Intercorp Perú Ltd. and Subsidiaries

Transcription

1 Intercorp Perú Ltd. and Subsidiaries Consolidated financial statements as of June 30, 2017, December 31, 2016 and for the six-month periods ended June 30, 2017 and 2016

2 Intercorp Perú Ltd. and Subsidiaries Consolidated financial statements as of June 30, 2017, December 31, 2016 and for the sixmonth periods ended June 30, 2017 and 2016 Contents Consolidated financial statements Consolidated statements of financial position Consolidated income statements Consolidated statements of other comprehensive income Consolidated statements of changes in equity Consolidated statements of cash flows Notes to the consolidated financial statements

3 Intercorp Perú Ltd. and Subsidiaries Consolidated statements of financial position As of June 30, 2017 and December 31, 2016 (audited) Assets Note Cash and due from banks 4 Cash and clearing 1,757,007 1,575,924 Deposits in the Central Reserve Bank of Peru 4,323,393 5,331,244 Deposits in local and foreign banks 1,207,578 1,828,881 Restricted funds 2,911,844 3,315,482 10,199,822 12,051,531 Liabilities Note Deposits and obligations 10 28,463,557 29,933,851 Inter-bank funds 447, ,255 Due to banks and correspondents 11 6,915,997 6,948,688 Bonds, notes and other obligations 12 8,310,663 8,375,513 Due from customers on acceptances 29,077 16,392 Insurance contract liabilities 13 5,367,616 5,010,513 Accounts payable, provisions and other liabilities 9 3,908,930 3,839,757 Deferred Income Tax liability, net 398, ,211 Total liabilities 53,842,446 54,840,180 Inter-bank funds 20,007 5,002 Trading securities 273, ,333 Available-for-sale investments 5 (a) 9,493,878 9,454,014 Held-to-maturity investments 5 (g) 763, ,293 Loans, net 6 27,780,853 27,285,678 Investment property 7 3,299,175 3,208,769 Inventories, net 8 1,496,366 1,462,307 Property, furniture and equipment, net 5,898,206 5,631,179 Due from customers on acceptances 29,077 16,392 Accounts receivable and other assets, net 9 1,822,795 1,685,461 Goodwill, trademark and other intangible assets, net 1,930,392 1,876,932 Deferred Income Tax asset, net 234, ,967 53,042,170 51,657,327 Equity, net 14 Equity attributable to Intercorp Perú Ltd.ʼs shareholders: Capital stock 3,524,799 3,041,307 Reserves 2,536,014 2,336,014 Unrealized results 217,153 (65,623) Translation of foreign operations 5,020 20,975 Retained earnings 474, ,324 6,757,398 6,328,997 Non-controlling interest 2,642,148 2,539,681 Total equity, net 9,399,546 8,868,678 Total assets 63,241,992 63,708,858 Total liabilities and equity net 63,241,992 63,708,858 The accompanying notes are an integral part of these consolidated statements.

4 Intercorp Perú Ltd. and Subsidiaries Consolidated income statements For the six-month periods ended June 30, 2017 and 2016 Note Interest and similar income 16 2,067,466 2,001,692 Interest and similar expenses 16 (758,736) (722,395) Net Interest and similar income 1,308,730 1,279,297 Provision for loan losses, net of recoveries 6(c) (489,818) (458,383) Net interest after provision for loan losses, net of recoveries 818, ,914 Gross profit from retail business 19 1,209,204 1,111,548 Fee income from financial services, net , ,532 Net gain on foreign exchange transactions 106, ,758 Net gain on sale of securities 84,596 68,176 Net loss on trading securities (7,552) (59,648) Income from educational services 274, ,438 Income from rental of investment property 123, ,548 Loss on sale and valuation of investment property, net (6,582) (1,312) Others 23 78,246 67,478 Total other income 2,302,677 2,085,518 Insurance premiums and claims Net premiums earned 21 2,759 (56,629) Claims and benefits incurred for life insurance contracts and others 22 (171,956) (151,556) Total net premiums earned minus claims and benefits (169,197) (208,185) Salaries and employee benefits 17 (948,769) (891,161) Selling and administrative expenses 18 (1,070,453) (986,282) Depreciation of property, furniture and equipment (168,301) (159,677) Amortization of intangible (50,312) (44,433) Impairment loss on available-for-sale investments 5(c) (5,019) (76,889) Expenses related to rental income (579) (957) Others 23 (67,776) (57,122) Total other expenses (2,311,209) (2,216,521) Income before translation result and Income Tax 641, ,726 Translation result 77,253 48,698 Income Tax (244,997) (234,853) Net profit for the period 473, ,571 Attributable to: Intercorp Perúʼs shareholders 329, ,527 Non-controlling interest 143,689 95, , ,571 Basic and diluted earnings per share (A and B classes) attributable to Intercorp Perú s shareholders (in Soles) Weighted average number of outstanding shares (A and B classes) adjusted for stock split (in thousands) , ,019 The accompanying notes are an integral part of these consolidated financial statements.

5 Intercorp Perú Ltd. and Subsidiaries Consolidated statements of other comprehensive income For the six-month periods ended June 30, 2017 and Net profit for the period 473, ,571 Other comprehensive income Net gain on available-for-sale investments 346, ,477 Gain (loss) on cash flow hedges (310) 458 Exchange differences on translation of foreign operations (20,216) (21,453) Total other comprehensive income 325, ,482 Total comprehensive income for the period 799, ,053 Attributable to: Intercorp Perúʼs shareholders 596, ,728 Non-controlling interest 202, , , ,053 The accompanying notes are an integral part of these consolidated financial statements.

6 Intercorp Perú Ltd. and Subsidiaries Consolidated statements of changes in equity For the six-month periods ended June 30, 2017 and 2016 Number of shares Issued Capital stock Reserves Unrealized results, Note 14 (c) Available-forsale investments Cash flow hedges Exchange differences on translation of foreign operations Retained earnings Total Non controlling interest Total equity (in thousands) Balance as of January 1, ,019 2,536,133 2,336,014 (351,524) (354) 28,628 1,056,746 5,605,643 2,407,876 8,013,519 Net profit for the period , ,527 95, ,571 Other comprehensive income , (16,571) - 311,201 97, ,482 Total other comprehensive income , (16,571) 200, , , ,053 Dividends declared, Note 14(a) - (101,700) (101,700) (115,560) (217,260) Capitalization of profits, Note 14(a) - 505, (505,174) Others (23,241) (22,496) Balance as of June 30, ,019 3,041,307 2,336,014 (24,106) - 12, ,144 6,016,416 2,461,400 8,477,816 Balance as of January 1, ,019 3,041,307 2,336,014 (66,645) 1,023 20, ,324 6,328,997 2,539,681 8,868,678 Net profit for the period , , , ,439 Other comprehensive income ,020 (245) (15,954) - 266,821 58, ,647 Total other comprehensive income ,020 (245) (15,954) 329, , , ,086 Dividends declared, Note 14(a) (97,335) (97,335) (102,617) (199,952) Capitalization of profits, Note 14(a) - 483, (483,492) Constitution of reserves, Note 14 (b) , (200,000) Purchase of shares in treasury by Subsidiaries, net of dividends received (41,715) (41,715) - (41,715) Others (29,120) (29,120) 2,569 (26,551) Balance as of June 30, ,019 3,524,799 2,536, , , ,412 6,757,398 2,642,148 9,399,546 The accompanying notes are an integral part of these consolidated financial statements.

7 Intercorp Perú Ltd. and Subsidiaries Consolidated statements of cash flows For the six-month periods ended June 30, 2017 and Reconciliation of net profit for the period with cash from operating activities Net profit for the period 473, ,571 Adjustments to net profit Plus (minus) Provision for loan losses, net of recoveries 489, ,383 Depreciation of property, furniture and equipment 168, ,677 Amortization of intangible assets 50,312 44,433 Deferred Income Tax (20,806) 9,136 Gain on sale of securities (84,596) (68,176) Impairment loss on avaible-for-sale investments 5,019 76,889 Net loss on trading securities 7,552 59,648 Loss on sale and valuation of investment property, net 6,582 1,312 Translation result (77,253) (48,698) Provision for impairment of inventories net of recoveries 13,460 11,027 Increase in accrued receivable interest (7,533) (17,855) Decrease in accrued payable interest (3,077) (46,541) Net changes in assets and liabilities Net increase in loans (976,673) (1,240,253) Net increase in trading securities (53,082) (76,026) Net decrease in deposits and obligations (1,470,423) (2,365,274) Net increase of inventories (47,519) (1,146) Decrease in restricted funds 403,638 72,117 Increase in other assets (144,732) (625,210) Net increase in other liabilities 380, ,024 Net cash used in operating activities (887,391) (2,782,962) The accompanying notes are an integral part of these consolidated financial statements.

8 Consolidated statements of cash flows (continued) Cash flows from investing activities Net purchases of investment properties (216,260) (80,032) Purchase of property, furniture and equipment (316,056) (330,137) Purchase of intangible assets (103,772) (37,050) Net (increase) decrease of held-to-maturity investments (151,876) 584 Net decrease (increase) of available-for-sale investments 372,976 (106,869) Net cash used in investing activities (414,988) (553,504) Cash flows from financing activities Net decrease in due to banks and correspondents (28,271) (34,788) Net decrease in bonds, notes and other obligations (66,064) (251,243) Net increase in inter-bank funds (assets) (15,005) (56,656) Net increase in inter-bank funds (liabilities) 115,562 - Payment of dividends to shareholders (49,297) (52,890) Payments of dividends to non-controlling interest (102,617) (115,560) Net cash used in financing activities (145,692) (511,137) Net decrease of cash and cash equivalent (1,448,071) (3,847,603) Cash at the beginning of the period 8,736,049 8,969,548 Cash at the end of the period 7,287,978 5,121,945 The accompanying notes are an integral part of these consolidated financial statements.

9 Intercorp Perú Ltd. and Subsidiaries Notes to the consolidated financial statements As of June 30, 2017, December 31, 2016 and for the six-month periods ended June 30, 2017 and Business activity Intercorp Perú Ltd., henceforth Intercorp Perú or the Company, is a limited liability holding company incorporated in November 1997 in The Commonwealth of the Bahamas. Intercorp Perú performs as a holding of the group of Subsidiaries of the denominated Intercorp Group, thus coordinating their policies and management. Intercorp Perú also operates as an investment company, investing in all types of securities. The Company s legal address is Sassoon House Shirley Street & Victoria Avenue, Nassau, the Bahamas. Management and its administrative offices are located at Av. Carlos Villarán 140, La Victoria, Lima - Peru. The operations of Intercorp Perú and its Subsidiaries are concentrated mainly in Peru, the Bahamas and the Republic of Panama; with activities in the financial, insurance, retail, real estate and educational industries. The most important activities and data of the Subsidiaries as of June 30, 2017 and December 31, 2016 are disclosed in Note 2. The accompanying unaudited consolidated financial statements as of June 30, 2017 were approved by Management on August 14, The accompanying audited consolidated financial statements as of December 31, 2016 were approved by the General Shareholders Meeting held on April 11, Organization of Intercorp Perú Group Below is the information about the entities that are part of Intercorp Group. 2.1 Financial and insurance entities Intercorp Financial Services Inc., henceforth IFS - It is a limited liability holding, incorporated in September 2006 in the Republic of Panama, in order to group the companies of Intercorp Group engaged in financial and insurance business. As of June 30, 2017, the Company holds directly and indirectly percent of the issued capital stock of IFS and percent of the outstanding capital of IFS (directly and indirectly percent and percent, respectively, as of December 31, 2016). The percentage of indirect participation over IFS capital stock is held by Intercorp Perú through its subsidiaries IFH Capital Corp. and Intercorp Capital Investments Inc., in which Intercorp Perú holds 100 percent of their capital stock and, at the same time, each of these subsidiaries hold 8.62 percent of IFS capital stock. As of June 30, 2017 and December 31, 2016, IFS holds percent of the outstanding capital stock of Banco Internacional del Perú S.A.A. Interbank (henceforth, Interbank or the bank ) and 100 percent of the outstanding capital stock of Interseguro Compañía de Seguros S.A. (henceforth, Interseguro ) and Inteligo Group Corp. (henceforth, Inteligo ). The accompanying notes are an integral part of these consolidated financial statements.

10 Acquisition of Seguros Sura S.A. and Hipotecaria Sura Empresa Administradora S.A. - In May 2017, IFS and Interseguro subscribed the purchase agreement of Seguros Sura S.A. and Hipotecaria Sura Empresa Administradora S.A. As of the date of this report, said transaction is pending of approval by the Superintendence of Banking, Insurance and AFPs (henceforth SBS ). The Subsidiaries of IFS and their economic activities are presented below: (i) Banco Internacional del Perú S.A.A. - Interbank and Subsidiaries - The Bank is incorporated in Peru and it is authorized by the Superintendence of Banking, Insurance and Private Pension Funds Administrators (henceforth, SBS, for its Spanish acronym) to operate as a universal bank in accordance with the Peruvian legislation. Interbank's operations are governed by the General Act of the Financial and Insurance System and the Organic Act of the Superintendence of Banks and Insurance SBS Act (henceforth, the Banking and Insurance Act ), that establishes the requirements, rights, obligations, guarantees, restrictions and other operating conditions that Peruvian financial and insurance entities must comply with. As of June 30, 2017 and December 31, 2016, Interbank had 278 and 282 offices, respectively and a branch established in the Republic of Panama. Additionally, it holds 100 percent of the shares of the following Subsidiaries: Entity Interfondos S.A. Sociedad Administradora de Fondos Activity Management of mutual funds and investment funds. Internacional de Títulos Sociedad Titulizadora S.A. - Intertítulos S.T. Management of securitization funds. Inversiones Huancavelica S.A. Real estate activities. Contacto Servicios Integrales de Créditos y Cobranzas S.A. Collection services. Corporación Inmobiliaria de La Unión 600 S.A. Real estate activities. Compañía de Servicios Conexos - Expressnet S.A.C. Services related to credit card transactions or products related to the brand American Express. IBK DPR Securitizadora A consolidated special purpose entity (SPE), by which Interbank issued negotiable long-term notes which matured in

11 (ii) Interseguro Compañía de Seguros S.A. and Subsidiaries Interseguro is incorporated in Peru and its operations are governed by the Banking and Insurance Act. It is authorized by the SBS to issue life and general risk insurance contracts. As of June 30, 2017 and December 31, 2016, Interseguro controls the following Subsidiaries: Entity Centro Comercial Estación Central S.A. Empresa Administradora Hipotecaria IS S.A. Activity Administration of the "Estación Central Shopping Mall, located in downtown Lima; as of June 30, 2017 and December 31, 2016, Interseguro holds 75 percent of its capital stock and Real Plaza S.R.L, a Subsidiary belonging to the retail and real estate business of the Group (see Note 2.2), holds the remaining 25 percent. Was incorporated in February 2014 in Peru. It does not have operations and is in the process of liquidation. As of June 30, 2017 and December 31, 2016, Interseguro holds 100 percent of its shares and it has a paid in capital of S/1. Likewise, Interseguro holds contributions in Patrimonio Fideicometido D.S EF, Interproperties Perú (henceforth Patrimonio Fideicometido Interproperties Perú ), that is a structured entity, incorporated in April 2008, and in which several investors (related parties to the Intercorp Group) contributed investment properties; each investor or investors have ownership of and specific control over the contributed investment property. For accounting purposes and under IFRS 10 Consolidated Financial Statements, the assets included in said structure are considered silos, because they are ring-fenced parts of the wider structured entity (the Patrimonio Fideicometido - Interproperties Perú). Intercorp Group has ownership and decision making power over these properties and the Group has the exposure or rights to their returns; therefore, the Group has consolidated the silos containing the investment properties that it controls. In the Universal Shareholders Meeting held on December 21, 2016, it was approved a project of simple reorganization between Interseguro and Mapfre Peru Vida Compañía de Seguros y Reaseguros S.A. (henceforth Mapfre, an unrelated party), through which Interseguro is committed to the acquisition of an equity block comprised of assets, liabilities, rights, obligations and legal matters related to an annuity retirement insurance policies portfolio issued by Mapfre. On May 24, 2017, the SBS authorized said reorganization. Consequently, Interseguro acquired a package comprising assets for S/182,704,000 and liabilities for the same amount. In that sense, there was not an increase in equity. On the other hand, in April 2016, the plenary session of the Congress of the Republic of Peru approved an amendment to the Act of the Private Pension System, in which the affiliates of the 3

12 Private Pension Fund Administration Companies ( AFP - for its Spanish acronym) who are 65 years old and retire, can choose an additional retirement scheme in addition to the options in force, which are: a) Planned Retirement, managed by an AFP; and b) the acquisition of an annuity retirement insurance plan, managed by a life insurance company; such is the case of Interseguro. This new retirement scheme allows the affiliate to dispose the 95.5 percent of their Individual Capitalization Account ( CIC, for its Spanish acronym). (iii) Inteligo Group Corp. and Subsidiaries - Inteligo Group Corp. is an entity incorporated in the Republic of Panama. As of June 30, 2017 and December 31, 2016, it holds 100 percent of the shares of the following Subsidiaries: Entity Inteligo Bank Ltd. Activity It is incorporated in The Commonwealth of the Bahamas and has a branch established in the Republic of Panama that operates under an international license issued by the Superintendence of Banks of the Republic of Panama. Its main activity is to provide private and institutional banking services mainly to Peruvian citizens. Inteligo Sociedad Agente de Bolsa S.A. Brokerage firm incorporated in Peru. (iv) San Borja Global Opportunities S.A.C. Its corporate purpose is the acquisition and holding of shares and securities. As of June 30, 2017 and December 31, 2016, it did not have operations. 4

13 2.2 Retail and real estate businesses (i) Intercorp Retail Inc. - It is a limited liability holding company, incorporated in the Republic of Panama in December 2010, in order to group the entities of Intercorp Group engaged in the retail business in Peru. As of June 30, 2017 and December 31, 2016, the Company holds 100 percent of the capital stock of Intercorp Retail Inc., which owns the following Subsidiaries: Entity InRetail Perú Corp. (As of June 30, 2017 and December 31, 2016 Intercorp Retail Inc. holds percent, respectively, of its outstanding capital stock. Also, Intercorp Perú, through its Subsidiaries, holds and percent, respectively, (directly and indirectly) of InRetail Peru Corp.'s outstanding capital stock. Activity Holding incorporated in the Republic of Panama in January 2011, which holds 100 percent of the capital stock of the following Subsidiaries, which operate several businesses: (a) Shopping malls: Developed by InRetail Real Estate Corp., owner of Patrimonio en Fideicomiso InRetail Shopping Malls, which in turn is owner of (i) Real Plaza S.R.L., (ii) Patrimonio en Fideicomiso D.S. No EF- Interproperties Holding and Patrimonio en Fideicomiso-D.S. No EF Interproperties Holding II, equity trusts which are special-purpose entities; see description in paragraph 2.2(v); (b) Patrimonio en Fideicomiso Inretail Consumer: Equity trust incorporated in August 2014, which develops the following retail businesses: (i) Supermarkets: Developed by Supermercados Peruanos S.A. and Subsidiaries, a company that, as of June 30, 2017 and December 31, 2016, operates stores, under the trademarks Plaza Vea, Plaza Vea Súper, Vivanda and Mass ; (ii) Pharmacies: Developed by Eckerd Perú S.A. and Subsidiaries, a company that, as of June 30, 2017 and December 31, 2016, operates 1,149 and 1,020 stores, respectively, under the trademark Inkafarma. (c) Inretail Management S.R.L., company dedicated to the administration of personnel and operations of the aforementioned equity trusts. 5

14 Entity IFH Retail Corp. (As of June 30, 2017 and December 31, 2016, Intercorp Retail Inc. holds and percent of its capital stock) HPSA Corp. (As of June 30, 2017 and December 31, 2016, Intercorp Retail Inc. holds percent of its capital stock) Lince Global Opportunities Corp. (As of June 30, 2017 and December 31, 2016, Intercorp Retail Inc. holds 100 percent of its capital stock) Activity Holding incorporated in the Republic of Panama in September 2006, owner as of June 30, 2017 and December 31, 2016, of and percent of Tiendas Peruanas S.A. and Subsidiaries, see Note 2.2(ii), a company engaged in retail business through department stores under the trademark Oeschle (25 premises as of June 30, 2017 and December 31, 2016) and of 96 percent of Financiera Oh! S.A. (henceforth Financiera ), as of June 30, 2017 and December 31, 2016, a company that provides financial support to the companies of Intercorp Group dedicated to the retail business. Holding incorporated in the Republic of Panama, owner of Homecenters Peruanos S.A. and Subsidiary, a company engaged in the operation of the business of home improvement stores under the trademark Promart (23 stores as of June 30, 2017 and December 31, 2016). Holding incorporated in the Republic of Panama in December 2010, which holds percent of the capital stock of Inmobiliaria Milenia S.A., a company engaged in the real estate business. (ii) Callao Global Opportunities - Subsidiary of Intercorp Perú, incorporated in 2011 as a limited liability holding company in the Republic of Panama. As of June 30, 2017 and December 31, 2016, holds and percent of the capital stock of Tiendas Peruanas S.A. and Subsidiaries. On the other hand, as indicated in Note 2.2(i), Intercorp Perú holds and percent of IFH Retail Corp. as of June 30, 2017 and December 31, 2016, respectively and; which, in turn, holds and percent of Tiendas Peruanas S.A., and therefore the joint shareholding of Intercorp Perú, through IFH retail Corp. and Callao Global Opportunities Corp. in Tiendas Peruanas is equivalent to and percent of its capital stock as of June 30, 2017 and December 31, 2016, respectively. (iii) Intercorp Investments Perú Inc. - It is a limited liability holding company incorporated in September 2006 in the Republic of Panama. As of June 30, 2017 and December 31, 2016, the Company holds 100 percent of its capital stock. Intercorp Investments Perú Inc. is the sole shareholder of Horizonte Global Opportunities Corp., a holding company incorporated in the Republic of Panama, owner of Horizonte Global Opportunities Perú S.A.C., whose sole asset is a land lot located in the district of Independencia in Lima. 6

15 (iv) Urbi Propiedades S.A. - As of June 30, 2017 and December 31, 2016, the Company holds 100 percent of the capital stock of this entity, incorporated in Peru in 1998, engaged in real estate management and in the provision of structuring and real estate project management. In addition and through its Subsidiaries, it is developing a number of real estate projects. In January 2016, Urbi Propiedades S.A split an equity block in the amount of to S/6,019,000 in favor of Urbi Proyectos S.A., a Subsidiary of Intercorp, established in September 2015, engaged in real estate projects. As of June 30, 2017 and December 31, 2016, Urbi holds 100 percent of the following Subsidiaries: Entity Alameda Colonial S.A. Domus Hogares del Norte S.A. Club de Socios S.A. A Urbi Solutions S.A.C. a Activity Incorporated in Lima in May 2006, to build apartments under the Government s program Mi Vivienda. Incorporated in Lima in June 2009, to develop a real estate project called Domus Hogares del Norte. Incorporated in Lima in August 2007 in order to engage in the management, administration and organization of recreational, sports and social activities, among others. As of June 30, 2017 and December 31, 2016, Urbi Propiedades S.A. and Intercorp Perú maintain percent and percent, respectively, of the capital stock of this entity. Incorporated in Lima in June 2014 to engage in the construction of real estate projects. (v) Patrimonio en Fideicomiso D.S. No EF, Interproperties Holding and Interproperties Holding II - In September 2011 and May 2012, Patrimonio en Fideicomiso D.S. No EF, Interproperties Holding and Patrimonio en Fideicomiso D.S. No EF, Interproperties Holding II (henceforth and collectively Interproperties Holding ) were incorporated with the purpose of creating autonomous equity trust, independent from each investor constituted as originator. Through these equity trusts, investments in real estate projects are made, and their yields back (i) the certificates of participation issued, and (ii) the compliance with other obligations assumed directly or through third parties in order to obtain the resources that are necessary to make said investments. As of June 30, 2017 and December 31, 2016, the company that consolidates financial information with Intercorp Perú and that holds 100 percent of the participations in Interproperties Holding is InRetail Perú Corp. Through these equity trusts, Intercorp Group holds the ownership of the property where the shopping 7

16 malls called Real Plaza operate. As of June 30, 2017 and December 31, 2016, there were 21 shopping malls located in the cities of Chiclayo, Trujillo, Huancayo, Arequipa, Juliaca, Nuevo Chimbote, Huanuco, Cajamarca, Piura, Pucallpa, Cusco, Sullana and Lima. (vi) Intercorp Re Inc. - It is a limited liability holding incorporated in August 2015 in the Republic of Panama. As of June 30, 2017 and December 31, 2016, the Company holds 100 percent of its capital stock and, in turn, Intercorp Re Inc. is the sole shareholder of Inteligo Real Estate Corp., a holding company incorporated in the Republic of Panama, owner of Inteligo Real Estate Perú S.A.C., whose sole asset is an interest in a land lot controlled by Interseguro and located in the district of San Isidro in the city of Lima. 2.3 Educational business (i) NG Education Holdings Corp. - It is a limited liability holding incorporated in January 2011 in the Republic of Panama, whose purpose is to group the Subsidiaries of Intercorp Group engaged in the educational business in Peru. During 2016, NG Education Holdings Corp. sold 50 percent of its participation in Colegios Peruanos (equivalent to 10,585,563 shares) to NG Education Holdings IV Corp. (a related entity). After this operation, NG Education Holdings Corp. reduced its capital; therefore, as of June 30, 2017 and December 31, 2016, Intercorp Perú holds and percent of its capital stock, respectively. As of June 30, 2017, NG Education S.A.C., Subsidiary of NG Education Holdings Corp., acquired the entire non-controlling interest of Universidad Tecnológica del Perú S.A.C.; there by become the sole shareholder of this Subsidiary. NG Education Holdings Corp. has the following Subsidiaries: Entity Colegios Peruanos S.A. (As of June 30, 2017 and December 31, 2016, NG Education Holdings Corp. holds and percent, respectively, of its capital stock). NG Education S.A.C. (As of June 30, 2017 and December 31, 2016, NG Education Holdings Corp. holds and percent, respectively, of its capital stock) Activity As of June 30, 2017, it operates 41 schools under the trademark Innova Schools (35 schools as of December 31, 2016). Holding incorporated in Peru in November As of June 30, 2017, NG Education S.A.C. holds 100 percent (50 percent plus one share as of December 31, 2016) of the following Subsidiaries: (a) Universidad Tecnológica del Perú S.A.C.: Incorporated in Lima in February It has the following 3 business units: UTP University, IDAT 8

17 Entity Activity (b) Institute, Post-Graduate School. Promotora de la Universidad Tecnológica de Chiclayo S.A.C.: An entity with operations in Peru which as of June 30, 2017 and December 31, 2016, has 1 premise. (ii) NG Education Holdings II Corp. - It is a limited liability holding company incorporated in October 2013 in the Republic of Panama. As of June 30, 2017 and December 31, 2016, Intercorp Peru holds 50 percent of the capital stock of NG Education Holdings II Corp., which in turn owns the following Subsidiary: Entity Servicios Educativos Perú S.A.C. (As of June 30, 2017 and December 31, 2016, NG. Education Holdings II Corp. holds 100 percent of its capital stock) Activity Company incorporated in Peru in October As of June 30, 2017 and December 2016, it holds 80 percent of the capital stock of Servicios Educativos Empresariales S.A.C., incorporated in Lima in February 2012, which operates 4 premises under the trademark Zegel- IPAE. (iii) NG Education Holdings III Corp. It is a limited liability holding company incorporated in July 2013 in the Republic of Panama. As of June 30, 2017 and December 31, 2016, Intercorp Perú holds and percent, respectively, of its capital stock and, in turn, it holds and percent as of June 30, 2017 and December 31, 2016, respectively, of the capital stock of Colegios Peruanos S.A. 2.4 Other entities As of June 30, 2017 and December 31, 2016, the Company holds 100 percent of the capital stock of the following Subsidiaries: Company Activity Country of incorporation Inversiones Río Nuevo S.A.C. Real estate business Peru San Miguel Global Opportunities S.A.C. Real estate business Peru Intercorp Management S.A.C. Administration services Peru Puente de San Miguel Arcángel S.A. Holding Republic of Panama Centro Cívico S.A. Real estate business Peru Ronepeto S.A. Real estate business Peru La Punta Global Opportunities Corp. Specialized investments Republic of Panama Urbi Proyectos S.A., see Note 2.2 (iv) Real estate projects Peru 9

18 The following table presents the financial information of the main Subsidiaries, before eliminations for consolidation purposes with Intercorp Perú, as of June 30, 2017 and December 31, 2016: As of June 30, Total assets Total liabilities Net equity Net profit (loss) As of December 31, As of June 30, As of December 31, As of June 30, As of December 31, For the six-month periods ended June 30, Entity Intercorp Financial Services Inc. and Subsidiaries 50,639,113 51,719,359 45,495,811 46,721,013 5,143,302 4,998, , ,680 Intercorp Retail Inc. and Subsidiaries 11,048,864 10,963,561 6,732,611 6,772,519 4,316,253 4,191, , ,791 NG Education Holdings Corp. and Subsidiaries 1,753,628 1,371, , , , ,371 10,539 (16,988) Urbi Propiedades S.A. and Subsidiaries 347, , , , , ,392 (1,702) (4,757) Intercorp Investments Perú Inc. and Subsidiaries 139, ,996 32,229 32, , ,445 (3,767) (2,191) Callao Global Opportunities Corp. 135,170 92,631 30, ,247 92,631 (13,073) (16,550) Intercorp RE Inc. and Subsidiaries 87,993 93,263 3,147 4,626 84,846 88,637 (3,791) (1,660) La Punta Global Opportunities Corp. 188, , , ,216 (8) (9) San Miguel Global Opportunies S.A.C 47,690 47,612 9,326 9,112 38,364 38,500 (136) (202) NG Education Holdings II Corp. and Subsidiaries 53,654 51,381 28,975 28,866 24,679 22,515 (1,285) (1,143) NG Education Holdings III Corp. 67,997 32,426 23,434-44,563 32,426 (842) (562) 10

19 3. Significant accounting principles and practices The accompanying consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards (henceforth IFRS ) issued by the International Accounting Standards Board ( IASB ). The accounting principles and practices as of June 30, 2017 are consistent with respect to the rules applied as of December 31, 2016, which are included in the audited consolidated financial statements as of December 31, 2016, as dated March 24, Cash and due from banks This caption is comprised of the following: Cash and clearing 1,757,007 1,575,924 Deposits in the Central Reserve Bank of Peru - BCRP (b) 4,322,712 5,330,627 Deposits in domestic and foreign banks (c) 1,207,569 1,828,847 Restricted funds (d) 2,911,844 3,315,482 Total 10,199,132 12,050,880 Accrued interest ,199,822 12,051,531 (b) As of June 30, 2017, the Cash and due from banks caption of the consolidated statements of financial position includes approximately US$1,539,571,000 and S/963,972,000 (US$1,588,248,000 and S/882,796,000, as of December 31, 2016), which represents the legal reserve that Interbank and Financiera must maintain for their deposits and obligations. These funds are kept in Interbank s and Financiera s vaults and in the Central Reserve Bank of Peru (henceforth BCRP, for its Spanish acronym), and are within the limits established by the legal provisions in force. The legal reserve maintained at the BCRP is non-interest bearing, except for the part of the legal reserve that exceeds the minimum legal reserve required. As of June 30, 2017, the monthly excess in foreign currency amounted to approximately US$499,140,000 equivalent to approximately S/1,623,703,000, and acrued interest un US Dollars at an annual average rate of 0.29 percent (US$345,688,000 equivalent to approximately S/1,160,129,000 as of December 31, 2016 at an annual average rate of 0.18 percent), whereas the excess amount in Soles amounted to approximately S/6,954,670,000 and accrued interest in Soles at an annual average rate of 0.80 percent (S/2,466,520,000 and accrued interest at an annual average rate of 1.05 percent as of December 31, 2016). 11

20 (c) Deposits in domestic and foreign banks are mainly in Soles and US Dollars, they are freely available and acrue interest at market rates. As of June 30, 2017 and December 31, 2016, Intercorp Group does not have significant deposits in any specific financial institution. (d) As of June 30, 2017 and December 31, 2016, the Restricted Funds caption is mainly comprised of deposits in the BCRP amounting to approximately US$834,208,000 (equivalent to S/2,713,680,000) and US$915,204,000 (equivalent to S/3,071,424,000), respectively, which guarantee loans received from this entity, see Note 11(b). As of June 30, 2017 and December 31, 2016, this caption included restricted funds for approximately US$45,985,000 (equivalent to S/149,590,000) and US$58,027,000 (equivalent to S/194,737,000), respectively, which mainly correspond to counterparty requirements in derivatives financial instruments transactions, see Note 9(b). 12

21 5. Available-for-sale and held-to-maturity investments (a) The detail of available-for-sale investments is as follows: Unrealized gross amount Unrealized gross amount Amortized Estimated Amortized Estimated Gains Losses Gains Losses cost fair value cost fair value Debt instruments Corporate, leasing and subordinated bonds 3,918, ,357 (56,088) 3,989,017 3,983,833 36,621 (155,543) 3,864,911 Negotiable Certificates of Deposit issued by BCRP 1,493,070 1,675 (62) 1,494,683 1,709,845 2,523 (84) 1,712,284 Mutual funds and investment funds participations 1,238, ,369 (17,233) 1,400,219 1,218, ,136 (18,558) 1,328,063 Peruvian Sovereign Bonds 1,086,144 28,095 (28,602) 1,085,637 1,223,965 4,171 (90,732) 1,137,404 Bonds guaranteed by the Peruvian Government 529,864 16,088 (1,853) 544, ,338 7,674 (5,962) 473,050 Global Bonds of the Republic of Peru 268, (854) 268, ,182 - (6,366) 175,816 Foreign Sovereign Bonds an Global Bonds from other countries 200, (876) 199, ,554 - (3,350) 246,204 Liquidated Certificates of Deposit issued by BCRP 29,993 - (9) 29, Indexed Certificates of Deposit issued by BCRP , ,465 Total 8,765, ,135 (105,577) 9,011,779 9,078, ,176 (280,595) 8,977,197 Listed shares Shares of private sector (domestic and foreign) 327,675 18,071 (19,069) 326, ,691 26,232 (8,387) 320,536 Non-listed shares Royalty Pharma (f) 60,991 7,123-68,114 62,923 5,341-68,264 Others , (129) 1, ,604 25,867 (19,069) 396, ,582 32,267 (8,516) 390,333 9,154, ,002 (124,646) 9,408,181 9,445, ,443 (289,111) 9,367,530 Accrued Interest 85,697 86,484 9,154, ,002 (124,646) 9,493,878 9,445, ,443 (289,111) 9,454,014 13

22 (b) Intercorp Group has determined that the unrealized losses as of June 30, 2017 and December 31, 2016, are of temporary nature. Intercorp Group intends and has the capacity to hold each investment for a period of time sufficient to allow for an anticipated recovery in fair value, until the maximum period for anticipated recovery or maturity. Intercorp Group has considered the following criteria in determining whether a loss is temporary or not for equity investments (shares) and, when it is applicable, to mutual and investment funds: - The length of time and the extent to which fair value has been below cost; - The severity of the impairment; - The cause of the impairment and the financial condition and near-term prospects of the issuer; and - Activity in the market of the issuer, which may indicate adverse credit conditions. Intercorp Group has considered the following criteria in determining whether a loss is temporary or not for debt instruments (fixed maturity): - Assets whether it is probable that Intercorp Group will receive all amounts due, according to the contractual terms of the security (principal and interest). The identification of credit-impaired securities considers a number of factors, including the nature of the security and the underlying collateral, the amount of subordination or credit enhancement supporting the security, published credit rating and other information and other evidentiary analyses of the probable cash flows from the security. If recovery of all amounts due is not probable, a credit impairment is deemed to exist and the unrealized loss is recorded directly in the consolidated income statements. This unrealized loss recorded in the consolidated income statements represents the security s decline in fair value, including the decline due to forecasted cash flow shortfalls as well as general market spread widening. - For financial instruments with unrealized losses but not identified as impaired, the Group determines whether it has the intent and capacity to hold each investment for a period of time sufficient to allow for an anticipated recovery of fair value. Intercorp Group estimates the forecasted recovery period using current estimates of volatility in market interest rates (including liquidity and risk premiums). Intercorp Group s assertion regarding its intent and capacity to hold investments considers a number of factors, including a quantitative estimate of the expected recovery period and the length of that period (which may extend to maturity), the severity of the impairment and Intercorp Group s strategy with respect to the identified security or portfolio. If Intercorp Group does not have the intent and ability to hold the security for a sufficient time period, the unrealized loss is recorded directly in the consolidated income statements. 14

23 (c) As a result of the impairment assessment of its available-for-sale investments, Intercorp Group recorded an impairment loss amounting to S/5,019,000 and S/76,889,000 as of June 30, 2017 and 2016, respectively, which is presented in the caption Impairment loss on available-for-sale investments of the consolidated income statements. The movement of unrealized results available-for-sale investments, net of deferred Income Tax and non-controlling interest, is presented in Note 14(c). As of June 30, 2017 and December 31, 2016, the detail of unrealized losses of debt instruments as available-for-sale is as follows: Amortized cost Unrealized gross gain Unrealized gross loss Amortized cost Unrealized gross gain Unrealized gross loss Issuer Peruvian Sovereign Bonds 1,086,144 28,095 (28,602) 1,223,965 4,171 (90,732) Banco de Crédito del Perú S.A. 69,341 - (7,743) 184, (6,962) Corporación Financiera de Desarrollo S.A. 268,318 5,593 (8,438) 182, (15,368) H2Olmos S.A. 117, (4,717) 115, (11,417) Vale Overseas Ltd. 91, (4,934) 94,645 - (11,183) Instruments with individual losses lower than S/4 million (51,143) 7,714 (144,933) 33,855 (105,577) 12,112 (280,595) (d) As of December 31, 2016, Interbank held Negotiable Certificates of Deposit issued by BCRP for an approximately amount of S/101,054,000 that guarantee loans with this entity, see Note 9(b), that ended in January (e) During 2016, Interbank was part of a securities exchange program offered by the Peruvian Government through which: - Delivered global and sovereign bonds for US$52,360,000 (equivalent to approximately S/178,128,000) and S/74,152,000, respectively, with maturity between March 2019 and July 2025, and effective annual interest rates between 1.50 and 2.59 percent and 4.8 percent, respectively; and - Received sovereign bonds for S/249,863,000, with maturity in August 2028 and effective annual interest rates between 6.35 and 6.38 percent. (f) Corresponds to participations in RPI International Holding, LP (RPI Partnership) and Royalty Pharma Cayman Holding, LP ( RPS Partnership ). RPI Partnership and RPS Partnership invest in a series of feeder funds whose objective is to invest in Royalty Pharma Investments and Royalty Pharma Select, respectively, which are investment funds established under the laws of the Republic of Ireland and authorized by its Central Bank. These investment funds are engaged in the purchase of medical patents and biotechnology. The participations in RPI Partnership and RPS Partnership are not liquid and require authorization for their trading. As of June 30, 2017 and December 31, 2016, Intercorp Group holds 152,251 participations of RPI Partnership, whose fair values amounts to approximately US$20,939,000 and US$20,341,000 (equivalent to approximately S/68,115,000 and S/68,264,000, respectively). During 2017 and 2016 Intercorp Group received dividends from these participations for approximately S/2,119,000 and S/19,317,000, respectively, which are included in the Interest and similar income caption of the consolidated income statements. 15

24 (g) As of June 30, 2017 and December 31, 2016, held-to-maturity investments are entirely composed of Sovereign Bonds of the Republic of Peru, for an amount of S/763,169,000 and S/611,293,000, respectively, including accrued yields. During 2016, Interbank reclassified Peruvian Sovereign Bonds classified as available-for-sale investment into heldto-maturity investments. The carrying amounts as of the dates of reclassification amounted to approximately S/129,548,000 and the unrealized loss accumulated in net equity amounted to S/220,000; the latter amount shall be transferred to results during the remaining term of the instruments. As a result of this transfer, Interbank has recorded in its results for the six-month periods ended June 30, 2017 and 2016 a net loss of approximately S/1,295,000 and S/1,247,000, respectively. As of June 30, 2017 and December 31, 2016, the carrying amount of these investments amounted to S/552,455,000 and S/432,832,000, respectively. As of June 30, 2017 and December 31, 2016, the maturity of these investments fluctuates between August 2020 and August 2037, have accrued interest at an effective annual rate between 4.24 and 6.33 percent, and its estimated fair value amounts to approximately S/570,942,000 and S/605,299,000, respectively. 16

25 6. Loans, net (a) The detail of the loan portfolio is as follows: Direct loans Loans 21,219,651 20,518,210 Credit cards 4,306,337 4,399,150 Leasing 1,503,331 1,631,146 Discounted notes 410, ,210 Factoring 204, ,763 Advances and overdrafts 37,147 39,483 Refinanced loans 291, ,770 Past due and under legal collection loans 785, ,800 28,758,064 28,202,532 Plus (minus) Accrued interest from performing loans 342, ,098 Unearned interest and interest collected in advance (33,201) (26,507) Allowance for loan losses (c) (1,286,428) (1,224,445) Total direct loans 27,780,853 27,285,678 Indirect loans 4,449,480 4,388,328 17

26 (b) The direct loan portfolio, classified by type of loan, is presented below: Commercial loans 13,054,453 12,875,605 Consumer loans 9,879,566 9,714,787 Mortgage loans 5,233,883 5,041,107 Small and micro-business loans 590, ,033 Total 28,758,064 28,202,532 (c) The changes in the allowance for loan losses (direct and indirect) were as follows: Beginning balances 1,248,421 1,119,815 Provision 489, ,383 Recovery of written-off loans 70,405 64,310 Written-off portfolio (482,409) (411,088) Translation result and others (6,766) (8,928) Ending balances (*) 1,319,469 1,222,492 As of December 31 (*) 1,248,421 (*) The allowance for loan losses includes the allowance for indirect loans and credit risk associated to over indebtedness amounting to approximately S/33,041,000 and S/23,976,000 as of June 30, 2017 and December 31, 2016, respectively, which is presents in the Accounts payable, provisions and other liabilities caption of the consolidated statements of financial position; see Note 9(a). In Management s opinion, the allowance for loan losses recorded as of June 30, 2017 and December 31, 2016, has been established in accordance with IAS 39 and it is sufficient to cover incurred losses on the loan portfolio. 18

27 7. Investment property (a) This caption is made up as follows: Acquisition or Valuation methodology construction year Hierarchy level (i) Land - Cuartel San Martín - Lima (c) 324, , /2017 Level 3 Appraisal Appraisal San Martin de Porres - Lima 256, , Level 3 Appraisal Appraisal San Isidro - Lima 241, , Level 3 Appraisal Appraisal Puruchuco 139, , Level 3 Appraisal Appraisal Ate Vitarte - Lima 46,313 46, Level 3 Appraisal Appraisal Piura 38,465 39, Level 3 Appraisal Appraisal Lurín - Lima 43,242 34, Level 3 Appraisal Appraisal Centro Urbano Nuevo Chimbote 32,664 31, Level 3 Appraisal Appraisal Sullana 24,166 25, Level 3 Appraisal Appraisal Carabayllo - Lima 22,546 16, Level 3 Appraisal Appraisal Cañete - Lima 16,083 16, Level 3 Appraisal Appraisal Tarapoto 15,236 15, Level 3 Appraisal Appraisal Zapallal 13,054 13, Level 3 Appraisal Appraisal Others 41,257 32,414 - Level 3 Appraisal Appraisal 1,254,329 1,083,566 Built investment property - Real Plaza - Shopping Malls San Isidro - Lima 163, , Level 3 DCF DCF Primavera - Lima 159, , Level 3 DCF DCF Chiclayo 152, , Level 3 DCF DCF Trujillo 128, , Level 3 DCF DCF Piura 120, , Level 3 DCF DCF Pucallpa 87, , Level 3 DCF DCF Cajamarca 77,030 76, Level 3 DCF DCF Pro - Lima 49,283 48, Level 3 DCF DCF Chorrillos - Lima 46,210 45, Level 3 DCF DCF Santa Clara - Lima 30,497 30, Level 3 DCF DCF Colmenares 31,092 22, Level 3 DCF DCF Nuevo Chimbote 19,541 19, Level 3 DCF DCF Talara 8,860 9, Level 3 DCF DCF Sullana 5,301 5, Level 3 DCF DCF 1,079,267 1,189,273 19

28 Acquisition or Valuation methodology construction year Hierarchy level (i) Built on leased land (iii) - Salaverry - Lima 302, , Level 3 DCF DCF Centro Cívico - Lima 152, , / 2014 Level 3 DCF DCF Cuzco 123, , Level 3 DCF DCF Huancayo 87,030 85, Level 3 DCF DCF Arequipa 54,951 50, Level 3 DCF DCF Juliaca 54,227 54, Level 3 DCF DCF Villa Maria del Triunfo - Lima 59,091 42, /2016 Level 3 DCF DCF Huánuco 52,432 51, Level 3 DCF DCF Others 1,288 1,418 - Level 3 DCF DCF 887, ,579 Buildings - Ate Vitarte - Lima 53,909 45, Level 3 DCF DCF Panorama - Lima 20,422 20, Level 3 DCF DCF Pardo y Aliaga - Lima 3,271 3, Level 3 DCF DCF Trujillo - 10, Level 3 DCF DCF 77,602 80,351 3,299,175 3,208,769 DCF: Discounted cash flow (i) (ii) (iii) During 2017 and 2016, there were no transfers between levels of hierarchy. As of June 30, 2017 and December 31, 2016, there are no liens on investment property. For the building of these shopping malls, Intercorp Group entered into contracts: leasehold (contractual agreement between the landowner and Intercorp Group through which Intercorp Group is allowed to build shopping malls). These agreements have a term of duration ranging between 20 and 70 years. 20