This is an abridged version of the annual report and sustainable 2012 to see the full version,
click here.
Message from the Chairman of the Board
Dear shareholders and employees:

The year 2012 was a transition period for the Group. We were able to demonstrate our strength in the face of growing competition. First and foremost, we maintained our firm purpose to “eradicate financial exclusion” and align our business strategy with our Philosophy and Principles in order to provide our clients with a wider range of innovative and efficient services and products that generate social, economic and human value.

Over the course of the year, we consolidated our position as a multi-product and multi-country Group. Our products and services encompass the following categories:

> Microcredit

> Savings products

> Insurance

> Payment channels

> Financial education

We reorganized the way we do business to strengthen and position our companies for further growth. We currently operate in high-growth markets, with enormous opportunities and with one of the most favorable environments in the modern history of the countries in which we do business. After completing the Group’s transition in 2012 with significant investments and the proper organizational restructuring, which go hand-in-hand with the fortitude of our world-class team, we are ready to capitalize on the new opportunities before us.

One of our main investments consisted of developing the Compartamos Banco SAP platform in Mexico. This is advancing quickly and with positive results. We thus hope to transfer this new technology to Peru and Guatemala in the midterm. Doing this will allow us to standardize, automate and optimize the processes and information managed by each Group company while also providing improved services and offering additional information to support new strategies and products.

In order to establish a responsible and competitive environment, and reinforce our commitment to generating social, economic and human value in the lives of our clients and employees, Compartamos Banco and the ‘Comisión Nacional para la Defensa de los Usuarios de Servicios Financieros, CONDUSEF’, (Mexican Commission for the Defense of Financial Institution Users) are working together on consultancy and financial training issues and information concerning the use of financial products and services.

We reinforced our clients’ protection and financial education principles and processes among our employees and clients by applying 11 key principles, creating a Client Protection Index and offering the “Improving my personal finances” workshop. This resulted in us staying free from any type of penalty from any of the authorities in any of the countries where we do business, with a 78% client satisfaction rate.

We call upon our competitors to join our efforts in protecting our clients, which include encouraging the creation of improved client information to strengthen Credit Risk Rating Companies, among others, thereby keeping our clients from over-indebtedness.

We consolidated a new phase for the Group with the deposit pilot project implemented by Compartamos Banco and our new subsidiary, Aterna. The challenges we overcame in 2012 meant a new era for the Group, as we moved from microcredit to microfinance providing micro-insurance through Aterna and strengthening our deposit pilot project at Compartamos Banco.

This new Aterna line of business positioned the company in the micro-insurance sector in Mexico and the Americas with 3,178,887 active policies. Its ultimate goal is to promote a prevention culture at the Base of the Pyramid, to contribute to the prevention-risk balance that must exist in the region’s microfinance sector. The creation of this new company, partnered with Grupo CP, has allowed us to establish a true benefit and added value for our clients. We sold this considerable number of policies through four different channels.

Meanwhile, Yastás, our bank brokerage administrative subsidiary, completed over 2.7 million transactions through its 1,567 affiliates in four states across Mexico, thereby reaffirming the Group’s purpose of eradicating financial exclusion. This new payment channel will allow us to bring a wide range of services closer to the communities that need it most.

Another major aspect of the 2012 transition was the extensive business expansion with urban products into sectors Compartamos Banco did not normally serve. We invested in new markets with ‘Crédito Comerciante’, with a 43.7% growth in the number of clients compared to last year while our ‘Crédito Individual’ rates grew 53.7% over 2011. This increase again demonstrated our team’s great capacity for execution and commitment to offer more and better services.

Despite facing greater competition in all our markets, we achieved substantial results thanks to the all-inclusive nature and excellence of our service. These results include: 2.88% delinquency rate, with a 79.75% client retention rate in Mexico, and 64.32% and 74.63% client retention rates in Guatemala and Peru, respectively, demonstrating our leadership and market position with strong growth and the continued excellence of our portfolio.

The rapid growth of the microfinance sector in all countries where we do business contributes to our purpose that consists of “eradicating financial exclusion”, thus becoming a tool for social and economic development in the region.

These lines of action serve as the general framework for the social, economic and human value that we generate through our operations in Mexico, Guatemala and Peru, helping to consolidate our position as a major player in the microfinance sector in Latin America. In doing so, we maintain our principle of reaching out to the greatest number of people in the shortest time possible.

Ours is a “Generation Y” Group, since the average age of our employees is 31.1. Youth is one of our greatest strengths. It allows us to maintain an innovative attitude towards business opportunities and our operations. This innovative attitude allows us to venture into new business and technologies to streamline our operations and improve our Client Services.

With our youth, we are also able to uphold a renewed business outlook that involves being a company that manages and creates profitable business with ethics and a strong sense of responsibility. As such, the Great Place To Work Institute continues to rank us as one of the top best two companies to work for in Mexico.

This is the best way to guarantee our profitability and stay true to our sense of purpose through corporate governance, which we take to mean an attitude rather than a simple structure and the tracking of processes. Our achievements and challenges are permanently overseen by our Board of Directors and its different committees committed to the company and its shareholders. Our institutional attitude is based on continuous improvement. We are proud of the exemplary Board of Directors that governs us; I am personally very grateful for the dedicated participation and resolution each of our board members brings to ensure the Group’s strong development.

As far as the securities market is concerned, in 2012 we achieved excellent share liquidity, which has allowed us to maintain our listing on the Mexican Stock Exchange’s Prices and Quotation Index. Also, thanks to our approach and actions in the field of sustainability, Grupo Compartamos is listed on the Mexican Stock Exchange Sustainability Index. Both of these distinctions increase our visibility and trust in the eyes of our Group’s investors. Our share price grew 7.6% in 2012.

Moreover, on October 26th, 2012, the Board of Directors approved the dividend policy applicable as of 2013, agreeing to the payment of a minimum 40% annual ordinary dividend for the previous year’s net profits with room for additional payouts. Added to ordinary payouts and repurchases, these additional payouts, which are still pending approval, must not result in annual capitalization reductions of more than three percentage points.

We believe that there are great opportunities to cater to markets hereto ignored and provide better service to our clients every day with more and better products. Our positive performance in 2012 in the face of a more competitive environment reflects the strength of our Group.

Looking forward, we will invest, train our staff members and develop new products and services while focusing on innovation to evolve the traditional microfinance model into a more modern and efficient model. We will also expand to eradicate financial exclusion thereby generating social, economic and human value for the largest number of people in the shortest time possible. This is our mission and we will put all our efforts into making it come true.

Finally, I wish to thank the Grupo Compartamos shareholders and employees for allowing me to serve as Chairman of the Board of Directors over the course of these years. I especially want to thank Carlos Danel and Carlos Labarthe (“The Carlos”). You are the best! It has been my honor, and I clearly received much more than I could have modestly contributed. This is not a goodbye since I will continue to enjoy one of my greatest privileges —as long as I have your trust—, serving as a board member with the best professional team I have ever known: the Compartamos family. The Chairmanship will remain in the best hands possible, which is another reason why I say that the best is yet to come for Compartamos under this extraordinary leadership.

Álvaro Rodríguez Arregui

Chairman of the Board of Directors