Financial Statements For the fiscal year commenced January 1, 2013 and ended December 31, 2013, presented on a comparative basis

Transcription

1 Financial Statements For the fiscal year commenced January 1, 2013 and ended December 31, 2013, presented on a comparative basis

2 Financial Statements For the fiscal year commenced January 1, 2013 and ended December 31, 2013, presented on a comparative basis Table of Contents Annual Report Statement of Income Statement of Other Comprehensive Income Statement of Financial Position Statement of Changes in Shareholders Equity Statement of Cash Flows Notes to the Financial Statements Additional Information to the Notes to the Financial Statements as required by Section 12 of Chapter III, Title IV, of the amended regulations of the National Securities Commission (C.N.V.) (N.T. 2013). Summary of Activity Independent Auditors Report Supervisory Committee s Report

3 2013 Annual Report

4 TARJETA NARANJA S.A. Annual Report as of December 31, 2013 In compliance with legal provisions and the by-laws, Tarjeta Naranja S.A. submits this Annual Report, together with the Statement of Financial Position, Statement of Income, Statement of Changes in Shareholders' Equity, Statement of Cash Flows and the corresponding notes and schedules, for the 19th fiscal year of the Company, ended December 31, FINANCIAL CONDITION (Information Presented in Thousands of Pesos) During 2013, Tarjeta Naranja continued consolidating its position and managed to increase its market share in the Argentine credit cards market. This year open accounts exceeded 2.5 million and taking into consideration additional cardholders, the Company has 3.7 million customers. Meanwhile, the number of authorized cards is 6.9 million, including Tarjeta Naranja, Tarjeta Naranja Visa, Tarjeta Naranja Mastercard and Tarjeta Naranja American Express. In turn, transactions increased by 15.73% and average consumption by open account increased by 26.13%. At fiscal year-end, net operating income amounted to AR$ 3,418,747, representing a 30% increase as compared to 2012 and consolidating the prior year s positive trend in generating income. Such income is explained by the 36% increase in net income from services and the 19% increase in net income from financing. Operating expenses increased by 35% as compared to the prior year, mainly due to the rise in labor costs changed by trade union agreements, the increase in tax disbursements and rates, and other operating expenses. As a result, net income increased by 13%, as compared to 2012, and at fiscal year-end, consolidated net income amounted to AR$ 489,713. The shareholders equity at year-end amounted to AR$ 1,942,084 and the distribution of dividends for AR$ 110,000 was approved at the Ordinary Shareholders Meeting held on March 22, SOURCES OF FINANCING During FY 2013, Tarjeta Naranja carried out the following transactions regarding debt issuance and sources of financing. Bank and Financial Loans New loans were obtained from several banks in the aggregate amount of AR$ 670 million. In turn, loans and checking account overdrafts were extended in the aggregate amount of AR$ 233 million. In FY 2013, loan principal and interest payments were made in the amount of AR$ 566 million. Financial Leases In FY 2013, financial lease payments due were made in the amount of AR$ 26 million.

5 Notes ( Obligaciones Negociables ) Within the framework of the Global Program for the Issuance of Notes ( Obligaciones Negociables ), Class XX, XXI, XXII and XXIII Notes were placed for AR$ 789 million. Principal and interest on Notes were paid in the amount of AR$ 707 million. Foreign Currency Debt Hedging At fiscal year-end, we have forward transactions and other investments to hedge cash flow risks of foreign currency-denominated debt. Other Available Sources We have a credit line available that has not been used related to a commitment signed with Banco Galicia for AR$ 100 million. SIGNIFICANT EVENTS DURING FISCAL YEAR : Let s Join Together Again We ended 2012 convinced that to take on challenges and face changes, we needed to support us and work together, organizing a great team with our employees, cardholders and merchants ("Comercios Amigos"). Therefore, Let s Join Together Again was the motto that inspired us throughout In the words of David Ruda, our CEO, "we recover the concept of teaming, reunification, which means being together, combining ideas and adding projects so that everything may go better for all of us. And if the need to change arises from this relationship, then don't be afraid. Let s change! In this context, and for everyone to listen thereto, we want to shout: Give me your hand, it is necessary for us to join together again! Summer Once more, the summer operation integrated actions at the main tourist centers and a number of benefits such as discounts of up to 20% at the best restaurants, three-installment and 0% interest rate plan (named Zeta ) at supermarkets and gas stations, and exclusive benefits at hotels, entertainment, travel agencies and transportation companies, among others. This year the traditional Naranja Show combined in Mar del Plata and Carlos Paz two exclusive recitals performed by Diego Torres with dazzling firework shows. Over 250,000 persons enjoyed these shows, and cardholders and the public in general were provided with a unique experience. Financieramente Incorrectos (Financially Incorrect) Campaign In an evolution of the Financieramente Incorrectos (Financially Incorrect) campaign launched in 2012, where we revealed Tarjeta Naranja s essence, this year we presented a second part intended to communicate our products. The campaign, designed by the BBDO agency, reflected a core message: it is possible to change from a No to a Yes ( Zi instead of Sí in Spanish, which is written wrong on purpose to include the letter Z) with the Z Plan, an innovative product that provides our cardholders with more freedom upon purchasing decision-making. Through a saga of three commercials that appeal to humor and feelings, we managed to share the attributes that make us different reinforcing the value proposal we provide to our more than 3.7 million customers throughout the country. Argentina s National Soccer Team: Light Blue, White and Naranja (Orange)! As official sponsor of Argentina s National Soccer Team, Tarjeta Naranja continued supporting the national team in all official qualifying rounds for 2014 Brazil World Cup and friendly games. In order to continue consolidating the brand throughout the country, we carried out branding actions in

6 seven matches, and offered special benefits and promotions for cardholders, such as the exclusive presale in all games. In addition, we developed an advertising spot to celebrate before everybody the qualification for Brazil World Cup, which was communicated on TV, printed media and social networks. The piece was developed through a modern digital animation technique and portrays the arrival of our team of stars to Maracaná Stadium with the dream to be World Champions. Un gol, un potrero (One Goal, One Soccer Field) Relying on the fact that the Un Gol, un Potrero (One Goal, One Soccer Field) program expresses and shares the joy we feel to support the Argentina s National Soccer Team, we continued working hard on this initiative as focal point of the sponsorship. Through this Social Responsibility program, which is aimed at fostering sports among children, since 2011, we have remodeled 78 sports areas of schools, community centers and neighborhood clubs so that more than 15,000 children throughout the country enjoy practicing sports. The participation continues growing, with over 3,250 enrolled institutions throughout the country and more than 75,000 Facebook friends voting for winners. Naranja Store One year after its launch, Naranja Store consolidates itself in the e-commerce world with sales made in 2013 amounting to AR$ 15 million. With an increasing number of transactions, Tarjeta Naranja s online purchasing site currently connects more than 200 Merchants ( Comercios Amigos ) throughout the country with 10,000 active cardholders at the platform, who are allowed to access selected products with distinctive plans, promotions and benefits. Through this alternative purchasing channel, Tarjeta Naranja offers more convenient proposals for its users and continues strengthening the relationship with its Merchants ( Comercios Amigos ) in the country. Other Products and Services Convivimos, Tarjeta Naranja s monthly magazine, consolidated itself in 2013 as leader among the subscribed publications in Argentina, with a circulation of 550,000 issues and more than two million readers. Thought for the whole family, the magazine of the Company s publishing division directly reaches thousands of houses throughout the country. In December, we celebrated this achievement with a special edition, which presented Lionel Messi on the cover and an exclusive interview. As new service for cardholders, we implemented the cell phone top-ups by means of the tarjetanaranja.com web services. Throughout 2013, top-ups amounted to over AR$ 100 million. Tarjeta Naranja offers a wide range of products as regards personal insurance, which amounted to 2.4 million policies in force at fiscal year-end. Services on your cell phone, whereby cardholders may control their operations and receive text messaging with information about each purchase made, due dates, payments made, withdrawals, transfer notices and balance queries. In 2013, the number of customers who use it increased by 16% in 2013, reaching 1,200,000 persons. Innovation In 2013, we reinforced the space for open innovation, Ideas Naranja (Naranja Ideas), a collaborative platform that invites the community to propose ideas and vote or comment others ideas based on the instruction given by Tarjeta Naranja. Calls took place in June and September this year with two new questions. In June the trigger was: Which new product or service would you like Tarjeta Naranja to offer? And in September we asked: How would you like a brand to surprise you when you visit its stores? This was earmarked for generating innovative ideas to continue improving the service quality. People s participation was very important, and over 10,000 ideas and 260,000 visits to the innovación.tarjetanaranja.com site were received.

7 Martes Financieramente Incorrectos (Financially Incorrect Tuesdays) During 2013, promotional actions were performed, which became distinctive as compared to competitors and were positively valued by customers, who increased the use of their cards. The most outstanding promotion was Martes financieramente incorrectos (Financially incorrect Tuesdays), which offered a 15% discount without limit on large brands throughout the country. From March to June and from September to December, cardholders could take advantage of this benefit at more than 2,100 points of sale of subscribed brands. For the Mother s Day in October, the discount increased to 20%. In addition, there were ongoing promotions with discounts and 0% interest installment plans in all sectors. Many agreements were entered into with top brands in Argentina, such as FIAT, Movistar, Claro, DirecTV, Dexter, Falabella, Phillips, Disco Virtual, LAN, Musimundo, Garbarino, Frávega, Walmart, ADT, Libertad and Jumbo, among others. Likewise, special promotions with renowned stores of each city were carried out in every region throughout the country. One Million Friends on Facebook We continued participating in the different social platforms with the commitment to providing customer services, talking to our community of friends, sharing colorful news, exclusive benefits and publications of interest. In November, we reached the spectacular amount of one million friends on Facebook, which at fiscal year-end stood at 1,051,700. This makes us become the financial sector institution in Argentina with the highest amount of friends on this social network. In turn, in Twitter we began the year with 6,752 followers. At the end of 2013, they amounted to 31,800. To reward the work performed on social networks, the Interactive Advertising Bureau (IAB), agency that regulates the global digital advertising, awarded us two prizes for the 2013 Best Digital Campaigns. The prized initiatives were Lovekedin (Golden Prize), developed for the Valentine s Day and #Quieromichulengo (Bronze Prize), launched to increase participation in Twitter under the framework of the Financially Incorrect campaign. Actions for Merchants ( Comercios Amigos ) During 2013, actions, events and initiatives specially intended for our Merchants ( Comercios Amigos ) were carried out. We made an alliance with Google and with this, we granted an exclusive benefit to our countrywide subscribed stores, which could access to Google AdWords, an online advertising solutions package furnished with effective tools to boost their businesses. In September, we held the fifth edition of the Contest of Naranja s Windows, in which over 1,000 stores throughout the country participated, with the instruction to create original windows where the orange color played a leading role. With the designer Benito Fernández as member of the jury, the winners were chosen. The first prize was a trip to Paris and the second one a trip to Río de Janeiro, both for two persons. Throughout the year, Tarjeta Naranja invited stores to participate in training conferences about several matters in order to strengthen the relationship by providing them with a different value proposal. The conferences held in Rosario, Bahía Blanca, Mar del Plata, Resistencia and Neuquén should be highlighted, whereat Paula Molinari, a Leadership and Change Management specialist, lectured. In addition, the Company s directors, who specially traveled to force a closer relationship with stores, attended these events. Branch Network At fiscal year-end, Tarjeta Naranja has a network of 215 service centers throughout the country. This network includes 166 branches and 49 points of sale, distributed as follows: 9 in the City of Buenos Aires, 26 in Greater Buenos Aires, 20 in the rest of the Province of Buenos Aires, 18 in Santa Fe, 50 in Córdoba, 4 in Chubut, 9 in Entre Ríos, 8 in Río Negro, 9 in Tucumán, 7 in

8 Corrientes, 2 in La Pampa, 6 in Misiones, 3 in San Luis, 2 in Tierra del Fuego, 5 in Catamarca, 3 in Chaco, 3 in Formosa, 5 in Jujuy, 5 in La Rioja, 5 in Neuquén, 9 in Salta, 2 in Santa Cruz and 5 in Santiago del Estero. During the year, Tarjeta Naranja continued increasing its presence in the Autonomous City of Buenos Aires (CABA, as per its initials in Spanish) and the rest of the country. We opened seven branches, distributed in Villa Crespo and Villa del Parque (CABA); in Mina Clavero and La Calera (Córdoba), Puerto Iguazú (Misiones), Perico (Jujuy) and San Miguel de Tucumán. Additionally, we moved ten branches to different parts of the country in order to improve the customer s experience. In August, we opened offices in the neighborhood of Balvanera, in the City of Buenos Aires. Administrative and commercial areas were established therein in order to connect and supply branches in the area. Ongoing Improvement with LEAN This year we began a change adopting the LEAN methodology in Tarjeta Naranja s processes, along with the international consulting firm McKinsey. The purpose is to streamline the operation, increase efficiency and improve the customer s experience ensuring the quality of our products and services. We started up with two very important processes for the customer, Contact Center and Collections, and then we continued working on the network of Stores and Processing. To perform this task, fulltime interdisciplinary teams were formed, which during four months diagnosed, designed, piloted and launched improvements removing activities that do not add value and increasing the capacity of work teams through simple tools. During 2014, LEAN will continue being applied to other processes. New Tools to Assess Credit Risk In 2013, we introduced tools that allow us to assess the risk level associated with each applicant and/or customer and achieved an objective credit risk management at the Origination, Behavior and Collection instances. Through these Scoring Models, we improved the customer segmentation by risk and achieved an increased efficiency in the processes related to Account Additions, and Collection and Account Management, in addition to making decision criteria consistent and improving the quality of the response to the customer with New Cards In August this year, new designs were launched for all cards issued by the Company in order to align them with the last design trends. From that date to the fiscal year-end, 1,954,678 cards were delivered with the new image. Casa Naranja In order to respond to the Company s growth and group a significant part of Employees from Nonbusiness Areas in the same place, during 2013, we continued with the works for the new sustainable headquarters in the City of Córdoba. It is a 12-story building with a first floor, occupies 18,800 m2, will accommodate 700 employees and will be added to the other real property that Naranja has in the same block. It will be the first building in Córdoba to be awarded the LEED (Leadership in Energy & Environmental Design) certification, which implies very important contributions regarding eco-efficiency. At the end of fiscal year 2013, the building achieved a 65% progress and is expected to be completed towards the end of 2014.

9 Tarjeta Naranja Perú The Company continued developing the business in Peru, where it began operations in At fiscal year-end, the affiliate has 11 branches in Lima, a team of 487 employees and 80,671 active cards. Tarjeta Naranja Perú resulted from an association with Banco de Crédito del Perú (BCP), main private bank in such country. Employee Management Tarjeta Naranja s organizational culture places people first. Therefore, the Human Resources management is focused on keeping an excellent work environment and fostering the ongoing development of employees. During 2013, 283 people joined the firm and headcount amounted to 4,049 employees throughout the country by year-end. In-house contests and promotions were carried out as a result of being interested in providing multiple development opportunities, thus encouraging individual growth. Focused on training, more than 2,600 training courses were taught, most of which were under the charge of 505 in-house trainers of the Company, who are employees who assume the task of transferring knowledge. Seeking the ongoing improvement, the Performance Assessment process was renewed, which takes place twice a year for the purpose of achieving that results better reflect each employee s performance, and thus be able to identify improvement opportunities. We also added changes in the Democratic Assessment, an instrument to know employees satisfaction level with respect to their leaders. For the strategic purpose of being among the best companies to work for in Argentina, Tarjeta Naranja continued performing actions to achieve an excellent work environment. In November 2013, as part of the Environment Diagnosis process, the in-house environment survey was conducted, which seeks to know the employees perceptions of the different actions implemented at the Organization. Aspects to be improved were identified and the results of the improvements implemented, as a result of the diagnosis made in 2012, were assessed. Additionally, to supplement our in-house measurements of the environment with an external view that allows us to compare us with other companies, in August this year we worked again along with Great Place to Work (GPTW) in preparing a diagnosis. The invitation to participate in this measurement was extended to all the Company s employees and leaders. The results obtained continue placing us as one of the best companies to work for in the country. Technology and Processes During the year, investments continued being made in the technological upgrade and the development of improvements in the applications, with a great dedication of resources to the strategic support for the Company s growth. In order to achieve that cardholders and stores may virtually provide all services in the branch network, we began implementing Naranja Online. This development improves the web functionalities through a new Service-Oriented Architecture (SOA), which provides the best usability practices of online information. In seeking to optimize the performance of our processing system for branches, contact center and other areas, improvements were made in storage hardware and applications, thus managing to reduce the time of processes. We continued making progress with the Communications initiative, which consists in sending our customers information about the status of their proceedings through non-traditional channels, such as and SMS. Accordingly, during the year, 10 million notices were sent per month.

10 In addition, we implemented an application for the sale through non-traditional channels by means of the contact center, web site and social networks. This allows customers to request their card from any place, around the clock, without the need to go to a branch. To provide further facilities to customers, who may easily pay at outsourced institutions, we developed a technology that allows cardholders to pay their account statement by solely showing their national identity cards. In order to process the data volume generated by each Company s area, a Business Intelligence (BI) tool was implemented, which allows providing support information for strategic decisionmaking, according to Tarjeta Naranja s current and future needs. Prevention of Asset Laundering and Funding of Terrorist Activities Tarjeta Naranja has internal control policies and procedures to ensure that its products and services are not used for criminal purposes. During 2013, initiatives, such as the acquisition of the Systech Vigía tool in its profile and monitoring modules, which are integrated into the already existing Vigía Lista module, were implemented to mitigate the risk. With this, we achieved a comprehensive understanding of customers and their behavior, which allows us to detect irregular situations related to asset laundering, financing of terrorist activities and/or fraud. In addition, it makes it easier to record the detected cases and assign an individual Laundering Risk Rating (IRL, as per its initials in Spanish) to each customer. We strengthened control processes and in order to have updated information about those customers with higher consumption, we requested documentation supporting revenues, as well as supplementary information regarding them. All of the Company s employees received in-house training and education regarding this matter at three complexity levels depending on their positions. Furthermore, the members of the Control and Prevention Committee and the Anti-laundering Unit received external training. Corporate Social Responsibility Tarjeta Naranja understands that the long-term growth should be supported with a sustainable management that considers and includes the community and the neediest groups. All programs encouraged by the Company include the contribution from Employees, Cardholders, Merchants ( Comercios Amigos ) and Suppliers. All employees, who move themselves to start up each program, actively took part in the multiple initiatives developed this year. Some of the most outstanding are: Débito Solidario (Solidary Debit) Program: Tarjeta Naranja has been carrying out this program for 17 years, which consists in collecting the contributions cardholders donate through automatic credit card debit to be fully delivered to different non-profit organizations throughout the country. In 2013, AR$ 36,795,921 was collected by these means. Apadrinando Escuelas (Support for Schools) Program: In order to foster equal opportunities for public primary school children throughout the country, a joint work with Sponsor Merchants ( Comercios Amigos ), which also make an economic contribution to meet children s and institutions needs, has been conducted since The year ends with 361 Sponsored Schools and 406 Sponsor Merchants ( Comercios Amigos ). Apadrinando Comedores (Support for Community Kitchens) Program: through the work of volunteers at community or soup kitchens from different districts of the country, we have sought to help with food, education, clothing and recreation of children for 10 years. In 2013, 208 volunteers promoted actions at 39 organizations by providing 3,482 children with relief, affection and assistance. Primary and Secondary School Scholarship Program: together with FONBEC, we implemented this program whereby 96 sponsors, all Naranja s employees, made

11 contributions for 100 sponsored children. The purpose is to enable outstanding children and young people to continue their studies avoiding school dropout. Paper Recycling Program: During the year, 120,000 kg of out-of-use paper were recycled, which represented income amounting to AR$ 86,674 that was allocated to the programs. Inclusion of Individuals with Disabilities: We continued hiring people with disabilities and five employees are currently working in different areas of the Company. For further information about the programs, we recommend reading the Informe de Actividades de Responsabilidad Social 2013 (2013 Report on Social Responsibility Activities) available on tarjetanaranja.com Recognitions Tarjeta Naranja continues consolidating its leadership and positioning among the most recognized companies in the country. During 2013, the Company continued winning recognitions and awards. It is worth mentioning, the prize awarded by ZonaJobs, an Argentine leading employment site that conducted a survey of more than 20,000 employees to prepare a ranking of the most qualified companies to develop the work life. Tarjeta Naranja was ranked second among The Best Companies Qualified by Their Employees ( Las empresas mejor calificadas por sus empleados ) and third among The Most Valued Companies ( Las empresas más valoradas ), on which people would like to work. Naranja also had a significant place in the rankings of the most influential press publications in the country. In August, it was included in the 23 rd place in the The 100 Companies with the Best Reputation in Argentina ( Las 100 empresas con mejor reputación del país ) ranking published by Clarín Newspaper. In the same month, El Cronista newspaper placed us sixth in its The 100 Companies with the Highest Turnover ( Las 100 empresas que más facturan ) ranking and in December we were placed 36 th in the The 100 Companies with Best Image ( Ranking de las 100 empresas con mejor imagen ) ranking published by Ámbito Financiero newspaper. Moreover, creativity and communication strategy were recognized with important prizes: a Silver Effie Award for the Financially Incorrect campaign, in addition to a Grand Prix and FePI prize for the advertising spot carried out for the classification of the National Soccer Team. These are in addition to the above-mentioned prizes for the 2013 Best Digital Campaigns awarded by the Interactive Advertising Bureau. PROJECTIONS AND OUTLOOK FOR : Restart After a year of intense activity, we propose ourselves to consider it ended and start again with the intention of making 2014 a better year for everybody. In the words of David Ruda, Tarjeta Naranja s CEO: Restart is to start again. Start from scratch, over and out, reset. It is to clear our minds of the memories of difficult times and fill our hearts with new, ambitious, daring, different projects that allow us to follow a different path to arrive different places. With this spirit we began a new fiscal year, in which the Company will focus on consolidating its presence and share in the market of the City and Province of Buenos Aires, keeping its leadership in the rest of the country. During 2014, we will work on broadening the customer s experience, increasing efficiency in all areas and achieving improvements in processes with the support of the LEAN methodology. Adopting this system in several key processes is one of the most important steps taken in 2013 that will be continued. We will continue changing other processes and we will work to ensure that the improvements achieved are maintained over time, applying the tools and the same enthusiasm with which they started.

12 With the mission to continue adding value to customers, we will work on increasing multichanneling. We will seek to make available to Cardholders and Merchants ( Comercios Amigos ) multiple ways to access all Tarjeta Naranja s services simply and easily. Thus, we will continue developing management tools to boost Naranja s online service. We will also continue working on providing facility and comfort for customers to obtain and pay their account statement. In order to optimize internal communication, we will implement a Collaborative Network, a tool that will foster participation and encourage employees to share information. Its main advantages will be the access to collective knowledge, the stimulation of joint work and the leading roles of employees. As official sponsor of Argentina s National Soccer Team and due to 2014 Brazil World Cup, we will conduct a strong institutional campaign with activities and special benefits for Cardholders and Merchants ( Comercios Amigos ), where the main purpose will be the loyalty of this audience. In line therewith, the Corporate Social Responsibility Un gol, un potrero program will be boost and will play an important role this year. During 2014, we seek to continue launching innovative products to the market, which are added to Tarjeta Naranja s array of products and services. Towards the last quarter of the year, we expect to move to and operate the new headquarters in Córdoba, which will be called Casa Naranja and will be a milestone in the Company s history. Regarding economic aspects, we will continue adapting to the real macroeconomic situation, which has a significant influence on the course of our operations. THE BOARD OF DIRECTORS

13 Schedule: Report on the Degree of Compliance with the Code on Corporate Governance Compliance Total Partial Noncompliance Report or Explain PRINCIPLE I. MAKE THE RELATIONSHIP TRANSPARENT AMONG THE ISSUER, THE GROUP HEADED THEREBY AND/OR OF WHICH IT IS A MEMBER AND ITS RELATED PARTIES Recommendation I.1: Ensure the disclosure by the Management Body of the applicable policies to the Issuer s relationship with the group headed thereby and/or of which it is a member and its related parties. X From a business viewpoint, Tarjeta Naranja S.A. is controlled by Tarjetas Regionales S.A., a member of Grupo Financiero Galicia S.A. This structure allows taking advantage of significant synergies. All business relationships with group companies, whether permanent or occasional in nature, are built under normal and usual market conditions. In accordance with professional accounting standards and as suggested by the best practices, the Company reports related party transactions in notes to the financial statements. The information disclosed includes the significant transactions performed with shareholders and managers under usual market conditions. Pursuant to the Company s Code of Ethics, Tarjeta Naranja considers the transparency of information as the basic principle that shall govern its relationship with shareholders, thus ensuring that the information reported to them, the appropriate markets and to said markets regulatory bodies, is true and complete. Said information shall accurately reflect the Company s financial condition and results of its operations, and shall be reported within the terms specified and in compliance with the other requirements set forth in the applicable standards and general principles of market operations as well as those related to good corporate governance assumed by the Company. Recommendation I.2: Ensure the existence of mechanisms that would prevent conflicts of interests. X Tarjeta Naranja has a Code of Ethics, which establishes the patterns of behavior related to business objectivity and the identification of possible conflicts of interests. In addition, the Company s Code of Ethics sets forth the duty to avoid acting on behalf of the Company in those situations that pose any type of personal interest or where either the person involved or his/her close relatives may personally benefit from a business opportunity in which the Company may be involved. Neither is it allowed to perform business or professional activities at the same time than those carried out for the Company, which in any way may compete with any of the Company s businesses. In the event any conflict of interest arises due to employment reasons or of any other kind, the facts shall be reported with no delay to the appropriate Manager. Additionally, those who may have any influence on Tarjeta Naranja s business decisions (or any of their close relatives) may not have a significant financial interest; for example, as a shareholder or administrator, in any of Tarjeta Naranja S.A. s suppliers, without the prior written consent by Tarjeta Naranja S.A. s Board of Directors.

14 Compliance Total Partial Noncompliance Report or Explain PRINCIPLE I. MAKE THE RELATIONSHIP TRANSPARENT AMONG THE ISSUER, THE GROUP HEADED THEREBY AND/OR OF WHICH IT IS A MEMBER AND ITS RELATED PARTIES Recommendation I.3: Prevent the misuse of inside information. X Pursuant to the Code of Ethics and the Confidentiality Agreement signed by any member of the organization upon joining the Company, such member agrees not to state, disseminate, disclose or report to third parties the information he/she may obtain or be provided to perform his/her duties and not to use it for his/her own benefit. Tarjeta Naranja s employees or those contracted thereby, such as in the cases of external audits or consulting firms, shall refrain from using confidential information for their own benefit and/or for the benefit of third parties (by virtue of the provisions set out in the Code of Ethics and, generally, in the contracts executed therewith). This includes the fact that the employees shall refrain from transferring confidential information to another person who then trades Tarjeta Naranja S.A. s securities, including call or put options on such securities, as well as from trading securities of any other Company whose value could be affected by Tarjeta Naranja s decisions that have not been released to the public yet, as well as call or put options on such securities. PRINCIPLE II. LAY THE BASIS FOR A SOUND MANAGEMENT AND SUPERVISION OF THE ISSUER Recommendation II. 1: Ensure that X the Management Body assumes the management and supervision of the Issuer and its strategic orientation II Approved strategic plan, management goals and annual budgets approved by the Management Body. II Policy on investments and financing approved by the Management Body. X X The Board of Directors annually reviews, submits for discussion and approves the strategic plan from which the management goals arise, as well as it approves the annual budget. This is entered into the Minutes of the Board of Directors' meetings. The Committee for Information Integrity monthly follows up the approved plans and, if appropriate, the Board of Directors determines the necessary adjustments. There is a policy on investments and financing approved by the Board of Directors.

15 Compliance Noncompliance Total Partial PRINCIPLE II. LAY THE BASIS FOR A SOUND MANAGEMENT AND SUPERVISION OF THE ISSUER II Policy on corporate X governance approved by the Management Body. Report or Explain The Board of Directors is in charge of managing Tarjeta Naranja S.A., and approving and monitoring that the general policies and strategies are implemented, particularly: The strategic or business plan, as well as the annual management and budget goals; The policy on investments and financing; The policy on corporate governance; The policy on corporate social responsibility; Policies on risk monitoring and management and any other policy aimed at the regular monitoring of internal information and control systems; The development of ongoing training programs for directors and senior officers; The entity s Code of Ethics; The policies on personnel compensation, economic incentives and performance evaluations; The policy on selection of suppliers and their treatment, avoiding the concentration of activities and conflicts of interests; Senior Management s powers and responsibilities. Additionally, the Board of Directors monitors compliance with the internal control and the regulatory framework, and the entity's risk profile, analyzing management reports prepared for Senior Management. The Board of Directors considers that establishing an adequate internal control is essential to meet the goals defined. Accordingly, internal audit processes play a key role within the organization. II Policy to select, evaluate and compensate firstclass managers approved by the Management Body. II Policy to assign responsibilities to first-class managers approved by the Management Body. X X The Human Resources Department sets policies on selection to fill vacancies at all organization levels, according to each position description. Internal contests, evaluations of potentials and external recruitments through specialized consulting firms are carried out to evaluate candidates and select them. Evaluations consider compliance with goals and qualitative aspects of each one s performance based on the required skills and corporate values. Compensation is established based on salary bands defined according to the responsibilities assigned to each of the positions. All these policies are approved by the Board of Directors. The issuer has position descriptions for all organization levels. The necessary skills for the performance in each position are described in such position descriptions, as well as the responsibilities assigned thereto. According to the position levels, descriptions are approved by each division and, in the case of descriptions of firstclass manager positions, they are approved by the Management Body.

16 Compliance Total Partial Noncompliance Report or Explain PRINCIPLE II. LAY THE BASIS FOR A SOUND MANAGEMENT AND SUPERVISION OF THE ISSUER II Supervision of succession plans of first-class managers approved by the Management Body. X With the information about the evaluation process and an evaluation of potential performed by first-class human resources consulting firms, the Human Resources Division annually prepares a map of talents, identifying risk areas (as to positions and persons) to be covered and the most suitable successors for each case, as well as the potential of each of Tarjeta Naranja s Managers. With the successors identified, the skills required for each position defined by the Board of Directors and Senior Management and the results of evaluations, development plans are prepared in order to ensure that Tarjeta Naranja always has the necessary talents to guarantee the success of its management. The outcome of the process described above is finally submitted to and approved by the Board of Directors and translates into specific and personalized action plans. II Policy on Corporate Social Responsibility approved by the Management Body. X The policy on Corporate Social Responsibility is reviewed by the Board of Directors, which approves the actions to be performed in each fiscal year. It follows up the actions through the reports annually submitted by the Social Responsibility area. The policies implemented are mainly focused on the following aspects: II Policy on comprehensive risk management and internal control and fraud prevention approved by the Management Body. X Our community: Apadrinando Escuelas (Support for Schools); Apadrinando Comedores (Support for Community Kitchens); Missions; Débito Solidario (Solidary Debit); Un Gol, un Potrero (One Goal, One Soccer Field); actions carried out from the branches in the communities where we are; cultural actions. Scholarships for primary and secondary school students. Schoolwork transition program for six-year students of marginal schools; Internship program for secondary schools: Donation of technological equipment. Environment: Sale of out-of-use paper to be recycled (eco-efficient paper); ecological bags; remanufactured toners and safe destruction of casings; recycling and final disposal of technological waste; campaign of bottle caps; cans for work (sculpture built with cans of food that are then donated to non-profit organizations). Our Employees: Training; the Best Place to Work; work environment; personnel selection; honors and recognitions; hiring of people with different abilities. Our Customers: Assured quality; means of contact and communication with our customers. Tarjetas Regionales, the controlling company, has a specific area for the risk analysis that supplements the analyses performed by the Issuer. Tarjeta Naranja has several committees reporting to the Board of Directors, such as the Audit Committee, the Control and Prevention of Money Laundering Committee and the Committee for Information Integrity. All these Committees ensure that financial internal control systems are sufficient, adequate and efficient, as well as the proper operation of the controls related to fraud detection, prevention of money laundering and the transparency of the entity s information. Thus, the Audit Committee quarterly supervises the progress of the annual audit plan, which, along with the Committee for Information Integrity, is intended to identify critical risks. During each meeting, the Audit Committee receives information from the internal audit department about the most significant events and the recommendations arising from its work, as well as the status of the recommendations issued in prior years, always for the sake of helping create an adequate control environment. In addition, the Prevention of Money Laundering and Funding of Terrorist Activities Committee meets every two months to show the results of controls and prevention of asset laundering, funding of terrorist activities and other illegal activities, in accordance with effective legal and administrative rules, in order to reduce and eliminate civil, criminal or commercial-type responsibilities for the organization.

17 Compliance Total Partial Noncompliance Report or Explain PRINCIPLE II. LAY THE BASIS FOR A SOUND MANAGEMENT AND SUPERVISION OF THE ISSUER II Policy on ongoing training for the members of the Management Body X The Company s Directors and Managers are trained enough to perform duties in their positions. The training plans managed by Human Resources aimed thereat include subjects related to strategy, management, trends, among others. Additionally, if the position requires so, the necessary technical training courses are added for the several positions. and first-class managers. II.1.2 Other significant policies approved by the Management Body N/A II.1.3 Policy intended for ensuring the availability of material information for the Management Body and a direct consultation way for managerial staff symmetrically for executive, external and independent members and in advance. II.1.4 Matters submitted for the Management Body s approval, accompanied by risk analyses and acceptable risk level. X X The Board of Directors meets at least once per month and, as required by any of the directors, it is in charge of Tarjeta Naranja S.A.'s general management and makes all the necessary decisions to fulfill said task. The members of the Board of Directors also take part, to a higher or lesser extent, in the committees created. Therefore, they are continuously informed about the entity s course of business and become aware of the decisions made by such bodies, which are transcribed into minutes. Additionally, the Board of Directors receives a monthly report prepared by the Chief Executive Officer, prepared by the Management Control area, the purpose of which is to report the material issues and events addressed at the different meetings held between him and Senior Management. The Board of Directors becomes aware of such reports, evidencing so in minutes. The different processes have scorecards, whose indicators allow the different management divisions to monitor the Company's activity and risk. A compliance parameter, a slight excess range and an undesired excess range have been defined for each indicator. The last two have contingency plans associated therewith, which specify the actions to be taken upon excesses. The indicators that are included within an unacceptable range are reported to Management, together with the remediation plan to be followed to redress the situation. The management information is monthly submitted to the Committee for Information Integrity and the Board of Directors. Tarjetas Regionales, the controlling company, has a specific area for the risk analysis that supplements the analyses performed by the Issuer. Recommendation II.2: Ensure an effective business management control. X

18 Compliance Total Partial Noncompliance Report or Explain PRINCIPLE II. LAY THE BASIS FOR A SOUND MANAGEMENT AND SUPERVISION OF THE ISSUER II.2.1 The Management Body verifies compliance with the annual budget and business plan. X Compliance with the annual budget and business plan is verified during the Board of Directors meetings held monthly by analyzing the management control report submitted by the Chief Executive Officer. The matters approved, as well as the changes introduced in planning, are entered into minutes. II.2.2 The Management Body verifies first-class managers' performance. Recommendation II.3: Report the Management Body s performance evaluation process and the related impact. II.3.1 Each member of the Management Body complies with the Corporate Bylaws and, as the case may be, with the Regulations governing the Management Body s operation. Specify the main guidelines set out in the Regulations. State the degree of compliance with the Corporate Bylaws and Regulations. X X X The Management Body generally verifies the first-class managers performance upon assessing compliance with the year s strategic plan. It individually validates the goals assigned to each of them and the qualitative aspects of the individual performance based on the required skills and corporate values. The Bylaws regulate the frequency of meetings, the appointment of the Chairman, the term of office, the scheme of valid sessions and guarantees granted by directors. Each director fully meets the provisions set out in the Company s Bylaws. At the Company, there are no Special Regulations governing the Management Body's operation, other than the provisions set out in the Corporate Bylaws.

19 Compliance Total Partial Noncompliance Report or Explain PRINCIPLE II. LAY THE BASIS FOR A SOUND MANAGEMENT AND SUPERVISION OF THE ISSUER II.3.2 The Management Body discloses the results of its performance considering the X As established by the Companies Law, the results of the Board of Directors performance are approved by the shareholders at the Ordinary Shareholders' Meeting, along with the approval of the financial statements. The Board of Directors provides thorough explanations in its Annual Report and answers all the questions asked at the Shareholders' Meeting, but it refrains from expressing an opinion on its performance, by virtue of legal restrictions. The assessment is conducted by the shareholders at the Shareholders Meeting, taking as well into consideration the informed opinion of the Supervisory Committee. goals set at the beginning of the period, so that the shareholders may assess the degree of compliance with such goals, which contemplate both financial and nonfinancial aspects. Furthermore, the Management Body submits a diagnosis about the degree of compliance with the policies mentioned in Recommendation II, points II.1.1.and II.1.2. Recommendation II.4: X That the number of external and independent members represents a significant proportion in the Management Body.

20 Compliance Total Partial Noncompliance Report or Explain PRINCIPLE II. LAY THE BASIS FOR A SOUND MANAGEMENT AND SUPERVISION OF THE ISSUER II.4.1 The proportion of executive, external and independent members (the latter defined by the regulations of this Commission) of the Management Body corresponds with the Issuer s capital structure. Specify. X Tarjeta Naranja S.A. s Board of Directors is the highest management body of the Company. It is made up of eight non-independent Directors and five non-independent alternate Directors, who should have the necessary knowledge and skills to clearly understand their corporate governance responsibilities and duties, and act as faithfully and diligently as a good businessperson does. Tarjeta Naranja S.A. complies with the appropriate standards regarding the total number of directors. Its Bylaws also provide for the flexibility necessary to adapt the number of directors to the possible changes in the conditions in which the entity carries out its activities, from five to nine directors. As Tarjeta Naranja S.A. does not publicly offer its shares, but debt securities, it is not required to have a given number of independent directors. The General Shareholders Meeting has the power to establish the number of directors and appoint them. The policy on the appointment of directors is the responsibility of the Shareholders Meeting. Tarjeta Naranja S.A. s Board of Directors does not take part in such decisions, as its members have no decision-making power at the Shareholders Meeting. II.4.2. During the current year, through a General Shareholders Meeting, the shareholders agreed on a policy aimed at having a proportion of at least 20% of independent members of total members of the Management Body. Recommendation II.5: Agree on the existence of standards and procedures inherent to the selection and proposal of members of the Management Body and first-class managers. X X Taking into account the information provided in the preceding point, over the last few years, the Shareholders Meeting has not set a policy regarding the proportion of independent directors. Neither are there shareholders' agreements aimed at appointing members of the Management Body. During the year elapsed, the independence of the members of the Board of Directors has not been challenged and there have been no abstentions due to conflict of interests. The members of the Board of Directors are appointed by the Shareholders Meeting, pursuant to effective laws. As regards first-class managers, the Company deems it appropriate for the Board of Directors to appoint them. Tarjeta Naranja S.A. s policy (reflected in its Code of Ethics) requires first-class executives to be people who qualify therefor by virtue of their appropriate education and experience, and who perform their duties professionally, ethically and responsibly.