According to INEGI, the Consumer Confidence Index as of September 30, 2012 increased to 94 points, from 90.8 as of December 31, 2011 and from 91.2 as of September 30, Inflation stability has also contributed to stability in borrowing costs, leading the Mexican Federal Government to issue bonds with terms of up to 30 years and enabling the financial market's expansion. As the result of these developments, larger segments of the Mexican population have been able to access credit with long-term interest rates, and Mexican families have been able to obtain mortgage loans with longer terms and more favorable conditions. These developments have also positively affected the credit consumption industry, with commercial banking credit increasing at a rate of over 10% annually. We expect our revenues will continue to reflect trends in the Mexican commercial sector. Since 2010, our revenues have shown positive growth, fundamentally driven by our efforts to maintain a leadership position in our businesses, the availability of credit at our points of sale, and our program for expansion and the renovation of our stores. Going forward, we also plan to continue working with suppliers to obtain more competitive prices on the supply side. Mexico has a large and well diversified economy based on strong macroeconomic indicators, conservative sovereign borrowings, stable levels of inflation and interest rates, and a well capitalized and liquid banking system. Economic activity in Mexico has continued to grow in GDP increased by 3.3% during the third quarter of 2012, even as the rate of growth of the global economy has slowed. In the euro zone, economic activity continued to contract due to fiscal and credit adjustments resulting from imbalances in several countries in the region. In the United States, economic growth remained subdued as reflection of a weakening consumer demand. In this context, the growth outlook for this year and the next has been adjusted to the downside for both developed and emerging economies. We believe that despite a positive economic outlook for Mexico and recent indicators of economic recovery, certain global factors such as economic turmoil in Europe, the credit crisis, high unemployment rates, the 57

60 level of the federal economic stimulus, and political and economic uncertainty in the United States, could bring about another slowdown in global economic activity. Our revenues could be adversely affected by these factors, combined with other issues such as growing competition and current insecurity in Mexico. Management Overview Except as otherwise indicated, figures as of and for the nine months ended September 30, 2012 and 2011, have been derived from our unaudited consolidated financial statements as of and for the nine months ended September 30, 2012 and 2011, prepared in accordance with IFRS, while figures as of and for the years ended December 31, 2011, 2010 and 2009 have been derived from our audited consolidated financial statements as of and for the years ended December 31, 2011, 2010 and 2009, prepared in accordance with MFRS. For purposes of this section, comparative percentages have been calculated based on the peso amounts. Results of Operations Nine Months Ended September 30, 2012 Compared with Nine Months Ended September 30, 2011 Income Our income for the nine months ended September 30, 2012 increased by 39% to Ps.50,401 million ($3,806 million) from Ps.36,330 million ($3,021 million) in the nine months ended September 30, This growth was the result of a 73% increase in income from the financial services segment and a 2% increase in income from the retail segment. Such increase in the financial services segment income was in turn due to the acquisition of Advance America, as well as a growing loan portfolio (primarily personal loans). During the nine months ended September 30, 2012, 64% of our income was derived from the financial services segment (which includes the results of operations of Advance America since April 23, 2012), while the remaining 36% came from the retail segment. During the nine months ended September 30, 2011, 52% of our income was derived from the financial services segment and 48% from the retail segment. Costs Our costs for the nine months ended September 30, 2012 increased by 29% to Ps.21,015 million ($1,587 million) from Ps.16,344 million ($1,359 million) for the nine months ended September 30, 2011 as a result of a significant increase in financial costs, primarily due to an increase in the credit reserves derived from the growth of our loan portfolio and to the addition of Advance America reserves to our consolidated results. Sales, Administration and Promotion Expenses Our sales, administration and promotion expenses for the nine months ended September 30, 2012 increased by 44% to Ps.19,978 million ($1,509 million) from Ps.13,708 million ($1,140 million) for the nine months ended September 30, This increase is primarily a result of an important growth in the number of points of sales and the addition of Advance America's expenses to our consolidated results. Depreciation and Amortization For the nine months ended September 30, 2012, our depreciation and amortization was Ps.1,619 million ($122 million) compared to Ps.1,293 million ($108 million) for the nine months ended September 30, This change is due primarily to the addition of more assets to our balance sheet as a consequence of our acquisition of Advance America. Comprehensive Financial Income Our comprehensive financial income is associated with the retail segment and, to a lesser extent, with the financial services business of Seguros Azteca; thus, no income or expense is associated with the financial services business of Banco Azteca. Our financial expense in the nine months ended September 30, 2012 was Ps.37,962 million ($2,867 million) compared to financial income of Ps.22,021 million ($1,831 million) in the nine months ended September 30, In the nine months ended September 30, 2012, an expense for the valuation of financial derivatives of Ps. 35,327 million ($2,668 million) was recorded due to a decrease in our share price on which the valuation of certain financial derivatives to which we are a party is based. This decrease in our share price was in turn triggered by certain changes made in April 2012 by the Bolsa Mexicana de Valores (the Mexican Stock Exchange or "BMV") to the methodology used to qualify companies for listing in the Prices and Quotes Index (Índice de Precios y Cotizaciones or "IPyC"), the main stock index of the BMV, which lists the 35 most liquid companies listed on the BMV (see "Our Business Legal Proceedings Civil Lawsuit against the BMV"). In the nine months ended 58

61 September 30, 2011, our holdings in the same financial derivatives resulted in other financial income of Ps. 21,970.3 million ($1,827 million). Such financial derivatives are based on the value of our shares as an initial reference value. The changes in the valuation of these financial derivatives do not have an effect on our cash flow. As of September 30, 2012, the notional value of these financial derivatives was Ps.10,377 million ($807 million). The potential gain for the company upon settlement is the difference between the initial reference value and the value of our shares on the termination date. As of September 30, 2012, we have set aside cash collateral in the amount of Ps.10,377 million ($807 million), equal to 100% of the notional value of the financial derivatives, which is the maximum amount that we would lose in the event that our share price on the termination date is below the initial reference value. For additional information see Note 10 to our audited consolidated financial statements as of and for the years ended December 31, 2011 and In addition, see "Our Business Legal Proceedings Civil Lawsuit against the BMV," for information on current litigation related to this line item. Income Tax In the nine months ended September 30, 2012, our results led to a tax provision of Ps.8,626 million ($651 million) largely due to the other financial income explained above, compared to a positive tax provision of Ps.7,507 million ($624 million) in the nine months ended September 30, 2011, primarily due to the other financial expense recorded that year. Consolidated Net Income Our consolidated net loss in the nine months ended September 30, 2012 was Ps.21,478 million ($1,622 million) compared to a consolidated net income of Ps.19,220 million ($1,598 million) in the nine months ended September 30, This change was mainly because of a decrease in our share price on which the valuation of certain financial derivatives to which we are a party are based. Even though the variations in the valuation of the financial derivatives during their lifetime do not represent an impact in our cash flow, the loss impacts our net income for the nine months ended September 30, Year Ended December 31, 2011 Compared with Year Ended December 31, 2010 Income Our income in 2011 increased by 19% to Ps.52,019 million ($4,185 million) from Ps.43,690 million ($3,457 million) in 2010 (see notes 1, 4 and 7 to the tables presented under "Summary Financial Information" and "Selected Financial Information"). This growth was the result of a 32% increase in income from the financial services segment, which was in turn due to a growing loan portfolio (primarily personal loans) and an 8% increase in income from the retail segment, which was in turn due to the increased sales of merchandise, particularly computers, motorcycles and telephones, in response to increased demand by our target customer base and strong economic growth in Mexico. As a result of the above, in 2011, 51% of our income was derived from the financial services segment, while the remaining 49% is attributable to the retail segment, whereas in 2010, 46% of our income was derived from the financial services segment and 54% from the retail segment. Costs Our costs in 2011 increased by 18% to Ps.24,297 million ($1,955 million) from Ps.20,612 million ($1,631 million) in 2010 (see notes 1, 4 and 7 to the tables presented under "Summary Financial Information" and "Selected Financial Information") as a net result of a 15% increase in retail costs and a 26% increase in financial services costs. The increase in retail costs was due to higher merchandise sales, whereas the increase in financial services costs was due to the growth of our credit portfolio. Sales, Administration and Promotion Expenses Our sales, administration and promotion expenses in 2011 increased by 19% to Ps.19,436 million ($1,564 million) from Ps.16,301 million ($1,290 million) in 2010 as a result of a 32% increase in the number of employees, from 39,429 to 52,064, due to the expansion of our operations in Mexico and other parts of Latin America, and a 28% increase in the number of our points of sale, from 2,253 to 2,878. Depreciation and Amortization For 2011, our depreciation and amortization was Ps.1,760 million ($142 million) compared to Ps.2,054 million ($163 million) in This decrease was due primarily to a reduction in our fixed assets. 59

62 Other (Expense) Income, Net In 2011, our other expenses were Ps.394 million ($32 million) compared to other income of Ps.395 million ($31 million) in This change was due primarily to an impairment of real estate in 2011 of Ps.338 million ($24 million) caused by a difference between the book value and the market value of certain real estate (see Note 2(m) to our audited consolidated financial statements as of and for the year ended December 31, 2011 and 2010). Comprehensive Financial Income Our comprehensive financial income is associated with the retail segment and, to a lesser extent, with the financial services business of Seguros Azteca; thus, no income or expense is associated with the financial services business of Banco Azteca. Our comprehensive financial income in 2011 was Ps.37,295 million ($3,001 million) compared to financial expense of Ps.5,530 million ($438 million) in In 2011, an income for valuation of financial derivatives of Ps.35,421 million ($2,850 million) was recorded due to an increase in our share price as of December 31, 2011, of Ps.1,385.92, compared to Ps as of December 31, 2010; whereas in 2010 holdings in the same financial derivatives resulted in other financial expense of Ps.4,917 million ($389 million). For additional information see Note 10 to our audited consolidated financial statements as of and for the years ended December 31, 2011 and Income Tax In 2011, our results led to a tax provision of Ps.13,402 million ($1,078 million) largely due to the other financial income explained above, compared to a negative tax provision of Ps.366 million ($29 million) in 2010, in turn largely due to the other financial expense recorded that year. Consolidated Net Income Our consolidated net income in 2011 increased to Ps.30,078 million ($2,420 million) from Ps.493 million ($39 million) in This change was mainly due to an increase in 2011 in the valuation of financial derivatives explained above. Year Ended December 31, 2010 Compared with Year Ended December 31, 2009 Income Our income in 2010 increased by 6% to Ps.43,690 million ($3,457 million) from Ps.41,313 million ($3,058 million) in 2009 (see note 1 to the tables presented under "Summary Financial Information" and "Selected Financial Information"). This growth was the result of a 9% increase in income from the retail segment, which was in turn due to increased sales of merchandise, particularly consumer electronics, household appliances, motorcycles and computers, due to improved economic conditions compared to The increase was also due to a 3% increase in income from the financial services segment due to an expansion of our credit loan portfolio and higher collections on consumer loans. As a result of the above, in 2010, 46% of our income was derived from the financial services segment, while the remaining 54% came from the retail segment, whereas in 2009, 48% of our income was derived from the financial services segment and 52% came from the retail segment. Costs Our costs in 2010 decreased by 1% to Ps.20,612 million ($1,631 million) from Ps.20,746 million ($1,536 million) in 2009 (see note 1 to the tables presented under "Summary Financial Information" and "Selected Financial Information") as a result of an 11% increase in retail costs and a 13% reduction in financial costs. The decrease in financial costs was primarily due to lower requirements for loan loss reserves, which was in turn due to a strengthening in the quality of our credit portfolio as our past due accounts as a percentage of our current portfolio decreased from 8.7% at the end of 2009 to 5.2% at the end of Sales, Administration and Promotion Expenses Our sales, administration and promotion expenses in 2010 increased by 9% to Ps.16,301 million ($1,290 million) from Ps.14,931 million ($1,105 million) in 2009 as a result of the opening of 211 points of sale year-overyear, and a 5% increase in the number of total employees, from 37,948 to 39,429 over the same period. 60

63 Depreciation and Amortization In 2010, our depreciation and amortization was Ps.2,054 million ($162 million) compared to Ps.1,989 million ($147 million) in This increase was due primarily to an increase of Ps.318 million ($26 million) in capital expenditures relating to store expansions. Other (Expense) Income, Net In 2010, our other income was Ps.395 million ($31 million) compared to other expenses of Ps.406 million ($30 million) in This change was primarily due to the suspension of our automobile sale business and a writeoff of an excess provision for taxes in Comprehensive Financial Income Our comprehensive financial income is associated with the retail segment and, to a lesser extent, with the financial services business of Seguros Azteca; thus, no income or expense is associated with the financial services business of Banco Azteca. Our financial expense in 2010 was Ps.5,530 million ($438 million) compared to financial income of Ps.3,840 million ($284 million) in In 2010, other financial expense of Ps.4,917 million ($389 million) was recorded due to a decrease in the valuation of financial derivatives based on prices of our shares we held in 2010, whereas in 2009 holdings in the same financial instruments resulted in other financial income of Ps.2,511 million ($186 million). Income Tax In 2010, our results led to a negative tax provision of Ps.366 million ($29 million) largely due to the other financial expenses explained above, compared to a tax provision of Ps.1,980 million ($147 million) in 2009, in turn largely due to the other financial income recorded in that year. Losses from discontinued operations During the fourth quarter of 2009, as a result of the global downturn in the automotive industry, our management decided to suspend the sale of automobiles. As a result, our descriptions of our financial results in 2009 exclude operations in our automotive division. These discontinued operations represented a net loss of Ps.397 million ($29 million) in 2009 which, in accordance with MFRS, is shown as a discontinued section in our income statement, discounting the relative effects of income tax. Consolidated Net Income Our consolidated net income in 2010 decreased by 90% to Ps.493 million ($39 million) from Ps.4,945 million ($366 million) in This change was mainly because of non-cash financial expense due to the decrease in 2010 of the market value of financial instruments that we held as explained in " Financial Income (Expense)" above. Liquidity and Capital Resources Factors that may influence our liquidity and capital resources as discussed below include: our ability to generate sufficient free cash flow; the ability of our subsidiaries to make distributions; factors that affect the results of our operations, including general economic conditions, demand for our products, the competitive environment, demographic changes in our market areas and regulation; and factors that affect our access to bank financing and the capital markets, including interest rate fluctuations, availability of credit and operational risks of our business. Our principal sources of liquidity include cash and marketable financial instruments on hand and noncommitted short-term revolving credit lines. For purposes of comparability, financial information on liquidity and capital resources as of December 31, 2011 included below, when compared to such information as of September 30, 2012, is derived from reconciliations to IFRS of our shareholders' equity as of December 31, 2011 (see Note 14 to our unaudited consolidated financial statements as of and for the nine months ended September 30, 2012 and 2011, beginning on page F-2). 61

64 Our net working capital increased by 59% to Ps.33,589 million ($2,614 million) as of September 30, 2012 from Ps.21,127 million ($1,511 million) as of December 31, This was largely due to an increase in our net credit portfolio. Our net working capital increased by 579% to Ps.18,504 million ($1,324 million) as of December 31, 2011 from Ps.2,725 million ($221 million) as of December 31, This was largely due to an increase in the valuation of derivative financial instruments. Our net working capital decreased by 76% to Ps.2,725 million ($221 million) as of December 31, 2010 from Ps.11,294 million ($865 million) as of December 31, This was largely due to a decrease in our net credit portfolio in 2010 and, to a lesser extent, to a 2% reduction in cash and investments in securities, which was partially offset by a 6% increase in consumer savings at Banco Azteca. Cash, marketable financial instruments and repos for the consolidated company decreased by 7% to Ps.48,862 million ($3,802 million) as of September 30, 2012 from Ps.52,381 million ($3,747 million) as of December 31, Cash, marketable financial instruments and repos for the retail business segment increased by 13% to Ps.24,499 million ($1,906 million) as of September 30, 2012 compared to Ps.21,683 million ($1,551 million) as of December 31, 2011 due principally to the decrease of non-current assets derived from the valuation of financial derivatives explained above. Cash, marketable financial instruments and repos for the financial services business segment decreased by 20% to Ps.24,362 million ($1,896 million) as of September 30, 2012 from Ps.30,604 million ($2,189 million) as of December 31, This change is mainly due to an increase in our credit portfolio. Grupo Elektra and the Guarantors had consolidated total indebtedness of Ps.17,174 million ($1,336 million) as of September 30, 2012 compared to Ps.13,404 million ($959 million) as of December 31, This increase was largely due to the issuance of senior notes for $150 million, the net result of the securitization of Dinero Express electronic money transfers fees for Ps.1,071 million ($83 million) and the credit bank line from Bancomext for Ps.922 million ($72 million). Cash, marketable financial instruments and repos increased by 9% to Ps.52,381 million ($3,747 million) as of December 31, 2011 from Ps.47,936 million ($3,879 million) as of December 31, Cash, marketable financial instruments and repos for the retail business segment increased by 100% to Ps.21,683 million ($1,551 million) as of December 31, 2011 from Ps.10,932 million ($885 million) as of December 31, Cash, marketable financial instruments and repos for the financial services business segment decreased by 17% to Ps.30,604 million ($2,189 million) as of December 31, 2011 from Ps.37,004 million ($2,995 million) as of December 31, This change is due principally to the increase of the net loan portfolio. Grupo Elektra and the Guarantors had consolidated total indebtedness of Ps.13,404 million ($959 million) as of December 31, 2011 compared to Ps.8,294 million ($671 million) as of December 31, This 62% increase was largely due to the issuance of senior notes for $400 million. Cash, marketable financial instruments and repos decreased by 2% to Ps.47,936 million ($3,879 million) as of December 31, 2010 from Ps.48,818 million ($3,738 million) as of December 31, Cash, marketable financial instruments and repos for the retail business segment decreased by 57% to Ps.10,932 million ($885 million) as of December 31, 2010 from Ps.25,177 million ($1,928 million) as of December 31, Cash, marketable financial instruments and repos for the financial services business segment decreased by 3% to Ps.37,004 million ($2,995 million) as of December 31, 2010 from Ps.38,125 million ($2,920 million) as of December 31, This change is due principally to an increase in our total net loan portfolio. Grupo Elektra and the Guarantors had consolidated total indebtedness of Ps. 8,294 million ($671 million) as of December 31, 2010 compared to Ps.6,905 million ($529 million) as of December 31, This 20% increase was largely due to the issuance of the long-term cebures Elektra 10-2 for Ps.1,000 million ($81 million) on November 11,

65 The following chart sets forth our generation and application of cash for the periods indicated: As of or for the Nine Months Ended September 30 As of or for the Year Ended December (1) 2012 (1) IFRS Unaudited MFRS Audited (Ps.) ($) (Ps.) (Ps.) ($) (Ps.) (Ps.) (in millions) Net cash provided by (used in) operating activities... (4,271) (332) (1,598) ,035 19,595 Net cash provided by (used in) investing activities... 4, (3,092) 1, (1,164) (87) Net cash provided by (used in) financing activities ,992 2, (754) (1,512) Cash, marketable financial instruments and repos at period end... 48,862 3,802-52,381 3,747 47,936 48,818 (1) On April 23, 2012 we acquired Advance America, after which date Advance America's operations have been consolidated into our financial statements. Therefore, financial information derived from our unaudited consolidated financial statements as of and for the nine months ended September 30, 2012 and 2011 includes the results of operations of Advance America since April 23, Net cash used in operating activities for the nine months ended September 30, 2012 increased by 167% to Ps.4,271 ($332 million) from Ps.1,598 ($119 million) for the nine months ended September 30, This change was mainly due to an increase in our total net loan portfolio. Net cash provided by operating activities for the year ended December 31, 2011 decreased by 71% to Ps.304 ($22 million) from Ps.1,035 ($84 million) for the year ended December 31, This change was mainly due to the net result of an increase in our total net loan portfolio and inventories, and an increase in other liabilities. Net cash provided by operating activities for the year ended December 31, 2010 decreased by 95% to Ps.1,035 million ($84 million) from Ps.19,595 million ($1,501 million) for the year ended December 31, This change was mainly due the net result of an increase in our total net loan portfolio and inventories, and a lower increase in other liabilities. For the nine months ended September 30, 2012, investing activities provided net cash for Ps.4,394 million ($342 million) compared to a use of net cash in investing activities of Ps.3,092 million ($230 million) for the nine months ended September 30, This change was mainly due to the net result of the acquisition of Advance America and a disposition of investments in securities. For the year ended December 31, 2011, investing activities provided net cash for Ps.1,156 ($83 million) compared to a use of net cash in investing activities of Ps.1,164 million ($94 million) for the year ended December 31, This change was mainly due to the net result of an increase in collected interest and an increase in capital expenditures for store expansions. Net cash used in investing activities for the year ended December 31, 2010 increased by 1,238% to Ps.1,164 million ($94 million) from Ps.87 million ($7 million) for the year ended December 31, This change was mainly due to the net result of an increase in collected interest and an increase in investments in associates and subsidiaries and in capital expenditures for store expansions. Net cash provided by financing activities for the nine months ended September 30, 2012 decreased by 92% to Ps.309 million ($24 million) from Ps.3,992 million ($297 million) for the nine months ended September 30, This change was mainly due to the net result of an increase in our indebtedness and an increase in principal and interest payments under our existing indebtedness, and an increase in other financing activities. For the year ended December 31, 2011, financing activities provided net cash for Ps.2,985 million ($214 million) compared to a use of net cash in financing activities of Ps.754 million ($61 million) for the year ended December 31, This change was mainly due to the net result of an increase in additional paid-in capital and in our indebtedness (largely as a result of the issuance of senior notes for $400 million in August 2011), and an increase in repurchases of our shares. Net cash used in financing activities for the year ended December 31, 2010 decreased by 50% to Ps.754 million ($61 million) from Ps.1,512 million ($116 million) for the year ended December 31, This change was mainly due to a decrease in principal and interest payments under our indebtedness. For more detail, see "Consolidated Statements of Cash Flows" set forth in our consolidated financial statements. 63

66 Indebtedness The following chart sets forth our debt facilities outstanding as of September 30, 2012: Description (Ps.) ($) Rate Maturity (in millions) Call money (1) % 10/01/2012 Commerzbank AG (2) % 10/01/2012 Banco Monex TIIE bps 10/09/2012 Cebures Elektra 312 Actinver... 1, TIIE bps 10/25/2012 Banorte TIIE bps 10/26/2012 Wells Fargo (2) % 11/01/2012 Banco Invex TIIE bps 12/13/2012 Cebures Elektra 10-2 Actinver... 1, TIIE bps 11/07/2013 Cebures Elektra 11 Actinver... 2, TIIE bps 03/27/2014 Arrendadora Internacional Azteca % 12/31/2015 Private Loan... 1, % 03/13/2017 National Integrity Life Insurance Company (2) % 06/10/2017 Obligaciones Bazteca 08 Banco Invex... 1, TIIE bps 01/11/2018 Senior Notes (2)... 7, % 08/06/2018 Cebures Invex DINEXCB , TIIE bps 05/02/2019 Bancomext % 05/08/2019 Banxico (SHIF) % 07/09/2027 Total Debt... 18,941 1,473 Current portion of short term debt... 4, Long term debt... 14,604 1,136 Total debt... 18,941 1,473 (1) Represents short-term interbank transactions conducted by Banco Azteca. (2) Indebtedness denominated in U.S. dollars and accounted for in pesos at the applicable exchange rate. The following chart sets forth the maturities of our debt facilities outstanding as of September 30, 2012: (Ps.) ($) (in millions) , , , and beyond... 11, Total Debt... 18,941 1,473 Current portion of long term debt... 4, Long term debt... 14,604 1,136 See Note 8 to our unaudited consolidated financial statements as of and for the nine months ended September 30, 2012 and 2011 for further information on our indebtedness. Capital Expenditures Grupo Elektra's capital expenditures for the nine months ended September 30, 2012 was Ps.2,456 million ($191 million), mainly as a result of an increase in our points of sales. Grupo Elektra's capital expenditures for the year ended December 31, 2011 was Ps.2,346 million ($168 million), mainly as a result of the expansion of our operations in Mexico, the remodeling of stores in Central and South America and upgrades to our retail and banking technologies. 64

67 The following chart sets forth our capital expenditures as of the dates or for the periods indicated: As of or for the Nine Months Ended September 30 As of or for the Year Ended December (Ps.) ($) (Ps.) (Ps.) ($) (Ps.) (Ps.) (in millions) Stores and regional offices... 2, ,054 1, , Technology, licenses and systems development Transportation equipment Machinery, equipment and furnishing Other (1) Total... 2, ,389 2, ,758 1,440 (1) Other includes corporative offices, distribution centers, etc. Internal Controls We implement various internal control systems in all critical areas of our operations, including: in-store operations (cash sales, in-store expenditure, etc.); treasury (flow of funds control, bank reconciliations, fund transfers to stores, etc.); electronic money transfers (control of receipt and cash payment); research, provision, and collection of credits; stock management (receipt, transfers, and departure of goods); fixed asset management (additions, reductions, inventories, etc.); and payroll (workforce personnel monitoring, processing and payment of wages and compensation, etc.). Internal control procedures are designed by the Methods and Procedures Office, which is responsible for evaluating, creating, implementing, and disseminating policies that best embody our values, vision, and mission. This office is responsible for creating internal control policies for both operational areas and administrative and corporate areas. All approved policies can be accessed by employees on our intranet. The Comptroller reviews and disseminates the accounting policies that are most suitable and that provide reasonable security over transactions made and registered in conformity with the Normas de Información Financiera (Financial Information Regulations, or "NIF"), as well as with internal policies. Finally, our Auditing Office ensures that internal control policies are enforced, company resources are suitably used, and reports of our operations are accurate. Information Disclosure Controls Our information disclosure controls are designed with the aim of ensuring that information is compiled and communicated to our Directors, including the Director General ("CEO") and the Chief Financial Officer ("CFO"). This information must be submitted in a manner suitable for opportune decision making regarding disclosure of required information. Internal procedures and controls for financial reports are designed with the aim of providing reasonable certainty that: our transactions are duly authorized; assets are protected against inappropriate or unauthorized use; and transactions are duly documented and reported. Limitations of the Validity of Controls Our administration, including our CEO and our CFO, do not expect, nor can they guarantee, that our Disclosure Controls and Internal Controls prevent all errors and fraud. A control system, regardless of how wellconceived and operated it may be, may only provide a reasonable but not absolute guarantee of compliance with its objectives. Furthermore, the design of a control system must reflect the fact that resource limitations exist, and that the benefits offered by controls must be considered in relation to their costs. Given the limitations inherent in all control systems, no evaluation of controls can provide the absolute guarantee that all matters of control and cases of fraud that may occur within our business will be detected. These inherent limitations include the reality that 65

68 judgment in decision making may be incomplete, and that failure may occur through simple errors or mistakes. Additionally, controls may be circumvented by individual acts of certain persons, either by the collusion of two or more people or through someone ignoring a control. The design of any control system is also based on certain actions regarding the probability of future events, and cannot ensure that a particular control will be successful in achieving its objectives under all possible future conditions. With time, a control may become inadequate due to changes in conditions, or the level of compliance with policies or procedures related to the control may deteriorate. Given the limitations inherent in any cost-effective control system, false declarations made due to errors or fraud may go undetected. Annual Evaluation of our Information Disclosure Controls and Internal Controls As of December 31, 2011, an evaluation was made under the supervision and with the participation of our administration, including our CEO and our CFO, assessing the effectiveness of the design and operation of our information disclosure controls. From this evaluation, it was concluded that, subject to the limitations mentioned above: the design and operation of our controls are effective in guaranteeing the disclosure of company information subject to disclosure, as stipulated in the LMV; and our internal controls are effective in providing the reasonable guarantee that our financial statements are clearly presented in conformity with the NIF regulations. In 2012, no significant changes were made to our internal controls, or in other areas that could have a significant effect on these controls. Code of Ethics. Considering the above, in 2003 our Board of Directors adopted a Code of Ethics applicable to our CEO, CFO, finance officer, and other persons undertaking similar roles. Our Code of Ethics is available on our website, at Critical Accounting Reserves, Provisions, and Estimations In drafting our financial statements in accordance with the NIF regulations, our management was required to make estimates affecting the sums reported therein. Real results may differ from these estimates. No critical accounting estimations were made. Preventive estimates for credit risks of Banco Azteca are detailed in the Annual Report issued by Banco Azteca presented in compliance with general regulations applicable to issuers of securities and other participants in the securities exchange, for the financial reporting period ended December 31,

69 OUR BUSINESS Overview We are one of the largest specialty retailing, consumer finance and banking services companies in Mexico in terms of number of stores, branches and revenues. We also operate in Argentina, Brazil, El Salvador, Guatemala, Honduras, Panama and Peru. In April 2012, we began operating in the United States after our acquisition of Advance America, a leading non-bank provider of cash advance services in the United States. We operate in two business segments: retail and financial services. Our retail products are sold principally through Elektra and Salinas y Rocha stores, which offer brand-name consumer electronics, household appliances, motorcycles, computers, furniture, mobile phones, tires and vehicle batteries. In addition to selling retail products, we offer retail customer services such as electronic money transfers, extended product warranties and mobile phone air time. As of September 30, 2012, we operated 1,023 retail stores in Mexico and 230 retail stores in seven other Latin American countries. An integral part of our overall business strategy has been to provide consumer financial services to our customers, which makes our retail products and services more accessible to them. We believe our consumer financing offerings increase the potential customer base for our retail segment and strengthen our existing customers' loyalty and purchasing power, thereby increasing overall sales and profitability. For the nine months ended September 30, 2012, our retail operations accounted for 36% of our total consolidated revenues and 48% of our total consolidated EBITDA. For the same period in 2011, our retail operations accounted for 48% of our total consolidated revenues and 59% of our total consolidated EBITDA. Our financial services segment is mainly comprised of our subsidiary Banco Azteca and other subsidiaries of Grupo Elektra that operate banks under the Banco Azteca brand name. Since April 2012, our financial services segment is also comprised of our subsidiary Advance America, a leading non-bank provider of cash advance services in the United States. In addition, our financial services segment includes the operation of Afore Azteca, Seguros Azteca, Seguros Azteca Daños and Punto Casa de Bolsa. For the nine months ended September 30, 2012, our financial services operations accounted for 64% of our total consolidated revenues and 52% of our total consolidated EBITDA. In Mexico, Banco Azteca has branches in all of our 1,023 retail stores and 2,108 independent branches. We also operate banks under the Banco Azteca brand name in 204 of our retail stores and 372 independent locations in Central and South America, except in Argentina, where we do not have a bank. Banco Azteca provides consumer credit, personal loans, commercial credit, payroll loans, auto loans, working capital loans, group loans, credit card accounts and other consumer and commercial finance services. During the nine months ended September 30, 2012 through our financial services segment, we provided financing for 67% of our retail sales and provided over Ps.13,305 million ($1,035 million) of secured and unsecured commercial credit to more than 35 corporate customers. Afore Azteca engages in pension fund administration. Seguros Azteca provides life and health insurance products, Seguros Azteca Daños provides casualty insurance products under the Seguros Azteca brand name and Punto Casa de Bolsa is a brokerage firm that offers fixed income and equity instruments and other financial products to its client base. Banco Azteca banks, Afore Azteca, Seguros Azteca, Seguros Azteca Daños and Punto Casa de Bolsa are subject to banking regulations, pension fund regulations, insurance regulations, and brokerage regulations, respectively. In the United States, Advance America is the largest non-bank provider of cash advance services, as measured by number of stores, with 2,409 centers in 29 states. Advance America also has 32 centers in the United Kingdom and 18 centers in Canada that have ceased all operations as part of our strategy to focus on the Americas. Advance America is subject to a variety of federal, state and local regulations on cash advance services in the United States. For the nine months ended September 30, 2012, Advance America, which was consolidated into our financial statements effective April 23, 2012, accounted for approximately 8% of our total consolidated revenues and 7% of our total consolidated EBITDA. We also hold, through subsidiaries and affiliates, strategic minority investments in TV Azteca, the second largest producer of Spanish language television content in the world, and Iusacell, one of the largest mobile telephone companies in Mexico. 67

70 Our Corporate Structure The following chart shows our organizational structure including our main subsidiaries and affiliates (strategic investments), and where they operate: The following table provides an overview of the products and services that may be offered by Grupo Elektra at its points of sale: Retail Segment Financial Services Segment Products Services Latin America United States Consumer electronics Money transfers Consumer credit Cash advance services Household appliances Extended warranties Personal loans Furniture Mobile phone airtime Pawnshop loans Mobile phones Motorcycles (Italika) Tires Vehicle batteries Computers Savings accounts Time deposits Debit cards Credit cards Insurance Pension funds Credit reports Leasing Small business loans Corporate loans Bill pay services Group loans Cash concentration/disbursement services 68

71 Business Strengths Retail Segment Leading Market Position As of September 30, 2012, we had a total of 1,198 Elektra stores, of which 968 were located throughout Mexico, and 55 Salinas y Rocha stores, all of which were located throughout Mexico. We have one of the largest distribution networks in the Mexican consumer electronics, household appliances, furniture and motorcycle markets, as measured by number of retail stores. Our extensive store network allows us to have direct and frequent access to our customer base. We also believe that we have established a leading market position for our branded consumer electronics, branded household appliances, branded motorcycles and money transfers throughout Mexico. Outside Mexico, our international Elektra store network competes against local and international retailers in the seven other Latin American countries where we have established operations. We also believe that for most of our customers, our stores are the most convenient source of many household goods and our pricing and commercial terms are consistent with our customers' income levels and consumption patterns. Differentiated Shopping Experience We offer our customers a differentiated shopping experience through: Comprehensive Product Offering Delivered at a Compelling Value. We offer a wide variety of products to our customers including, among other things, electronics, furniture and household appliances. At our stores, our customers can fulfill all their household needs at highly competitive prices. Our marketing department makes pricing analyses of various market participants in order to assure that we have the most competitive prices in the market. The value of our products coupled with our financing options give our customers the possibility to finance the purchase of 75% of the products offered in our stores for as low as $8 per week. For $25 per week, our customers can finance the purchase of 98% of our store offerings. This allows our customers to purchase goods that they might not otherwise be able to afford. Integrated Consumer-Targeted Banking Services. Synergies between the financial services business and the retail business are fundamental to our margins, asset turnover and profitability. Consumer credit services are offered through Banco Azteca, with the aim of providing clients with financing options that allow them to acquire our products at an affordable weekly cost. Through Banco Azteca, we build a long-term relationship with our customers that translates into millions of people visiting and returning to branches inside our stores on a weekly basis to make credit payments. This approach allows families to get acquainted with our merchandise offerings and better know how to fulfill future household needs through purchases at the store. In addition, Banco Azteca allows customers to effectively purchase goods and services by providing credit, which in turn allows the retail segment to use its liquidity to increase product offerings and improve operations. Banco Azteca pays the retail business in cash for the goods sold on credit. It also manages collections while the retail business remains focused on merchandise solutions, customer service and expansion. Outstanding Customer Service. We train all of our sales personnel to successfully provide expert advice to all of our clients and enhance their shopping experience, particularly for products with advanced technology. Strong International Presence with Compelling Growth Prospects We have leveraged our expertise in the retail and financial services businesses to expand into other Latin American countries that have demographics similar to Mexico's. In 1997, we began to operate stores outside of Mexico and as of September 30, 2012, we operated 230 Elektra points of sale in Argentina, Brazil, Guatemala, Honduras, Panama and Peru. For the nine months ended September 30, 2012, our international operations (excluding Advance America) represented approximately 14% of our consolidated revenues and we expect to further increase our international operations through acquisitions and the opening of new points of sale both in countries in which we currently operate and in countries where we currently have no presence. Strong Brand Recognition with High Consumer Loyalty We believe our brands are well positioned in the minds of consumers, which drives repeat business. In addition, we believe that our credit consumer sales or installment sales program helps win the early loyalty of young Latin American consumers by giving them the opportunity to increase their quality of life. We believe that we will retain the loyalty of these young consumers as they mature because of the broad range of competitively-priced products and services for all age groups that we offer through Elektra and Salinas y Rocha. 69

72 In addition, we have a strong and growing market share with our own brand, ekt, through which we sell electronics, computers, cell phones, white goods and appliances, and have also launched a new dining room line, bedrooms and other furniture, all of which are provided to us by world-class manufacturers. As of September 30, 2012, ekt had 11% market share of the offered stock keeping units (SKUs) of the product lines offered in Mexico. Under our own Italika brand we have become the largest motorcycle assembler and distributor in Mexico with more than 50% market share. Advanced Distribution and Technology Capabilities With real-time inventory control sales monitoring systems at most of our stores in Mexico and the rest of Latin America, and through the use of our own satellite and/or fiber optics systems linking all of our stores with our headquarters in Mexico City, we utilize advanced retail technology comparable to that of other leading retailers worldwide. We operate SAP Retail, a system supported by a cutting-edge technology that allows us to implement an integrated planning process to optimize the administration of our products and services. Our distribution network incorporates up-to-date technology and distribution logistics that enable us to effectively manage our network of stores. Proven and Experienced Management Team Our management has demonstrated its ability to successfully implement our strategy and to manage our expansion, both in Mexico and the rest of Latin America. Our senior management has extensive experience in retail operations, systems, new-product introduction and distribution earned through our 61 years of operation. In addition, senior management has trained and developed management talent at various levels to help fulfill future Grupo Elektra management needs. Established Relationships with Major Suppliers Throughout the years we have established solid relationships with our major merchandise suppliers, which give us a strong purchasing power that allows us to offer quality products at prices which provide us a competitive selling advantage over other retailers. In addition, although we purchase a significant portion of our total inventory from a limited number of vendors (as most specialty retailers do), during the nine months ended September 30, 2012, the largest vendor accounted for only 11% of our purchases and approximately 67% of our purchases of electronics, appliances and cell phones were supplied by 10 vendors. Financial Services Segment Leading Market Position in the Bank-Store Segment and Integrated Consumer-Targeted Banking Services Within the bank-store segment (which is currently Banco Azteca's core segment of operations) as of September 30, 2012, Banco Azteca was the largest bank in Mexico, as measured by branches, assets, total loan portfolio and deposits, with more than twice as many branches as our next largest competitor and approximately four times its assets, total loan portfolio and deposits. As mentioned above, synergies between the financial services business and the retail business are fundamental to our margins, asset turnover and profitability. In Mexico, Banco Azteca has branches in all of our 1,023 retail stores and 2,108 independent branches. We also operate banks under the Banco Azteca brand name in 204 of our retail stores and 372 independent locations in Central and South America, except in Argentina, where we do not have a bank. The Elektra stores allow Banco Azteca to increase its consumer loan portfolio by selling most of their goods and services through credit. We believe that the trust we have built over more than six decades of operations in the retail segment, our ample distribution network of more than 3,700 points of sale, and the significant number of daily visitors to our stores, bring an unparalleled business opportunity to our financial services segment. Low Levels of Past Due Loans With significant credit experience, knowledge of the target market and thorough risk analysis, we are able to offer credit to a wide range of customers, including those who may not have proof of income. Our loan portfolio has solid performance ratios. For Banco Azteca Mexico, the percentage of loans that were 90 days past due was 4.6% as of December 31, 2011 and 5.1% as of September 30, For Grupo Elektra's consolidated loan portfolio, the percentage of loans that were 90 days past due was 5.5% as of the year ended December 31, 2011 and 5.9% as of the nine months ended September 30, Low Cost and Alternative Sources of Funding For the years ended December 31, 2010 and 2011, and for the nine months ended September 30, 2012, the average cost of funding for all of Banco Azteca's products was, respectively, 2.93%, 2.50% and 2.31%; that is, 70

73 respectively, 198, 232 and 246 basis points below the TIIE for the same period. Such low cost of funding allows us to obtain very significant margins on the fees and rates we charge for our loans. Strong Presence and Growth Opportunities in the United States through our Subsidiary Advance America In April 2012, we acquired Advance America, a leading non-bank provider of cash advance services in the United States that serves middle-income working individuals who typically live paycheck to paycheck and often face unexpected expenses or periodic financial difficulties. For the year ended December 31, 2011, Advance America generated approximately $625.9 million in revenues and gross profits of approximately $181.2 million. The acquisition of Advance America also provides great potential for growth to our financial services segment, mainly due to the following reasons: Diversified National Presence. Advance America is the largest non-bank provider of cash advance services in the United States, as measured by number of stores. With 2,409 branches in 29 states as of September 30, 2012, Advance America had twice as many locations as its next largest competitor. This geographic diversification helps mitigate the risk and possible financial impact of unfavorable legislative changes in the economic environment of a particular region and allows us to take advantage of competitive opportunities in those markets. For the nine months ended September 30, 2012, Ohio, Florida, California, and Texas, which accounted for approximately 12.2%, 11.9%, 11.3% and 10.6%, respectively, of Advance America's total revenues, were the only states that accounted for more than 10% of Advance America's total revenues. Customer Satisfaction. Advance America's cash advance services are cost-competitive and easy to understand. Rates and fees are posted on the walls and the advance process is simple, reliable, and transparent for customers. Periodic surveys are conducted with customers to measure their satisfaction with Advance America. In the most recent survey conducted in April 2012, approximately 96% of surveyed customers rated Advance America's customer service as good or excellent. Unsatisfied Demand. We believe that there is a large unsatisfied demand for short-term consumer credit in the United States, fostered by the limited access to and relatively high cost of other forms of short-term consumer credit. A study by the National Bureau of Economic Research published in March 2011 showed that 47% of American households responded that they either probably or certainly could not raise $2,000 within a 30-day period to cope with a financial emergency. Opportunities for Launching New Products. Advance America's large and widespread distribution network and its recognized brand name can be leveraged to offer alternative products. Over the last several years, Advance America began to offer prepaid debit cards, money transfer services and tax services as an agent for third-party vendors, as well as gold buying services. We believe there are opportunities to expand core services and to offer new products such as installment loans, title loans, prepaid debit cards, etc. Opportunities for Reaching Other Markets. We believe there is great potential for growth by expanding Advance America's customer base to population segments that are currently underserved. Opportunities for Synergies. Advance America's distribution network can also be used to create synergies with our other existing businesses, such as our retail customer electronic money transfer services. Business Strategy We have a strong strategic focus on growth, seeking to further expand our sales and profitability by capitalizing on our position as a leading distributor of consumer electronics, basic household goods, furniture, motorcycles, mobile phones and services in Mexico and the rest of Latin America and by leveraging our distribution network and customer base to offer new financial services, reach new markets and launch new ventures. We continue to focus on low- and middle-income demographic segments of the population as our target customers. We will also continue to pursue our international expansion as we believe we can replicate our success in Mexico in those countries we have identified as attractive business opportunities. As of September 30, 2012, international operations represented approximately 22% of our consolidated revenues. We employ a conservative strategy in applying our retail and financial business expertise and expansion strategies to markets that have similar demographics to those of Mexico. In April 2012, we began operating in the United States after our acquisition of Advance America, a leading non-bank provider of cash advance services in the United States. We are also currently exploring the possibility of expanding our points of sales in the countries in which we already have a presence. During 2013, we plan to increase the network of our money transfer services brand, Dinero Express, by adding agents in Latin America. 71

74 Retail Segment Key elements of our strategy in the retail segment include: Focus on Our Target Consumer Our target market is the low- and middle-income segments of the populations of Mexico and the other Latin American countries where we operate. In particular, we target young customers, who are establishing new households and are relying on Elektra for their furniture, consumer electronics, appliances, mobile phones and household appliances. According to the INEGI, the Mexican middle class, which we have served for the past 61 years, is made up of approximately 76 million Mexicans, and comprises the majority of the population in Mexico. Leverage on Our Scalable Infrastructure We believe that with 1,023 stores as of September 30, 2012, we have reached the size and market exposure necessary to establish our leadership in the specialty retail sector in Mexico. Our objective is to replicate that success in the other Latin American countries where we have a presence. The pillars of our growth strategy are: Utilize Our Extensive Store Network. We will continue to leverage our extensive store network with the introduction of new products and services. We develop products and services that we believe will best capitalize on our current retail and consumer finance competencies, while providing benefits to customers and increasing traffic in our stores. Continue to Realize Synergies with the Financial Services Segment. We target the low- and middle-income demographic segments of the population. The typical monthly income of our target customer limits his or her ability to shop for durable goods without consumer credit financing. Therefore, we will continuously pursue synergies between our retail and our financial services segments. Invest in Technology. We will continue to develop information and merchandise management systems that allow us to achieve an even more efficient management of our high-volume operations and take full advantage of the satellite and fiber optics communications network that links most of our stores. Focus on Key Product Lines and Own Brands. We will continue to take advantage of the significant growth of the mobile phones market in Mexico. We will also continue to expand the presence in the market of our ekt brand, through which we sell electronics, computers, cell phones, white goods and appliances, a dining room line, bedrooms and other furniture. Empower our Employees. We will continue to emphasize the individual responsibility of our employees while providing them with extensive training in our corporate standards of excellence. We will also continue to motivate our employees with career advancement opportunities, cash bonuses, incentive programs and public recognition. We firmly believe that our workforce is an essential element in the future success of our business. Drive Profitability by Continually Enhancing our Product Offerings We believe that our most important growth potential resides in four business lines: furniture, motorcycles, mobile phones and our own brand products. Furniture. Through our own brand "ekt," we have just launched a new line of furniture: bedrooms, dining rooms and computer desks. With this brand, we expect to increase market share since we plan to offer the best quality and design at the best price points currently available in Mexico. Motorcycles. We believe there is great potential for our motorcycle business in Mexico and throughout the rest of Latin America due to an insufficient supply of public transportation and growth of cities. Under our own Italika brand we have become the largest motorcycle assembler and distributor in Mexico with 50% market share. We have captured more than half of the motorcycle market in Mexico, and already sold our one-millionth motorcycle. Given our extensive brand recognition and affordable prices, we believe that we can profit from a growing transportation need in the region. Mobile Phones. The wireless telecommunication services industry is a multibillion dollar business in Mexico. Yet, Mexico holds Latin America's lowest mobile phone penetration rate. We believe that Mexico will continue to follow the trends of other countries with similar income levels. Thus, this industry will continue to experience significant growth. We have become one of the largest distributors of mobile phones, equipment and services in Mexico, as measured by points of sale and market share. This has been accomplished by taking advantage of the Elektra Movil concept, which consists of having a site at the stores specializing in mobile phones, services and personal orientation, as a store-within-a-store. The 72

75 concept offers handsets, equipment and airtime from all of the leading carriers such as Iusacell, Unefon and Movistar. In addition we are the leaders in Mexico in offering unlocked mobile phones to our customers. Store Brand Products. We offer quality consumer electronics, computers, white goods, cell phones, furniture and household appliances under our proprietary brand "ekt." Given current demographic and economic trends, we believe there will be a fast-growing demand for quality electronic products and household appliances at affordable prices throughout Mexico and the rest of Latin America. Enhance Our Customer Loyalty We want to attract young Latin American consumers with affordable products at Elektra and Salinas y Rocha and, as they mature and their preferences and incomes change, retain their loyalty through the entire store network. In addition to providing credit to support the purchasing habits of our target market, we have developed loyalty programs like "Cliente Amigo," which rewards frequent users of our money transfer services and encourages future use of such services. Financial Services Segment Key elements of our strategy in the financial services segment include: Continue Providing our Financial Services to an Underserved Target Customer Base Our financial services business in Latin America will continue to target the segment of the population that has low consumer credit penetration and therefore presents an important growth opportunity for our business. Our target market ranges from the low- to middle-income segments of the populations of Mexico and the other Latin American countries where we operate, which we estimate to be the majority of the population in these countries. The low average monthly income limits our target customer's ability to shop for durable goods without financing. Mexico's relatively low consumer credit penetration and a low ratio of loans to deposits indicate ample scope for significant expansion of credit. Despite intense loan growth since 1994, banking penetration in Mexico remains low compared to other Latin American countries and the rest of the world. Such low penetration is largely driven by the large fraction of the Mexican population that remains without access to financial services. The unbanked segment, which is primarily composed of the low- and middle-income segments of the Mexican population, represents a significant growth opportunity for us to continue catering to these segments. Continue Expanding Our Activities in the Group and Personal Loans Segment We will continue to expand our lending activity in the group loans segment, which we carry out through "Micronegocio Azteca," a group loan business mainly targeting on entrepreneurial and head of household women. Additionally, through our personal loans segment we offer short-term loans to individuals with diverse personal purposes. These two businesses have been our fastest growing businesses in our financial services segment in Latin America. We believe the main drivers of such growth have been our wide credit experience, technological operative platform, personalized client services and social scope of the project. We intend to continue expanding businesses by increasing the number of points of sale and our credit portfolio. Enhance and Seize the Growth Potential of Our United States Operation In April 2012, we began operating in the United States after our acquisition of Advance America, a leading non-bank provider of cash advance services in the United States. A principal component of Advance America's strategy has been to be a leading provider of cash advance services in each market where it operates. We intend to maintain Advance America's operations throughout the United States and to improve perstore profitability by focusing on improved store operations, expanding our customer base by, for instance, targeting underserved markets, providing a wider variety of financial service offerings from our existing point of sale locations and expanding our online cash advance business. We also intend to realize potential synergies between our cash advance business and other existing businesses, such as the money transfer business. We believe that by focusing Advance America's business in the United States we will increase profitability and improve margins. In line with that strategy, we have ceased all operations in the United Kingdom and Canada, which have been historically unprofitable. 73

76 History The table below summarizes key milestones in the history of Grupo Elektra: Year Event 1950 Grupo Elektra is founded by Hugo Salinas Rocha to manufacture radios Grupo Elektra begins offering installment sales services and conducting door-to-door sales Ricardo B. Salinas Pliego becomes President of Grupo Elektra Grupo Elektra starts operating electronic money transfers with Western Union Grupo Elektra begins operating in Latin American countries outside of Mexico Grupo Elektra receives licenses to operate a bank in Mexico Grupo Elektra receives licenses to operate a pension fund in Mexico Grupo Elektra receives licenses to operate an insurance company in Mexico, and expands its commercial and banking operations in Latin American countries outside of Mexico Grupo Elektra acquires Advance America and begins its operation in the financial services segment in the United States. Grupo Elektra receives licenses to operate a Brokerage House in Mexico. Our Target Customers Elektra's target market is the low- and middle-income segments of the populations of Mexico and the other Latin American countries where we operate and Salinas y Rocha's target market is the Mexican middle class. We estimate that 68% of the Latin American population is of middle or low income. We believe that our "typical" lower-income customer is an individual who is actively engaged in the informal (non-registered) employment market and has a household income between $660 and $1,130 per month. Meanwhile, our "typical" middle-income customer is formally employed and has a household income of between $1,130 and $8,230 per month. However, we believe that the majority of our lower- and middle-income "typical" customers do not own cars and therefore shop in relatively close proximity to their households or at locations served by public transportation. We believe that our target market has been historically underserved by other retailers and banks in Mexico and the rest of Latin America and that we can continue to develop the market and grow with it. The Mexican population is young. According to figures from the 2010 interim Mexican census, which was updated in March 2011, approximately 32% of the Mexican population is between the ages of 20 and 39 (the age when marriages typically occur and households are formed) and approximately 48% of the Mexican population is less than 25 years of age. According to INEGI, there are over 500,000 marriages a year in Mexico alone, which means that there is an increasing number of new households every year that need to be furnished with the type of merchandise we offer. We therefore anticipate continued strong demand for the basic household products and services we offer. The populations in the other Latin American countries in which Grupo Elektra currently operates Argentina, Brazil, El Salvador, Guatemala, Honduras, Panama and Peru are also young. According to the Latin American and Caribbean Demographic Center, approximately 45% of the Latin American population is less than 24 years of age in these countries. In April 2012, we acquired Advance America, a leading non-bank provider of cash advance services in the United States, and the largest non-bank provider of cash advance services in the United States, as measured by number of stores. Advance America serves middle-income working individuals when they face unexpected expenses or periodic financial difficulties by providing them cash advance services. The following table shows selected demographic data of Advance America's customers, based on a survey of approximately 385,000 randomly selected customers across all states that performed a transaction with Advance America between November 1, 2010 and October 31, 2011, along with comparable U.S. census data: Advance America Customers U.S. Census Data (2010) Average Age (years) Median Household Income $54,373 $50,046 Percentage Home Ownership 48% 65% Percentage with Minimum of a High School Degree 94% 85% 74

77 A study by the National Bureau of Economic Research published in March 2011 showed that 47% of American households responded that they either probably or certainly could not raise $2,000 within a 30-day period to cope with a financial emergency. We also intend to expand our customer base, as well as our product offerings, to include markets that are currently underserved. Description of the Retail Business We are one of the largest specialty retailing, consumer finance and banking services companies in Mexico in terms of number of stores, branches and revenues. We are also present in Argentina, Brazil, El Salvador, Guatemala, Honduras, Panama and Peru. We operate in two business segments: retail and financial services. Our retail products are sold principally through Elektra and Salinas y Rocha stores, which offer brand-name consumer electronics, household appliances, motorcycles, computers, furniture, mobile phones, tires and vehicle batteries. In addition to selling retail products, we provide retail customer services such as electronic money transfers, extended product warranties and mobile phone airtime. Store Operations As of September 30, 2012, we operated 1,253 stores and 20 distribution centers, including 1,023 stores in all 32 Mexican states and 230 stores in Argentina, Brazil, Guatemala, Honduras, Panama and Peru. Virtually all of our stores are street front stand alone buildings located in commercial shopping districts of urban areas. Parking access is generally not a consideration for our customers. Our two store formats, the Elektra stores and Salinas y Rocha stores, are operated by Elektra Milenio. The Elektra stores sell brand-name consumer electronics, household appliances and furniture, targeting low- and middle- we operate. The income segments of the populations of Mexico and the other Latin American countries where Salinas y Rocha stores offer a line of products that is similar to those offered by the Elektra stores but are targeted only to middle-income clientele in Mexico. The following map and table show the geographical distribution of our stores in Mexico and the rest of Latin America as of September 30,

78 Market Number of Stores Square Meters Mexico 1, ,899 Peru 66 50,432 Guatemala 56 44,211 Brasil 46 24,216 Argentina 26 12,704 Honduras 25 20,600 Panama 11 10,183 Total 1,253 1,056,245 Our stores in both Mexico and other countries in Latin America are designed to maximize sales and the use of space. In particular, we believe that the fact that there is a Banco Azteca kiosk in the back of each Elektra store, and that customers must walk through the entire store in order to get to Banco Azteca, increases sales to customers who have purchased products from us on credit in the past and who return to our stores to make their weekly credit payments. Recently we started remodeling some of our stores. We have been increasing the average size of our stores and remodeling their floors and ceilings to make them more attractive to our customers. For now we are focusing on our main stores but plan on expanding this model to all of our locations. Before the remodeling, we stored boxes of all our products in our selling space. We now keep larger items in storage in order to keep the selling space free of boxes and clutter. Most importantly, we are now able to display our furniture in a way similar to the way our customers would arrange the furniture in their house. They can therefore immediately picture how the furniture would look in their homes and are more inclined to make purchases. All stores in Mexico and most stores in the other Latin American countries where we operate are open from 9 a.m. to 9 p.m. seven days a week. Managers may extend store hours during the holiday season. Site selection Our stores are typically located in retail commercial districts in urban environments. Other factors we consider when evaluating potential store sites include proximity to our target demographic, growth potential of the market and competition. We continuously evaluate our existing and potential sites to position our stores in desirable locations and relocate stores that are not properly positioned. We lease approximately 90% of our stores in order to keep this flexibility in case we decide to relocate. Our lease agreements have a duration ranging from three to 10 years and are renewable under the terms of the applicable agreements. The majority of our lease agreements contemplate the following conditions that are favorable to us: (i) no security deposit requirement; (ii) right to transfer or sublet the facility to our subsidiaries; (iii) non-restrictive termination clauses; and (iv) no guarantor requirement. Our aggregate annual rent is Ps.1,486 million ($115.6 million). We also operate the distribution centers described below: Distribution Center Size in Square Meters Location Owned/Leased Mexico 38,719 Mexico City, Mexico Owned Guadalajara 32,682 Jalisco, Mexico Owned Villahermosa 15,061 Tabasco, Mexico Leased Lerma 14,031 Estado de Mexico, Mexico Owned Hermosillo 8,756 Sonora, Mexico Leased Juarez 8,201 Chihuahua, Mexico Leased Laredo 8,143 Tamaulipas, Mexico Leased La Paz 6,191 Baja California Sur, Mexico Leased Cancun 5,000 Quintana Roo, Mexico Leased Tijuana 1,000 Baja California Norte, Mexico Leased Lima 5,000 Lima, Peru Leased Chiclayo 5,000 Lambayeque, Peru Leased Villa El Salvador 450 Lima, Peru Leased San Pedro Sula 7,740 Cortes, Honduras Leased 76

79 Distribution Center Size in Square Meters Location Owned/Leased Pernambuco 3,300 Pernambuco, Brazil Leased Paraiba 4,200 Paraiba, Brazil Leased Guatemala 4,686 Guatemala City, Guatemala Leased Amatitlán 2,000 Guatemala City, Guatemala Leased Buenos Aires 5,000 Buenos Aires City, Argentina Leased Panama 3,800 Panama City, Panama Leased Properties The following table describes the value of our property, plants, furniture, equipment and investment in our stores and branches, as set forth in our consolidated financial statements: As of September As of December 31 30, (Ps.) ($) (Ps.) ($) (Ps.) (Ps.) (in millions) Investment in stores and branches... 2, , ,033 2,266 Computer equipment... 1, ,063 Land Buildings Transport equipment Furniture and office equipment Other Total... 6, , ,941 6,534 These assets are used in our network of stores and branches, as well as at distribution centers throughout Mexican territory, Central and South America and the United States, as well as for corporate use. Our Products and Merchandising Strategy Products and Services Category Products Selected Brands Consumer Electronics Furniture Major Household Appliances Small Household Appliances Motorcycles Proprietary Brands: ekt Video and video recording equipment (cameras, TV sets, home theater systems and DVD players), sound systems (car stereos, modular stereo systems, and recorders). Living room sets, dining room sets, bedroom sets, kitchens, single chairs, tables, armoires, headboards, dressers, book cases, sofas and mattresses. Refrigerators, washers, freezers, ovens and stoves. Irons, microwave ovens, toasters, coffee machines, vacuum cleaners, and other small appliances. Over 20 different models, including: eight moped models, seven scooter models, three sport bike models, one dual purpose bike model, one chopper model and two four-wheeler models. Electronic products and appliances such as USB devices, memory stick devices, computer Sony, Panasonic, Sharp, Samsung and LG. ekt, San Rogelio, Simmons, Selther, Sealy and Terciopelera Nacional. Daewoo, LG, Koblens, General Electric, Mabe, Maytag, Easy, IEM, and Whirlpool. Daewoo, LG, Samsung, Tefal, Black & Decker and Panasonic. Italika (proprietary brand). ekt. 77

80 Computers boards, webcams, headphone sets, computer mouse pads, DVD players, portable DVD players, mp3 and mp4 players, CD recorders, radios, audio equipment, cam recorders, television sets and plasma, LCD and LED flat screens, mobile phones, air conditioning units, ceiling fans, heat devices, iron machines, and washing machines. Personal computing equipment desktops, laptops, notebooks, netbooks, and tablets. HP, Dell and Vaio. Tires Tires. Michellin, Woodrich, Tornel, Euzkadi, and Bridgestone. Vehicle Batteries Vehicle Batteries. LTH. Bicycles Bicycles. Benotto, Mercurio, Turbo and Apache. Mobile Phone Products and Services Mobile phone equipment and airtime. Iusacell, Movistar, Unefon and unlocked phones and ownbranded phones (ekt). Additionally, Elektra and Salinas y Rocha stores offer other services such as: Category Products Selected Brands Extended Warranties Money Transfer Services (1) Repair and maintenance for products not covered by the manufacturer's warranty. We conduct money transfer service through two business models: 1. As an agent of the most important money transmitters worldwide, such as Western Union and MoneyGram, among others, on a nonexclusive basis. 2. With our own service "Dinero Express," Grupo Elektra also offers domestic and international money transfer services in Mexico and all the countries where the group operates. In addition, Dinero Express retains agents in Mexico and the rest of Latin America. (1) These services are also offered at Banco Azteca's branches. Under the trademark "Milenia," extended warranty service that includes warranty certificates and additional service contracts. Dinero Express, Western Union, MoneyGram, DolEx, Ria, Xoom, Bancomer Transfer Services, Sigue. Each of our stores sells the major categories of products and services described above. The following table presents a summary of total revenues for: Nine Months Ended September 30, 2012 Years Ended December Revenue Breakdown by Product Electronics... 23% 26% 27% 26% Appliances... 21% 23% 25% 25% Computers and Telephones... 22% 24% 23% 23% Motorcycles... 23% 16% 13% 12% Furniture... 10% 10% 11% 11% 78

81 Other... 1% 1% 1% 3% Total Revenues % 100% 100% 100% Merchandising Strategy We focus on providing a comprehensive selection of affordable, high-quality merchandise that are appealing to our target customers. We offer a wide range of product selections from entry-level to high-end products. We primarily sell brand name warranted merchandise. Our established relationships with major vendors give us purchasing power that allows us to offer quality products at prices which provide us a competitive selling advantage over other retailers. Pricing Strategy We offer products at cash prices that are competitive in our target market. Additionally, consumer credit services are offered through Banco Azteca, with the aim of providing clients with financing options that allow them to acquire our products at an affordable weekly cost. Our customers can purchase 75% of our products for as low as $8 per week. They can purchase 98% of our products for $25 per week. Our marketing research department monitors prices at competing stores, so as to ensure that we always offer the most competitive prices available. In some regions, store managers have the flexibility to match the prices of local competitors, within certain specified parameters. Through our financial services segment, we provided financing for 60% of our retail sales during the nine months ended September 30, Purchasing Similar to other specialty retailers, we purchase a significant portion of our total inventory from a limited number of vendors. The principal suppliers of Elektra and Salinas y Rocha are: Loncin Imports and Exports, Sony de Mexico, Unefon, Samsung Electronics, Mabe, Pegaso PCS, Whirlpool Mexico, Hewlett Packard Mexico, LG Electronics de Mexico and Panasonic de Mexico; together, merchandise supplied by these companies represented 13% of our consolidated net revenues for the nine months ending September 30, We have not experienced significant difficulty in maintaining adequate sources of merchandise, and we generally expect that adequate sources of merchandise will continue to exist for the types of products we sell. Distribution Channels and Inventory Management Merchandise is distributed to our retail stores through 20 distribution centers, which are strategically located throughout Mexico and in each of the South and Central American countries where we do business (except for El Salvador), facilitating the optimization of freight costs and delivery times. The maps below show the locations of our distribution centers, as of September 30, Our distribution centers in Mexico, Guadalajara and Lerma are owned by us, while all others are leased. 79

82 Merchandise is purchased in each country through local suppliers, an and d in Central America we have also engaged regional suppliers, working in partnership with them towards the economic development of each country in which we operate. In some countries, small quantities of specific products are imported, allowing us to maintain maint exclusive product lines in our retail stores. 80

83 Cyclic or Seasonal Trends Specialized retail sales traditionally take place throughout the year; however, highest sales volume occurs in the months of May, November, and December due to Mother's Day and the Christmas holiday season, respectively. Assembly and Manufacturing Plants We own a motorcycle plant where we assemble our Italika brand motorcycles. Our motorcycle plant has an assembly capacity of 350,000 motorcycles per year. Marketing We design our marketing and advertising programs to increase our brand-name recognition, educate consumers about our products and services and generate customer traffic in order to increase sales. We conduct our advertising programs primarily through national and regional television stations, local radio, direct mail, telephone and our website. Our promotional programs focus on the opportunity to acquire products for low prices at affordable weekly payments. Personnel and Training We have developed a standardized and effective system for operating our Grupo Elektra stores. The system includes procedures for information technology, inventory management, transaction processing, customer relations, store administration, merchandise display, consumer credit policies and collection procedures. As part of this effort, we have developed and maintain operating manuals outlining our procedures relating to maintenance, security and accounting. Our management structure provides that store managers generally report to regional managers, who report to division managers who, in turn, report to management at our headquarters in Mexico City. Our stores employ an average of 23 sales personnel and other support staff including cashiers and store managers. Retail Training We give a high priority to training and certification of our personnel so as to ensure the highest levels of customer service. We believe the success of our retail operations depends, among other factors, on the level of service provided by our personnel. Before taking on responsibilities and functions, all store and credit personnel receive complete training managed by a District Head and their immediate supervisor, and if outside Mexico, supported by an online distance learning model comprising four phases: Basic, Intermediate, Advanced and Growth toward the next position. This model allows new hires to receive an introduction to the company, learn about the basis of the position that they will fill and specialize and develop their skills with a view to promotion to the next position. Mexico-based personnel are provided with in-store information that allows them to evaluate the performance of the store, thus maximizing results and sustaining the continual improvement of each point of sale. Online training is focused on understanding concepts that will later be reinforced by the immediate supervisor and District Head through role playing exercises. Furthermore, training and refresher courses also reach every store, allowing our personnel to be trained in real time whenever a need or a new product and/or service arises. The Training Design Center (Centro de Diseño Instruccional, or "CDI"), is where courses are developed and training is designed. A group of experts develops the educational model to be implemented, taking into account client needs. The training techniques and methodologies that we have implemented have been our means of achieving top quality training solutions. This development model takes into account the needs and requirements of each position, so as to ensure that all of our personnel acquire the knowledge they need to successfully complete their functions, generating value for our clients through high quality service. Description of Financial Services Business An integral part of our overall business strategy in Mexico and the other countries of Latin America is to provide consumer financial services to our retail customers though Banco Azteca, that enables them to more easily purchase our retail products and services. We also offer commercial credit products to corporate clients and individuals. Our lending activity has been increasing steadily (16.5% annually on average between 2006 and September 30, 2012), with our group loans segment and personal loans segment being our fastest growing businesses in our financial services segment in Latin America. We believe the main drivers of such growth have been our wide credit experience, technological operative platform, personalized client services and social scope of the project. In addition, in April 2012 we started our operations in the United States through the acquisition of Advance America, a leading non-bank provider of cash advance services in the United States that serves middle-income 81

84 working individuals who typically live paycheck to paycheck and often face unexpected expenses or periodic financial difficulties. Advance America's large and widespread distribution network and its recognized brand name can be leveraged to offer alternative products, such as installment loans, title loans and prepaid debit cards, among others, but also to reach other target markets that are not currently customers of Advance America, such as Hispanics. Its distribution network can also be used to create synergies with our other existing businesses, such as our retail customer money transfer services. Our Financial Services Business in Latin America Sales on Credit and Credit Approval Process As an alternative to conventional cash sales, we offer our customers a credit program through our Banco Azteca banking subsidiaries that provides them with a convenient source of financing to help them make purchases. We believe this helps increase our number of potential customers and enhances the purchasing power of our existing customer base, which translates into an increase in our sales volume and profitability. During 2010 and 2011, and the nine months ended September 30, 2012, we financed 60%, 60% and 67%, respectively, of our retail sales. The average amount of our consumer credits is Ps.2,485 ($193). We offer our clients an easy credit solution that is collection-oriented. The process can be summarized as follows: (1) a client walks into our store; (2) credit is offered to the customer; (3) the customer provides a photo identification and proof of address; (4) if the customer provides proof of income, credit is assigned according to the customer's paying capacity, but if proof of income cannot be furnished, we estimate our customer's paying capacity and issue a loan amount accordingly; (5) once the loan is approved, the client can opt to (a) purchase an item from the store; (b) take cash or (c) obtain a credit card that can be used in any other store; (6) once the credit is issued in any form, the client is required to make repayments in weekly installments. Typically, as part of the credit process a company representative pays a visit to the customer's residence, as we have found this to be a good source of information regarding the customer's ability to pay. The credit approval process normally takes less than 24 hours, including the visit to the applicant's residence. The credit approval process involves an investigation process that comprises a credit officer visit to the address of the client, references, guarantee and credit bureau check. Clients without formal payment slips are worthy of credit for a monthly income of up to Ps.4,500 ($350). If the customer has a previous payment record, we regard this as the best evidence of a client's ability to repay a loan. When a payment record is good, we will consider increasing the credit amount up to 5%. Conversely, if the customer skips a weekly installment, a notice is issued and if payment is not produced, we will immediately seek payment or repossession of the collateral assigned to the loan, which is usually the product for which purchase the loan was granted. We believe that this process is fast, efficient and secure. See " Account Collection Procedure." As of September 30, 2012, we had 16.5 million active retail credit accounts in Mexico. We also provide personal and group credits, out main target market being Mexican lower-income segments, with particular focus on the informal sector. These are basically personal credits for individual purposes. The average amount of our personal and group credits is Ps.4,500 ($350). We also provide corporate credits, which we grant applying a selective tailor-made criteria, with a strong focus on collateral (2:1). We currently do not promote actively our corporate lending activity. The credit approval process for our commercial credit products is based on CNBV regulations and guidelines. This process includes a review of legal and financial information and documentation required to be submitted by the applicant. If the applicant meets certain creditworthiness and anti-money laundering standards, the application is forwarded to the Credit Committee for further review and a final decision. Banco Azteca Banco Azteca is engaged in the provision of financing services to market segments in Mexico that have traditionally not been served by commercial banks. Grupo Elektra also has other subsidiaries that operate banks in Brazil, El Salvador, Guatemala, Honduras, Panama and Peru under the Banco Azteca brand name, which generally utilize the same business model and strategies as Banco Azteca. In order to reach its target market, Banco Azteca has branches within all Elektra and Salinas y Rocha stores, as well as independent bank branches known as Tiendas de Servicios Financieros. Since 2002, Banco Azteca has offered consumer credit to our customers in Mexico under the "Credimax" trademark. Banco Azteca also offers Credimax Efectivo, a personal cash loan designed for discretionary spending. Because these are often the only financing options available to the majority of our customers, we believe that our 82

85 consumer financing services increase the number of potential customers and increase our existing customers' loyalty and purchasing power, thereby increasing overall sales and providing low-risk financing income, which results in increased profitability. Currently, Banco Azteca's product lines include consumer sales credit and personal loans, mortgage lending, credit for entrepreneurs, consumer deposit-taking services, utilities payment services, currency sale and purchase, and Internet banking and payment services. Banco Azteca supports these main business lines through various other activities that are permitted under Mexican banking regulations, including investing in securities; issuing indebtedness; securities repurchase and reverse repurchase agreement transactions; financial factoring transactions and operations; securities trading; commodities and U.S. foreign exchange transactions; trust operations; leasing operations, and other banking and financial transactions. Banco Azteca also provides commercial credit products such as revolving credit, term loans, project finance loans, securitizations and leasing. Banco Azteca does not have a standardized commercial credit product, and instead offers tailor-made commercial credit solutions to its commercial clients. Most of our commercial credit facilities are structured loans where Banco Azteca (or a special purpose vehicle) holds as collateral the shares, assets, cash flows and/or other collateral of the borrower. We believe that our ability to create customized financial products for our corporate clients gives us the competitive advantage to service start-ups, projects or other types of companies for which traditional commercial banks do not always dedicate the required resources. Virtually all of our deposits have maturities of less than one year. The following table presents information regarding our Latin American credit portfolio as of the dates indicated: Nine Months ended Year ended September 30 December (Ps.) ($) (Ps.) (Ps.) ($) (Ps.) (in millions, except as otherwise indicated) Total outstanding portfolio balance... 56, ,181 37, ,817 Number of accounts (period end) Percent of balances 90 days past due Bad debt charge-offs (net of recoveries)... (1,504) (117) (485) (1,957) (140) (1,239) 2009 (Ps.) 21, (1,957) Products and Services Banco Azteca offers the following products and services: Consumer Credit: Consumer credit is offered in stores operated by Elektra, Salinas y Rocha and other stores with a Banco Azteca branch. Payments are made by the client on a weekly basis, directly at the Banco Azteca branch located in the store where the purchase was made. There are incentives for prompt payment. As of September 30, 2012, the average maturity of loans in Banco Azteca's consumer credit portfolio was 48 weeks. Personal Loans: Personal loans are granted to our clients individually and for discretionary purchases. Procedures for application, review and approval of the loans are substantially equivalent to those used for consumer credit. For new personal loans with a principal amount in excess of Ps.5,000 ($389), Banco Azteca requires a thirdparty guarantee (aval) and security, which usually consists of white goods or appliances. Personal loans are made for up to Ps.70,000 in cash, depending on the client's ability to repay. As of September 30, 2012, the average maturity of loans in Banco Azteca's personal loan portfolio was 64 weeks. Commercial Credit: Banco Azteca provides tailor-made commercial credit products such as revolving credit, term loans, project finance, securitizations, leasing and factoring to its commercial clients, including related companies and third parties in Mexico and abroad. Commercial credit products represent approximately 32% of our total loan portfolio. Most of our commercial credit facilities are structured loans where Banco Azteca (or a special purpose vehicle) holds as collateral the shares, assets, cash flows and/or other collateral of the borrower. Payroll Loans: Banco Azteca makes secured, cosigned cash loans for employees of companies that use our payroll banking service, Nómina Azteca, and who have been employed by the same company for over one year. These loans can be used to purchase goods at Elektra or can be made in cash, with direct payment from the customer's payroll account. Credimax Auto: Banco Azteca makes auto loans with very simple and flexible requirements, no commissions are charged on the loan and discounts are available for prompt payment. 83

86 Micronegocio Azteca: Banco Azteca has a microcredit program based on a group-lending model (where a group of individuals is responsible for the repayment of the loan, as opposed to a personal loan), which is targeted primarily to women, entrepreneurs and heads of households who are seeking the opportunity to grow their businesses or otherwise improve their lives. This has been a fast-growing business, and we believe this is due to our wide credit experience, technological operative platform, personalized client services and social scope of the project. As of September 30, 2012, this segment had 688 centers, 1.2 million customers and a credit portfolio of Ps.6,927 million ($539 million). Our business plan for this segment contemplates reaching at least 700 centers, 1.5 million customers and a credit portfolio of Ps.7,698 million ($592 million) by the end of In May 2012, we started operations of this business segment in El Salvador. Empresario Azteca 5-50: Microcredit loans are available to cover working capital needs for Mexican small businesses in the sectors of manufacturing, trade and services. Empresario Azteca Negocio: These credit offerings are designed for small businesses to cover working capital needs or to purchase machinery and equipment in the domestic trade, manufacturing, and service sectors. Payments are weekly, and there are savings for on-time payment. Tarjeta Azteca: The "Azteca Card" is the means of payment for the line of credit that Banco Azteca offers its clients, giving them access to products sold through internal channels and at thousands of establishments affiliated with VISA. There are no service charges and weekly payments are required. Presta Prenda: Prestaprenda is a pawnshop with 808 centers in Mexico as of September 30, 2012, that provides loans with gold pledges. The loan amount is calculated depending on weight and the carat of the gold piece. Additionally, Banco Azteca offers other services such as: Nómina Azteca: Nómina Azteca is Banco Azteca's electronic banking portal payroll management service. This service provides employees with payroll transfers with a VISA debit card. Terminales POS: This is a mobile point of sale terminal that also accepts payment for products and services using credit and debit cards, allowing for increased walk-in traffic on sales floors. Banca WEB: Businesses that contract this service can receive Banco Azteca consumer credit (Tarjeta Azteca) or credit for purchasing vehicles such as automobiles and motorcycles. The purchaser receives on loan a kit to outfit the module (fingerprint scanner, camera, thermal printer, and electronic signature pad) and signs a confidentiality agreement with the bank. Banco Azteca also offers a number of Elektra products and services at its branches at a commission to Grupo Elektra, such as: Dinero Express, Western Union, Vigo, Orlandi Valuta, MoneyGram, Ria, Dolex, Bancomer Transfer Services (BTS), Sigue, Xoom, purchase/sale of silver coins, mobile phone air time and internet usage time. Distribution Channels Banco Azteca has a banking branch in each Elektra and Salinas y Rocha store, where clients can obtain credit to acquire the goods sold in the stores. This credit is offered for repayment in weekly installments ranging from 13 to 104 weeks. Additionally, Banco Azteca's other services (personal loans, the Azteca Card and savings and investment products) are available at both in-store locations and independent branches. Account Collection Procedure In 2009, we implemented a reinforced collection plan, hiring 2,000 additional collectors and allocating our collection personnel in those areas with higher delinquency rates. As of September 30, 2012, we employed approximately 9,930 people in our collections department. In 2007, we also implemented our "Pago Puntual" program, designed to reward our clients who pay on time by applying a discount on the applicable interest rates. The weighted annual average rate for these customers is 42% vis-à-vis 60%, and approximately 75% of our customers make use of this program. Past due retail credit accounts are subject to preliminary collection procedures, including a prompt visit to the client following the first payment delinquency, and follow-up visits if the account remains delinquent. When an account becomes more than 13 weeks past due, the account is subject to enhanced scrutiny and efforts to repossess the collateral. If we have been unable to collect full payment or the collateral within one year, we assign the account to an outside collections agency. Once the collateral is repossessed, we cease efforts to collect on outstanding amounts due on the account. However, the client must settle the past due account before being able to make further purchases on the account. 84

87 Past due commercial credit accounts are also subject to preliminary collection procedures involving regular communications with the borrower in order to explore potential alternative payment plans. If attempts to restructure the payment plan or loan are unsuccessful, we may seek to enforce guarantees of the loan and/or initiate legal proceedings against the borrower. Our account collection and recovery procedures in Mexico are subject to the Commerce Code (Código de Comercio), the Consumer Protection Law, and the Federal Civil Code (Código Civil Federal). Other Financial Services Businesses We have subsidiaries engaged in the insurance, pension fund industries and a brokerage house (since 2012). Seguros Azteca began operations in 2004 to offer life and health insurance policies. Seguros Azteca Daños, started operations in 2006 to offer casualty insurance products. Afore Azteca, our pension fund administration company, began operations in Punto Casa de Bolsa is a brokerage firm. As of September 30, 2012, the main product marketed by Seguros Azteca was Vidamax life insurance. Vidamax is available to all our clients who are granted a consumer cash loan, or acquire any product through a credit from Banco Azteca. As of September 30, 2012, the main products of Seguros Azteca Daños and Afore Azteca were casualty insurance and pension fund administration, respectively. Currently, the products that Punto Casa de Bolsa offers to its client base are fixed income and equity instruments and other financial products. Financial Services Training Banco Azteca implements an extensive internal onsite training and accreditation program, focused on training new hires and existing employees. This program meets the company's training needs, providing personnel with necessary knowledge and skills to fulfill the requirements of their positions. Our Financial Services Business in the United States In April 2012, we acquired Advance America, the largest non-bank provider of cash advance services in the United States, as measured by number of stores. With 2,409 branches in 29 States, Advance America has more than twice as many locations as its next largest competitor. The acquisition, which included the purchase of Advance America's outstanding common stock and the repayment of its debt, amounted to approximately $755 million. During 2012, we ceased all Advance America's operations in the United Kingdom and Canada, which had been historically unprofitable, as part of our strategy to increase profitability and improve margins by focusing Advance America's business in the Americas. Through Advance America, we serve middle-income working individuals when they face unexpected expenses or periodic financial difficulties. Cash advances are typically small-denomination, short-term, unsecured advances that are due on the customer's next payday. We offer various types of short-term credit products and services in accordance with applicable legislative and regulatory requirements. For example, in Texas, we offer feebased credit services to assist customers in obtaining an extension of consumer credit through a third-party lender. We currently service installment loans directly to customers in Illinois, Colorado, Delaware and Wisconsin, and second mortgage loans in Ohio. We also offer certain complementary products and services. For example, we sell prepaid debit cards as an agent of a bank regulated by the U.S. Office of the Comptroller of the Currency ("OCC"). We also sell money orders and provide money transfer services as an agent of a registered money transmitter. In the near future, we intend to expand our product and service offerings and reach new market segments. Cash Advance Services and Credit Approval Process Through Advance America, our primary business is offering cash advance services, which include cash advances and installment loans. In most states where we operate, we originate cash advance services under the authority of state-specific enabling statutes that allow for services ranging from single cash advances to installments with closed-end terms. Additionally, where permitted by applicable law, we may service customers for a third-party lender. For example, we operate as a credit services organization ("CSO") and a credit access business ("CAB") in Texas, where we offer a fee-based credit services package to assist customers seeking consumer credit through a third-party lender. Under the terms of the agreement with this lender, we process customer applications and are contractually obligated for all losses. The particular cash advance services may change in response to changes in state law and federal law. The permitted size of a cash advance varies by jurisdiction and ranges from $50 to $5,000. However, our typical cash advance ranges from $50 to $1,200. The finance charges on cash advance services we currently offer also vary by jurisdiction and range up to 22% of the amount of the cash advance. We may also charge and collect fees for returned checks, late fees, and other fees as permitted by applicable law. Fees for returned checks or electronic debits that are declined for non-sufficient funds ("NSF") vary by state and range up to $30, and late fees vary by 85

88 state and range up to $50. For the nine months ended September 30, 2012 and the years ended December 31, 2011 and 2010, total NSF fees collected were approximately $2.0 million, $ 2.9 million and $2.9 million, respectively, and total late fees collected were approximately $1.0 million, $1.0 million and $0.9 million, respectively. In Texas and online, the third-party lender charges NSF fees and late fees in accordance with applicable law. A customer may obtain a cash advance in one of three ways: (1) by visiting one of our centers in person, completing an application, and receiving a cash advance from us; (2) by visiting our website, beginning the application process online, and then visiting one of our centers in person to complete the application and receive a cash advance from us; although in some states the online process can be completed without the need to visit a center in person; or (3) by visiting our website, completing an application online with a third-party lender, and receiving a cash advance from the third-party lender, which is directly deposited into the customer's bank account. Although there are numerous differences under the various state-level enabling regulations, the application and approval process, underwriting criteria, delivery method, repayment and collection practices, customer and market characteristics, and underlying economics of our principal products and services generally are substantially similar in most states. In order for a new customer to be approved for a cash advance, he or she is required to have a bank account and a regular source of income. To obtain a cash advance, a customer typically: (1) visits the center or our website; (2) whether the client visits a center or applies for a cash advance online, he or she must complete an application and, in case of in-store applications, also present certain required documentation in the store, usually proof of identification, a pay stub or other evidence of income and a bank statement; (3) enters into an agreement governing the terms of the cash advance, including the customer's agreement to repay the amount advanced in full on or before a specified due date (usually the customer's next payday), and our agreement to defer the presentment or deposit of the customer's check, in case of in-store applications, or ACH authorization, in case of online applications, until the due date; (4) in case of in-store applications, writes a personal check for the principal amount of the cash advance and charges for applicable fees and/or interest or, in case of online applications, provides an ACH authorization which enables electronic payment from the customer's account, to cover the amount of the cash advance and charges for applicable fees and/or interest of the balance due under the agreement (however, some products do not require customers to provide a personal check or ACH authorization); and (5) in case of in-store applications, the client receives cash or a check on the spot and makes an appointment to return on the specified due date, typically his or her next payday, to repay the advanced amount plus the applicable charges and reclaim his or her check (payment cycles may vary depending upon state law and type of service); whereas in case of online applications, the funds are usually credited to the client's bank account on the next business day and the principal amount and the applicable charges are electronically deducted from the client's bank account on the specified due date. The personal information that each new customer must provide us is entered into our information system and, where applicable, that of the third-party lender. The customer's identification, proof of income and/or employment and proof of bank account are verified. We determine whether to approve a cash advance and the size of a cash advance based primarily on a customer's income. We do not perform credit checks through consumer reporting agencies. When a third-party lender provides the cash advance, such as in Texas and online, the applicable third-party lender decides whether to approve a cash advance and establishes all of the underwriting criteria and terms, conditions, and features of the customer agreements. In 2011, we implemented a proprietary eligibility assessment model ("EAM"), which uses a statisticalbased approach to assess eligibility, using fraud attributes in conjunction with our customer application information to make underwriting decisions with respect to our first-time customers and to reduce our loan fraud rate. This approach assists us to comply with the Fair Lending and Equal Credit Opportunity rules. The model is used extensively throughout our cash advance center network, but is not currently used for online advances where the applicable third-party lender determines its own underwriting decisions. The following table presents key operating data for Advance America's business: Year Ended December U.S. GAAP Audited (in thousands of $, except as otherwise indicated) Other Financial and Statistical Data: Number of centers open at end of period... Number of customers served all credit products (in thousands)... Number of cash advances originated (in thousands)(1)... Aggregate principal amount of cash advances originated(1)... Average amount of each cash advance originated (in $)(1) ,352 1,310 10,027 3,710, ,584 1,347 10,561 3,965,

89 Average charge to customers for providing and processing a cash advance (in $)(1)... Average duration of a cash advance (in days)(1)(2)... Average number of lines of credit outstanding during the period (in thousands)(3)... Average amount of aggregate principal on lines of credit outstanding during the period(3)... Average principal amount on each line of credit outstanding during the period (in $)(3)... Number of installment loans originated (in thousands)(4)... Aggregate principal amount of installment loans originated(4)... Average principal amount of each installment loan originated (in $)(4) , , , (1) Excludes lines of credit and installment loans. (2) Excludes the effect of extended payment plans. (3) In Virginia, Advance America began offering lines of credit in November 2008, ceased offering new lines of credit to customers in February 2010, and stopped providing advances on existing lines of credit in September (4) The installment loan activity for 2009 reflects loans originated by Advance America as the lender in Illinois only. For 2010, the installment loan activity reflects loans Advance America originated as the lender in Illinois and Colorado. For 2011, the installment loan activity reflects loans Advance America originated as the lender in Illinois, Colorado, South Carolina, Tennessee, and Wisconsin. Other Products and Services Advance America offers alternative products and services to its customers where permissible under applicable law. For instance, in Ohio and Wisconsin, it currently offers check-cashing services at state authorized rates. It may also offer the products or services of a third party at its centers pursuant to an agreement with the third party. For instance, Advance America currently offers pre-paid debit cards and money orders, money transmission, bill payment services, and income tax return preparation and processing services. The Advance America branded pre-paid Visa debit card is issued by a bank regulated by the OCC. The card allows a cardholder to load cash onto the card and use the card wherever VISA debit cards are accepted. We are compensated under an agreement with the bank based on a number of factors related to the bank's revenue from cardholder purchases and subsequent activity, such as charges for loads, ATM withdrawals, account maintenance/plan charges, and point of sale purchases. Advance America sells money orders and provides money transfer and bill payment services as an agent of a licensed third-party money transmitter. We are compensated by the money transmitter based upon the number and value of money transfers, money orders, and bill payments made at our centers. In over half of Advance America's centers, pursuant to an agreement, we act as an agent of a third party which uses its software to process and prepare income tax returns. We earn a percentage of the return preparation, electronic filing and other service fees charged by the third party. Advance America launched its gold buying product in Florida, Ohio and Texas during the fourth quarter of 2011 and has since expanded in 14 states. Advance America uses in-store testing equipment to evaluate the purity and weight of the gold items presented and utilizes a broker to re-evaluate the gold purchased and sell the items to refiners. In the near future, we intend to expand our product and service offerings, as well as reach new market segments. Payment Plans In most states, a customer may qualify for an extended payment plan ("Payment Plan"). Generally, the terms of the Payment Plans conform to the CFSA Best Practices for extended payment plans. Certain states have specified their own terms and eligibility requirements for Payment Plans. Typically, a customer may enter into a Payment Plan for no additional fee once every 12 months and the Payment Plan will call for scheduled payments that coincide with the customer's next four paydays. In some states, a customer may enter into a Payment Plan more frequently. We do not engage in collection efforts while a customer is enrolled in a Payment Plan. However, if a customer misses a scheduled payment under a Payment Plan, we may resume our normal collection procedures. We do not offer a Payment Plan for installment loans. The third-party internet lender offers Payment Plans as required by state law. In addition, certain states also provide for credit counseling plans. If a customer informs us that he or she has entered into a credit counseling plan, we work with the credit counselor and the customer to create a modified Payment Plan. Collection Procedures Repayment terms vary depending upon state law, the type of cash advance service offered, and whether the cash advance was completed online or in one of our centers. Generally, as part of the loan origination and application process, we explain the customer's repayment obligations and establish the expectation that the customer 87

90 will pay us in cash on or before the due date in accordance with their agreement with us. The day before the due date, we generally call the customer to confirm their payment due date. At the specified due date, the customer is required to make a payment, usually a payment of the total cash advance and applicable fees and interest. Payment is usually made in person, in cash at the center where the cash advance was initiated. Upon payment in full, a customer's check may be returned and/or their ACH authorization deemed to be revoked. If the customer does not repay the outstanding cash advance in full on or before the due date, we will seek to collect the amount of the cash advance and any applicable fees, including any applicable late and NSF fees due, and may deposit the customer's personal check or initiate the electronic payment from the customer's bank account. If a customer does not pay the amount due, our center management has the discretion to either commence past-due collection efforts, which typically may proceed for up to 14 days in most states, or deposit the customer's personal check or debit their bank account in accordance with their ACH authorization. If center management decides to commence past-due collection efforts, employees typically contact the customer by telephone to obtain a payment or a promise to pay and, in cases where we hold a check, attempt to exchange the customer's check for a cashier's check, if funds are available. If, at the end of this past-due collection period or Payment Plan, the center has been unable to collect the amount due, the customer's check is deposited or their ACH authorization is processed. Additional collection efforts are not required if the customer's deposited check or ACH debit clears. If the customer's check or ACH debit does not clear and is returned because of non-sufficient funds in the customer's account or because of a closed account or a stop-payment order, we initiate additional collection efforts. These additional collection efforts are carried out by center employees and typically include contacting the customer by telephone to obtain payment or a promise to pay and attempting to exchange the customer's check for a cashier's check, if funds become available. We also send out a series of collection letters, which are automatically distributed from a central location based on a set of predetermined criteria. Distribution Channels We operate the largest non-bank network of cash advance centers in the United States. The following graphic illustrates the composition of our center network by geographic area as of September 30, Our average center size is approximately 1,500 square feet. We try to locate our centers in highly visible, accessible locations. Our centers, which we design to have the appearance of a mainstream financial institution, are typically located in middle-income shopping areas with high retail activity. Other tenants in these shopping areas typically include grocery stores, discount retailers, and national quick service restaurants. All of our centers are leased, with typical lease terms of three years with an option to renew at the end of the lease term. Our leases usually require that we pay all maintenance costs, insurance costs, and property taxes. The cost of furniture and equipment in each of our centers does not exceed approximately $15,000 on average, and is easily movable. 88

91 Cyclic or Seasonal Trends Advance America's business is seasonal due to the impact of fluctuating demand for cash advance services and fluctuating collection rates throughout the year. Demand has historically been higher in the third and fourth quarters of each year, corresponding to the back-to-school and holiday seasons, and lowest in the first quarter of each year, corresponding to customers' receipt of income tax refunds. Competition Retail Competitors in Mexico Our retail business in Mexico is highly competitive. The market is very fragmented and consumers are served by a wide variety of formats, including independent retail stores, retail chains and department stores, as well as informal outlets such as street vendors and markets. Our main competitors in Mexico are Almacenes Coppel and Grupo Famsa, in addition to independent retail stores. The following table provides information regarding Elektra and its main competitors in Mexico, as of September 30, Store Elektra and Salinas y Rocha Coppel Famsa Number of Stores in Mexico 1, (1) 382(2) (1) Source: Third Quarter 2012 Report to the Mexican Stock Exchange by Coppel, S.A. de C.V. (2) Source: Third Quarter 2012 Report to the Mexican Stock Exchange by Grupo Famsa S.A.B. de C.V. As of September 30, 2012, we were operating 1,023 stores in the Elektra and Salinas y Rocha formats in Mexico. Given this extensive distribution network, we believe that we are one of the leaders in the specialized retail segment. We consider Almacenes Coppel to be our principal competitor at a national level. We also compete with regional and local specialized retail outlets and department stores. We believe that our retail operations place us in a competitive position in our target market in Mexico. Retail Competitors of Elektra in Central and South America Our consumer electronics, household appliances and furniture retail operations in Central and South America face a large number of competitors in all product categories. As in Mexico, the retail sector in all of Latin America is highly fragmented and consumers are served by a wide variety of formats including independent retail stores, retail chains and department stores, as well as informal outlets such as street vendors and markets. The following table sets forth certain information, based on our estimates, concerning our primary competitors in the seven Central and South American countries where we operate retail business in consumer electronics, household appliances and furniture: Argentina Garbarino Brazil Lojas Maia Megatone Lojas Eletro Shoping Lojas laser Eletro Lojas Insinuante Fravega Ribeiro Radio Sapienza Coppel El Salvador Almacenes Prado Guatemala La Curacao Honduras La Curacao Panama Panafoto Peru Carsa Agencias Way El Gallo más Gallo Almacenes Tropigas Audiofoto La Curacao Rodelag Tiendas EFE Casa Confort Plaza Vea Diunsa Casa Gala Saga Falabella Lady Lee Multimax Tottus Jetstero Créditos Mundiales Ripley Almacenes Tropigas Almacenes Japon Dístelsa- Max Supertiendas El Gallo más Gallo Musimundo Walmart Verdugo 89 Hipermercados Metro

92 Argentina Brazil El Salvador Guatemala Honduras Panama Peru Tiendas Oeschle Hiraoka Source: Competitors' websites and market research in each country. Competitors of Banco Azteca in Mexico Banco Azteca faces intense competition. Principal competitors for our consumer products as of September 30, 2012 included: (i) Banco Coppel, Banco Ahorro Famsa and Banco Wal-Mart Adelante (specialized retail) which have followed the example of Grupo Elektra in opening their own banks parallel to a retail operation business, (ii) Sociedades Financieras de Objeto Múltiple (Multiple Purpose Financial Companies, or "Sofomes"), specialized in micro-credit, consumer credit, mortgages and auto loans, (iii) Cajas de Ahorro Popular ("Popular Savings Funds"), which are located in middle-income neighborhoods that are also served by Banco Azteca and (iv) the network of informal credit companies that currently operate in the Mexican economy. Principal competitors for our commercial credit products as of September 30, 2012 included Banamex, S.A., Banca Mifel, S.A., Banco Actinver, S.A., Banco del Bajío, S.A., Banco Inbursa, S.A., Banco Interacciones, S.A., Banco Invex, S.A., Banco Mercantil del Norte, S.A., Banco Monex, S.A., Banco Multiva, S.A., Banco Santander, S.A., BBVA Bancomer, S.A., CIBanco, S.A., HSBC México, S.A., IXE Banco, S.A. and Scotiabank, S.A. Competitors of Banco Azteca in Central and South America Banco Azteca serves a market that has traditionally been neglected by the commercial banking sector. Banking was affected by the foreign debt crisis in Latin America during the mid-1980s. This crisis motivated certain local and international banks to abandon the market, giving rise to the next phase in the development of banking in the region: the merging of institutions in order to increase operational efficiency. The low level of penetration of banking into the lower-income sectors of society and the lack of availability of information constitute a barrier to entry into this market by traditional banks. Principal competitors of Banco Azteca include the following institutions: Brazil Banco Real Banco Do Brasil El Salvador Sociedad de Ahorro y Crédito Apoyo Integral Credicomer Guatemala Banrural Honduras Banco Atlantida Panama Caja de Ahorro Peru Mi Banco Banco de Antigua (Scotiabank) Banco de los Trabajadores Banco de América Central (BAC/GE Money) MICOOPE Banco Covelo Banco Nacional Cajas Municipales Banco ProCredit Banco Delta Edpymes Banco de Occidente Mi Banco CrediScotia Financiera Banco de América Central de Honduras (BAC) Banco Financiera Comercial Hondureña Cooperativa Sagrada Familia Cooperativa ELGA St Georges Bank Financiera Edyficar HSBC Financiera TFC Bac Credomatic Banco Falabella Unibank Banco Ripley Banco General Financiera Universal Banco Bradesco Progresemos Itaú Unibanco Accovi BIC Banco Citi Banco Daycoval Agrícola Banco Internacional Banco ABC HSBC Banco Panamericano Promerica Banco Agromercantil Banco GyT Continental Cruzeiro do Sul Scotiabank Banco de Crédito 90

93 Brazil Banco Sofisa Parana Banco Banco Pine Banco Indusval El Salvador Caja de Crédito Metropolitano COASPAE Guatemala Banco Fichosa Honduras Panama Multibank Banvivienda Primer Banco de los Trabajadores Iztalqueño Banco Universal Global Bank BTS Banco Panamá Peru Financiera Primera Banco Financiero Banco de Comercio América Central CAMETRO Caja de Crédito de Soyapango Caja de Crédito de Sonsonate Source: Competitors' websites and market research in each country. Competitors of Advance America in the United States The cash advance services industry is highly fragmented. In March 2012, Stephens, Inc. estimated that there were approximately 19,000 outlets (including our own centers) in the United States, down 2.6% from the prior year. Our network of 2,409 centers in the United States as of September 30, 2012 represents the largest network of such centers in the United States. Historically, cash advance services have been highly competitive due to relatively low barriers to entry and the regulatory safe harbor that many state statutes provided. We believe the industry has begun to mature and that the number of competitors is contracting. However, we believe that competition remains high even as our industry matures and consolidates. We believe our principal competitors for short-term credit customers in the United States are merchants who accept late payments and banks and credit unions that provide overdraft services and bounced check protection for their account holders. We believe that our two largest cash advance company competitors, Check 'n Go and Check into Cash, each have over 1,000 cash advance centers, respectively. We also believe that QC Holdings, Inc. has over 460 locations in the United States. The remaining competitors are primarily smaller chains and single-unit operators. We also compete with businesses offering cash advances and short-term loans over the internet as well as by phone, many of whom operate outside of the state regulatory framework. We believe the credit provided and fees generated by the cash advance services industry are small in comparison to the overall short-term credit market. The cash advance services industry provides services that are designed to be simple, affordable, and convenient alternatives to merchant late fees, penalties, and overdraft service fees. Within the cash advance services industry, we believe that the principal competitive factors are customer service, location, convenience, speed, and confidentiality. In addition to businesses that provide cash advance services as their core product line, there are other companies that offer cash advance services as an ancillary financial product to their customers. These include banks and credit unions, which provide cash advance services to their customers as an alternative or in addition to overdraft services, some of which have a much larger branch and automated teller machine network than our center network. These also include companies with the primary business of cashing checks, selling money orders, providing pawn lending, title lending, money transfer services, or offering similar financial services. These competitors include Dollar Financial Corp., ACE Cash Express, Inc., and Cash America International, Inc. Regulation As a company primarily engaged in offering retail commercial and financial services, Grupo Elektra is subject to a diverse array of consumer and financial regulatory requirements under the laws of the jurisdictions in 91

94 which it operates, including Mexico, including a comprehensive regulatory regime that governs the activities of Banco Azteca banking operations. Some of these regulatory requirements are discussed below. Consumer Protection Laws The Ley Federal de Protección al Consumidor (the "Consumer Protection Act"), which regulates consumer installment sales programs in Mexico, became effective on December 24, Consumer credit services are regulated by the banking regulation of the countries where they are offered. The Ley de Protección y Defensa al Usuario de Servicios Financieros (the "Banking Regulation") protects and defends the rights of users of financial services. The collection practices and repossession procedures we use in our operations in Mexico are regulated under the Consumer Protection Act, the Mexican Commercial Code and the Mexican Civil Code. In the other Latin American countries where we operate, we are regulated by each country's commercial, civil and consumer protection laws and regulations. The consumer protection laws and their enforcement in the other Latin American countries where we do business are comparable to Mexican law. Regulations Affecting Registered Companies The LMV became effective on January 2, This Act imposes regulations on public offerings, market trading, intermediaries and authorities activities and services related to the securities exchange and also foresees internal and external enforcement controls and severe sanctions in case of infringements. The main objectives of the LMV are to protect investors' rights, to ensure that market trade is done in a fair, transparent, efficient and equitable manner, to minimize the risks related to market trading and to promote competition. The Ley General de Sociedades Mercantiles (the General Corporation and Partnership Law, or "LGSM"), which regulates any commercial companies, became effective on August 4, The LGSM imposes several rules regarding the constitution and activities of Mexican companies, as well as the obligations, rights and limitations related to them. It also establishes regulations on the payment of dividends, profit distribution, reserve funds, shareholders' rights and obligations, shareholders' meetings, rules regarding the company's administration and surveillance, periodic disclosures regarding financial, accounting and corporate information and foresees internal and external controls for enforcement and sanctions in case of infringements. The Disposiciones de Caracter General Aplicables a Las Emisoras de Valores y a Otros Participantes del Mercado de Valores (the General Regulations Applicable to Securities Issuers and Other Market Securities Participants or "the Provisions"), became effective on March 19, The main objectives of the Provisions are to compile the general rules issued by CNBV in connection with: (i) the registration and maintenance of securities with the National Registry of Securities; (ii) public offerings; (iii) disclosure of information provided by issuers for appropriate decision-making in the investment field; and (iv) the repurchase of shares by companies that have registered such securities with the aforementioned Registry, in order to facilitate their consultation, application and compliance, among others. Regulations Affecting Money Transfers The Ley General de Organizaciones y Actividades Auxiliares del Crédito (the "Organizations and Credit Auxiliaries Activities Act") establishes the rules, procedures and mechanisms with which the authorized companies must comply in order to offer and operate money transfer services. The main objectives of these regulations are to prevent the funding of terrorist activities as well as to prevent fraud and illegally funded transactions. These money transfer regulations provide for sanctions in case of noncompliance. Privacy Regulations The Ley Federal de Protección de Datos Personales en Posesión de los Particulares (the "Federal Law for Protection of Personal Information in Possesion of Private Parties") establishes the rules and procedures with which the companies must comply when obtaining, managing, transferring and using personal information of their clients. The main objectives of these regulations are to protect the privacy and prevent the misuse of personal and sensitive information. These regulations provide for sanctions in the event of noncompliance. 92

95 Regulations Affecting Afore Azteca (the Pension Fund Administrator) Under Mexican Law, employees, employers and the Mexican federal government must make regular pension contributions to the Instituto Mexicano del Seguro Social (the Mexican Social Security Institute, or "IMSS") and the IMSS must deposit those fees into an individual account for each employee. Pension fund administration companies (known as afores) are authorized by the Comision Nacional del Sistema de Ahorro para el Retiro (the National Retirement Fund System Commission, or "CONSAR") to manage such pension fund accounts. They are also authorized to distribute those funds to applicable sub-accounts and to administer Sociedades de Inversión Especializadas en Fondos para el Retiro (known as siefores), which are companies that specialize in investing such pension funds. Pension fund administrators are regulated by the Ley de los Sistemas de Ahorro para el Retiro (the Mexican Savings Retirement System Act). The CONSAR supervises pension fund administrations and the Comision Nacional para la Protección y Defensa de los Usuarios de Servicios Financieros (the Mexican Defense and Protection of the Users of Financial Services Commission, or "CONDUSEF") receives complaints against pension fund administrators. Regulations Affecting Seguros Azteca The insurance companies are authorized by the SHCP and supervised by the Comision Nacional de Seguros y Finanzas (the National Insurance and Bonding Commission, or "CNSF"). These companies are regulated by the Ley General de Instituciones y Sociedades Mutualistas de Seguros (the "Insurance Act"), by the Ley Sobre el Contrato de Seguro (the "Insurance Contract Act") and by the provisions established by the CNSF and the SHCP. The insurance regulations establish the insurance companies' organization and performance as well as the minimum requirements that the insurance contracts must observe. Regulations Affecting Banco Azteca Our banking activities are regulated and supervised by the Secretaría de Hacienda y Crédito Público (the Ministry of Finance, or "SHCP"), Banco de México, CNBV, IPAB and the CONDUSEF. The SHCP possesses broad powers over the Mexican financial system and regulates its structure and operations through an extensive scheme of regulations and policies governing Mexican commercial banking operations. The Ministry of Finance is also responsible for licensing commercial banking activities and authorizing branch operations. The CNBV is an autonomous agency of the Mexican Ministry of Finance, and operates under the oversight of a board of governors. This Board of Governors is comprised of 10 members plus the President of the Commission, of which five members are appointed by the SHCP, three by the Mexican Central Bank, one by the CONSAR and another member by the CNSF. The CNBV is responsible for the supervision of banks, with the responsibility of assuring that banking transactions are carried out in a safe and sound manner and in accordance with Mexican laws and regulations, and reviewing and assessing the risks to which regulated banking entities are exposed, as well as the adequacy of their control systems and management, in order to promote sound liquidity, solvency and stability levels. The CNBV also issues rules and regulations governing banking entities, and acts as the Government's consulting agency on financial matters. In addition, among other activities the CNBV approves the incorporation, operation and minimum capital of financial institutions, as well as the appointment of directors, officers, statutory auditors and attorneys-in-fact of such institutions. The Ley de Instituciones de Crédito (the "Banking Act") became effective on July 18, The Banking Act, as well as the requirements established by the CNBV and the SHCP in order to protect the public interest, regulate Banco Azteca's banking and credit services, as well as Banco Azteca's organization and operations. These banking regulations impose, among others, the following obligations: (i) capital adequacy, (ii) early intervention provisions, (iii) reserve and compulsory deposit requirements, (iv) credit diversification rules, (v) classification of loans and allowance for loan losses, (vi) related party transactions, (vii) bank secrecy provisions, (viii) credit bureaus, (ix) anti-money-laundering requirements, (x) credit investigation and reporting requirements, (xi) bank deposit insurance and (xii) risk management, among others. The Disposiciones de Carácter General Aplicables a las Instituciones de Crédito (the General Regulations Applicable to Banking Institutions the "Banking Provisions"), became effective on December 2, The main objectives of the Banking Provisions are to complement the Banking Act in connection with: (i) capital adequacy, (ii) early intervention provisions, (iii) reserve and compulsory deposit requirements, (iv) credit diversification rules, 93

96 (v) classification of loans and allowance for loan losses, (vi) related party transactions, (vii) credit bureaus, (viii) credit investigation and reporting requirements, and (ix) risk management, among others. Regulations Affecting Advance America Federal Regulation in the United States In July 2010, Congress enacted the Dodd-Frank Act, which authorized the creation of the CFPB to regulate a variety of consumer finance transactions. The CFPB has regulatory, supervisory, and enforcement powers over non-bank providers of consumer financial products and services, like us. The CFPB has explicit supervisory authority to: (i) examine and require registration of providers of consumer financial products and services, including providers of consumer loans such as us; (ii) adopt rules describing specified acts and practices as being "unfair," "deceptive," or "abusive," and hence unlawful; and (iii) impose recordkeeping obligations. We do not currently know the nature and extent of the rules the CFPB will consider for consumer loan products and services such as those offered by us or the timeframe in which the CFPB may consider such rules. The CFPB has indicated that it intends to systematically gather data to obtain a complete understanding of the consumer loan market and its impact on consumers. Although the CFPB does not have the authority to regulate fees or interest rates, it is possible that the CFPB could propose and adopt rules that would make short-term consumer lending products and services materially less profitable or even impractical to offer, which could force us to modify or terminate certain of our product offerings in the United States. The CFPB focuses mainly on clarity, transparency, simplicity and full disclosure in the consumer loan market. In addition to the Dodd-Frank Act's grant of regulatory and supervisory powers to the CFPB, the DoddFrank Act gives the CFPB authority to pursue administrative proceedings or litigation for violations of federal consumer financial laws (including the CFPB's own rules). In these proceedings, the CFPB can obtain cease and desist orders (which can include orders for restitution or rescission of contracts, as well as other kinds of affirmative relief) and monetary penalties ranging from $5,000 per day for ordinary violations of federal consumer financial laws to $25,000 per day for reckless violations and $1 million per day for knowing violations. Also, where a company has violated Title X of the Dodd-Frank Act or CFPB regulations implemented under Title X of the DoddFrank Act, the Dodd-Frank Act empowers state attorneys general and state regulators to bring civil actions for the kind of cease and desist orders available to the CFPB. Our products and services are subject to a variety of other federal laws and regulations, such as the TILA, the ECOA, the FCRA, the FDCPA, the GLBA, the Bank Secrecy Act, the Money Laundering Control Act of 1986, the Money Laundering Suppression Act of 1994, and the PATRIOT Act, and the regulations promulgated under each statute. Among other things, these laws require disclosure of the principal terms of each transaction to every customer, prohibit misleading advertising, protect against discriminatory lending practices, and proscribe unfair credit practices. Our marketing efforts and the representations we make about our advances also are subject to federal and state unfair and deceptive practices statutes. The FTC and the CFPB enforce the Federal Trade Commission Act and the state attorneys general and private plaintiffs enforce the analogous state statutes. Various anti-cash advance legislation has been proposed or introduced in the U.S. Congress. Congressional members continue to receive pressure from consumer advocates and other industry opposition groups to adopt such legislation. In 2008 and 2009, bills were introduced in Congress that would have placed a federal cap of 36% on the effective APR on all consumer loan transactions. Another bill would have placed a 15-cents-per-dollar borrowed ($0.15/$1.00) cap on fees for cash advances, banned rollovers (payment of a fee to extend the term of a cash advance or other short-term financing), and required Advance America to offer an extended payment plan that would severely restrict its cash advance product. Any such federal legislative or regulatory initiatives could have a material adverse impact on our business and our ability to continue current operations. State Regulation in the United States Our business is regulated under a variety of enabling state statutes, including payday loan, deferred presentment, check-cashing, money transmission, small loan, CSO and CAB regulations and state laws, all of which are subject to change. Some of these legislative and regulatory changes may require us to cease operations, while other changes may result in less significant short-term or long-term changes, interruption in revenues, and lower operating margins. We generally cannot estimate what effect, if any, operational changes we make in response to legislative and regulatory changes may have on our financial results until we are able to develop legal and financially viable alternative products and services. From time to time, we may also choose to operate in a state even if legislation or regulations cause us to operate at a loss in that state. 94

97 The terms of our products and services vary from state to state in order to comply with the laws and regulations of the states in which we operate. As of September 30, 2012, we operated in 29 states. We currently do not conduct business in the remaining 21 states or in the District of Columbia. The scope of state regulation, including the fees and terms of our products and services, varies from state to state. Most states with laws that specifically regulate our products and services limit the principal amount of a cash advance or loan and establish maximum fees and/or interest and other charges to consumers. In addition, many states regulate the maximum amount, maturity, and renewal or extension of cash advances or loans. Our collection activities regarding past due amounts are subject to consumer protection laws and state regulations relating to debt collection practices. In addition, some states restrict the advertising content of our marketing materials. During the last few years, legislation that prohibits or severely restricts our products and services has been introduced or adopted in a number of states and at the federal level, and we expect that trend to continue for the foreseeable future. During the first quarter of 2010, laws that implemented a statewide database requirement came into effect in Kentucky, South Carolina, and Washington, and a similar law in Wisconsin in January There is also another statewide database requirement scheduled to be set in January Legislation was adopted in New Hampshire in 2008 that effectively prohibits us from offering cash advances to consumers in that state. As a result, in February 2009, we decided to close all of our centers in New Hampshire. In January 2012, new enabling legislation was adopted in New Hampshire but was subsequently vetoed by New Hampshire's governor. Also in January 2012, a bill went into law in Mississippi, which, among other things, modifies certain aspects of our cash advance product in that state and extends the statute's sunset provision through In March 2011, a law enacted in Illinois created a longer-term product with multiple installments, applicable fees, and a statewide database reporting requirement. We began offering products in conformity with this new legislation in June In Montana, a bill became effective in January 2011 which caused us to discontinue operations in that state. In Colorado, a new legislation was enacted in August 2010 and it permits a multiple installment loan product which caused a significant decrease in our profits in Colorado. Furthermore, legislation permitting cash advances in Arizona expired in July 2010, and, as a result, we ceased operations in Arizona. In response to and in anticipation of similar amendments to the law, we are regularly refining our cash advance services and developing new products and services or operations to address recent or anticipated legislative and regulatory changes. Statutes authorizing our products and services typically provide the state agencies that regulate banks and financial institutions with significant regulatory powers to administer and enforce the law. In most states, we are required to apply for a license, file periodic written reports regarding business operations, and undergo comprehensive state examinations to ensure that we comply with applicable laws. Under statutory authority, state regulators have broad discretionary power and may impose new licensing requirements, interpret or enforce existing regulatory requirements in different ways, or issue new administrative rules, even if not contained in state statutes, that affect the way we conduct business and may force us to terminate or modify our operations in particular states. Regulators may also impose rules that are generally adverse to our industry. Additionally, state attorneys general and banking regulators scrutinize our products and services and may take actions that could require us to modify, suspend, or cease operations in their respective states. See " Legal Proceedings." Local Regulation in the United States In addition to state and federal laws and regulations, our business can be subject to various local rules and regulations such as local zoning regulations that require special use permits for, or impose other restrictions, on providers of cash advances and similar services. Such local regulations could have a material adverse effect on our business, results of operations, and financial condition. Patents, Licenses, Trademarks and Other Contracts Grupo Elektra holds a portfolio of over 3,132 trademarks, including brands such as Elektra, Banco Azteca, Seguros Azteca, Afore Azteca, Advance America, Guardadito, Guardadito Dólares, Italika, Dinero Express, Credimax, Credifácil, Vidamax, Milenia, ekt, Milenia, "Revalora tu mundo" (Revalue your world) as well as slogans such as "Abonos chiquitos para pagar poquito" (Small payments to pay little), "Nadie vende más barato que Elektra" (Nobody sells cheaper than Elektra), "Dinero Express tu dinero como de rayo" (Dinero Express, your money like lightning), "chaz chaz" (marketing reference to cash payment), "en Elektra sí se puede" (At Elektra, yes you can), "más que una garantía todo un compromiso" (more than a guarantee, a whole commitment) and "Con Elektra vives mejor" (You live better with Elektra), among others. Our trademark portfolios are registered in Mexico, the U.S., Argentina, Bolivia, Honduras, Peru, El Salvador, the Dominican Republic, Chile, Venezuela, Guatemala, Costa Rica, Uruguay, Paraguay, Nicaragua, Ecuador, Colombia, Panama, Brazil, Spain, Canada, China, the UK, Greece, Italy, Benelux, Portugal, France and other jurisdictions. 95

98 In most countries, trademark registrations are effective for 10 years starting from the presentation of the registration application, so each year we have to renew expiring trademarks. In addition, we have a program in each of the countries where we do business to protect our trademarks against piracy and we monitor the internet for unauthorized use of our trademarks, logos, and slogans and take appropriate legal action. On November 9, 2005, Elektra entered into a 10-year franchise contract with Elektra Panamá S.A., a Panamanian company that is not affiliated with us ("Elektra Panama"), pursuant to which Elektra Panama is licensed to operate a store under the Elektra brand name. Employees As of September 30, 2012, we employed 75,301 people, of whom approximately 2% were union members in Mexico. Our labor relations are good, and we use collective bargaining agreements to manage our relationships with unions. These agreements are reviewed annually with respect to salaries, and every two years with respect to benefits. Our total workforce in all the countries where we do business as of the nine months ended September 30, 2012 and the years ended December 31, 2009, 2010 and 2011, is shown in the table below: Personnel Mexico Central & S. America United States Total workforce Change from December 31, 2011 to September 30, 2012 Nine months ended September 30, ,467 2,714 23,237 58,597 10,648 6,056 75,301 Years ended December 31, ,130 7,934 52, ,800 6,629 39, ,915 6,583 37,498 Strategic Investments As of September 30, 2012, we hold, through subsidiaries and affiliates, strategic minority interests in TV Azteca and Iusacell. TV Azteca is one of the two largest producers of Spanish-language television programming in the world, operating two national television networks in Mexico, Azteca 13 and Azteca 7, through more than 300 owned and operated stations across the country. Iusacell is one of the largest mobile telephone and PCS service providers in Mexico. In addition to its core mobile telephony services, Iusacell also provides a wide range of other telecommunications services, including long distance, wireless local telephony and data transmission services. Legal Proceedings We are involved in a number of active lawsuits, including lawsuits filed by private litigants and matters arising out of actions taken by state regulatory authorities. We are also involved in various other legal proceedings with regulators. In addition, we are obligated to advance expenses to, and, in certain circumstances, indemnify for damages incurred, by certain of our current and former officers and directors in responding to inquiries or defending against claims or proceedings that have arisen by reason of the fact that such person is or was an officer or director of the Company. Under certain circumstances, we may also be obligated to defend and indemnify other parties against whom claims have been asserted. Unless otherwise stated below, we are vigorously defending against these actions and will, when management believes appropriate in consideration of ongoing litigation expenses and other factors, evaluate reasonable settlement opportunities. The probability of an unfavourable outcome and/or the amount of losses, if any, cannot be reasonably estimated for these legal proceedings unless otherwise stated below. Accordingly, except as otherwise specified below, no accrual has been recorded for any of these matters as of September 30, Cancellation of registry as a vehicle manufacturer We have filed a petition to nullify a ruling by the Mexican Ministry of Economy (Secretaría de Economía) denying renewal of our auto subsidiaries' registration in the Registry of Manufacturers of New Light Automobiles in Mexico, and an extension of the time to construct an automobile plant in Michoacán. Through our subsidiaries we imported 5,000 vehicles into Mexico without payment of import tariffs pursuant to provisions that granted tax relief for such imports for entities listed on the Registry of Manufacturers of New Light Automobiles. At the time of imports, we were listed on the registry because of our intent to build a plant in the State of Michoacán. In 2007, we entered into an agreement with the Government of Michoacán to build a 96

99 manufacturing plant in Michoacán within three years. We later submitted an application to the Ministry of the Economy for an extension of the deadline to construct the automobile plant, but were denied. We have appealed the denial. Our contract with the Government of Michoacán was terminated on November 30, 2010, without liability to either party. If the appeal against the denial of our request for a time extension is not granted, there is a risk that the Mexican government may attempt to charge tariffs of 50% of the cost of the vehicles we imported, instead of the 0% rate at which they were imported. As of September 30, 2012, the total sum related to this contingency was Ps.336 million ($26.1 million); however, no liability reserves are recognized as of this date, as we believe that sufficient legal cause exists to contest any payments being made in this regard. Civil Lawsuit against the BMV On June 25, 2012, we filed a lawsuit against the BMV and its president and chief executive officer, Luis Tellez. The claim seeks a verdict that declares unlawful the new methodology published by the BMV on April 11, 2012 to qualify companies for listing on the IPyC, the main stock index of the BMV, which lists the 35 most liquid companies listed on the BMV. The claim also seeks the payment of the damages derived to us from the disclosure of such change in the methodology that affected our share price and from the omission by the BMV to suspend the trading of our shares following an extraordinary and unusual reduction in their price thus allowing a further price decrease. In that connection, such price reduction has a direct effect on our obligations under certain financial derivatives transactions entered into with financial sector counterparties that are based on the value of our shares as an initial reference value. The settlement amount of such financial derivatives is determined on the scheduled or anticipated termination date and is equal to the value of the shares on such date minus the initial reference value. Therefore, our potential gain upon settlement is the positive difference between the initial reference value and the value of our shares on the termination date, whereas our potential loss upon settlement is the negative difference thereof. Under such financial derivatives, as of September 30, 2012 we have set aside cash collateral in the amount of Ps.10,377 million ($807 million), equal to 100% of the notional value of the financial derivatives, which is the maximum amount that we would lose in the event that our share price on the termination date is below the initial reference value. As of September 30, 2012, we had incurred losses for Ps.6,390 million ($483 million) in connection with these financial derivative transactions (see "Operating and Financial Review Management Overview Results of Operations Nine Months Ended September 30, 2012 Compared with Nine Months Ended September 30, 2011 Comprehensive Financial Income." For additional information see Note 10 to our audited consolidated financial statements as of and for the years ended December 31, 2011 and On June 29, 2012, the Federal District Superior Civil Court issued an injunction ordering that until a final ruling is rendered, the new IPyC calculation methodology and its effects do not apply to us. The civil action is still at an early stage. Therefore, we cannot currently predict what the outcome will be. El Salvador The Consumer Protection Bureau (Defensoría del Consumidor, or "CPB") imposed on Elektra de El Salvador a penalty of $0.43 million and seeks for interest restitution of $0.32 million due to infringement of the Consumer Protection Law. The amount of $0.10 million of interest restitution remains pending. The CPB aims to give retroactive effect to the law passed in October The penalty stems from the method of calculating interest on global balances, when the amended law states that interest shall be calculated on the unpaid balance. The process is currently in the Supreme Court. Argentina A class action claims that Elektra Argentina applied usurious rates, and used misleading advertisements, among other arguments. We filed an appeal against the admission of the class action. The civil action is in an initial stage and is not quantified so it is not possible yet to predict what the outcome could be. Honduras The National Banking and Insurance Commission of Honduras (the "CNBS") ordered Banco Azteca de Honduras ("BAZ") to: (i) discontinue the practice of marketing products that do not comply with Honduran law, (ii) not exercise exclusive powers of financial groups with its related company Comercializadora EKT, SA ("CEKT"), (iii) discontinue all operations, activities and/or services with CEKT, and (iv) change the method of calculating interest and reduce interest rates competitive parameters, among other orders. This was challenged by BAZ and, as a result, BAZ obtained a suspension of the contested measures. Also, in judgments of first and second instance, the contested decisions were declared void. The final judgment is still pending and if the measures were to be reinstated, then BAZ would be required to: (i) pay fines of $0.8 million and (ii) to change the way BAZ operates in that country as mentioned above. If this were to happen, it could have an adverse effect on the results of BAZ. 97

100 Advance America Litigation Advance America and its subsidiaries are involved in a number of active lawsuits, including lawsuits filed by private litigants and matters arising out of actions taken by state regulatory authorities. These entities are also involved in various other legal proceedings with regulators. In addition, Advance America is obligated to advance expenses to, and, under certain circumstances, indemnify for damages incurred by some of its current or former officers, directors, and/or certain employees, incurred in relation to the claims or proceedings that have arisen with regard to such persons' position as officer, director, or employee of Advance America. Under certain circumstances, the Company may also be obligated to defend and indemnify other parties against whom claims have been asserted. Unless otherwise stated below, we are vigorously defending against these actions and will, when management believes appropriate in consideration of ongoing litigation expenses and other factors, evaluate reasonable settlement opportunities. The probability of an unfavourable outcome and/or the amount of losses, if any, cannot be reasonably estimated for these legal proceedings unless otherwise stated below. Accordingly, except as otherwise specified below, no accrual has been recorded for any of these matters as of September 30, Pennsylvania Department of Banking v. NCAS of Delaware, LLC (Pennsylvania) On September 27, 2006, the Pennsylvania Department of Banking filed a lawsuit in the Commonwealth Court of Pennsylvania alleging that Advance America's operating subsidiary in Delaware, NCAS of Delaware, LLC, was providing lines of credit to borrowers in Pennsylvania without a license required under Pennsylvania's financial licensing law and charging interest and fees in excess of the amounts permitted by Pennsylvania's usury law. In July 2007, the court determined that certain aspects of Advance America's Choice Line of Credit required its subsidiary to be licensed under Pennsylvania's Consumer Discount Company Act ("CDCA") and enjoined such subsidiary from: a) continuing its lending activities in Pennsylvania for so long as the CDCA violations continued; and b) collecting monthly participation fees on the Choice Line of Credit. Advance America's subsidiary appealed to the Pennsylvania Supreme Court and, in May 2008, the Pennsylvania Supreme Court upheld the lower court's ruling. The Pennsylvania Department of Banking subsequently amended its complaint to add the Pennsylvania Attorney General as a plaintiff, to name the parent company, Advance America as a defendant, and to seek damages, fines, and penalties under Pennsylvania's CDCA, usury laws, and consumer protection laws. In April 2010, the Pennsylvania Commonwealth Court dismissed the alleged CDCA and usury allegations and partially dismissed the alleged consumer protection law violations. The remaining alleged consumer protection law claims will proceed before the trial court. These remaining claims could, under certain circumstances, total approximately $45 million in damages, plus civil penalties of $1,000 for each violation of the Pennsylvania Consumer Protection Law and an additional $2,000 for violations against customers over the age of 60, and attorneys' fees and costs. The parties are currently engaged in discovery. Sharlene Johnson, Helena Love and Bonny Bleacher v. Advance America, Cash Advance Centers, Inc. et al. (Pennsylvania) On August 1, 2007, Sharlene Johnson, Helena Love, and Bonny Bleacher filed a putative class action lawsuit in the United States District Court, Eastern District of Pennsylvania against Advance America and two of its subsidiaries alleging that they provided lines of credit to borrowers in Pennsylvania without a license required under Pennsylvania law and with interest and fees in excess of the amounts permitted by Pennsylvania law. The complaint seeks, among other things, a declaratory judgment that the monthly participation fee charged to customers with a line of credit is illegal, an injunction prohibiting the collection of the monthly participation fee, and payment of damages equal to three times the monthly participation fees paid by customers since June 2006, which could total approximately $135 million in damages, plus attorneys' fees and costs. By order dated August 18, 2011, as amended by memorandum order dated August 31, 2011, the trial court compelled the class representatives to arbitrate their claims on an individual basis and stayed the litigation. The trial court denied plaintiff's motion to certify the August 18, 2011 order. By order dated November 13, 2012, the trial court dismissed the case. On December 3, 2012, plaintiffs filed a notice of appeal. Betts and Reuter v. McKenzie Check Advance of Florida, LLC et al. (Florida) Advance America's subsidiary, McKenzie Check Advance of Florida, LLC ("McKenzie"), along with certain of its former directors, are defendants in a putative class action lawsuit commenced by former customers Wendy Betts and Donna Reuter, on January 11, 2001, and a third named class representative, Tiffany Kelly, in the Circuit Court of Palm Beach County, Florida. This putative class action alleges that McKenzie, by and through the actions of certain officers, directors, and employees, engaged in unfair and deceptive trade practices and violated Florida's criminal usury statute, the Florida Consumer Finance Act, and the Florida Racketeer Influenced and Corrupt Organizations Act. The suit seeks unspecified damages, and the named defendants could be required to refund fees and/or interest collected, refund the principal amount of cash advances, pay multiple damages, and pay other monetary penalties. Ms. Reuter's claim has been held to be subject to binding arbitration. However, the trial 98

101 court has denied the defendants' motion to compel arbitration of Ms. Kelly's claims. The appellate court affirmed the trial court's decision, but certified a "Question of Great Public Importance" to the Florida Supreme Court. The Florida Supreme Court accepted our appeal and stayed the appellate court's mandate pending the outcome of their review of the appellate court's decision. Oral argument before the Florida Supreme Court was heard in May We now await a final decision regarding the enforceability of the arbitration clause. Reuter and Betts v. Advance America, Cash Advance Centers of Florida, Inc. et al. (Florida) A second Florida lawsuit was filed on August 24, 2004, in the Circuit Court of Palm Beach County by former customers Gerald Betts and Ms. Reuter against Advance America and its Florida subsidiary, Advance America, Cash Advance Centers of Florida, Inc., along with certain officers, directors and former directors. The allegations, relief sought, and defenses in this lawsuit are nearly identical to those alleged in the first Betts and Reuter lawsuit. The case is currently stayed, pending a decision in Betts and Reuter. Other We are also involved in other litigation, arbitrations, and administrative proceedings that are incidental to our business, including, without limitation, regulatory enforcement matters, individual consumer claims, contractual disputes, intellectual property disputes, employee claims, and customer claims, among others. We do not anticipate that any of these actions will have a significant negative effect on our business activities or financial condition. 99

102 DIRECTORS AND SENIOR MANAGEMENT Directors Our board of directors (the "Board") is comprised of nine members who are elected for one-year terms at our annual ordinary meeting of shareholders. Three of the directors appointed must be independent Directors who are not employed by or affiliated with our controlling shareholders. The current term of office of each director will expire at the next annual shareholders' meeting taking place on a date to be designated in the first four months of The address of each director is Av. Insurgentes Sur No Tower I, Col. Tlalpan La Joya C.P , Mexico City, Mexico. The following table sets forth the names of our current directors, their ages as of September 30, 2012, and their positions and year of appointment: Name Age Position Director Since Ricardo B. Salinas Pliego(1) 56 Chairman of the Board/Non-independent Director/Significant Shareholder 1993 Hugo Salinas Price 80 Non-independent Director 1993 Pedro Padilla Longoria 46 Non-independent Director 1993 Guillermo E. Salinas Pliego(1) 52 Non-independent Director 1993 Roberto Servitje Achutegui 59 Independent Director 2000 Luis Jorge Echarte Fernández 67 Non-independent Director 2003 Joaquín Arrangoiz Orvañanos 55 Non-independent Director 2008 Marcelino Gómez Velasco y San Román 54 Independent Director 2010 Gonzalo Brockmann García 57 Independent Director 2010 (1) Son of Hugo Salinas Price The following provides biographical information about the directors of Grupo Elektra. Ricardo B. Salinas Pliego. Mr. Salinas has served as our President since He has served as Chairman of the board of directors of Banco Azteca since Mr. Salinas is one of our controlling shareholders and has served as the President of the board of Directors of TV Azteca since Mr. Salinas Pliego also serves on the board of directors of numerous other Mexican companies including Iusacell, Azteca Holdings and Grupo Móvil Access. Mr. Salinas Pliego received a degree in accounting from the Instituto Tecnológico de Estudios Superiores de Monterrey ("ITESM") and received an MBA from the Freeman School of Business at Tulane University. Hugo Salinas Price. Mr. Salinas has served as our Honorary President since In 1997, he founded the Asociación Cívica Mexicana Pro-Plata A.C., for which he currently serves as president. Mr. Salinas holds degrees from Wharton and ITESM and a degree in Law from the Universidad Nacional Autónoma de México ("UNAM"). Pedro Padilla Longoria. Mr. Padilla has served as a director since 1993 and was our CEO between 1993 and Mr. Padilla also serves on the Board of Directors of Banco Azteca, TV Azteca, Móvil@ccess and Iusacell. Mr. Padilla received a degree in law from UNAM. Guillermo Salinas Pliego. Mr. Salinas has served as director since He also serves on the board of directors of Banco Azteca and has served as director of TV Azteca. He is the President of Grupo Avalanz. Mr. Salinas is a Certified Public Accountant, holding an undergraduate degree in accounting from ITESM. Roberto Servitje Achutegui. Mr. Servitje has served as director since From 1993 until 2000, he served as an external advisor to the Board. He is the Chairman of Grupo Altec S.C. Formerly he was Executive Vice President and Director of Grupo Industrial Bimbo, Mexico's leading producer and distributor of baked goods, where he worked for over 28 years. Mr. Servitje graduated from the Universidad Iberoamericana and holds an MBA from the J. L. Kellogg Graduate School of Business at Northwestern University. Luis Jorge Echarte Fernández. Mr. Echarte has served as director since March He is the General Director of International Relations for Grupo Salinas, Chairman of the Board of Azteca International and General Director of the Fundación Azteca América. Mr. Echarte holds undergraduate degrees from Memphis State 100

103 University and the University of Florida and has completed the Executive Management Program at Stanford University. Joaquín Arrangoiz Orvañanos. Mr. Arrangoiz has served as director since Mr. Arrangoiz also has served as a director of TV Azteca since 1998 and as TV Azteca's Co-General Director of Sales since Mr. Arrangoiz received a degree in administration from UNAM and a postgraduate degree from UCLA. Marcelino Gómez Velasco y San Román. Mr. Gómez has served as director since He has served as director of Grupo Iusacell since He has also served as President of the Board of Directors of Grupo Netec, S. A. de C.V, an educational and technical consulting company. Mr. Gómez received a degree in system engineering from Universidad Iberoamericana and holds a MBA from The Wharton School of Business at University of Pennsylvania. Gonzalo Brockmann García. Mr. Brockmann has served as director since He is President of Best Western Hotels in Mexico, Central America and Ecuador. Formerly, he was President of Hostels of America. Mr. Brockmann graduated from the Universidad Anahuac and holds a MBA from the University of Texas. Corporate Governance Pursuant to applicable law, at least 25% of the members of the Board of Directors are required to be independent, with no affiliation with the controlling shareholders or management. Our independent Directors are currently Roberto Servitje Achutegui, Marcelino Gómez Velasco y San Román and Gonzalo Brockmann. Through a shareholders' meeting held on August 17, 2009, the shareholders approved the restructuring of the committees to support and assist the board of directors. Such committees are the following: The Audit Committee reviews our financial reporting procedures and internal financial control systems, as well as the activities and independence of independent auditors and the activities of internal audit staff, review the internal control policies and procedures and reviews related party transactions, among other things. As of September 30, 2012, the audit committee was comprised of the following independent directors: Gonzalo Brockmann García, Marcelino Gómez Velasco y San Román and Roberto Servitje Achutegui, which were appointed on March 23, Currently we do not have an audit committee financial expert but we are presently looking for a person who complies with the requirements to qualify as a financial expert to serve as a member of the Audit Committee. The Company Practices Committee (Comité de Prácticas Societarias) reviews the investment policy of the company and the use of the assets of the company; approves the capital expenditures and supervises its use and opines on the performance of the executive officers, among others. As of April 8, 2011, this committee was comprised of two independent directors, Gonzalo Brockmann García and Roberto Servitje Achutegui, and one nonindependent director, Guillermo Salinas Pliego. Executive Officers The following table sets forth the names of our current executive officers, their ages as of September 30, 2012, their current positions and the year of appointment as an executive officer. Name Age Executive Officer Since Position Carlos Septién Michel 59 Chief Executive Officer 2002 Rodrigo Pliego Abraham 47 Chief Finance Officer 1994 Manuel González Palomo 55 Vice President of Systems 1990 Luis Niño de Rivera Lajous 66 Vice President of Banco Azteca's Board of Directors 2002 Mario Gordillo Rincon 44 General Director of Financial Services 1993 Josué Garza Aldape 45 General Director of Geographic Operation 1992 Gabriel Roqueñí Rello 51 General Counsel of Grupo Elektra and subsidiaries 1990 Ricardo B. Salinas Pliego 56 Chairman

104 The following provides biographical information about our executive officers. See " Directors" for biographical information on Ricardo B. Salinas Pliego. Carlos Septién Michel. Mr. Septién has served as CEO since 2007 and as CEO of Banco Azteca since April Previously, he served as the Adjunct General Director of Banorte. Prior to that, he held positions as Chief Executive Officer of BanCrecer and Chief Executive Officer of IXE Banco. He has more than 30 years of banking experience. Mr. Septién received an industrial engineering degree from Universidad Iberoamericana and holds an MBA from Purdue University. Rodrigo Pliego Abraham. Mr. Pliego is our Chief Financial Officer. Previously, he was the Chief Financial Officer of TV Azteca, a position he held since July Prior to serving as Chief Financial Officer in TV Azteca, he served as the Administration Director of TV Azteca from May 1994 through July He received an undergraduate degree in Electrical and Mechanical Engineering from UNAM. Manuel González Palomo. Mr. González has served as Vice President of Systems since Since joining Grupo Elektra in 1990, he has held the positions of Director of Finance, Director of Human Resources and General Director of Systems. Mr. González holds a bachelor's degree in accounting, an MBA and a Masters in Operations Research, all from the ITESM. Luis Niño de Rivera Lajous. Mr. Niño de Rivera has served as Vice President of Banco Azteca's Board of Directors since He is also a member of the Board of Directors of The Mexico Private Equity Fund, the Club de Banqueros de México and the International Committee of Indiana University Foundation. He has served as CEO of several companies, such as Dresdner Bank Mexico, Citibank (Panama), Arrendadora Financiera Mexicana and Factoring Corporativo. Mr. Niño de Rivera holds a degree in Management from Indiana University and a Master's Degree on International Business and Politics from New York University. Mario Gordillo Rincón. Mr. Gordillo has served as General Director of Financial Services of Banco Azteca since Since joining Grupo Elektra in 1993 from Coca-Cola de México, he has held several positions as Line Manager, Director of Financial Services, Director of Distribution, Director of the Clothing Operations and General Director of Commercial Development. Mr. Gordillo holds a degree in Industrial Engineering and Systems from the ITESM and an MBA from Instituto Panamericano de Alta Dirección de Empresa ("IPADE"). He also holds a master's degree in finance from the ITESM. Josué Garza Aldape. Mr. Garza has served as General Director of Geographic Operations since Previously, he served as Adjunct General Director of Sales of Financial Products of Banco Azteca. Mr. Garza joined Grupo Elektra in He received a degree in management from Universidad Autónoma de Nuevo Leon. Gabriel Roqueñí Rello. Mr. Roqueñí is the General Counsel of Grupo Elektra and subsidiaries (including General Counsel of Banco Azteca) since Prior to that, he held management positions at different companies, such as Avon Cosmetics. He received a law degree from Universidad Panamericana ("UP") and a master's degree from IPADE. Retirement Plans In 1994, we established a non-contributory pension plan for our employees, including our officers. As of September 30, 2012, the liabilities related to such pension plan amounted to Ps.301 million ($23 million). 102

105 PRINCIPAL SHAREHOLDERS Principal Shareholders As of the last annual shareholders' meeting held on March 26, 2012 the heirs of Hugo Salinas Rocha, Ricardo B. Salinas Pliego, Hugo Salinas Price and Esther Pliego de Salinas (collectively, the "Controlling Shareholders"), control approximately million shares of Grupo Elektra ("Common Shares"). The Controlling Shareholders thus control approximately 70.5% of Grupo Elektra, while 29.5% is owned by outside investors. Through ownership of these shares, the Controlling Shareholders currently have the power to determine the outcome of substantially all actions requiring shareholder approval, including the power to elect the majority of our directors and to determine whether or not dividends will be paid. Capital Stock The capital stock of Grupo Elektra is variable and, as of September 30, 2012, amounted to Ps.566 million ($44 million). We have one class of Common Shares with full and equal voting rights and no par value. As of September 30, 2012, there were 284,291,164 Common Shares authorized and 237,078,143 Common Shares outstanding. The following table sets forth, as of September 30, 2012 certain information with respect to our capital stock: Capital Stock(1) Number of Shares Series Common Shares Nominal Value Fixed Amount Variable Amount Free Subscription Fixed Variable ,204,800 3,354, ,559, ,243 7,781 (1) Amounts in thousands of pesos. Dividends The declaration, amount and payment of dividends are determined by majority vote of the holders of Common Shares and generally, but not necessarily, on the recommendation of the Board. Dividends are declared in the first four months of the year based on our audited financial statements for the preceding fiscal year. The amount of any such dividend would depend on, among other things, our operating results, financial condition and capital requirements and general business conditions. Under our bylaws and the Mexican General Corporate Law, the net income of our company is applied as follows: At the annual ordinary general meeting of our shareholders, the Board submits our financial statements for the previous fiscal year, together with the report thereon by the Board, to the shareholders of Common Shares for approval. Once the financial statements have been approved by the holders they determine the allocation of our net income for the preceding year. They are required by law to allocate at least 5% of such net income to a legal reserve, which is not available for distribution except as a stock dividend, until the amount of the legal reserve equals 20% of our historical capital stock (before the effect of restatement). Thereafter, the holders of Common Shares may determine and allocate a certain percentage of net income to any general or special reserve, including a reserve for open-market purchases of our shares. As of September 30, 2012, the legal reserve was Ps.160 million ($12 million). 103

106 For the past four years, we have paid the following dividends: Date of Declaration Date of Payment Ps.(1) $(2) Percentage of Previous Year's Operating Income April 2, 2009 April 30, % March 23, 2010 April 7, % April 8, 2011 April 18, % March 26, 2012 April 3, % (1) Expressed in nominal millions of pesos. (2) Based on exchange rates applicable as of each relevant date of payment. 104 Dividend in Ps. Per Share Dividend in $ Per Share(2)

107 RELATED PARTY TRANSACTIONS Historically, we have engaged, and we expect to continue to engage, in a variety of transactions with our affiliates, including entities owned or controlled by Grupo Elektra or our Controlling Shareholders. We have an Audit Committee comprised of three independent directors who review certain of our proposed transactions, including transactions with affiliates, to determine whether these transactions are related to our business and, in the case of a transaction with an affiliate, to determine whether such transaction is consummated on terms that are at least as favorable to us as terms that would be obtainable at the time for a comparable transaction or series of similar transactions in arm's-length dealings with an unrelated third person. The LMV requires the Audit Committee to review and make recommendations on any transaction with an affiliate with the exception of (i) transactions that do not involve a material amount, (ii) transactions entered into in the ordinary course of business and (iii) transactions made on an arm's-length basis. However, these transactions described in (i) to (iii) would require Board approval and prior Audit Committee recommendation if they consist of purchases or sales of assets, granting of guarantees or incurrence of debt; in each case, in an amount equal to or greater than 5% of our consolidated assets, based on figures for the immediately preceding quarter. In addition, the provisions of the LMV require us to obtain a fairness opinion in case of purchases or sales of assets, granting of guarantees or incurrence of debt having a value that is equal to or greater than 10% of our consolidated assets prior to Board approval of such transaction. Under the LMV, if the Board does not follow the recommendations of the Audit Committee with regard to a related party transaction, disclosure must be made to the public through the Mexican Stock Exchange. In compliance with the LMV, any transaction valued at 20% or more of our consolidated assets also requires majority shareholder approval, regardless of whether such transaction is with an affiliate. In addition to what is required by the LMV, our internal policy requires the Audit Committee to review and make recommendations to the Board on any proposed transaction that is (1) with one or more of our affiliates and valued at 1% or more of our consolidated assets, based on figures for the immediately preceding quarter and (2) with one or more of our regulated affiliates if the value of the transaction exceeds $1,000,000. The Board has also approved a Related Party Transaction Policy (the "Policy"). The Policy establishes restrictions and approvals that must be obtained before engaging in a transaction with any affiliate. The Policy provides for internal and external controls and sanctions in the event the Policy is breached. Banco Azteca Agreements Banco Azteca in its ordinary course of business has granted credit to its affiliates (including senior management), but due to Secreto Bancario ("Mexican Bank Secrecy Provisions"), Banco Azteca is not permitted to disclose the identity of its loan recipients. The parties that have received such loans are unable to waive or have not otherwise waived the application of these privacy laws. In January 2003, Elektra and Salinas y Rocha executed a lease agreement with Banco Azteca, pursuant to which Elektra and Salinas y Rocha will lease to Banco Azteca space inside of our stores for Banco Azteca to operate its banking branches. Elektra received Ps million ($65.3 million), Ps million ($73.6 million), Ps.1,138.3 million ($87.2 million) and Ps million ($61.5 million) for the years ended December 31, 2011, 2010 and 2009, and the nine months ended September 30, 2012, respectively, under the lease agreement. In January 2003 and May 2004, Elektra and Salinas y Rocha executed agreements with Banco Azteca pursuant to which Banco Azteca would be permitted to offer its deposit taking and credit services within Elektra and Salinas y Rocha stores and in exchange would pay Elektra or Salinas y Rocha, as applicable, a commission on each completed customer transaction. Elektra and Salinas y Rocha received an aggregate of Ps.2,724.3 million ($194.9 million), Ps.2,063 million ($166.9 million), Ps.1,886.9 million ($144.5 million) and Ps.3,222.7 million ($250.8 million) for the years ended December 31, 2011, 2010 and 2009, and the nine months ended September 30, 2012, respectively, under these agreements. Each of our retail subsidiaries has a retail bank account with Banco Azteca pursuant to a standard retail banking agreement that each such subsidiary entered into with Banco Azteca. For most stores, at the end of each day, excess cash from the retail business is deposited into the bank account at the Banco Azteca branch within the Elektra or Salinas y Rocha store. Our retail subsidiaries also maintain bank accounts with other banking institutions where they may choose at any time to deposit funds if such banks offer a more competitive rate than Banco Azteca. Our retail subsidiaries are not obligated to make deposits in their Banco Azteca accounts or engage in any other such banking transactions that are not otherwise standard obligations for other retail banking customers. Agreements with Iusacell In August 2003, we entered into a contract with Iusacell for a sum of up to Ps.80.0 million ($7.3 million), to control and register reciprocal remittances derived from corporate or commercial relations and the contracting of 105

108 financing and administration services between the two companies. Iusacell provided a promissory note for $7 million as a guarantee of its obligations under the contract. The contract is for an indefinite term. Our revenues generated from this arrangement were Ps.20 million ($1.4. million), Ps.63.9 million ($5.2 million) and Ps.44.9 million ($3.4 million) as of December 31, 2011, 2010 and 2009, respectively. During the nine-month period ended September 30, 2012, there were no operations under this agreement. In August 2003, we entered into a ten-year trade commission contract with Iusacell, whereby Iusacell designated us as a commission agent to promote and commercialize its services, and to sell its products in our Mexican stores. In August 2006, we entered into a contract with Iusacell whereby Iusacell would pay a commission based on the number of mobile phone units sold and commissions on sales of the service plan Plan Viva Control ("PVC"). Conversely, we pay Iusacell when applicable, for various telecommunications and administrative services. As a consequence of these commercial relationships, we had net income of Ps million ($10.4 million), Ps million ($24.2 million), Ps million ($16.9 million) and Ps million ($15.4 million), for the years ended December 31, 2011, 2010 and 2009, and the nine months ended September 30, 2012, respectively. In 2005, we entered into a contract with Iusacell that provides for us to directly negotiate and purchase handheld equipment units from manufacturers or suppliers. The sums involved in these operations were Ps.5.3 million ($0.4 million), Ps million ($49.0 million) and Ps.9.5 million ($0.7 million), for the years ended December 31, 2011, 2010 and 2009, respectively. No operations were undertaken between the parties during the nine-month period ended September 30, In February 2005, we entered into a contract with Iusacell for the provision of services for voice, data, connectivity, monitoring and last mile equipment administration, mainly (broadband connection). Expenditures through these operations were Ps million ($8.9 million), Ps.91.9 million ($7.4 million), Ps.97.5 million ($7.5 million) and Ps.75.5 million ($5.9 million) for the years ended December 31, 2011, 2010 and 2009, and the nine months ended September 30, In January 2003, we entered into a contract with Teleactivos, a subsidiary of Iusacell, providing for us to receive telephone customer service for our clients. For this service, we paid Teleactivos Ps.47.2 million ($3.4 million), Ps.61.8 million ($5.0 million), Ps.65.6 million ($5.0 million) and Ps.36.1 million ($2.8 million) for the years ended December 31, 2011, 2010 and 2009, and the nine months ended September 30, 2012, respectively. Seguros Azteca provides office leasing services to Grupo Salinas Telecom ("GST"). The consideration thereof was Ps.10.8 million ($0.8 million), Ps.10.6 million ($0.9 million), Ps.7.6 million ($0.6 million) and Ps.7.4 million ($0.6 million), for the years ended December 31, 2011, 2010 and 2009, and the nine months ended September 30, 2012, respectively. Banco Azteca provides other services to GST's subsidiaries such as banking and portfolio management services, collection services and fiduciary services. For these services, Banco Azteca received Ps.27.7 million ($2.0 million), Ps.52.4 million ($4.2 million), Ps.19.2 million ($1.5 million) and Ps.12.3 million ($1.0 million), for the years ended December 31, 2011, 2010 and 2009, and the nine months ended September 30, 2012, respectively. Banco Azteca paid to GST Ps million ($9.4 million), Ps million ($9.4 million), Ps million ($9.7 million) and Ps million ($9.1 million) for the services of (i) call center customer care and (ii) telecommunication services, for the years ended December 31, 2011, 2010 and 2009, and the nine months ended September 30, 2012, respectively. Contracts with Grupo Móvil Access and Subsidiaries. On July 20, 2009 we entered into a contract through our subsidiary Seguros Azteca to open a simple line of credit with Móvil Access, S. A. de C. V. ("Movil Access") for Ps.63.0 million ($4.6 million) at an interest rate of TIIE 28-day plus 7%. On October 21, 2009, this contract was amended to extend the line of credit by Ps.4.0 million ($0.3 million). On February 20, 2010, the contract was amended again to extend the maturity date of the loan. The loan matures and must be paid in full by August 20, On October 7, 2009, Seguros Azteca restructured several simple credit contracts with a number of subsidiaries of Grupo Iusacell that were entered into during 2007 and Seguros Azteca signed assignment contracts with Móvil Access, Iusatel, Iusacell PCS de México and Unefon, providing for Movil Access to assume debt in the amount of Ps million ($26.4 million) at an interest rate of TIIE 28 days plus 7%. On February 20, 2010, the assignment agreement was amended to extend the maturity of the loan until August 20, On August 20, 2012, Movil Acesss entered into a debt assignment agreement with Operadora Unefon S.A. de C.V. ("Operadora Unefon"), whereby Operadora Unefon was assigned the outstanding debt derived from the 106

109 credits agreements entered into with Seguros Azteca in 2009 and amended on February 20, 2010, in the amount of Ps million ($ 22.7 million) at an interest rate of TIIE 28 days plus 7%. The credit is scheduled to mature on August 20, Contracts with Azteca Holdings and Subsidiaries. Seguros Azteca provides the following services to TV Azteca (i) insurance of assets and (ii) leasing of offices. For these services Seguros Azteca received Ps million ($7.4 million), Ps million ($8.4 million), Ps.66.7 million ($5.1 million) and Ps.8.7 million ($0.7 million), for the years ended December 31, 2011, 2010 and 2009, and the nine months ended September 30, 2012, respectively. During 2011, Seguros Azteca entered into several credit agreements with Arrendadora Internacional Azteca ("AIA") for an aggregate amount of Ps million ($ 24.2 million). As of September 30, 2012, Ps.33 million was paid and the balance of Ps million is scheduled to mature in Additionally, as of September 30, 2012, new credit agreements were subscribed for an aggregate amount of Ps.95.3 million ($7.4 million), with maturity scheduled for Additionally, we entered into advertisement agreements with Estudios Azteca, S.A. de C.V. ("Estudios Azteca") for the transmission of commercials on Azteca's channels 7 and 13. Estudios Azteca received payment of Ps million ($28.9 million), Ps million ($27.7 million), Ps.210 million ($16.1 million) and Ps.277 million ($21.6 million) for the years ended December 31, 2011, 2010 and 2009, and the nine months ended September 30, 2012, respectively. Controlling Shareholder Litigation In 2005, Ricardo B. Salinas Pliego, one of the Controlling Shareholders of Grupo Elektra, was named as a codefendant in an action brought by the U.S. Securities and Exchange Commission (the "SEC") against Mr. Salinas, TV Azteca, Azteca Holdings, S.A. de C.V. (the parent corporation of TV Azteca) and Pedro Padilla Longoria (the Chief Executive Officer of TV Azteca), alleging that TV Azteca failed to disclose the related party nature of a transaction involving Unefon, S.A. de C.V., then a TV Azteca subsidiary, and an entity in which Mr. Salinas Pliego held a beneficial interest. In 2006, all defendants consented, without admitting or denying the allegations of the SEC, to a final judgment that imposed a permanent injunction prohibiting future specified securities law violations. Each of the individual defendants consented to payment of fines and agreed, as an undertaking, not to serve as an officer or director of a U.S. public company, except under limited circumstances for a period of five years, which expired on September 15, In connection with the settlement, TV Azteca also consented, without admitting or denying the SEC's findings, to the entry of an order terminating the registration of its securities with the SEC. The Mexican regulatory authorities also investigated this series of transactions and imposed fines on Messrs. Salinas Pliego, Padilla Longoria and TV Azteca. Messrs. Salinas Pliego, Padilla Longoria and TV Azteca are challenging these fines. Grupo Elektra was not a defendant or otherwise involved in these proceedings. 107

110 TERMS AND CONDITIONS The following are the terms and conditions (the "Conditions") of the Notes which (subject to completion and amendment) will be attached to or incorporated by reference into each of the Notes, provided that the relevant Pricing Supplement (the "Pricing Supplement") in relation to a particular Series of Notes may specify other terms and conditions which shall, to the extent so specified, replace or modify the following Conditions for the purpose of such Series of Notes. The Notes to which these Conditions pertain are issued and will be issued in one or more Series with the benefit of a trust deed dated March 12, 2013 (such trust deed as amended and/or supplemented and/or restated from time to time the "Trust Deed"), by and among the Issuer, the Guarantors and The Bank of New York Mellon, as trustee (the "Trustee" which term includes any additional or successor trustee under the Trust Deed). The Notes are constituted by, and in accordance with, the Trust Deed and have the benefit of an agency agreement dated March 12, 2013 (such agency agreement as amended and/or supplemented and/or restated from time to time the "Agency Agreement") by and among the Issuer, the Guarantors, the Trustee, The Bank of New York Mellon, London Branch as issuing and principal paying agent (the "Principal Paying Agent" which term includes any additional or successor principal paying agent appointed under the Agency Agreement) and as calculation agent and, where applicable, registrar and transfer agent, The Bank of New York Mellon as the New York paying agent (the "New York Paying Agent") and The Bank of New York Mellon SA/NV, Dublin Branch as the Irish paying agent (the "Irish Paying Agent"). Notes having the same Interest Payment Dates, Issue Price and Maturity Date, bearing interest at the same rate and the terms of which are otherwise identical, are hereinafter together referred to as a "Series" of Notes, and the particular Note to which these Conditions are attached or incorporated by reference is referred to herein as this "Note," and this Note, together with the other Notes of the same Series, are hereinafter together referred to as "this Series" or the "Notes of this Series." The Pricing Supplement applicable to a Series of Notes may specify other terms and conditions which shall, to the extent so specified or to the extent inconsistent with these Conditions, amend, vary, replace, add to or modify these Conditions for the purposes of such Series of Notes, in which event, these Conditions as so amended, varied, replaced, added to or modified by such Pricing Supplement shall be referred to herein as the or these "Conditions" with respect to such Series of Notes. Copies of the Trust Deed, the Agency Agreement and each Pricing Supplement are on file and available for inspection at the offices of the Trustee and New York Paying Agent, being as of the date hereof 101 Barclay Street 4 E, New York, NY 10286, United States, the Principal Paying Agent, being as of the date hereof One Canada Square, London E14 5AL, United Kingdom, and the Irish Paying Agent, being as of the date hereof Hanover Building, Windmill Lane, Dublin 2, Ireland. The holders of the Notes and the holders of any Coupons (if any) appertaining to the Notes and the holders of any Receipts (if any) appertaining to the Notes (the "Noteholders") are deemed to have notice of, and are entitled to the benefit of, all the provisions of the Trust Deed and the Agency Agreement. Words and expressions defined in the Trust Deed or used in the applicable Pricing Supplement shall have the same meanings where used in these Conditions unless the context otherwise requires or unless otherwise stated. 1. Form and Title of Notes The Notes are issuable in bearer or fully registered form ("Notes") as a global note, without coupons or receipts ("Global Note"), or, in limited circumstances, as definitive notes ("Definitive Notes"), with Coupons (if in bearer form) at the time of issue attached thereto (except in the case of Zero Coupon Notes (as defined below)) and, in the case of bearer Definitive Notes repayable in installments, with Receipts at the time of issue attached thereto, in the denominations specified in the applicable Pricing Supplement (the "Authorized Denominations"). The Definitive Notes will be serially numbered. The Notes may be issued (a) to bear interest on a fixed rate basis ("Fixed Rate Notes"), (b) to bear interest on a floating rate basis ("Floating Rate Notes"), or (c) on a non-interest bearing basis ("Zero Coupon Notes") or any combination, in each case as specified in the applicable Pricing Supplement. Each Definitive Note in bearer form will be issued with Coupons attached unless it is a Zero Coupon Note, in which case reference to interest (other than in relation to interest due after the Maturity Date) and Coupons in these Conditions are not applicable. Title to Notes, Receipts and Coupons in bearer form shall pass by delivery. The Issuer, the Trustee, the Principal Paying Agent and any agent of the Issuer or the Trustee or the Principal Paying Agent except as required by law shall deem and treat the bearer of a Note, Receipt or Coupon in bearer form as the owner thereof for all purposes, whether or not such Note or, in the case of a Definitive Note, such Receipt or Coupon, be overdue, and neither the Issuer nor the Trustee nor the Principal Paying Agent nor any such agent shall be affected by notice to the contrary, any writing on it, or its theft or loss and shall incur no liability for so doing. 108

111 Title to Notes in registered form passes upon registration of transfers in the Register in accordance with the provisions of the Agency Agreement and the Trust Deed. Notes in registered form will be transferable only on the books of the Agents. The registered holder of any Note in registered form will (except as otherwise required by law) be treated as its absolute owner for all purposes (whether or not it is overdue and regardless of any notice of ownership, trust or any interest in it, any writing on it, or its theft or loss) and no person will be liable for so treating the holder. 2. Ranking of Notes and Note Guarantee (a) Ranking of Notes If the Pricing Supplement specifies that the Notes are unsecured Notes, the Notes and the relevant Receipts (if any) and the relevant Coupons (if any) are unsecured, unsubordinated and unconditional obligations of the Issuer ranking pari passu with all other outstanding unsubordinated and unsecured obligations of the Issuer, and constitute valid and legally binding obligations of the Issuer, enforceable in accordance with their respective terms (subject to general equitable principles and bankruptcy, concurso mercantil and insolvency laws and other similar laws affecting creditors' rights generally), and are entitled to the benefits provided by the Trust Deed and the Agency Agreement. If the Pricing Supplement specifies that the Notes are secured Notes, the Notes will constitute direct and unsubordinated obligations of the Issuer that are secured by the collateral identified in the Pricing Supplement. (b) Ranking of the Note Guarantee The payment of principal and interest in respect of the Notes, the Receipts and the Coupons and all other monies payable by the Issuer under or pursuant to the Trust Deed has been fully, unconditionally and jointly and severally guaranteed by the Guarantors in the Trust Deed (the "Note Guarantee"). The obligations of the Guarantors under the Note Guarantee are unsecured, unsubordinated and unconditional obligations of the Guarantors ranking pari passu with all other outstanding unsubordinated and unsecured obligations of the Guarantors, and constitute valid and legally binding obligations of the Guarantors, enforceable in accordance with their respective terms (subject to general equitable principles and bankruptcy, concurso mercantil and insolvency laws and other similar laws affecting creditors' rights generally). 3. Interest (a) Interest on Fixed Rate Notes (b) (i) Each Fixed Rate Note bears interest from and including the Issue Date, at the Interest Rate(s) per annum specified in the applicable Pricing Supplement payable in arrear on the Interest Payment Date(s) in each year and on the Maturity Date so specified if such Maturity Date does not fall on an Interest Payment Date. The first payment of interest will be made on the Interest Payment Date next following the Issue Date. (ii) Interest will be paid, in respect of Fixed Rate Notes subject to and in accordance with the provisions of Condition 5 of these Conditions. (iii) If Interest is required to be computed for a period of other than a full year, such interest shall be computed on the basis specified in the applicable Pricing Supplement. (iv) Interest will cease to accrue on each Fixed Rate Note on the due date for payment thereof unless, upon due presentation thereof, payment of principal is improperly withheld or refused, in which event interest will continue to accrue (as well after as before any judgment) as provided in the Trust Deed. Interest on Floating Rate Notes Interest on each Floating Rate Note will be determined by such interest rate formula as may be agreed to by the Relevant Lead Dealer for the relevant Series and the Issuer and specified in the applicable Pricing Supplement. The amount of interest payable in respect of any Floating Rate Note for any period shall be calculated by multiplying the product of the Interest Rate(s) per annum as specified in the applicable Pricing Supplement and the outstanding principal amount thereof by the Day Count Fraction. "Day Count Fraction" means, in respect of the calculation of an amount for any period of time ("Calculation Period"), such day count fraction as may be specified in the Pricing Supplement and: (i) if "Actual/365 (Fixed)" is so specified, means the actual number of days in the Calculation Period divided by 365; 109

112 4. (ii) if "Actual/360" is so specified, means the actual number of days in the Calculation Period divided by 360; (iii) if "Actual/365" or "Actual/Actual" is so specified, means the actual number of days in the Calculation Period divided by 365 (or, if any portion of that Calculation Period falls in a leap year, the sum of (A) the actual number of days in that portion of the Calculation Period falling in a leap year divided by 366 and (B) the actual number of days in that portion of the Calculation Period falling in a non-leap year divided by 365); (iv) if "Actual/365 (Sterling)" is so specified, means the actual number of days in the Calculation Period divided by 365, or in the case of a Calculation Period falling in a leap year, 366. Redemption and Purchase The Notes shall not be subject to redemption by the Issuer or the holder of a Note except as specified in the Pricing Supplement and as provided in this Condition 4. (a) At Maturity Unless otherwise specifically specified in the applicable Pricing Supplement and unless previously redeemed or purchased and cancelled, each Note will be redeemed by the Issuer at its final redemption amount on the Maturity Date specified in the applicable Pricing Supplement (which final redemption amount shall, if not otherwise specified in the Pricing Supplement, be the nominal amount of such Note). (b) Redemption for Tax Reasons Unless otherwise specifically indicated in the applicable Pricing Supplement, if as a result of any change in or amendment to the laws (or any regulations or rulings promulgated thereunder) of Mexico or of any political subdivision or taxing authority thereof or therein affecting taxation, or any change or amendment in official position regarding application or interpretation of such laws, regulations or rulings (including a holding by a court of competent jurisdiction), which change or amendment becomes effective on or after the relevant Issue Date, the Issuer has or will become obligated to pay additional amounts as described under Condition 6 of these Conditions in excess of the additional amounts the Issuer would be obligated to pay if payments made on the Notes were subject to withholding or deduction at a rate of 4.9% as a result of the taxes, duties, assessments and other governmental charges described under Condition 6 of these Conditions or if a Guarantor would be unable for reasons outside of its control to procure payment by the Issuer and in making payment itself would be obligated to pay additional amounts as described under Condition 6 of these Conditions in excess of the additional amounts that Guarantor would be obligated to pay if payments made on the Notes were subject to withholding or deduction at a rate of 4.9%. as a result of the taxes, duties, assessments and other governmental charges described under Condition 6 of these Conditions, such Note will be subject to a one-time redemption by the Issuer, in whole but not in part, at any time thereafter, upon giving of irrevocable notice in accordance with Condition 13 of these Conditions, on such redemption date as the Issuer shall select but which shall in the case of Floating Rate Notes be an Interest Payment Date, at a redemption price equal to 100% of the outstanding principal amount thereof together with accrued and unpaid interest. Moreover, the Issuer shall not have the right to redeem the Notes pursuant to the provisions set forth in this Condition 4(b) unless the Issuer or, as the case may be, the relevant Guarantor has taken all reasonable measures (to the extent permitted by applicable law) to avoid the obligation to pay additional amounts described under Condition 6 of these Conditions. In the event that the Issuer elects to redeem Notes pursuant to the provisions set forth in this Condition 4(b), the Issuer will deliver to the Trustee and the Principal Paying Agent (i) a certificate, signed by an authorized representative, stating that the Issuer is entitled to redeem such Notes pursuant to their terms in accordance with the terms of the Agency Agreement and specifying the date of redemption and the principal amount of Notes to be redeemed (and the Trustee shall be entitled to accept such certificate delivered with an opinion as referred to in (ii) below as sufficient evidence of the satisfaction of the conditions precedent set out above (without liability to any person) in which event it shall be conclusive and binding on the Trustee, Noteholders, Receiptholders and the Couponholders that the Issuer is entitled to effect such redemption) and (ii) an opinion of independent legal advisors of recognized standing to the effect that the Issuer or, as the case may be, the relevant Guarantor has or will become obligated to pay any amounts as described under Condition 6 of these Conditions such that the Issuer has the right to redeem such Notes. In rendering such opinion, such independent legal advisors shall be entitled to rely on certificates of the Issuer, the relevant Guarantor, the Issuer's independent accountants and the relevant Guarantors' independent accountants as to factual matters and as to calculations relating to such additional amounts. The foregoing provisions in this paragraph are applicable regardless of whether "Issuer Call" is indicated as being applicable in the Note or the relevant Pricing Supplement. 110

113 (c) Redemption at the Option of Issuer (Issuer Call) If Redemption at the Option of the Issuer (i.e., Issuer Call) is specified in the applicable Pricing Supplement, the Issuer may, having given not more than 60 nor less than 30 days' notice (or such other notice period as may be specified in the applicable Pricing Supplement) to the Trustee and the Principal Paying Agent, and, in accordance with Condition 13 of these Conditions, to the holders of the Notes of the Series to be redeemed, redeem all or some only of the Notes of such Series then outstanding on any Optional Redemption Date (as defined in the applicable Optional Redemption Annex) and at the Optional Redemption Amount(s) (as defined in the applicable Optional Redemption Annex) specified in, or determined in the manner specified in, the applicable Pricing Supplement together, if appropriate, with interest accrued to (but excluding) the relevant Optional Redemption Date. Any such redemption must be of a nominal amount not less than the Minimum Redemption Amount (as defined in the applicable Optional Redemption Annex) or not more than a Higher Redemption Amount (as defined in the applicable Optional Redemption Annex), in each case as may be specified in the applicable Pricing Supplement. In the case of a partial redemption of Notes of a Series, the Notes of the Series to be redeemed ("Redeemed Notes") will be selected by the Issuer individually by lot, in the case of Redeemed Notes represented by definitive Notes of the Series, and in accordance with the rules of Euroclear Bank S.A./N.V. ("Euroclear") and/or Clearstream Banking, société anonyme ("Clearstream, Luxembourg"), in the case of Redeemed Notes represented by a Global Note, not more than 30 days prior to the date fixed for redemption. In the case of Redeemed Notes represented by definitive Notes, a list of the serial numbers of such Redeemed Notes will be published in accordance with Condition 13 not less than 15 days prior to the date fixed for redemption. (d) Notices to Redeem Notices to redeem Notes pursuant to Condition 4(b) or 4(c) of these Conditions shall be published in accordance with the provisions of Condition 13 of these Conditions and shall specify the date fixed for redemption, which shall be not less than 30 nor more than 60 days after such notification, the applicable redemption price, the place or places of payment, that payment will be made upon presentation and surrender of the Notes to be redeemed in the case of bearer Notes, that interest accrued to the date fixed for redemption will be paid as specified in such notice, and that on and after such date interest thereon will cease to accrue. With respect to notices relating to redemption pursuant to Condition 4(b), such notice shall also state that the conditions precedent to such redemption have occurred and state that the Issuer has elected to redeem all the Notes in accordance with Condition 4(b) of these Conditions. (e) Redemption at the Option of the Noteholders (Noteholder Put) If Redemption at the Option of the Noteholder (i.e., Noteholder Put) is specified in the applicable Pricing Supplement, upon a Noteholder giving to the Issuer not more than 60 nor less than 30 days' notice (or as otherwise specified in the Pricing Supplement) (which notice shall be irrevocable) the Issuer will redeem subject to, and in accordance with, the terms specified in the applicable Pricing Supplement in whole, but not in part, a Definitive Note or Global Note on an Optional Redemption Date at the Optional Redemption Amount each specified and defined in the applicable Pricing Supplement with respect to such a redemption, together with any accrued interest. (f) Cancellation All Notes which are redeemed will forthwith be cancelled (together with all unmatured Receipts and Coupons attached thereto or surrendered therewith at the time of redemption). All Notes so cancelled (together with all unmatured Receipts and Coupons cancelled therewith) shall be forwarded to the Principal Paying Agent and cannot be reissued or resold. (g) Purchase of Notes by the Issuer and the Guarantors The Issuer, any of the Guarantors, any of the Issuer's Subsidiaries and any of the Guarantors' Subsidiaries may, directly or indirectly, to the extent permitted by applicable law, purchase Notes (provided that, in the case of Definitive Notes in bearer form, all unmatured Receipts and Coupons appertaining thereto are purchased therewith) in the open market or by tender at any price and at any time. Any Note purchased by the Issuer, any Guarantor, any of the Issuer's Subsidiaries or any of the Guarantors' Subsidiaries, directly or indirectly, shall be surrendered to the Principal Paying Agent for cancellation. Any Notes surrendered as aforesaid may not be reissued or resold and will be cancelled promptly. "Issuer's Subsidiaries" means any corporation or other entity of which at least a majority of the outstanding securities or other ownership interests having by the terms thereof ordinary voting power to elect a majority of the board of directors or other persons performing similar functions of such corporation or other entity (irrespective of whether or not at the time securities or the ownership interests of any other class or classes of such corporation or entity shall have or might have voting power by reason of the happening of any contingency) is at the time directly or indirectly owned or controlled by the Issuer and/or one or more of the Issuer's Subsidiaries. "Guarantors' Subsidiaries" means any corporation or other entity of which at least a majority of the outstanding 111

114 securities or other ownership interests having by the terms thereof ordinary voting power to elect a majority of the board of directors or other persons performing similar functions of such corporation or other entity (irrespective of whether or not at the time securities or the ownership interests of any other class or classes of such corporation or entity shall have or might have voting power by reason of the happening of any contingency) is at the time directly or indirectly owned or controlled by a Guarantor and/or one or more of the Guarantors' Subsidiaries. 5. Payments (a) Method of Payment Subject as provided below, payments in respect of the Notes will be made in the Specified Currency by wire transfer. Payments will be subject in all cases to any fiscal or other laws and regulations applicable thereto in the place of payment, but without prejudice to the provisions of Condition 6 of these Conditions. (b) Payments (i) Payments of principal and interest (if any) in respect of the Definitive Notes in bearer form (if issued) will (subject as provided below) be made against presentation or surrender of such Notes, Receipts or Coupons, as the case may be, at any specified office of any Paying Agent outside the United States and its posessions. If any Definitive Notes in bearer form are redeemed or become repayable prior to the Maturity Date in respect thereof, principal will be payable on surrender of each such Note together with all unmatured Coupons appertaining thereto. All payments of interest and principal with respect to Definitive Notes in bearer form will be made to accounts located outside the United States and its posessions. Payments of installments of principal (if any) in respect of Definitive Notes in bearer form, other than the final installment, will (subject as provided below) be made in the manner provided in accordance with this paragraph against presentation and surrender (or, in the case of part payment of any sum due, endorsement) of the relevant Receipt in accordance with this paragraph. Payment of the final installment will be made in the manner provided in this paragraph only against presentation and surrender (or, in the case of part payment of any sum due, endorsement) of the relevant Definitive Note in bearer form in accordance with this paragraph. Each Receipt must be presented for payment of the relevant installment together with the Definitive Note in bearer form to which it appertains. Receipts presented without the Definitive Note in bearer form to which they appertain do not constitute valid obligations of the Issuer. Upon the date on which any Definitive Note in bearer form becomes due and repayable, unmatured Receipts (if any) relating thereto (whether or not attached) shall become void and no payment shall be made in respect thereof. (ii) Payments of principal and interest (if any) in respect of the Definitive Notes in registered form (if issued) will (subject as provided below) be made by wire transfer in the Specified Currency on the relevant payment date to the holder (or to the first named of joint holders) of the Definitive Note in registered form appearing on the Register at the close of business on the fifteenth day before the relevant date for the payment of principal and interest (the "Record Date"). (iii) Payments of principal and interest (if any) in respect of Notes represented by any Global Note will (subject as provided below) be made in the manner specified above and otherwise in the manner specified in the relevant Global Note. A record of each payment made on such Global Note distinguishing between any payment of principal and any payment of interest, will be made, or caused to be made, on such Global Note by the Paying Agent to which such Global Note is presented for the purpose of making such payment or on the Register applicable to such Global Note, and such record shall be prima facie evidence that payment in question has been made. (iv) The bearer or registered holder of the relevant Global Note shall be the only person entitled to receive payments in respect of Notes represented by such Global Note and the Issuer, or as the case may be, the Guarantors will be discharged by payment to, or to the order of, the bearer or registered holder of such Global Note in respect of each amount so paid. No person, other than the bearer or registered holder of the relevant Global Note, shall have any claim against the Issuer in respect of any payments due on that Global Note. (v) If notice of redemption has been given in accordance with Condition 13 of these Conditions, the Notes shall be paid and redeemed by the Issuer at the places and in the manner herein specified, together with accrued interest on the Notes to the redemption date; provided, however, that interest due on or prior to the redemption date on Definitive Notes in bearer form shall be payable only upon the presentment and surrender of Coupons for such interest. If any Definitive Note in bearer 112

115 form surrendered for redemption shall not be accompanied by all appurtenant Coupons maturing after the redemption date, such Note may be paid after deducting from the amount otherwise payable an amount equal to the face amount of all such missing Coupons, or the surrender of such missing Coupon or Coupons may be waived by the Issuer and the Trustee or Paying Agents if they are furnished with such security or indemnity as they may require. From and after the redemption date, if monies for the redemption of Notes called for redemption shall have been made available at the main office of the Principal Paying Agent for redemption on the redemption date, the Notes called for redemption shall cease to bear interest, the Coupons appertaining to the Definitive Notes in bearer form maturing subsequent to the redemption date shall be void, and the only right of the holders of such Notes shall be to receive payment of the appropriate redemption amount, together with accrued interest on the Notes to the redemption date as aforesaid. If monies for the redemption of the Notes are not made available for payment until after the redemption date, the Notes called for redemption shall not cease to bear interest until such monies have been so made available. (c) Payment Business Day If the date for payment on any amount in respect of any Note is not a Payment Business Day (as defined below), the holder thereof shall not be entitled to payment until the next following Payment Business Day and shall not be entitled to further interest or other payment in respect of such delay if such payment is made on such next succeeding Payment Business Day. For these purposes, unless otherwise specified in the applicable Pricing Supplement, "Payment Business Day" means any day which is a day on which banks and foreign exchange markets are open for business in London and any Additional Business Centre specified in the applicable Pricing Supplement, and on which Euroclear and Clearstream, Luxembourg are open for business. (d) Applicable Laws All payments are subject in all cases to any applicable fiscal or other laws and regulations, but without prejudice to the provisions of Condition 6 of these Conditions. No commissions or expenses shall be charged to the Noteholders, Receiptholders or Couponholders in respect of such payments. 6. Taxation (a) The Issuer or, as the case may be, the Guarantors will pay such amounts ("Additional Amounts") as may be necessary in order to ensure that the net amounts received by the holders of Notes, Receipts and Coupons after any withholding or deduction for or on account of any present or future taxes or duties of whatever nature imposed or levied by Mexico or any authority in Mexico shall equal the respective amounts of principal and interest which would have been received in respect of the Notes, Receipts and Coupons in the absence of such withholding or deduction, and the delivery by the Issuer or, as the case may be, the Guarantors of any such Additional Amounts to the appropriate Mexican authorities shall constitute receipt by the relevant Noteholders of such Additional Amounts so delivered; except that no such Additional Amounts shall be payable with respect to: (i) taxes or duties with respect to any Note, Receipt or Coupon presented for payment by or on behalf of a holder who is liable for such taxes or duties by reason of such holder having some connection with Mexico other than the mere holding of such Note, Receipt or Coupon; (ii) any Note, Receipt or Coupon presented for payment more than 15 days after the Relevant Date (as defined herein) except to the extent that the holder would have been entitled to such Additional Amounts on presenting such Note for payment on the last day of such 15-day period (as used in this Condition 6, "Relevant Date" in respect of any payment means the date on which such payment first becomes due except that, if the full amount of the monies payable has not been received by the Principal Paying Agent on or prior to such due date, it means the date on which, the full amount of such monies having been so received, notice to that effect is duly given to the Noteholders in accordance with Condition 13); (iii) any tax or duty required to be deducted or withheld by any Paying Agent from a payment on a Note, Receipt or Coupon if such payment can be made without such deduction or withholding by any other Paying Agent who can make such payment in accordance with the terms of the Agency Agreement and these Conditions; (iv) any tax, assessment or other governmental charge which is payable otherwise than by withholding from payments on or in respect of any Note, Receipt or Coupon (other than stamp, transfer or other similar taxes); 113

116 (v) any estate, inheritance, gift, sales, stamp, transfer or personal property tax; (vi) any taxes imposed on, or withheld or deducted from, payments made to a holder or beneficial owner of a Note at a rate in excess of the 4.9% rate of tax in effect on the date hereof and uniformly applicable in respect of payments made by the Issuer to all holders or beneficial owners eligible for the benefits of a treaty for the avoidance of double taxation to which Mexico is a party without regard to the particular circumstances of such holders or beneficial owners (provided that, upon any subsequent change in the rate of tax that would be applicable to payments to all such holders or beneficial owners without regard to their particular circumstances, such changed rate shall be substituted for the 4.9% rate for purpose of this clause (vi)); (vii) any taxes that are imposed on, or withheld or deducted from, payments made to the holder or beneficial owner of a Note to the extent such taxes would not have been so imposed, deducted or withheld but for the failure by such holder or beneficial owner to comply with any certification, identification, information, documentation or other reporting requirement concerning the nationality, residence, identity or connection with Mexico (or any political subdivision or territory or possession thereof or area subject to its jurisdiction) of such holder or beneficial owner; (viii) any taxes that are payable otherwise than by deduction or withholding from a payment on a Note; (ix) any payment on a Note to any holder who is a fiduciary or partnership or other than the sole beneficial owner of any such payment, to the extent that a beneficiary or settlor with respect to such fiduciary, a member of such a partnership or the beneficial owner of such payment would not have been entitled to the Additional Amounts had such beneficiary, settlor, member or beneficial owner been the holder of such Note; or (x) any combination of the aforementioned. (b) Any reference in the Notes to principal and/or interest shall be deemed also to refer to any Additional Amounts which may be payable under the undertakings referred to in this Condition 6. (c) The Issuer shall pay all stamp and other duties, if any, which may be imposed by Mexico or any political subdivision thereof or taxing authority of or in the foregoing with respect to the execution and delivery of the Trust Deed, the Agency Agreement or the issuance of the Notes. (d) Any reference in these Conditions to principal, premium and/or interest shall be deemed to include any additional amounts which may be payable under this Condition or any undertaking given in addition to or substitution for it under these presents. 7. Events of Default If any of the following events shall occur while any Notes of this Series issued pursuant to the Programme are outstanding: (i) default by the Issuer in the payment of any principal due on any Note of this Series on the due date for payment thereof; or (ii) default by the Issuer in the payment of any interest due on any Note of this Series for a period of more than thirty (30) days after the due date for payment thereof; or (iii) default in the performance of any other covenant of the Issuer or any Restricted Subsidiary in the Trust Deed, the Agency Agreement or in the Notes, which, if (in the opinion of the Trustee) capable of being remedied, continues for 45 consecutive days after written notice of such default has been given, by the Trustee, to the Issuer or the relevant Guarantor (as the case may be); or (iv) the validity of the Notes of any Series or the Trust Deed or the Agency Agreement is contested by the Issuer or any of the Guarantors, or any final decision by any court having jurisdiction from which no appeal (which term "appeal" shall include the bringing of an action in the form of a juicio de amparo with respect to such final decision) may be or is taken shall purport to render any material (in the opinion of the Trustee) provision of the Notes of any Series or any material (in the opinion of the Trustee) provision of the Trust Deed or the Agency Agreement invalid or unenforceable or purport to prevent or materially (in the opinion of the Trustee) delay the performance or observance by the Issuer or any of the Guarantors of any of its obligations under such Notes or any of its material (in the opinion of the Trustee) obligations under the Trust Deed or the Agency Agreement; or 114

117 (v) a decree or order by a court having jurisdiction shall have been entered adjudging the Issuer or any of the Guarantors as bankrupt, or in concurso mercantil or otherwise insolvent, or approving as properly filed a petition seeking reorganization or concurso mercantil of the Issuer or any of the Guarantors and such decree or order shall have continued unanswered by the Issuer or the relevant Guarantor (as the case may be) for a period of nine days after notice is delivered to the Issuer or the relevant Guarantor (as the case may be) or undischarged for a period of 120 days from the date of such decree or order; or a decree or order of a court having jurisdiction for the appointment of a receiver, liquidator, síndico, interventor or trustee or assignee in bankruptcy, concurso mercantil or insolvency of the Issuer or any of the Guarantors or in relation to the property of the Issuer or any of the Guarantors or for the winding up or liquidation of the affairs of the Issuer or any of the Guarantors shall have been entered, and such decree or order shall have continued unanswered by the Issuer or the relevant Guarantor (as the case may be) for a period of nine days after notice is delivered to the Issuer or the relevant Guarantor (as the case may be) or undischarged for a period of 120 days from the date of such decree or order; or (vi) the Issuer or any of the Guarantors shall institute proceedings to be adjudicated a voluntary bankrupt, or shall consent to the filing of a bankruptcy proceeding against it, or shall file a petition or answer or consent seeking reorganization or concurso mercantil, or shall consent to the filing of any such petition, or shall consent to the appointment of a receiver or liquidator, síndico, interventor or trustee or assignee in bankruptcy, concurso mercantil or insolvency of it or its property, or shall make an assignment for the benefit of creditors, or shall admit in writing its inability to pay its debts generally as they become due; or (vii) all or a substantial (in the opinion of the Trustee) part of the assets of the Issuer and the Issuer's Subsidiaries taken as a whole or any of the Guarantors and the relevant Guarantors' Subsidiaries taken as a whole or substantially all of the shares of the Issuer or any of the Guarantors shall be nationalized or expropriated by any governmental authority, or any license, permit or other authorization material (in the opinion of the Trustee) to the conduct of the business of the Issuer or any of the Issuer's Subsidiaries or any of the Guarantors or any of the Guarantors' Subsidiaries shall have been revoked and not reinstated within 120 days; or (viii) any other event specified as an "Additional Event of Default" in the applicable Pricing Supplement; then the Trustee at its discretion may, and if so requested in writing by the holders of at least one-quarter in aggregate principal amount of the Outstanding Notes of the relevant Series or if so directed by an Extraordinary Resolution of the Noteholders of such Series shall (subject in any such case to being secured and/or indemnified and/or prefunded to its satisfaction), give notice to the Issuer that the Notes of such Series are, and they shall accordingly immediately become, due and payable at 100% of the outstanding principal amount thereof together with accrued and unpaid interest thereon. At any time after the Notes become due and payable, the Trustee may, at its discretion and without further notice, institute such actions, steps or proceedings against the Issuer and/or the Guarantors as it may think fit to enforce the terms of the Trust Deed, the Notes, the Receipts and the Coupons, but it need not take any such proceedings unless (a) it shall have been so directed by an Extraordinary Resolution or so requested in writing by Noteholders holding at least a majority in aggregate principal amount of the Outstanding Notes of the relevant Series and (b) it shall have been indemnified and/or secured and/or prefunded to its satisfaction. No Noteholder, Receiptholder or Couponholder may proceed directly against the Issuer or the Guarantor unless the Trustee, having become bound so to proceed, fails to do so within a reasonable time and such failure is continuing. The Trustee shall not be obliged to take any action in relation to the enforcement or realization of any security or collateral or security or collateral document unless an Event of Default or Potential Event of Default has occurred and directed to do so by the holders of at least a majority in aggregate principal amount of the Outstanding Notes and indemnified and/or secured and/or prefunded to its satisfaction. 8. Meetings of Noteholders; Modification and Waiver The Trust Deed contains provisions for convening meetings of Noteholders to consider any matter affecting their interests, including the modification by Extraordinary Resolution of these Conditions or other provisions of the Trust Deed. The quorum at any such meeting for passing an Extraordinary Resolution will be one or more persons holding or representing not less than 75% in principal amount of the Outstanding Notes of the relevant Series, or at any adjourned such meeting one or more persons being or representing Noteholders whatever the principal amount of the Notes of the relevant Series so held or represented. An Extraordinary Resolution passed at any meeting of 115

118 Noteholders will be binding on all Noteholders, whether or not they are present at the meeting, and, if applicable, on all Receiptholders and Couponholders. The Trust Deed provides that meetings of more than one Series may be held where in the opinion of the Trustee there is no conflict of interests between the holders of the Notes of such Series. Except as may be provided in the Conditions of a particular Series of Notes in respect of such Series of Notes and subject always to such Conditions in respect of such Series of Notes, in relation to each Series, the Trustee may agree, without the consent of the Noteholders to (i) any modification of, or to any waiver or authorization of any breach or proposed breach of, any of these Conditions or any provision of the Trust Deed or, in the case of modification, the Agency Agreement which, in the opinion of the Trustee, is not materially prejudicial to the interests of the Noteholders, or (ii) any modification to any of the same which is in the opinion of the Trustee of a formal, minor or technical nature or to correct a manifest error. Any such modification, waiver, authorization or substitution shall be binding on all Noteholders and, if applicable, all Receiptholders and all Couponholders and any such modification or substitution shall be notified to the Noteholders by the Issuer in accordance with Condition 13 as soon as practicable thereafter unless, in the case of modification, the Trustee agrees otherwise. In connection with the exercise by it of any of its trusts, powers, authorities and discretions (including, without limitation, any modification, waiver, authorization, determination or substitution), the Trustee shall have regard to the interests of the Noteholders as a class (but shall not have regard to any interests arising from circumstances particular to individual Noteholders, Receiptholders or Couponholders of the relevant Series whatever their number) and, in particular but without limitation, shall not have regard to the consequences of any such exercise for individual Noteholders, Receiptholders or Couponholders of the relevant Series (whatever their number) resulting from their being for any purpose domiciled or resident in, or otherwise connected with, or subject to the jurisdiction of, any particular territory or any political subdivision thereof and the Trustee shall not be entitled to require, nor shall any Noteholder, Receiptholder or Couponholder of the relevant Series be entitled to claim, from the Issuer, any Guarantor, the Trustee or any other person any indemnification or payment in respect of any tax consequences of any such exercise upon individual Noteholders, Receiptholders or Couponholders of the relevant Series. The Trust Deed contains provisions for the indemnification of the Trustee and for its relief from responsibility including for the exercise of any voting rights in respect of any collateral and for the validity, sufficiency and enforceability (which the Trustee has not investigated) of any security which may be granted in respect of any Series. The Trustee is exempted from liability with respect to any loss or theft or reduction in value of any collateral, from any obligation to insure or to procure the insuring of any collateral and from any claim arising from the fact that any collateral will be held in safe custody by any custodian selected by the Trustee. The Trustee is not responsible for supervising the performance by any other person of its obligations to the Issuer or any of the Guarantors. 9. Covenants of the Issuer The Issuer agrees to comply with the following covenants for so long as any Note issued under the Programme remains outstanding: (a) Payment of Principal and Interest It will duly and punctually pay or cause to be paid the principal of and interest (and any Additional Amounts) on each of the Notes and any other payments to be made by the Issuer under the Notes, the Trust Deed and the Agency Agreement, at the place or places, at the respective times and in the manner provided in the Notes, the Trust Deed and the Agency Agreement. (b) Authorization and Consents It will forthwith take, fulfill or do any action, condition or thing (including the obtaining or effecting of any necessary consent, approval, authorization, exemption, filing, license, order, recording, registration or translation) at any time required to be taken, fulfilled or done in order (1) to enable the Issuer lawfully to enter into, exercise its rights and perform and comply with its obligations under the Trust Deed, the Agency Agreement or the Programme Agreement, (2) to ensure that those obligations are legally binding and enforceable and (3) to enable a Spanish translation, prepared by a court approved translator, of the Trust Deed, the Agency Agreement, the Programme Agreement and the Notes to be admissible in evidence in the courts of Mexico. (c) Payment of Taxes It will pay all stamp and other duties, if any, which may be imposed by Mexico, the United States, Luxembourg, Belgium or any political subdivision thereof or taxing authority of or in the foregoing with respect to the execution and delivery of the Trust Deed or the Agency Agreement or the issuance of the Notes (other than taxes on income imposed in the jurisdiction where the relevant taxpayer is incorporated or qualified to do business). 116

119 (d) Continued Existence of the Issuer It shall not dissolve or liquidate in whole or in part, except as permitted under the Trust Deed. (e) Change of Control (i) Upon the occurrence of a Change of Control, each holder of Notes shall have the right to require that the Issuer to purchase all or a portion of such holder's Notes at a purchase price equal to 101% of the principal amount thereof, plus accrued and unpaid interest thereon through the date of purchase (the "Change of Control Payment"). (ii) Within 30 days following the date upon which the Change of Control occurred, the Issuer must give a Change of Control Notice to each holder of Notes, with a copy to the Trustee, offering to purchase the Notes as described above (a "Change of Control Offer"). The Change of Control Offer shall state, among other things, the purchase date, which must be no earlier than 30 days nor later than 60 days from the date of the Change of Control Notice, other than as may be required by law (the "Change of Control Payment Date"). (iii) On the Business Day immediately preceding the Change of Control Payment Date, the Issuer shall, to the extent lawful, deposit with the Paying Agent Specified Currency in an amount equal to the Change of Control Payment in respect of all Notes or portions thereof so tendered. On the Change of Control Payment Date, the Issuer will, to the extent lawful: (1) accept for payment all Notes or portions thereof properly tendered and not withdrawn pursuant to the Change of Control Offer; and (2) deliver or cause to be delivered to the Trustee the Notes so accepted together with an Officer's Certificate stating the aggregate principal amount of Notes or portions thereof being purchased by the Issuer. (iv) If only a portion of a Definitive Note is purchased pursuant to a Change of Control Offer, a new Definitive Note in a principal amount equal to the portion thereof not purchased shall be issued in the name of the holder thereof upon cancellation of the original Definitive Note (or appropriate adjustments to the amount and beneficial interests in a Global Note will be made, as appropriate). Notes (or portions thereof) purchased pursuant to a Change of Control Offer will be cancelled and cannot be reissued. (v) The Issuer shall not be required to make a Change of Control Offer upon a Change of Control if: (1) a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in this Condition 9(e) applicable to a Change of Control Offer made by the Issuer and purchases all Notes properly tendered and not withdrawn pursuant to the Change of Control Offer, or (2) notice of redemption has been given by the Issuer pursuant to Condition 4, unless and until there is a default in payment of the applicable redemption price. (vi) A Change of Control Offer may be made in advance of a Change of Control, conditioned upon the occurrence of such Change of Control, if a definitive agreement is in place for the Change of Control at the time of making the Change of Control Offer. (vii) In the event that holders of not less than 95% of the aggregate principal amount of the Outstanding Notes accept a Change of Control Offer and the Issuer or a third party purchases all of the Notes held by such holders, the Issuer shall have the right, on not less than 30 nor more than 60 days' prior notice, given not more than 30 days following the Change of Control Payment Date pursuant to the Change of Control Offer described above, to redeem all of the Notes that remain Outstanding following such purchase at a purchase price equal to the Change of Control Payment plus, to the extent not included in the Change of Control Payment, accrued and unpaid interest, if any, on the Notes that remain Outstanding, to the payment date (subject to the right of Holders on the relevant Record Date to receive interest due on the relevant Interest Payment Date). (viii) The Issuer shall comply with the requirements of Rule 14e-1 under the Exchange Act and any other applicable securities laws and regulations in connection with the purchase of Notes in connection with a Change of Control Offer. To the extent that the provisions of any securities laws or regulations conflict with this Condition 9(e), the Issuer shall comply with the applicable 117

120 securities laws and regulations and will not be deemed to have breached its obligations under these Conditions or the Trust Deed by doing so. (f) Limitation on Incurrence of Additional Indebtedness (i) The Issuer shall not, and shall not cause or permit any of its Restricted Subsidiaries to, directly or indirectly, Incur any Indebtedness, except that the Issuer and any Guarantor may Incur Indebtedness if, at the time of and immediately after giving pro forma effect to the Incurrence thereof and the application of the proceeds therefrom, (a) the Consolidated Leverage Ratio is not greater than 3.0 to 1.0, and (b) the BIS Ratio is not less than 10%. (ii) Notwithstanding Condition 9(f)(i) above, the Issuer and its Restricted Subsidiaries, as applicable, may Incur the following Indebtedness ("Permitted Indebtedness"): (1) Indebtedness in respect of the Notes (including any Note Guarantee in respect thereof) excluding Notes issued pursuant to Condition 18; (2) Guarantees by the Issuer or any Guarantor of Indebtedness of the Issuer or any other Guarantor permitted hereunder; provided that if any such Guarantee is of Subordinated Indebtedness, then the Note Guarantee of such Guarantor shall be senior to such Guarantor's Guarantee of such Subordinated Indebtedness; (3) Indebtedness Incurred by the Issuer or any Guarantor under any Credit Facilities (including Guarantees in respect thereof) in an aggregate principal amount outstanding at any one time not to exceed the greater of (x) U.S.$100.0 million and (y) 2.5% of Consolidated Tangible Assets; (4) other Indebtedness of the Issuer and its Restricted Subsidiaries outstanding on the Issue Date other than Indebtedness specified under paragraph (3) of this Condition 9(f)(ii); (5) Hedging Obligations entered into by the Issuer and its Restricted Subsidiaries in the ordinary course of business and not for speculative purposes; (6) intercompany Indebtedness between the Issuer and any Restricted Subsidiary or between any Restricted Subsidiaries; provided that: (x) if the Issuer or any Guarantor is the obligor on any such Indebtedness owed to a Restricted Subsidiary that is not a Guarantor, such Indebtedness must be expressly subordinated to the prior payment in full of all obligations under the Notes and the Trust Deed, in the case of the Issuer, or such Guarantor's Note Guarantee, in the case of any such Guarantor, and (y) in the event that at any time any such Indebtedness ceases to be held by the Issuer or a Restricted Subsidiary, such Indebtedness shall be deemed to be Incurred and not permitted by this Condition 9(f)(ii)(6) at the time such event occurs; (7) Indebtedness of the Issuer or any of its Restricted Subsidiaries arising from the honouring by a bank or other financial institution of a cheque, draft or similar instrument inadvertently (including daylight overdrafts paid in full by the close of business on the day such overdraft was Incurred) drawn against insufficient funds in the ordinary course of business; provided that such Indebtedness is extinguished within five Business Days of Incurrence; (8) Indebtedness of the Issuer or any of its Restricted Subsidiaries represented by letters of credit for the account of the Issuer or any Restricted Subsidiary, as the case may be, in order to provide security for workers' compensation claims, payment obligations in connection with self-insurance or similar requirements in the ordinary course of business; (9) Capitalized Lease Obligations or Purchase Money Indebtedness of the Issuer or any Restricted Subsidiary, in each case Incurred for the purpose of acquiring or financing all or any part of the purchase price or cost of construction or improvement of property or equipment used in the business of the Issuer or such Restricted Subsidiary in an aggregate principal amount outstanding at any one time not to exceed the greater of (x) U.S.$50.0 million and (y) 1.25% of Consolidated Tangible Assets; (10) Indebtedness in respect of bid, performance or surety bonds in the ordinary course of business for the account of the Issuer or any of its Restricted Subsidiaries, including Guarantees or obligations of the Issuer or any Restricted Subsidiary with respect to letters of credit supporting such bid, performance or surety obligations (in each case other than for the payment of borrowed money); 118

121 (11) Refinancing Indebtedness in respect of: (x) Indebtedness (other than Indebtedness owed to the Issuer or any Subsidiary of the Issuer) Incurred pursuant to Condition 9(f)(i) above (it being understood that no Indebtedness outstanding on the Issue Date is Incurred pursuant to Condition 9(f)(i) above), or Indebtedness Incurred pursuant to clause (1) or (4) of this Condition 9(f)(ii); (12) Deposits received from customers of a Bank Regulated Subsidiary; (13) Permitted Acquisition Indebtedness; (14) Indebtedness of the Issuer or any of its Restricted Subsidiaries Incurred pursuant to any Receivables Transaction; (15) the Guarantee by the Issuer of any Indebtedness Incurred by a Guarantor in accordance with the terms of these Conditions and the Trust Deed; (16) Indebtedness of the Issuer or any Restricted Subsidiary not to exceed U.S.$250.0 million at any one time outstanding which Indebtedness (x) represents an advancement of amounts payable to the Issuer and its Restricted Subsidiaries as commissions in respect of the money transfer business of the Issuer's retail segment by the lender of such Indebtedness or its Affiliates, (y) is to be repaid by the retention of such commissions by such lender or its Affiliates and (z) is Incurred in the ordinary course of business consistent with past practice; (17) unsecured Indebtedness of Bank Regulated Subsidiaries Incurred in the ordinary course of business; and (18) Additional Indebtedness of the Issuer or any Guarantor in an aggregate principal amount not to exceed U.S.$20.0 million at any one time outstanding (which amount may, but need not, be Incurred, in whole or in part, under the Credit Facilities). (iii) For purposes of determining compliance with, and the outstanding principal amount of, any particular Indebtedness Incurred pursuant to and in compliance with, this Condition 9(f): (1) The amount of Indebtedness issued at a price that is less than the principal amount thereof shall be equal to the amount of the liability in respect thereof determined in accordance with GAAP. (2) The accrual of interest, the accretion or amortization of original issue discount, the payment of regularly scheduled interest in the form of additional Indebtedness of the same instrument or the payment of regularly scheduled dividends on Disqualified Capital Stock in the form of additional Disqualified Capital Stock with the same terms shall not be deemed to be an Incurrence of Indebtedness for purposes of this Condition 9(f); provided that any such outstanding additional Indebtedness or Disqualified Capital Stock paid in respect of Indebtedness Incurred pursuant to any provision of Condition 9(f)(ii) shall be counted as Indebtedness outstanding thereunder for purposes of any future Incurrence under such provision. (3) In the event that Indebtedness meets the criteria of more than one of paragraphs (1) to (18) of Condition 9(f)(ii), or is entitled to be Incurred pursuant to Condition 9(f)(i) above, the Issuer, in its sole discretion, will be permitted to classify such Indebtedness at the time of its Incurrence in any manner that complies with this Condition 9(f). In addition, any Indebtedness originally classified as Incurred pursuant to paragraphs (1) to (18) of Condition 9(f)(ii) or Condition 9(f)(i) may later be reclassified by the Issuer, in its sole discretion, such that it will be deemed to be Incurred pursuant to another of such paragraphs or Condition 9(f)(i) to the extent that such reclassified Indebtedness could be Incurred pursuant to such other paragraph or Condition 9(f)(i) at the time of such reclassification (provided that Indebtedness outstanding on the Issue Date under Credit Facilities shall be deemed incurred under Condition 9(f)(ii)(3). (4) For purposes of determining compliance with any U.S. dollar denominated restriction on the Incurrence of Indebtedness, the principal amount of Indebtedness denominated in a currency other than U.S. dollars shall be the U.S. Dollar Equivalent thereof. Notwithstanding any other provision of this Condition 9(f), the maximum amount of Indebtedness that the Issuer or any Restricted Subsidiary may incur pursuant to this Condition 9(f) shall not be deemed to be exceeded as a result solely of fluctuations in exchange rates or currency values. 119

122 (5) For purposes of determining any particular amount of Indebtedness: (i) Guarantees, Liens or obligations with respect to letters of credit supporting Indebtedness otherwise included in the determination of such particular amount shall not be included, (ii) any Liens granted pursuant to Condition 9(m) shall not be treated as Indebtedness and (iii) liabilities recorded on the balance sheet of the Issuer or any Restricted Subsidiary in connection with equity derivative transactions involving the Common Stock of the Issuer that are collateralized by cash shall not be treated as Indebtedness. (g) Limitation on Guarantees The Issuer shall not permit any Restricted Subsidiary that is not a Guarantor to Guarantee any Indebtedness of the Issuer or to secure any Indebtedness of the Issuer with a Lien on the assets of such Restricted Subsidiary, unless contemporaneously therewith (or prior thereto) effective provision is made to Guarantee or secure the Notes, as the case may be, on an equal and ratable basis with such Guarantee or Lien for so long as such Guarantee or Lien remains effective, and in an amount equal to the amount of Indebtedness so Guaranteed or secured. Any Guarantee by any such Restricted Subsidiary of Subordinated Indebtedness of the Issuer will be subordinated and junior in right of payment to the contemporaneous Guarantee of the Notes by such Restricted Subsidiary. (h) Limitation on Restricted Payments. (i) The Issuer shall not, and shall not cause or permit any of its Restricted Subsidiaries to, directly or indirectly, take any of the following actions (each, a "Restricted Payment"): (1) declare or pay any dividend or return of capital or make any distribution on or in respect of shares of Capital Stock of the Issuer or any Restricted Subsidiary to holders of such Capital Stock, other than: (x) dividends, return of capital or distributions payable in Qualified Capital Stock of the Issuer, (y) dividends, return of capital or distributions payable to the Issuer and/or a Restricted Subsidiary, or (z) dividends, distributions or returns of capital made on a pro rata basis to the Issuer and its Restricted Subsidiaries, on the one hand, and minority holders of Capital Stock of a Restricted Subsidiary, on the other hand (or on less than a pro rata basis to any minority holder); (2) purchase, redeem or otherwise acquire or retire for value: (x) any Capital Stock of the Issuer, or (y) any Capital Stock of any Restricted Subsidiary held by an Affiliate of the Issuer (other than a Restricted Subsidiary) or any Preferred Stock of a Restricted Subsidiary, except for Capital Stock held by the Issuer or a Restricted Subsidiary or purchases, redemptions, acquisitions or retirements for value of Capital Stock on a pro rata basis from the Issuer and/or any Restricted Subsidiaries, on the one hand, and minority holders of Capital Stock of a Restricted Subsidiary, on the other hand, according to their respective percentage ownership of the Capital Stock of such Restricted Subsidiary; (3) make any principal payment on, purchase, defease, redeem, prepay, decrease or otherwise acquire or retire for value, prior to any scheduled final maturity, scheduled repayment or scheduled sinking fund payment, as the case may be, any Subordinated Indebtedness (excluding (x) any intercompany Indebtedness between or among the Issuer and/or any Restricted Subsidiaries or (y) the purchase, repurchase or other acquisition of Indebtedness that is contractually subordinate to the Notes or any Note Guarantee, as the case may be, purchased in anticipation of satisfying a sinking fund obligation, principal installment or final maturity, in each case within one year of such date of purchase, repurchase or acquisition); or (4) make any Investment (other than Permitted Investments); if at the time of the Restricted Payment and immediately after giving effect thereto: (A) a Default or an Event of Default shall have occurred and be continuing; (B) the Issuer is not able to Incur at least U.S.$1.00 of additional Indebtedness pursuant to Condition 9(f)(i); or (C) the aggregate amount (the amount expended for these purposes, if other than in cash, being the Fair Market Value of the relevant property) of the proposed Restricted Payment and all other Restricted Payments made subsequent to the Issue Date up to the date thereof, less any Investment Return calculated as of the date thereof, shall exceed the sum of: 120

123 (i) 50% of cumulative Consolidated Net Income of the Issuer or, if such cumulative Consolidated Net Income of the Issuer is a loss, minus 100% of the loss, accrued during the period, treated as one accounting period, beginning in the fiscal quarter immediately preceding the fiscal quarter in which the Issue Date occurs, to the end of the most recent fiscal quarter for which consolidated financial information of the Issuer is available; plus (ii) 100% of the aggregate Net Cash Proceeds received by the Issuer or any Restricted Subsidiary from any Person from: (1) any contribution to the equity capital of the Issuer not representing an interest in Disqualified Capital Stock or any sale of Qualified Capital Stock of the Issuer, in each case, subsequent to the Issue Date, or (2) any sale subsequent to the Issue Date (and, in the case of Indebtedness of a Restricted Subsidiary, at such time as it was a Restricted Subsidiary) of any Indebtedness of the Issuer or any Restricted Subsidiary that has been converted into or exchanged for Qualified Capital Stock of the Issuer, excluding, in each case, any Net Cash Proceeds: (ii) (y) received from a Subsidiary of the Issuer; or (z) applied in accordance with Condition 9(h)(ii)(2) or (3) below. Notwithstanding Condition 9(h)(i) above, this Condition 9(h) does not prohibit: (1) the payment of any dividend or the consummation of any irrevocable redemption of Subordinated Indebtedness within 60 days after the date of declaration of such dividend or giving of the redemption notice, as the case may be, if the dividend or redemption would have been permitted on the date of declaration or notice pursuant to Condition 9(h)(i); provided that such redemption shall be included (without duplication for the declaration) in the calculation of the amount of Restricted Payments; (2) the acquisition of any shares of Capital Stock of the Issuer, (x) in exchange for Qualified Capital Stock of the Issuer, or (y) through the application of the net proceeds received by the Issuer from a substantially concurrent sale of Qualified Capital Stock of the Issuer or a contribution to the equity capital of the Issuer not representing an interest in Disqualified Capital Stock, in each case not received from a Subsidiary of the Issuer; provided that the value of any such Qualified Capital Stock issued in exchange for such acquired Capital Stock and any such net proceeds shall be excluded from Condition 9(h)(i)(C)(ii) above (and were not included therein at any time); (3) the voluntary prepayment, purchase, defeasance, redemption or other acquisition or retirement for value of any Subordinated Indebtedness solely in exchange for, or through the application of net proceeds of a substantially concurrent sale, other than to a Subsidiary of the Issuer, of: (x)qualified Capital Stock of the Issuer, or (y) Refinancing Indebtedness for such Subordinated Indebtedness; provided that the value of any Qualified Capital Stock issued in exchange for Subordinated Indebtedness and any net proceeds referred to above shall be excluded from Condition 9(h)(i)(C)(ii) above (and were not included therein at any time); (4) if no Default or Event of Default shall have occurred and be continuing, repurchases by the Issuer of Common Stock of the Issuer or options, warrants or other securities exercisable or convertible into Common Stock of the Issuer from any current or former employees or directors or consultants of the Issuer or any of its Subsidiaries or their authorized representatives upon the death, disability or termination of employment or directorship of the employees, officers or directors, or the termination of retention of any such consultant, in an amount not to exceed U.S.$5.0 million in any calendar year (with unused amounts in any calendar year being permitted to be carried over into succeeding calendar years) plus the cash proceeds of key man life insurance policies received by the Issuer and its Restricted Subsidiaries; 121

124 (5) the repurchase of Capital Stock deemed to occur upon the exercise of stock options or warrants to the extent such Capital Stock represents a portion of the exercise price of those stock options or warrants; (6) the declaration and payment of regularly scheduled or accrued dividends or distributions to holders of any class or series of Disqualified Capital Stock of the Issuer or any Restricted Subsidiary issued on or after the Issue Date in accordance with the covenant set forth in Condition 9(f); (7) upon the occurrence of a Change of Control and within 60 days after the completion of the offer to repurchase the Notes pursuant to Condition 9(e), any repurchase, redemption or other acquisition or retirement for value of any Subordinated Indebtedness of the Issuer or any Guarantor required pursuant to the terms thereof as a result of such Change of Control; provided that (A) the terms of such purchase or redemption are substantially similar in all material respects to the comparable provision included in the Conditions, and (B) at the time of such purchase or redemption no Default or Event of Default shall have occurred and be continuing (or would result therefrom); (8) if no Default or Event of Default shall have occurred and be continuing, the purchase by the Issuer of fractional shares arising out of stock dividends, splits or combinations or business combinations; (9) payments or distributions in the nature of satisfaction of statutory redemption or dissenters' rights under Mexican law; and (10) if no Default or Event of Default shall have occurred and be continuing, the payment of cash dividends on or in respect of Capital Stock of the Issuer or the repurchase or Capital Stock of the Issuer in an aggregate amount not to exceed $25.0 million in any calendar year. In determining the aggregate amount of Restricted Payments made subsequent to the Issue Date, amounts expended pursuant to paragraphs (1) (without duplication for the declaration of the relevant dividend), (4) and (7) of Condition 9(h)(ii) shall be included in such calculation and amounts expended pursuant to paragraphs (2), (3), (5),(6), (8), (9) and (10) above shall not be included in such calculation. (i) Limitation on Asset Sales and Sales of Subsidiary Stock. (i) The Issuer shall not, and shall not permit any of its Restricted Subsidiaries to, consummate an Asset Sale unless: (1) the Issuer or the applicable Restricted Subsidiary, as the case may be, receives consideration at the time of the Asset Sale at least equal to the Fair Market Value of the assets sold or otherwise disposed of, and (2) at least 75% of the consideration received for the assets sold by the Issuer or the Restricted Subsidiary, as the case may be, in the Asset Sale shall be in the form of cash or Cash Equivalents received at the time of such Asset Sale. For purposes of this Condition 9(h)(i)(2), the following are deemed to be cash: (x) Indebtedness and other liabilities shown on the most recent consolidated balance sheet of the Issuer prior to the date of such Asset Sale (other than Subordinated Indebtedness) that are assumed by the transferee of any such assets and as a result of which the Issuer and its Restricted Subsidiaries are no longer responsible for such Indebtedness; and (y) the Fair Market Value of any Capital Stock of a Person engaged in a Permitted Business that will become, upon purchase, a Restricted Subsidiary or assets (other than current assets as determined in accordance with GAAP or Capital Stock) to be used by the Issuer or any Restricted Subsidiary in a Permitted Business; and (z) any securities, notes or other obligations received by the Issuer or any such Restricted Subsidiary from such transferee that are converted, sold for or exchanged by the Issuer or such Restricted Subsidiary into cash or Cash Equivalents within 120 days (180 days in the case of land sales) of the receipt thereof (subject to ordinary settlement periods), to the extent of the cash or Cash Equivalents received in that conversion, sale or exchange, provided that amounts received pursuant to clauses (x) and (y) shall not be deemed to constitute Net Cash Proceeds for purposes of making an Asset Sale Offer. (ii) For the avoidance of doubt, a disposition of accounts receivable (including those of a Bank Regulated Subsidiary) in connection with a Receivables Transaction does not constitute an Asset Sale. 122

125 (iii) The Issuer or such Restricted Subsidiary, as the case may be, may apply the Net Cash Proceeds of any such Asset Sale within 365 days thereof to: (1) repay any Indebtedness of the Issuer or a Restricted Subsidiary that is secured by a Lien or Indebtedness of any Restricted Subsidiary that is not a Guarantor (including, in each case without limitation, Capitalized Lease Obligations), (2) make capital expenditures in a Permitted Business, or (3) purchase (x) assets (other than current assets as determined in accordance with GAAP or Capital Stock) to be used by the Issuer or any Restricted Subsidiary in a Permitted Business, or (y) all or substantially all of the assets of, or any Capital Stock of, a Person engaged in a Permitted Business if, after giving effect to any such acquisitions of Capital Stock, the Permitted Business is or becomes a Restricted Subsidiary from a Person other than the Issuer and its Restricted Subsidiaries; provided that, in the case of clauses (x) and (y), a binding commitment to acquire such assets or such Capital Stock shall be deemed a permitted application of such Net Cash Proceeds hereunder, so long as (i) the Issuer or such Restricted Subsidiary enters into such binding commitment within 365 days after receipt of such Net Cash Proceeds, (ii) such binding commitment is subject only to customary conditions and (iii) such acquisition is consummated within six months from the date of signing such binding commitment. (iv) To the extent all or a portion of the Net Cash Proceeds of any Asset Sale are not applied within 365 days of the Asset Sale as set forth in Condition 9(h)(iii)(1) or (2) (or, in the case of Condition 9(h)(iii)(3) only, within such longer period set forth therein), the Issuer shall make an offer to purchase Notes (the "Asset Sale Offer"), at a purchase price equal to 100% of the principal amount of the Notes to be purchased, plus accrued and unpaid interest thereon, to the date of purchase (the "Asset Sale Offer Amount"). The Issuer shall purchase pursuant to an Asset Sale Offer from all tendering Noteholders on a pro rata basis, and, at the Issuer's option, on a pro rata basis with the holders of any other Senior Indebtedness with similar provisions requiring the Issuer to offer to purchase the other Senior Indebtedness with the proceeds of Asset Sales, that principal amount (or accreted value in the case of Indebtedness issued with original issue discount) of Notes and the other Senior Indebtedness to be purchased equal to such unapplied Net Cash Proceeds. The Issuer may satisfy its obligations under this Condition 9(h) with respect to the Net Cash Proceeds of an Asset Sale by making an Asset Sale Offer prior to the expiration of the relevant 365-day period. (v) The purchase of Notes pursuant to an Asset Sale Offer shall occur not less than 20 Business Days following the date thereof, or any longer period as may be required by law, nor more than 45 days following the 365th day following the Asset Sale. The Issuer may, however, defer an Asset Sale Offer until there is an aggregate amount of unapplied Net Cash Proceeds from one or more Asset Sales equal to or in excess of U.S.$15.0 million. At that time, the entire amount of unapplied Net Cash Proceeds, and not just the amount in excess of U.S.$15.0 million, shall be applied as required pursuant to this Condition 9(h). Pending application in accordance with this Condition 9(h), Net Cash Proceeds shall be applied to temporarily reduce revolving credit borrowings that can be reborrowed or Invested in Cash Equivalents. (vi) Each Asset Sale Offer Notice shall be given to the record Holders as shown on the Note Register within 20 days following such 365th day, with a copy to the Trustee, which notice shall govern the terms of the Asset Sale Offer. Each Asset Sale Offer Notice will state, among other things, the purchase date, which must be no earlier than 30 days nor later than 60 days from the date the notice is mailed, other than as may be required by law (the "Asset Sale Offer Payment Date"). (vii) Upon receiving the Asset Sale Offer Notice, Holders may elect to tender their Notes in whole or in part in amounts of U.S.$2,000 or integral multiples of U.S.$1,000 in excess thereof in exchange for cash. (viii) On the Business Day immediately preceding the Asset Sale Offer Payment Date, the Issuer shall, to the extent lawful, deposit with the Paying Agent U.S. Legal Tender in an amount equal to the Asset Sale Offer Amount in respect of all Notes or portions thereof so tendered. On the Asset Sale Offer Payment Date, the Issuer will, to the extent lawful: (1) accept for payment all Notes or portions thereof properly tendered pursuant to the Asset Sale Offer; and 123

126 (2) deliver or cause to be delivered to the Principal Paying Agent the Notes so accepted together with an Officer's Certificate stating the aggregate principal amount of Notes or portions thereof being purchased by the Issuer. (j) (ix) To the extent Holders of Notes and holders of other Senior Indebtedness, if any, which are the subject of an Asset Sale Offer, properly tender and do not withdraw Notes or the other Senior Indebtedness in an aggregate amount exceeding the amount of unapplied Net Cash Proceeds, the Issuer shall purchase the Notes and the other Senior Indebtedness on a pro rata basis (based on amounts tendered). If only a portion of a Note is purchased pursuant to an Asset Sale Offer, a new Note in a principal amount equal to the portion thereof not purchased will be issued in the name of the Holder thereof upon cancellation of the original Note (or appropriate adjustments to the amount and beneficial interests in a Global Note will be made, as appropriate). Notes (or portions thereof) purchased pursuant to an Asset Sale Offer shall be cancelled and cannot be reissued. (x) The Issuer shall comply with the requirements of Rule 14e-1 under the Exchange Act and any other applicable securities laws in connection with the purchase of Notes pursuant to an Asset Sale Offer. To the extent that the provisions of any applicable securities laws or regulations conflict with this Condition 9(h), the Issuer shall comply with these laws and regulations and shall not be deemed to have breached its obligations under this Condition 9(h) by doing so. (xi) Upon completion of an Asset Sale Offer, the amount of Net Cash Proceeds will be reset at zero. Accordingly, to the extent that the aggregate amount of Notes and other Indebtedness tendered pursuant to an Asset Sale Offer is less than the aggregate amount of unapplied Net Cash Proceeds, the Issuer and its Restricted Subsidiaries may use any remaining Net Cash Proceeds for any purpose not otherwise prohibited hereby. (xii) In the event of the transfer of substantially all (but not all) of the property and assets of the Issuer and its Restricted Subsidiaries as an entirety to a Person in a transaction permitted under these Conditions or the Trust Deed, the Surviving Entity shall be deemed to have sold the properties and assets of the Issuer and its Restricted Subsidiaries not so transferred for purposes of this Condition 9(h) and shall comply with the provisions of this covenant with respect to the deemed sale as if it were an Asset Sale. In addition, the Fair Market Value of properties and assets of the Issuer or its Restricted Subsidiaries so deemed to be sold shall be deemed to be Net Cash Proceeds for purposes of this Condition 9(h). (xiii) If at any time any non-cash consideration received by the Issuer or any Restricted Subsidiary, as the case may be, in connection with any Asset Sale is converted into or sold or otherwise disposed of for cash (other than interest received with respect to any non-cash consideration), the conversion or disposition shall be deemed to constitute an Asset Sale hereunder and the Net Cash Proceeds thereof shall be applied in accordance with this Condition 9(h) within 365 days of conversion or disposition. Merger, Consolidation and Sale of Assets. (i) The Issuer shall not, in a single transaction or series of related transactions, consolidate or merge with or into any Person (whether or not the Issuer is the surviving or continuing Person), or sell, assign, transfer, lease, convey or otherwise dispose of (or cause or permit any Restricted Subsidiary to sell, assign, transfer, lease, convey or otherwise dispose of) all or substantially all of the Issuer's properties and assets (determined on a consolidated basis for the Issuer and its Restricted Subsidiaries), to any Person unless: (1) either: a. the Issuer (in the case of a consolidation or merger with or into any Person) shall be the surviving or continuing corporation; or b. the Person (if other than the Issuer) formed by such consolidation or into which the Issuer is merged or the Person which acquires by sale, assignment, transfer, lease, conveyance or other disposition the properties and assets of the Issuer and of the Issuer's Restricted Subsidiaries substantially as an entirety (the "Surviving Entity"): i. shall be a corporation organized and validly existing under the laws of Mexico or the United States of America, any State thereof or the District of Columbia, and 124

127 ii. shall expressly assume, by Supplemental Trust Deed (in form and substance satisfactory to the Trustee), executed and delivered to the Trustee, the due and punctual payment of the principal of, and premium, if any, and interest on all of the Notes and the performance and observance of the provisions of these Conditions to be performed or observed by the Issuer; (2) immediately after giving effect to such transaction and the assumption contemplated by Condition 9(j)(i)(1)(b)(ii) above (including giving effect on a pro forma basis to any Indebtedness, including any Acquired Indebtedness, Incurred or anticipated to be Incurred in connection with or in respect of such transaction), the Issuer or such Surviving Entity, as the case may be, will be able to Incur at least U.S.$1.00 of additional Indebtedness pursuant to Condition 9(f)(i). (3) immediately before and immediately after giving effect to such transaction and the assumption contemplated by Condition 9(j)(i)(1)(b)(ii) above (including, without limitation, giving effect on a pro forma basis to any Indebtedness, including any Acquired Indebtedness, Incurred or anticipated to be Incurred and any Lien granted in connection with or in respect of the transaction), no Default or Event of Default shall have occurred or be continuing; (4) each Guarantor (including Persons that become Guarantors as a result of the transaction) has confirmed by Supplemental Trust Deed that its Note Guarantee will apply for the Obligations of the Surviving Entity in respect of the Notes; (5) if the Issuer is organized under Mexican law and merges with a corporation, or the Surviving Entity is, organized under the laws of the United States, any State thereof or the District of Columbia or the Issuer is organized under the laws of the United States, any State thereof or the District of Columbia and merges with a corporation, or the Surviving Entity is, organized under the laws of Mexico, the Issuer or the Surviving Entity will have delivered to the Trustee an Opinion of Counsel from each of Mexico and the United States to the effect that, as applicable: a. each holder of the Notes will not recognize income, gain or loss for U.S. or Mexican income tax purposes as a result of the transaction and will be taxed in such holder's home jurisdiction in the same manner and on the same amounts (assuming solely for this purpose that no Additional Amounts are regarded to be paid on the Notes) and at the same time as would have been the case if the transaction had not occurred; b. no other taxes on income, including capital gains, will be payable by holders of the Notes under the laws of Mexico or the United States relating to the acquisition, ownership or disposition of the Notes, including the receipt of interest or principal thereon; provided that such holder does not use or hold, and is not deemed to use or hold the Notes in carrying on a business in Mexico or the United States; and (6) the Issuer or the Surviving Entity has delivered to the Trustee an Officer's Certificate and an Opinion of Counsel, each stating that the consolidation, merger, sale, assignment, transfer, lease, conveyance or other disposition and, if required in connection with such transaction, the Supplemental Trust Deed, comply with the applicable provisions of the Trust Deed and that all conditions precedent therein relating to the transaction have been satisfied. (ii) For purposes of this Condition 9(j), the transfer (by lease, assignment, sale or otherwise, in a single transaction or series of transactions) of all or substantially all of the properties or assets of one or more Restricted Subsidiaries of the Issuer, the Capital Stock of which constitutes all or substantially all of the properties and assets of the Issuer (determined on a consolidated basis for the Issuer and its Restricted Subsidiaries), shall be deemed to be the transfer of all or substantially all of the properties and assets of the Issuer. (iii) Upon any consolidation, combination or merger or any transfer of all or substantially all of the properties and assets of the Issuer and its Restricted Subsidiaries in accordance with this Condition 9(j), in which the Issuer is not the continuing corporation, the Surviving Entity formed 125

128 by such consolidation or into which the Issuer is merged or to which such conveyance, lease or transfer is made will succeed to, and be substituted for, and may exercise every right and power of, the Issuer under the Trust Deed, the Agency Agreement and the Notes, with the same effect as if such Surviving Entity had been named as such and the Issuer shall be released from its obligations under the Trust Deed, the Agency Agreement and the Notes. For the avoidance of doubt, compliance with this Condition 9(j) will not affect the obligations of the Issuer (including a Surviving Entity, if applicable) under Condition 9(e), if applicable. (iv) Each Guarantor shall not, and the Issuer shall not cause or permit any Guarantor to, consolidate with or merge into, or sell or dispose of all or substantially all of its assets to, any Person (other than the Issuer) that is not a Guarantor unless: (1) such transaction is otherwise in compliance with these Conditions and the Trust Deed, and such Person (if such Person is the surviving entity) assumes all of the obligations of such Guarantor in respect of its Note Guarantee by executing a Supplemental Trust Deed and providing the Trustee with an Officer's Certificate and Opinion of Counsel, each stating that the consolidation, merger, sale, assignment, transfer, lease, conveyance or other disposition and the Supplemental Trust Deed comply with these Conditions and all Conditions relating to the transaction have been satisfied; (2) such Note Guarantee is to be released as provided under Condition 17; or (3) such sale or other disposition of substantially all of such Guarantor's assets is made in accordance with Condition 9(i). The provisions of this Condition 9(j) will not apply to: (1) any transfer of the properties or assets of a Restricted Subsidiary to the Issuer, a Guarantor or another Restricted Subsidiary; (2) any merger of a Restricted Subsidiary into the Issuer, a Guarantor or another Restricted Subsidiary; or (3) any merger of the Issuer into a Wholly Owned Subsidiary of the Issuer; so long as, in each case the Indebtedness of the Issuer and its Restricted Subsidiaries taken as a whole is not increased thereby. (k) Limitation on Designation of Unrestricted Subsidiaries. (i) The Issuer may designate after the Issue Date any Subsidiary of the Issuer as an "Unrestricted Subsidiary" under the Conditions and the Trust Deed (a "Designation") only if: (1) no Default or Event of Default shall have occurred and be continuing at the time of or after giving effect to such Designation and any transactions between the Issuer or any of its Restricted Subsidiaries and such Unrestricted Subsidiary are in compliance with Condition 9(n); (2) at the time of and after giving effect to such Designation, the Issuer could Incur U.S.$1.00 of additional Indebtedness pursuant to Condition 9(f)(i); and (3) the Issuer would be permitted to make an Investment at the time of Designation (assuming the effectiveness of such Designation and treating such Designation as an Investment at the time of Designation) as a Restricted Payment pursuant to Condition 9(h)(i) in an amount (the "Designation Amount") equal to the Fair Market Value of the sum of the net assets of such Unrestricted Subsidiary at the time of its Designation and the amount of any Indebtedness of such Unrestricted Subsidiary owed to the Issuer or any Restricted Subsidiary immediately following such Designation, and, at the time of such Designation, neither the Issuer nor any Restricted Subsidiary will: (x) provide credit support for, subject any of its property or assets (other than the Capital Stock of any Unrestricted Subsidiary) to the satisfaction of, or Guarantee, any Indebtedness of such Unrestricted Subsidiary (including any undertaking, agreement or instrument evidencing such Indebtedness); (y) be directly or indirectly liable for any Indebtedness of such Unrestricted Subsidiary; or (z) be directly or indirectly liable for any Indebtedness which provides that the holder thereof may (upon notice, lapse of time or both) declare a default thereon or cause the payment thereof to be accelerated or payable prior to its final scheduled maturity upon the occurrence of a default with respect to any Indebtedness of such 126

129 Unrestricted Subsidiary, except for any non-recourse Guarantee given solely to support the pledge by the Issuer or any Restricted Subsidiary of the Capital Stock of such Unrestricted Subsidiary. (ii) (iii) (l) The Issuer may revoke any Designation of a Subsidiary as an Unrestricted Subsidiary (a "Revocation") only if: (1) no Default or Event of Default shall have occurred and be continuing at the time of and after giving effect to such Revocation; and (2) all Liens and Indebtedness of such Unrestricted Subsidiary outstanding immediately following such Revocation would, if Incurred at such time, have been permitted to be Incurred for all purposes of these Conditions and the Trust Deed. The Designation of a Subsidiary of the Issuer as an Unrestricted Subsidiary shall be deemed to include the Designation of all of the Subsidiaries of such Subsidiary. All Designations and Revocations must be evidenced by resolutions of the Board of Directors of the Issuer and an Officer's Certificate, delivered to the Trustee certifying compliance with the preceding provisions. Limitation on Dividends and Other Payment Restrictions Affecting Restricted Subsidiaries. (i) (ii) Except as provided in paragraph (ii) of this Condition 9(l), the Issuer shall not, and shall not cause or permit any of its Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or permit to exist or become effective any encumbrance or restriction on the ability of any Restricted Subsidiary to: (1) pay dividends or make any other distributions on or in respect of its Capital Stock to the Issuer or any other Restricted Subsidiary or pay any Indebtedness owed to the Issuer or any other Restricted Subsidiary; (2) make loans or advances to, or Guarantee any Indebtedness or other obligations of, or make any Investment in, the Issuer or any other Restricted Subsidiary; or (3) transfer any of its property or assets to the Issuer or any other Restricted Subsidiary. Paragraph (i) of this Condition 9(l) shall not apply to encumbrances or restrictions existing under or by reason of: (1) applicable law, rule, regulation or order (including any restrictions imposed on a Regulated Subsidiary); (2) these Conditons, the Trust Deed, the Notes and the Note Guarantees; (3) the terms of any Indebtedness or other agreement outstanding on the Issue Date, and any amendment, modification, restatement, renewal, restructuring, replacement or Refinancing thereof; provided that any such amendment, modification, restatement, renewal, restructuring, replacement or Refinancing is not materially more restrictive, taken as a whole, with respect to such encumbrances or restrictions than those in existence on the Issue Date; (4) customary non-assignment provisions of any contract and customary provisions restricting assignment or subletting in any lease governing a leasehold interest of any Restricted Subsidiary, or any customary restriction on the ability of a Restricted Subsidiary to dividend, distribute or otherwise transfer any asset which secures Indebtedness secured by a Lien, in each case permitted to be Incurred hereunder; (5) (x) any instrument governing Acquired Indebtedness not Incurred in connection with, or in anticipation or contemplation of, the relevant acquisition, merger or consolidation, or (y) any other agreement or instrument binding on a Person acquired or its assets or properties which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person or the properties or assets of the Person so acquired; (6) restrictions with respect to a Restricted Subsidiary of the Issuer imposed pursuant to a binding agreement which has been entered into for the sale or disposition of Capital Stock or assets of such Restricted Subsidiary; provided that such restrictions apply solely to the Capital Stock or assets of such Restricted Subsidiary being sold; (7) customary restrictions imposed on the transfer of copyrighted or patented materials; 127

130 (m) (8) an agreement governing Indebtedness of the Issuer or any Restricted Subsidiaries permitted to be Incurred subsequent to the date hereof in accordance with Condition 9(f); provided that the provisions relating to such encumbrance or restriction contained in such agreement are no more restrictive than those contained in the Indebtedness or agreement referred to in Condition 9(l)(ii)(3) above or, in the case of Indebtedness Incurred to Refinance Acquired Indebtedness, no more restrictive than those contained in the Indebtedness or agreement referred to in Condition 9(l)(ii)(5) above; (9) purchase money obligations for property (including Capital Stock) acquired in the ordinary course of business and Capitalized Lease Obligations that impose restrictions on the property purchased or leased of the nature described in Condition 9(l)(i)(3) above; (10) Liens permitted to be incurred under Condition 9(m) that limit the right of the debtor to dispose of or otherwise transfer the assets securing such Indebtedness or any proceeds thereof; (11) provisions limiting the payment of dividends in the organizational documents, shareholders' agreements, joint venture agreements or similar documents of, or related to, Restricted Subsidiaries that are not Wholly Owned Subsidiaries and which are customary for such documents and which have been entered into with the approval of the Issuer's Board of Directors; (12) restrictions on cash deposited with banks in the ordinary course of business consistent with past practice; (13) restrictions customarily granted in connection with securitization, factoring or discounting involving receivables that are imposed in connection with a Receivables Transaction; or (14) any instrument evidencing or relating to Indebtedness incurred pursuant to Condition (f)(ii)(3). Limitation on Liens. The Issuer shall not, and shall not cause or permit any of its Restricted Subsidiaries to, directly or indirectly, Incur any Liens of any kind (except for Permitted Liens) against or upon any of their respective properties or assets, whether owned on the Issue Date or acquired after the Issue Date, or any proceeds therefrom, to secure any Indebtedness unless contemporaneously therewith effective provision is made: (1) in the case of the Issuer or any Restricted Subsidiary other than a Guarantor, to secure the Notes and all other amounts due hereunder; and (2) in the case of a Guarantor, to secure such Guarantor's Note Guarantee and all other amounts due hereunder; in each case, equally and ratably with such Indebtedness (or, in the event that such Indebtedness is subordinated in right of payment to the Notes or such Note Guarantee, as the case may be, prior to such Indebtedness) with a Lien on the same properties and assets securing such Indebtedness for so long as such Indebtedness is secured by such Lien. (n) Limitation on Transactions with Affiliates. (i) The Issuer shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, enter into any transaction or series of related transactions (including, without limitation, the purchase, sale, lease or exchange of any property or the rendering of any service) with, or for the benefit of, any of its Affiliates (each an "Affiliate Transaction"), unless: (1) the terms of such Affiliate Transaction are no less favorable than those that could reasonably be expected to be obtained in a comparable transaction at such time on an arm's-length basis from a Person that is not an Affiliate of the Issuer; (2) in the event that such Affiliate Transaction involves aggregate payments, or transfers of property or services with consideration in excess of U.S.$15.0 million, the terms of such Affiliate Transaction will be approved by a majority of the members of the Board of Directors of the Issuer (including a majority of the disinterested members thereof), the approval to be evidenced by a Board Resolution stating that the Board of Directors has 128

131 determined that such transaction complies with the preceding provisions and an Officer's Certificate; and (3) (ii) (o) in the event that such Affiliate Transaction involves aggregate payments, or transfers of property or services with consideration in excess of U.S.$25.0 million (excluding sales or purchases of advertising or communications services in the ordinary course of business), the Issuer will, prior to the consummation thereof, obtain a favorable opinion as to the fairness of such Affiliate Transaction to the Issuer and the relevant Restricted Subsidiary (if any) from a financial point of view from an Independent Financial Advisor and file the same with the Trustee. The Trustee shall be entitled to rely upon such opinion without further inquiries or liability. The provisions of paragraph (i) of this Condition 9(n) shall not apply to: (1) Affiliate Transactions with or among the Issuer and any Restricted Subsidiary or between or among Restricted Subsidiaries; (2) reasonable fees and compensation paid to, and any indemnity provided on behalf of, officers, directors, employees, consultants or agents of the Issuer or any Restricted Subsidiary as determined in good faith by the Issuer's Board of Directors; (3) Affiliate Transactions undertaken pursuant to any contractual obligations or rights in existence on the Issue Date and any amendment, modification, extension or replacement of such agreement (so long as such amendment, modification, extension or replacement is not materially more disadvantageous to the Holders, taken as a whole, than the original agreement as in effect on the Issue Date); (4) any Restricted Payments made in compliance with Condition 9(h); (5) loans and advances to officers, directors and employees of the Issuer or any Restricted Subsidiary for travel, entertainment, moving and other relocation expenses, in each case made in the ordinary course of business and not exceeding U.S.$2.0 million outstanding at any one time; and (6) any issuance of Capital Stock (other than Disqualified Stock) of the Issuer to Affiliates of the Issuer or to any director, officer, employee or consultant of the Issuer or any Restricted Subsidiary, and the granting and performance of registration rights. Conduct of Business The Issuer and its Restricted Subsidiaries shall not engage in any business other than a Permitted Business. (p) Reports to Holders (i) So long as there remain Outstanding Notes, the Issuer shall furnish to the Trustee; (1) within 120 days following the end of each of the Issuer's fiscal years, an "Operating Financial Results" section with scope and content substantially similar to the corresponding section of the Offering Circular (after taking into consideration any changes to the business and operations of the Issuer after the Issue Date), consolidated audited income statements, statements of shareholders equity, balance sheets and cash flow statements and the related notes thereto for the Issuer for the two most recent fiscal years in accordance with GAAP, which need not, however, contain any reconciliation to U.S. GAAP or otherwise comply with Regulation S-X of the SEC, together with an audit report on such financial statements by the Issuer's independent auditors (in each case, presented in the English language); and (2) within 60 days following the end of the first three fiscal quarters in each of the Issuer's fiscal years, quarterly reports containing unaudited consolidated balance sheets, statements of income, statements of shareholders equity and statements of cash flows and the related notes thereto for the Issuer and the Subsidiaries on a consolidated basis, in each case for the quarterly period then ended and the corresponding quarterly period in the prior fiscal year and prepared in accordance with GAAP, which need not, however, contain any reconciliation to U.S. GAAP or otherwise comply with Regulation S-X of the SEC, together with an "Operating Financial Results" section for such quarterly period and condensed footnote disclosure (in each case, presented in the English language). 129

132 In addition, each of the reports provided pursuant to this Condition 9(p)(i) shall include the Consolidated Leverage Ratio and BIS Ratio for such period, together with an appropriate footnote or other disclosure providing in reasonable detail the calculation of such ratios. (q) (r) (ii) None of the information provided pursuant to paragraph (i) of this Condition 9(p) shall be required to comply with Regulation S-K as promulgated by the SEC. In addition, if and so long as the Notes are admitted to listing on the Official List of the Irish Stock Exchange and to trading on the Global Exchange Market and the rules of the Irish Stock Exchange so require, copies of such reports furnished to the Trustee shall also be made available by the Issuer at the specified office of the Irish Paying Agent. (iii) Delivery of such reports, information and documents to the Trustee shall be for informational purposes only, no liability shall accrue to the Trustee and the Trustee's receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Issuer's compliance with any of the covenants contained in the Conditions or the Trust Deed (as to which the Trustee shall be entitled to conclusively rely upon an Officer's Certificate). Listing. (i) In the event that the Notes are listed on the Global Exchange Market, the alternative market of the Irish Stock Exchange, the Issuer shall use its reasonable best efforts to maintain such listing, provided that if, as a result of the European Union regulated market amended Directive 2001/34/EC (the "Transparency Directive") or any legislation implementing the Transparency Directive the Issuer could be required to publish financial information either more regularly than it otherwise would be required to or according to accounting principles which are materially different from the accounting principles which the Issuer would otherwise use to prepare its published financial information, the Issuer may delist the Notes from the Global Exchange Market in accordance with the rules of the Irish Stock Exchange and seek an alternative admission to listing, trading and/or quotation for the Notes on a different section of the Irish Stock Exchange or by such other listing authority, stock exchange and/or quotation system inside or outside the European Union as the Issuer may decide. (ii) From and after the date the Notes are listed on the Global Exchange Market, the alternative market of the Irish Stock Exchange and so long as it is required by the rules of the Irish Stock Exchange, all notices to the Holders will be published in English. (iii) The Issuer agrees to notify promptly the Trustee whenever the Notes become listed on any stock exchange and of any delisting thereof. Suspension of Covenants. (i) During any period of time that (x) the Notes have Investment Grade Ratings from at least two Rating Agencies, and (y) no Default or Event of Default has occurred and is continuing (the occurrence of the events described in the foregoing paragraphs (x) and (y) being collectively referred to as a "Covenant Suspension Event"), the Issuer and its Restricted Subsidiaries will not be subject to Conditions 9(f), 9(g) (provided that such covenant shall apply to any Restricted Subsidiary that guarantees Indebtedness upon any Reversion Date (as defined below)), 9(h), 9(i),9(j)(i)(3) 9(k), 9(l) and 9(n) (collectively, the "Suspended Covenants"). (ii) In the event that the Issuer and its Restricted Subsidiaries are not subject to the Suspended Covenants for any period of time as a result of the foregoing, and on any subsequent date (the "Reversion Date") the Covenant Suspension Event ceases to exist, then the Issuer and its Restricted Subsidiaries will thereafter again be subject to the Suspended Covenants. The period of time between the date of the Covenant Suspension Event and the Reversion Date is referred to as the "Suspension Period." Notwithstanding that the Suspended Covenants may be reinstated, no Default or Event of Default will be deemed to have occurred as a result of a failure to comply with the Suspended Covenants during the Suspension Period (or upon termination of the Suspension Period or after that time based solely on events that occurred during the Suspension Period). (iii) On the Reversion Date, all Indebtedness incurred during the Suspension Period will be classified to have been Incurred pursuant to Condition 9(f)(i) or Condition 9(f)(ii) (to the extent such Indebtedness would be permitted to be Incurred thereunder as of the Reversion Date and after giving effect to Indebtedness Incurred prior to the Suspension Period and outstanding on the 130

133 Reversion Date). To the extent such Indebtedness would not be so permitted to be Incurred pursuant to Condition 9(f)(i) or Condition 9(f)(ii), such Indebtedness will be deemed to have been outstanding on the Issue Date, so that it is classified as permitted under Condition 9(f)(ii)(4). Calculations made after the Reversion Date of the amount available to be made as Restricted Payments under Condition 9(h) will be made as though Condition 9(h) had been in effect since the Issue Date and throughout the Suspension Period. Accordingly, Restricted Payments made during the Suspension Period will reduce the amount available to be made as Restricted Payment under Condition 9(h)(i). (iv) 10. The Issuer will forthwith give the Trustee written notice of any Covenant Suspension Event and in any event not later than ten Business Days after such Covenant Suspension Event has occurred. In the absence of such notice, the Trustee may assume (without a duty to inquire or liability to any person) the Suspended Covenants apply and are in full force and effect. The Issuer will give the Trustee written notice of any occurrence of a Reversion Date not later than five Business Days after it becomes aware of such Reversion Date. After any such notice of the occurrence of the Reversion Date, the Trustee may assume (without a duty to inquire or liability to any person) the Suspended Covenants apply and are in full force and effect. Replacement of Notes, Exchange and Transfer. Subject to the succeeding paragraph, if any mutilated Note is surrendered to the Principal Paying Agent, the Issuer shall execute, and the Principal Paying Agent shall authenticate and deliver in exchange therefor, a new Note of like tenor and principal amount, bearing (with respect to Definitive Notes) a serial number not contemporaneously outstanding. If there be delivered to the Issuer and the Principal Paying Agent (i) evidence to their reasonable satisfaction of the destruction, loss or theft of any Note, and (ii) such security or indemnity as may be reasonably required by them, then, in the absence of notice to the Issuer or the Principal Paying Agent (with respect to Notes) that such Note has been acquired by a bona fide purchaser, the Issuer shall execute, and upon its request the Principal Paying Agent shall authenticate and deliver in lieu of any such destroyed, lost or stolen Note, a new Note of like tenor and principal amount, bearing a serial number not contemporaneously outstanding. Upon the issuance of any new Note under this Condition 10, the Issuer may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and the expenses of the Trustee or the Principal Paying Agent, as the case may be) connected therewith. Every new Note issued pursuant to this Condition 10 in lieu of any destroyed, lost or stolen Note shall constitute an original contractual obligation of the Issuer, whether or not the destroyed, lost or stolen Note shall be at any time enforceable by anyone. Any new Note delivered pursuant to the provisions of this Condition 10 shall be so dated that neither gain nor loss of interest shall result from such exchange. The provisions of this Condition 10 and the provisions of the Agency Agreement regarding the replacement or payment of mutilated, destroyed, lost or stolen Notes are exclusive with respect to the replacement or payment of mutilated, destroyed, lost or stolen Notes, and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Notes. 11. Paying Agents. The names of the initial Paying Agents and their initial specified offices are set out below. The Issuer and the Guarantors (acting together) are entitled, with the prior written consent of the Trustee, to vary or terminate the appointment of any Paying Agent and/or appoint additional or other Paying Agents and/or approve any change in the specified office through which any Paying Agent acts, provided that the Issuer and the Guarantors will at all times appoint at least one Paying Agent in a Member State of the European Union that will not be obliged to withhold or deduct tax pursuant to European Council Directive 2003/48/EC or any law implementing or complying with, or introduced in order to conform to such Directive. In addition, the Issuer and the Guarantors (acting together) shall forthwith appoint a Paying Agent having a specified office in New York City in the circumstances described in Condition 5(b)(iv). Any variation, termination, appointment or change shall only take effect (other than in the case of insolvency, when it shall be of immediate effect) after not less than 30 nor more than 45 days' prior notice thereof shall have been given to the Noteholders in accordance with Condition 13. In acting under the Agency Agreement, the Paying Agents act solely as agents of the Issuer and the Guarantors and, in certain circumstances specified therein, the Trustee, and do not assume any obligation to, or relationship of agency or trust with, any Noteholders, Receiptholders or Couponholders. The Agency Agreement 131

134 contains provisions permitting any entity into which any Paying Agent is merged or converted or with which it is consolidated or to which it transfers all or substantially all of its assets to become the successor paying agent. 12. Prescription. The Notes, Receipts and Coupons shall be prescribed and become void unless presented for payment within a period of 10 years (in the case of principal) and five years (in the case of interest) after the Relevant Date therefor. "Relevant Date" means the date on which payment of principal and interest first becomes due, except that, if the full amount of the moneys payable has not been duly received by the Trustee or the Principal Paying Agent, as the case may be, on or prior to such due date, it means the date on which the full amount of such moneys having been so received, notice to that effect is duly given to the Noteholders in accordance with Condition Notices. All notices regarding the Notes shall be given to holders of Definitive Notes and interests in a Global Note by publication at least once in a leading daily newspaper in the English language of general circulation in London. Neither the failure to give notice nor any defect in any notice to any particular Noteholder shall affect the sufficiency of any notice with respect to other Notes. Such notices will be deemed to have been given on the date of such publication or, if published in such newspapers on different dates, on the date of the first such publication. Notice to be given by any Noteholder shall be in writing and given by forwarding the same, together (in the case of Definitive Notes) with the relative Note or Notes, to the Principal Paying Agent. While any Notes are represented by a Global Note, such notice may be given by any holder of an interest in such Global Note to the Principal Paying Agent via Euroclear and/or Clearstream, Luxembourg, as the case may be, in such manner as the Principal Paying Agent and Euroclear and/or Clearstream, Luxembourg, as the case may be, may approve for this purpose. 14. Currency Indemnity. The relevant Specified Currency is the sole currency of account and payment for all sums payable by the Issuer or the Guarantors under or in connection with the Notes, including damages. Any amount received or recovered in a currency other than in the relevant Specified Currency (whether as a result of, or of the enforcement of, a judgment or order of a court of any jurisdiction, in the winding-up or dissolution of the Issuer or the Guarantors or otherwise) by any Noteholder in respect of any sum expressed to be due to it from the Issuer or the Guarantors shall only constitute a discharge of the Issuer or the Guarantors to the extent of the relevant Specified Currency amount which the recipient is able to purchase with the amount so received or recovered in that other currency on the first date on which it is practicable for such Noteholder to so purchase the relevant Specified Currency with the amount so received or recovered in that other currency (such date with respect to such a receipt or recovery by a Noteholder in a currency other than the relevant Specified Currency being referred to herein as the "First Practicable Conversion Date"). If that relevant Specified Currency amount is less than the relevant Specified Currency amount expressed to be due to the recipient under any Note, the Issuer or the Guarantors shall indemnify such recipient against any loss sustained by it as a result. In any event, the Issuer or the Guarantors shall indemnify the recipient against the cost of making any such purchase. For the purposes of this Condition 14, it will be sufficient for the Noteholder to demonstrate that it would have suffered a loss had an actual purchase been made on the First Practicable Conversion Date. These indemnities constitute a separate and independent obligation from the Issuer's and/or the Guarantors' other obligations, shall give rise to a separate and independent cause of action, shall apply irrespective of any indulgence granted by any Noteholder and shall continue in full force and effect despite any other judgment, order, claim or proof for a liquidated amount in respect of any sum due under any Note or any other judgment or order. If any amount is received or recovered by a Noteholder in a currency other than the relevant Specified Currency and if the actual conversion of such amount to the relevant Specified Currency by such Noteholder results in a net surplus (after deductions of all costs and expenses of such conversion), such surplus must be returned to the Issuer within 30 days of such conversion. 15. Governing Law. The Trust Deed, the Agency Agreement, the Notes, the Receipts and the Coupons and any non-contractual obligations arising out of or in connection with the Trust Deed, the Agency Agreement, the Notes, the Receipts and the Coupons are governed by, and shall be construed in accordance with, English law. 16. Jurisdiction. The Issuer irrevocably agrees for the benefit of the holders of the Notes that the courts of England shall have jurisdiction to hear and determine any suit, action or proceedings, and to settle any disputes, which may arise 132

135 out of or in connection with the Notes (respectively, "Proceedings" and "Disputes") and, for such purposes, irrevocably submits to the jurisdiction of such courts. The Issuer irrevocably waives any objection which it might now or hereafter have to the courts of England being nominated as the forum to hear and determine any Proceedings and to settle any Disputes and agrees not to claim that any such court is not a convenient or appropriate forum. Nothing contained in this Condition 16 shall limit any right to take Proceedings against the Issuer in any court of competent jurisdiction, nor shall the taking of Proceedings in one or more jurisdictions preclude the taking of Proceedings in any other jurisdiction, whether concurrently or not. The Issuer appoints, designates and empowers TMF Corporate Services Limited at its office at 6 St Andrew Street, 5th Floor, London EC4A 3AE, United Kingdom, as its agent for service of process, and undertakes that, in the event of such person ceasing so to act or ceasing to be domiciled in England, it will appoint, designate and empower another person domiciled in England as its agent for service of process in England in respect of any Proceedings. Nothing herein shall affect the right to serve process in any other manner permitted by law. 17. Note Guarantees. (a) Limitation on Liability; Termination, Release and Discharge. The Obligations of each Guarantor in respect of its Note Guarantee shall be limited to the maximum amount as shall, after giving effect to all other contingent and fixed liabilities of such Guarantor and after giving effect to any collections from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under its Note Guarantee or pursuant to its contribution obligations under the Trust Deed, result in such Obligations not constituting a fraudulent conveyance, fraudulent transfer or similar illegal transfer under applicable law. (b) Additional Note Guarantees. Each Guarantor shall automatically be released and relieved of its obligations under its Note Guarantee in the event: (i) there is a sale or other disposition of Capital Stock of such Guarantor following which such Guarantor is no longer a direct or indirect Subsidiary of the Issuer; or (ii) such Guarantor is Designated as an Unrestricted Subsidiary in accordance with Condition 9(k); provided that the transaction is carried out pursuant to and in accordance with all other applicable Conditions. The Issuer covenants and agrees that, if at any time after the date hereof any Person that is not a Regulated Subsidiary becomes a Restricted Subsidiary (including upon a Revocation of the Designation of a Subsidiary as an Unrestricted Subsidiary) and such Person has aggregate assets in excess of U.S.$2.0 million, the Issuer shall (and in regards to any such Person that is a Regulated Subsidiary and/or has aggregate assets of U.S.$2.0 millon or less the Issuer may, at its sole and absolute discretion), after becoming aware of such event, (i) promptly notify the Trustee in writing of such event; (ii) make any other notification required by the Irish Stock Exchange so long as any Notes are listed on the Irish Stock Exchange; and (iii) cause such Restricted Subsidiary to become a Guarantor by executing a Notation of Guarantee and a Supplemental Trust Deed and providing the Trustee with an Officer's Certificate and Opinion of Counsel pursuant to the provisions of the Trust Deed and to comply in all respects with the provisions of these Conditions, the Trust Deed and the Notes, as applicable; provided, however, that each Guarantor will be automatically and unconditionally released and discharged from its obligations under such additional Note Guarantee only in accordance with Condition 17(b). 18. Descriptive Headings The descriptive headings appearing in these Conditions are for convenience of reference only and shall not alter, limit or define the provisions hereof. 19. Further Issues of Notes The Issuer may from time to time without the consent of the Noteholders create and issue further notes, bonds or Notes having the same terms and conditions as the Notes of a Series in all respects (or in all respects except for the payment of interest on the Notes (i) scheduled and paid prior to the date of issuance of such notes, bonds or Notes or (ii) payable on the first Interest Payment Date following such date of issuance) so that such further issue shall be consolidated and form a single Series with the outstanding Notes of such Series; provided that nothing in this Condition shall prevent the Issuer from creating and issuing further notes, bonds or Notes that do not have the 133

136 same terms and conditions as the Notes and which are not consolidated with any of the Notes to form a single Series. Any further notes, bonds or Notes forming a single Series with the outstanding Notes of any Series constituted by the Trust Deed shall, and any other notes, bonds or Notes may (with the consent of the Trustee), be constituted by the Trust Deed. 20. Contracts (Rights of Third Parties) Act No person shall have any right to enforce any term or condition of the Notes under the Contracts (Rights of Third Parties) Act 1999, but this does not affect any right or remedy of any person which exists or is available apart from the Contracts (Rights of Third Parties) Act Definitions "Acquired Indebtedness" means Indebtedness of a Person or any of its Subsidiaries existing at the time such Person becomes a Restricted Subsidiary or at the time it merges or consolidates with the Issuer or any of its Restricted Subsidiaries or is assumed in connection with the acquisition of assets from such Person. Such Indebtedness shall be deemed to have been Incurred at the time such Person becomes a Restricted Subsidiary or at the time it merges or consolidates with the Issuer or a Restricted Subsidiary or at the time such Indebtedness is assumed in connection with the acquisition of assets from such Person. "Asset Acquisition" means: (a) an Investment by the Issuer or any Restricted Subsidiary in any other Person pursuant to which such Person will become a Restricted Subsidiary, or will be merged with or into the Issuer or any Restricted Subsidiary; (b) the acquisition by the Issuer or any Restricted Subsidiary of the assets of any Person (other than a Subsidiary of the Issuer) which constitute all or substantially all of the assets of such Person or comprises any division or line of business of such Person or any other properties or assets of such Person other than in the ordinary course of business; or (c) any Revocation with respect to an Unrestricted Subsidiary. "Asset Sale" means any direct or indirect sale, disposition, issuance, conveyance, transfer, lease, assignment or other transfer, including a Sale and Leaseback Transaction (each, a "disposition") by the Issuer or any Restricted Subsidiary of: (a) any Capital Stock other than Capital Stock of the Issuer; or (b) any property or assets (other than cash, Cash Equivalents or Capital Stock) of the Issuer or any Restricted Subsidiary. Notwithstanding the preceding, the following items shall not be deemed to be Asset Sales: (1) the disposition of all or substantially all of the assets of the Issuer and its Restricted Subsidiaries as permitted under Condition 9(j); (2) a disposition of inventory or damaged, worn-out, obsolete or no longer useful assets or properties (including without limitation non-performing loans) in the ordinary course of business; (3) a disposition of assets of the Issuer or any Restricted Subsidiary or Capital Stock of any Restricted Subsidiary that is not a Regulated Subsidiary in any transaction or series of related transactions with an aggregate Fair Market Value not to exceed U.S.$10.0 million in any fiscal year; (4) for purposes of Condition 9(i) only, the making of a Restricted Payment or Permitted Investment permitted under Condition 9(h); (5) a disposition or other transfer to the Issuer or a Restricted Subsidiary, including a Person that is or will become a Restricted Subsidiary immediately after the disposition; (6) a disposition of accounts receivable in connection with a Receivables Transaction for Fair Market Value thereof; (7) the creation of a Lien permitted under these Conditions or the Trust Deed (or any sale or transfer of an asset or property upon the foreclosure of such Lien), other than a deemed Lien in connection with a Sale and Leaseback Transaction; (8) sales, leases, conveyances or other dispositions of real or personal property in the ordinary course of business, including, without limitation, exchanges or swaps of real estate, for the development of the Issuer's or any of its Restricted Subsidiaries' projects; (9) an issuance or sale of Capital Stock by a Restricted Subsidiary of the Issuer to the Issuer or any of its Restricted Subsidiaries; (10) the good faith surrender or waiver of contract rights, tort claims or statutory rights in connection with a settlement; and (11) sales or other dispositions of inventory, receivables and current assets in the ordinary course of business, including of the Issuer's products and services in barter transactions in exchange for advertising time. "Asset Sale Offer" has the meaning assigned to it in Condition 9(i)(iv). "Asset Sale Offer Amount" has the meaning assigned to it in Condition 9(i)(iv). "Asset Sale Offer Notice" means notice of an Asset Sale Offer made pursuant to Condition 9(i), that shall state: (1) that an Asset Sale has occurred, the circumstances of the Asset Sale, the Net Cash Proceeds of which are included in 134

137 the Asset Sale Offer, that an Asset Sale Offer is being made pursuant to Condition 9(i), and that all Notes that are timely tendered will be accepted for payment; (2) the Asset Sale Offer Amount and the Asset Sale Offer Payment Date; (3) that any Notes or portions thereof not tendered or accepted for payment will continue to accrue interest; (4) that, unless the Issuer defaults in the payment of the Asset Sale Offer Amount with respect thereto, all Notes or portions thereof accepted for payment pursuant to the Asset Sale Offer shall cease to accrue interest from and after the Asset Sale Offer Payment Date; (5) that any Holder electing to have any Notes or portions thereof purchased pursuant to the Asset Sale Offer will be required to surrender such Notes, with the form entitled "Option of Holder to Elect Purchase" on the reverse of such Notes completed, to the Principal Paying Agent at the address specified in the notice prior to the close of business on the third Business Day preceding the Asset Sale Offer Payment Date; (6) that any Holder shall be entitled to withdraw such election if the Principal Paying Agent receives, not later than the close of business on the second Business Day preceding the Asset Sale Offer Payment Date, a facsimile transmission or letter, setting forth the name of the Holder, the principal amount of Notes delivered for purchase, and a statement that such Holder is withdrawing such Holder's election to have such Notes or portions thereof purchased pursuant to the Asset Sale Offer; (7) that any Holder electing to have Notes purchased pursuant to the Asset Sale Offer must specify the principal amount that is being tendered for purchase, which principal amount must be U.S.$2,000 and in integral multiples of U.S.$1,000 in excess thereof; (8) that any Holder of Certificated Notes whose Certificated Notes are being purchased only in part will be issued new Certificated Notes equal in principal amount to the unpurchased portion of the Certificated Note or Notes surrendered, which unpurchased portion will be equal in principal amount to U.S.$100,000 and in integral multiples of U.S.$1,000 in excess thereof; (9) that the Principal Paying Agent will make a notation on the schedule of increases or decreases of any Global Note adjusting the principal amount thereof to be equal to the unpurchased portion of such Global Note; and (10) any other information necessary to enable any Holder to tender Notes and to have such Notes purchased pursuant to Condition 9(i). "Asset Sale Offer Payment Date" has the meaning assigned to it in Condition 9(i)(vi). "Asset Sale Transaction" means any Asset Sale and, whether or not constituting an Asset Sale, (1) any sale or other disposition of Capital Stock, (2) any Designation with respect to an Unrestricted Subsidiary and (3) any sale or other disposition of property or assets excluded from the definition of Asset Sale by clause (1) of that definition. "Bank Regulated Subsidiary" means any direct or indirect Subsidiary of the Issuer that is (x) subject to Mexican Law of Credit Institutions (Ley de Instituciones de Crédito), the General Provisions Applicable to Credit Institutions (Disposiciones de Carácter General Aplicables a las Instituciones de Crédito) published on December 2, 2005, as amended from time to time, and other rules and regulations issued from time to time by the Mexican Ministry of Finance and Public Credit (Secretaría de Hacienda y Crédito Público), Mexican National Banking and Securities Commission (Comisión Nacional Bancaria y de Valores), and the Institute for the Protection of Bank Savings (Instituto de Protección al Ahorro Bancario) (collectively, the "Mexican Banking Regulators"), and is authorised to conduct banking activities as an institución de banca multiple and regulated by the Mexican Banking Regulators or (y) subject to the rules and regulations of any other country that are analogous to the Mexican rules and regulations described in the preceding clause (x) and that is authorised to conduct banking activities and regulated by the banking regulators in such country. "BIS Ratio" means the índice de capitalización (ICAP) of the Issuer's principal Bank Regulated Subsidiary, as calculated pursuant to applicable regulations promulgated by Mexican Banking Regulators. As of the Issue Date, Banco Azteca, S.A. (Mexico), is the Issuer's principal Bank Regulated Subsidiary. "Board of Directors" means, as to any Person, the board of directors, management committee or similar governing body of such Person or any duly authorised committee thereof. "Board Resolution" means, with respect to any Person, a copy of a resolution certified by the Secretary or an Assistant Secretary of such Person to have been duly adopted by the Board of Directors of such Person and to be in full force and effect on the date of such certification, and delivered to the Trustee. The Trustee may rely upon such Board Resolution without further inquiry or liability. "Broker-Dealer Regulated Subsidiary" means any direct or indirect Subsidiary of the Issuer that is (x) subject to the Mexican Securities Exchange Law (Ley del Mercado de Valores), the Mutual Funds Law (Ley de Sociedades de Inversión), the General Provisions Applicable to Broker-Dealers (Disposiciones de Carácter General Aplicables a las Casas de Bolsa) published on September 6, 2004, as amended from time to time, and other rules and regulations issued from time to time by the Mexican Ministry of Finance and Public Credit (Secretaría de Hacienda y Crédito Público), Mexican National Banking and Securities Commission (Comisión Nacional Bancaria y de Valores), the Mexican Central Bank (Banco de México) and the National Commission for the Protection and Defense of Clients of Financial Services (Comisión Nacional para la Protección y Defensa de los Usuarios de Servicios Financieros) (collectively, the "Mexican Securities Regulators"), and is authorised to conduct broker-dealer or securities intermediation activities as a casa de bolsa, sociedad operadora de sociedades de inversion or a sociedad 135

138 distribuidora de sociedades de inversión and regulated by the Mexican Securities Regulators or (y) subject to the rules and regulations of any other country that are analogous to the Mexican rules and regulations described in the preceding clause (x) and that is authorised to conduct broker-dealer or securities intermediation activities and regulated by, the regulators in such country that are analogous to the Mexican Securities Regulators. "Capitalized Lease Obligations" means, as to any Person, the obligations of such Person under a lease that are required to be classified and accounted for as capital lease obligations under GAAP. For purposes of this definition, the amount of such obligations at any date shall be the capitalised amount of such obligations at such date, determined in accordance with GAAP, and the stated maturity thereof shall be the date of the last payment of rent or any other amount due under such lease prior to the first date upon which such lease may be prepaid by the lessee without payment of a penalty. "Capital Stock" means: (1) with respect to any Person that is a corporation, any and all shares, interests, participations or other equivalents (however designated and whether or not voting) of corporate stock, including each class of Common Stock and Preferred Stock of such Person; (2) with respect to any Person that is not a corporation, any and all partnership or other equity or ownership interests of such Person; and (3) any warrants, rights or options to purchase any of the instruments or interests referred to in clause (1) or (2) above. "Cash Equivalents" means: (1) marketable direct obligations issued by, or unconditionally guaranteed by, the United States government or issued by any agency thereof and backed by the full faith and credit of the United States, in each case maturing within one year from the date of acquisition thereof; (2) securities issued by the government of Mexico and maturing not later than one year after the acquisition thereof; (3) marketable direct obligations issued by any state of the United States of America or any political subdivision of any such state or any public instrumentality thereof maturing within one year from the date of acquisition thereof and, at the time of acquisition, having one of the two highest ratings obtainable from either S&P or Fitch or any successor thereto; (4) commercial paper maturing no more than one year from the date of creation thereof (x) at the time of acquisition, having a rating of at least F-1 from Fitch, at least P-1 from Moody's, or at least A-1 from S&P or (y) issued by Banco Azteca, S.A. (Mexico); (5) demand deposits, certificates of deposit, time deposits or bankers' acceptances maturing within one year from the date of acquisition thereof issued by (a) any bank organised under the laws of the United States of America or any state thereof or the District of Columbia, (b) any non-u.s. bank having at the date of acquisition thereof combined capital and surplus of not less than U.S.$500 million, (c) in the case of Mexican peso deposits, any of the five toprated banks (as evaluated by an internationally recognised rating agency) organised under the laws of Mexico or (d) Nacional Financiera S.N.C., Banco Nacional de Comercio Exterior, S.N.C., Banco Nacional de Obras y Servicios Públicos, S.N.C. or Banco Azteca, S.A. (Mexico); (6) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clause (1) above entered into with any bank meeting the qualifications specified in clause (5) above; and (7) investments in money market funds which invest substantially all of their assets in securities of the types described in clauses (1) to (6) above. "Change of Control" means the occurrence of one or more of the following events: (1) any Person or Group other than the Permitted Holders is or becomes the beneficial owner (as defined below), directly or indirectly, in the aggregate of more than 50% of the total voting power of the Voting Stock of the Issuer (including a Surviving Entity, if applicable); (2) the Issuer consolidates with, or merges with or into, another Person, or the Issuer sells, conveys, assigns, transfers, leases or otherwise disposes of all or substantially all of the assets of the Issuer, determined on a consolidated basis, to any Person, other than a transaction where the Person or Persons that, immediately prior to such transaction "beneficially owned" the outstanding Voting Stock of the Issuer are, by virtue of such prior ownership, the "beneficial owners" in the aggregate of a majority of the total voting power of the thenoutstanding Voting Stock of the surviving or transferee person (or if such surviving or transferee Person is a direct or indirect Wholly Owned Subsidiary of another Person, such Person who is the ultimate parent entity), in each case whether or not such transaction is otherwise in compliance with these Conditions or the Trust Deed; or (3) the approval by the shareholders of the Issuer of any plan or proposal for the liquidation or dissolution of the Issuer, whether or not otherwise in compliance with the provisions of these Conditions or the Trust Deed. For purposes of this definition: (a) "beneficial owner" shall have the meaning specified in Rules 13d-3 and 13d-5 under the Exchange Act, except that any Person or Group shall be deemed to have "beneficial ownership" of all securities that such Person or Group has the right to acquire, whether such right is exercisable immediately, only after the passage of time or, except in the case of the Permitted Holders, upon the occurrence of a subsequent condition; (b) "Person" and "Group" shall have the meanings for "person" and "group" as used in Sections 13(d) and 14(d) of the Exchange Act; and (c) the Permitted Holders or any other Person or Group shall be deemed to beneficially own any Voting Stock of a Person held by any other Person (the "parent entity") so long as the Permitted Holders or such other Person or Group, as the case may be, beneficially own, directly or indirectly, in the aggregate at least 50% of the voting power of the Voting Stock of the parent entity and no other Person or Group beneficially owns an equal or greater amount of the Voting Stock of the parent entity. 136

139 "Common Stock" of any Person means any and all shares, interests or other participations in, and other equivalents (however designated and whether voting or non-voting) of such Person's common equity interests, whether outstanding on the Issue Date or issued after the Issue Date, and includes, without limitation, all series and classes of such common equity interests. "Consolidated EBITDA" means, for any period, Consolidated Net Income for the Issuer and the Guarantors for such period, plus the following, without duplication, to the extent deducted or added in calculating such Consolidated Net Income: (1) Consolidated Income Tax Expense for such period; (2) Consolidated Interest Expense for such period; (3) Consolidated Non-cash Charges for such period; (4) any income or loss from discontinued operations; in each case as set forth in the most recent financial statements of the Issuer and the Guarantors, prepared in accordance with GAAP. "Consolidated Income Tax Expense" means, with respect to any period, the provision for income taxes payable by the Issuer and the Guarantors for such period as determined on a consolidated basis in accordance with GAAP. "Consolidated Interest Expense" means, for any period, the sum of, without duplication determined on a consolidated basis in accordance with GAAP: (1) the aggregate of cash and non-cash interest expense of the Issuer and the Guarantors for such period determined on a consolidated basis in accordance with GAAP, including, without limitation (whether or not interest expense in accordance with GAAP): (a) any amortisation or accretion of debt discount or any interest paid on Indebtedness of the Issuer and the Guarantors in the form of additional Indebtedness, (b) any amortisation of deferred financing costs, (c) the net expenses under Hedging Obligations (including amortisation of fees), (d) all capitalised interest, (e) the interest portion of any deferred payment obligation, (f) commissions, discounts and other fees and charges Incurred in respect of letters of credit or bankers' acceptances, and (g) any interest expense paid in respect of Indebtedness of another Person that is Guaranteed by the Issuer or any Guarantor or secured by a Lien on the assets of the Issuer or any Guarantor; and (2) the interest component of Capitalized Lease Obligations paid, accrued and/or scheduled to be paid or accrued by the Issuer or any Guarantors during such period. "Consolidated Leverage Ratio" means, as of any date of determination, the ratio of the aggregate amount of Consolidated Total Indebtedness as of such date to Consolidated EBITDA for the four most recent full fiscal quarters for which financial statements are available ending prior to the date of such determination (the "Four Quarter Period"). For purposes of this definition, "Consolidated Total Indebtedness" and "Consolidated EBITDA" will be calculated after giving effect on a pro forma basis for the period of such calculation to: (1) the Incurrence, repayment or redemption of any Indebtedness (including Acquired Indebtedness) of the Issuer and the Guarantors, and the application of the proceeds thereof, including the Incurrence of any Indebtedness (including Acquired Indebtedness), and the application of the proceeds thereof, giving rise to the need to make such determination, occurring during such Four Quarter Period or at any time subsequent to the last day of such Four Quarter Period and on or prior to such date of determination, to the extent such Indebtedness is outstanding on the date of determination, as if such Incurrence, and the application of the proceeds thereof, repayment or redemption occurred on the first day of such Four Quarter Period; and (2) any Asset Sale Transaction or Asset Acquisition by the Issuer or any Guarantor, including any Asset Sale Transaction or Asset Acquisition giving rise to the need to make such determination, occurring during the Four Quarter Period or at any time subsequent to the last day of the Four Quarter Period and on or prior to such date of determination, as if such Asset Sale Transaction or Asset Acquisition occurred on the first day of the Four Quarter Period. Furthermore, the amount of Indebtedness under any revolving credit facility will be computed based on: (a) the average daily balance of such Indebtedness during such Four Quarter Period, or (b) if such facility was created after the end of such Four Quarter Period, the average daily balance of such Indebtedness during the period from the date of creation of such facility to the date of such calculation, in each case giving pro forma effect to any borrowings related to any transaction referred to in clause (2) above. For the avoidance of doubt, this paragraph shall not apply to any amount repaid under a revolving credit facility to the extent commitments thereunder are permanently reduced by such amount repaid and shall be given effect on a pro forma basis pursuant to clause (1) above. "Consolidated Net Income" means, for any period, the aggregate net income (or loss) of the Issuer and the Guarantors (after deducting (or adding) the portion of such net income (or loss) attributable to minority interests in Subsidiaries of the Issuer or any Guarantor) for such period on a consolidated basis, determined in accordance with GAAP; provided that there shall be excluded therefrom to the extent reflected in such aggregate net income (loss): (1) net after-tax items classified as extraordinary gains or losses; (2) the net income (but not loss) of any Restricted Subsidiary that is not a Guarantor to the extent that (and only so long as) a corresponding amount could not be distributed or otherwise transferred to the Issuer or a Guarantor at the date of determination as a result of any restriction pursuant to the constituent documents of such Restricted Subsidiary or any law, regulation, agreement or judgment applicable to any such distribution (including, in the case of a Bank Regulated Subsidiary, any restrictions 137

140 on distributions with respect to applicable minimum capital requirements imposed by the Mexican Banking Regulators); (3) any gain (or loss) from foreign exchange translation or change in net monetary position; (4) any gains or losses (less all fees and expenses or charges relating thereto) attributable to the early extinguishment of Indebtedness and Hedging Obligations; (5) the cumulative effect of changes in accounting principles; and (6) any net gain or loss recorded in connection with equity derivative transactions involving the Common Stock of the Issuer (including, for the avoidance of doubt, any associated tax gain or loss). "Consolidated Non-cash Charges" means, for any period, the aggregate depreciation, amortisation and other noncash expenses or losses of the Issuer and the Guarantors for such period, determined on a consolidated basis in accordance with GAAP (excluding any such charge which constitutes an accrual of or a reserve for cash charges for any future period or the amortisation of a prepaid cash expense paid in a prior period). "Consolidated Tangible Assets" means, at any time, the total consolidated assets of the Issuer and the Guarantors as set forth on the balance sheet as of the most recent fiscal quarter of the Issuer, prepared in accordance with GAAP, less Intangible Assets. "Consolidated Total Indebtedness" means, as of any date of determination, an amount equal to the sum of the aggregate amount (without duplication) of all Indebtedness of the Issuer and the Guarantors outstanding at such time, determined on a consolidated basis in accordance with GAAP. "Covenant Suspension Event" has the meaning assigned to it in Condition 9(r). "Credit Facilities" means one or more debt facilities, commercial paper facilities, structured notes, certificates or other similar instruments, in each case with banks, investment banks, sociedades financieras de objeto múltiple, sociedades financieras de objeto limitado, insurance companies, mutual funds and/or other institutional lenders or institutional investors, in each case providing for revolving credit loans or letters of credit, and in each case, as amended, extended, renewed, restated, Refinanced, supplemented or otherwise modified (in whole or in part, and without limitation as to amount, terms, conditions, covenants and other provisions) from time to time. "Currency Agreement" means, in respect of any Person, any foreign exchange contract, currency swap agreement or other similar agreement as to which such Person is a party designed to hedge foreign currency risk of such Person. "Default" means an event or condition the occurrence of which is, or with the lapse of time or the giving of notice or both would be, an Event of Default. "Deposits" means any deposits received from customers of a Bank Regulated Subsidiary, including without limitation, those made through or documented by certificates of deposit, short-term deposits, investments, bank notes (pagarés bancarios) and similar instruments. "Designation" has the meaning assigned to it in Condition 9(k). "Designate," "Designated" and "Designating" will have the corresponding meanings. "Designation Amount" has the meaning assigned to it in Condition 9(k). "disposition" has the meaning assigned to it in the definition of "Asset Sale." "Disqualified Capital Stock" means that portion of any Capital Stock which, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable at the option of the holder thereof), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable at the sole option of the holder thereof, in any case, on or prior to the final maturity date of the Notes; provided, however, that any Capital Stock that would not constitute Disqualified Stock but for provisions thereof giving holders thereof the right to require such Person to purchase or redeem such Capital Stock upon the occurrence of an "asset sale" or "change of control" occurring prior to the final maturity of the Notes shall not constitute Disqualified Stock if: (1) the "asset sale" or "change of control" provisions applicable to such Capital Stock are not materially more favorable to the holders of such Capital Stock than the terms applicable to the Notes and described under Condition 9(i) and Condition 9(e), respectively; and (2) any such requirement only becomes operative after compliance with such terms applicable to the Notes, including the purchase of any Notes tendered pursuant thereto. The amount of any Disqualified Capital Stock shall be equal to the greater of its voluntary or involuntary liquidation preference and its maximum fixed repurchase price, but excluding accrued dividends, if any. The amount of any Disqualified Stock that does not have a fixed redemption, repayment or repurchase price shall be calculated in accordance with the terms of such Disqualified Stock as if such Disqualified Stock were redeemed, repaid or repurchased on any date on which the amount of such Disqualified Stock is to be determined hereunder; provided, however, that if such Disqualified Stock could not be required to be redeemed, repaid or repurchased at the time of such determination, the redemption, repayment or repurchase price shall be the book value of such Disqualified Stock as reflected in the most recent financial statements of such Person. 138

141 "Exchange Act" means the Securities Exchange Act of 1934, as amended, or any successor statute or statutes thereto. "Fair Market Value" means, with respect to any asset, the price (after taking into account any liabilities relating to such assets) which could be negotiated in an arm's-length transaction, for cash, between a willing seller and a willing and able buyer, neither of which is under any compulsion to complete the transaction; provided that the Fair Market Value of any such asset or assets will be determined conclusively by the Board of Directors of the Issuer acting in good faith, and will be evidenced by a Board Resolution. "Fitch" means Fitch Ratings and any successor to its rating agency business. "Four Quarter Period" has the meaning assigned to it in the definition of "Consolidated Leverage Ratio." "GAAP" means generally accepted accounting principles that are applicable to the Issuer, as in effect from time to time, consistently applied throughout the periods involved. "Guarantee" means any obligation, contingent or otherwise, of any Person directly or indirectly guaranteeing any Indebtedness of any other Person: (1) to purchase or pay, or advance or supply funds for the purchase or payment of, such Indebtedness of such other Person, whether arising by virtue of partnership arrangements, or by agreement to keep-well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions or otherwise, or (2) entered into for purposes of assuring in any other manner the obligee of such Indebtedness of the payment thereof or to protect such obligee against loss in respect thereof, in whole or in part, provided that "Guarantee" will not include endorsements for collection or deposit in the ordinary course of business. "Guarantee" used as a verb has a correlative meaning. "Guarantor" means any Restricted Subsidiary which provides a Note Guarantee pursuant to these Conditions or the Trust Deed until such time as its Note Guarantee is released in accordance with these Conditions or the Trust Deed; provided that a Restricted Subsidiary that is a Regulated Subsidiary shall not provide a Note Guarantee hereunder. "Hedging Obligations" means the obligations of any Person pursuant to any Interest Rate Agreement or Currency Agreement. "Indebtedness" means with respect to any Person, without duplication: (1) the principal amount (or, if less, the accreted value) of all obligations of such Person for borrowed money (excluding, for the avoidance of doubt, any Deposits); (2) the principal amount (or, if less, the accreted value) of all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments; (3) all Capitalized Lease Obligations of such Person; (4) all obligations of such Person issued or assumed as the deferred purchase price of property, all conditional sale obligations and all obligations under any title retention agreement (but excluding trade accounts payable, commercial letters of credit and other accrued liabilities arising in the ordinary course of business that are not overdue by 180 days or more or are being contested in good faith by appropriate proceedings promptly instituted and diligently conducted); (5) all letters of credit, banker's acceptances or similar credit transactions, including reimbursement obligations in respect thereof (but excluding commercial letters of credit excluded pursuant to clause (4) above and related reimbursement obligations); (6) Guarantees and other contingent obligations of such Person in respect of Indebtedness referred to in clauses (1) to (5) above and clauses (8) to (10) below; (7) all Indebtedness of any other Person of the type referred to in clauses (1) to (6) which is secured by any Lien on any property or asset of such Person, the amount of such Indebtedness being deemed to be the lesser of the Fair Market Value of such property or asset or the amount of the Indebtedness so secured; (8) all obligations under Hedging Obligations of such Person; (9) all liabilities recorded on the balance sheet of such Person in connection with a sale or other disposition of accounts receivables and related assets; (10) all Disqualified Capital Stock issued by such Person; and (11) to the extent not otherwise included in this definition, the Receivables Transaction Amount outstanding relating to any Receivables Transaction. "Independent Financial Advisor" means an accounting firm, appraisal firm, investment banking firm or consultant of internationally recognised standing that is, in the reasonable good faith judgment of the Issuer's Board of Directors, qualified to perform the task for which it has been engaged by the Issuer at its own expense and which is independent in connection with the relevant transaction. "Insurance Regulated Subsidiary" means any direct or indirect Subsidiary of the Issuer that is subject to rules and regulations issued from time to time by the Mexican National Insurance and Bonding Commission (Comisión Nacional de Seguros y Fianzas) (or the analogous rules and regulations of any other country), and is authorised to conduct insurance activities. "Intangible Assets" means all unamortised debt discount and expense, unamortised deferred charges, restricted cash, goodwill, patents, trademarks, service marks, trade names, copyrights and all other items which would be treated as intangibles on the consolidated balance sheet of the Issuer and the Guarantors prepared in accordance with GAAP. 139

142 "Interest Rate Agreement" of any Person means any interest rate protection agreement (including, without limitation, interest rate swaps, caps, floors, collars, derivative instruments and similar agreements) and/or other types of hedging agreements designed to hedge interest rate risk of such Person. "Investment" means, with respect to any Person, any: (1) direct or indirect loan, advance or other extension of credit (including, without limitation, a Guarantee) to any other Person, (2) capital contribution to (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others) any other Person, or (3) any purchase or acquisition by such Person of any Capital Stock, bonds, notes, debentures or other securities or evidences of Indebtedness issued by, any other Person. "Investment" will exclude accounts receivable or deposits arising in the ordinary course of business as well as the purchase or acquisition of inventory, supplies, material or equipment. "Invest," "Investing" and "Invested" will have correlative meanings. If the Issuer or any Restricted Subsidiary sells or otherwise disposes of any Capital Stock of a Restricted Subsidiary (including any issuance and sale of Capital Stock by a Restricted Subsidiary) such that, after giving effect to any such sale or disposition, such Restricted Subsidiary would cease to be a Subsidiary of the Issuer, the Issuer shall be deemed to have made an Investment on the date of any such sale or disposition equal to the sum of the Fair Market Value of the Capital Stock of such former Restricted Subsidiary held by the Issuer or any Restricted Subsidiary immediately following such sale or other disposition and the amount of any Indebtedness of such former Restricted Subsidiary Guaranteed by the Issuer or any Restricted Subsidiary or owed to the Issuer or any other Restricted Subsidiary immediately following such sale or other disposition. "Investment Grade Rating" means a rating equal to or higher than (i) Baa3 (or the equivalent) by Moody's, (ii) BBB(or the equivalent) by Fitch, or (iii) or BBB- (or the equivalent) by S&P, if any such entity ceases to rate the Notes for reasons outside of the control of the Issuer, the equivalent investment grade credit rating from any other Rating Agency. "Investment Return" means, in respect of any Investment (other than a Permitted Investment) made after the Issue Date by the Issuer or any Restricted Subsidiary: (1) the cash proceeds and Fair Market Value of property other than cash received by the Issuer or any Restricted Subsidiary upon the sale, liquidation or repayment of such Investment or, in the case of a Guarantee, the amount of the Guarantee upon the unconditional release of the Issuer and its Restricted Subsidiaries in full, less any payments previously made by the Issuer or any Restricted Subsidiary in respect of such Guarantee; (2) in the case of the Revocation of the Designation of an Unrestricted Subsidiary, an amount equal to the least of: (a) the Issuer's Investment in such Unrestricted Subsidiary at the time of such Revocation; (b) that portion of the Fair Market Value of the net assets of such Unrestricted Subsidiary at the time of Revocation that is proportionate to the Issuer's equity interest in such Unrestricted Subsidiary at the time of Revocation; and (c) the Designation Amount with respect to such Unrestricted Subsidiary upon its Designation which was treated as a Restricted Payment; and (3) in the event the Issuer or any Restricted Subsidiary makes any Investment in a Person that, as a result of or in connection with such Investment, becomes a Restricted Subsidiary, the existing Investment of the Issuer and its Restricted Subsidiaries in such Person, in the case of each of (1), (2) and (3), up to the amount of such Investment that was treated as a Restricted Payment under Condition 9(h) less the amount of any previous Investment Return in respect of such Investment. "Ireland" means the Republic of Ireland. "Lien" means any lien, mortgage, deed of trust, pledge, security trust (Fidecomiso de Garantías), security interest, charge or encumbrance of any kind (including any conditional sale or other title retention agreement, any lease in the nature thereof and any agreement to give any security interest); provided that the lessee in respect of a Capitalized Lease Obligation or Sale and Leaseback Transaction will be deemed to have Incurred a Lien on the property leased thereunder. "Mexican Banking Regulators" has the meaning assigned to it in the definition of "Bank Regulated Subsidiary." "Moody's" means Moody's Investors Service, Inc. "Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds in the form of cash or Cash Equivalents, including payments in respect of deferred payment obligations when received in the form of cash or Cash Equivalents received by the Issuer or any of its Restricted Subsidiaries from such Asset Sale, net of: (1) reasonable out-of-pocket expenses and fees relating to such Asset Sale (including, without limitation, legal, accounting and investment banking fees and sales commissions); (2) taxes paid or payable in respect of such Asset Sale after taking into account any reduction in consolidated tax liability due to available tax credits or deductions and any tax sharing arrangements; (3) repayment of Indebtedness secured by a Lien permitted under these Conditions or the Trust Deed that is required to be repaid in connection with such Asset Sale; and (4) appropriate amounts to be provided by the 140

143 Issuer or any Restricted Subsidiary, as the case may be, as a reserve, in accordance with GAAP, against any liabilities associated with such Asset Sale and retained by the Issuer or any Restricted Subsidiary, as the case may be, after such Asset Sale, including, without limitation, pension and other post-employment benefit liabilities, liabilities related to environmental matters and liabilities under any indemnification obligations associated with such Asset Sale, but excluding any reserves with respect to Indebtedness. "Non-Recourse Indebtedness" with respect to any Person means Indebtedness of such Person for which (1) the sole legal recourse for collection of principal and interest on such Indebtedness is against the specific property identified in the instruments evidencing or securing such Indebtedness and such property was acquired with the proceeds of such Indebtedness or such Indebtedness was incurred within 365 days after the acquisition or construction of such property and (2) no other assets of such Person may be realised upon in collection of principal or interest on such Indebtedness. "Obligations" means, with respect to any Indebtedness, any principal, interest (including, without limitation, PostPetition Interest), penalties, fees, indemnifications, reimbursements, damages, and other liabilities payable under the documentation governing such Indebtedness, including in the case of the Notes and the Note Guarantees, these Conditions or the Trust Deed. "Officer" means, when used in connection with any action to be taken by the Issuer or a Guarantor, as the case may be, the Chairman of the Board of Directors, the Chief Executive Officer, the President, the Chief Financial Officer, any Vice President, the Treasurer, the Controller or the Secretary of the Issuer or such Guarantor, as the case may be, any representative of the Issuer or such Guarantor duly authorised by resolution of its respective Board of Directors to take such action, or any attorney-in-fact acting under a power-of-attorney duly granted by the Issuer or such Guarantor, as the case may be. "Officer's Certificate" means, when used in connection with any action to be taken by the Issuer or a Guarantor, as the case may be, a certificate signed by an Officer and delivered to the Trustee or Paying Agent. The Trustee may rely upon such Officer's Certificate without further inquiry or liability. "Opinion of Counsel" means a written opinion of counsel, who may be an employee of or counsel for the Issuer (except as otherwise provided in this Indenture) and which opinion shall be reasonably acceptable to the Trustee. "Pension Regulated Subsidiary" means any direct or indirect Subsidiary of the Issuer that is subject to rules and regulations issued from time to time by the Mexican National Commission for the Pension System (Comisión Nacional del Sistema de Ahorro para el Retiro) (or the analogous rules and regulations of any other country), and is authorised to conduct asset management activities. "Permitted Acquisition Indebtedness" means Indebtedness of the Issuer or any of its Restricted Subsidiaries to the extent such Indebtedness was Indebtedness of (i) a Subsidiary prior to the date on which such Subsidiary became a Restricted Subsidiary or (ii) a Person that was merged or amalgamated into the Issuer or a Restricted Subsidiary, provided that on the date such Subsidiary became a Restricted Subsidiary or the date such Person was merged and amalgamated into the Issuer or a Restricted Subsidiary, as applicable, after giving pro forma effect thereto, (a) the Issuer, would be permitted to incur at least U.S.$1.00 of additional Indebtedness pursuant to Condition 9(f)(i), or (b) the Consolidated Leverage Ratio of the Issuer and the Restricted Subsidiaries would be less than the Consolidated Leverage Ratio immediately prior to such transaction. "Permitted Business" means (x) the business or businesses conducted by the Issuer and its Restricted Subsidiaries as of the Issue Date, any extension of such business or businesses and any business ancillary, complementary or reasonably related thereto and (y) any other business acquired by any Bank Regulated Subsidiary in connection with the foreclosure or receipt of collateral in the ordinary course of business. "Permitted Holders" means (i) Mr. Ricardo B. Salinas Pliego ("RBSP"), (ii) any trust for the benefit of RBSP, his spouse, issue or immediate family or (iii) any Person directly or indirectly controlled by RBSP. "Permitted Indebtedness" has the meaning set forth in Condition 9(f)(ii). "Permitted Investments" means: (1) Investments by the Issuer or any Restricted Subsidiary in any Person that is, or that result in any Person becoming, immediately after such Investment, a Restricted Subsidiary or constituting a merger or consolidation of such Person into the Issuer or with or into a Restricted Subsidiary; (2) Investments by any Restricted Subsidiary in the Issuer; (3) Investments in cash and Cash Equivalents; (4) any extension, modification or renewal of any Investments existing as of the Issue Date (but not Investments involving additional advances, contributions or other investments of cash or property or other increases thereof, other than as a result of the accrual or accretion of interest or original issue discount or payment-in-kind pursuant to the terms of such Investment as of the Issue Date); (5) Investments permitted pursuant to Condition 9(n)(ii)(2) and Condition 9(n)(ii)(5); (6) Investments received as a result of the bankruptcy or reorganisation of any Person or taken in 141

144 settlement of or other resolution of claims or disputes, and, in each case, extensions, modifications and renewals thereof; (7) Investments made by the Issuer or its Restricted Subsidiaries as a result of non-cash consideration permitted to be received in connection with an Asset Sale under Condition 9(i); (8) Investments in the form of Hedging Obligations permitted under Condition 9(f)(ii)(5); (9) Investments in any Persons engaged in a Permitted Business not to exceed 2.0% of Consolidated Tangible Assets at any one time outstanding; (10) receivables owing to the Issuer or any Restricted Subsidiary if created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary trade terms; (11) payroll, travel, entertainment, relocation and similar advances to cover matters that are expected at the time of such advances ultimately to be treated as expenses for accounting purposes and that are made in the ordinary course of business; (12) loans or advances to employees made in the ordinary course of business consistent with past practices of the Issuer or such Restricted Subsidiary; (13) Investments in any Person to the extent such Investments consist of prepaid expenses, negotiable instruments held for collection and lease, utility and workers' compensation, performance and other similar deposits made in the ordinary course of business by the Issuer or any Restricted Subsidiary; (14) Investments in a Receivables Entity in connection with a Receivables Transaction; provided that such Investment in any such Person is in the form of any equity interest or interests in receivables and related assets generated by the Issuer or any Restricted Subsidiary and transferred to such Person in connection with a Receivables Transaction; (15) cash deposits with banks made in the ordinary course of business of the Issuer and its Restricted Subsidiaries, consistent with past practice, to secure payment of trade payables; (16) any Investment, to the extent the consideration therefor consists entirely of Qualified Capital Stock; and (17) any extension of credit provided by the Issuer or any Restricted Subsidiary. "Permitted Liens" means any of the following: (1) statutory Liens of landlords and Liens of carriers, warehousemen, mechanics, suppliers, materialmen, repairmen and other Liens imposed by law incurred in the ordinary course of business for sums not yet delinquent or being contested in good faith, if such reserve or other appropriate provision, if any, as shall be required by GAAP shall have been made in respect thereof; (2) Liens Incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security, including any Lien securing letters of credit issued in the ordinary course of business consistent with past practice in connection therewith, or to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids, leases, government performance and return-of-money bonds and other similar obligations (exclusive of obligations for the payment of borrowed money); (3) Liens upon specific items of inventory or other goods and proceeds of any Person and any proceeds thereof securing such Person's obligations in respect of bankers' acceptances issued or created for the account of such Person to facilitate the purchase, shipment or storage of such inventory or other goods; (4) Liens securing reimbursement obligations with respect to commercial letters of credit which encumber documents and other property relating to such letters of credit and products and proceeds thereof; (5) Liens encumbering deposits made to secure obligations arising from statutory, regulatory, contractual, or insurance or warranty requirements of the Issuer or a Restricted Subsidiary, including rights of offset and set-off; (6) Liens securing Hedging Obligations that relate to Indebtedness that is Incurred in accordance with Condition 9(f) and that are secured by the same assets as secure such Indebtedness; (7) (I) Liens existing on the Issue Date and (II) Liens to secure any Refinancing Indebtedness which is Incurred to Refinance any Indebtedness Incurred in accordance with Condition 9(f) which has been secured by a Lien permitted under Condition 9(m) other than Liens Incurred pursuant to clause (10) below; provided that such new Liens: (a) are not materially less favorable to the Holders of Notes and are not materially more favorable to the lienholders with respect to such Liens than the Liens in respect of the Indebtedness being Refinanced, and (b) do not extend to any property or assets (or type of assets or property) other than the property or assets (or type of assets or property) securing the Indebtedness Refinanced by such Refinancing Indebtedness; (8) Liens securing Acquired Indebtedness Incurred in accordance with Condition 9(f) not Incurred in connection with, or in anticipation or contemplation of, the relevant acquisition, merger or consolidation; provided that (a) such Liens secured such Acquired Indebtedness at the time of and prior to the Incurrence of such Acquired Indebtedness by the Issuer or a Restricted Subsidiary and were not granted in connection with or in anticipation of the Incurrence of such Acquired Indebtedness by the Issuer or a Restricted Subsidiary and (b) such Liens do not extend to or cover any property of the Issuer or any Restricted Subsidiary other than the property that secured the Acquired Indebtedness prior to the time such Indebtedness became Acquired Indebtedness of the Issuer or a Restricted Subsidiary and are no more favorable to the lienholders than the Liens securing the Acquired Indebtedness prior to the Incurrence of such Acquired Indebtedness by the Issuer or a Restricted Subsidiary; (9) purchase money Liens securing Purchase Money Indebtedness, Non-Recourse Indebtedness or Capitalized Lease Obligations Incurred in accordance with Condition 9(f); provided that: (a) the related Purchase Money Indebtedness does not exceed the cost of such property or other cost of construction or improvement of such property and shall not be secured by any property of the Issuer or any Restricted Subsidiary other than the property so acquired, constructed or improved, and (b) the Lien securing such Indebtedness will be created within 90 days of such acquisition, construction or improvement; (10) Liens securing an amount of Indebtedness (including all Refinancing thereof) outstanding at any one time not to exceed U.S.$50.0 million; (11) any pledge or deposit of cash or property in conjunction with obtaining surety and performance bonds and letters of 142

145 credit required to engage in constructing on-site and off-site improvements required by municipalities or other governmental authorities in the ordinary course of business; (12) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods; (13) Liens encumbering customary initial deposits and margin deposits, and other Liens that are customary in the industry and incurred in the ordinary course of business securing Indebtedness under Hedging Obligations and forward contracts, options, futures contracts, futures options or similar agreements or arrangement designed to protect the Issuer and its Restricted Subsidiaries from fluctuations in the price of commodities; (14) Liens for taxes, assessments or governmental charges or claims that are not yet delinquent or that are being contested in good faith by appropriate proceedings promptly instituted and diligently concluded; provided that any reserve or other appropriate provision as is required in conformity with GAAP has been made therefor; (15) licenses of intellectual property in the ordinary course of business; (16) Liens to secure a defeasance trust; (17) easements, rights of way, zoning and similar restrictions, reservations, restrictions or encumbrances in respect of real property or title defects that were not incurred in connection with Indebtedness and that do not in the aggregate materially adversely affect the value of said properties (as such properties are used by the Issuer or its Restricted Subsidiaries) or materially impair their use in the operation of the business of the Issuer and its Restricted Subsidiaries; (18) Liens arising from precautionary Uniform Commercial Code financing statement filings regarding operating leases entered into by the Issuer or any of its Restricted Subsidiaries in the ordinary course of business; (19) Liens in favor of the Issuer or any Guarantor; (20) judgment Liens not giving rise to an Event of Default so long as any appropriate legal proceedings that may have been duly initiated for the review of such judgment shall not have been finally terminated or the period within which such legal proceedings may be initiated shall not have expired; (21) Liens on Capital Stock of an Unrestricted Subsidiary that secure Indebtedness or other obligations of such Unrestricted Subsidiary; (22) Liens on accounts receivable or related assets incurred in connection with a Receivables Transaction; (23) Liens securing obligations of the Issuer or a Restricted Subsidiary arising under equity derivative transactions involving the Common Stock of the Issuer; and (24) Liens securing Indebtedness incurred pursuant to Condition 9(f)(ii)(3). "Post-Petition Interest" means all interest accrued or accruing after the commencement of any insolvency or liquidation proceeding (and interest that would accrue but for the commencement of any insolvency or liquidation proceeding) in accordance with and at the contract rate (including, without limitation, any rate applicable upon default) specified in the agreement or instrument creating, evidencing or governing any Indebtedness, whether or not, pursuant to applicable law or otherwise, the claim for such interest is allowed as a claim in such insolvency or liquidation proceeding. "Preferred Stock" of any Person means any Capital Stock of such Person that has preferential rights over any other Capital Stock of such Person with respect to dividends, distributions or redemptions or upon liquidation. "Purchase Money Indebtedness" means Indebtedness Incurred for the purpose of financing all or any part of the purchase price, or other cost of construction or improvement of any property (other than Capital Stock); provided that the aggregate principal amount of such Indebtedness does not exceed the lesser of the Fair Market Value of such property or such purchase price or cost, including any Refinancing of such Indebtedness that does not increase the aggregate principal amount (or accreted amount, if less) thereof as of the date of Refinancing. "Qualified Capital Stock" means any Capital Stock that is not Disqualified Capital Stock and any warrants, rights or options to purchase or acquire Capital Stock that is not Disqualified Capital Stock that are not convertible into or exchangeable into Disqualified Capital Stock. "Rating Agencies" means (i) Fitch, (ii) Moody's and (iii) S&P, or if Fitch, Moody's or S&P shall not make a rating of the Notes publicly available, a nationally recognised United States securities rating agency or agencies, as the case may be, selected by the Issuer, which shall be substituted for Fitch, Moody's or S&P, as the case may be. "Receivables Entity" means a Person in which the Issuer or any Restricted Subsidiary makes an Investment and: (1) to which the Issuer or any Restricted Subsidiary transfers receivables and related assets in connection with a Receivables Transaction; (2) which engages in no activities other than in connection with the Receivables Transaction; (3) no portion of the Indebtedness or any other obligations (contingent or otherwise) of which: (a) is guaranteed by the Issuer or any Restricted Subsidiary (excluding guarantees of Obligations (other than the principal of, and interest on, Indebtedness) pursuant to Standard Securitization Undertakings); (b) is recourse to or obligates the Issuer or any Restricted Subsidiary in any way other than pursuant to Standard Securitization Undertakings; or (c) subjects any property or asset of the Issuer or any Restricted Subsidiary, directly or indirectly, contingently or otherwise, to the satisfaction thereof, other than pursuant to Standard Securitization Undertakings; (4) with which neither the Issuer nor any Restricted Subsidiary has any material contract, agreement, arrangement or understanding (except in connection with a Receivables Transaction) other than on terms no less favorable to the Issuer or such Restricted Subsidiary than those that might be obtained at the time from Persons that are not Affiliates of the Issuer, other than fees payable in the ordinary course of business in connection with servicing receivables; and (5) to which 143

146 neither the Issuer nor any Restricted Subsidiary has any obligation to maintain or preserve such entity's financial condition or cause such entity to achieve certain levels of operating results. "Receivables Transaction" means any securitisation, factoring, discounting or similar financing transaction or series of transactions that may be entered into by the Issuer or any of its Restricted Subsidiaries in the ordinary course of business pursuant to which the Issuer or any of its Restricted Subsidiaries may sell, convey or otherwise transfer to any Person (including a Receivables Entity), or may grant a security interest in, any receivables (whether now existing or arising in the future) of the Issuer or any of its Restricted Subsidiaries, and any assets related thereto, including all collateral securing such receivables, all contracts and all guarantees or other obligations in respect of such receivables, the proceeds of such receivables and other assets which are customarily transferred, or in respect of which security interests are customarily granted, in connection with securitisation, factoring or discounting involving receivables. "Receivables Transaction Amount" means the amount of obligations outstanding under the legal documents entered into as part of a Receivables Transaction on any date of determination that would be characterised as principal if such Receivables Transaction were structured as a secured lending transaction rather than a purchase. "Redemption Date" means, with respect to any redemption of Notes, the date fixed for such redemption pursuant to these Conditions or the Trust Deed and the Notes. "Refinance" means, in respect of any Indebtedness, to issue any Indebtedness in exchange for or to refinance, replace, defease or refund such Indebtedness in whole or in part. "Refinanced" and "Refinancing" will have correlative meanings. "Refinancing Indebtedness" means Indebtedness of the Issuer or any Restricted Subsidiary issued to Refinance any other Indebtedness of the Issuer or a Restricted Subsidiary so long as: (1) the aggregate principal amount (or initial accreted value, if applicable) of such new Indebtedness as of the date of such proposed Refinancing does not exceed the aggregate principal amount (or initial accreted value, if applicable) of the Indebtedness being Refinanced (plus the amount of any premium required to be paid under the terms of the instrument governing such Indebtedness and the amount of reasonable expenses incurred by the Issuer in connection with such Refinancing); (2) such new Indebtedness has: (a) a Weighted Average Life to Maturity that is equal to or greater than the Weighted Average Life to Maturity of the Indebtedness being Refinanced, and (b) a final maturity that is equal to or later than the final maturity of the Indebtedness being Refinanced; and (3) if the Indebtedness being Refinanced is: (a) Indebtedness of the Issuer, then such Refinancing Indebtedness will be Indebtedness of the Issuer and/or a Guarantor, (b) Indebtedness of a Guarantor, then such Refinancing Indebtedness will be Indebtedness of the Issuer and/or such Guarantor, and (c) Subordinated Indebtedness, then such Refinancing Indebtedness shall be subordinate to the Notes or the relevant Note Guarantee, if applicable, at least to the same extent and in the same manner as the Indebtedness being Refinanced. "Regulated Subsidiary" means Bank Regulated Subsidiary, Broker-Dealer Regulated Subsidiary, Insurance Regulated Subsidiary and Pension Regulated Subsidiary. "Restricted Subsidiary" means any Subsidiary of the Issuer which at the time of determination is not an Unrestricted Subsidiary. "Revocation" has the meaning set forth under Condition 9(k)(ii). "S&P" means Standard & Poor's, a division of The McGraw-Hill Companies, Inc., and any successor to its rating agency business. "Sale and Leaseback Transaction" means any direct or indirect arrangement with any Person or to which any such Person is a party providing for the leasing to the Issuer or a Restricted Subsidiary of any property, whether owned by the Issuer or any Restricted Subsidiary at the Issue Date or later acquired, which has been or is to be sold or transferred by the Issuer or such Restricted Subsidiary to such Person or to any other Person by whom funds have been or are to be advanced on the security of such Property. "SEC" means the Securities and Exchange Commission. "Securities Act" means the Securities Act of 1933, as amended, or any successor statute or statutes thereto. "Senior Indebtedness" means any Indebtedness of the Issuer or any Guarantor that ranks equal in right of payment with the Notes or the relevant Note Guarantee, as the case may be. "Significant Subsidiary" means a Subsidiary of the Issuer constituting a "Significant Subsidiary" of the Issuer in accordance with Rule 1-02(w) of Regulation S-X under the Securities Act in effect on the Issue Date. 144

147 "Standard Securitization Undertakings" means representations, warranties, covenants and indemnities entered into by the Issuer or any Restricted Subsidiary which are reasonably customary in securitisation of receivables transactions. "Subordinated Indebtedness" means, with respect to the Issuer or any Guarantor, any Indebtedness of the Issuer or such Guarantor, as the case may be which is expressly subordinated in right of payment to the Notes or the relevant Note Guarantee, as the case may be. "Subsidiary" means, with respect to any Person, any other Person of which such Person owns, directly or indirectly, more than 50% of the voting power of the other Person's outstanding Voting Stock. "Surviving Entity" has the meaning assigned to it in Condition 9(j)(i)(1). "Unrestricted Subsidiary" means any Subsidiary of the Issuer Designated as such pursuant to Condition 9(k). Any such Designation may be revoked by a Board Resolution of the Issuer, subject to the provisions of Condition 9(k). "U.S. Dollar Equivalent" means with respect to any monetary amount in a currency other than U.S. dollars, at any time for determination thereof, the amount of U.S. dollars obtained by converting such non-u.s. dollar currency involved in such computation into U.S. dollars at the spot rate for the purchase of U.S. dollars with the applicable non-u.s. dollar currency as published in The Wall Street Journal in the "Exchange Rates" column under the heading "Currency Trading" (or, if no longer so published, from an appropriate publicly available source of such market data) on the date two Business Days prior to such determination. "U.S. Government Obligations" means direct obligations (or certificates representing an ownership interest in such obligations) of the United States of America (including any agency or instrumentality thereof) for the payment of which the full faith and credit of the United States of America is pledged and which are not callable or redeemable at the issuer's option. "U.S. Legal Tender" means such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts. "Voting Stock" with respect to any Person, means securities of any class of Capital Stock of such Person entitling the holders thereof (whether at all times or only so long as no senior class of stock has voting power by reason of any contingency) to vote in the election of members of the Board of Directors (or equivalent governing body) of such Person. "Weighted Average Life to Maturity" means, when applied to any Indebtedness at any date, the number of years (calculated to the nearest one-twelfth) obtained by dividing: (1) the then-outstanding aggregate principal amount or liquidation preference, as the case may be, of such Indebtedness into (2) the sum of the products obtained by multiplying: (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payment of principal or liquidation preference, as the case may be, including payment at final maturity, in respect thereof, by (b) the number of years (calculated to the nearest one-twelfth) which will elapse between such date and the making of such payment. "Wholly Owned Subsidiary" means, for any Person, any Subsidiary (Restricted Subsidiary in the case of the Issuer) of which all the outstanding Capital Stock (other than, in the case of a Subsidiary not organised in the United States, directors' qualifying shares or an immaterial amount of shares required to be owned by other Persons pursuant to applicable law) is owned by such Person or any other Person that satisfies this definition in respect of such Person. 145

148 SELLING RESTRICTIONS The Notes may be subject to restrictions on transfer in certain jurisdictions, including, but not limited to, the United States, where Notes may be sold only pursuant to an exemption from the registration requirements of the Securities Act or pursuant to an effective registration statement under the Securities Act. In view of such restrictions, purchasers are advised to consult legal counsel prior to making any offer, resale, pledge or transfer of any Notes. United States Rule 144A Notes Each purchaser of Notes within the United States purchasing the Notes pursuant to Rule 144A, by accepting delivery of this Offering Circular, will be deemed to have represented, agreed and acknowledged that: 1. it is (a) a QIB, (b) acquiring such Notes for its own account or for the account of a QIB and (c) aware, and each beneficial owner of such Notes has been advised, that the sale of such Notes to it is being made in reliance on Rule 144A; 2. it understands that the Notes have not been registered under the Securities Act and may not be offered, sold, pledged or otherwise transferred except (a) to us, (b) in accordance with Rule 144A to a person that it and any person acting on its behalf reasonably believe is a QIB purchasing for its own account or for the account of a QIB, (c) in an offshore transaction in accordance with Rule 903 or Rule 904 of Regulation S, (d) pursuant to an exemption from registration under the Securities Act provided by Rule 144 thereunder (if available) or (e) pursuant to an effective registration statement under the Securities Act, in each case in accordance with any applicable securities laws of any State of the United States; 3. it understands that such Notes, unless we determine otherwise in compliance with applicable law, will bear a legend to the following effect: THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OR WITH ANY SECURITIES REGULATORY AUTHORITY OF ANY STATE OR OTHER JURISDICTION OF THE UNITED STATES AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (1) TO THE ISSUER, (2) IN ACCORDANCE WITH RULE 144A UNDER THE SECURITIES ACT TO A PERSON THAT THE HOLDER AND ANY PERSON ACTING ON ITS BEHALF REASONABLY BELIEVE IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER, (3) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (4) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (5) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. NO REPRESENTATION CAN BE MADE AS TO THE AVAILABILITY OF THE EXEMPTION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT FOR RESALES OF THIS NOTE; 4. it understands that we, the registrar, the Dealers and their affiliates, and others will rely upon the truth and accuracy of the foregoing acknowledgements, representations and agreements. If it is acquiring any Notes for the account of one or more QIBs it represents that it has sole investment discretion with respect to each such account and that it has full power to make the foregoing acknowledgements, representations and agreements on behalf of each such account; 5. it understands that the Notes offered in reliance on Rule 144A will be represented by a Rule 144A Global Note. Before any interest in such Rule 144A Global Note may be offered, sold, pledged or otherwise transferred to a person who takes delivery in the form of an interest in the related Regulation S Global Note, it will be required to provide the Issuer with a written certification (the form of which certificate can be obtained from the Issuer) as to compliance with applicable securities laws; and 6. (a) either (i) it is not, and is not acting on behalf of, an employee benefit plan (as defined in Section 3(3) of ERISA, as defined below) or other plan (as defined in Section 4975(e)(1) of the Code, as defined below) subject to the prohibited transaction provisions of the United States Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or Section 4975 of the United States Internal Revenue Code of 1986, as amended ("Code"), or any entity which may be deemed to hold assets of any such employee benefit plan or other plan, or a governmental, church or non-u.s. plan which is subject to any federal, state, local or non-u.s. law that is substantially similar to the prohibited transaction provisions of Section 406 of ERISA or Section 4975 of the Code, and no part of the assets to be used by it to purchase or hold the Notes or any interest therein constitutes the assets of 146

149 any such employee benefit plan or plan, or (ii) its acquisition, holding and disposition of the Notes or any interest therein does not and will not constitute or otherwise result in a non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of the Code (or, in the case of a governmental, church or non-u.s. plan, a violation of any substantially similar federal, state, local or non-u.s. law); and (b) it agrees not to sell or otherwise transfer any interest in the Notes otherwise than to a purchaser or transferee that is deemed to make these same representations, warranties and agreements with respect to its acquisition and holding of such Notes. Prospective purchasers are hereby notified that sellers of the Notes may be relying on the exemption from the provisions of Section 5 of the Securities Act provided by Rule 144A. Regulation S Notes Each purchaser of Notes outside the United States pursuant to Regulation S and each subsequent purchaser of such Notes, by accepting delivery of this Offering Circular and the Notes, will be deemed to have represented, agreed and acknowledged that: 1. it is, or at the time Notes are purchased will be, the beneficial owner of such Notes and (a) it is not a U.S. person and it is located outside the United States (within the meaning of Regulation S) and (b) it is not an affiliate of us or a person acting on behalf of one of our affiliates; 2. it understands that such Notes have not been registered under the Securities Act and that, prior to the expiration of the distribution compliance period, it will not offer, sell, pledge or otherwise transfer such Notes except (a) to us, (b) in accordance with Rule 144A under the Securities Act to a person that it and any person acting on its behalf reasonably believe is a QIB purchasing for its own account or the account of a QIB, (c) in an offshore transaction in accordance with Rule 903 or Rule 904 of Regulation S or (d) if such Notes have been registered pursuant to an effective registration statement under the Securities Act, in each case in accordance with any applicable securities laws of any State of the United States; 3. it understands that such Notes, unless we determine otherwise in accordance with applicable law, will bear a legend to the following effect: THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OR WITH ANY SECURITIES REGULATORY AUTHORITY OF ANY STATE OR OTHER JURISDICTION OF THE UNITED STATES AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES EXCEPT (A) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OR (B) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT; 4. it understands that we, the Registrar, the Dealers and our and their affiliates, and others will rely upon the truth and accuracy of the foregoing acknowledgements, representations and agreements; and 5. it understands that the Notes offered in reliance on Regulation S will initially be represented by a Regulation S Global Note. Before any interest in the Regulation S Global Note may be offered, sold, pledged or otherwise transferred to a person who takes delivery in the form of an interest in a Rule 144A Global Note, it will be required to provide the Issuer with a written certification (the form of which can be obtained from the Issuer) as to compliance with applicable securities laws. 6. (a) either (i) it is not, and is not acting on behalf of, an employee benefit plan (as defined in Section 3(3) of ERISA) or other plan (as defined in Section 4975(e)(1) of the Code) subject to the prohibited transaction provisions of ERISA, or Section 4975 of the Code, or any entity which may be deemed to hold assets of any such employee benefit plan or plan, or a governmental, church or non-u.s. plan which is subject to any federal, state, local or non-u.s. law that is substantially similar to the prohibited transaction provisions of Section 406 of ERISA or Section 4975 of the Code, and no part of the assets to be used by it to purchase or hold the Notes or any interest therein constitutes the assets of any such employee benefit plan or plan, or (ii) its acquisition, holding and disposition of the Notes or any interest therein does not and will not constitute or otherwise result in a non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of the Code (or, in the case of a governmental, church or non-u.s. plan, a violation of any substantially similar federal, state, local or non-u.s. law); and (b) it agrees not to sell or otherwise transfer any interest in the Notes otherwise than to a purchaser or transferee that is deemed to make these same representations, warranties and agreements with respect to its acquisition and holding of such Notes. WE AND THE DEALERS WILL RELY UPON THE TRUTH AND ACCURACY OF THE FOREGOING ACKNOWLEDGMENTS, REPRESENTATIONS AND AGREEMENTS. 147

150 Mexico The Notes may not be publicly offered or traded in Mexico unless the same are offered or traded pursuant to the provisions of Article 8 of the LMV and regulations issued thereunder. The information contained in this Offering Circular is solely the responsibility of the Issuer and the Guarantors and has not been reviewed or authorized by the CNBV. The terms of the offering have been notified to the CNBV for information purposes only which does not constitute a certification as to the investment quality of the Notes or of the solvency of Grupo Elektra or the Guarantors. United Kingdom Each Dealer has represented and agreed that: (i) in relation to any Notes which have a maturity of less than one year, (a) it is a person whose ordinary activities involve it in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of its business and (b) it has not offered or sold and will not offer or sell any Notes other than to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or as agent) for the purposes of their businesses or who it is reasonable to expect will acquire, hold, manage or dispose of investments (as principal or agent) for the purposes of their businesses where the issue of the Notes would otherwise constitute a contravention of Section 19 of the Financial Services and Markets Act 2000 ("FSMA") by Grupo Elektra; (ii) it has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the FSMA) received by it in connection with the issue or sale of any Notes in circumstances in which Section 21(1) of the FSMA would not apply to Grupo Elektra; and (iii) it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to any Notes in, from or otherwise involving the United Kingdom. European Economic Area In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each, a "Relevant Member State"), each Dealer has represented and agreed that with effect from and including the date on which the Prospectus Directive is implemented in that Relevant Member State (the Relevant Implementation Date) it has not made and will not make an offer of Notes which are the subject of the offering contemplated by this Offering Circular as completed by the final terms in relation thereto to the public in that Relevant Member State except that it may, with effect from and including the Relevant Implementation Date, make an offer of such Notes to the public in that Relevant Member State: (i) if the final terms in relation to the Notes specify that an offer of those Notes may be made other than pursuant to Article 3(2) of the Prospectus Directive in that Relevant Member State (a Non-exempt Offer), following the date of publication of a prospectus in relation to such Notes which has been approved by the competent authority in that Relevant Member State or, where appropriate, approved in another Relevant Member State and notified to the competent authority in that Relevant Member State, provided that any such prospectus has subsequently been completed by the final terms contemplating such Non-exempt Offer, in accordance with the Prospectus Directive, in the period beginning and ending on the dates specified in such prospectus or final terms, as applicable; (ii) at any time to legal entities which are authorized or regulated to operate in the financial markets or, if not so authorized or regulated, whose corporate purpose is solely to invest in securities; (iii) at any time to any legal entity which has two or more of (1) an average of at least 250 employees during the last financial year; (2) a total balance sheet of more than 43,000,000; and (3) an annual net turnover of more than 50,000,000, as shown in its last annual or consolidated accounts; (iv) at any time to fewer than 100 or, if the Relevant Member State has implemented the relevant provisions of the 2010 PD Amending Directive, 150 natural or legal persons (other than qualified investors as defined in the Prospectus Directive) subject to obtaining the prior consent of the relevant Dealer nominated by Grupo Elektra for any such offer; or (v) at any time in any other circumstances falling within Article 3(2) of the Prospectus Directive, provided that no such offer of Notes referred to in (ii) to (v) above shall require Grupo Elektra or any Dealer to publish a prospectus pursuant to Article 3 of the Prospectus Directive or supplement a prospectus pursuant to Article 16 of the Prospectus Directive. 148

151 For the purposes of this provision, the expression an offer of Notes to the public in relation to any Notes in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the Notes to be offered so as to enable an investor to decide to purchase or subscribe the Notes, as the same may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State and the expression "Prospectus Directive" means Directive 2003/71/EC (and amendments thereto, including the 2010 PD Amending Directive, to the extent implemented in the Relevant Member State) and includes any relevant implementing measure in each Relevant Member State and the expression 2010 PD Amending Directive means Directive 2010/73/EU. Hong Kong No Notes have been offered or sold, and no Notes may be offered or sold, in Hong Kong, by means of any document, other than to persons whose ordinary business is to buy or sell shares or debentures, whether as principal or agent; or to "professional investors" as defined in the Securities and Futures Ordinance (Cap. 571) of Hong Kong and any rules made under that Ordinance; or in other circumstances which do not result in the document being a "prospectus" as defined in the Companies Ordinance (Cap. 32) of Hong Kong or which do not constitute an offer to the public within the meaning of the Companies Ordinance (Cap.32) of Hong Kong. No document, invitation or advertisement relating to the Notes has been issued or may be issued or may be in the possession of any person for the purpose of issue (in each case whether in Hong Kong or elsewhere), which is directed at, or the contents of which are likely to be accessed or read by, the public of Hong Kong (except if permitted under the securities laws of Hong Kong) other than with respect to Notes which are or are intended to be disposed of only to persons outside Hong Kong or only to "professional investors" as defined in the Securities and Futures Ordinance (Cap. 571) of Hong Kong and any rules made under that Ordinance. This Offering Circular has not been registered with the Registrar of Companies in Hong Kong. Accordingly, this Offering Circular may not be issued, circulated or distributed in Hong Kong, and the Notes may not be offered for subscription to members of the public in Hong Kong. Each person acquiring the Notes will be required, and is deemed by the acquisition of the Notes, to confirm that he is aware of the restriction on offers of the Notes described in this Offering Circular and the relevant offering documents and that he is not acquiring, and has not been offered any Notes in circumstances that contravene any such restrictions. Singapore This Offering Circular has not been and will not be lodged or registered with the Monetary Authority of Singapore. Accordingly, this Offering Circular and any other document or material in connection with the offer or sale, or the invitation for subscription or purchase of the Notes, may not be issued, circulated or distributed, nor may the Notes be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to the public or any member of the public in Singapore other than (i) to an institutional investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore (the "SFA"), (ii) to a relevant person as defined under Section 275(2), or any person pursuant to Section 275(1A) of the SFA, and in accordance with the conditions, specified in Section 275 of the SFA, or (iii) otherwise pursuant to, and in accordance with the conditions of any other applicable provision of the SFA. Where the Notes are subscribed or purchased under Section 275 of the SFA by a relevant person which is: (a) a corporation (which is not an accredited investor as defined under Section 4A of the SFA) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or (b) a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary is an accredited investor, shares, debentures and units of shares and debentures of that corporation or the beneficiaries' rights and interest in that trust shall not be transferable for six months after that corporation or that trust has acquired the Offer Shares under Section 275 of the SFA except: (i) to an institutional investor under Section 274 of the SFA or to a relevant person defined in Section 275(2) of the SFA, or to any person pursuant to an offer that is made on terms that such shares, debentures and units of shares and debentures of that corporation or such rights and interest in that trust are acquired at a consideration of not less than $200,000 (or its equivalent in a foreign currency) for each transaction, whether such amount is to be paid for in cash or by exchange of securities or other assets, and further for corporations, in accordance with the conditions, specified in Section 275 of the SFA; 149

152 (ii) where no consideration is given for the transfer; or (iii) where the transfer is by operation of law. Switzerland This Offering Circular as well as any other material relating to the Notes does not constitute an issue prospectus pursuant to Articles 652a and/or 1156 of the Swiss Code of Obligations. The Notes will not be listed on the SIX Swiss Exchange and, therefore, the documents relating to the Notes, including, but not limited to, this document, do not claim to comply with the disclosure standards of the listing rules of the SIX Swiss Exchange and corresponding prospectus schemes annexed to the listing rules of the SIX Swiss Exchange. The Notes are being offered in Switzerland by way of a private placement, i.e. to a small number of selected investors only, without any public offer and only to investors who do not purchase the Notes with the intention to distribute them to the public. The investors will be individually approached by Grupo Elektra from time to time. This Offering Circular as well as any other material relating to the Notes are personal and confidential and do not constitute an offer to any other person. This Offering Circular may only be used by those investors to whom it has been handed out in connection with the offering described herein and may neither directly nor indirectly be distributed or made available to other persons without the express consent of Grupo Elektra. It may not be used in connection with any other offer and shall in particular not be copied and/or distributed to the public in (or from) Switzerland. Argentina The Notes will not be marketed in Argentina by means of a public offer of securities, as such term is defined under Section 2 of Argentine Law No. 26,831, as amended. No application has been or will be made with the Argentine Comisión Nacional de Valores, the Argentine securities governmental authority, to offer the Notes in Argentina. Brazil The offering of the Notes will not be carried out by any means that would constitute a public offering in Brazil under Law 6,385 of December 7, 1976, as amended, and under CVM Rule No. 400 of December 29, 2003, as amended. Accordingly, this Offering Circular and any supplements thereto have not been, and will not be, delivered for registration to the Comissão de Valores Mobiliários ("CVM"), the Brazilian Central Bank ("BCB") or other Brazilian authorities and the issue of the Notes has not been authorized by the CVM, BCB or any other Brazilian authority and this Offering Circular and any supplement thereto shall not be construed as being a public offering of securities or an offering in the financial and capital markets in Brazil. Documents relating to the offering, as well as the information contained herein and therein, may not be supplied or distributed to the public in Brazil, as the offering of the Notes pursuant to this Offering Circular and any supplements thereto will not be a public offering of securities in Brazil, nor be used in connection with any offer for subscription or sale of Notes to the public in Brazil. Any public offering or distribution, as defined under Brazilian laws and regulations, of the Notes in Brazil is not legal without prior registration with the CVM. Chile The Notes have not and will not be registered with the Chilean Securities Commission (Superintendencia de Valores y Seguros) under Law 18,045, as amended, of Chile, and, accordingly, may not be offered to persons in Chile except in circumstances that do not constitute a public offering under Chilean law. Colombia Neither this Offering Circular nor any supplement thereto will be delivered for registration to the National Registry of Securities and Issuers ("NRSI") in Colombia and the issue of the Notes will not be authorized by the Colombian Superintendence of Finance, and neither this Offering Circular nor any supplement thereto shall be construed as being a public offering of securities in Colombia. Accordingly, this document and accompanying supplements may not be issued, circulated or distributed in Colombia, nor may the Notes be marketed, offered or sold, other than in circumstances which do not constitute an offer of the Notes to the public in Colombia pursuant to Decree 2555 of 2010 issued by the Ministry of Finance and other applicable and concordant regulations. Furthermore, the terms Decree 2555 of 2010 must be abided to offer privately and to market the Notes in Colombia or to Colombian residents. Panama The Notes will not be registered with the National Securities Commission of the Republic of Panama under Decree Law No. 1 of July 8, 1999 (the "Panamanian Securities Act") and may not be publicly offered or sold within Panama, except in certain limited transactions exempt from the registration requirements of the Panamanian 150

153 Securities Act. The Notes do not benefit from the tax incentives provided by the Panamanian Securities Act and are not subject to regulation or supervision by the National Securities Commission of the Republic of Panama. Peru The Notes will not be subject to a public offering in the Republic of Peru. Therefore, this Offering Circular has not been, and will not be, registered with the Peruvian Superintendency of Securities Market (Superintendencia del Mercado de Valores or "SMV"). This Offering Circular and other offering materials relating to the offer of the Notes may be supplied only to those Peruvian Institutional Investors who expressly requested it. They are strictly confidential and may not be distributed to any person or entity other than the recipients hereof. The Notes may be offered in Peru only to Institutional Investors as a private offering in accordance with Peruvian Law and are subject to limitations as to their transferability as detailed therein and in this Offering Circular. In order for Peruvian pension funds to invest in the Notes, all necessary registrations with the Superintendency of Banking, Insurance and Peruvian Private Pension Funds Administrators (Superintendencia de Banca, Seguros y Administradoras Privadas de Fondos de Pensiones or "SBS") have been made or will have to be made. Other Institutional Investors, as defined by Peruvian legislation, must rely on their own examination of the Issuer and the terms of the offering of the Notes in order to determine their legal ability to invest in them. We strongly recommend that each investor seeks independent advice from local counsel in connection with the acquisition of the Notes. Uruguay In Uruguay the Notes are being placed relying in a private placement ("oferta privada") pursuant to Section 2 of Law N 18,627. The Notes are not and will not be registered with the Financial Services Superintendence of the Central Bank of Uruguay to be publicly offered in Uruguay. 151

154 TAXATION This summary is general information only. Prospective purchasers of Notes should consult their tax advisors as to the Mexican or other tax consequences of the purchase, ownership and disposition of the Notes, including the effect of any foreign, state or local tax laws to which they are subject. Mexican Taxation This summary of certain Mexican tax considerations deals only with holders of the Notes that are not residents of Mexico for Mexican tax purposes and that do not conduct a trade or business through a permanent establishment in Mexico (a "Foreign Holder"), but does not purport to be a comprehensive description of all the tax considerations that may be relevant to a decision to purchase the Notes. This summary is based on the federal tax laws of Mexico as in effect on the date of this Offering Circular (including the Tax Treaty described below), as well as on rules and regulations of Mexico and regulations available on or before such date and now in effect. All of the foregoing are subject to change, which change could apply retroactively and could affect the continued validity of this summary. For purposes of Mexican taxation, an individual is a resident of Mexico if he has established his domicile in Mexico, unless he has another domicile in a foreign country and his personal and economic relations (centre of vital interest) are not in Mexico (except for Mexican public officers or governmental employees). Under the Código Fiscal de la Federación (the Mexican Tax Code, or "MTC"), the centre of vital interest of an individual is deemed to be located in Mexico if: (i) the source of wealth of more than 50% of the total income obtained by the individual in a calendar year comes from Mexico, or (ii) the individual's principal place of business is located within Mexican territory. An individual of Mexican nationality is presumed to be a resident of Mexico for tax purposes unless such person demonstrates otherwise. A legal entity is a resident of Mexico if its main administration or effective management is located in Mexico. If a non-mexican tax resident has a permanent establishment (i.e., a place of business) in Mexico, such permanent establishment shall be required to pay taxes in Mexico on taxable income attributable to such permanent establishment in accordance with relevant Mexican tax provisions. Taxation of Interest and Principal Under the Ley del Impuesto Sobre la Renta (the Mexican Income Tax Law, or "MITL"), payments of interest made by Grupo Elektra or any Guarantor in respect of the Notes (including payments of principal in excess of the issue price of such Notes, which, under Mexican law, are deemed to be interest) to a Foreign Holder will generally be subject to Mexican Income Tax (the "Withholding Tax") assessed at a rate of 4.9% if (i) the relevant Notes are placed among the public-at-large or (ii) the Notes are placed, through banks or brokerage houses, in a country which has entered into a treaty to avoid double taxation with Mexico and provided that (x) the notice set forth in Article 7, paragraph two, of the LMV has been filed with the CNBV describing the most relevant terms and conditions of the offer of the Notes (the "CNBV Notice") and (y) the relevant requirements set forth by the Servicio de Administración Tributaria (the Mexican Tax Administration Service, or "SAT") through general rules (the "Rules") are complied with. The requirements established by the SAT are as follows: (i) Grupo Elektra must file before the SAT a copy of the CNBV Notice, (ii) Grupo Elektra must file before the SAT within the first 15 business days after the placement date of the Notes, a tax notice describing certain tax information relating to Grupo Elektra and financial information relating to the Notes; (iii) Grupo Elektra must file before the SAT within the first 15 business days of each July, October, January and April of the following year, information regarding the amount of interest paid on the Notes and the date of such payment, and a statement representing that the persons or entities referred to in sections (x) and (y) below are not the effective beneficiaries of 5.0% or more of the aggregate amount of each such interest payment, and (iv) Grupo Elektra maintains such notices and records required by the Rules. Grupo Elektra and each Guarantor expects that such requirements will be met. If the requirements under such Rules are not complied with, withholding tax on the payment of interest on the Notes will be assessed at a rate of 10% for holders other than parties related to Grupo Elektra or the relevant Guarantor, as the case may be, as defined above, in which case payments of interest will be assessed at a rate of 30%. The Rules, together with other tax regulations, are enacted on an annual basis, and therefore, no assurances can be given that the Rules will be extended or that equivalent Rules will be enacted. The withholding tax rates of 4.9% and 10% above mentioned will not be applicable if the effective beneficiaries receive, either directly or indirectly, individually or in conjunction with related parties, more than 5% of the interest derived from the Notes and such beneficiaries are: (x) shareholders of Grupo Elektra or the relevant Guarantor, as the case may be, that own, directly or indirectly, individually or collectively, with related persons more than 10% of Grupo Elektra's or the relevant Guarantor's, as the case may be, voting stock or (y) corporations more than 20% of the stock of which is owned, directly or indirectly, individually or collectively, with related 152

155 persons of Grupo Elektra or the relevant Guarantor, as the case may be. For such purposes, parties are considered to be related parties when one of them holds interest in the business of the other, when they have common interests, or when a third person has an interest in their business or assets. In this case, the interest will be subject to Withholding Tax at a general tax rate of 30%. Payments of interest made by Grupo Elektra or any Guarantor with respect to the Notes to non-mexican pension or retirement funds will be exempt from Mexican withholding taxes, provided that any such fund (i) is the effective beneficiary of the interest, (ii) is duly incorporated pursuant to the laws of its country of origin (regardless of the type of organization), (iii) is exempt from income tax in such country, and (iv) is registered at the Registry of Foreign Banks, Financing Entities, Pension, Retirement Funds and Investment Funds in accordance with the Rules issued by the SAT. Grupo Elektra and the Guarantors have agreed, subject to specified exceptions and limitations, to pay additional amounts to the holders of the Notes in respect of the Withholding Tax mentioned above. Under existing Mexican law and regulations, a Foreign Holder will not be subject to any Mexican taxes in respect of payments of principal made by Grupo Elektra or any Guarantor with respect to the Notes (except to the extent such payments of principal are in excess of the issue price of the Notes). Taxation of Dispositions of Notes Payments in excess of the issue price of the Notes resulting from the sale made by Foreign Holders of the Notes, are deemed to be interest for Mexican tax purposes to the extent the purchaser of the Notes is a Mexican resident or a foreign resident with a permanent establishment in Mexico. The corresponding withholding tax rate would depend on the beneficial owner of the gain. In addition, purchases of the Notes by a non-mexican tax resident below par value may be subject to Withholding Tax if the seller of the Notes is either a Mexican individual or a Mexican company. Capital gains resulting from the sale or other disposition of the Notes by a Foreign Holder to another Foreign Holder will not be subject to Mexican income or other similar taxes. Transfer and Other Taxes There are no Mexican stamp, registration of similar taxes payable by a Foreign Holder in connection with the purchase, ownership or disposition of any Notes. A Foreign Holder of Notes will not be liable for Mexican estate, gift, inheritance or similar tax with respect to the Notes. Payments of Interest Under Council Directive 2003/48/EC on the taxation of savings income (the "Savings Directive"), each Member State of the European Union, or EU, is required to provide to the tax authorities of another Member State details of payments of interest or other similar income paid by a person within its jurisdiction to, or secured by such a person for, an individual beneficial owner resident in, or certain limited types of entities established in, that other Member State; however, for a transitional period, Austria and Luxembourg will (unless during such period they elect otherwise) instead apply a withholding system in relation to such payments. Under such withholding system, the beneficial owner of the interest payment must be allowed to elect that certain provision of information procedures should be applied instead of withholding. The current rate of withholding is 35%. The transitional period is to terminate at the end of the first full fiscal year following the conclusion of agreements by certain non-eu countries to exchange of information procedures relating to interest and other similar income. A number of non-eu countries, and certain dependent or associated territories of certain Member States, have adopted or agreed to adopt similar measures (either provision of information or transitional withholding) in relation to payments made by a person within its jurisdiction to, or secured by such a person for, an individual beneficial owner resident in, or certain limited types of entities established in, a Member State. In addition, the Member States have entered into provision of information or transitional withholding arrangements with certain of those dependent or associated territories in relation to payments made by a person in a Member State to, or secured by such a person for, an individual beneficial owner resident in, or certain limited types of entities established in, one of those countries or territories. A proposal for amendments to the Savings Directive has been published, including a number of suggested changes which, if implemented, would broaden the scope of the rules described above. No Additional Amounts will be payable with respect to a note where withholding or deduction is imposed or levied on a payment pursuant to the Savings Directive or any other EU directive implementing the conclusions of the ECOFIN Council meeting of November 26-27, 2000 on the taxation of savings income, or any law implementing or complying with, or introduced in order to conform to, such a directive. If any Definitive Notes are issued, the Issuer will, to the extent 153

156 permitted by law, maintain a paying agent in a Member State that will not be obliged to withhold or deduct tax pursuant to the Savings Directive or any such directive or law. Holders should consult their tax advisors regarding the implications of the Savings Directive in their particular circumstances. U.S. Taxation U.S. Internal Revenue Service Circular 230 Notice: To ensure compliance with Internal Revenue Service Circular 230, holders of Notes or prospective purchasers are hereby notified that: (i) any discussion of U.S. federal income tax issues contained or referred to in this Offering Circular or any document referred to herein is not intended or written to be used, and cannot be used or relied upon by holders of Notes for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code of 1986, as amended (the Code); (ii) such discussion was written solely for use in connection with the promotion or marketing, to the extent permitted by applicable law, of the Notes; and (iii) holders of Notes should seek advice based on their particular circumstances from an independent tax advisor. General The following is a general summary of certain principal U.S. federal income tax consequences that may be relevant with respect to the acquisition, ownership or disposal of the Notes. This summary addresses only the U.S. federal income tax considerations of holders that acquire the Notes at their original issuance pursuant to this Offering Circular and that will hold such Notes as a capital asset within the meaning of the Code. This summary does not purport to address all U.S. federal income tax matters that may be relevant to a particular holder of the Notes. In particular, this summary does not address tax considerations applicable to holders of the Notes that may be subject to special tax rules including, without limitation, the following: (i) financial institutions; (ii) insurance companies; (iii) dealers or traders in Notes, currencies or notional principal contracts; (iv) tax-exempt entities; (v) regulated investment companies; (vi) real estate investment trusts; (vii) persons that will hold the Notes as part of a "hedging" or "conversion" transaction or as a position in a "straddle" or as part of a "synthetic Note" or other integrated transaction for U.S. federal income tax purposes; (viii) persons whose "functional currency" is not the U.S. dollar; (ix) persons that own (or are deemed to own) 10% or more of the voting shares (or interests treated as equity) of the Company; and (x) partnerships or other pass through entities for U.S. federal income tax purposes, or persons who hold Notes through such partnerships or other pass through entities. Further, this summary does not address alternative minimum tax consequences or the indirect effects on the holders of equity interests in a holder of the Notes. This summary also does not describe any tax consequences arising under the laws of any taxing jurisdictions other than the federal income tax laws of the U.S. federal government. This summary is based on the Code, U.S. Treasury Regulations and judicial and administrative interpretations thereof, in each case as in effect and available on the date of this Offering Circular. All of the foregoing are subject to change, which change could apply retroactively and could affect the tax consequences described below. Prospective investors should consult their own tax advisors with respect to the U.S. federal, state, local and foreign tax consequences of acquiring, owning or disposing of the Notes. For the purposes of this summary, a U.S. Holder is a beneficial owner of the Notes that is, for U.S. federal income tax purposes: (i) a citizen or individual resident of the United States; (ii) a corporation created or organized in or under the laws of the United States or any state thereof (including the District of Columbia); (iii) an estate the income of which is subject to U.S. federal income taxation regardless of its source; or (iv) a trust if (x) a court within the United States is able to exercise primary supervision over its administration and (y) one or more United States persons have the authority to control all of the substantial decisions of such trust. As provided in U.S. Treasury Regulations, certain trusts that maintain a valid election to be treated as United States persons also are U.S. Holders. A Non-U.S. Holder is a beneficial owner of the Notes that is not a U.S. Holder. If a partnership holds the Notes, the U.S. federal income tax treatment of a partner generally will depend upon the status of the partner and the activities of the partnership. A partner of a partnership holding the Notes should consult its tax advisor about its particular situation. 154

157 Taxation of U.S. Holders Original Issue Discount In general, subject to a de minimis exception, the Notes will be treated as being issued with original issue discount ("OID") to the extent their "stated redemption price at maturity" exceeds their "issue price." The stated redemption price at maturity of a Note is the aggregate of all payments due to its holder under such Note at or prior to its maturity, other than interest payments that (among other requirements) are actually and unconditionally payable at least annually. Interest meeting these requirements is referred to as "qualified stated interest." The cash interest payable unconditionally twice annually at a fixed percentage of the principal amount of the Notes will be qualified stated interest. If a substantial amount of the Notes is issued for cash in this offering, the issue price of the Notes will be the first price at which a substantial amount of Notes is issued for cash. It is expected that a substantial amount of the Notes will be issued for cash in this offering. If a substantial amount of the Notes is not issued for cash in this offering, the issue price of the Notes will be determined under the rules applicable to debt instruments issued for property. A Note will be considered to have de minimis OID if the difference between the Note's stated redemption price at maturity and its issue price is less than 0.25% of the stated redemption price at maturity multiplied by the number of complete years to maturity. If the amount of the OID on the Notes equals or exceeds the de minimis amount, U.S. Holders will be required to include OID on the Notes in income for U.S. federal income tax purposes as it accrues on a constant yield to maturity basis, regardless of such holders' regular methods of accounting for U.S. federal income tax purposes. The amount of OID includible in income will be the sum of the "daily portions" of OID with respect to the Notes for each day during the taxable year or portion of the taxable year in which a holder holds the Notes ("accrued OID"). The daily portion is determined by allocating to each day in any accrual period a pro rata portion of the OID allocable to that accrual period. The amount of OID allocable to any accrual period is an amount equal to the excess, if any, of (i) the product of the Note's adjusted issue price at the beginning of such accrual period and its yield to maturity (determined on the basis of compounding at the close of each accrual period and properly adjusted for the length of the accrual period) less (ii) the amount of any qualified stated interest allocable to the accrual period. OID allocable to a final accrual period is the difference between the amount payable at maturity (other than a payment of qualified stated interest) and the adjusted issue price at the beginning of the final accrual period. Special rules apply for calculating OID for an initial short accrual period. The adjusted issue price of the Notes at the beginning of any accrual period is equal to their issue price increased by the accrued OID for each prior accrual period previously includible in gross income and decreased by the amount of any payments previously made on the Notes (other than qualified stated interest payments). Under these rules, a U.S. Holder must include in income increasingly greater amounts of OID in successive accrual periods. A U.S. Holder may elect to treat all interest on the Notes as OID and calculate the amount included in gross income under the constant yield method described above. For the purposes of this election, interest includes stated interest, OID, de minimis OID, and unstated interest. The election is to be made for the taxable year in which the Notes are acquired and may not be revoked without the consent of the Internal Revenue Service. A U.S. Holder should consult with its own tax advisors if it is considering this election. Notwithstanding the above, a U.S. Holder who purchases the Notes at less than par but at more than the "issue price" will not need to include the full amount of OID on the Notes in income for U.S. federal income tax purposes. U.S. Holders should consult their own tax advisors regarding the U.S. federal income tax consequences of owning Notes issued with OID. Stated Cash Interest on the Notes Interest paid on the Notes, including the payment of any Additional Amounts, will be taxable to a U.S. Holder as ordinary income at the time it is received or accrued, depending on the U.S. Holder's method of accounting for U.S. federal income tax purposes. Interest income on the Notes and payments of any Additional Amounts will be treated as foreign source income for U.S. federal income tax purposes, which may be relevant in calculating a U.S. Holder's foreign tax credit limitation for U.S. federal income tax purposes. The U.S. foreign tax credit limitation is calculated separately with respect to specific classes of income. The foreign tax credit rules are complex, and U.S. Holders should consult their own tax advisors regarding the availability of a foreign tax credit and the application of the limitation in their particular circumstances. Sale, Exchange, Redemption or Other Disposition of the Notes Upon the disposition of a Note by sale, exchange, redemption or otherwise, a U.S. Holder generally will recognize gain or loss equal to the difference between (i) the amount realized on the disposition and (ii) the holder's 155

158 adjusted tax basis in the Note. A holder's adjusted tax basis in a Note generally will be the holder's purchase price of the Note, increased by any OID includable in income by the holder with respect to the Notes, and reduced by the amounts of any payments previously received by the holder (other than qualified stated interest). Except to the extent attributable to accrued but unpaid interest (which will be taxable as interest income to the extent not previously included in income), any gain or loss on the sale or other disposition of a Note will be capital gain or loss and will generally be treated as from U.S. sources for purposes of the U.S. foreign tax credit limitation. Such capital gain or loss will generally be long-term capital gain or loss if the holder held the Note for more than one year at the time of the disposition. Certain non-corporate U.S. Holders (including individuals) are eligible for preferential rates of U.S. federal income taxation in respect of long-term capital gains. The ability of a U.S. Holder to deduct a capital loss is subject to limitations under the Code. Taxation of Non-U.S. Holders Subject to the backup withholding discussion below, a Non-U.S. Holder generally should not be subject to U.S. federal income or withholding tax on any payments on the Notes and gain from the sale, exchange, redemption or other disposition of the Notes unless (i) that payment and/or gain is effectively connected with the conduct by that Non-U.S. Holder of a trade or business in the United States; (ii) in the case of any gain realized by an individual Non-U.S. Holder, that Non-U.S. Holder is present in the United States for 183 days or more in the taxable year of the sale or other disposition and certain other conditions are met; or (iii) the Non-U.S. Holder is subject to tax pursuant to provisions of the Code applicable to certain expatriates. Non-U.S. Holders should consult their own tax advisors regarding the U.S. federal income tax considerations and other tax consequences of acquiring, owning or disposing of the Notes. Information Reporting and Backup Withholding Backup withholding and information reporting requirements may apply to certain payments and accrued OID on the Notes, and of proceeds of the sale or other disposition of the Notes, made to U.S. Holders. The Company, its agent, a broker or any paying agent, as the case may be, may be required to backup withholding tax from any payment if a U.S. Holder fails (i) to furnish its U.S. taxpayer identification number, (ii) to certify that it is not subject to backup withholding or (iii) to otherwise comply with the applicable requirements of the backup withholding rules. Certain U.S. Holders are not subject to the backup withholding and information reporting requirements. Non-U.S. Holders may be required to comply with applicable certification procedures to establish that they are not U.S. Holders in order to avoid the application of such information reporting requirements and backup withholding. Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules generally may be claimed as a credit against such holder's U.S. federal income tax liability provided that the required information is timely furnished to the Internal Revenue Service. In addition, recently enacted legislation may require certain U.S. Holders to report to the Internal Revenue Service certain information with respect to their beneficial ownership of certain foreign financial assets, such as the Notes, if the aggregate value of all such assets exceeds $50,000. The new requirement applies to U.S. individuals and, if specified by the Internal Revenue Service, domestic entities formed (or availed of) for the purpose of holding, directly or indirectly, specified types of foreign financial assets. Applicable U.S. Holders who fail to report required information could be subject to substantial penalties and an extended statute of limitations. The new requirement applies to U.S. individuals and, if specified by the Internal Revenue Service, domestic entities formed (or availed of) for purpose of holding, directly or indirectly, specified types of foreign financial assets. U.S. Holders should consult their own tax advisors with respect to this and any other reporting requirement that may apply with respect to their acquisition of a Note. 156

159 SUBSCRIPTION AND SALE Pursuant to the Programme Agreement, the Dealers have established with the Issuer a basis upon which they may, from time to time, agree to purchase the Notes for an indefinite period of time under the Programme. Certain additional dealers may, from time to time, enter into a dealer accession agreement with the Issuer in order to become a Dealer and purchase Notes, from time to time, in accordance with the terms and conditions of the Programme Agreement. In the Programme Agreement, the Issuer has agreed to reimburse the Dealers for certain expenses in connection with the establishment of the Programme, and the issuance of each Series of Notes under the Programme. The Issuer has agreed to indemnify the Dealers against certain liabilities in connection with the offer and sale of the Notes, including liabilities under the Securities Act. The Notes have not been and will not be registered under the Securities Act. The Notes may not be offered or sold within the United States or to U.S. persons, except to qualified institutional buyers in reliance on the exemption from registration provided by Rule 144A under the Securities Act and to certain non-u.s. persons in offshore transactions in reliance on Regulation S under the Securities Act. Prospective purchasers that are qualified institutional buyers are hereby notified that the seller may be relying on the exemption from the provisions of Section 5 of the Securities Act provided by Rule 144A. For a description of certain restrictions on transfers of the Notes, see "Selling Restrictions." The Notes may not be publicly offered or traded in Mexico unless the same are offered or traded pursuant to the provisions of Article 8 of the LMV and regulations issued thereunder. The information contained in this Offering Circular is solely the responsibility of the Issuer and the Guarantors and has not been reviewed or authorized by the CNBV. The terms of the offering have been notified to the CNBV for information purposes only which does not constitute a certification as to the investment quality of the Notes or of Grupo Elektra's solvency. No action has been or will be taken in any jurisdiction that would permit a public offering of the Notes, or the possession, circulation or distribution of this Offering Circular or any other material relating to the Issuer, the Guarantors or the Notes in any jurisdiction where action for that purpose is required. Accordingly, the Notes may not be offered or sold, directly or indirectly, and neither this Offering Circular, nor any other offering material or advertisement in connection with the Notes, may be distributed or published in, or from, any country or jurisdiction, except under circumstances that will result in compliance with any applicable rules and regulations of any such country or jurisdiction. Purchasers of Notes may be required to pay stamp taxes and other charges in accordance with the laws and practices of the country of purchase in addition to the purchase price. 157

160 AVAILABLE INFORMATION For so long as any Series of Notes is outstanding, copies of the following items will be available in physical form at the offices of Grupo Elektra, located at Av. FFCC de Río Frío N 419 CJ, Col. Fraccionamiento Industrial del Moral, Delegación Iztapalapa, C.P , Mexico City, Mexico, and at the offices of the Irish Paying Agent, located at Hanover Building, Windmill Lane Dublin 2, Ireland: this Offering Circular; the applicable Pricing Supplement(s); the constitutional documents of Grupo Elektra; consolidated audited financial statements of Grupo Elektra and its subsidiaries as of and for the years ended December 31, 2011, 2010 and 2009, in each case together with the audit reports prepared in connection therewith; consolidated unaudited interim financial statements of Grupo Elektra and its subsidiaries as of and for the nine months ended September 30, 2012 and 2011; the most recently published audited consolidated financial statements (if any) of Grupo Elektra and its subsidiaries, in each case together with any audit reports prepared in connection therewith; the most recently published unaudited interim financial statements (if any) of Grupo Elektra and its subsidiaries, in each case together with any review reports prepared in connection therewith; a copy of the trust deed and agency agreement governing the Notes; and any other documents relating to the offering of Notes referred to herein. 158

161 LISTING AND GENERAL INFORMATION The information contained in this Offering Circular is solely the responsibility of Grupo Elektra and the Guarantors. Grupo Elektra and the Guarantors, having taken all reasonable care, confirm that the information contained in this Offering Circular is, to the best of their knowledge, in accordance with the facts and contains no omission likely to affect its import. Since September 30, 2012, there has been no significant change in the financial or trading position of Grupo Elektra or Grupo Elektra and its consolidated subsidiaries (including each of the Guarantors) ("Grupo Elektra's Group") and since December 31, 2011 there has been no material adverse change in the financial position or prospects of Grupo Elektra or Grupo Elektra's Group which is not otherwise disclosed in this Offering Circular. Notes issued under the Programme may at any time, but are not required to, be listed on one or more stock exchanges. Application has been made for this Offering Circular to be approved by the Irish Stock Exchange. We may apply for any Series of Notes to be issued under the Programme to be admitted to the Official List of the Irish Stock Exchange and trading on its Global Exchange Market, as set forth in the applicable Pricing Supplement. This Offering Circular constitutes "Base Listing Particulars" for the purpose of any such listing and trading. The Global Notes will be deposited upon issuance with a common depositary for Euroclear and Clearstream, Luxembourg. Grupo Elektra estimates that it will incur approximately 5,000 euros in costs related to the approval of this Offering Circular by the Irish Stock Exchange. Except as disclosed in this Offering Circular, within the 12 months preceding the date of this Offering Circular neither Grupo Elektra nor Grupo Elektra's Group is or has been involved in any governmental, legal or arbitration proceedings (including any such proceedings which are pending or threatened of which Grupo Elektra or Grupo Elektra's Group are aware) which may have, or have in such period had, significant effects on the financial position or profitability of Grupo Elektra and/or Grupo Elektra's Group. Except as disclosed herein, there are no potential conflicts of interest between any duties of any of the members of the administrative, management or supervisory bodies of Grupo Elektra towards Grupo Elektra and their private interests and/or other duties. The price and amount of the Notes to be issued under the Programme will be determined by Grupo Elektra and the relevant Dealers at the time of issue in accordance with prevailing market conditions. Grupo Elektra has obtained all necessary consents, approvals and authorizations in connection with the issuance of the Notes. Grupo Elektra's consolidated financial statements as of and for the years ended December 31, 2011, 2010 and 2009 were audited by Castillo. Castillo is a member of BDO International Limited and is registered with the CCPM, and its address is Paseo de la Reforma 505, Piso 31, Cuauhtémoc, Mexico City, 06500, Mexico. 159

162 SUMMARY OF CERTAIN DIFFERENCES BETWEEN MFRS AND U.S. GAAP/IFRS Our audited consolidated financial statements, which are stated in pesos, have been prepared in accordance with MFRS, as issued by the CINIF, which differ in certain significant respects from U.S. GAAP, and IFRS, as adopted by the IASB. Pursuant to the General Provisions Applicable to Securities Issuers and Other Participants in the Securities Market (Disposiciones de Carácter General Aplicables a las Emisoras de Valores y a Otros Participantes del Mercado de Valores), beginning with the year ending December 31, 2012, Mexican companies with securities listed on the BMV are required to prepare and present financial information in accordance with IFRS. Accordingly, our annual consolidated financial statements as of and for the year ended December 31, 2012 will be our first annual financial statements prepared in accordance with IFRS. Our transition date to IFRS is January 1, 2011, and therefore, the year ended December 31, 2011 will be the comparative period established by IFRS 1, First Time Adoption of International Financial Reporting Standards. In accordance with IFRS 1, we have applied applicable mandatory exceptions and certain optional exemptions to the retroactive application of IFRS. See Note 14 to our unaudited consolidated financial statements as of and for the nine months ended September 30, 2012 and 2011, beginning on page F-2 for further information about our transition to IFRS, including the mandatory exceptions and voluntary exemptions that we have applied. CNBV rules require that interim financial information published during the year of adoption also be presented under IFRS. Accordingly, our unaudited consolidated financial statements as of and for the nine months ended September 30, 2012 and 2011, which are stated in pesos, have been prepared in accordance with IFRS, as adopted by the IASB. See Note 14 to our unaudited consolidated financial statements as of and for the nine months ended September 30, 2012 and 2011 for a reconciliation to IFRS of our shareholders' equity as of and for the year ended December 31, 2010 and of our consolidated net income and shareholders' equity as of and for the year ended December 31, 2011 and the nine months ended September 30, Except as described before, we are not providing any reconciliation to U.S. GAAP or IFRS of our consolidated financial statements or other financial information in this Offering Circular. There is no assurance that a reconciliation would not identify material quantitative differences between our consolidated financial statements and other financial information as prepared on the basis of IFRS or U.S. GAAP and such financial statements or information prepared on the basis of U.S. GAAP or IFRS. Accordingly, there is no assurance that the following summary of differences between MFRS, U.S. GAAP and IFRS is complete. In making an investment decision, investors must rely upon their own examination of Grupo Elektra, the terms of the offering and the financial information. Potential investors should consult their own professional advisors for an understanding of the differences between MFRS, U.S. GAAP and IFRS, and how those differences might affect the financial information provided herein. Accounting for the Effects of Inflation MFRS Through December 31, 2007, MFRS required that the effects of inflation be recorded in financial information and that financial statements be restated to constant Mexican pesos as of the latest balance sheet date presented. Beginning January 1, 2008, MFRS modified the accounting for the recognition of the effects of inflation and defines two economic environments: (i) an "inflationary environment," where the cumulative inflation of the three preceding years is 26.0% or more, in which case the effects of inflation should be recognized using the comprehensive method; and (ii) a "non-inflationary environment," where the cumulative inflation of the three preceding years is less than 26.0%, in which case no inflationary effects should be recognized in the financial statements. IFRS and U.S. GAAP Under U.S. GAAP and IFRS, companies are generally required to prepare financial statements using historical cost, whereby amounts are not subsequently adjusted for inflation except when the entity operates in a hyperinflationary environment, generally defined under both U.S. GAAP and IFRS as comprehensive inflation over the three-preceding years of greater than 100%. Additionally, IFRS 1, First-time Adoption of International Financial Reporting Standards, is the standard applied by entities adopting IFRS for the first time, and allows for certain optional exemptions from retrospective application of its standards, for instance, with respect to the measurement of items of property, plant and equipment and the possible consideration of indexation previously included in the value of such assets or the fair value of the asset at a specified date. Such an option does not exist under U.S. GAAP. 160

163 Inventories MFRS and IFRS MFRS and IFRS require the use of the full absorption inventory costing method, which requires the inclusion of all fixed overhead costs in the value of inventory. Additionally, inventories are measured at the lower of cost or net realizable value (defined as the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated selling costs). MFRS and IFRS do not contemplate the concept of reducing net realizable value to allow for a normal profit margin. Finally, use of the last-in-first-out method to assign costs to inventory is prohibited. U.S. GAAP U.S. GAAP requires the use of the full absorption inventory costing method. Inventory should be stated at the lower of cost or market. Market is defined as replacement cost, provided, that the cost does not exceed net realizable value or is not less than the net realizable value reduced by a normal profit margin. Finally, use of the lastin-first-out-method to assign costs to inventory is permitted. Depreciation of Property, Plant and Equipment MFRS and IFRS MFRS and IFRS require entities to follow a component approach with respect to property, plant and equipment, when the cost of a separate component of the asset is significant in relation to the cost of the asset as a whole and when such component has a useful life different from the other components of that asset. MFRS and IFRS also require that the residual value, useful life and depreciation method of fixed assets be reviewed at least at each financial year-end. Additionally, IFRS 1 allows for certain optional exemptions from retrospective application of other IFRS, for instance, as it relates to the measurement of an item of property, plant and equipment at the date of transition to IFRS at its fair value. U.S. GAAP Under U.S. GAAP, an item of property, plant and equipment composed of significant parts is generally depreciated over a weighted-average useful life for the item as a whole, excluding its residual value, if any. A components approach for depreciation is permitted but not required. Valuation of Property, Plant and Equipment MFRS and U.S. GAAP MFRS and U.S. GAAP require that investments in property, plant and equipment be valued at historical cost. IFRS IFRS contains an accounting policy choice, permitting property, plant and equipment to be recognized at either historical cost or fair value (cost model or revaluation model). Capitalization of Comprehensive Financing Cost MFRS MFRS requires comprehensive financing cost to be capitalized on qualifying assets, which are assets that require a period of time to be ready for their intended use. Comprehensive financial results to be capitalized include interest expense, foreign currency exchange gains and losses and monetary gain or loss related to financial liabilities stemming from inflationary effects. IFRS Under IFRS, borrowing costs must be capitalized for qualifying assets. Borrowing costs may include interest on bank overdrafts and short-term and long-term borrowings, amortization of ancillary costs incurred in connection with the arrangement of borrowings, finance charges in respect of finance leases recognized, and exchange differences arising from foreign currency borrowings to the extent that they are regarded as an adjustment to the interest costs (i.e. the foreign exchange difference capitalized should not exceed the difference between the interest rates on local and outside-market borrowings). 161

164 U.S. GAAP Under U.S. GAAP, interest expense incurred during the construction or acquisition of a qualifying asset must also be capitalized as part of the cost of the qualifying asset. When financing is denominated in Mexican pesos, the monetary gain related to the financing is included in this computation; when financing is denominated in U.S. dollars, only interest is capitalized and the monetary gains and losses are excluded. U.S. GAAP does not permit the capitalization of foreign exchange gains or losses. Business Acquisitions MFRS MFRS requires that when consideration paid in a business acquisition is lower than the fair value of the identifiable assets acquired and liabilities assumed, a subsequent review must be performed of the values assigned to such assets and liabilities. If after such review, an excess persists, the acquired long-term non-monetary assets should be reduced by such excess, until they reach a value of zero, at which such point, any remaining excess shall be recognized as a gain within results as a non-ordinary item. In addition, MRFS do not permit the recognition of a contingent liability acquired in a business acquisition when an outflow of resources is not likely to occur. IFRS and U.S. GAAP IFRS and U.S. GAAP also require the acquirer to reassess the value of acquired assets and assumed liabilities when consideration paid in a business combination is lower than the fair value of such assets and liabilities. While the entity shall recognize at fair value, any additional assets or liabilities identified in such review, it shall not decrease the value of any non-monetary assets, assuming the original estimate of their fair value was accurate. Any existing excess shall be recognized as a gain in the statement of income as of the acquisition date. IFRS states that contingent liabilities acquired in a business acquisition shall be recognized if present obligation arising from past events exists and the fair value of the contingency can be measured reliably, even though an outflow of resources reporting economic benefits is not probable. U.S. GAAP requires that contingent liabilities are recognized at fair value if determinable during the measurement period. If fair value is not determinable, existing U.S. GAAP guidance with respect to contingencies is followed. Consolidation Criteria MFRS and IFRS Under IFRS and MFRS, an entity is required to consolidate subsidiaries over which it has established control, which is defined as the ability to govern the operating and financial policies so as to obtain benefits from the entity's activities. Thus, the basis for consolidating an entity depends on governance and risks and rewards. Control is presumed to exist when an entity directly or indirectly holds more than half of the voting common stock of the subsidiary, considering currently exercisable or convertible potential voting rights. However, control can also exist despite not holding more than half of voting stock when other factors are present that demonstrate the entity's ability to control based on an assessment of corporate governance and economic risk and benefits. U.S. GAAP U.S. GAAP requires consolidation when a company has a controlling financial interest over another entity, either through a majority voting interest or through the existence of other control factors. Additionally, it permits consolidation of variable interest entities for which the company is the primary beneficiary, which is defined as the entity that (i) will absorb a majority of the investee's expected losses and (ii) is entitled to receive a majority of the investee's expected residual returns or both. In the instance that a non-controlling interest in an investment exists, and such non-controlling interest has substantive rights to effectively participate in significant decisions related to the investee's ordinary course of business, the majority investor is precluded from consolidating such entity. Under both MFRS and U.S. GAAP, the term "minority interest" was changed to "non-controlling interest" in

165 Associated Companies MFRS MFRS requires entities to apply the equity method of accounting over investments in which the investor is able to exercise significant influence. Significant influence is presumed to occur when the investor holds between 10% and 50% of the investee, unless the contrary is demonstrated. Significant influence can also be demonstrated with a holding of less than 10% if a specific set of requirements is fulfilled. IFRS and U.S. GAAP IFRS as well establishes that investments in associates should be accounted for using the equity method of accounting when significant influence exists. However, significant influence is presumed to exist when the entity holds 20% to 50% of the investee, unless it can be clearly demonstrated that such investment does not constitute significant influence. As well, investments of less than 20% can be accounted for using the equity method of accounting if the ability to exercise significant influence can be clearly demonstrated. Under IFRS, entities must consider both shares held as well as potential voting rights that are currently exercisable. Potential voting rights are not considered under U.S. GAAP. Fair Value of Financial Instruments MFRS MFRS defines "fair value" as the amount an interested and informed market participant would be willing to exchange for the purchase or sale of an asset or to assume or settle a liability in a free market. As such, this definition can result in the use of either an entry or an exit price. An entity's own credit risk is not considered in the valuation of financial instruments. IFRS Under IFRS, the objective of determining fair value for a financial instrument that is traded in an active market is to arrive at the price at which a transaction would occur at the balance sheet date in that instrument (i.e., without modifying or repackaging the instrument) in the most advantageous active market to which the entity has immediate access. As such, assets are valued on the basis of an "in exchange" valuation premise; the fair value of a liability is determined on the basis of settlement of the liability. As well, fair value measurements should incorporate the bid price for assets and the asking price for liabilities and the midpoint of the bid-ask spread for offsetting market risk positions. U.S. GAAP U.S. GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Accordingly, this definition only considers an exit price. Furthermore, U.S. GAAP requires the consideration of the principal and most advantageous market and the highest and best use of the asset in order to determine its fair value, and not only the intentions of the entity with respect to such asset. As such, assets are valued on how they are best used, whether in conjunction with other assets ("in use") or on a stand-alone basis ("in exchange"); the fair value of liabilities is determined on the basis of the price that would be paid to transfer the obligation to another market participant. U.S. GAAP also prioritizes the inputs to valuation techniques used to measure fair value into three different levels, depending on whether or not the input is observable in an active market. Finally, U.S. GAAP requires that the fair value determination include consideration of the entity's own credit risk rating. Labor Obligations MFRS Liabilities and costs related to pension plans, seniority premiums and severance payments are accounted in a similar manner under both MFRS and U.S. GAAP. The primary difference is that MFRS does not require recognition of the over-or under-funded status of a defined postretirement plan for which reason unrecognized items do not form part of the labor obligation liability until the amounts are amortized to such liability over future years. IFRS IFRS requires the recognition of a provision only when an entity has a present obligation as a result of a past event and certain other conditions are met. Accordingly, while IFRS contemplates recognition of liabilities and costs related to pension plans and seniority premiums in a manner similar to that of MFRS, that the obligation for 163

166 employee termination liabilities (severance payments) occurs on the date on which the labor relationship with the employee is terminated, for which reason, employee termination liabilities are generally not accrued over the service period of the employee, but rather recognized on the date of termination. U.S. GAAP Under U.S. GAAP, the accounting for defined benefit postretirement plans, which include seniority premiums within Mexico, requires that the overfunded or underfunded status of a defined benefit postretirement plan (other than a multiemployer plan) be recognized within the balance sheet, as an asset or liability, as the case may be. Changes in the funded status in the year must be recognized through other comprehensive income and are subsequently amortized from other comprehensive income to results in future years. Deferred Income Tax and Statutory Employee Profit Sharing MFRS MFRS is similar to IFRS and U.S. GAAP with respect to accounting for deferred income taxes in that an asset and liability approach is required. Under this approach, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, as well as the recognition of operating loss and tax credit carryforwards. These temporary differences are measured using enacted tax rates expected to apply to taxable income in the years in which such temporary differences are expected to be recovered or settled. Under MFRS, (i) any deferred tax assets recorded must be reduced by a valuation allowance if it is "highly probable" that all or a portion of the deferred tax asset will not be realized and (ii) the net deferred income tax asset or liability is presented as a long-term asset or liability. In addition, during 2007, the Mexican tax authorities issued a new Business Flat Tax or IETU. For MFRS purposes, companies must determine whether they will be subject to regular income tax or IETU in the future and recognize the deferred income tax accordingly. Therefore, deferred taxes are calculated by scheduling the reversal of temporary differences under each tax regime and applying either the income tax or IETU rate to such temporary differences, based on what the entity expects to pay in each period. If, based on its projections, a company determines that it will be subject to both IETU and ISR in the future, it is required to schedule out the reversal of temporary differences under each tax regime and record the amount that represents the larger liability or the smaller benefit. Under MFRS, calculation of deferred employee profit sharing requires a balance sheet methodology similar to that used for deferred income taxes. MFRS allows the recognition of a net statutory employee profit sharing asset. Finally, during 2009, the Mexican tax authorities enacted various tax reforms that included, among other changes, changes in tax rates and other changes with respect to the consolidation tax regime, such changes to become effective in MFRS issued an interpretation specifically addressing the accounting for these tax changes enacted in 2009, indicating that certain effects could be recognized directly through retained earnings, as opposed to affecting results of IFRS and U.S. GAAP Both IFRS and U.S. GAAP also require a balance sheet approach to calculating deferred income taxes. However, under IFRS, a deferred tax asset shall be recognized to the extent that it is "probable" that taxable profit will be available against which the deductible temporary difference can be utilized; under U.S. GAAP, a valuation allowance is recognized against deferred income tax assets if, based on the weight of available evidence, it is "more likely than not" that all or a portion of the deferred tax asset will not be realized. While the accounting for deferred income taxes is similar under MFRS, IFRS and U.S. GAAP, IFRS includes certain exceptions to the recognition of a deferred tax asset or liability for taxable or deductible temporary differences. One such exception includes the first-time recognition of an asset or liability in a transaction not deemed as a business combination and for which at the time of the transaction, recognition of the asset or liability does not affect either accounting or tax profit or loss. In such situations, the related deferred tax asset or liability must not be recognized for financial reporting purposes. U.S. GAAP permits the recognition of a deferred tax asset or liability, but they are calculated using specific equations. Additionally, with respect to goodwill, neither IFRS nor U.S. GAAP permit the recognition of a deferred tax liability related to goodwill even though a taxable temporary difference exists. IFRS considers that goodwill is not frequently deductible in determining the entity's taxable income, whether by impairment of the goodwill carrying value or when goodwill is cancelled upon the sale of business originating such goodwill. 164

167 In addition, with respect to IETU, similar to MFRS, companies must determine whether they will be subject to regular income tax or IETU in the future based on company projections, and accordingly recognize deferred taxes based on the tax they expect to pay in each period. However, if a company's projections indicate that it will be subject to both IETU and ISR in the future, both IFRS and U.S. GAAP require the entity to schedule out the reversal of temporary differences for both ISR and IETU, by year, and recognize a corresponding deferred tax asset or liability accordingly. This approach results in the recognition of a deferred tax asset or liability that includes both income tax and IETU effects. With respect to the Mexican income tax reforms enacted in 2009, both IFRS and U.S. GAAP would require that any and all changes resulting from application of the tax reforms be recorded through income tax expense in profit or loss of 2009, rather than the special treatment through retained earnings as permitted by MFRS. Both MFRS and IFRS require deferred income taxes to be classified as long-term. U.S. GAAP requires that the deferred income tax asset or liability be classified as current or long-term, depending on the asset or liability which generates such deferred. Finally, IFRS does not contemplate the recognition of deferred statutory employee profit sharing. U.S. GAAP does, and requires the use of the balance sheet methodology similar to MFRS, but U.S. GAAP does not allow the recognition of a net deferred employee profit sharing asset. Impairment of Long-Lived Assets other than Goodwill MFRS MFRS requires long-lived assets with definite lives, such as property, machinery and equipment, including certain intangible assets, be evaluated periodically in order to determine whether there is an indication of potential impairment. When impairment indicators exist, an impairment loss is recognized based on the recoverable amount of the asset. The recoverable amount of the asset is the greater of the net selling price of the asset and its value in use, which such value is determined based on recognized valuation techniques, such as discounted future net cash flows. In addition, under certain limited circumstances, the reversal of previously recognized impairment losses is permitted. Any recorded impairment losses are presented as non-ordinary expenses. IFRS Under IFRS an impairment loss is measured as the excess of an asset's carrying amount over its recoverable amount. Recoverable amount is defined as the higher of an asset's fair value less costs to sell (i.e. net sale proceeds) and its value in use. Fair value less costs to sell is the amount obtainable from the sale of an asset or cash-generating unit in an arm's length transaction between knowledgeable, willing parties, less the costs of disposal. The value in use involves discounting the expected future cash flows to be generated by the asset to their net present value. U.S. GAAP U.S. GAAP requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The carrying amount of an asset is not recoverable when the estimated future undiscounted cash flows expected to result from the use of the asset are less than the carrying value of the asset. The impairment loss is measured as the difference between the carrying value of the asset and its fair value. Any impairment loss recorded for an asset to be held and used establishes a new cost basis and, therefore, cannot be reversed in the future. Any recorded impairment losses are presented in operating expenses. Impairment of Goodwill MFRS The determination of impairment of goodwill under MFRS is a one-step test which compares the carrying value of goodwill to its recoverable value. Recoverable value is the greater of net selling price of the asset, if obtainable, and its value in use. Value in use is determined based on recognized valuation techniques, including discounted future net cash flows. Goodwill impairments can be reversed under certain circumstances. IFRS Under IFRS, impairment of goodwill is measured at the cash-generating unit level, or the smallest group of assets that includes the asset and that generates cash inflows from continuing use that are largely independent of the cash inflows from other asset groups or groups of assets. The carrying value of the cash-generating unit is compared 165

168 to its recoverable amount to determine an impairment loss, if one exists. Goodwill impairments may not be reversed. U.S. GAAP Impairment of goodwill is performed at the reporting unit level under U.S. GAAP, which is equivalent to an operating segment or one level below an operating segment. U.S. GAAP requires a two-step approach to measuring impairment on goodwill, which includes (i) comparing the fair value of the reporting unit to its carrying value; if it is less, then goodwill is considered impaired; (ii) the goodwill impairment is measured as the excess of the carrying amount of goodwill over its implied fair value. The implied fair value of goodwill is determined by a hypothetical purchase price allocation in which the fair value determined in the first step is allocated to the various assets and liabilities included in the reporting unit in the same manner that goodwill is determined in a business combination. Goodwill impairments may not be reversed. Statement of Changes in Financial Position MFRS MFRS requires the presentation of a statement of changes in financial position, which presented sources and uses of resources, determined based on the change in assets and liabilities in the balance sheet in constant pesos, regardless of whether such changes stemmed from cash or non-cash transactions. MFRS requires the presentation of a cash flow statement, using either the direct or indirect method, presented in nominal pesos. A statement of cash flows presents cash inflows and outflows stemming from operating, investing and financing activities of a company on a gross basis. IFRS and U.S. GAAP IFRS and U.S. GAAP require a statement of cash flows describing the cash flows provided by or used in operating, investing and financing activities, similar to that presented under MFRS beginning January 1, Noncash transactions are excluded from the statement of cash flows. Under U.S. GAAP, supplemental disclosure of interest and income taxes paid must be disclosed; interest and dividends are generally presented within operating activities. Under IFRS, the statement of cash flows generally begins with pre-tax net income; and optional presentations of interest exist under IFRS. Deferred Income Tax and Statutory Employee Profit Sharing MFRS MFRS establishes that interest should be recognized on accrual basis and not describing a specific method. IFRS and U.S. GAAP Under IFRS and U.S. GAAP companies are required to recognize accrued interest exclusively applying the effective interest method. Other Income and Expense Under MFRS, other income (expense) includes items which have been excluded from the determination of operating income under MFRS. Certain items included therein, such as employee profit sharing and other labor costs and gains and losses on the sale of fixed assets, must be included as part of operating income (loss) for both IFRS and U.S. GAAP purposes. 166

169 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Unaudited Consolidated Financial Statements of Grupo Elektra for the Nine Months Ended F-2 September 30, 2012 and Condensed consolidated balance sheets as of September 30, 2012 and F-5 Condensed consolidated statements of income for the nine months ended September 30, 2012 and F-7 Condensed consolidated statements of changes in stockholders' equity for the nine months ended September 30, 2012 and F-8 Condensed consolidated statements of cash flows for the nine months ended September 30, 2012 and F-9 Notes to consolidated financial statements... F-10 F-49 Audited Consolidated Financial Statements of Grupo Elektra as of December 31, 2011 and Consolidated balance sheets as of December 31, 2011 and F-52 Consolidated statements of income for the years ended December 31, 2011 and F-54 Consolidated statements of changes in stockholders' equity for the years ended December 31, 2011 and F-55 Consolidated statements of cash flows for the years ended December 31, 2011 and F-56 Notes to consolidated financial statements... F-57 F-89 Audited Consolidated Financial Statements of Grupo Elektra as of December 31, 2010 and Consolidated balance sheets as of December 31, 2010 and F-92 Consolidated statements of income for the years ended December 31, 2010 and F-94 Consolidated statements of changes in stockholders' equity for the years ended December 31, 2010 and F-95 Consolidated statements of cash flows for the years ended December 31, 2010 and F-96 Notes to consolidated financial statements... F-97 F-130 Audited Consolidated Financial Statements of Advance America as of December 31, 2010 and Consolidated balance sheets as of December 31, 2010 and F-132 Consolidated statements of income for the years ended December 31, 2010 and F-133 Consolidated statements of changes in stockholders' equity for the years ended December 31, 2010 and F-134 Consolidated statements of cash flows for the years ended December 31, 2010 and F-135 Notes to consolidated financial statements... F-136 F-1

170 F-2

171 F-3

172 F-4

173 F-5

174 F-6

175 F-7

176 F-8

177 F-9

178 F-10

179 F-11

180 F-12

181 F-13

182 F-14

183 F-15

184 F-16

185 F-17

186 F-18

187 F-19

188 F-20

189 F-21

190 F-22

191 F-23

192 F-24

193 F-25

194 F-26

195 F-27

196 F-28

197 F-29

198 F-30

199 F-31

200 F-32

201 F-33

202 F-34

203 F-35

204 F-36

205 F-37

206 F-38

207 F-39

208 F-40

209 F-41

210 F-42

211 F-43

212 F-44

213 F-45

214 F-46

215 F-47

216 F-48

217 F-49

218 F-50

219 F-51

220 F-52

221 F-53

222 F-54

223 F-55

224 F-56

225 F-57

226 F-58

227 F-59

228 F-60

229 F-61

230 F-62

231 F-63

232 F-64

233 F-65

234 F-66

235 F-67

236 F-68

237 F-69

238 F-70

239 F-71

240 F-72

241 F-73

242 F-74

243 F-75

244 F-76

245 F-77

246 F-78

247 F-79

248 F-80

249 F-81

250 F-82

251 F-83

252 F-84

253 F-85

254 F-86

255 F-87

256 F-88

257 F-89

258 F-90

259 F-91

260 F-92

261 F-93

262 F-94

263 F-95

264 F-96

265 F-97

266 F-98

267 F-99

268 F-100

269 F-101

270 F-102

271 F-103

272 F-104

273 F-105

274 F-106

275 F-107

276 F-108

277 F-109

278 F-110

279 F-111

280 F-112