Intercorp Perú Ltd. and Subsidiaries

Transcription

1 Intercorp Perú Ltd. and Subsidiaries Consolidated financial statements as of September 30, 2016, December 31, 2015 and for the nine-month periods ended September 30, 2016 and 2015

2 Intercorp Perú Ltd. and Subsidiaries Consolidated financial statements as of September 30, 2016, December 31, 2015 and for the nine-month periods ended September 30, 2016 and 2015 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 September 30, 2016 and December 31, 2015 (audited) Note Note Assets Cash and due from banks 4 Cash and clearing 1,489,565 1,714,916 Deposits in the Central Reserve Bank of Peru 4,687,584 6,090,647 Deposits in local and foreign banks 1,948,860 1,163,985 Restricted funds 3,429,374 3,693,643 11,555,383 12,663,191 Liabilities Deposits and obligations 10 28,485,581 28,282,113 Inter-bank funds 238,003 - Due to banks and correspondents 11 7,749,312 7,768,674 Bonds, notes and other obligations 12 8,403,607 8,399,537 Due from customers on acceptances 17,611 25,357 Insurance contract liabilities 13 5,029,336 4,477,089 Accounts payable, provisions and other liabilities 9 3,876,102 3,806,151 Deferred Income tax liability, net 345, ,374 Total liabilities 54,145,192 53,150,295 Inter-bank funds 230, ,028 Trading securities 72, ,794 Available-for-sale investments 5 (a) 9,385,986 8,080,230 Loans, net 6 27,220,727 26,035,932 Held-to-maturity investments 5 (e) 471, ,561 Investment property 7 3,177,803 3,038,549 Inventories, net 8 1,386,094 1,323,082 Property, furniture and equipment, net 5,458,873 5,247,601 Accounts receivable and other assets, net 9 2,015,003 1,867,112 Goodwill, trademark and other intangible assets, net 1,822,124 1,807,518 Due from customers on acceptances 17,611 25,357 Deferred Income tax asset, net 171, ,859 51,430,210 48,500,623 Equity 14 Equity attributable to Intercorp Perú s shareholders: Capital stock 3,041,307 2,536,133 Reserves 2,336,014 2,336,014 Unrealized results 118,106 (351,879) Traslation results 26,008 28,629 Retained earnings 743,352 1,056,746 6,264,787 5,605,643 Non-controlling interests 2,575,614 2,407,876 Total net equity 8,840,401 8,013,519 Total assets 62,985,593 61,163,814 Total liabilities and equity 62,985,593 61,163,814 The accompanying notes are an integral part of these consolidated statements.

4 Intercorp Perú Ltd. and Subsidiaries Consolidated income statements For the nine-month periods ended September 30, 2016 and 2015 Note Interest and similar income 16 2,984,414 2,601,670 Interest and similar expenses 16 (1,078,585) (959,120) Gross financial margin 1,905,829 1,642,550 Provision for loan losses, net of recoveries 6(c) (676,434) (500,389) Net interest after provision for loan losses, net of recoveries 1,229,395 1,142,161 Gross profit from retail business 19 1,692,293 1,505,442 Fee income from financial services, net , ,567 Net gain on foreign exchange transactions 211, ,994 Net gain on sale of securities 97, ,417 Net loss on trading securities (50,368) (53,479) Income from educational services 340, ,093 Income from rental of investment properties 199, ,215 Gain on sale and valuation of investment property, net 11,986 46,329 Others 23 93, ,139 Total other income 3,234,400 3,136,717 Insurance premiums and claims Net premiums earned 21 (84,370) 337,746 Claims and benefits incurred for life insurance contracts and others 22 (230,220) (188,985) Total net premiums earned less claims and benefits (314,590) 148,761 Salaries and employee benefits 17 (1,341,581) (1,250,237) Selling and administrative expenses 18 (1,467,620) (1,376,562) Depreciation of property, furniture and equipment (240,862) (216,067) Amortization of intangible (69,195) (51,854) Impairment loss on available-for-sale investments 5(c) (62,469) (66,657) Expenses related to rental income (1,068) (464) Others 23 (125,557) (122,894) Total other expenses (3,308,352) (3,084,735) Income before translation result and Income Tax 840,853 1,342,904 Translation result (19,052) (238,387) Income tax (350,414) (323,253) Net profit for the period 471, ,264 Attributable to: Intercorp Perú s shareholders 312, ,001 Non-controlling interests 158, , , ,264 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) , ,655 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 nine-month periods ended September 30, 2016 and 2015 Net profit for the period 471, ,264 Other comprehensive income: Other comprehensive income to be reclassified to the consolidated income statements in subsequent periods: Net gain (loss) on available-for-sale investments 610,691 (586,602) Net movement on cash flow hedges 335 2,459 Exchange differences on translation of foreign operations (3,397) 25,325 Other comprehensive income to be reclassified to the consolidated income statements in subsequent periods, net of income tax 607,629 (558,818) Total comprehensive income for the period, net of income tax 1,079, ,446 Attributable to: Intercorp Perú s shareholders 779, ,027 Non-controlling interests 299, ,419 1,079, ,446 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 nine-month periods ended September 30, 2016 and 2015 Number of shares (in thousands) Issued In treasury Unrealized results Capital Treasury Reserves Availablefor-sale Cash Exhange Retained Total Non Total equity, stock stock flow differences on earnings controlling net investments hedge translation of interests foreign operations Balance as of January 1, ,019 (1,834) 2,079,390 (19,347) 2,282,757 55,646 (2,629) (13,659) 975,372 5,357,530 2,319,527 7,677,057 Net profit for the period , , , ,264 Other comprehensive income (440,433) 1,871 17,588 - (420,974) (137,844) (558,818) Total comprehensive income (440,433) 1,871 17, , , , ,446 Dividends declared (45,975) (45,975) - (45,975) Dividends declared to non-controlling interests of Subsidiaries (128,719) (128,719) Capital contribution from non-controlling interests in Subsidiaries ,938 46,938 Purchase of treasury stock, note 14 (b) - (351) - (7,405) (7,405) (2,217) (9,622) Sale of treasury stock, note 14 (b) - 2,185-26, ,379 59,131 17,705 76,836 Capitalization of reserves and retained earnings - 456,743-53, (510,000) Others (17,681) (17,681) (24,310) (41,991) Balance as of September 30, ,019-2,536,133-2,336,014 (384,787) (758) 3, ,096 5,462,627 2,334,343 7,796,970 Balance as of January 1, ,019-2,536,133-2,336,014 (351,525) (354) 28,629 1,056,746 5,605,643 2,407,876 8,013,519 Net profit for the period , , , ,387 Other comprehensive income , (2,621) - 467, , ,629 Total comprehensive income , (2,621) 312, , ,128 1,079,016 Dividends declared (101,700) (101,700) (115,560) (217,260) Capitalization of reserves and retained earnings , (505,174) Others (19,044) (19,044) (15,830) (34,874) Balance as of September 30, ,019-3,041,307-2,336, ,201 (95) 26, ,352 6,264,787 2,575,614 8,840,401 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 nine-month periods ended September 30, 2016 and 2015 Reconciliation of net profit with cash from operating activities Net profit for the period 471, ,264 Adjustments to net profit Plus (less) Provision for loan losses, net of recoveries 676, ,389 Depreciation of property, furniture and equipment 240, ,067 Amortization of intangible assets 69,195 51,854 Deferred income tax 1,442 (33,775) Gain on sale of securities (97,703) (125,417) Impairment loss on avaible-for-sale investments 62,469 66,657 Net loss on trading securities 50,368 53,479 Gain on valuation of investment properties, net (11,986) (46,329) Translation result 19, ,387 Impairment loss on inventories 3,628 1,269 Increase in accrued receivable interest (8,919) (31,325) (Decrease) Increase in accrued payable interest (10,272) 88,028 Net changes in assets and liabilities Net increase in loans (1,851,592) (3,456,171) Net decrease (increase) in held-to-maturity investments 7,673 (472,912) Net increase in trading securities and available-for-sale investments (651,957) (793,333) Net increase in deposits and obligations 215,489 2,348,925 Net increase of inventories (66,640) (97,505) Net decrease (increase) in restricted funds 264,269 (2,515,977) Net increase in other assets (147,716) (163,923) Net increase in other liabilities 535, ,095 Net cash used in operating activities (*) (229,235) (2,912,253) (*) See note 3.

8 Consolidated statements of cash flows (continued) Cash flows from investing activities Purchase of investment properties (121,612) (105,201) Purchase of property, furniture and equipment (460,585) (520,223) Purchase of intangible assets (76,055) (93,719) Net cash used in investing activities (658,252) (719,143) Cash flows from financing activities Net increase in due to banks and correspondents 6,967 3,606,349 Net (decrease) increase in bonds, notes and other obligations (24,008) 185,083 Net decrease in inter-bank funds assets 15, ,587 Net increase in inter-bank funds liabilities 238, ,024 Payment of dividends to shareholders (76,455) (64,662) Payments of dividends to non-controlling interest of Subsidiaries (115,560) (128,719) Net income from sale of treasury shares - 48,523 Capital contribution of non-controlling shareholders - 46,938 Net cash provided by financing activities 43,948 4,158,123 Net (decrease) increase of cash and cash equivalent (843,539) 526,727 Cash at the beginning of the year 8,969,548 5,726,900 Cash at the end of the period 8,126,009 6,253,627

9 Intercorp Perú Ltd. and Subsidiaries Notes to the consolidated financial statements As of September 30, 2016, December 31, 2015 and for the nine-month periods ended September 30, 2016 and Business activity Intercorp Perú Ltd. (henceforth Intercorp Perú or the Company ), is a limited liability holding company incorporated in November 1997 in The Bahamas. Intercorp Perú performs as the holding company 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 various 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 September 30, 2016 and December 31, 2015 are disclosed in Note 2. The accompanying unaudited consolidated financial statements as of September 30, 2016 were approved by Management on November 14, The accompanying consolidated financial statements as of December 31, 2015 were approved by Management on March 22, Organization of Intercorp 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 company, incorporated in the Republic of Panama on September 19, 2006, with the purpose of grouping the Group s Subsidiaries engaged in the financial and insurance business. As of September 30, 2016, Intercorp Perú, and its Subsidiaries, held percent of the issued capital stock of IFS (78.08 percent as of December 31, 2015). As of September 30, 2016 and December 31, 2015, IFS holds percent of the outstanding capital stock of Banco Internacional del Perú S.A.A. Interbank (henceforth, the Bank ) and 100 percent of the outstanding capital stock of Interseguro Compañía de Seguros S.A. (henceforth, Interseguro ), Inteligo Group and San Borja Global Opportunities S.A.C.

10 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 legal provisions in force in Peru. The Bank'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 (henceforth, the Banking and Insurance Act ) - Act 26702, that establishes the requirements, rights, obligations, guarantees, restrictions and other operating conditions that Peruvian financial and insurance entities must comply with. As of September 30, 2016 and December 31, 2015, Interbank has 289 and 290 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 Manages mutual funds and investment funds. Internacional de Títulos Sociedad Titulizadora S.A. - Intertítulos S.T. Manages 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 S.A. Expressnet S.A.C. Services related to credit card transactions or products related to the brand American Express. IBK Securitizadora A special purpose entity (SPE), through which Interbank issued negotiable long-term notes. (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. 2

11 As of September 30, 2016 and December 31, 2015, Interseguro controls the following Subsidiaries: Entity Centro Comercial Estación Central S.A. Activity Administration of "Centro Comercial Estación Central, located in Lima; as of September 30, 2016 and December 31, 2015, 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. Empresa Administradora Hipotecaria S.A. Incorporated in February 2014 in Peru. It does not have operations and it is in the process of being liquidated. As of September 30, 2016 Interseguro holds 100 percent of its shares and it has a paid in capital of S/1 (S/2,550 as of December 31, 2015). Patrimonio Fideicometido D.S EF, Interproperties Perú (henceforth, PF Interproperties Perú ) is a structured entity, incorporated in April 2008, in which several investors (all of them direct and indirect Subsidiaries of Intercorp Perú) contributed investment properties; each investor has ownership of and specific control over the contributed investment property (considered as silos under IFRS 10). Interseguro has the ownership and the decision-making power on the properties that it contributed, and it has the exposure or rights over their returns; consequently, Interseguro consolidates the silos containing investment properties that it controls. The other Subsidiaries consolidate the silos that contain the investment properties that they control. (iii) Inteligo Group Corp. and Subsidiaries - Inteligo Group Corp. is an entity incorporated in the Republic of Panama. As of September 30, 2016 and December 31, 2015, it holds 100 percent of the shares of the following Subsidiaries: Entity Activity Inteligo Bank Ltd. 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. Inteligo Sociedad Agente de Bolsa S.A. Incorporated in Peru and provides brokerage services. (iv) San Borja Global Opportunities S.A.C. It is a company which corporate purpose is the acquisition and holding of shares and securities. As of September 30, 2016 and December 31, 2015, it had no operations. 3

12 2.2 Retail and real estate businesses (i) Intercorp Retail Inc. - A limited liability holding company incorporated in the Republic of Panama in December 2010, in order to group the companies of Intercorp Group engaged in the retail business in Peru. As of September 30, 2016 and December 31, 2015, the Company holds 100 percent of the capital stock of Intercorp Retail Inc. and it, at the same time, owns the following Subsidiaries: Entity InRetail Perú Corp. (As of September 30, 2016 and December 31, 2015 Intercorp Retail Inc. holds and percent, respectively, of its outstanding capital stock. Also, as of such dates, Intercorp Perú, through its Subsidiaries, holds and percent (directly and indirectly) of the outstanding capital stock of InRetail Perú Corp). 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 through InRetail Real Estate Corp., owner of Patrimonio en Fideicomiso InRetail Shopping Malls, 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, which are special purpose entities; see description in paragraph 2.2(v); (b) Patrimonio en Fideicomiso Inretail Consumer: Incorporated in August 2014 and develops the following retailers: (i) Supermarkets: developed by Supermercados Peruanos S.A. and Subsidiaries, a company that, as of September 30, 2016 and December 31, 2015, has hypermarkets, supermarkets and discount stores, under the trademarks Plaza Vea, Plaza Vea Súper, Vivanda, Mass and Economax and; (ii) Pharmacies: developed by Eckerd Perú S.A. and Subsidiaries, a company that, as of September 30, 2016 and December 31, 2015, has 980 and 848 stores, under the trademark Inkafarma. (c) Inretail Properties Management S.R.L., company dedicated to personnel management and operations of Patrimonio en Fideicomiso. IFH Retail Corp. (As of September 30, 2016 and December 31, 2015, Intercorp Retail Inc. holds percent of its capital stock) Holding incorporated in the Republic of Panama in September 2006, owner as of September 30, 2016 and December 31, 2015, of percent 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 Oeschle (23 and 21 premises as of September 30, 2016 and December 31, 2015, respectively) and of 96 percent of Financiera Oh! S.A.-before 4

13 Entity Activity Financiera Uno- (henceforth, la Financiera ), as of September 30, 2016 and December 31, 2015, a company that provides financial support to the companies of Intercorp Group engaged in the retail business. HPSA Corp. (As of September 30, 2016 and December 31, 2015, Intercorp Retail Inc. holds 65 percent of its capital stock) 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 (22 and 21 stores as of September 30, 2016 and December 31, 2015, respectively). Lince Global Opportunities Corp. (As of September 30, 2016 and December 31, 2015, Intercorp Retail Inc. holds 100 percent of its capital stock) Holding incorporated in the Republic of Panama in December 2010 that 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 September 30, 2016 and December 31, 2015, it holds percent of the capital stock of Tiendas Peruanas S.A. On the other hand, as indicated in Note 2.2(i), Intercorp Perú holds percent of IFH Retail Corp and, it, in turn, held percent of Tiendas Peruanas S.A., so that the joint participation of Intercorp Perú on Tiendas Peruanas is equivalent to percent of its capital stock as of September 30, 2016 and December 31, (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, 2016 and December 31, 2015, 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., which sole asset is a land lot located in the district of Independencia in Lima. (iv) Urbi Propiedades S.A. - As of September 30, 2016 and December 31, 2015, the Company holds 100 percent of the capital stock of this entity, incorporated in Peru in Urbi is engaged in real estate management and provides structuring and management services for real estate projects, and through its Subsidiaries, it is developing several real estate projects. In January 2016, Urbi Propiedades S.A performed an equity spin-off amounting to S/6,019,000 transferred to Urbi Proyectos S.A., subsidiary company of Intercorp Perú, incorporated in September 5

14 2015, to develop real estate projects. As of September 30, 2016 and December 31, 2015, Urbi owns 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 September 30, 2016 and December 31, 2015, Urbi Propiedades S.A. and Intercorp Perú maintain a percent and percent share, 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. Through these equity trusts the Intercorp Group maintains the ownership of the property where the shopping malls called Real Plaza operate. As of September 30, 2016 and December 31, 2015, there were 17 shopping malls located in the cities of Chiclayo, Trujillo, Huancayo, Arequipa, Juliaca, Nuevo Chimbote, Huánuco, Cajamarca, Piura, Pucallpa and Lima. 6

15 (vi) Intercorp RE Inc. - It is a limited liability holding incorporated in August 2014 in the Republic of Panama. As of September 30, 2016 and December 31, 2015, the Company holds 100 percent of its capital stock. 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., which sole asset is a land lot controlled by Interseguro and located in the district of San Isidro in 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 with the purpose of grouping the companies of Intercorp Group engaged in the educational business in Peru. As of September 30, 2016, the Company sold 50 percent of its shareholding in Colegios Peruanos (equivalent to 10,585,563 shares) to NG Education Holdings IV Corp. (a related entity). As result of this transaction, Intecorp Perú holds percent of the capital stock of NG Education Holdings Corp. (50 percent as of December 31, 2015). On the other hand, NG Education Holdings Corp. is the owner of the following Subsidiaries: Entity Colegios Peruanos S.A.C. (As of September 30, 2016, NG Education Holdings Corp. holds percent of its capital stock and percent as of December 31, 2015) Activity As of September 30, 2016, it operates 35 schools under the trademark Innova Schools (29 schools as of December 31, 2015). NG Education S.A.C. (As of September 30, 2016 and December 31, 2015, NG Education Holdings Corp. holds 99.9 percent of its capital stock) Holding incorporated in Peru in November NG Education S.A.C. holds 50 percent plus one share of the following Subsidiaries: (a) Universidad Tecnológica del Perú S.A.C.: incorporated in Lima in February It has the following 6 business units: UTP University, IDAT Institute, Post-Graduate School, Language Center, Information Technologies and Systems Center (CETIS, by its Spanish acronym) and Rangers Academy. (b) Promotora de la Universidad Tecnológica de Chiclayo S.A.C.: An entity with operations in Peru which. As of September 30, 2016 and December 31, 2015, it has 1 premises. 7

16 (ii) NG Education Holdings Corp. II - It is a limited liability holding company incorporated in October 2013 in the Republic of Panama. As of September 30, 2016 and December 31, 2015, Intercorp Peru holds 50 percent of the capital stock of NG Education Holdings Corp. II, which in turn owns the following Subsidiary: Entity Servicios Educativos Perú S.A.C. (As of September 30, 2016 and December 31, 2015, NG. Education Holdings Corp. II holds 100 percent of its capital stock) Activity Company incorporated in Peru in October As of September 30, 2016 and December 2015, 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 Instituto Peruano de Administración de Empresas - IPAE. (iii) NG Education Holdings Corp. III It is a limited liability holding company incorporated in July 2013 in the Republic of Panama. As of September 30, 2016, Intercorp Perú holds percent of its capital stock and, in turn, it holds percent of the capital stock of Colegios Peruanos S.A.(50 percent and 6.55 percent as of December 31, 2015, respectively). 2.4 Other entities As of September 30, 2016 and December 31, 2015, 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 8

17 The following table presents the main financial information of the Subsidiaries before eliminations for consolidation: Total assets Total liabilities Shareholders' equity Net income (loss) As of As of As of As of As of As of For the nine-month periods December September 30, December 31, September 30, December 31, September 30, ended September 30, 31, Company Intercorp Financial Services Inc. and Subsidiaries 51,376,085 50,000,869 46,363,867 45,539,938 5,012,218 4,460, ,378 1,017,905 Intercorp Retail Inc. and Subsidiaries 10,424,448 10,148,266 6,368,613 6,167,047 4,055,835 3,981, ,100 (27,136) NG Education Holdings Corp. and Subsidiaries 1,331,516 1,198, , , , ,516 (4,385) (2,152) Urbi Propiedades S.A. and Subsidiaries 246, , , , , ,597 (6,091) 4,980 Intercorp Investments Perú Inc. and Subsidiaries 141, ,610 28,643 28, , ,778 (4,020) 1,826 Callao Global Opportunities Corp. 86, , , ,457 (25,100) (22,926) Intercorp RE Inc. and Subsidiaries 94,339 92,639 4,341 3,444 89,998 89, La Punta Global Opportunities Corp. 118,874 64, ,874 64,026 (3) 16 San Miguel Global Opportunies S.A.C 48,463 48,395 8,303 8,009 40,160 40,386 (225) 6,442 NG Education Holdings Corp. II and Subsidiaries 51,801 53,745 26,947 23,084 24,854 30,661 (2,963) (1,059) NG Education Holdings Corp. III 33,324 12, ,322 12,086 (882) - Other Subsidiaries 26,706 20,950 34,911 29,516 (8,205) (8,566) (17,158) (12,029) 9

18 3. Significant accounting principles and practices The accompanying consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards ( IFRS ) issued by the International Accounting Standards Board (henceforth IASB ). The accounting principles and practices as of September 30, 2016 are consistent with respect to the rules applied as of 31 December 2015, which are included in the audited consolidated financial statements dated March 22, Notwithstanding the aforementioned - for presentation and comparison purposes - cash flow from due to banks and correspondents amounting to S/472,912,000 has been reclassified as operating activities in the consolidated statement of cash flows for period Cash and due from banks This caption is comprised of the following: Cash and clearing 1,489,565 1,714,916 Deposits in the Central Reserve Bank of Peru - BCRP (b) 4,687,227 6,090,304 Deposits in banks (c) 1,948,843 1,163,965 Restricted funds (d) 3,429,374 3,693,643 Total 11,555,009 12,662,828 Accrued interest ,555,383 12,663,191 (b) As of September 30, 2016, the Cash and due from banks caption of the consolidated statements of financial position includes approximately US$1,510,974,000 and S/908,682,000 (US$1,936,668,000 and S/901,025,000, as of December 31, 2015), which represent the legal reserve that Interbank and Financiera must maintain for their obligations with the public. 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 September 30, 2016, the monthly excess in US Dollars amounted to approximately US$182,389,000 equivalent to approximately S/620,123,000, and beared interest at an annual average rate of 0.11 percent (US$241,116,000 equivalent to approximately S/823,811,000 as of December 31, 2015 at an annual average rate of 0.09 percent), whereas the excess amount in Soles amounted to approximately S/1,044,426,000 and accrued interest at an annual average rate of 1.05 percent as of September 30, 2016 (S/3,743,802,000 and an annual average rate of 0.48 percent as of 31 December, 2015). 10

19 (c) Deposits in banks of the country and abroad are mainly in Soles and US Dollars, they are freely available and bear interest at market rates. As of September 30, 2016 and December 31, 2015, the Company does not have significant deposits in any specific financial institution. (d) As of September 30, 2016 and December 31, 2015, the Restricted Funds caption is mainly comprised by deposits in the BCRP amounting to approximately US$931,290,000 (equivalent to S/3,166,387,000) and US$960,688,000 (equivalent to S/3,276,907,000), respectively, as a guarantee for loans received from this entity, see Note 11(b). As of September 30, 2016 and December 31, 2015, this caption included restricted funds related to requirements from counterparties of derivative financial instruments transactions (see Note 9(f)) amounted to approximately US$67,935,000 (equivalent to S/230,980,000) and US$98,653,000 (equivalent to S/336,504,000) respectively and; cash from remittances received which guarantee the payment of the trading notes issued by IBK DPR Securitizadora, amounted to approximately US$9,929,000 (equivalent to S/33,869,000) as of December 31,

20 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 Debts Instruments Corporate, leasing and subordinated bonds 3,841,590 96,528 (81,207) 3,856,911 3,339,469 18,996 (401,522) 2,956,943 Negotiable Certificates of Deposit issued by BCRP 1,739,618 40,527 (237) 1,779, ,165 1 (2,846) 874,320 Peruvian Sovereign Bonds 1,323,458 34,460 (37,212) 1,320,706 1,117, (142,913) 975,125 Mutual funds and investments participations 1,135,727 57,728 (23,002) 1,170,453 1,045,667 84,301 (48,402) 1,081,566 Bonds guaranteed by the Peruvian Government 475,510 28,779 (1,158) 503, ,040 4,018 (20,129) 429,929 Indexed Certificates of Deposit issued by BCRP 129, (322) 129, , (1,527) 667,348 Global Bonds of the Republic of Peru , ,296 Sovereign Bonds an Global Bonds from other countries 41,851 - (1) 41,850 66,065 - (1,150) 64,915 Total 8,687, ,155 (143,139) 8,802,676 7,974, ,761 (618,489) 7,463,442 Listed shares Shares of the Peruvian private sector and abroad 372,588 46,900 (6,527) 412, ,053 1,732 (14,441) 303,344 Non-listed shares Royalty Pharma (d) 89,712 1,439-91, ,243 81, ,001 Others (131) 1,554 6,509 - (428) 6, ,282 49,042 (6,658) 505, ,805 83,490 (14,869) 538,426 9,150, ,197 (149,797) 9,308,342 8,443, ,251 (633,358) 8,001,868 Accrued Interest 77,644 78,362 9,150, ,197 (149,797) 9,385,986 8,443, ,251 (633,358) 8,080,230 12

21 (b) The Group has determined that the unrealized losses as of September 30, 2016 and December 31, 2015, are of temporary nature. The 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. The 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. The 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 the 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. The Group estimates the forecasted recovery period using current estimates of volatility in market interest rates (including liquidity and risk premiums). The 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 the Group s strategy with respect to the identified security or portfolio. If the 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. 13

22 (c) As a result of the impairment assessment of its available-for-sale investments, the Company recorded an impairment loss amounting to S/62,469,000 and S/66,657,000 as of September 30, 2016 and 2015, respectively, which is presented in the caption Impairment loss on available-for-sale investments of the consolidated income statements. The movement of available-for-sale investments unrealized results, net of deferred income tax and non-controlling interests, is presented in Note 14(c). As of September 30, 2016 and December 31, 2015, the detail of unrealized losses of debt instruments and participations in mutual funds and investments participations classified as Available-for-sale is as follows: Unrealized gross Unrealized gross Unrealized gross Unrealized gross Amortized cost Amortized cost gain losses gain losses Peruvian Sovereign Bonds 1,323,458 34,460 (37,212) 1,117, (133,672) Bonds guaranteed by the Peruvian Government 475,510 28,779 (1,158) 446,040 4,018 (20,129) Fibra Uno 107,105 - (7,383) 66,617 - (8,154) Vale Overseas Ltd. 95,983 - (13,923) 96,725 - (36,574) Corporación Financiera de Desarrollo S.A. 89,143 - (12,731) 168,843 - (28,727) H2Olmos S.A. 113,200 - (6,551) 110, (17,194) Instruments with individual losses lower than S/6 million 4,880,964 93,052 (64,181) 1,345,532 6,114 (374,039) 7,085, ,291 (143,139) 3,352,143 10,486 (618,489) (d) 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 the Central Bank of Ireland. 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 September 30, 2016, the Group held 700,000 and 167,251 participations of RPS Partnership and RPI Partnership, respectively, which fair values amounted to approximately US$4,537,000 and US$22,273,000 (equivalent to approximately S/15,424,000 and S/75,727,000, respectively). As of December 31, 2015, the Group held 300,000 and 283,537 participations of RPS Partnership and RPI Partnership, respectively, which fair values amounted to approximately US$27,423,000 and US$39,713,000 (equivalent to approximately S/93,541,000 and S/135,460,000, respectively). During 2016, the Group sold 230,000 and 116,286 participations of RPS Partnership and RPI Partnership, respectively, at their fair value, of approximately US$32,890,000, generating gains amounting to US$14,243,000 (equivalent to approximately S/48,199,000), which are included in the "Net gain on sale of securities" caption of the consolidated income statements. During 2015, Interseguro sold to a related entity 54,978 and 135,000 participations of RPS Partnership and RPI Partnership, respectively, at their fair value of approximately US$23,496,000, generating a realized gain of approximatelyus$18,347,000 (equivalent to approximately S/60,343,000), which is included in the "Net gain on sale of securities" caption of the consolidated income statements. During 2016 and 2015 the Group received dividends from these participations for approximately S/20,977,000 and S/6,197,000, respectively, which are included in the Interest and similar income caption of the consolidated income statements. 14

23 (e) During 2015, Interbank reclassified Peruvian Sovereign Bonds classified as available-for-sale investment category into held-to-maturity investments category. The carrying amounts as of the dates of reclassification amounted to approximately S/295,041,000 and the unrealized loss accumulated in net equity amounted to S/25,208,000; the latter amount shall be transferred to results during the remaining term of the instruments. As of September 30, 2016 and 2015, approximately S/1,887,000 and S/425,000 has been transferred to results. As of September 30, 2016, the carrying amount of these investments amounts to S/295,785,000 (S/300,736,000 as of December 31, 2015). Subsequently, Interbank acquired Peruvian Sovereign Bonds for S/175,201,000 and classified them as held-to-maturity investments; as of September 30, 2016, the carrying amount adds up to S/176,103,000 (S/178,825,000 as of December 31, 2015). As of September 30, 2016 and December 31, 2015, the maturities of these investments fluctuate between August, 2020 and August, 2037, they have accrued interest at an effective annual rate between 5.34 and 6.33 percent and 6.48 and 7.90 percent, respectively. 15

24 6. Loans, net (a) The detail of the loan portfolio is as follows: Direct loans Loans 20,056,931 19,156,760 Credit cards 4,664,595 4,291,789 Leasing 1,660,473 1,816,891 Discounted notes 394, ,557 Factoring 229, ,824 Advances and overdrafts 85,164 43,128 Refinanced loans 316, ,106 Past due and under legal collection loans 716, ,595 Plus (less) 28,123,776 26,832,650 Accrued interest from performing loans (d) 324, ,246 Unearned interest and interest collected in advance (26,277) (15,762) Allowance for loan losses (c) (1,201,655) (1,096,202) Total direct loans, net 27,220,727 26,035,932 Indirect loans 4,875,015 4,888,336 (b) The direct loan portfolio, classified by type of loan, is presented below: Commercial loans 12,837,032 12,499,124 Consumer loans 9,714,031 9,034,083 Mortgage loans 5,016,324 4,766,516 Small and micro-business loans 556, ,927 Total 28,123,776 26,832,650 16

25 (c) The changes in the allowance for loan losses (direct and indirect) were as follows: Beginning balances 1,119, ,179 Provision 676, ,389 Recovery of written-off loans 89,289 81,860 Written-off portfolio (653,024) (433,840) Written-off sales (1,665) (3,165) Translation result (1,328) 21,429 Others (5,098) - Ending balances (*) 1,224,423 1,049,852 As of December 31 (*) 1,119,815 (*) Allowance for loan losses includes the allowance for indirect loans and credit risk associated to over indebtedness amounting to approximately S/22,768,000, S/23,613,000 as of September 30, 2016 and December 31, 2015, respectively, which is presented 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 September 30, 2016 and December 31, 2015, has been established in accordance with IAS 39 and it is sufficient to cover incurred losses on the loan portfolio. (d) Interest rates on loans are freely determined based on the rates prevailing in the market. 17

26 7. Investment property (a) This caption is made up as follows: Valuation methodology (e) Acquisition or Hierarchy level (i) construction year Land - San Martin de Porres 269, , Level 3 Appraisal Appraisal San Isidro Lillingstone 258, , Level 3 Appraisal Appraisal Cuartel San Martín 166, , Level 3 Appraisal Appraisal Puruchuco 130, , Level 3 Appraisal Appraisal Explanada 47,232 47, Level 3 Appraisal Appraisal Centro Urbano Nuevo Chimbote 45,246 42, Level 3 Appraisal Appraisal Piura 38,033 36, Level 3 Appraisal Appraisal Sullana 23,793 23, Level 3 Appraisal Appraisal Lurín 20,147 23, Level 3 Appraisal Appraisal Cañete 16,109 16, Level 3 Appraisal Appraisal Carabayllo 22,781 16, Level 3 Appraisal Appraisal Tarapoto 15,376 15, Level 3 Appraisal Appraisal Zapallal 13,644 13, Level 3 Appraisal Appraisal Others 39,071 49,001 - Level 3 Appraisal Appraisal 1,106,442 1,083,434 Investment properties - Centros Comerciales Real Plaza - Pucallpa 220, , Level 3 DCF DCF Centro Comercial San Isidro 161, , Level 3 DCF DCF Primavera 161, , Level 3 DCF DCF Chiclayo 149, , Level 3 DCF DCF Trujillo 119, , Level 3 DCF DCF Piura 116, , Level 3 DCF DCF Cajamarca 76,834 76, Level 3 DCF DCF Pro 47,194 46, Level 3 DCF DCF Chorrillos 45,795 39, Level 3 DCF DCF Santa Clara 30,197 24, Level 3 DCF DCF Centro Comercial Colmenares 27,531 20, Level 3 DCF DCF Nuevo Chimbote 19,396 18, Level 3 DCF DCF Sullana (e) 5,522 5, Level 3 DCF DCF 1,180,249 1,126,017 18

27 Valuation methodology (e) Acquisition or Hierarchy level (i) construction year Leased land - Salaverry 285, , Level 3 DCF DCF Centro Cívico 153, , / 2014 Level 3 DCF DCF Cuzco 113, , Level 3 DCF DCF Huancayo 85,074 82, Level 3 DCF DCF Huánuco 53,367 52, Level 3 DCF DCF Juliaca 51,906 51, Level 3 DCF DCF Arequipa 54,368 41, Level 3 DCF DCF Otros 1,478 1,668 - Level 3 DCF DCF 798, ,253 Buildings - Ate Vitarte 48,269 46, Level 3 DCF DCF Hebraica 20, Level 3 DCF - Panorama 20, Level 3 DCF - Pardo y Aliaga 3,032 3, Level 3 DCF DCF 92,458 49,845 3,177,803 3,038,549 DCF: Discounted cash flow (i) (ii) During 2016 and 2015, there were no transfers between levels of hierarchy. For the building of these shopping malls, the Company entered into contracts: leasehold (contractual agreement between the landowner and the Company through which the Company is allowed to build shopping malls). These agreements have a term of duration ranging between 20 and 70 years. 19

28 (b) The movement of the caption is as follows: S/ (000) S/ (000) Balance at the beginning 3,038,549 2,623,611 Additions (c) 126, ,252 Sale of assets (d) (5,086) (94,051) Fair value adjustments 9,191 43,566 Transfer from (to) property, furniture and equipment 8,451 (572) Ending balance 3,177,803 2,771,806 As of December 31, 3,038,549 (c) During the first quarter of 2016 and 2015, main additions correspond to various constructions in the shopping malls. (d) During 2016 and 2015, sales to third parties generated gains amounting to S/2,795,000 and S/2,763,000, respectively. The results of the sale of investment properties are presented as Gain on sale and valuation of investment property, net in the consolidated income statements. (e) Fair value measurement Investment property and investment property under construction The discounted cash flow (DCF) method is used for completed shopping malls, buildings and investment property built on land leases.this method involves the projection of a series of periodic cash flows at present value through a discount rate. The periodic calculation of cash flows is normally determined as rental income net of operating expenses. The series of periodic net operating income, together with an estimation of the terminal value (which uses the traditional valuation method) at the end of the projection period, is discounted at present value. The sum of the net current values is equal to the investment property s fair value. The fair value of land lots is determined based on the value assigned by an external appraiser. The external appraiser uses the market comparable method; under this method a property s fair value is estimated based on comparable transactions. 20

29 8. Inventories, net (a) The following table presents the components of this caption: Inventories from retail activities, net (b) 1,364,660 1,300,852 Inventories from real estate activities, net 21,434 22,230 Total 1,386,094 1,323,082 (b) The table below presents the balance of inventories from retail activities: Inventories 1,327,153 1,240,742 In-transit inventories 41,122 61,239 Miscellaneous supplies 14,116 16,780 1,382,391 1,318,761 Less Allowance for obsolescence of inventories (c) (17,731) (17,909) Total 1,364,660 1,300,852 (c) The movement of the allowance for obsolescence of inventories in retail activities as of September 30, 2016 and 2015 is as follows: Balance at the beginning of the period 17,909 24,163 Provision for the period 17,118 14,216 Recoveries (6,580) (4,973) Write-offs (10,716) (17,918) Balance at the end of period 17,731 15,488 As of December 31, 17,909 21