Translation of separate financial statements originally issued in Spanish Note 18

Transcription

1 Intercorp Perú Ltd. Separate financial statements as of September 30, 2018, January 1, 2018, December 31, 2017, and for the nine-month periods ended September 30, 2018 and 2017

2 Intercorp Perú Ltd. Separate financial statements as of September 30, 2018, January 1, 2018, December 31, 2017, and for the nine-month periods ended September 30, 2018 and 2017 Contents Separate financial statements Separate statements of financial position Separate income statements Separate statements of other comprehensive income Separate statements of changes in equity Separate statements of cash flows Notes to the separate financial statements

3 Intercorp Perú Ltd. Separate statements of financial position As of September 30, 2018, January 1, 2018, and December 31, 2017 (restated) Assets Current assets Restated Note (Note 3.2) (Note 3.1) Cash and due from banks 15(a) 3,873 13,494 13,494 Accounts receivable from Subsidiaries, related entities and others 5 1,586 44,520 44,520 Investments at fair value through profit or loss 6 80,255 63,710 - Total current assets 85, ,724 58,014 Available-for-sale investments 6 and ,378 Investments at fair value through other comprehensive income 7-16,668 - Investment property 8 138, , ,468 Investments in Subsidiaries 9 9,722,143 8,448,261 8,534,306 Other assets Total assets 9,947,040 8,724,552 8,810,597 Liabilities and equity Current liabilities Accounts payable to Subsidiaries 15(b) 6,098 48,713 48,713 Loans payable 10(a) 133, , ,000 Interest, provisions and other accounts payable 10(b) 68,432 78,542 78,542 Total current liabilities 207, , ,255 Corporate bonds 11 1,112,084 1,096,875 1,096,875 Total liabilities 1,319,614 1,334,130 1,334,130 Equity, net 12 Capital stock 4,010,690 3,524,799 3,524,799 Reserves 3,740,123 2,626,014 2,626,014 Unrealized results 76,098 (334,095) (219,351) Retained earnings 800,515 1,573,704 1,545,005 Total equity, net Total liabilities and equity, net 8,627,426 7,390,422 7,476,467 9,947,040 8,724,552 8,810,597 The accompanying notes are an integral part of these separate financial statements.

4 Intercorp Perú Ltd. Separate income statements For the nine-month periods ended September 30, 2018 and 2017 (restated) Restated Note (Note 3.1) Participation in income of Subsidiaries 9(b) 641, ,689 Income (expenses) Financial income 14 2,431 31,060 Financial expenses 14 (62,853) (64,648) General expenses (18,570) (13,444) Loss on derivative financial instruments 4 (2,092) (3,150) Gain on valuation of financial investments 6(c) 15,276 - Other expenses, net (23,457) (21,220) Exchange difference, net (10,037) 27,485 Total expenses, net Net profit for the period (99,302) (43,917) 542, ,772 Earnings per share (A and B classes) basic and diluted, in Soles Weighted average number of outstanding shares (A and B classes), (in thousand) , ,019 The accompanying notes are an integral part of these separate financial statements.

5 Intercorp Perú Ltd. Separate statements of other comprehensive income For the nine-month periods ended September 30, 2018 and 2017 (restated) Restated (Note 3.1) Net profit for the period 542, ,772 Other comprehensive income to be reclassified to the separate income statements in subsequent periods Investments at fair value through other comprehensive income: Net unrealized (loss) gain from investments at fair value through other comprehensive income (132) (11,806) Financial instruments of Subsidiaries: Net variation of unrealized results in financial instruments of Subsidiaries, Note 9(b) 405, ,752 Exchange difference on translation of foreign operations, Note 9(b) 5,236 (13,910) Total other comprehensive income to be reclassified to the separate income statements in subsequent periods 410, ,036 Total other comprehensive income for the period 952, ,808 The accompanying notes are an integral part of these separate financial statements.

6 Intercorp Perú Ltd. Separate statements of changes in equity For the nine-month periods ended September 30, 2018 and 2017 (restated) Number of shares Unrealized results, net Issued Capital stock Reserves Financial Instruments at fair value through other comprehensive income Financial instruments of Subsidiaries Exchange difference on translation of foreign currency operations Retained earnings Total (in thousands) Balances as of January 1, ,019 3,041,307 2,336,014 44,015 (109,637) 20, ,324 6,328,997 Change in accounting policy, Note (376,938) - 376,938 - Balances as of January 1, Restated 149,019 3,041,307 2,336,014 44,015 (486,575) 20,974 1,373,262 6,328,997 Net profit for the period - Restated, Note , ,772 Other comprehensive income Restated, Note (11,806) 225,752 (13,910) - 200,036 Total other comprehensive income (11,806) 225,752 (13,910) 636, ,808 Dividends declared, Note 12(a) (97,335) (97,335) Capitalization of profits, Note 12(a) - 483, (483,492) - Constitution of reserves, Note 12(c) , (290,000) - Net variation of treasury stock held by Subsidiaries, net of dividends received (41,606) (41,606) Others (37,128) (37,128) Balances as of September 30, Restated 149,019 3,524,799 2,626,014 32,209 (260,823) 7,064 1,060,473 6,989,736 Balances as of January 1, ,019 3,524,799 2,626,014 41, ,007 2,580 1,017,984 7,476,467 Change in accounting policy, Note (527,021) - 527,021 - Balances as of January 1, Restated 149,019 3,524,799 2,626,014 41,083 (263,014) 2,580 1,545,005 7,476,467 Effect of first adoption of IFRS 9, Note (40,951) (73,793) - 28,699 (86,045) Balances as of January 1, 2018 after IFRS 9 149,019 3,524,799 2,626, (336,807) 2,580 1,573,704 7,390,422 Net profit for the period , ,479 Other comprehensive income (132) 405,089 5, ,193 Total other comprehensive income (132) 405,089 5, , ,672 Declared Dividends, Note 12(a) (97,818) (97,818) Capitalization of profits, Note 12(a) - 485, (485,891) - Constitution of reserves, Note 12(c) - - 1,114, (1,114,109) - Net variation of treasury stock held by Subsidiaries, net of dividends received, Note 9(b) , ,328 Effect of change in Subsidiaries shareholding (83,394) (83,394) Acquisition of non-controlling interest related to Quicorp (Note 1.2.1) , ,368 Others (58,152) (58,152) Balances as of September 30, ,019 4,010,690 3,740,123-68,282 7, ,515 8,627,426 The accompanying notes are an integral part of these separate financial statements.

7 Intercorp Perú Ltd. Separate statements of cash flows For the nine-month periods ended September 30, 2018 and 2017 (restated) Restated Reconciliation of net profit with cash used in operating activities Net profit for the period 542, ,772 Plus (minus) Net gain of participation in income of Subsidiaries (641,781) (680,689) Loss on derivative financial instruments 2,092 3,150 Gain on valuation of financial investments (15,276) - Net changes in asset and liability accounts Decrease (increase) of other accounts receivable 53,141 (9,960) Decrease of interest, provisions and other accounts payable (51,181) (27,734) Net cash used in operating activities (110,526) (78,461) Investing activities Dividends received 389, ,982 Sale of available-for-sale investments - 38,364 Capital contribution to Subsidiaries (192,142) (189,532) Net cash provided by investing activities 197, ,814 Financing activities Loans received from third parties, net 23,000 80,000 Loans paid to Subsidiaries, net (45,978) (121,585) Payment of dividends (73,887) (73,530) Payment of Notes - (40,320) Net cash used in financing activities (96,865) (155,435) Net (Decrease) increase in cash and cash equivalents (9,621) 13,918 Balance of cash and cash equivalents at the beginning of period 13,494 1,826 Balance of cash and cash equivalents at the end of period 3,873 15,744 The accompanying notes are an integral part of these separate financial statements.

8 Intercorp Perú Ltd. Notes to the separate financial statements As of September 30, 2018, January 1, 2018, and June 30, 2018 (restated) 1. Business activity, acquisitions and relevant events 1.1 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, Urb. Santa Catalina, La Victoria, Lima, Peru. The Company holds investments in a variety of entities domiciled mainly in Peru, in the Bahamas and in the Republic of Panama. The activities and the most important information about the Subsidiaries as of September 30, 2018, and December 31, 2017, are disclosed in Notes 2 and 9. These separate financial statements were approved by Management on October 31, 2018, and the audited separate financial statements as of December 31, 2017, were approved by the General Shareholders Meeting held on April 2, These separate financial statements have been prepared in order to comply with the legal requirements in force in Peru regarding the presentation of financial information and reflect the investment in its Subsidiaries at their equity values as of September 30, 2018, January 1, 2018, and December 31, 2017, and not on a consolidated basis. These separate financial statements must be read together with the consolidated financial statements of Intercorp Perú and Subsidiaries, which are presented separately and within the legal deadlines. 1.2 Acquisitions: Acquisition of Quicorp Group.- InRetail Pharma (formerly Eckerd Perú S.A. and as main shareholder) constituted IR Pharma S.A.C. (formerly Chakana Salud S.A.C.) with the aim of acquiring 100 percent of Quicorp S.A. and its Subsidiaries (henceforth and jointly Quicorp ), which are the following: Química Suiza Comercial S.A., Química Suiza S.A., Cifarma S.A., Mifarma S.A.C., Empresa Comercializadora Mifarma S.A., Botica Torres de Limatambo S.A.C., BTL Amazonía S.A.C., Vanttive S.A.C., Farmacias Peruanas S.A., Droguería La Victoria S.A.C., Vanttive Cía Ltda., Quifatex S.A., Quimiza Ltda., Quideca S.A., Albis S.A., Jorsa de la Selva S.A. and Superfarma Mayorista S.A. It should be noted that these entities operate in the segments of manufacturing, distribution and retail within the pharmaceutical sector, with presence in Peru, Ecuador, Bolivia and Colombia. The consideration paid amounted to approximately US$583 million (equivalent to approximately S/1,872 million). At the date of acquisition (January 2018) InRetail Pharma S.A. held percent of the shareholding of IR Pharma S.A.C., while the remaining percent was held by NG Infra II S.A.C.

9 Subsequently, in April 2018, InRetail Pharma S.A. absorbed IR Pharma S.A.C. and as a consequence of this absorption, it issued shares in favor of NG Infra II S.A.C., resulting in a capital increase of S/481,500,000 in InRetail Pharma S.A. As a consequence of the transactions detailed in the previous paragraphs, as of September 30, 2018, percent of the shareholdering of InRetail Pharma S.A. corresponds to InRetail Perú Corp. and the remaining percent to NG Infra II S.A.C. As of December 31, 2017, InRetail Perú Corp. held 100 percent of InRetail Pharma S.A Acquisition of Seguros Sura and Hipotecaria Sura.- In May 2017, Intercorp Financial Services Inc. (a Subsidiariy, henceforth IFS ) signed a share purchase agreement with Sura Asset Management S.A. (Colombia), Sura Asset Management Perú S.A. (Peru) and Grupo Wiese (Peru) for the direct and indirect purchase up to 100 percent of Seguros Sura and Hipotecaria Sura. The acquisition was approved by Peru s Superintendence of Banking, Insurance and Private Pension Funds Administrators (henceforth SBS, by its Spanish acronym) on September 28, As a consequence, on November 2, 2017, IFS acquired percent of Seguros Sura s capital stock and 70.0 percent of Hipotecaria Sura s capital stock. On the same date, Interseguro, a Subsidiary of IFS, acquired 9.19 percent of Seguros Sura s capital stock. Subsequently, on November 22, 2017, IFS acquired percent of Seguros Sura s capital stock as well as percent of Hipotecaria Sura s capital stock. The latter two acquisitions were made through the purchase of the companies Negocios e Inmuebles S.A. and Holding Retail Perú S.A. After such acquisitions, IFS holds percent of Seguros Sura s capital stock and percent of Hipotecaria Sura s capital stock. The price of the overall transaction was US$275,865,000 (equivalent to approximately S/891,911,000). The consideration transferred by IFS and Interseguro amounted to approximately S/811,238,000 and S/80,673,000, respectively. As of the date of this report, the merging between Interseguro and Seguros Sura has concluded, pursuant to the approvals issued by the SBS and within the legal deadlines. 1.3 Relevant events: Restatement of financial statements for previous periods.- Until December 31, 2017, the Subsidiaries of Intercorp Financial Services Inc., Interseguro and Seguros Sura recognized in the results of the period the effect of changes in interest rates used to discount the pension liabilities of retirement, disability and survival coverage. During the first quarter of 2018, with the purpose of better reflecting the insurance business performance, said Subsidiaries changed their accounting policy in order to recognize such effect as part of the unrealized results, within the net equity. As consequence of this change in the accounting policy made by said Subsidiaries and by applying the equity method, to value the investment in Subsidiaries, the Company has restated its financial information 2

10 corresponding to previous periods. See Note 3.1 for further detail on the restatement performed by the Company First adoption of IFRS 9 Financial Instruments.- Starting on January 1, 2018, the Company and its Subsidiaries have adopted IFRS 9, which replaces IAS 39 Financial Instruments: Recognition and Measurement. Likewise, the Company has used the exception established by the standard that allows not restating the information of previous periods. In this sense, the difference in book values of financial assets and liabilities resulting from the adoption of IFRS 9, amounting to S/86,045,000, has been recognized in the initial balances as of January 1, 2018 (transition period) as a reduction in the retained earnings of the Company. See Note 3.2 for further detail Modification of parameters used by Subsidiary for the computation of insurance contract liabilities (technical reserves) Modification of interest rates During the second quarter of 2018, Interseguro modified the assumptions for the estimation of interest rates used for the discount of pension reserves. As result, the level of reserves diminished by approximately S/520 million. This amount was recorded as a liability reduction in reserves with a respective increase in unrealized results in the net equity of Interseguro. In accordance with the accounting standards in force, the change was performed in the second quarter, in a prospective manner, without modifying the reported balances of previous periods. As a result of this change and in application of the equity participation method, followed by Intercorp Perú for the valuation of the investment in its subsidiaries, the impact attributable to Intercorp Perú is reflected as an increase in the caption Unrealized results of the equity Adoption of new Mortality Tables In March 2018, through Resolution No , the SBS published new mortality tables aimed to reflect the recent changes in mortality or life expectancy of the affiliates and pensioners of the Private System of Pension Funds Administration. According to Peruvian regulation, said regulation will enter into force in January 2019 and its adoption will be gradual throughout a 10-year period. Notwithstanding the aforementioned, for purposes of estimation of the technical reserves under IFRS, Interseguro has adopted the new mortality tables in the second quarter of 2018, and consequently has determined greater liabilities in reserves for approximately S/145 million, which were recorded as expenses in its separate income statements. As a result of this adoption and in application of the equity participation method, followed by Intercorp Perú for the valuation of the investment in its subsidiaries, the impact attributable to Intercorp Perú is reflected as a reduction in net income. 3

11 2. Organization of Intercorp Perú Group Below is the information about the entities that are part of Intercorp Group Financial and insurance entities Intercorp Financial Services Inc. - 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 September 30, 2018, the Company holds directly and indirectly percent of the issued capital stock of IFS and percent of the outstanding capital stock of IFS (directly and indirectly percent and percent, respectively, as of December 31, 2017). The percentage of indirect participation over IFS issued capital stock is held by Intercorp Perú through its subsidiaries IFH Capital Corp. and Intercorp Capital Investments Inc., these subsidiaries hold percent of IFS capital stock. As of September 30, 2018, and December 31, 2017, IFS held percent of the outstanding capital stock of Banco Internacional del Perú S.A.A. Interbank (henceforth Interbank ) and 100 percent of the outstanding capital stock of Interseguro Compañía de Seguros S.A. (henceforth Interseguro ), Inteligo Group Corp. (henceforth Inteligo ) and San Borja Global Opportunities S.A.C. In addition, as of December 31, 2017, it holds percent and percent of the capital stock of Seguros Sura S.A. and Hipotecaria Sura Empresa Administradora Hipotecaria S.A., respectively. The operations of Interbank, Interseguro, Seguros Sura and Hipotecaria Sura are concentrated in Peru, while the operations of Inteligo and Subsidiaries are concentrated in Perú and Panamá. The Subsidiaries of IFS and their economic activities are presented below: (a) Banco Internacional del Perú S.A.A. - Interbank and Subsidiaries Interbank is incorporated in Peru and is authorized to operate as a universal bank by the SBS, in accordance with Peruvian legislation. Interbank's operations are governed by the Banking and Insurance Act, which establishes the requirements, rights, obligations, restrictions and other operating conditions that Peruvian financial and insurance entities must comply with. As of September 30, 2018, and December 31, 2017, Interbank had 268 and 272 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 Internacional de Títulos Sociedad Titulizadora S.A. - Intertítulos S.T. Inversiones Huancavelica S.A. Contacto Servicios Integrales de Créditos y Cobranzas S.A. Activity Management of mutual funds and investment funds. Management of securitization funds. Real estate activities. Collection services. 4

12 Entity Compañía de Servicios Conexos Expressnet S.A.C. Activity Services related to credit card transactions or products related to the brand American Express. (b) 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 September 30, 2018, and December 31, 2017, 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 December 31, 2017, Interseguro holds 75 percent of its capital stock. As of September 30, 2018, Interseguro sold its stake to a related company. Was incorporated in February 2014 in Peru. It does not have operations and is in the process of liquidation. As of September 30, 2018, and December 31, 2017, Interseguro holds 100 percent of its shares and 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 ), 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. Interseguro has ownership of and decision making power over these properties, and the Group has the exposure or rights to their returns; therefore, Interseguro has consolidated the silos containing the investment properties that it controls. In April 2016, the Congress of the Republic of Peru approved an amendment to the Act of the Private Pension System, by which the affiliates of the Private Pension Fund Administration Companies ( AFP, by 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, as is the case of Interseguro. This new retirement scheme allows the affiliates to dispose the 95.5 percent of their Individual Capitalization Account ( CIC, by its Spanish acronym). During 2017, Interseguro launched the product named Renta Particular Plus. This allowed to maintain the product portfolio level and the long-term cash fundraising, while counterbalancing the retirement income reduction due to the modification of the Private Pension System Act. 5

13 (c) Inteligo Group Corp. and Subsidiaries Inteligo Group Corp. is an entity incorporated in the Republic of Panama. As of September 30, 2018, and December 31, 2017, it holds 100 percent of the shares of the following Subsidiaries: Entity Inteligo Bank Ltd. Inteligo Sociedad Agente de Bolsa S.A. 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. Brokerage firm incorporated in Peru. (d) Seguros Sura S.A. Seguros Sura was incorporated in Peru and its operations were governed by Banking and Insurance Act, it was authorized to issue life and general risk insurance contracts. Seguros Sura merged with Interseguro as of March 30, (e) Hipotecaria Sura Empresa Administradora Hipotecaria S.A. Hipotecaria Sura Empresa Administradora Hipotecaria S.A. is incorporated in Peru and its regulated by the SBS. Its main activity is to grant mortgage loans. Since 2015, it has not granted any new mortgage loans. As of September 30, 2018, it is under the process of liquidation. (f) Negocios e Inmuebles S.A. and Holding Retail Perú S.A. These entities were acquired by IFS as part of the purchase of Seguros Sura and Hipotecaria Sura. As of December 31, 2017, the only activity of these entities is to maintain collectively 30.7 percent of Seguros Sura s capital stock and 30.0 percent of Hipotecaria Sura s capital stock. As a result of the merger of Interseguro with Seguros Sura, this subsidiary received shares of Interseguro in exchange of its shares in Seguros Sura, becoming a shareholder of 8.5 percent of Interseguro. (g) San Borja Global Opportunities S.A.C. Its corporate purpose is the commercialization of products and services through the Internet or related activities. As of September 30, 2018, it has a paid-in capital of S/1,461,000 (as of December 31, 2017, it did not have operations and had a paid-in capital of S/1,000) 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. 6

14 As of September 30, 2018, and December 31, 2017, the Company holds 100 percent of the capital stock of Intercorp Retail Inc., which owns the following Subsidiaries: Entity Ownership (%) as of September 30, 2018 Activity InRetail Perú Corp (58.33 as of December 31, 2017). 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 specialpurpose 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 September 30, 2018, and December 31, 2017, operates stores under the trademarks Plaza Vea, Plaza Vea Súper, Vivanda and Mass. (ii) Pharmacies: Developed by InRetail Pharma S.A. (formerly Eckerd Perú S.A.) and Subsidiaries, a company that, as of September 30, 2018, and December 31, 2017, operates 1,082 and 1,153 stores, respectively, under the trademark Inkafarma. In January 2018, InRetail Pharma S.A., through its Subsidiary IR Pharma S.A.C., acquired 100 percent of Quicorp and its Subsidiaries; see Note , which operate under its main trademarks: Mifarma and BTL. (c) InRetail Management S.R.L., company dedicated to the administration of personnel and operations of the aforementioned equity trusts. IFH Retail Corp Holding incorporated in the Republic of Panama in September As of September 30, 2018, and December 31, 2017, holds and percent, respectively, of Tiendas Peruanas S.A. and Subsidiaries; see Note 2.2(ii), a company engaged in the retail business through department stores under the trademark Oechsle (23 premises as of September 30, 2018, and December 31, 2017, respectively) and 96 7

15 Entity Ownership (%) as of September 30, 2018 Activity percent of Financiera Oh! S.A., a company that provides financial support to the companies of Intercorp Group dedicated to the retail business. HPSA Corp 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 (25 and 23 stores as of September 30, 2018, and December 31, 2017, respectively). Lince Global Opportunities Corp 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, holds percent of the capital stock of Tiendas Peruanas S.A. as of September 30, 2018 (72.56 percent as of 31 December, 2017). On the other hand, as indicated in Note 2.2(i), Intercorp Perú, through its participation in Intercorp Retail, holds percent of the capital stock of Tiendas Peruanas S.A. As of September 30, 2018, the joint shareholding of Intercorp Perú in Tiendas Peruanas, through IFH Retail Corp. and Callao Global Opportunities, is equivalent to percent of its capital stock. As of December 31, 2017, the joint shareholding is equivalent to percent of its capital stock. (iii) Intercorp Investments Perú Inc. - It is a limited liability holding company incorporated in September 2006 in the Republic of Panama. As of September 30, 2018, and December 31, 2017, 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. (iv) Urbi Propiedades S.A. - As of September 30, 2018, and December 31, 2017, 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. As of September 30, 2018, and December 31, 2017, Urbi holds 100 percent of the following Subsidiaries: Entity Alameda Colonial S.A. Activity Incorporated in Lima in May 2006, to build apartments under the Government s program Mi Vivienda. 8

16 Entity Domus Hogares del Norte S.A. Urbi Solutions S.A.C. Activity Incorporated in Lima in June 2009, to develop a real estate project called Domus Hogares del Norte. Incorporated in Lima in June 2014 to engage in the construction of real estate projects. As of September 30, 2018, Intercorp Perú and Urbi Propiedades sold their participation in Club de Socios S.A. to third parties not related to the Group. (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 trusts, 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 September 30, 2018, and December 31, 2017, 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 malls called Real Plaza operate. As of September 30, 2018, and December 31, 2017, there were 21 and 19 shopping malls, respectively, located in different cities of Perú. (vi) Intercorp Re Inc. It is a limited liability holding incorporated in August 2015 in the Republic of Panama. As of September 30, 2018, and December 31, 2017, 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 Educational business (i) NG Education Holdings Corp. - It is a limited liability holding company 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. As of September 30, 2018, and December 31, 2017, Intercorp Perú holds 100 percent of Class A shares and percent of Class B shares of NG Education Holdings Corp. s capital stock. 9

17 NG Education Holdings Corp. has the following Subsidiaries: Entity Ownership (%) as of September 30, 2018 Activity Colegios Peruanos S.A (34.25 as of December 31, 2017) As of September 30, 2018, it operates 49 schools under the trademark Innova Schools (41 schools as of December 31, 2017). NG Education S.A.C Holding incorporated in Peru in November NG Education S.A.C. holds 100 percent as of September 30, 2018, and December 31, 2017 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 Institute and Post-Graduate School. As of September 30, 2018, UTP has a 100 percent investment in the following subsidiaries: (i) Corriente Alterna S.A.C.: School of artistic training that provides the career of visual arts and has 1 premise in Lima. (ii) Instituto Superior Tecnológico Privado Corriente Alterna S.A.C.: As of the date of this report, it is not operating. (b) Promotora de la Universidad Tecnológica de Chiclayo S.A.C.: An entity with operations in Peru which as of September 30, 2018, and December 31, 2017, has 1 premise. 10

18 (ii) NG Education Holdings II Corp. - It is a limited liability holding company incorporated in October 2013 in the Republic of Panama. As of September 30, 2018, and December 31, 2017, Intercorp Perú holds 50 percent of the capital stock of NG Education Holdings II Corp., which in turn owns the following Subsidiaries: Entity Ownership (%) as of September 30, 2018 Activity Servicios Educativos Perú S.A.C Company incorporated in Peru in October As of September 30, 2018, and December 31, 2017, it holds 100 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 and 2 premises under construction in San Juan de Lurigancho (Lima) and Ica, respectively, which are set to begin operations in October (iii) NG Education Holdings III Corp. - It is a limited liability holding company incorporated in July 2013 in the Republic of Panama. As of September 30, 2018, and December 31, 2017, Intercorp Perú holds percent of its capital stock and, in turn, it holds percent of the capital stock of Colegios Peruanos S.A.. (iv) Intercorp Education Services; SL. It is a limited liability holding company incorporated in November 2017 in Spain. As of September 30, 2018, Intercorp Perú holds percent of its capital stock. This Subsidiary holds percent of the capital stock of Transformando la Educación en México, S.L. de C.V. wich holds percent of the capital stock of Servicios Administrativos Transformando la Educación en México, S.C. This Subsidiary operates 1 premise, located in the State of Mexico, under the trademark Innova Schools Other entities As of September 30, 2018, and December 31, 2017, 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. Administrative 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. Real estate projects Peru Beacon Healthcare S.A.C. Specialized investments in health Peru 11

19 3. Main accounting principles and practices The accompanying separate financial statements have been prepared from the accounting records of Intercorp Perú, in accordance with the IFRS issued by the IASB. As of September 30, 2018, the accounting principles and practices are consistent with standards applied as of December 31, 2017, which are included in the audited financial statements dated March 19, 2018, except for the following: 3.1 Restatement of financial statements of previous periods.- Until December 31, 2017, the Subsidiaries Interseguro and Seguros Sura recognized in their results the effect of changes in market interest rates used to discount the pension liabilities of retirement, disability and survival coverage. In the first quarter of 2018, with the purpose of better reflecting the insurance business performance, said Subsidiaries changed their accounting policy in order to recognize the effect of changes in market interest rates as part of the unrealized results, within the net equity. As consequence of this change in the accounting policy made by said Subsidiaries, the Company s net equity has been restated in the following terms: Balances as of December 31, 2017 Equity, net Reported Adjustments 1/ Restated Capital stock 3,524,799-3,524,799 Reserves 2,626,014-2,626,014 Unrealized results, net 307,670 (527,021) (219,351) Retained earnings 1,017, ,021 1,545,005 Total equity, net 7,476,467-7,476,467 1/ Correspond to the cumulative effect as of December 31, 2017 (S/527,021,000), attributable to Intercorp Perú according to its participation in IFS. 12

20 Additionally, as a result of the change in the accounting policy, the net income has been restated, as shown below: Separate income statements For the nine-month periods ended September 30, 2017 Reported Adjustments 2/ Restated Participation in income of Subsidiaries 562, , ,689 Income (expenses) Financial expenses (33,588) - (33,588) General expenses (37,814) - (37,814) Exchange difference, net 27,485-27,485 Total other income (43,917) - (43,917) Net profit for the period 518, , ,772 2/ Correspond to the third quarter of 2018 effect (S/118,241,000), attributable to Intercorp Perú according to the ownership in its Subsidiary. 13

21 3.2 First adoption of IFRS 9 Financial Instruments.- Starting on January 1, 2018, the Company and its Subsidiaries have adopted IFRS 9, which replaces IAS 39 Financial Instruments: Recognition and Measurement. The main impacts of said adoption are described below: (a) Classification and Measurement Financial Assets IFRS 9 includes three main classification categories for financial assets: measured at amortized cost; at fair value through profit or loss; and at fair value through other comprehensive income. It also eliminates IAS 39 s existing categories of financial assets: held-to-maturity, loans and receivables, and available-for-sale. A financial asset is recorded at amortized cost if it meets the following two conditions and is not designated at fair value through profit or loss: - The objective of the business model is to hold the financial asset in order to collect the contractual cash flows; and - The contractual terms of the assets correspond to cash flows that are solely payments of principal and interest (SPPI) on the outstanding principal amount. A financial asset must be measured at fair value through other comprehensive income only if it that meets the following two conditions and is not designated at fair value through profit or loss: - The objective of the business model is to both obtain contractual cash flows and sell the financial assets; and - The contractual terms of the assets give rise to cash flows that are SPPI on the outstanding principal amount. At the initial recognition of an equity instrument that is not held for trading, the Group can make an irrevocable choice to present the posterior value changes in other comprehensive income. This decision is made per instrument. All financial assets that are not measured at amortized cost or at fair value through other comprehensive income, according to the previously discussed conditions, are measured at fair value through profit or loss. (b) Impairment Financial assets, loan commitments and financial guarantee contracts IFRS 9 replaces the model of incurred loss of IAS 39 with the model of expected credit loss (ECL). This new model requires the estimation of expected credit loss adjusted by the future changes in macroeconomic factors (forwardlooking approach), which shall be determined based on probability weighting. The new impairment model is applied to financial instruments that are not measured at fair value through profit or loss, such as: Financial assets that are debt instruments; Rent receivables; Loan commitments and issued financial guarantee contracts (formerly, impairment was measured under IAS 14

22 37 Provisions, Contingent Liabilities and Contingent Assets ). According to IFRS 9, equity instruments that are measured at fair value are not subject to credit loss due to impairment. The credit-impaired financial assets defined by IFRS 9 in a similar way that impaired financial assets are defined by IAS 39. Expected credit loss model At each reporting date, the Company and its Subsidiaries measure the expected credit loss by classifying the financial assets as follows: Stage 1: 12-month expected credit loss is recognized in financial assets whose credit risk has not increased significantly since their initial recognition. The interest income is measured based on the gross carrying amount of the financial asset. Stage 2: lifetime expected credit loss is recognized in financial assets whose credit risk has increased significantly since their initial recognition. The interest income is measured based on the gross carrying amount of the financial asset. Stage 3: lifetime expected credit loss is recognized in credit-impaired financial assets. The interest income is measured based on the net carrying amount of the financial asset. (c) Classification Financial liabilities IFRS 9 maintains most of the existing requirements of IAS 39 for the classification of financial liabilities. (d) Contract derecognition and amendment IFRS 9 includes the requirements of IAS 39 for the derecognition of financial asset and liability accounts without substantial modifications. (e) Hedge accounting IFRS 9 does not change the general principles on how an entity accounts for the effective hedges; therefore, its application has not had significant impact on the financial statements of IFS and its Subsidiaries. (f) Transition The Company has used the exception established by IFRS 9 that allows not restating information from previous periods. Consequently, the difference in the book value of financial assets and liabilities resulting from the adoption of IFRS 9 has been recognized in the initial balances as of January 1, 2018 (transition period). 15

23 The impact of the first adoption of IFRS 9 for the Company and its Subsidiaries amounted to S/86,045,000, has been recorded in retained earnings as of January 1, 2018, and is made up as follows: Unrealized results, net Retained earnings Total equity Higher loan provisions for calculation of expected loss in Subsidiaries - (86,045) (86,045) Accumulated valuation as of January 1, 2018 related to financial instruments of Intercorp Perú designated as investments at fair value through profit or loss (40,951) 40,951 - Accumulated valuation as of January 1, 2018 related to financial instruments of Subsidiaries (73,793) 73,793 - Total (114,744) 28,699 (86,045) The reconciliation of the separate statements of financial position of the Company as of January 1, 2018, is presented below: 16

24 Reconciliation of the separate statements of financial position - The reconciliation of the separate statements of financial position under IAS 39 and IFRS 9 as of January 1, 2018, is presented below: Balances according to IAS 39 Reclassifications Adjustments/ adoption IFRS 9 Balances according to IFRS 9 Reference Category Category Assets Cash and due from banks Accounts receivable from Subsidiaries, related entities and others Investments at fair value through profit or loss A Loans and accounts receivable 13, ,494 Amortized cost Loans and accounts receivable 44, ,520 Amortized cost Fair value through profit or loss - 63,710-63,710 Total current assets 58,014 63, ,724 Fair value through profit or loss Available-for-sale investments A Available-for-sale 80,378 (80,378) - - N/A Investments at fair value through other comprehensive income A N/A - 16,668-16,668 Investment property 137, ,468 Fair value through other comprehensive income Investment in Subsidiaries B Equity value 8,534,306 - (86,045) 8,448,261 Equity value Other assets Amortized cost Amortized cost Total non-current assets 8,752,583 (63,710) (86,045) 8,602,828 Total assets 8,810,597 - (86,045) 8,724,552 Liabilities Accounts payable to Subsidiaries N/A 48, ,713 N/A Loans payable 110, ,000 Interest, provisions and other accounts payable Amortized cost 78, ,542 Amortized cost Total current liabilities 237, ,255 Corporate bonds Amortized cost 1,096, ,096,875 Amortized cost Total liabilities 1,334, ,334,130 Total equity, net 7,476,467 - (86,045) 7,390,422 A. As of January 1, 2018, Intercorp Perú has opted to irrevocably designate some equity instruments of its portfolio as measured at fair value through profit or loss (S/63,710,000) and at fair value through other comprehensive income (S/16,668,000), that previously were designated as available-for-sale. B. As of January 01, 2018, corresponds to Equity value in the effect of first adoption of IFRS 9 of Subsidiaries. 17

25 Reconciliation of the separate statements of other comprehensive income The reconciliation of other comprehensive income under IAS 39 and IFRS 9 as of January 1, 2018, is detailed below: Retained earnings Balance according to IAS 39 (December 31, 2017) Restated 1,545,005 Adjustments or reclassifications related to adoption of IFRS 9 Equity value in the effect of first adoption of IFRS 9 of its Subsidiaries 28,699 Initial balance under IFRS 9 (as of January 1, 2018) 1,573,704 Unrealized results Balance under IAS 39 (as of December 31, 2017) Restated (219,351) Adjustments or reclassifications related to adoption of IFRS 9 Equity value in the effect of first adoption of IFRS 9 of its Subsidiaries (114,744) Initial balance under IFRS 9 (as of January 1, 2018) (334,095) Total impact on net equity due to adoption of IFRS 9 (86,045) 3.3 Modification of parameters used by Subsidiary for the computation of insurance contract liabilities (technical reserves) For further detail of the changes made, starting in the second quarter of 2018, see Note

26 4. Foreign currency transactions and foreign exchange risk exposure Transactions in foreign currency are performed using exchange rates prevailing in the free market. As of September 30, 2018, the weighted average exchange rate of free market per US Dollar was S/3.298 bid and S/3.302 ask (S/3.238 and S/3.245, as of December 31, 2017, respectively). As of September 30, 2018, the exchange rate for the accounting of asset and liability accounts in foreign currency set by the SBS was S/3.300 (S/3.241 as of December 31, 2017). The table below presents the detail of the Company s foreign currency assets and liabilities, stated in US Dollars as of September 30, 2018, January 1, 2018, and December 31, 2017: US$(000) US$(000) US$(000) Assets Cash and due from banks Accounts receivable from subsidiaries and others 368 3,947 3,947 Investments at fair value through profit or loss 24,335 19,676 - Available-for-sale investments ,676 Other assets ,193 24,258 24,258 Liabilities Accounts payable to Subsidiaries and related entities Interest, provisions and other accounts payable 17,719 15,604 15,604 Corporate bonds 246, , , , , ,151 Liability position, net (239,089) (237,893) (237,893) As of September 30, 2018, and December 31, 2017, the Company does not have operations with derivative financial instruments for hedging or trading purposes. Consequently, the exchange risk of this position at said dates is assumed by the Company. During the first quarter of 2018, the Company signed foreign currency forward contracts, designated as financial instruments for trading purposes, with its subsidiary Interbank and with maturities in May 2018 for nominal amounts of approximately US$71,500,000. As of September 30, 2018, as result of the holding of these financial instruments, the Company recorded a gain of approximately S/2,092,000, which is presented in the caption Loss on derivative financial instruments in the separate income statements. 19

27 5. Accounts receivable from Subsidiaries, related companies and others (a) This caption is made up as follows: and Subsidiaries (b) ,105 Related entity 1, Others - 1 1,586 44,520 (b) As of September 30, 2018, and December 31, 2017, it mainly corresponds to loans which bear interest at market rates, with short-term maturities and without specific guarantees. See Note 15(d). 6. Investments at fair value through profit or loss (a) This caption is made up as follows as of September 30, 2018, and January 1, 2018: Foreign mutual funds participations (b) 35,850 24,758 Foreign investment funds participations 44,405 38,952 80,255 63,710 (b) Corresponds to participations in NG Capital Partners I, an investment fund located in Canada and dedicated to invest mainly in related entities established in Peru. (c) As a result of the valuation of financial investments at fair value through profit or loss, the Company has recognized a gain amounting to S/15,276,000 which is presented in the caption Income on valuation of financial investments of the separate income statements, as of September 30, (d) Until December 31, 2017, these investments were recorded as available-for-sale investments. As of January 1, 2018, as part of the adoption of IFRS 9, the Company designated these investments at fair value through profit or loss. See Note 3.2(f). 20