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1 Latin American Equity Research Mexico City, February 24, 2009 WALMEX For Those About to Buy, We Salute You Upgrading to Buy Joaquin Ley* Company Update Mexico Retail BUY Roberto Liaño* Mexico: Banco Santander S.A. Mexico: Banco Santander S.A. (5255) (5255) (2/23/09) CURRENT PRICE: US$1.95/M$29.10 TARGET PRICE: US$2.85/M$39.00 What s Changed Rating: From Hold to Buy Price Target (US$): From 3.15 to 2.85 EBITDA Estimates (US$): 09 From 2.10 Bn to From 2.31 Bn to From 2.64 Bn to 2.57 Company Statistics Bloomberg WALMEXV 52-Week Range (US$) E P/E Rel to the IPC (x) E P/E Rel to Retail (x) 1.0 IPC (US$) 1,204 3-Yr EPS CAGR (07-10E) 14.1% Market Capitalization (US$ Mn) 16,424 Float (%) 32 3-Mth Avg Daily Vol (US$000) 31,490 Shares Outst Mn 8,435 Net Debt/Equity (x) -0.1 Book Value per Share (US$) 0.69 Estimates and Valuation Ratios E 2010E 2011E Net Earn (M$ Mn) 14,673 15,196 17,670 21,635 Current EPS Net Earn (US$ Mn) 1,061 1,109 1,307 1,574 Current EPS P/E (x) P/Sales (x) P/CE (x) FV/EBITDA (x) FV/Sales (x) FCF Yield (%) 3.1% 3.2% 3.8% 5.1% Div per Share (US$) Div Yield (%) 1.9% 2.3% 2.4% 2.7% Sources: Bloomberg, Company reports, and Santander estimates. Investment Thesis: We are upgrading our rating on Walmex s shares to Buy from Hold. We maintain our YE09 TP in pesos at M$39.00 per share; however, due to changes in our exchange rate assumption, we lowered our YE09 TP in dollars to US$2.85 from US$3.15. The upgrade is based on what we view as an already compelling valuation relative to both its peers and historical trading levels. In U.S. dollars, Walmex s shares currently trade at a 2009E P/E of 14.8x, at a discount to the average of the Latin American retail sector of 15.5x. In pesos, Walmex trades at a 12-month forward P/E of 16.2x, close to its record low and close to two standard deviations below its historical average. While we believe we are seeing a secular de-rating of Walmex s valuation (based on slower earnings growth rates and the future development of the banking business), we also perceive the current level as an attractive entry point, with limited downside risk, based on recent history. Based on data for the past few months, we still believe Walmex can show some SSS growth in 2009 (3%), while ongoing developments in logistics and inventory management should allow for a stable gross margin, despite the company s being aggressive in pricing and the mix deteriorating. (In 4Q08, Walmex expanded its gross margin by 30 bps YoY.) We expect much less pressure on SG&A from utilities in 2009; however, we believe the real drop we expect in SSS and the expenses of the bank should still put pressure on the EBITDA margin in 2009, which we anticipate to contract nearly 30 bps compared to In any case, we expect the FCF yield for 2009 to remain basically unchanged YoY (close to 3%) and the ROE (almost 20%) to do the same. Reasons for Changes in Earnings Estimates. We have lowered our U.S. dollar EPS estimates for 2009, 2010 and 2011 by 12%, 6%, and 2% respectively, as a result of factoring our new FX assumptions, implying a steeper depreciation of the Mexican peso. In local currency, our estimates have not changed much. Valuation and Risks: Our YE09 TP is based on a DCF analysis for which we use a WACC of 10.9% and a perpetuity growth rate of 3.5%. Our TP offers an upside in U.S. dollars of 46%, which coupled to an expected dividend yield of 2%, indicates a total expected return of 48% (compared with our local benchmark of 10%). Our TP implies a target 12 forward P/E of 18.6x, 15% above its current level and showing a 13% discount to the historical average. Risks include: weaker-thanexpected SSS; a narrower-than-anticipated gross margin; a more negative-than-expected impact from the banking operation in the short term; and potential fiscal changes. * Employed by a non-us affiliate of Santander Investment Securities Inc. and is not registered/qualified as a research analyst under FINRA rules.

2 Walmex Wrapping up 2008 with total sales of US$17.7 billion, EBITDA of US$1.7 billion, and net income of US$1.1 billion in 2008, Walmex is the largest Mexican food retailer. At year-end 2008, the company operated 753 self-service stores, 84 department stores, and 372 restaurants for a total selling space of 3,734,771 square meters and 83,650 seats. According to our estimates, Walmex has a market share of around 45% within the formal food retail sector. Wal-Mart Stores owns 68% of the total outstanding shares, while the remaining 32% is free float. OUTLOOK FOR 2009 There is no doubt that 2009 will be more challenging than From GDP growth in Mexico of 1.3% in 2008, our economics team now expects that to drop to a negative 1.6% for Compared with payroll growth of 2.2% in real terms in 2008 (+0.1% real wages, +2.1% employment), we expect a decline of 2.4% in 2009 (all due to job losses). For a retailer such as Walmex whose sales of non-food items is close to 50% of its total sales, this scenario is particularly worrisome, as it could open up the potential for a further deterioration in the mix, which would hurt both the average ticket and margins. However, we note that the GDP contraction we assume for full-year 2009 is in line with the reported drop in 4Q08. Despite a number of challenges in the quarter negative calendar effects and the loss of the food voucher program from the Mexico City government Walmex still posted a SSS nominal increase of 1.8% and total sales growth of 8.4%. Even more significant, in our opinion, was that, despite the sales mix deterioration (sales of Vips and Suburbia in 2008 dropped 5% YoY, and their EBIT fell more than 20% compared to 2007) and a very aggressive pricing effort, the company s gross margin for the quarter expanded 30 bps year on year. The SSS data for December 2008 and January 2009, when adjusted for calendar effects and the food voucher impact, suggest that likefor-like revenue might be growing in excess of 4% in nominal terms. Therefore, although the economic environment continues to deteriorate, recent data released by the company gives us some level of comfort about the outlook for Walmex in Food inflation in Mexico in 2009 should still be high, at around 7%, compared with close to 10% in However, while this looks supportive for food retailers, it may not benefit Walmex. In recent conversations with company management, we learned (to our surprise) that Walmex s product price decline in 2008 was even steeper for non-durables than for durables, following the aggressive price-cutting efforts carried out by the company. After the analysts meeting on February 19, it is clear to us that these pricing efforts are set to continue throughout 2009, so even slightly lower food inflation might be beneficial for the company s margins. Walmex intends to focus pricing efforts in 2009 on some of the most important product categories for consumers, aiming to further boost customer flows at the stores. The key product categories for Walmex in 2009 will continue to be perishable products, household care, affordable entertainment, and pharmacy. The pricing effort will be accompanied by an advertising campaign, as well as by improved customer service, aimed at taking advantage of the fact that, in this environment, some competitors might be cutting down on service. For the specialty businesses (Sam s Club, Suburbia, Vips), management expects that these formats might benefit from some trading down by consumers from more expensive department stores/restaurants, although we also believe that these very same formats might lose some customers to the informal commerce segment. Our estimate for 2009 calls for a nominal SSS growth rate of 3.0%, all of it based on bigger customer flows. The abovementioned price efforts, together with the ongoing deterioration in the sales mix might lead to some gross margin erosion in However, as we discussed earlier, in this same context, the company was able to not just sustain but to expand the gross margin in 4Q08. For 2009, we are assuming a stable gross margin at 21.8%, based on (1) further improvements in the supply chain for perishables, as Walmex continues to eliminate middlemen in the process, (2) increase self-distribution from 81% to 90%. (3) the company optimize inventory management, 2 2

3 reducing the need for markdowns and reducing shrinkage, and (4) potentially increase privatelabel products as a percentage of total sales. We do not expect imported goods to put any significant pressure on the gross margin. According to recent conversations with management, Walmex is passing through the FX depreciation to prices, which competitors are doing as well. Therefore, we expect this should translate into lower sales for the imported goods segment, but probably not put the margin at risk. On February 19, Walmex announced a sales-floor expansion of 10% for We viewed the data as positive, particularly considering the current macroeconomic environment. A 10% expansion implies some 380,000 additional square meters of sales floor. We point out that, as a whole, members of ANTAD (the National Association of Self-Service and Department Stores) plan to expand sales floor by 4.7% in 2009, or about 700,000 square meters. This means that in 2009, Walmex representing some 30% of ANTAD s total sales will represent more than 50% of the expansion. The fact that Walmex s main competitors are planning to expand minimally or not at all in 2009 should, therefore, increase the industry leader s market share. The 10% sales floor expansion announced by Walmex is consistent with the guidance provided by the company over time about its five-year rolling-expansion plan. Some investors/analysts have argued that in order to take advantage of both its financial muscle and the situation of its main competitors, Walmex should have accelerated organic expansion in We disagree with this. We believe that if Walmex had accelerated its expansion in the face of decreasing demand, its margins, return on investment, and cash flow generation would have been put at risk. In other words, it would have represented increasing market share gains at the expense of reducing shareholder value. Following a 12% selling floor expansion in 2008, the 10% announced for 2009 plus our assumption of a SSS increase of 3% lead to a total revenue growth estimate of almost 9% YoY in nominal peso terms. Regarding 2009 expansion, Walmex will focus on the bodega format, particularly on the smaller concepts of bodega (Mi Bodega and Bodega Express). Note that although the bodega concept has a lower margin than a hyper market (although still higher than a membership club), it is the format that matures the fastest, the one that is less decretive to EBIT in the first 12 months of operations, and, in time, the one generating the highest ROIC. Also, expansion through the smaller formats relates to the fact that 50% of the market still is in that kind of format, representing an attractive market-share-gain opportunity, in our view. As we expect expenses to increase as a proportion of total sales in 2009, despite gross margin stability, we believe that the EBITDA margin might drop some 30 bps this year. At the analysts meeting, Walmex management elaborated on several initiatives to reduce SG&A expenses, including renegotiating contracts with media and telecommunication companies, reducing store/office supply costs, increasing associates productivity by implementing local/global benchmarks, and reducing energy consumption. On this front, following payroll and D&A, energy is the most important expense line. In 2008, this expense increased significantly by some 30%. For 2009, we are assuming it evolves in line with expected inflation (+4.3%). If the company is able to actually reduce that expense, there would be upside risk in our margin estimate. In any case, our SSS growth assumption still represents a real drop of more than 1%, implying some operating deleveraging. Also, we expect the bank s expenses to keep growing. Conservatively, we are assuming these two factors will not be offset by the above-mentioned expense reduction initiatives, thereby there will be pressure on the EBITDA margin. Our estimate calls for a nominal EBITDA increase slightly north of 6% in Note that our Buy rating on Walmex s shares is based on valuation and balance sheet soundness, for we do not expect any earnings catalysts in On this front, we highlight that 1Q09 earnings should be particularly weak (we expect a bottom-line decline of 5% YoY), not just because of the nearly 3% GDP drop we anticipate for the quarter, but also because the U.S. investors inquiries should be directed to Santander Investment Securities Inc. at (212) /(212)

4 Walmex calendar will be adverse in 1Q09 compared with 1Q08, as 2008 was a leap year and Easter was in March, while this year, the holiday will be in April. Figure 1. Walmex Revenue Growth, Margins, Stores, and Square Meters 2008A 2011E 2008A 2009E 2010E 2011E 09E/08A 10E/09E 11E/10E Nominal M$ Total Revenue Growth 11.1% 8.9% 11.3% 14.5% Nominal M$ SSS Growth 4.6% 3.0% 5.0% 7.0% Gross Margin 21.8% 21.8% 22.1% 22.5% EBITDA Margin 9.8% 9.5% 9.9% 10.4% Net Margin 6.0% 5.7% 6.0% 6.4% Mi Bodega Express % 78% 49% Bodega Aurrera % 17% 16% Superama % 6% 8% Wal-Mart Supercenter % 9% 9% Sam s Club % 7% 10% Suburbia % 8% 11% Vips % 9% 5% Total M2 3,734,771 4,115,639 4,528,499 5,022,726 10% 10% 11% Source: Walmex, Santander estimates. REVISED ESTIMATES We are lowering our U.S. dollar estimates for 2009, 2010, and 2011 as a result of having factored into our earnings model new FX assumptions that imply a weaker Mexican peso. However, our estimates in local currency barely changed. Figure 2. Walmex Estimate Revisions, 2009E-2011E (U.S. Dollars in Millions*) 2009E 2010E 2011E Previous Current Change Previous Current Change Previous Current Change Revenue 21,876 19,471-11% 23,582 21,962-7% 25,503 24,721-3% Op. Profit 1,725 1,522-12% 1,920 1,805-6% 2,226 2,181-2% Op. Margin 7.9% 7.8% -1% 8.1% 8.2% 1% 8.7% 8.8% 1% EBITDA 2,095 1,856-11% 2,305 2,172-6% 2,637 2,574-2% Net Income 1,266 1,109-12% 1,392 1,307-6% 1,610 1,574-2% EPS % % % *Except per share/adr data. Sources: Company reports and Santander estimates. Figure 3. Walmex Estimate Revisions, 2009E-2011E (Mexican Pesos in Millions*) 2009E 2010E 2011E Previous Current Change Previous Current Change Previous Current Change Revenue 269, ,753-1% 302, ,927-2% 341, ,853 0% Op. Profit 21,222 20,848-2% 24,636 24,403-1% 29,788 29,979 1% Op. Margin 7.9% 7.8% -1% 8.1% 8.2% 1% 8.7% 8.8% 1% EBITDA 25,767 25,421-1% 29,575 29,367-1% 35,282 35,385 0% Net Income 15,577 15,196-2% 17,862 17,670-1% 21,537 21,635 0% EPS % % % *Except per share/adr data. Sources: Company reports and Santander estimates. 4

5 VALUATION The target price we reach through our DCF is US$2.85 per share for year-end We calculated a WACC of 10.9%. The cost of equity is of 11.3%, for which we assume a risk-free rate of 6.2%, an equity risk premium of 6.5%, and a beta of The after-tax cost of debt assumed is 3.6%, and the equity/debt structure considered is 95%/5%. The perpetuity growth rate considered is 3.5%. Figure 4. Walmex Free Cash Flow 2010E 2019E (U.S. Dollars in Millions) 2010E 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E EBIT 1,805 2,181 2,530 2,881 3,225 3,606 4,009 4,392 4,781 5,027 Tax Rate 28.0% 28.0% 28.0% 28.0% 28.0% 28.0% 28.0% 28.0% 28.0% 28.0% NOPLAT 1,300 1,570 1,821 2,074 2,322 2,596 2,887 3,162 3,442 3,620 Depreciation Changes in WC CAPEX -1,037-1,133-1,235-1,226-1,333-1,294-1,383-1,313-1,217-1,058 Deferred Liabilities FCF ,262 1,412 1,762 2,004 2,389 2,804 3,070 Source: Santander Investment. WC: Working Capital. Figure 5. Walmex Discounted Cash Flow 2010E 2019E (U.S. Dollars in Millions) 2010E 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E Residual WACC 10.9% 10.9% 10.9% 10.9% 10.9% 10.9% 10.9% 10.9% 10.9% 10.9% 10.9% Discounted CFs ,044 1,105 1,091 14,743 NPV of CFs 8,800 Additions 766 Deductions 294 Target Mkt Cap 24,015 Current Mkt Cap 16,424 Target Price 2.85 Source: Santander. Additions include cash and non consolidated subsidiaries. Deductions include debt and minorities. In pesos, the stock is trading at a 12 months forward P/E of 16.2x, almost two standard deviations below its historical average of 21.4x. We believe that we are witnessing a secular de-rating of Walmex s valuation, based on two factors. First, the historical average P/E is built on a net profit CAGR of nearly 20% in nominal pesos, which we do not expect to see in the future, at least not sustainably. Second, we believe that, at some point (we are expecting breakeven by year-end 2011), the bank will be accretive to earnings but dilutive to valuation when considering the P/E multiples at which banks trade in Latin America. Nevertheless, for the time being, we believe that the current valuation level (almost an all-time low) represents a compelling entry point with limited downside risk, considering that from 2010 onward, we expect Walmex s earnings to grow in the mid- to high-teens annually. Our target price implies a target 12-month forward P/E of 18.6 times, 15% above current levels but still 13% below the historical average and in line with the one negative standard deviation for that average. In U.S. dollars, Walmex trades at a 2009E P/E of 14.8x, a 5% discount to the average of the Latin American retail sector. We believe that the past, when Walmex traded at a significant premium to its peers, is gone for good, given the above-mentioned reasons. However, the fact that the stock trades at a discount already gives us some level of comfort that the current valuation level for Walmex should present limited downside risk. U.S. investors inquiries should be directed to Santander Investment Securities Inc. at (212) /(212)

6 Walmex Figure 6. Walmex 12MF PE January 2003 to Date SD SD 24.4 Average SD SD 15.5 Current 16.2 Jan-03 Apr-03 Jul-03 Oct-03 Jan-04 Apr-04 Jul-04 Sep-04 Dec-04 Mar-05 Jun-05 Sep-05 Dec-05 Mar-06 Jun-06 Sep-06 Dec-06 Mar-07 Jun-07 Sep-07 Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 Source: Santander estimates Figure 7. Latin American Retailers Valuation Table. Closing Prices as of February 23, 2009 Current Target Market FV/EBITDA P/E Ticker Rating Price Price Upside Cap 2009E 2010E 2009E 2010E Alsea ALSEA* Buy % Comerci COMERUBC UR 0.19 UR NA 203 NA NA NA NA Famsa GFAMSAA Hold % Liverpool LIVEPOL1 Underperform % 3, Soriana SORIANAB Hold % 2, Walmex WALMEXV Buy % 16, Mexico 22, Cencosud CENCOSUD Buy % 3, D&S DYS Underperform % 2, Falabella FALAB Buy % 6, La Polar LAPOLAR Buy % Ripley RIPLEY Buy % Chile 14, Dufry DUFB11 Buy % Guararapes GUAR3 Hold % Hering HGTX3 Buy % L Ame. LAME4 Buy % 1, L Renner LREN3 Buy % CBD CBD Hold % 2, B2W BTOW3 Buy % 1, Brazil 7, LatAm 44, Sources: Company reports and Santander estimates 6

7 RISKS A poorer-than-expected SSS performance would have a negative impact on our top-line growth estimate and also could erode the EBITDA margin, following lower operating leverage. An unexpected worsening of the company s working capital structure could have a negative affect on both target price and rating. If inventory turns perform worse than expected; and/or payables deteriorate following a potentially more aggressive strategy with suppliers, it would hurt the working capital structure, potentially having a negative impact on free cash flow generation. We expect the gross margin to be stable or slightly improve going forward. However, if a massive opening of low-gross-margin formats (mainly clubs), and/or stepped-up competition and/or deteriorated macroeconomic conditions put pressure on the gross margin, negatively affecting EBITDA, returns on investment, and cash flow generation, that could threaten our target price and rating. An unexpected slowdown of the expansion plan could have a negative effect on our estimates, as a significant portion of the EBITDA growth we forecast for Walmex should come from selling-floor expansion. Changes to the VAT law could have a negative impact on our estimates and target price. Applying a VAT rate to products that currently have a 0% rate might hurt both sales and the gross margin. However, changes to the VAT law do not seem to be on the Mexican Congress s schedule. We expect Walmex s banking operation to reach breakeven at some point in If expenses associated with the banking operation are larger than expected, that might have a negative impact on our estimates and target price. U.S. investors inquiries should be directed to Santander Investment Securities Inc. at (212) /(212)

8 Walmex FINANCIAL STATEMENTS 8 Figure 8. Walmex Income Statement, Balance Sheet, and CF Statement, E (U.S. Dollars in Millions) Income Statement E 2010E 2011E Sales 17, , , , Cost of Sales -13, , , , Gross Profit 3, , , , Oper. and Adm. Expenses -2, , , , Operating Profit 1, , , , Depreciation EBITDA 1, , , , Financing Costs Interest Paid Interest Earned Monetary Gain/Loss FX Gain/Loss Other Financial Operations Profit before Taxes 1, , , , Tax Provision Profit after Taxes 1, , , , Subsidiaries Extraordinary Items Minority Interest Net Profit 1, , , , Balance Sheet 2008 % 2009E % 2010E % 2011E % Assets 8, , , , Short-Term Assets 2, , , , Cash and Equivalents Accounts Receivable Inventories 1, , , , Other Short-Term Assets Long-Term Assets Fixed Assets 5, , , , Deferred Assets Other Assets Liabilities 3, , , , Short-T. Liabilities 2, , , , Suppliers 1, , , , Short-Term Loans Other ST Liabilities Long-Term Loans Deferred Liabilities Other Liabilities Majority Net Worth 5, , , , Net Worth 5, , , , Minority Interest Cash Flow E 2010E 2011E Net Majority Earnings 1, , , ,573.7 Non-Cash Items Changes in Working Capital Capital Increases/Dividends Change in Debt Capital Expenditures , ,132.5 Net Cash Flow Beginning Treasury Ending Treasury Sources: Company reports and Santander estimates.

9 Figure 9. Walmex Income Statement, Balance Sheet, and CF Statement, E (Millions of Nominal Mexican Pesos) Income Statement E 2010E 2011E Sales 244, , , , Cost of Sales -191, , , , Gross Profit 53, , , , Oper. and Adm. Expenses -33, , , , Operating Profit 19, , , , Depreciation 4, , , , EBITDA 23, , , , Financing Costs Interest Paid Interest Earned Monetary Gain/Loss FX Gain/Loss Other Financial Operations Profit before Taxes 19, , , , Tax Provision -5, , , , Profit after Taxes 14, , , , Subsidiaries Extraordinary Items Minority Interest Net Profit 14, , , , Balance Sheet E 2010E 2011E Assets 118, , , , Short-Term Assets 39, , , , Cash and Equivalents 11, , , , Accounts Receivable 4, , , , Inventories 22, , , , Other Short-Term Assets Long-Term Assets Fixed Assets 79, , , , Deferred Assets Other Assets Liabilities 44, , , , Short-T. Liabilities 35, , , , Suppliers 27, , , , Short-Term Loans Other ST Liabilities 7, , , , Long-Term Loans 3, , , , Deferred Liabilities Other Liabilities 5, , , , Majority Net Worth 74, , , , Net Worth 74, , , , Minority Interest Cash Flow E 2010E 2011E Net Majority Earnings 14, , , ,634.8 Non-Cash Items 4, , , ,505.3 Changes in Working Capital 1, Capital Increases/Dividends -6, , , ,964.1 Change in Debt Capital Expenditures -11, , , ,569.0 Net Cash Flow 2, Beginning Treasury 8, , , ,836.1 Ending Treasury 11, , , ,009.8 Sources: Company reports and Santander estimates. U.S. investors inquiries should be directed to Santander Investment Securities Inc. at (212) /(212)

10 Walmex IMPORTANT DISCLOSURES Walmex 12-Month Relative Performance (U.S. Dollars) WALMEX IPC Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Sources: Bloomberg and Santander. Walmex Three-Year Stock Performance (U.S. Dollars) H $3.00 2/16/06 H $ /19/05 H $3.85 9/21/06 H $4.80 1/10/07 B $5.00 7/28/07 B $4.60 2/15/08 H $4.60 7/24/08 H $ /4/08 B $ /27/ D-05 M-06 J-06 S-06 D-06 M-07 J-07 S-07 D-07 M-08 J-08 S-08 D-08 3,500 3,000 2,500 2,000 1,500 1, Analyst Recommendations and Price Objectives SB: Strong Buy B: Buy H: Hold UP: Underperform S: Sell UR: Under Review Walmex (L Axis) IPC (R Axis) Due to the decreased liquidity of the Walmex ADR (WMMVY), we have switched our coverage to the local share (WALMEXV MM) as of June 7, Our target price has been adjusted accordingly. Source: Santander. 10

11 Key to Investment Codes IMPORTANT DISCLOSURES Rating Definition % of Companies Covered with This Rating % of Companies Provided Investment Banking Services in the Past 12 Months Buy Expected to outperform the local market benchmark by more than 10% % 65.63% Hold Expected to perform within a range of 0% to 10% above the local market benchmark % 21.88% Underperform/Sell Expected to underperform the local market benchmark. 9.14% 12.50% Under review 1.08% The numbers above reflect our Latin American universe as of Friday, February 6, For a discussion, if applicable, of the valuation methods used to determine the price targets included in this report and the risks to achieving these targets, please refer to the latest published research on these stocks. Research is available through your sales representative and other electronic systems. Target prices are 2009 year-end unless otherwise specified. Recommendations are based on a total return basis (expected share price appreciation + prospective dividend yield) unless otherwise specified. Stock price charts and rating histories for companies discussed in this report are also available by written request to Santander Investment Securities Inc., 45 East 53 rd Street, 17 th Floor (Attn: Research Disclosures), New York, NY USA. Ratings are established when the firm sets a target price and/or when maintaining or reiterating the rating. Ratings may not coincide with the above methodology due to price volatility. Management reserves the right to maintain or to modify ratings on any specific stock and will disclose this in the report when it occurs. Valuation methodologies vary from stock to stock, analyst to analyst, and country to country. Any investment in Latin American equities is, by its nature, risky. A full discussion of valuation methodology and risks related to achieving the target price of the subject security is included in the body of this report. The benchmark used for local market performance is the country risk of each country plus the 1-year U.S. Treasury yield plus 6.5% of equity risk premium, unless otherwise specified. The benchmark plus the 10.0% differential used to determine the rating is time adjusted to make it comparable with the total return of the stock over the same period. For additional information about our rating methodology, please call (212) This research report ( report ) has been prepared by Santander Investment Securities Inc. ("SIS"; SIS is a subsidiary of Santander Investment I, S.A. which is wholly owned by Banco Santander, S.A. ["Santander"]) on behalf of itself and its affiliates (collectively, Grupo Santander) and is provided for information purposes only. This report must not be considered as an offer to sell or a solicitation of an offer to buy any relevant securities (i.e., securities mentioned herein or of the same issuer and/or options, warrants, or rights with respect to or interests in any such securities). Any decision by the recipient to buy or to sell should be based on publicly available information on the related security and, where appropriate, should take into account the content of the related prospectus filed with and available from the entity governing the related market and the company issuing the security. This report is issued in Spain by Santander Investment Bolsa, Sociedad de Valores, S.A. ( Santander Investment Bolsa ) and in the United Kingdom by Banco Santander, S.A., London Branch. Santander London is authorized by the Bank of Spain. This report is not being issued to private customers. SIS, Santander London and Santander Investment Bolsa are members of Grupo Santander. The following analysts hereby certify that their views about the companies and their securities discussed in this report are accurately expressed, that their recommendations reflect solely and exclusively their personal opinions, and that such opinions were prepared in an independent and autonomous manner, including as regards the institution to which they are linked, and that they have not received and will not receive direct or indirect compensation in exchange for expressing specific recommendations or views in this report, since their compensation and the compensation system applying to Grupo Santander and any of its affiliates is not pegged to the pricing of any of the securities issued by the companies evaluated in the report, or to the income arising from the businesses and financial transactions carried out by Grupo Santander and any of its affiliates: Joaquin Ley*, Roberto Liaño*. *Employed by a non-us affiliate of Santander Investment Securities Inc. and not registered/qualified as a research analyst under FINRA rules, and is not an associated person of the member firm, and, therefore, may not be subject to the FINRA Rule 2711 and Incorporated NYSE Rule 472 restrictions on communications with a subject company, public appearances, and trading securities held by a research analyst account. Grupo Santander receives non-investment banking revenue from the subject companies, with the exception of Coemrci, Grupo Famsa, D&S, Falabella, LaPolar, Ripley, Hering, CBD, B2B. Within the past 12 months, Grupo Santander has managed or co-managed a public offering of securities of Alsea. Within the past 12 months, Grupo Santander has received compensation for investment banking services from Alsea, Cencosud, D&S. In the next three months, Grupo Santander expects to receive or intends to seek compensation for investment banking services from Alsea, Grupo Famsa, Liverpool, Cencosud, Dufry. Santander or its affiliates and the securities investment clubs, portfolios and funds managed by them do not have any direct or indirect ownership interest equal to or higher than one percent (1%) of the capital stock of any of the companies whose securities were evaluated in this report, and are not involved in the acquisition, disposal and intermediation of such securities on the market. The information contained within this report has been compiled from sources believed to be reliable. Although all reasonable care has been taken to ensure the information contained within these reports is not untrue or misleading, we make no representation that such information is accurate or complete and it should not be relied upon as such. All opinions and estimates included within this report constitute our judgment as of the date of the report and are subject to change without notice. From time to time, Grupo Santander and/or any of its officers or directors may have a long or short position in, or otherwise be directly or indirectly interested in, the securities, options, rights or warrants of companies mentioned herein. Any U.S. recipient of this report (other than a registered broker-dealer or a bank acting in a broker-dealer capacity) that would like to effect any transaction in any security discussed herein should contact and place orders in the United States with SIS, which, without in any way limiting the foregoing, accepts responsibility (solely for purposes of and within the meaning of Rule 15a-6 under the U.S. Securities Exchange Act of 1934) for this report and its dissemination in the United States by Santander Investment Securities Inc. All Rights Reserved. 2009