BANCO INTERACCIONES, S.A., INSTITUCIÓN DE BANCA MÚLTIPLE, GRUPO FINANCIERO INTERACCIONES AND SUBSIDIARIES. Consolidated Financial Statements

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1 BANCO INTERACCIONES, S.A., INSTITUCIÓN DE BANCA MÚLTIPLE, GRUPO FINANCIERO INTERACCIONES AND SUBSIDIARIES Consolidated Financial Statements As of December 31, 2016 and 2015 with Report of Independent Auditors

2 BANCO INTERACCIONES, S.A., INSTITUCIÓN DE BANCA MÚLTIPLE, GRUPO FINANCIERO INTERACCIONES AND SUBSIDIARIES Consolidated Financial Statements As of December 31, 2016 and 2015 Contents: Report of Independent Auditors Audited Consolidated Financial Statements: Consolidated Balance sheets Consolidated Statements of Income Consolidated Statements of Changes in Equity Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements

3 REPORT OF INDEPENDENT AUDITORS The Board of Directors and Shareholders of Banco Interacciones, S.A. Institución de Banca Múltiple, Grupo Financiero Interacciones Opinion We have audited the accompanying consolidated financial statements of Banco Interacciones, S.A., Institución de Banca Múltiple, Grupo Financiero Interacciones and Subsidiaries (the Bank), which comprise the consolidated balance sheet as of December 31, 2016, and the consolidated statements of income, statement of changes in equity and cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information. In our opinion, the accompanying consolidated financial statements have been prepared, in all material respects, in accordance with the regulatory accounting framework for credit institutions established by the Mexican National Banking and Securities Commission (the Commission). Basis for audit opinion We conducted our audit in accordance with the International Standards on Auditing (ISA). Our responsibilities under those standards are described in the Auditor s responsibilities for the audit of the consolidated financial statements section of this report. We are independent from the Bank within the meaning of the Code of Ethics for Accounting Professionals of the International Ethics Standards Board for Accountants (IESBA), the ethical requirements applicable to our audit of the consolidated financial statements in Mexico established by the Code of Ethics of the Mexican Institute of Public Accountants (IMCP, Spanish acronym), and the General Dispositions Applicable to Credit Institutions issued by the Commission and have fulfilled our other responsibilities under those relevant ethical requirements and the Code of Ethics of the IESBA. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

4 2. Key audit matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context. We have fulfilled the responsibilities described in the "Auditor's responsibilities for the audit of the consolidated financial statements" section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the consolidated financial statements. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying consolidated financial statements. Assessment of key assumptions considered in the calculation of the loan-loss reserve We considered the loan-loss reserve to be a key audit matter since for the calculation of the reserve, the Bank s Management considered various assumptions and factors to determine loss severity and probability of default of the loan portfolio by applying the required methodologies for each type of loan, as established by the Commission. We also deemed the loan-loss reserve to be a key audit matter because it is an integral component of the loan portfolio, which the Bank considers its principal asset in view of the fact that it is the result of its main business activity. As of December 31, 2016, the Bank s loan-loss reserve is Ps. 1,469 million. See Notes 2 and 8 to the accompanying consolidated financial statements for a discussion of the Bank's policies and Management s analyses of the loan-loss reserve. How our audit addressed the key audit matter: We analyzed the risk considerations related to the calculation of the loan-loss reserve and we determined the procedures and scope for our review. We performed a walkthrough of the loanloss reserve calculation in order to understand the design and operation of the key controls related to it. We performed substantive tests on a representative sample of loans where we assessed the calculation of the respective loan-loss reserve. A description of the main audit procedures that we applied is as follows: (1) we compared the arithmetical accuracy of the calculations made by Management; (2) we verified the loan balances against the operating systems bases of the loan portfolio and the respective support documentation; (3) we evaluated the assumptions and factors considered by Management to calculate the probability of default; (4) we evaluated the calculation of loss severity and compared this calculation with the supporting documentation of the associated guarantees; and (5) we assessed the disclosures required by the accounting rules related to the loan-loss reserve described in the accompanying consolidated financial statements.

5 3. Other information Management is responsible for the other information. The other information comprises the information included in the Annual Report required by the General Dispositions Applicable to Securities Issuers and Other Securities Market Participants issued by the Commission, but does not include the consolidated financial statements and our auditor s report thereon. We expect to obtain the other information after the date of this auditor s report. Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the consolidated financial statements, our responsibility is to read the other information when we have access to it and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. When we read and consider the Annual Report, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance and to issue a statement on the Annual Report required by the Commission that contains a description of the matter. Responsibilities of Management and of those charged with governance for the consolidated financial statements Management is responsible for the preparation and fair presentation of the accompanying consolidated financial statements, in accordance with the regulatory accounting framework for credit institutions established by the Commission, as described in Note 2, and for such internal control as Management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. In preparing the consolidated financial statements, Management is responsible for assessing the Bank s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting, unless Management either intends to liquidate the Bank or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Bank s financial reporting process.

6 4. Auditor s responsibilities for the audit of the consolidated financial statements The objectives of our audit are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements. As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by Management. Conclude on the appropriateness of Management s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Bank s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor s report. However, future events or conditions may cause the Bank to cease to continue as a going concern. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

7 5. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. The engagement partner on the audit resulting in this independent auditor s report is Jorge E. Peña. Our audit opinion and the accompanying financial statements and footnotes have been translated from the original Spanish version into English for convenience purposes only. Mancera, S.C. A Member Practice of Ernst & Young Global Limited Jorge E. Peña Mexico City February 28, 2017

8 BANCO INTERACCIONES, S.A., INSTITUCIÓN DE BANCA MÚLTIPLE, GRUPO FINANCIERO INTERACCIONES AND SUBSIDIARIES Consolidated Balance Sheets As of December 31, 2016 and 2015 (Amounts in millions of Mexican pesos) (Notes 1 and 2) Assets Liabilities Cash and cash equivalents (Note 3) Ps. 12,782 Ps. 6,069 Core deposits (Note 13) Demand deposits Ps. 49,744 Ps. 35,068 Investments in securities (Note 4) Time deposits Held-for-trading 65,933 71,129 General public 16,455 16,273 Available-for-sale 2,564 2,512 Money market transactions 18,353 16,687 Held-to-maturity 2,113 2,066 34,808 32,960 70,610 75,707 Debt securities issued (Note 13) 16,976 14,314 Assets under security repurchase agreements (Note 5) ,528 82,342 Interbank and other borrowings (Note 14) Derivatives (Note 6) Held-for-trading Demand loans Performing loan portfolio (Note 7) Short-term 7,111 4,620 Commercial loans Long-term 11,237 10,916 Business or commercial activity 24,793 23,783 18,848 15,536 Financial entities 487 1,920 Government entities 89,518 71,190 Liabilities under security repurchase agreements (Note 5) 60,441 65,261 Consumer loans Home mortgage loans Collateral securities sold or pledged as collateral Total performing loan portfolio 114,977 97,172 Derivatives (Note 6) Non-performing loan portfolio Held-for-trading Business or commercial activity Home mortgage loans 7 9 Other accounts payable Total non-performing loan portfolio Income tax payable Total loan portfolio 115,034 97,286 Employee profit sharing payable Balance payable under open transactions Loan-loss reserve (Note 8) ( 1,469) ( 1,620) (Note 15) 452 1,149 Loan portfolio, net 113,565 95,666 Amounts owed under margin accounts Other accounts receivable, net (Note 9) 2,897 2,174 Sundry creditors and other accounts payable (Note 16) 1,894 1,994 2,840 3,492 Foreclosed and repossessed assets, net (Note 10) Outstanding subordinated debt (Note 17) 3,561 3,557 Deferred tax 16 - Property, furniture and equipment, net (Note 11) Deferred credits and early payments Total liabilities 189, ,751 Equity investments Equity (Note 19) Deferred taxes, net (Note 20) Contributed capital Share capital 3,624 3,624 Other assets (Note 12) Deferred charges, prepaid expenses and intangibles Earned capital 1, Capital reserves 1, Other short- and long-term assets Retained earnings 6,466 4,630 1, Unrealized loss on available-for-sale securities Remeasurements of net defined benefit liability ( 8) - Net income 2,406 2,184 10,199 7,952 Total equity 13,823 11,576 Total assets Ps. 202,889 Ps. 182,147 Total liabilities and equity Ps. 202,889 Ps. 182,147

9 Memorandum accounts Loan commitments Ps. 1,335 Ps. 2,077 Assets held in trust or under mandate (Note 23a) Trusts Ps. 77,710 Ps. 69,896 Mandates Ps. 858 Ps. 748 Assets held for safekeeping or managed (Note 23b) Ps. 40,270 Ps. 21,755 Collateral securities received (Note 23c) Ps. 10,083 Ps. 29,738 Collateral securities received and sold or pledged as collateral (Note 23d) Ps. 2,702 Ps. 20,599 Uncollected accrued interest on overdue loans (Note 23e) Ps. 311 Ps. 354 Other memorandum accounts Ps. 206 Ps. 192 The Bank s historical share capital at December 31, 2016 and 2015 is Ps. 2,604. The accompanying notes are an integral part of these financial statements.

10 BANCO INTERACCIONES, S.A., INSTITUCIÓN DE BANCA MÚLTIPLE, GRUPO FINANCIERO INTERACCIONES AND SUBSIDIARIES Consolidated Statements of Income For the Periods from January 1 to December 31, 2016 and 2015 (Amounts in millions of Mexican pesos) (Notes 1 and 2) Interest income (Note 24a) Ps. 11,069 Ps. 7,864 Interest expense (Note 24b) 8,053 5,537 Net interest income 3,016 2,327 Loan-loss reserve (Note 8) 1,125 1,176 Net interest income adjusted for credit risk 1,891 1,151 Commissions and fees income (Note 24c) 4,369 4,705 Commissions and fees expense (Note 24d) 1,518 1,875 Net trading (loss)/income (Note 24e) ( 282) 175 Other operating income (Note 24f) Administrative and promotional expenses 2,156 1,842 Operating income 3,006 2,932 Share of profit of associates 4 2 Income before income tax 3,010 2,934 Current income tax (Note 20) 539 1,157 Deferred income tax, net (Note 20) 65 ( 407) Net income Ps. 2,406 Ps. 2,184 The accompanying notes are an integral part of these financial statements.

11 BANCO INTERACCIONES, S.A., INSTITUCIÓN DE BANCA MÚLTIPLE, GRUPO FINANCIERO INTERACCIONES AND SUBSIDIARIES Consolidated Statements of Changes in Equity For the Periods from January 1 to December 31, 2016 and 2015 (Amounts in millions of Mexican pesos) (Notes 1, 2 and 19) Contributed capital Unrealized loss on availablefor-sale securities Earned capital Remeasurements of net defined benefit liability Share capital Capital reserves Retained earnings Net income Total equity Balance at December 31, 2014 Ps. 3,624 Ps. 688 Ps. 3,491 Ps. 346 Ps. - Ps. 1,750 Ps. 9,899 Resolutions adopted by shareholders: Appropriation of net income of prior year to retained earnings 1,750 ( 1,750) - Creation of reserves 175 ( 175) - Dividends paid to shareholders ( 436) ( 436) , ( 1,750) ( 436) Recognition of comprehensive income: Net income 2,184 2,184 Unrealized loss on available-for-sale securities ( 71) ( 71) ( 71) - 2,184 2,113 Balance as December 31, , , ,184 11,576 Resolutions adopted by shareholders: Appropriation of net income of prior year to retained earnings 2,184 ( 2,184) - Creation of reserves 218 ( 218) - Dividends paid to shareholders ( 130) ( 130) , ( 2,184) ( 130) Recognition of comprehensive income: Net income 2,406 2,406 Unrealized loss on available-for-sale securities ( 21) ( 21) Remeasurements of net defined benefit liability ( 8) ( 8) ( 21) ( 8) 2,406 2,377 Balance at December 31, 2016 Ps. 3,624 Ps. 1,081 Ps. 6,466 Ps. 254 Ps. ( 8) Ps. 2,406 Ps. 13,823 The accompanying notes are an integral part of these financial statements.

12 BANCO INTERACCIONES, S.A., INSTITUCIÓN DE BANCA MÚLTIPLE, GRUPO FINANCIERO INTERACCIONES AND SUBSIDIARIES Consolidated Statements of Cash Flows For the Periods from January 1 to December 31, 2016 and 2015 (Amounts in millions of Mexican pesos) (Notes 1 and 2) Net income Ps. 2,406 Ps. 2,184 Adjustment of items not affecting cash flows Depreciation of property, furniture and equipment Amortization of intangible assets Provisions Current and deferred income tax Share of loss/(profit) of subsidiaries and associates 9 ( 2) 677 1,184 Operating activities Investments in securities 5,075 ( 41,366) Assets under security repurchase agreements 616 ( 561) Derivatives (asset) ( 101) - Loan portfolio, net ( 17,900) ( 15,289) Foreclosed and repossessed assets, net Other operating assets, net 224 ( 1,494) Core deposits 19,189 11,345 Interbank and other borrowings 2, Liabilities under security repurchase agreements ( 4,820) 43,409 Securities sold or pledged as collateral Derivatives (liability) 407 ( 28) Subordinated debt 4 1,001 Other operating liabilities ( 682) 1,049 Income tax paid ( 1,607) ( 1,229) Net cash flows from/(used in) operating activities 3,987 ( 2,896) Investing activities Proceeds from sale of property, furniture and equipment - 73 Purchase of property, furniture and equipment ( 22) ( 9) Purchase of shares of subsidiaries ( 102) ( 48) Purchase of intangible assets ( 103) ( 28) Cash dividends received - 15 Net cash flows (used in)/from investing activities ( 227) 3 Financing activities Dividends paid ( 130) ( 436) Net cash flows used in financing activities ( 130) ( 436) Net increase in cash and cash equivalents 6, Cash and cash equivalents at beginning of year 6,069 6,030 Cash and cash equivalents at end of year Ps. 12,782 Ps. 6,069 The accompanying notes are an integral part of these financial statements.

13 BANCO INTERACCIONES, S.A., INSTITUCIÓN DE BANCA MÚLTIPLE, GRUPO FINANCIERO INTERACCIONES AND SUBSIDIARIES Notes to Consolidated Financial Statements As of December 31, 2016 and 2015 (Amounts in millions of Mexican pesos, except for foreign currency and exchange rates) 1. Description of the business and approval of issue of the financial statements a) Corporate purpose Banco Interacciones, S.A., Institución de Banca Múltiple, Grupo Financiero Interacciones and Subsidiaries (the Bank) was incorporated and authorized to operate as a full-service bank on September 8, 1993, as published in the Official Gazette on that same date. The Bank s majority shareholder is Grupo Financiero Interacciones, S.A.B. de C.V. (Grupo Financiero Interacciones), who holds 99.99% of its shares. The Bank s head offices are located in the Cuauhtemoc district of Mexico City at Avenida Paseo de la Reforma #383, 15th floor. The Bank is engaged in providing banking and lending services in terms of the rules established by the National Banking and Securities Commission (CNBV), Banco de México (Banxico), and the Mexican Credit Institutions Act (the Act). The Bank is currently authorized by Banxico to engage in transactions with derivatives. The Bank is subject to the money laundering prevention rules and regulations issued by the Ministry of Finance and Public Credit (SHCP, Spanish acronym). b) Approval of issuance of the financial statements On February 28, 2017, the accompanying consolidated financial statements and these notes were authorized for issuance by the Bank s Board of Directors, under the responsibility of the following group officers: Gerardo C. Salazar Viezca, General Director; Alejandro Frigolet Vázquez-Vela, Assistant Corporate Finance and Administrative Director; Juan José Cadena Orozco, Director of Accounting and Financial Reporting; and Carlos Alberto Andrade Téllez, Corporate Internal Audit Director. The accompanying consolidated financial statements shall be subject to further approval of the shareholders. As part of its inspection and oversight powers, the CNBV has the right to order those modifications and corrections to the Bank s financial statements that it considers necessary prior to their publication.

14 2. c) Relevant Events Merger of Marina Capital S.A. de C.V. At an extraordinary general shareholders meeting held on March 23, 2016, the Bank s shareholders agreed to have the Bank acquire Marina Capital, S.A. and for the acquired company to be merged into the Bank. Marina Capital was a Mexican company that operated as a mutual fund in international markets and which rendered no services to the general public. On December 31, 2015, the assets and equity of Marina Capital were Ps. 2,152 and Ps. 23, respectively. Due to the acquisition and subsequent merger of Marina Capital, S.A., all of the rights, obligations, property, contracts, agreements, assets, liabilities, shares, privileges, and guarantees and all other components that comprise the merged company s equity were transferred to the Bank (surviving company). The fair value of the consideration paid by the Bank for Marina Capital, S.A. was Ps. 45, which the Bank had paid in advance in However, since the merger did not take effect until 2016, the Bank s payment for this acquisition is not reflected in its statements of cash flows. The accounting effects of the acquisition and merger of Marina Capital, S.A. into Banco Interacciones at December 31, 2016 are as follows: a) The Bank determined goodwill of Ps. 32 related to the acquisition b) The Bank acquired cash totaling Ps. 54, which was deposited into and held as restricted by a foreign bank. c) The Bank absorbed a clearing account of Ps. 435 d) The Bank acquired a position of Ps. 493 in held-for-trading securities comprised of U.S. treasury bonds and a short position of Ps. (493) for instruments that the Bank is required to deliver under a securities lending transaction, which is presented as a liability under collateral securities received or pledged as collateral. e) Amounts owed under margin accounts of Ps. 435

15 3. 2. Significant Accounting Policies a) Basis of preparation and presentation of financial information The accompanying consolidated financial statements were prepared in accordance with the regulatory accounting framework for credit institutions issued by the CNBV. Under these accounting standards, credit institutions are required to observe the Mexican Financial Reporting Standards (Mexican FRS), as issued or adopted by the Mexican Financial Reporting Standards Board (Consejo Mexicano de Normas de Información Financiera, A.C. or CINIF), and any other accounting rules issued by the CNBV for adoption by such entities. The CNBV s own accounting standards include rules with respect to accounting valuations, recognition, and disclosures and financial statement presentation applicable to certain captions in the financial statements. b) Consolidation of financial statements The accompanying consolidated financial statements include the financial statements of the Bank (holding company) and of Inmobiliaria Interdiseño, S.A. de C.V.; Inmobiliaria Interorbe, S.A. de C.V.; Inmobiliaria Mobinter, S.A. de C.V.; Estrategia en Finanzas & Infraestructura, S.A. de C.V., and Interacciones Sociedad Operadora de Fondos de Inversión, S.A. de C.V. (subsidiaries). The accompanying consolidated financial statements reflect the operating results of the subsidiaries from the date of acquisition through December 31, The financial statements of the consolidated entities have been prepared at the same reporting date and for the same reporting period as those of the Bank. All significant intercompany balances and transactions have been eliminated on consolidation. Highlights of the condensed financial information of each of the subsidiaries at and for the years ended December 31, 2016 and 2015 are as follows (does not include the elimination of intercompany transactions): 2016 Subsidiary Equity interest Total assets Total liabilities Equity Operating income Net income for the year Inmobiliaria Interorbe, S.A. de C.V. (1) 99.99% Ps. 52 Ps. - Ps. 52 Ps. - Ps. - Inmobiliaria Mobinter, S.A. de C.V. (1) 99.99% Inmobiliaria Interdiseño, S.A. de C.V % ( 18) Estrategia en Finanzas & Infraestructura S.A. de C.V % Interacciones Sociedad Operadora de Fondos de Inversión, S.A. de C.V % Ps. 809 Ps. 606 Ps. 203 Ps. 317 Ps. ( 12) 2015 Subsidiary Equity interest Total assets Total liabilities Equity Operating income Net income for the year Inmobiliaria Interorbe, S.A. de C.V % Ps. 59 Ps. 8 Ps. 51 Ps. 2 Ps. 30 Inmobiliaria Mobinter, S.A. de C.V % Estrategia en Finanzas & Infraestructura S.A. de C.V % Interacciones Sociedad Operadora de Fondos de Inversión, S.A. de C.V % Ps. 181 Ps. 22 Ps. 159 Ps. 46 Ps. 55

16 4. (1) Reported revenue and earnings of less than Ps. 1 million in 2016, since their main source of revenue is rent. The subsidiaries sold most of their real estate in Inmobiliaria Interdiseño, S.A. de C.V. was incorporated on January 27, 1989 and it is mainly engaged in owning and managing real estate, as well as in planning, repairing, and building the buildings or part of the buildings that house the offices of its majority shareholder or of other companies of the majority shareholders. On September 5, 2016, through official communication No /113941/2016, Banco Interacciones obtained authorization to acquire its stake in Interdiseño, S.A. de C.V. Inmobiliaria Interorbe and Inmobiliaria Mobinter are primarily engaged in leasing property, furniture and equipment to companies that are part of Grupo Financiero Interacciones; however, for the year ended December 31, 2016, the only assets that these companies had were parking spaces. In November 2016, the Bank finalized the sale for a final sale price of Ps The Bank acquired a 99.94% equity interest in the subsidiary, which is represented by 498,109 shares of the subsidiary variable share capital. This acquisition gave rise to goodwill of Ps. 56. The most significant charges to the Bank s consolidated financial statements resulting from the acquisition at December 31, 2016 are as follows: 1) Other accounts receivable - Ps. 58 2) Fixed assets, net - Ps ) Other accounts payable - Ps ) Interbank loans - Ps ) Equity - Ps. 32 6) Earnings - Ps. (14) Estrategia en Finanzas & Infraestructura, S.A. de C.V. was incorporated on October 2, 2001, and is primarily engaged in providing advisory services with a focus on two main lines of business: 1) advisory services related to optimizing the finances of Federal, state and local governments and government entities, and 2) advisory services related to planning public and private infrastructure projects. Interacciones Sociedad Operadora de Sociedades de Inversión is primarily engaged in rendering mutual fund management services and services related to the distribution and valuation of shares in mutual funds. It also provides accounting and administrative services for mutual funds. c) Business combinations and goodwill In accordance with Mexican FRS B-7 Business Combinations, the net assets acquired in business combinations are to be valued at their fair value, with certain exceptions. This standard requires that goodwill be recognized in full for both the controlling and non-controlling portion of the equity interest, since both must be measured at fair value.

17 5. Acquisitions of businesses and associates are recognized using the purchase method. The acquisition of non-controlling interests is considered a transaction between entities under common control and any difference between the purchase price and the book value of the net assets acquired is assessed as an equity transaction. Goodwill represents the difference between the acquisition cost and the fair value of the net assets acquired at the purchase date. Goodwill is considered to have an indefinite life and is therefore not amortized, but instead is subject to impairment testing at the end of the reporting period, or whenever there are indicators of impairment. Contingent consideration to be transferred by the acquirer will be recognized at fair value at the acquisition date. Subsequent changes in the fair value of contingent considerations classified as assets or liabilities are recognized in either profit or loss as a change to other comprehensive income. Contingent consideration that is classified as equity is not remeasured and subsequent settlement is accounted for within equity. Impairment losses are recognized when the carrying amount of goodwill exceeds its recoverable amount (the higher of the asset s net selling price and its value in use). For the year ended December 31, 2016, the Bank recognized no loss from impairment in the value of goodwill. d) Consolidated statements of cash flows The Bank prepares its consolidated statements of cash flows using the indirect method, which adjusts accrual basis net income or loss for the effects of non-cash transactions, movements in operating cash flows balances, and cash flows from investing and financing activities. e) Recognition of the effects of inflation on financial information Mexico s annual inflation rate for the years ended December 31, 2016 and 2015 was 3.36% and 2.13%, respectively. In 2016 and 2015, the Bank operated in a non-inflationary economic environment, as defined under Mexican FRS B-10, since the cumulative inflation rate for the three years prior to 2016 and 2015 of 9.89% and 10.55%, respectively, did not exceed 26%. As a result, beginning January 1, 2008, the Bank ceased to recognize the effects of inflation on its financial information. Consequently, only non-monetary items acquired before December 1, 2007, recognize the effects of inflation from the date they were acquired, contributed or initially recognized through December 31, Such non-monetary items include fixed assets, share capital, capital reserves, and retained earnings. f) Presentation of financial statements CNBV regulations require that amounts shown in the consolidated financial statements of credit institutions be expressed in millions of Mexican pesos. Consequently, items with balances of less than one million Mexican pesos, as reflected in the Bank s accounting records, have been excluded from their respective captions in the financial statements.

18 6. g) Significant accounting estimates and assumptions The preparation of the Bank s consolidated financial statements requires management to make judgments, estimates and assumptions that affect the reported amount of revenues, expenses, assets and liabilities, and the accompanying disclosures, including the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of the affected asset or liability in future periods. The key assumptions concerning future events and circumstances and other key sources of uncertainty at the reporting date that represent a significant risk of causing the need for a material adjustment to the carrying amounts of assets and liabilities in subsequent periods, are described below. The Bank based its assumptions and estimates on the best available information at the time the financial statements were prepared. Nevertheless, existing estimates and assumptions about future events and circumstances may change due to market events beyond the Bank s control. Such changes are immediately reflected in management s assumptions as they occur. Fair value measurement of financial instruments Where the fair values of financial assets and financial liabilities recorded on the consolidated statement of financial position cannot be derived from the price vector provided by a price supplier, they are determined using a variety of valuation techniques that include the use of mathematical models. The inputs to these models are derived from observable market data where possible, but if this is not available, judgment is required to establish fair value. These judgments include considerations of liquidity and model inputs such as volatility for longer dated derivatives and discount rates, prepayment rates, and default rate assumptions for securities. Loan-loss reserve To calculate its loan-loss reserve, the Bank individually assesses its outstanding commercial loans based on the classification of borrowers established in the CNBV s grading methodology. This assessment requires management s judgment in analyzing the quantitative and qualitative factors of borrowers to assign credit scores to each borrower. This credit score is a critical factor for estimating the probability of default based on the expected loss formula and consequently, for determining the applicable reserve rate applied and the risk grade for each loan. Actual results could differ from the assessment of these factors.

19 7. Impairment of investment in securities The Bank reviews its debt securities classified as available-for-sale and held-to-maturity investments at each reporting date to assess whether they are impaired. The Bank also records impairment charges on these equity investments when there has been a significant or prolonged decline in the fair value below their cost. Interpreting the meaning of what may be deemed to be significant or extended requires judgment by management. Nevertheless, the Bank evaluates, among other factors, the historical changes in the pricing and terms of each instrument, as well as the size of differences between the fair value and acquisition cost of its investments. Deferred income tax assets The Bank periodically evaluates the possibility of recovering its deferred tax assets based on the amount of taxable income it expects to generate in future years and when necessary, it creates a valuation allowance for those assets that do not have a high probability of being realized. Judgment is required to determine the amount of deferred tax assets that can be recognized, based upon the likely timing and level of future taxable profits, together with future tax-planning strategies. Allowance for foreclosed or repossessed assets The Bank creates an allowance for foreclosed or repossessed assets in accordance with the CNBV valuation rules for this allowance, which require that the allowance be calculated considering the specified allowance percentages and the length of time that has passed since the foreclosure or repossession of the assets took place. The Bank s Management also measures the carrying amounts of these assets considering its expectations regarding their recoverability and the net realizable value of each asset. The factors underlying the calculations of these allowances (i.e., percentages and terms) and management s other analyses considered for estimating the amount of the allowance may differ from actual results. h) Cash and cash equivalents Cash and cash equivalents principally consist of bank deposits and highly liquid investments with maturities of less than 90 days. These investments are stated at cost plus unpaid accrued interest at the date of the consolidated statement of financial position, which is similar to their market value. Call money financing extended or acquired in the interbank market and whose repayment period may not exceed three business days are presented in the statement of financial position as part of the caption Cash and cash equivalents, and in the case of financing extended, and Demand loans in the case of financing received. Interest expense and income under these short-term loans is recognized on an accrual basis in the income statement under the caption Net interest income.

20 8. Bills of exchange with immediate guaranteed collection are recognized as part of Other cash equivalents if they are collectible within two business days (for bills of exchange issued in Mexico) or five business days (for bills of exchange issued abroad) after the date of the transaction that gave rise to them. Bills of exchange that are not recovered within these terms are transferred to the Loan portfolio or Other accounts receivable caption, depending on the nature of the source transaction. For all bills of exchange transferred to the Other accounts receivable caption, an allowance for the full amount of the debt is created within 15 calendar days after the transfer. i) Recognition of transactions The Bank s transactions involving securities, derivatives, security repurchase agreements and security loans, among others (both proprietary and on customers behalf), are recognized at the time the respective agreements are entered into (i.e.. trade date), irrespective of the settlement date. j) Unrealized gain or loss on financial instruments In determining the fair value of both proprietary and customer positions in derivative financial instruments contracted through recognized markets, the Bank uses the prices, rates and other market information provided by a CNBV-authorized price supplier. For non-standard securities and transactions, the Bank uses valuation models, as discussed above in the Significant accounting estimates and assumptions section. k) Open transactions - Securities trading The related amount receivable or payable under open securities transactions is recognized in the corresponding clearing account at the agreed on price at the time of the trade. The difference between the market price of the securities and the agreed on price is recognized in the consolidated income statement as part of the caption Net trading (loss)/income. - FOREX trading The Bank buys and sells currency futures with 24-, 48- and 72-hour terms. Foreign currencies bought and sold are recorded in assets or liabilities at the transaction s inception date. Dollar amounts are translated into Mexican pesos using the FIX exchange rate published by Banco de México in the Official Gazette one business day after either the date of the related transactions or the financial statements reporting date. When it is agreed that settlement shall be within a maximum of two bank-working days from the trade date, the traded currency is recorded as a restricted liquid asset (in the case of buy transactions) and a liquid asset outlay (in the case of sell transactions), with a respective credit or debit against the corresponding clearing account. Gains or losses on FOREX trading are recognized in the income statement as part of the caption Net trading (loss)/income.

21 9. Debit balances in clearing accounts that are not recovered within 90 calendar days subsequent to the trade date are reclassified as overdue debt under the caption Other accounts receivable and the Bank creates an allowance account for the entire balance. As at 31 December 2016, the Bank did not have any unrecoverable FOREX balances. For securities and FOREX transactions that are not paid for immediately in cash or where settlement is not on a same-day basis, the related amount receivable or payable is recorded in Mexican pesos in clearing accounts, until the respective payment is made. Debit and credit balances in clearing accounts are included in the consolidated statement of financial position as part of Other accounts receivable and Balance payable under open transactions, as the case may be, and may be offset only if and when the Bank has the contractual right to do so and intends to settle the net amount, or to simultaneously realize the asset and settle the liability. l) Investments in securities Investments in securities include investments in debt and equity instruments. These investments are classified based on Management s intention with regard to holding each investment at the time they are acquired. Each classification is governed by specific rules with respect to the way the investment is measured, valued and presented in the financial statements, as described below: - Held-for-trading securities These instruments are acquired to earn returns from the appreciation in their value realized through short-term trading transactions. At the end of each month, held-for-trading securities are valued at fair value, and the related gain or loss is recognized in the consolidated income statement as part of the caption Net trading (loss)/income. At the time the instruments are sold, the unrealized gain or loss is reclassified in the consolidated income statement as securities trading income or loss, as the case may be. - Available-for-sale securities These are debt securities and equity instruments that are not acquired to earn returns from price differences resulting from short-term trading activities and the Bank neither has the intention nor the ability to hold the debt securities to their maturity. Therefore, these instruments are residual in nature (i.e., they are acquired for purposes different from those of the held-for-trading or held-to-maturity securities). Available-for-sale securities are measured at fair value, and the related gain or loss, net of income tax, is recognized in the consolidated statement of changes in equity as part of the caption Unrealized loss on available-for-sale securities. At the time the instruments are sold, the cumulative unrealized gain or loss is reclassified in the income statement as securities trading gains or losses under the caption Net trading (loss)/income. - Held-to-maturity securities Held-to-maturity financial investments are debt instruments with fixed or determinable payments and fixed maturities, which the Bank has the intention and ability to hold to maturity.

22 10. Held-to-maturity securities are valued at their amortized cost, which means that accrued interest includes the amortization of the premium or discount (included in the fair value, if applicable, at which they were initially recognized) and the transaction costs. In accordance with the CNBV s accounting rules, the Bank may not classify any financial assets as held-to-maturity if in the current-year or the two immediately preceding years it has sold or reclassified held-to-maturity securities before maturity, regardless of whether the financial assets it intends to classify as held-to-maturity and those that were sold or reclassified before maturity share similar characteristics, except under the following conditions: a) within 28 days prior to either the instrument s maturity or, when applicable, the date of the repurchase option of the security by the issuer, or b) after more than 85% of the original nominal value of the security has accrued or, when applicable, has been earned by the Bank. During the years ended December 31, 2016 and 2015, the Bank has not sold any held-to-maturity securities. At the time of their acquisition, investments in securities are initially measured at fair value (which includes any applicable discount or premium). Transaction costs associated with the acquisition of securities are recognized depending on their category: a) trading securities are recognized in profit or loss at the date of acquisition; and b) available-for-sale securities and held-to-maturity securities are initially recognized as part of the investment. Accrued interest on debt securities is recognized in net profit or loss in the applicable category as part of the caption Investments in securities. Accrued interest collected is reclassified from the Investments in securities caption to the Cash and cash equivalents caption. - Dividends Stock dividends are accounted for by increasing the number of shares outstanding of the investee and, at the same time, reducing the average stock price of the shares in question. This is the same as assigning a zero value to the dividend. Cash dividends received are accounted for by reducing the value of the investment. - Transfers of financial instruments between categories During the years ended December 31, 2016 and 2015, the Bank made no reclassifications of instruments between categories. No reclassifications are permitted between financial instrument categories, except for securities reclassified from held-to-maturity to available-for-sale, which is allowed provided that the Bank does not intend to hold these instruments to maturity. Any unrealized gain or loss at the reclassification date is recognized under the caption Unrealized loss on available-for-sale securities in the consolidated statement of changes in equity.

23 11. Any reclassification of instruments between categories other than the reclassification mentioned above requires the CNBV s authorization. m) Security repurchase agreements (repos) The Bank enters into repos involving government and bank securities. The receivables or payables under repos, which respectively represent the Bank s right to receive the cash back from the repo seller and its obligation to return the cash back to the repo buyer, plus or minus the related repo interest, are recorded in the consolidated statement of financial position under Assets under security repurchase agreements or Liabilities under security repurchase agreements, respectively. Financial assets that the Bank delivers as collateral as the repo seller are classified as restricted securities based on the type of financial assets in question. Collateral securities received by the Bank as the repo lender are recorded in memorandum accounts under Collateral securities received. The memorandum accounts containing collateral received by a repo buyer that the repo buyer sells or delivers as collateral under another repo are canceled at the time the repo buyer acquires the financial asset that it will return to the repo seller or at the time the second repo matures or the repo seller of that repo has defaulted on its obligations under the repo agreement. These collateral securities are recorded in memorandum accounts under Collateral securities received and sold or pledged as collateral. - As the borrower The Bank as the repo seller records the cash that it receives from the repo buyer or a debit clearing account, and at the same time records an accounts payable initially recorded at the repo contract price, which represents the Bank s obligation to return the cash to the repo buyer. Over the term of the repo, the account payable is measured at amortized cost using the effective interest method in order to recognize the repo interest in profit or loss as it accrues. - As the lender The Bank as the repo buyer records the cash that it provides to the repo seller or a credit clearing account, and at the same time records an account receivable initially recorded at the repo contract price, which represents the Bank s right to receive the cash back from the repo seller. Over the term of the repo, the account receivable is measured at amortized cost using the effective interest method in order to recognize the repo interest in profit or loss as it accrues.

24 12. - Offsetting a financial asset and financial liability Whenever the Bank sells or pledges in guarantee collateral securities it has received as the repo borrower, the account payable that it had recorded for these financial assets is offset against the account receivable that the Bank had recorded as the repo borrower. The net asset or liability resulting from this offsetting is shown in the statement of financial position as part of either Assets under security repurchase agreements or Collateral securities sold or pledged as collateral, as the case may be. n) Derivative financial instruments and hedging activities Derivatives are recognized in the consolidated statement of financial position at fair value, regardless of whether they are classified as held for trading or as hedges. Cash flows received or delivered to adjust derivatives to their fair value at the inception of the hedge (excluding premiums on options) are recognized as part of the fair value of the instrument. The Bank uses hedging instruments as part of its strategies for mitigating or eliminating altogether the various financial risks it is exposed to and its strategies regarding asset/liability management, as well as to reduce its deposits and borrowing costs. Transactions conducted for trading purposes refer mainly to transactions that the Bank carries out with its customers or with other intermediaries to meet their financial risk hedging requirements, and they generate hedging positions that the Bank offsets through mirror transactions conducted on the open market. Transaction costs are expensed as incurred. At December 31, 2016 and 2015, the Bank maintains no open hedge derivative positions. Highlights of the accounting treatment of the Bank s transactions with derivative financial instruments are as follows: - Options Options are contracts under which the Bank has the right, but not the obligation, to buy an underlying asset at a determined price called the strike price, at an established date or time. The premium paid on an option transaction is presented separately in the consolidated statement of financial position as part of the caption Derivatives for trading or hedging purposes. The fair value of an option is the premium paid or received by the Company for the option, which is subsequently measured based on the fair value of the associated swap contract. - Swaps Swaps are contractual agreements between two parties to exchange payment flows at specified intervals and dates. The Bank maintains long and short interest rate swap positions that are denominated in a single currency. The Bank calculates the payment flows from these instruments by multiplying the notional amount by the interest rate received or paid in the swap. At December 31, 2016, the market value of the Bank s swap position is Ps. 101.