ANNUAL EARNINGS REPORT 2014

Transcription

1 Investment that Transforms [THE FOLLOWING TRANSLATION IS FOR CONVENIENCE PURPOSES ONLY] ANNUAL EARNINGS REPORT 2014 INVESTOR RELATIONS Daniel Braatz / CFO db@fhipo.com Xavier Martínez / IRO xm@fhipo.com T: +52 (55) inverstorrelations@fhipo.com

2 INDEX ABOUT FHIPO... 2 Who is FHipo?... 2 Mission / Vision... 2 Values... 3 Relevant Events... 3 Message from the CEO to our Shareholders... 6 Business Model... 8 Initial Public Offering of CBFIs PORTFOLIO Our Portfolio and Infonavit Total Program Portfolio Composition OUR BORROWERS, EXCECUTION TEAM AND CONTRIBUTION TO THE MORTGAGE MARKET Our Loans Execution Team Contribution to the Mortgage Market CORPORATE GOVERNANCE Our Committees Our Advisor and Manager s Board of Directors FINANCIAL INFORMATION Summary of Key Financial Metrics Comments and Analysis from the Administration FINANCIAL STATEMENTS Independent Auditors Report Financial Statements PAGE

3 ABOUT FHIPO Who is FHipo? We are a Mexican irrevocable trust created to acquire, originate, co-participate, service and manage Mortgage Loans Portfolios in Mexico. The main focus of FHipo is the generation of income through the management and optimization of mortgage portfolios, using different funding and collections mechanisms. We are the first investment vehicle in Mexico that allows the general public to invest in high-quality residential mortgage portfolios, providing capital returns linked to the income of mortgages and contributing to the financing of housing in Mexico. Our portfolio is integrated by mortgages with an attractive risk-reward ratio, serviced through payroll deduction mechanisms, as well as an analysis and reporting platform from our strategic partners. FHipo s equity trades as Certificados Bursátiles Fiduciarios Inmobiliarios (CBFIs) in the Mexican Stock Exchange under the ticker symbol FHIPO. Mission / Vision Our mission is to strengthen the liquid secondary mortgage market, thereby creating a deeper market and making available to the general public the opportunity of investing in mortgage portfolios, while at the same time provide liquidity to institutions that grant mortgage financing, for them to continue the essential labor of offering Mexicans a financial solution which allows access to adequate housing, and improving the quality of life of each of our borrowers. By a constant and permanent innovating process, we are truly committed to the development of the Mexican mortgage market, providing financing throughout a capital funding platform, aspiring to offer in our portfolio a full range of mortgage services tied to the needs of each person. We understand the lack of mortgage products/services in Mexico, and that is why our team is constantly reviewing new opportunities to provide an integral service to the Mexican market, while at the same time offering an attractive rate of return to our investors. Our vision is to make progress, going from being the first Mortgage REIT in Mexico to the most prestigious and competent Mortgage REIT at an international level. The aforementioned will be possible through clear business policies, corporate organizational skills and a team with vast experience in the financial management of mortgage portfolios. FHipo is characterized by its capable and dedicated team who is committed to an effective, transparent, and professional business execution; thus promoting sustained growth of our co-participated mortgage portfolio, currently with Infonavit, and the implementation of new partnerships with various financial institutions in the country. 2 PAGE

4 Values - DYNAMISM We have a flexible structure that allows us to adapt promptly to changes that the market could demand. We have the ability to discover and exploit business opportunities with anticipation, gaining favorable positions and taking advantage of opportunities as they arise. - LEADERSHIP We have a team oriented on performance and focused on results. We aim to be leaders in our sector as a new asset class, and distinguish ourselves through our experience in financial management and execution. - COMMITMENT, EFFICIENCY AND TRANSPARENCY Each member of our team has the ability to perform their tasks efficiently, working together to reach the intended objectives, as well as the expectations of our partners and investors at all time. We are committed at all times with Mexico, our partners, and our investors in the consolidation and growth of a transparent vehicle listed in the capital markets, generating confidence to our partners and investors, while promoting a responsible growth of the mortgage market, improving conditions for all Mexicans. - ACCOUNTABILITY We consider ourselves, at all times, responsible of maintaining an efficient performance level, which allows us to execute and achieve our goals in an agile way, creating value in our portfolio and differentiating ourselves from the market given the attention and transparency we provide to our investors. This enables us to deliver results to our investors, and access considerable opportunities with all those mortgage originators who place their trust in our investment vehicle. - INTEGRITY A value we believe is critical for the development and progress of our company, we believe and work hard to make every employee within FHipo a capable, responsible and honest person. Relevant Events - On November 5 th 2014, FHipo successfully concludes its Initial Public Offering on the Mexican Stock Exchange. FHipo s Certificados Bursátiles Fiduciarios Inmobiliarios ( CBFIs ) began trading on the Mexican Stock Exchange under the ticker symbol "FHIPO". The global offering consisted of 300,000,000 CBFIs, 38.55% of which were placed among Mexican investors and the remaining 61.45% was purchased by international investors under Rule 144A-Reg S of the United States. The pricing was Ps. $25.00 per CBFI, amounting to an aggregate value of Ps. $7,500 million. Casa de Bolsa Credit Suisse (México), S.A. de C.V., Casa de Bolsa Banorte Ixe, S.A. de C.V,Morgan Stanley, Casa de Bolsa, S.A. de C.V. acted as joint bookrunners along with Casa de Bolsa BBVA Bancomer, S.A. de C.V. 3 PAGE

5 - On November 19 th 2014, FHipo announces the exercise of the Overallotment Option, due to the successful placement of its CBFIs and the positive performance observed in the secondary market, the bookrunners exercised successfully and in its entirety the over-allotment option ( green-shoe ). Therefore, investors have acquired through the bookrunners 45,000,000 additional CBFIs at the price of the global offering, Ps. $25.00 per CBFI. Thus, after the IPO and exercising this option there are 345,000,000 CBFIs outstanding and the total proceeds of the offering reached Ps. $8,625 million. - On December 8 th 2014, FHipo confirms Information related to its Funding Strategy for the 2015 period, planning to start its financing strategy during the year 2015 with a leverage ratio of no more than one time debt to equity, the aforementioned through different financing structures. - On December 15 th 2014, FHipo makes available to its investors the Report about its Portfolio s composition and the Accrued Interests corresponding to the month of November 2014, Reporting about the composition of its portfolio as well as the income by accrued interests for the same month. Briefing Notes during On November 19 th 2014, FHipo announced it began participation in the Infonavit Total Program. FHipo initiated the co-participation and continuous acquisition of mortgage loans / portfolios of the Infonavit Total Program on November 11 th FHipo as of November 14 th 2014 had a balance of more than one thousand million pesos in Infonavit Total mortgage loans. Notices of Meetings and Meetings during 2014 Invitation to the First Ordinary and Extraordinary Holder s Meeting (November 19 th, 2014) - First Ordinary Holder s Meeting (December 2 nd, 2014) Second Invitation to the First Extraordinary Holder s Meeting (December 4 th, 2014) - First Extraordinary Holding s Meeting (January 22 nd, 2015) 4 PAGE

6 Performance of our CBFI, Relevant Events, Briefing Notes and Assemblies 24.6 mm MXN $ $25.50 $25.00 Initial Public Offering (IPO) Listed Price of Ps. $25.00 FHipo exercised successfully and in its entirety the overallotment Option, total proceeds of the offering reached Ps. $8,625 million. Celebration of First Ordinary Holders Meeting Invitation to 1st Ordinary and Extraordinary Holders Meeting # of CBFIs 5,000,000 4,500,000 4,000,000 $24.50 $24.00 $23.50 FHipo announces the start of the coparticipation of mortgages within the Infonavit Total Program. Second Invitation to 1st Extraordinary Holder s Meeting to be held in FHipo confirms its funding Strategy for the year FHipo makes available to investors the reports about the portfolio composition and accrued interests as of Nov ,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000, ,000 $ Nov Nov Nov Nov-14 3-Dec Dec Dec Dec Dec-14 Volumen de of CBFIs Precio Price 5 PAGE

7 Message from the CEO to our Shareholders Dear shareholder, I address to you through this message to celebrate that during the year 2014 Fideicomiso Hipotecario ( FHipo ) was placed successfully in the Mexican Stock Exchange ( BMV ), through its Initial Public Offering ( IPO ), becoming the first vehicle of its kind in Latin America. FHipo was listed on the BMV on November 5 th 2014, however, efforts to achieve the previously stated began much earlier. The development of the FIBRA market in Mexico began in 2011 and is still considered a young market with great potential. Although FHipo is not a FIBRA, from a fiscal point of view, it shares with them its operating model and many other features, and that s why I am convinced that FHipo, as a new asset class, contributed significantly to the development of this sector, appearing as a highly innovative instrument in the Mexican market. Market development Mexican REIT market is created First lodging REIT in Mexico Commercial, office and industrial REITs Lodging REITs Mortgage REITs In our continuous process of execution and development of FHipo, we noticed that Mexico s demographic dynamics were favorable with a high demand of mortgage loans. The country's estimated population is of 119 million people, and is expected to increase 1.1% in It is estimated that approximately 31% of the population is between 21 and 40 years old, being mostly young people who hopefully will seek to purchase a home eventually. Additionally, we expect that the favorable changes in the socioeconomic structure of Mexico, with a significant number of Mexicans shaping up into the middle class, will increase significantly mortgage origination. We believe these factors coupled with the increased number of employees in the formal economy and low unemployment levels in the country will allow sustained growth in the demand for mortgage loans. From an economic perspective, it is worth mentioning that mortgage loans in Mexico represented only 9.9% of GDP this year, compared with 68.8% in the United States, 65.2% in Canada, 51.1% in the European Union, or 18.7% in Chile. 6 PAGE

8 We believe that the low mortgage penetration in the country, coupled with the favorable macroeconomic and demographic trends, present significant growth and investment opportunities. Being the first ones in the Mexican market, has allowed us access to the loan portfolios originated by the Institute of National Housing Fund for Workers, or Infonavit, the largest housing agency in Mexico and Latin America, agency with prudent origination policies, which has developed the ability to service mortgages through payroll deduction. However, In addition to our relationship with Infonavit, pursuing relationships with other mortgage originators is a fundamental part of our strategy as well as initiating our financing plans, always respecting our Leverage Guidelines approved by our Initial Technical Committee and under the best possible conditions in the market, for the benefit of our investors. FHipo is currently positioned to take advantage of this growth history, by obtaining the necessary resources through the market to participate in the Mexican mortgage sector. It was on November of this year when FHipo successfully concluded its initial public offering on the Mexican Stock Exchange, which amounted to Ps. $8,625 million, of which 62% came from international investors with an initial offering price per CBFI of Ps. $ We started operations with the purpose of providing the investing community the opportunity to participate in high quality mortgage portfolios, with capital, and expand their investment boundaries. I am pleased to inform that we finished the year 2014 with a mortgage loan portfolio which reached Ps. $2,017 million without registering a single non-performing loan. We strengthened the growth of our balance-sheet through the acquisition of the initial portfolio, and the origination of new mortgages through the Infonavit Total Program, in similar terms to those of other financial institutions who participate in the program, maintaining at all times portfolio quality by constantly monitoring our eligibility criteria. Our loan portfolio continues to grow stronger, maintaining attractive yield levels, with an annualized return on assets (ROA) of 4.8% and an annualized return on equity (ROE) of 4.8%, figures we consider attractive considering that at the end of 2014 we had operated for 52 calendar days and invested only 24.3% of our capital, in line with our objectives. The loans that as of today constitute our portfolio represent an adequate and diversified risk profile, with an average interest rate of 9.37% in Times Minimum Wage ("VSM") and 12.00% nominal for those mortgages originated in pesos. Likewise, our net income subject to distribution was of Ps. $55.5 million, resulting, after applying our distribution policy of 95% of such income, in a distribution of Ps. $0.153 per CBFI, equivalent to an annualized distribution on equity of 4.54%. Without question, the year 2015 will present challenges, but we are confident that we are prepared to face them and turn them into growth and expansion opportunities. I would like to thank the management team, our partners and our strategic allies, for their hard work and commitment, as well as our shareholders for their confidence in the project. Our commitment to you is unbreakable, and we are proud to share that FHipo continues to consolidate according to our expectations and objectives. Sincerely, Alfredo Vara - CEO 7 PAGE

9 Business Model Objective Our investment objective is to provide attractive risk-adjusted returns to our investors over the long-term, through a combination of dividends and capital appreciation. We intend to achieve this objective by leveraging our Advisor and Manager s expertise to construct selectively and manage actively a diversified mortgage investment portfolio by identifying asset classes that, when properly financed and managed, are designed to produce attractive risk-adjusted returns across a variety of market conditions and economic cycles. In addition to our relationship with Infonavit, our purpose is to seek relationships with other mortgage originators. We believe that our position as a mortgage trust with securities listed on the Mexican Stock Exchange, our operating structure and our fiscal treatment, give us the flexibility to have unlimited access to the capital and debt markets on favorable terms and conditions, allowing us to take advantage of acquisitions and the development of opportunities as they arise. Growth Strategy Our strategy is based on a long-term growth with the objective of increasing the size of our portfolio in order to maximize distributions to the holders of our CBFIs, while encouraging the growth of the Mexican mortgage market. We believe this strategy, together with a scarce supply of investment opportunities, with attractive yields, and a team with vast experience in the mortgage market, should lead to continuous generation of value for our investors. We believe we are well-positioned to take advantage of opportunities in the Mexican mortgage market. From a macroeconomic perspective, we believe that Mexico will continue to enjoy stability, and an expanding middle class, favorable country demographics, need for housing, and an underpenetrated Mexican mortgage sector compared with other developed and developing economies; components which we believe will increase the number of mortgage loans originated by FHipo. Funding Strategy We intend to employ some leverage with the purpose of having a more efficient capital structure and continue with the expansion of FHipo. LEVERAGE: Our initial leverage level is intended to maintain a solid equity base, superior to that of other participants in the mortgage sector. GUIDELINES: The maximum amount of leverage is determined in our Leverage Guidelines approved by our corporate governance based on our Advisor and Manager s assessment of a variety of factors, which may include: The anticipated liquidity and price volatility of the assets in our investment portfolio, the gap between the duration of our assets and liabilities including hedges, the availability and cost of financing or our assets, the strength of the Mexican economy, the volatility of interest rates, and the credit quality of the loans we acquire, among others. OPTIMAL CAPITAL STRUCTURE: We intend to fund our acquisition of mortgage portfolios through debt and equity financing, both through private and public transactions, provided that our long term leverage does not exceed 50% of the book value of our assets. 8 PAGE

10 Trust Structure Practices Committee Audit Committee Nomination Committee Public Float 92.5% Sponsor Trust 7.5% (1) Mortgage Originators Other Originators Technical Committee Manager and Advisor Technological Partner Note (1): Participation at IPO date. Does not consider the over-allotment option. Competitive Strengths - First mover advantage As the first movers we positioned ourselves as the first mortgage-focused investment trust in the Mexican market. - Agreement with Infonavit, for a one-year exclusivity period for public vehicles, to acquire mortgage loans from the Infonavit Total Program As a result of Our exclusivity agreement with Infonavit and our state-of-the-art infrastructure and technology for the origination, co-participation and acquisition of mortgage loans, reflect our edge and competitive advantage in the market. This advantage will provide our management team an opportunity to develop and solidify a long-term leading position in the Mexican mortgage-focused investment trust market prior to any other competitor, making ourselves indispensable in the Mexican mortgage market and becoming a difficult business model to replicate in the short term. - Partnership with Infonavit Infonavit services mortgage loans through employee payroll deductions, which allows the participation in unattended sectors not served by other participants. - Technological Platform Technological support system with Concord, a leading collection and servicing contractor. FHipo together with Concord has developed, and featured a strong technological platform that enables efficient payment processing and reporting services, as well as analysis of originated portfolios and data tape for performance evaluation, projections and technology to monitor collections. - Experience of Our Advisor and Manager The experience of our management team positions us well not only to make prudent investment decisions, but also to monitor the credit profile of our mortgage-related investments. 9 PAGE

11 Initial Public Offering of CBFIs FHipo s CBFIs (Certificados Bursátiles Fiduciarios Inmobiliarios) FHipo s CBFIs began trading on the Mexican Stock Exchange under the ticker symbol "FHIPO" November 5 th The global offering consisted of 345,000,000 CBFIs, including the over-allotment option. The pricing was Ps. $25.00 per CBFI, amounting to an aggregate value of Ps. $8,625 million % of which were placed among Mexican investors and the remaining 61.45% was purchased by international investors 1. Issuer Banco Invex, S.A. Instituto de Banca Múltiple Securities Offered CBFI (Certificado Bursátil Fiduciario Inmobiliario) Price per CBFI Ps. $25.00 per CBFI Offering Date November 5 th 2014 CBFIs Outstanding 345,000,000 CBFI s, including over-allotment option Global Offering Ps. $8,625,000,000 Manager and Advisor (Trustee) Concentradora Hipotecaria S.A.P.I. de C.V. The performance of our CBFI from the IPO up until December 31 st 2014 was the following: MXN $ $25.50 $25.00 $24.50 $24.00 $23.50 FHipo's IPO Nov Average Price $ Average Volume 1,191,914 $ Nov Nov Nov Nov-14 3-Dec Dec Dec Dec Dec-14 Volumen de CBFI IPO (November 5th 2014) Offering Price of Ps. $25.00 per CBFI Precio # of CBFIs 5,000,000 4,500,000 4,000,000 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000, ,000 1 Without taking into account the over-allotment option. 10 PAGE

12 PORTFOLIO Our Portfolio and Infonavit Total Program Our program The Institute of National Housing Fund for Workers ( Infonavit ) is the largest originator of mortgages in Mexico, and one of the largest mortgage lenders in Latin America and has originated more than 6 million mortgage loans since its creation. Infonavit s operations are financed mainly by payments of principal and interests received from the loans they maintain in their balance, as well as by the mandatory contributions made by employers to the National Housing Fund for an amount that is currently equivalent to 5% of the salary of each worker at its service. FHipo acquires 55% of each mortgage loan originated and coparticipated by the Infonavit to FHipo under the Infonavit Total Program, which exists since 2008, and in which other financial institutions participate in Mexico. The first acquisition made by FHipo was on November 11 th Subsequently, FHipo has constantly acquired/co-participated mortgage loans from the Infonavit Total Program. Meanwhile, workers who become borrowers of the Infonavit, service their mortgage loans through payroll deductions carried out by the employer, and transferred to the Infonavit, representing one of our main strengths for maintaining the quality of our assets, while simultaneously allowing our participation in unattended sectors. Participation in the Infonavit Total Program On August 13 th, 2014, FHipo celebrated an "Initial Assignment Agreement" with the Instituto del Fondo Nacional de la Vivienda para los Trabajadores, or "Infonavit", a Mexican housing agency dedicated, among other things, to mortgage financing. FHipo acquired the Initial Portfolio on November 11 th 2014, date on which the Initial Assignment Agreement as well as the exclusivity took full effect. Subsequently, FHipo has acquired mortgage loans of the Infonavit Total Program, accumulating a total of 9,680 mortgage loans as of December 31 st Through FHipo, the Infonavit continues to strengthen the objectives presented in the housing public policy, which plans to reduce responsibly the housing lag in Mexico, by improving and expanding existing housing, fomenting the acquisition of new homes, and promoting the participation of private capital in the origination of mortgage loans in Mexico. Finally the participation of FHipo jointly with the Infonavit will contribute to the development of a more thorough mortgage industry in Mexico, offering greater dynamism by creating new products, increasing liquidity and financing to unattended sectors through the participation of different institutions. 11 PAGE

13 Main Characteristics from the Infonavit Total Program Characteristics Our Main Eligibility Criteria Destination Borrower s Age Maximum Loan Amount Housing Acquisition (new or used) years 700 VSM s (1) ~ Ps. $1,431,918 Collection through automatic payroll deduction Loans must be issued for the purchase of residential housing A valid and perfected mortgage guarantees each loan Monthly payment 30% of the borrower s monthly income Interest Rate (VSM and Pesos) Term % % (VSM) (2) % (Pesos) Up to 30 years Maximum LTV at origination 95% Maximum PTI at origination 30% - 32% (3) The borrowers must have been employed for at least two years at their current job Loans must be denominated in VSM or Pesos Loan to Value 95% The interest rate must be higher than or equal to 8.5% (indexed to VSM) Source: Infonavit Note (1): VSM means times minimum wage, which is the index calculated by multiplying the current daily minimum wage of Mexico City ( Ps$67.29) by the average number of days in a month, each year (30.4). Note (2): The entire portfolio denominated in Pesos has a fixed nominal interest rate of 12.00%. Note (3): 30% if house does not have eco-technologies, and 32% if house has eco-technologies. Objective and Impact of FHipo in the Mexican Mortgage Market Acquisition, Co-participation, Origination and Management of Mortgage Loans Capital Platform and Development of Mortgage Products Origination through Strategic Partners Increase of Mortgage Suppliers IMPACT Increase of Capital invested in our Mortgage Portfolio Greater penetration in the Mexican Mortgage Market 12 PAGE

14 Our Mortgage Loans Within the Infonavit Total Program Main Characteristics Our Mortgage Loans (as of December 31 st 2014) Loans denominated in VSM Interest rate is indexed to VSM to match the currency denomination of the loans, therefore protecting interest rate against inflation and interest rate volatility. Loans denominated in Pesos Fixed nominal interest rate for all originated loans. Collection Automatic payroll deduction Automatic payroll deduction Origination Through Infonavit s platform Through Infonavit s platform Average Interest Rate 9.37% in VSM 12.00% nominal As percentage of the Mortgage Portfolio 90.7% 9.3% Nonperforming Loans 0.0% 0.0% Total number of Mortgage Loans 9, Source: Infonavit (1) (2) Note (1): VSM means times minimum wage, which is the index calculated by multiplying the current daily minimum wage of Mexico City ( Ps$67.29) by the average number of days in a month, each year (30.4). Note (2): The entire portfolio denominated in Pesos has a fixed nominal interest rate of 12.00%. 13 PAGE

15 Portfolio Composition The following table details the mortgage portfolio of FHipo as of December 31 st Total Value FHipo's Participation ~Ps. $3,598 million ~Ps. $1,979 million (Equivalent to 55% of Total Value) (1) Total Number of Loans (VSM and Pesos-denominated) ~9,680 VSM-denominated Loan Balance (3) Number of VSM-denominated Loans ~9,143 (3) ~Ps. $ 1,795 million (90.7% of Total Portfolio) Peso-denominated Loan Balance ~Ps. $184 million (9.3% of Total Portfolio) Number of Pesos-denominated Loans ~537 Average Loan Balance Average Interest Rate of VSM-denominated Loans 9.37% Average Interest Rate of Pesos-denominated Loans (2) (3) Loan-to-Value at Origination (LTV) 83.70% Payment-to-Income (PTI) 23.89% Number of Employers ~5,149 % of Loans with Payroll Deduction 100% (2) Ps. $204,487 (Equivalent to 55% Co-Participated) (5) 12.00% (Nominal) (4) (1) Performing Portfolio 100% (0.00% NPL's) Distribution by Borrower s Salary in VSM (as % of total loans in the portfolio) % 9.2% 11.2% 30.5% 13.5% (3) Distribution by Loan-to-Value (LTV) (as % of total loans in the portfolio) 9.5% 10.0% 19.6% 60.9% 65 % % % 85-95% Note: All data is consolidated (sum of mortgages denominated in Pesos and mortgages denominated in Times Minimum Wage VSM ), except when indicated. Note: (1) For every loan originated in the Infonavit Total Program, FHipo maintains ~55% of the participation while the Infonavit keeps the remaining ~45%. Note: (2) Weighted average. Note: (3) VSM means times minimum wage, which is the index calculated by multiplying the current daily minimum wage of Mexico City ( Ps$67.29) by the average number of days in a month, each year (30.4). Note: (4) The entire portfolio denominated in Pesos has a fixed nominal interest rate of 12.00%. 14 PAGE

16 STATE OF MEXICO NUEVO LEON VERAZCRUZ JALISCO QUERETARO DISTRITO FEDERAL GUANAJUATO COAHUILA QUINTANA ROO YUCATAN BAJA CALIFORNIA PUEBLA TAMAULIPAS SONORA CHIHUAHUA OTHERS Annual Earnings Report 2014 Number and Value of Mortgage Loans (number of loans and total value of originated mortgages) Total Accumulated Loans. Co-Participated by FHipo as of December 31 st ,680 $1,979 # of Total Loans MXN$ (millons) Distribution by Interest Rate in VSM (as % of total loans in the portfolio) (1) (2) Invested Equity (as % of total assets) 38.9% 47.8% 24.3% Infonavit Total Mortgages 1.8% 11.5% 8.1% - 8.5% 8.6% - 9.0% 9.1% - 9.5% 9.6%-10.0% 75.7% Investments in Government Securities (MBONOS, IMBPAG,LDBONDES) Geographic Distribution of Portfolio (as % of total loans in the portfolio) 21.6% Distribution by Loan Denomination (as % of total loans in the portfolio) 15.2% 11.0% 6.2% 4.7% 3.8% 5.4% 4.3% 3.7% 3.7% 3.6% 3.5% 3.0% 3.7% 3.5% 3.1% 9.3% Pesos 90.7% VSM + - Concentration Level Note: (1) VSM means times minimum wage, which is the index calculated by multiplying the current daily minimum wage of Mexico City ( Ps$67.29) by the average number of days in a month, each year (30.4). Note: (2) The entire portfolio denominated in Pesos has a fixed nominal interest rate of 12.00%. 15 PAGE

17 OUR BORROWERS, EXCECUTION TEAM AND CONTRIBUTION TO THE MORTGAGE MARKET Our Loans In 1972 the Infonavit Law is promulgated, which enforced the right to housing in the Constitution of the United Mexican States for workers, established on the February 5 th 1917, date the enactment was passed. The system consisted in gathering a mandatory contribution made by the employer through the National Housing Fund, equivalent to 5% of the salary of each formal worker, creating the opportunity for the employee to either obtain a mortgage or the right to have their savings returned to them. FHipo, through its participation in the Infonavit Total Program and the origination and collection platform, provides a full and personalized service to each borrower who co-participates Infonavit Total mortgages, in order to provide funding to a high quality mortgage sector generally disregarded by the private sector. At the end of 2014, FHipo had 9,680 borrowers, those whom are an essential part of the business and it was because of them we innovated with the creation of an investment vehicle that could bring private capital focused on financial solutions for housing. We are characterized for the agility and flexibility with which we execute our business plan, we set our sight on being leaders who facilitate all types of alternatives for the acquisition of a home throughout Mexico, including those segments that have been historically unattended by the financial institutions. Execution Team In FHipo, through Concentradora Hipotecaria, we seek to consolidate a team that has been growing day by day, maintaining an updated and distinguished training, focused on results. We count with experienced executives and directors in the mortgage sector as well as in the financial and banking sectors, thus helping shape a prominent team for the administration and execution of FHipo s business model. Contribution to the Mortgage Market FHipo is focused on managing mortgage portfolios in a timely and efficient manner, positioning itself as a valuable investment as well as providing liquidity to institutions which originate mortgage portfolios, contributing to the gradual increase of the mortgage supply in Mexico. We will continue working on bringing private capital resources, which will enable us to participate in the mortgage origination process in Mexico, strengthening the relations and the sustainable development of FHipo with Institutions that grant housing mortgage loans. We will keep reinforcing our team and commitments towards Mexicans as well as to our shareholders. 16 PAGE

18 CORPORATE GOVERNANCE We look after the interests of FHipo as well as those of our investors at all times, through the transparency of the vehicle. At the end of the period, we were able to establish four Committees: Practices, Nominations, Audit and Technical, through which we comply with the implementations, in a timely manner, in accordance with the Best Corporate Practices Code of the Mexican Stock Exchange and the CNBV (Comisión Nacional Bancaría de Valores). Our Committees Technical Committee Our Technical Committee is the one responsible of managing and pointing the company in the right direction, among other duties it is in charge of supervising the management and operation of the Mortgage Trust (FHipo) and the Subsidiary Vehicles; approve our investment guidelines; the acquisition of assets, as well as the distribution policy; relying at all times on the Practices Committee, the Audit Committee and the Nominations Committee. Audit Committee Member Alfredo Vara Alonso Daniel Michael Braatz Zamudio José de Jesús Gómez Dorantes Daniel Reséndiz Carillo Diego A. Dayenoff James Edward Walker José Vicente Corta Fernández Margarita de la Cabada Sebastián Fernández Cortina Technical Committee Position Executive Member Executive Member Executive Member Independent Member Independent Member Independent Member Independent Member Independent Member Independent Member Our Audit Committee is formed by independent members, and is responsible of reviewing and discussing our financial statements, and based on such review, to recommend to the Technical Committee to present the financial statements before the Holders Meeting. It also evaluates the performance of the external auditor, analyzes the opinions, reports and documents prepared by the external auditor. Recommends to the Technical Committee the accounting policies applicable to the Trust and reports to the Technical Committee of the status of the internal control, audit and compliance procedures. Member Daniel Reséndiz Carillo Margarita de la Cabada Sebastián Fernández Cortina Audit Committee Position Independent Member Independent Member Independent Member 17 PAGE

19 Practices Committee Annual Earnings Report 2014 Our Practices Committee is formed in its entirety of independent members, and is responsible of reviewing and expressing an opinion to the Technical Committee on related party transactions, responsible of knowing and giving recommendations to the Technical Committee with respect to any acts related to the corporate governance of the Trust; and is responsible of recommending to the Technical Committee requests from our Advisor and Manager and/or the Trustee any information that may be necessary to the Technical Committee to comply with its duties. Nominations Committee Member Daniel Reséndiz Carillo José Vicente Corta Fernández Margarita de la Cabada Practices Committee Position Independent Member Independent Member Independent Member Our Nominations Committee is formed in its entirety of independent members, and is responsible of searching, analyzing and assessing candidates for the Technical Committee, including without limitation, independent members; makes recommendations to the Holders Meeting, regarding the individuals to be appointed as members of the Technical Committee; propose to the Holders Meetings the remuneration to be paid to the members of the Technical Committee; and propose to the Holders Meeting the removal of members of the Technical Committee. Member Daniel Reséndiz Carillo José Vicente Corta Fernández Margarita de la Cabada Nominations Committee Position Independent Member Independent Member Independent Member Our Advisor and Manager s Board of Directors The Board of Directors of our Advisor and Manager is intergated by 16 professionals with extensive knowledge and experience in financial investments, management of financial vehicles and public companies, including underlying securities and mortgage portfolios. The board has 8 independent members, representing 50% of Concentradora Hipotecaria s Board of Directors. The members of the Board of Directors are recognized professionals who have owned and have operated some of the world s most recognized firms, whom continue to hold positions such as chairmen s of the boards of directors, CEOs, CFOs and investment directors, among others. The Board of Directors is in charge of establishing the general strategy of Concentradora Hipotecaria, monitoring the management of the company, the performance of its core directors, communication and information with investors, and the appointment and rewarding of main executives, among other responsibilities. The Board of Directors of our Advisor and Manager meets at least once a year, and can be summoned to an extraordinary session to approve topics that require special or immediate attention. 18 PAGE

20 The following table sets forth the names of the members of our Advisor and Manager s board of directors: Board of Directors Member Position Alfredo Vara Alonso Presidente del Consejo Alejandro Joaquín Martí García Consejero Propietario Alejandro Elek Hansberg Consejero Propietario Ángel Losada Moreno Consejero Propietario Carlos Javier Vara Alonso Consejero Propietario Daniel Michael Braatz Zamudio Consejero Propietario Henry Davis Signoret Consejero Propietario Fernando Ahumada Ayala Consejero Propietario Francisco José Islas Cervera Consejero Propietario Ignacio Gutiérrez Sainz Consejero Propietario José de Jesús Gómez Dorantes Consejero Propietario Jaime Alverde Losada Consejero Propietario Juan Carlos Hernaiz Vigil Consejero Propietario Pablo Escandón Cusi Consejero Propietario Ricardo Cervera Lomelí Consejero Propietario Shaun William O Neill Consejero Propietario FHipo s Main Executives and Concentradora Hipotecaria s Management Main Executives Alfredo Vara Alonso Daniel Michael Braatz Zamudio José de Jesús Gómez Dorantes Ignacio Gutiérrez Sainz Patricia Montiel Font CEO Chief Executive Officer CFO Chief Financial Officer COO Chief Operating Officer CBD Business Development CLO Legal Counsel Alfredo Vara Alonso is the Chief Executive Officer of Concentradora Hipotecaria ( CH ). He is also the founding partner of an investment bank boutique based in Mexico named VACE Partners. Mr. Vara previously worked for Deutsche Bank s Latin American Global Market Sales Group, which he joined in Mr. Vara has a wide experience in a full range of financial institution s products. He also served as head of the local debt capital markets group for 19 PAGE

21 Deustche Bank in Mexico, creating some of the first debt structuring and securitization deals in Mexico. Mr. Vara served as a member of the board of directors of Fincasa Hipotecaria. He is a member of the Infonavit s Audit Committee and a member of the Board of Directors and the Audit and Best Practices Committee of Afore XXI- Banorte. Prior to joining Deutsche Bank, Mr. Vara held different senior positions for the Mexican government focused on financial entities. He directly assisted the Mexican government in the creation and development of the Mexican internal debt market, by assisting Mexico government to obtain an Standard & Poor s government debt grade and the issuance of debt instruments denominated Bonos de Protección al Ahorro (BPA s and BPAT) for up to USD32 billion. In addition, as deputy secretary of financial institutions for the Instituto para la Protección al Ahorro Bancario (IPAB), Mr. Vara was responsible for managing the sales process, including the completion of the following transactions: the acquisition of Banca Promex by Bancomer, the Banco del Atlántico and the transfer of Banco del Atlántico s assets to Banco Internacional and the restructuring and assumption of all the operations of intervened banks by the Comision Nacional Bancaria y de Valores (CNBV). Mr. Vara managed resources authorized in the Expenditures Budget of the Mexican Government, in order to support fulfillment of obligations undertaken by the IPAB, as well as to implement programs to support depositary banks and debtors. Prior to working at the Mexican government, Mr. Vara worked for three years, from 2006 to 2009, at Citibank as a member of the structuring group in Mexico. Mr. Vara has a B.A. in Economics from the Instituto Tecnológico Autónomo de México. He graduated from Yale University, where he received a dual degree: MPPM from Yale School of Management and a M.A. in Economics. Daniel Michael Braatz Zamudio, in addition to serving as Chief Financial Officer of CH, is a founding partner of an Investment Bank Boutique based in Mexico named VACE Partners. In previous stages of his career, Mr. Braatz worked as an investment banker in Citigroup s Investment Banking Division. As an investment banker he primarily focused on structured finance consisting of assets securitizations, risks assessment associated with acquisition financing, balance sheet and liability management, project finance, special situations transactions, mergers, acquisitions, and debt structuring. Mr. Braatz has particular expertise in the Mexican public sector performing transactions for different government entities such as Infonavit s securitizations, asset monetization for the Secretaría de Relaciones Exteriores, debt restructuring for different States and Municipalities within Mexico, infrastructure/utilities privatizations and the structuring of different public-private partnerships. Additionally, Mr. Braatz s experience in capital markets transactions primarily consists of publicly traded securitizations, particularly on Mortgage Loans Portfolios and Government entities with long term revenue generation. Mr. Braatz served in the role of external advisor to Infonavit and Hipotecaria Total (HITO) participating in the offering structure and attending the deal roadshows. Transactions executed by Mr. Braatz in recent years include the privatization of the State of Puebla s public water system worth Ps.5,800 million in 2014 and the concession of the State of Puebla s toll-roads worth Ps.2,500 million in 2012; the structured sale of Crédito Maestro s shares to Crédito Real worth US$200 million in 2012; the debt restructuring of the State of Quintana Roo worth Ps.11,000 million and the debt restructuring for the Municipality of 20 PAGE

22 Benito Juarez in the State of Quintana Roo worth Ps.1,400 million; Project Finance for the urban toll-road Viaducto Bicentenario for Ps.5,500 million, which was named Deal of the Year in 2010 by Project Finance (Euromoney); the implementation of structured loans for Crédito Maestro during 2009 and 2010 with different financial entities worth US$100 million; the debt restructuring for Grupo Posadas in 2009 worth US$350 million; Grupo Gigante s US$1.7 billion divestiture of its supermarket retail business in 2007; the advisory to ANSA McAl on the acquisition of Sissons Paints in Central America; the acquisition of Aeroméxico (US$1.8 billion) by Banamex and a Group of Investors in 2007; Waldo s Holdings debt refinancing worth US$120 million, among others. Mr. Braatz graduated from Instituto Tecnológico Autónomo de México (ITAM) with a major in Industrial Engineering. His thesis on implementation of STP transactions for the Mexican Stock Exchange was awarded at the 2006 Business and Information Forum held in Singapore. He continues to be a member of ITAM s Financiers Association and member of the Instituto Mexicano de Ejecutivos de Finanzas (IMEF). Mr. Braatz has recently been appointed as member of the Auditing Committee of Infonavit. José de Jesús Gomez Dorantes is the Chief Operating Officer of CH. Mr. Gomez has wide experience in the financial and mortgage sectors of Mexico. He worked at Infonavit from 2002 to His experience working at Infonavite includes: (a) from 2009 to July 2013, Mr. Gomez worked as Deputy Director of Planning and Finance and was responsible for risk management, finance, strategic planning and issuance of Cedevis. As of January 2012, Mr. Gomez was also in charge of overseeing the activities of the General Secretariat of Infonavit, as well as its institutional relations with Mexico s congress; (b) from 2007 to 2009, Mr. Gomez coordinated the largest issuance program of mortgage backed bonds in Mexico, raising more than Ps.90,000 million; and (c) from 2002 to 2007, Mr. Gomez worked as coordinator of planning, acting as the head of the strategic and financial planning, management control and Infonavit investor relations. Mr. Gomez also participated in the creation of the Infonavit Total program. Prior to working at Infonavit, Mr. Gomez worked at Grupo Financiero BBVA Bancomer (GFBB). His experience at GFBB includes: (i) from 2000 to 2002, Mr. Gomez was the Director of Investor Relations and responsible for the administration of the program of investor relations (with portfolio managers, financial analysts and rating agencies). With a market value of US$ 6.6 billion in 2002, GFBB s investor relations program was elected in 2002 the best program in Mexico by the Institutional Investor Magazine; (ii) from 1998 to 2000, Mr. Gomez served as Deputy Director of Financial Projects, responsible for the financial and market analysis for corporate valuation, which supported the GFBB s recapitalization program, including the sale of 32% of GFBB s capital to the Banco Bilbao Vizcaya Argentaria (BBVA) for a total of US$ 2 billion and the acquisition of 49% of units of GFBB-Aetna (pension and insurance funds) for US$ 700 million; and (iii) from 1996 to 1998, Mr. Gomez served as Deputy Director of Mortgage Strategic Planning, responsible for the strategic and financial planning of a mortgage bank portfolio of US$ 4.5 billion worth and the management of strategic projects for such mortgage portfolios. Mr. Gomez studied at Industrial and System Engineering at the Institute of Technology and Superior Studies of Monterrey (ITESM). He received an MBA degree from A.B. Freeman School of Business, Tulane University, New Orleans, Louisiana, USA. Ignacio Gutiérrez Sainz currently serves as CH s Business Development Officer. Prior to joining CH, Mr. Gutiérrez worked as an Investment Banker at VACE Partners, a recognized Investment Bank based in México, with a team with more than 20 years of experience and with an impressive track record in the execution of mergers and acquisitions, 21 PAGE

23 debt structuring and equity raising transactions, that have been carried out by companies in the United States, Mexico and Latin America, in a variety of sectors including multiple transactions with state government agencies. As an investment banker, Mr. Gutiérrez has primarily focused on business origination through the implementation of different strategies as a result of the constant analysis and overview of specific sectors and market performance. These strategies have been materialized through the promotion and further execution of different special situations transactions, liability management, structured loans and assets securitizations. Some of the most prominent transactions in which Mr. Gutiérrez has participated are the privatization of the public water system (worth Ps.5,800 million) and the toll-roads (worth Ps.2,500 million) of the State of Puebla, the structured sale of 100% of Crédito Maestro s shares to Crédito Real worth US$200 million in 2012, and the debt restructuring of the State of Quintana Roo worth Ps.11,000 million, among others. Mr. Gutiérrez has a degree in Industrial Engineering from the Universidad Iberoamericana. During his time there, he formed part of the Alumni Society as Director of New Projects, executing and managing different programs with the objective of developing a bigger and stronger presence of the universities alumni in the Mexican growing corporate market. During his studies at the Universidad Iberoameriana, Mr. Gutiérrez focused on special topics of finance with economic and financial engineering. The foregoing concentrations, combined with his engineering background, have become an important tool in his professional development within the financial sector. Mr. Gutiérrez is also a member of the board of directors of GUTSA, EPCCOR and PECSA (Mexican realestate/housing/infrastructure companies). Patricia Montiel Font is the Chief Legal Officer of CH. Mrs. Montiel is also a partner in Casares, Castelazo, Frias and Zarate, S.C., a law firm specializing in corporate and financial law. From 1999 to 2006, Mrs. Montiel worked at the Mexican Institute for the Protection of Bank Savings (IPAB) as Deputy Secretary for protection of banking savings. Mrs. Montiel occupied different positions within the IPAB, although always focused on financial institutions. She participated in bidding processes of assets (credit portfolios, real and personal property and certificates) owned by financial institutions. Mrs. Montiel worked in the implementation of the restructuring of financial institutions and the sale of some of IPAB s assets. Mrs. Montiel has significant experience in the management, sale and transfer of loan portfolios of several financial institutions. Prior to working at IPAB, Mrs. Montiel worked at Chevez, Ruiz, Zamarripa y CIA., S.C., a tax law firm. Mrs. Montiel received a law degree from the Universidad Iberoamericana and a masters degree in Human Sciences from Universidad Anahuac Mexico Norte. 22 PAGE

24 FINANCIAL INFORMATION Summary of Key Financial Metrics Highlights of FHipo s Results ROE (1) 4.80% Attractive Distributions (2) 4.54% Non-current Loans 0.0% Invested Equity in Mortgages 1,979 millions Net Interest Margin (NIM) (2) 5.7% Total Number of Loans 9,680 loans Note (1): (Net Income / Total Equity), annualized considering 52 effective days of operation as well as the total portfolio, including positions in securities and shortterm Repurchase Agreements. Note (2): Annualized (compounded) considering 52 effective days of operation. As of December 31 st 2014, we have achieved the consolidation of our objectives and obtained superior results to the ones that were expected. Bellow you ll find our main financial results. Net Income of Ps. $55.5 million and a Net Income for distribution, in accordance with our 95% distribution policy, of Ps. $52.7 million, obtained during Income per Certificado Bursátil Fiduciario Inmobiliario or CBFI (EPS) of Ps. $ Financial Margin of Ps. $65.3 million (representing 100% of total interest income). The annualized Net Interest Margin (NIM) was 5.7%. The cost of funding for the year was Ps. $0.0, as of December 31 st 2014, FHipo does not have any debt obligations. The net mortgage portfolio reached Ps. $2,017.4 million as of This portfolio consists of loans of the Infonavit Total Program, and considers allowance for loan losses of 0.0% of the mortgage portfolio given that FHipo has not presented incurred losses in its portfolio. As of December 31 st 2014, there are no non-current loans. The efficiency ratio presented by FHipo as of December 31 st 2014, was 15.0%. The return on equity (ROE) obtained by FHipo during the year was 4.8% annualized, based on the Net Income for the period subject to distribution. 23 PAGE

25 Key Financial Metrics Figures are presented according to each metric (%, $) 2014 Financial Margin and Interest Revenues Financial Margin - "interest revenue - interest expense / total interest revenue" 100.0% Net Interest Margin (NIM) (1) - "interest revenue - interest expense / average net mortgage loans" 5.7% Efficiency Metrics Efficiency Ratio - "total expenses / total operating revenue" 15.0% Returns and Profits Earnings per CBFI (EPS) - "net income / number of CBFIs" $0.161 Return on Assets (ROA) (1) - "net income / total assets" 4.8% Return on Equity (ROE) (1) - "net income / total equity" 4.8% Other Metrics Non-current Loans / Net Portfolio 0.0% Note (1): Annualized considering 52 effective days in operation. (2): Total mortgage loans excludes allowance for loan losses. (3): Amount in pesos. Comments and Analysis from the Administration Operation Results (In Thousands of Mexican Pesos) 2014 REVENUES: Financial margin $65,340 (-) Allowance for loan losses 0 TOTAL OPERATING REVENUES, NET 65,340 TOTAL EXPENSES (9,816) NET INCOME $55,524 NET RESULT PER CBFI $0.161 Interest Income amounted to Ps. $65.3 million during Revenues consider accrued interest of the mortgage loan portfolio, the indexation to the minimum wage on unpaid balances of our mortgage loans denominated in VSM, and the returns obtained from investments in securities and repurchase agreements or repos. Interest income and indexing of the mortgage loan portfolio amounted to Ps. $40.8 million. The equity that is still not invested in residential mortgages, generated income that amounted in Ps. $24.5 million by being invested in local government securities. It is important to note that the total interest income was generated during a 52 day operating period, beginning the day we received the proceeds from the Global Offering. 24 PAGE

26 Equity invested in Mortgage Loans as % of Assets Interest Income 24.3% Infonavit Total Mortgages Government Securities 37.5% 62.5% Interests on Mortgage Loans Investment Income 75.7% Interest Expense were nonexistent, since FHipo did not have any debt obligations by the end of the period. The Financial Margin amounted Ps. $65.3 million and represents 100% of total interest income. The Allowance for Loan Losses was of Ps. $0.0 during 2014, determined based on the incurred loss model. The balance of the allowance for loan losses in the Balance Sheet as of December 31 st 2014 amounted to Ps. $0.0. Advisory, Administration, and Servicing Expenses amounted to Ps. $8.6 million during 2014, which represent 13.2% of total interest income, and include advisory, administration, and collection service fees received from the Infonavit and Concentradora Hipotecaria. Net Income amounted to Ps. $55.5 million as of December 31 st 2014, representing 85.0% of the total interest income of the same period. The aforementioned translates into a net income per CBFI of Ps. $ Balance Sheet (In Thousands of Mexican Pesos) 2014 ASSETS: Cash equivalents and debt securities $6,284,359 Mortgage loans, net 2,017,417 Accounts receivables and other assets 12,973 TOTAL ASSETS $8,314,749 LIABILITIES AND EQUITY TOTAL LIABILITIES $10,095 TOTAL EQUITY 8,304,654 0 TOTAL LIABILITIES AND EQUITY $8,314, PAGE

27 Total Assets as of December 31 st 2014, amounted to Ps. $8,314.7 million. The assets of FHipo are mainly comprised of: i) net mortgage loan portfolio amounting to Ps. $2,017.4 million, representing 24.3% of the total assets; and ii) cash equivalents and securities amounting to Ps. $6,284.4 million representing 75.7% of the total assets. The Mortgage Loan Portfolio co-participation with the Infonavit in the Infonavit Total Program is comprised of 9,680 mortgage loans as of December 31 st 2014, among the initial portfolio and loans acquired during the year. The total mortgage loan portfolio amounts Ps. $2,017.4 million, which includes uncollected accrued interest amounting to Ps. $25.4 million and the indexation of VSM denominated loans amounting to Ps. $12.6 million. As of December 31 st 2014, the allowance for loan losses was Ps. $0.0; determined with the incurred loss model. Finally, during the year, FHipo acquired mortgage loans amounting in Ps. $2,031.9 million, of which principal amortizations were received in the amount of Ps. $40.2 million, and we conducted mortgages reimbursements to the Infonavit of loans that did not meet our eligibility criteria, in the amount of Ps. $12.3 million. The aforementioned resulted in a current loan portfolio balance of Ps. $1,979.4 million. Non-Current Portfolio as a percentage of the total loan portfolio as of December 31 st 2014, was 0.0%. The Allowance for Loan Losses as of December 31 st 2014, was Ps. $0.0. Other Receivables amounted to Ps. $12.5 million in 2014, and correspond mainly to amortizations and interest effectively collected from the borrowers, which Infonavit has not yet transferred to FHipo and mortgage loans returned to the Infonavit. Total Equity amounts to Ps. $8,304.6 million, and consists of the amounts obtained from the Global Offering of CBFIs made in November 2014, net of issuance costs and net income obtained in PAGE

28 Distribution to Holders Annual Earnings Report 2014 In accordance to our distribution policy, during the third session of the Technical Committee, held on February 9 th 2015, FHipo gave notice to its members that for the period from November 5 th 2014 to December 31 st 2014 it will be realizing its interest distribution of Ps. $0.153 per CBFI, representing 95% of the net income of the fourth quarter of The interest distribution took place on February 27 th 2015, for a total amount of Ps. $ 52,747, Leverage At the end of 2014, FHipo had no debt obligations, all funds used for its operations are those obtained in the Global Offering. The sum of FHipo s total assets in 2014 amounted to Ps. $8,314.7 million, whereas the total financing for 2014 amounted to Ps. $0.00. The leverage level was 0.00%, since there are no debt obligations as of December 31 st 2014, therefore, the debt coverage ratio does not apply, since there are no payment obligations. 27 PAGE