NOTES TO THE FINANCIAL STATEMENTS
AS AT 30TH SEPTEMBER 2013 AND 31ST DECEMBER 2012
1.
INCORPORATION, ECONOMIC ACTIVITY AND APPROVAL OF THE
FINANCIAL STATEMENTS
(a) Incorporation and economic activity
Corporación Financiera de Desarrollo S.A. - COFIDE (hereinafter COFIDE or the
Corporation) is a mixed economy company whose shareholders include the
State (represented by the National Fund for Financing State Business Activities
– FONAFE, an entity of the Ministry of Finance – MEF) and the Corporación
Andina de Fomento – CAF, which hold 98.97% and 1.03% respectively. COFIDE
was created on the 18th of March 1971 by Law Decree Nº 18807 and enjoys
administrative, economic and financial autonomy.
The purpose of the Corporation is to contribution to the integral development of
the country, by attracting funds and providing finance through intermediate
financial institutions (IFIs), to promote and finance productive investments and
public and private infrastructure throughout Peru.
In addition, the Corporation manages funds and securities received principally
from the State and financial institutions, in its capacity as trustee, for which it
charges a commission.
The Corporation maintains a portfolio of loans assigned to it by certain IFIs, in
payment for monies owed to the Corporation (note 7(g)), arising from liquidation
processes started between 1997 and 2002.
The Corporation's activities are regulated by a number of legal provisions
included in its By-laws, specifically included to define its framework for action. In
addition, these activities are governed by the Finance, Insurance and Banking,
Insurance and Pension Fund Regulator (hereinafter the SBS) Framework act Law Nº 26702 (hereinafter the Act), and modifications contained in Legislative
Decree N° 1028 dated the 21st of June 2008.
The registered office of the Corporation is Augusto Tamayo N° 160, San Isidro,
Lima and its personnel (managers, officers and employees) as at the 30th
September 2013 and 31st December 2012 amounted to 194 and 194,
respectively.
(b) Approval of the Financial statements
The financial statements as at the 30th September 2013 have been approved for
issue by the management of the Corporation. These statements will be
submitted to the board of directors for approval; in the opinion of the
management, they will be approved by the board without modifications. The
financial statements for fiscal year ending the 31st of December 20122, prepared
in accordance with generally accepted accounting principles in Peru applicable
to finance companies, were approved by the AGM on the 22nd of March 2013.
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2.
SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies used by the Corporation in the preparation
and presentation of its financial statements are as follows:
(a) Basis for preparation and presentation
The financial statements are prepared and presented in accordance with
generally accepted accounting principles (GAAP) in Peru and applicable to
financial institutions, which include accounting standards and practices
authorised by the SBS in the application of its delegated powers set forth in the
Framework Act. The rules are set out in the Accounting Manual for Finance
Companies (hereinafter the Accounting Manual) approved by SBS ruling N° 89598 on the 1st of September 1998 and in force from the 1st of January 2001 and
complementary regulations.
The SBS has established that circumstances not envisaged in these rules shall
be subject to the GAAP Peru.
The GAAP Peru include: the Standards and Interpretations issued or adopted
by the International Accounting Standards Board (IASB), which include the
International Financial Reporting Standards (IFRS), the International Accounting
Standards (IAS) and interpretations issued by the International Financial
Reporting Interpretation Committee (IFRIC), or by the former Standards
Interpretation Committee (SIC) adopted by the IASB and made official by the
Peruvian Accounting Standards Board (PASB) for use in Peru.
(a-1) Harmonisation with the IFRS
SBS ruling N° 7036-2012 dated the 19th of September 2012 modified the
Accounting Manual to bring it into line with the IFRS, establishing, among others,
the following modifications from January 2013:
Incorporation of the conceptual framework of the IFRS into the preparation
of financial statements, including the definitions of material nature and
relative importance.
Incorporation of “consolidated financial statements” including: i) The income
statement and ii) the consolidated statement of comprehensive income in
place of the profit and loss account.
Separation of financial income and expenses in the income statement from
other income or expenditure from treasury operations.
-
Accrual of incomes within the periods of loan contracts, including
commissions on indirect loans.
Recording and presentation of amount disbursed for financial easing loans.
All adjustments to the accounts of previous years that may arise from the
application of the changes to the Accounting Manual will take effect for the
accumulated results as at the 1st of January 2013.
2
Revelations in addition to the notes to the financial statements will take effect on
the 31st of December 2013 and the comparative information will be revealed
insofar as it is applicable.
Thus in accordance with SBS rules for quarterly financial statements issued in
March, June and September 2013 do not require the submission of comparative
financial statements, therefore the comparative balances shown are the best
estimates for the comparable financial statements for fiscal year 2012.
As part of the harmonisation process with the IFRS, the SBS issued official
circular N° 45311-2012-SBS on the 30th of November 2012 and in compliance
with SBS ruling N°7036-2012, the SBS required finance companies to submit an
implementation plan, to include a timetable of activities for bringing their
accounts and IT systems into line with the above-mentioned ruling. In
compliance with the requirements of this official circular, the Corporation
submitted its implementation plan to the SBS on the 28th of December 2012.
The management of the Corporation believes that the changes to the Accounting
Manual will have no material impact on its financial statements for 2013
onwards.
(a-2) Standards and interpretations approved by the PSAB for use in Peru
from 2012 onwards
By means of ruling Nº 047-2011-EF/30 issued on the 17th of June 2011, the
PSAB approved the 2010 version of the IAS, IFRS, IFRIC and SIC adopted
internationally by the IASB for use in Peru from the 1st of January 2012.
By means of ruling Nº 048-2011-EF/30 issued on the 6th of January 2012, the
PSAB approved the 2011 versions of IAS, IFRS, IFRIC and SIC adopted
internationally by the IASB for use in Peru starting the day after publication.
The PSAB issued ruling Nº 051-2012-EF/30 on the 29th of August 2012
adopting the 2012 version of the International Financial Reporting Standards
(IAS, IFRS, IFRSIC and SIC), which will replace the 2011 version approved by
the Board, in accordance with the respective dates of application contained in
each one of the standards approved by the said ruling.
(b) Responsibility for the information and estimates used
The information contained in these financial statements is the responsibility of
the board of directors and the management of the Corporation. These
statements were drawn up using certain estimates used to quantify some of the
assets, liabilities, expenditure and commitments recorded in them, based on
their experience and other relevant factors. The actual results may differ from
these estimates.
These estimates are under continual review. The modifications to the accounting
estimates are recognised prospectively, and the effects of the change are
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recorded in the corresponding earnings or loss account for the year in which the
corresponding revisions took place.
The estimates and their sources of uncertainty considered most important in
drawing up the financial statements of the Corporation are:
Provision for loan portfolio
Reasonable value of financial derivatives
Current and deferred income tax
Other contingent assets and loans
Provision for non-performing accounts receivable
Useful life of real estate, fixtures and fittings
Useful life of intangible assets
Reasonable values, classification and investment risks
Recording of contingent liabilities
(c) Currency of preparation and presentation
The Corporation prepares and presents its financial statements in nuevos soles
(S/.), which is the currency of the principal economic environment in which it
operates.
(d) Financial instruments
Financial instruments are classified as liabilities or equity in accordance with the
substance of the contractual agreement from which they originate. The interest,
dividends, earnings and losses generated by a financial instrument classified as
a liability, are recorded as expenditure or income in the profit and loss account.
Financial instruments are offset when the Corporation has the legal right to do so
and the management intends to pay them on a net basis or to realise the asset
and pay the liability simultaneously.
Financial assets and liabilities shown in the financial position correspond to
available funds, investments available for sale, loans, accounts receivable and
liabilities in general. Furthermore, all derivatives are considered to be financial
instruments.
Accounting policies on the acceptance and evaluation of these items are given in
the respective accounting policies described in these notes.
(e) Financial derivatives
Are financial derivatives that meet the following conditions: (a) Their reasonable
value fluctuates in response to changes in the level or price of an underlying
asset, (b) they do not require an initial net investment or only require an
investment lower than that which would be required in contracts that respond in
a similar manner to changes in market variables and (c) they are to be liquidated
at a future date.
4
The Corporation classifies financial derivatives and records them in its accounts
in accordance with the provisions of SBS ruling N°1737-2006 and modifications
thereto; the latest being SBS ruling N° 1349-2008. The accounting treatment
envisaged by the SBS includes essential aspects established by IAS 39.
At the time of initial recording in the accounts, financial derivatives should be
classified in one of the following two categories: (a) Financial derivatives for
negotiation or (b) financial derivatives for hedging purposes. Financial
derivatives for negotiation are initially recorded at their reasonable value; all
subsequent changes in the reasonable value of the derivative will affect the
results of the fiscal year. Financial derivatives used for hedging purposes should
meet certain requirements established by the SBS concerning procedures,
techniques applicable and adequate, opportune documentation to support the
hedging strategy.
Swaps and forwards classified as financial derivatives for hedging purposes are
entered in the accounts initially at their reasonable value.
Future cash flow hedges are recorded as hedging derivatives, both as assets
and liabilities, as appropriate, in the statement of financial position and are
shown at their fair value. Insofar as these hedges are effective at offsetting
exchange rate and/or interest rate risk, changes in the fair value are recorded
directly under “Adjustments to equity” in the equity account. These amounts are
transferred to the results of the fiscal year in which the financial liability is
liquidated and are shown under the heading profit or loss from financial
derivatives.
Hedging instrument of all types should be valued periodically and when in a
range of 80-125% are considered highly effective at reducing the risk associated
with the exposure they are hedging. If at any time the hedge ceases to be
effective, changes in the reasonable value from then on will be reflected in the
results of the fiscal year.
Derivatives classified as for negotiation are initially recorded at their reasonable
value on the date of negotiation.
The reasonable values are obtained from market exchange rates and interest
rates. Earnings and losses from changes in reasonable value are recorded in the
profit and loss account.
The nominal value of financial derivatives is recorded in its agreed currency in
contingencies and memorandum accounts (Note 15-a)).
(f)
Loan portfolio and provision for non-performing items of the loan
portfolio
Loans are recorded when funds are disbursed to clients.
Those loans whose payment schedules and/or capital owed are changed
because of difficulties with payment by the debtor are considered to be
refinanced or restructured.
5
Financial leasing operations deriving from portfolio assignment agreements are
recorded in the accounts in accordance with SBS regulations and IAS 17, as
loans.
From the 1st of July 2010, the Corporation applied the criteria established in
SBS ruling Nº 11356-2008 "Regulations for Evaluation and Classification of
Debtors and Provision Requirement” to the recording of its loans and provision
for uncollectables.
Type of loans
In accordance with SBS ruling Nº 11356-2008 loans are classified as: i)
Corporate loans, ii) loans to large companies, (iii) loans to medium-sized
companies, iv) loans to small companies, v) loans to micro-enterprises (MES),
vi) revolving consumer loans, vii) non-revolving consumer loans and viii) housing
mortgage loans. This classification takes into consideration the nature of the
client (corporate, government or individual), the purpose of the loans and the
size of the business measured by earnings, indebtedness and other criteria.
Classification categories
The classification categories established by the SBS are as follows: Normal,
potentially problematical, deficient, doubtful and lost; in the case of the non-retail
loan portfolio (corporate clients, large and medium-sized companies)
classification is determined principally by the debtor's ability to pay, its cash flow,
the degree of compliance with its obligations, classifications assigned by other
financial entities, the debtor's financial position and the quality of its
management; whilst loans to small companies, MES and consumer loans
(revolving and non-revolving) and mortgages are classified as a function of the
number of days in arrears in repayment and classification by other financial
entities.
Provision requirement
In accordance with current regulations, the Corporation makes two classes of
provisions for its loan portfolio: Generic provisions and specific.
Generic provisions include those preventive provisions covering debtors in the
SBS's normal category and, in addition, a procyclic component when the
required by the SBS; as well as voluntary generic provisions. In accordance with
internal policies permitted by the SBS, the Corporation makes voluntary generic
provisions for the loan portfolio, the level of which depends on an evaluation
carried out by the management on the country's macroeconomic variables and
their impact on IFIs and debtors in general (Note 7). Furthermore, voluntary
generic provisions are created as a preventive measure for certain debtors with
greater exposure to risk.
In this regard, agreements by the board of directors N° 066-2005 and Nº 0032007, dated the 15th of September 2005 and 11th of January 2007 respectively,
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approved the redistribution and creation of voluntary generic provisions. The
value of the voluntary generic provisions is reported to the SBS.
Specific provisions are those created to cover direct loans and credit risk
exposure arising from indirect loans included in a higher risk category than
normal.
Provision requirements are determined using the debtor's risk classification,
whether or not there is any collateral guarantee and as a function of the type of
guarantees provided.
Furthermore, in compliance with SBS Ruling N° 041-2005, the Corporation
evaluates the exposure to exchange rate risk by loans denominated in foreign
currency and makes provisions as required by the SBS.
The Corporation uses the above criteria to set aside a specific provision for
accounts receivable in the assigned loan portfolio, included under the heading
Other Assets (Note 9).
As at the 30th September 2013 and 31st December 2012, provisions were
determined in accordance with instructions from the SBS in ruling Nº 113562008, which took effect in July 2010. The minimum percentages required for loan
provisions are given below:
Risk category
- Normal
Corporate loans
Loans to large companies
Loans to mid-sized companies
Loans to small companies
Loans to micro-enterprises
Revolving consumer loans
Non-revolving consumer loans
Home mortgages
- Potential problems
- Deficient
- Doubtful
- Lost
With
With preferred
guarantees guarantees
%
%
0.70
0.70
1.00
1.00
1.00
1.00
1.00
0.70
5.00
25.00
60.00
100.00
0.70
0.70
1.00
1.00
1.00
1.00
1.00
0.70
2.50
12.50
30.00
60.00
With very quickly
realisable preferred
guarantees
%
Auto-realisable
guarantees
0.70
0.70
1.00
1.00
1.00
1.00
1.00
0.70
1.25
6.25
15.00
30.00
0.70
0.70
1.00
1.00
1.00
1.00
1.00
0.70
1.00
1.00
1.00
1.00
Procyclic component
A procyclic provision is required for the normal risks portfolio. This represents an
additional component to the generic provision mentioned above and depends on
the "procyclic rule" being activated.
As at the 30th of September 2013 and the 31st of December 2012 the procyclic
factor for loan provisions was activated (Circular N° CR-249-2010 dated the 28th
of September 2010). The percentages used are shown below:
7
Provision
rate
Loan type
Corporate loans
Loans to large companies
Loans to mid-sized companies
Loans to small companies
Loans to micro-enterprises
Revolving consumer loans
Non-revolving consumer loans
Home mortgages
0.40%
0.45%
0.30%
0.50%
0.50%
1.50%
1.00%
0.40%
For corporate loans, loans to large companies and mortgages with selfliquidating preferred guarantees, the procyclic component shall be 0.3% for the
portion covered by such guarantees. For other loans with self-liquidating
preferred guarantees the procyclic component shall be 0% for the part covered
by the guarantees. For consumer loans repaid by payroll discounts the procyclic
component shall be 0.25%, provided that they meet the requirements of SBS
ruling N° 11356-2008..
When a debt is considered uncollectable it is written off against the respective
provision for non-performing loans. Later recovery of sums that have been
written off are recorded on the entries side of the profit and loss account.
The provision for overdue accounts is kept at a level that, in the opinion of the
company's management, is sufficient to cover potential losses in the loan
portfolio as at the date of the financial position.
(g) Investments
These investments can be classified as: Investments at reasonable value with
changes in the results, investments available for negotiation and investments
held to maturity. The Corporation keeps the following investments:
(G-1)
Investments available for sale
Consists of those securities that the management intends to sell for gain before
maturity. This category includes all investment instruments that are not classified
as investments at reasonable value or investments held to maturity. They are
valued at their reasonable value and gains or losses arising from changes in this
reasonable value are recorded in the equity account until the instrument is sold
or realised, at which time they are transferred to the results of the fiscal year
except for losses due to impairment of their value, which are recorded in the
results.
Gains or losses caused by exchange rate differences in instruments
representing capital are recorded in equity accounts while debt instruments are
recorded in the profit and loss account.
The performance of these investments is recognised when it accrues and
dividends when they are declared.
Provisions for impairment in the value of investments are based on internal
evaluations carried out by the Corporation and depend on the credit risk and
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exchange rate risk to which the issuer of the investment is exposed. Losses
through impairment of accumulated value recognised directly under equity
should be removed from this account and entered in the results of the fiscal year,
even though these investment instruments have not been sold or withdrawn.
(g-2) Investment in Corporación Andina de Fomento
In accordance with IAS 39 and the Executive Regulations for the Classification
and Valuation of Investments (Ruling N° 7033-2012-SBS), investments in equity
instruments that are not quoted in an active market and whose reasonable value
cannot be measured reliably shall be measured at cost.
As part of the harmonisation process with IFRS (SBS ruling N° 7036-2012) and
taking into account that shares in CAF do not pay cash dividends, have no
active public market, a reasonable estimate of the value of the investment
cannot be made and with reference to SBS official communication N° 458532012-SBS, which requires them to be treated in line with IFRS, the Corporation
maintains these investments as “Investments available for sale” at cost value,
which is equivalent to the last book value recorded by the Corporation and
reported by COFIDE to the SBS on 31 12 2012.
As at 31 12 2012, this investment was recorded as “Investments in subsidiaries
and associates”, valued using the equity participation method in accordance
with the provisions of official communications 6666-2006-SBS and 15306-SBS2007. See the notes to COFIDE's audited financial statements as at 31 12 2012.
(h) Real estate, fixtures and fittings
Real estate, fixtures and fittings are shown at cost less depreciation and any loss
through impairment of the recognised value. Initial disbursements and those
occurring later, relating to assets whose cost can be reliably determined and are
likely to be the sources of future economic benefits, are recognised as fixed
assets. Disbursements for maintenance and repairs are recognised as expenses
in the period in which they occur. Profits or losses from the sale or withdrawal of
items in the real estate, fixtures and fittings account consist of the difference
between the sale price and the book value of the asset and are recorded in the
profit and loss account of the fiscal year on the date the sale is completed.
Depreciation is calculated using the straight line method on the estimated useful
life of the different assets; estimated useful life is shown below:
Useful life
Item
Buildings
Installations, fixtures & fittings
Vehicles
Equipment - various
33
10 years
5 years
4 and
years
10
Estimates of useful life, residual value and methods of depreciation are reviewed
at the end of each reporting period in order to evaluate possible significant
9
changes in earlier expectations or in the expected pattern of consumption of the
future economic benefits incorporated into the assets; the effects of any change
in these estimates are incorporated prospectively in net earnings or losses of the
period in which they occur.
(i)
Realisable property received in lieu of payment and adjudicated
Property adjudicated and received in lieu of payment is recorded at the
adjudication value or value agreed in the payment contract, or the net value
realised, whichever is lower. Assets recovered after termination of a contract, if
any, are initially recorded at the unpaid value of the debt or the net value
realised, whichever is lower. If the unpaid value of the debt is greater than that of
the recovered asset, the difference is recorded as a loss, provided that there is
no likelihood of recovery.
The Corporation creates the following provisions as required by the SBS:
•
•
•
(j)
20% of the value on the date of adjudication or recovery of all property
received, unless the provision determined by the valuation is higher.
For assets other than real estate, a provision is made to cover the
remaining balance in a period of not more than 18 months.
In addition, a monthly provision for devaluation of real estate from the 18th
month after adjudication or recovery should be made within a maximum
period of 42 months, based on the net value obtained in the 18th month.
Intangible assets
Intangible assets with finite useful lives acquired separately are recorded at cost
less accumulated amortisation and any accumulated loss arising from
impairment of the recorded value. Amortisation is calculated using the straight
line method using the useful life estimated by the Corporation. Estimates of
useful life and methods of depreciation are reviewed at the end of each reporting
period to evaluate possible significant changes in earlier expectations or in the
expected pattern of consumption of the future economic benefits incorporated
into the assets; the effects of any change in these estimates are incorporated
prospectively in net earnings or losses of the period in which they occur.
Licences for computer programs are capitalised on the basis of the cost of
acquisition or making use of the specific computer program. These costs are
amortised using the straight line method during the estimated useful life. Useful
life is estimated at between 3 and 5 years.
Costs linked to the development or maintenance of computer programs are
recorded as costs when they are incurred. Costs incurred in the development of
computer programs recorded as assets are amortised over their estimated useful
lives.
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(k) Loss through deterioration
When events or economic changes occur that indicate that the value of an asset
with a long life cannot be recovered, the management reviews the book value of
these assets as at the date of each balance sheet. If this analysis shows that the
book value exceeds the recoverable value, a loss is recorded in the profit and
loss account. Recoverable values are recorded for each asset.
(l)
Borrowings and financial obligations - securities and obligations in
circulation
Liabilities under the heading borrowings and financial obligations and arising
from the issue of securities (corporate bonds) are recorded at their nominal value
with accrued interest recorded in the profit and loss account.
Discounts granted in bond placements are deferred and are amortised during
their lives.
(m) Income tax
Income tax expenditure includes the estimated amount of income tax payable
plus deferred income tax.
Current income tax is calculated by applying the tax rate established in current
tax legislation to net taxable income for the year.
Deferred income tax is the amount of tax it is expected to recover or to pay on
temporary differences between the book values of assets and liabilities and their
corresponding tax bases. Deferred income tax liabilities are generally recognised
for all taxable temporary differences. Deferred tax assets are generally
recognised for all deductible temporary differences and tax credits, rebates and
tax losses not made use of, insofar as the Corporation considers it likely that it
will have sufficient taxable gains in the future to be able to make use of them.
The book value of deferred tax assets is reviewed at the end of teach reporting
period and reduced to the extent that it is unlikely that the Corporation will have
future taxable gains in the future to recover all or part of these assets.
Taxes on deferred assets and liabilities are calculated using the tax rate that it is
expected will apply when the asset is realised or the liability cancelled, based on
rates and legislation approved or approval of which is almost completed, at the
end of the reporting period. Measurement of these deferred taxes reflects the
fiscal consequences deriving from the way in which the Corporation waits to
recover or liquidate the book value of its assets and liabilities at the end of the
reporting period.
Income taxes, both current and deferred, are recognised as expenditure or
income and included in the calculation of earnings or losses for the period,
except if those taxes are related to items recorded directly in the equity account,
in which case the tax on current or deferred income is also recorded directly in
the equity account.
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(n) Employee benefits
Benefits for employees include, among others, short-term benefits such as
salaries and social security contributions, annual holiday pay, sick pay and profit
sharing and incentives, if paid within twelve months of the end of the period.
These benefits are set against the profit or loss of the period in which an
employee has provided the services giving rise to the right to receive them. The
corresponding payment obligations are contained under other liabilities.
(n-1) Employee profit sharing
The company recognises as a liability and a cost employee profit sharing of 5%
of the tax base determined in accordance with current tax legislation.
(n-2) Holidays
Annual holidays are on an accrual basis. The provision for the estimated cost of
annual holidays and other paid absence arising from services provided by the
employees is recognised as at the date of the financial position.
(n-3) Severance pay
Provision for employee severance pay consists of the whole amount due in
accordance with current legislation. Payments are deposited in banks chosen by
the employees.
(o) Provisions
Provisions are accepted when the Corporation has a present obligation (whether
legal or implicit) arising from a past event and it is likely that the Corporation will
pay out money to pay that obligation and can make a reliable estimate of its
value.
The value of the provision corresponds to the best estimate, as at the date of the
financial position, of the disbursement necessary to pay the obligation, taking
into consideration the risks and uncertainties inherent in the majority of the
events and circumstances involved in assigning a value to the obligation. When
the value of the provision is measured using estimated cash flows to pay an
obligation, the book value is the present value of the corresponding
disbursements.
If it is expected that all or part of the disbursement necessary to cancel the
provision will be reimbursed by a third party, the receivable portion is recorded
as an asset when its recovery is practically certain and the value of this portion
can be reliably determined.
(p) Contingent assets and liabilities
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Contingent liabilities are not recognised in the financial statements, they are only
revealed in the notes. When there is little possibility of funds being used to cover
a contingent liability, such a revelation is not required.
Contingent assets are not recognised in the financial statements, they are only
revealed in the notes to the financial statements when income is likely.
The items formerly treated as contingent liabilities are recorded in the financial
statements for the period in which the change of probabilities occurs, that is,
when it is thought likely that funds will be required to cover the liability in
question. Items treated as contingent assets are recorded in the consolidated
financial statements in the period in which it is thought to be virtually certain that
income will be received.
(q) Payment of dividends
Cash dividends are recorded as a liability in the financial statements in the year
in which dividends are approved by the Corporation's shareholders.
(r)
Recognition of income and expenditure
Interest earnings and payments are recorded in the results of the period in which
they accrue, as a function of the validity of the operations generating them and
the interest rates agreed with clients; except interest generated by overdue,
refinanced and restructured loans and those subject to legal action; as well as
loans classified in the doubtful and lost categories, interest on which is
recognised as earned as and when it is collected. When the management
decides that the financial condition of the debtor has improved and the loan is
reclassified as current and/or in the normal, potentially problematical or deficient,
the interest is once again recognised as and when accrued.
Commissions for services are recognised as income when received. Other
income and expenditure is recorded in the period in which it accrues.
(s) Trustee activity
Assets maintained by the Corporation in its capacity as trustee on behalf of
clients or state entities, are not included in the Financial position. These assets
are kept separate in the financial statements and are recorded in the
Corporation's memorandum accounts.
(t)
Foreign currency
The operating currency of the Corporation is the Peruvian nuevo sol (S/.).
Operations in currencies other than the Peruvian nuevo sol are considered as
“foreign currency” transactions and are recorded using the exchange rates in
force on the dates of the said transactions. At the end of the reporting period,
balances for foreign-currency-denominated monetary items are converted using
the exchange rates in force on that date. Non-monetary balances recorded at
reasonable value and denominated in foreign currency are converted using the
exchange rate applicable on the date on which the reasonable value was
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determined. Balances of non-monetary items recorded at historic cost in foreign
currencies are converted using the exchange rates in force on that date.
Exchange rate differences arising from monetary items are recorded as profits or
losses in the fiscal year in which they occur, except for exchange rate
differences arising from monetary items receivable or payable for foreign
operations for which payment has not been planned nor is expected to occur in
the foreseeable future (considered part of the net investment in the foreign
operation), which are recorded initially as part of other consolidated results and
reclassified as net gains or losses in the fiscal year in which the said monetary
items are received or paid.
(u) Profit per share
Profit per basic share is calculated by dividing net profit for shareholders by the
weighted average of shares in circulation during the period. The calculation of
the weighted average considers that shares created by the capitalisation of
profits were always in circulation during the period. As at the 30th of September
2013 and 31st of December 2012, COFIDE had no financial instruments that
diluted profits per share, therefore basic profit and profit per share are the same
(note 19).
(v) Cash and cash equivalent
Cash and cash equivalents shown in the cash flow account includes available
and sight deposits in banks.
(w) Financial statements for fiscal year 2012
Following the guidelines of SBS ruling N° 7036-2012, the Corporation has made
some reclassifications during fiscal year 2012, principally of:

CAF investments in COFIDE
The Corporation considered recording shares belonging to Corporation
Andina de Fomento - CAF as financial liabilities in accordance with IAS 32,
because they give that entity the right to require COFIDE to purchase them
automatically. Consequently, (in thousands) S/. 15,640 and S/. 7,044 to
“Borrowings and financial obligations” charged to the “Capital” and
“Additional capital” accounts respectively, and another, amounting to (in
thousands) S/. 7,599 to “Accumulated results” charged to the “Additional
capital” account.

Guarantee Fund
For the purposes of presentation, the Corporation decided to reclassify its
restricted funds kept as guarantees for financial derivative contracts with J.
Aron. Consequently, a charge was recorded in “Accounts receivable”
under “Available” amounting to (in thousands) S/. 21,344.
14

Recognition of investments available for sale at cost
An increase in “Investments available for sale” amounting to (in thousands)
S/. 2,339,156, charged to “Investments in subsidiaries or associates” Investments in Corporación Andina de Fomento”.(See notes 2.g-2 and 6).

Securities and titles
For the purposes of presentation, the Corporation decided to reclassify
deferred expenses relating to security issues, recording a charge under
“Other assets” and an addition to “Securities and titles” amounting to (in
thousands) S/. 7,398 (see note 12).
Although there are other reclassifications in fiscal year 2012, these are related to
bringing the information into line with the new presentation required by the SBS
from the 1st of January 2013.
(x) Publications by the SBS applicable to the Corporation
During 2012 the SBS published the following rules, among others:
Ruling
(R)
Circular (C)
SBS N°
Description of the rule
Modifications to the rules for managing
A. 9076-2012
exchange rate risk: limits to foreign currency
positions.
A. 9075-2012
A. 8548-2012
A. 8181-2012
A. 7197-2012
A. 7036-2012
A. 7033-2012
A. 7068-2012
Rules for managing liquidity risk.
Modification to the rule concerning the
effective equity requirement to cover credit
risk approved by SBS ruling N° 14354-2009,
and modifications thereto.
Rule concerning information transparency
and contracting users of the financial system.
Incorporation of annexes 7-A and 7-B in
chapter V of the Accounting Manual for
financial companies.
Modifications to the Accounting Manual for
financial companies.
Approval of new rules for classifying and
valuing the investments of financial sector
companies.
Modification to the rule concerning integral
risk management.
15
Valid from
December
2012
December
2012
January
2013
January
2013
November
2012
September
2012
January
2013
September
2012
A. 3127-2012
3.
Replacement of article 3 of the rules
concerning the equity requirement to cover
operating risk, approved by SBS ruling N°
2115-2009.
June 2012
NEW INTERNATIONALLY APPROVED ACCOUNTING RULES NOT YET
APPLICABLE IN PERU.
(a) New IFRS and interpretations that do not significantly affect the values
reported and disclosures in the current period and previous year:
-
Amendments to IFRS 7 “Financial Instruments - Disclosures”. Effective for
annual periods commencing on or after the 1st of July 2011.
-
Amendments to IAS 12 - Deferred Income Taxes - asset recovery.
Effective for annual periods commencing on or after in 1st of January 2012
(b) New IFRS and interpretations taking effect after the presentation of the
financial statements.
-
IFRS 9 “Financial instruments”. Effective for annual periods commencing
on or after the 1st of January 2015.
IFRS 10 “Consolidated financial statements”. Effective for annual
periods commencing on or after the 1st of January 2013.
-
IFRS 11 “Joint Arrangements”. Effective for annual periods commencing
on or after the 1st of January 2013.
-
IFRS 12 “Disclosure of Interests in Other Entities”. Effective for annual
periods commencing on or after the 1st of January 2013.
-
IFRS 13 “Fair Value Measurement”. Effective for annual periods
commencing on or after the 1st of January 2013; may be applied before
then.
-
IAS 19 (revised in 2011) “Employee Benefits”. Effective for annual
periods commencing on or after the 1st of January 2013.
-
IAS 27 (revised in 2011) “Separate Financial Statements”. Effective for
annual periods commencing on or after the 1st of January 2013.
-
IAS 28 (revised in 2011) “Investments in Associates and Joint
Ventures”. Effective for annual periods commencing on or after the 1st of
January 2013.
-
Amendments to IAS 1 – “Presentation of Elements of Other Consolidated
Results”. Effective for annual periods commencing on or after the 1st of July
2012.
16
-
Amendments to IAS 32 “Offsetting Financial Assets and Financial
Liabilities". Effective for annual periods commencing on or after the 1st of
January 2013 and 2014 for disclosures.
-
Amendments to IFRS “Annual Improvements to IFRS 2009-2011”.
Effective for annual periods commencing on or after the 1st of January
2013. The amendments include amendments to IAS 16 “Property, Plant and
Equipment” and IAS 32 “Financial Instruments: presentation”.
The management of the Corporation considers that the application of these new
rules will have no material impact on the financial statements when they take
effect in Peru for companies in the financial sector.
4.
RISK MANAGEMENT
During the normal course of its business the Corporation is exposed to a variety
of risks. The Corporation's risk management programme concentrates mainly on
the financial markets and tries to minimise potential adverse effects on the
financial performance of the Corporation. The management is responsible for the
administration of risk; identifying, evaluating and hedging financial risks.
(a) Exchange rate risk
The management controls this risk by permanently monitoring established
policies, detecting situations that could create negative financial effects on the
Corporation.
the 30th of September 2013 and the 31st of December 2012, the balances of
foreign-currency-denominated financial assets and liabilities are expressed in
nuevos soles at the weighted average of the buying and selling exchange rates
published by the SBS and in force on that date. As at the 30th of September
2013 it was S/.2.782 per US$1 (S/.2.550 in December 2012), S/.0.028321 per ¥1
(S/.0.029651 in December 2012) and S/.3.764038 per €1 (S/.3.371233 in Dec.
2012).
Foreign currency balances are summarised as follows:
USD
US$000
30 09 2013
YEN
¥000
EUR
€000
USD
US$000
31 12 2012
YEN
¥000
EUR
€000
Assets:
Available funds
Available negotiable investments
for sale and permanent, net
Loans, net
Other assets
Total
109,083
1,596
1,676
63,965
6,472
1,692
80,809
1,007,145
12,852
1,209,889
22,578
24,174
10,079
11,755
90,020
771,126
12,130
937,241
57,658
64,130
9,959
11,651
Liabilities:
Borrowings & financial obligations
Shares, securities and obligations in circulation
Provision for contingent loans and others
Total
624,190
505,705
11,506
1,141,401
18,820,370
18,820,370
9,381
(30)
535
9,886
352,965
510,433
15,295
878,693
17,383,854
17,383,854
9,460
(16)
796
10,240
18,772,097
-
(138,589)
17,303,568
-
1,869
(80,041)
Swap and Forward operations, net
Net liability position
(162,781)
(94,293)
(24,099)
(16,156)
1,411
Operations in foreign currency were channelled through the free market banking
system. As at the 30th September 2013, the average free market bank
17
exchange rates published by the SBS for United States dollar sales and
purchases were S/. 2.781 and S/. 2.782 per US$1 respectively (S/. 2.549 and S/.
2.551 per US$1, respectively as at the 31st December 2012)
As at the 30th June 2013, the Corporation recorded net exchange rate earnings
of (in thousands) S/.33,290 (S/.19,227 as at the 30st December 2012), which
are shown net under “Exchange rate earnings (losses)" in the results of financial
operations - ROF, as appropriate, in the statement of results.
(b) Credit risk
the Corporation account has satisfactory controls for this risk, given that the
IFIs grant loans to their clients using funds provided by the Corporation, at their
own risk.
Furthermore, the IFIs are continually evaluated in order to determine the
corresponding lending policies, including credit limits. In addition, loan contracts
establish that the Corporation has the power to assign rights to IFI portfolios in
order to offset their loans.
Furthermore, lending operations are covered by credit risk policies independent
of their origin, instrumentation or means of concession, the objective being to
define the processes of identification, evaluation, monitoring, mitigation and
reporting of credit risk, as well as the process of analysis, measuring, approval,
control, monitoring and recovery of the operations. In addition, methodologies of
evaluation, monitoring and risk classification have been developed for the loan
portfolio, in addition to warning systems.
(c) Market risk
the Corporation is exposed to market risk, that is the risk of the reasonable value
or future cash flow from a financial instrument fluctuating because of changes in
market prices.
Market risk management uses internal models to measure interest rate,
exchange rate and portfolio risks. These models are based on the Value at Risk
methodology, which provides a continual gauge of the maximum loss that may
result from changes in these risk factors, given the level of exposure to them.
(d) Interest rate risk
Interest rate risk arises from the possibility of changes in interest rates affecting
future cash flows or the value of financial instruments. Cash flow interest rate
risk is the risk that future cash flows from a financial instrument will fluctuate
because of changes in market interest rates. Interest rate margins may increase
as the result of such changes, but they may also narrow in the event of
unexpected movements.
18
The Corporation has established policies for managing interest rate risk, in all
cases an equivalence is established between lending and deposit rates in order
to optimise the Corporation's financial margin.
The Corporation employs interest rate swaps at variable and fixed rates, in
order to reduce the negative gap between Libor-based interest rates and at the
same time to provide a reference to the real cost in order to make medium-term
loans at fixed rates.
(e) Liquidity risk
The purpose of the Corporation's liquidity risk management is to ensure that
sufficient funds are available to cover normal operations at the lowest possible
cost, as well as to maintain reserves of high-quality liquid assets to address
situations of stress. For this purpose the Corporation has policies for liquidity risk
management, a liquidity contingency plan and an internal model for managing
this risk in accordance with best practice, international standards and the
regulatory authority's guidelines.
The Corporation manages liquidity risk by examining different static and dynamic
as possible contingency plans, such as the use of available cash, use of
investments for sale, credit from foreign banks and other lines of credit.
The Corporation's assets and liabilities have been modified since the date of the
financial position until the envisaged expiry date as follows:
As at 30th September 2013:
Up to
1 month
S/.000
Assets:
Available
Investments
Loan portfolio
Accounts receivable
Other assets
1 to 2
months
S/.000
3 to 6
months
S/.000
6 to 12
months
S/.000
12 months
and more
S/.000
Total
S/.000
365,373
80,048
356
15,051
45
525,245
345
252
1,446
127,744
2,100
1,087
3,286
647,935
3,164
820
33,653
275,395
2,062
2,256
61
2,987,661
2,713,603
51,098
16,620
365,434
3,026,091
4,369,970
59,125
36,086
460,828
525,887
132,377
655,205
313,366
5,769,043
7,856,706
301,205
2,213
1,316
37,538
61
1,686
125,741
61
8,830
524,587
19,431
8,433
246,262
53,954
53,872
2,013,939
1,981,647
311,390
3,249,272
2,057,367
385,527
304,734
39,285
134,632
552,451
354,088
4,306,976
5,692,166
Gap (asset - liability)
156,094
486,602
(2,255)
102,754
(40,722)
1,462,067
2,164,540
Accumulated gap
156,094
642,696
640,441
743,195
702,473
2,164,540
Liabilities:
Borrowings & other obligations
Securities in circulation
Other liabilities
-
2 to 3
months
S/.000
19
As at 31st December 2012:
Up to
1 month
S/.000
Assets:
Available
Investments
Loan portfolio
Accounts receivable
Other assets
1 to 2
months
S/.000
2 to 3
months
S/.000
3 to 6
months
S/.000
6 to 12
months
S/.000
12 months
and more
S/.000
Total
S/.000
280,208
235
533,046
37
-
460
70,059
34
-
489
441,772
34
11,172
14,545
332,705
817
102
8,700
211,189
203
37,948
60
3,073,024
1,828,850
2,868
15,107
280,268
3,097,453
3,417,621
3,993
64,329
813,526
70,553
453,467
348,169
258,040
4,919,909
6,863,664
103,297
16,206
5,873
99,559
20,148
627
214,860
128
41,034
907,653
1,677
2,844
221,754
4,353
31,920
807,984
1,827,941
329,351
2,355,107
1,870,453
411,649
125,376
120,334
256,022
912,174
258,027
2,965,276
4,637,209
Gat (asset - liability)
688,150
(49,781)
197,445
(564,005)
13
1,954,633
2,226,455
Accumulated gap
688,150
638,369
835,814
271,809
271,822
2,226,455
Liabilities:
Borrowings & other obligations
Shares, securities & obligations in circulation
Other liabilities
(f)
Operating risk
Operating risk originates from human, process or system error, or external
factors, including legal risk.
The Corporation has identified its operating risks, concentrating on the
complementary processes that make up its operations. Furthermore, successive
improvements have been made in the policies and methodologies for identifying,
evaluating and monitoring operating risk, as well as in the definition of the roles
and responsibilities of those involved in managing it.
Indicators have been created to analyse the causes and effectiveness of the
control and mitigation measures for operating risk. Furthermore, a number of
reports are generated to permit continual monitoring of these risks and to
determine the measures necessary to mitigate them, in accordance with limits
set by the board of directors. At the same time, the Corporation's divisions and
departments are responsible for the qualitative valuation of their risks and
controls through the operating risk coordinators.
A database of losses to operating risk has been designed to complement the
qualitative analysis described above with a quantitative analysis.
Thus, although the Corporation currently bases its operating risk management
on the qualitative actions described, it is moving towards a management of this
risk that complements qualitative valuations with quantitative ones.
(g) Capital management – statutory reserve
The Corporation actively manages a capital base to cover the risks inherent in
its activities. The Corporation's capital adequacy is monitored using, among
other measures, the rules and ratios established by the SBS; it has policies for
capital adequacy that define levels of appetite for and tolerance of capital
adequacy risk through indicators that seek to optimise the risk / return ratio, as
well as guidelines for the management and assignation of capital.
20
The Corporation’s capital management objectives are broader in concept than
“net equity” shown in the financial statements, and are: (i) To comply with the
capital requirements established by the SBS; (ii) To safeguard the ability of the
Corporation to continue operating and provide returns to its shareholders and
benefits to other participants; and (iii) to maintain a strong capital base to
support future activities.
In accordance with SBS rules, the Corporation is obliged to maintain regulatory
capital equal to or greater than 10% of risk-weighted assets and contingencies,
including regulatory capital requirements for market risk, operating risk and
credit risk. As at the 30th of September 2013, the Corporation used the standard
method for calculating regulatory capital to cover credit risk, market risk and
operating risk. Furthermore, the 20th of July 2011 saw the publication of SBS
ruling N° 8425-2011 (rules for additional statutory reserve) by which companies
must comply with requirements throughout the economic cycle to cover the risk
of market concentration, interest rate risk and other risks. This additional
regulatory capital requirement must be achieved in five years, the first stage
being 40% of the total requirement by July 2012. The reserve will gradually
increase each year at a rate of 15% to achieve 100% by the 31st of July 2016.
This rule will be activated and deactivated in accordance with the rule son
procyclic credit provisions.
As at the 30th September 2013 and 31st December 2012, the regulatory capital
of COFIDE, calculated in accordance with current legislation was (in thousands)
S/.1,877,375 and S/.1,852,353 respectively; This figure is used to calculate
certain limits and restrictions applicable to banks in Peru, which the
management believes it has met in full.
As at the 30th September 2013, assets and contingent loans weighted by credit
risk amounted to (in thousands) S/.5,156,953 (in thousands S/.4,516,459 as at
the 31st December 2012) and the equity requirement for credit risk, market risk
and operating risk determined by the Corporation according to current
legislation totalled (in thousands) S/.545,461 (in thousands S/.480,392 as at the
31st December 2012); these figures generate a global capital ratio of 34.42%
(38.56% as at the 31st December 2012).
(h) Fair value of financial instruments
Fair value is the amount for which an asset may be sold or a liability paid
between interested, duly informed mutually independent parties. In cases where
the price is not available, the fair value is estimated using the price of a similar
financial instrument, the present value of future cash flows or other valuation
techniques, which are significantly affected by the different assumptions used.
Despite the methodologies used and the improved criteria applied by the
management to estimate the reasonable value of financial instruments, all
valuation techniques have inherent weaknesses. Consequently, the fair value
may not be a near estimate of the net realisable value or the sale values.
The methodologies and assumptions used depend on the risks and
21
characteristics of the different financial instruments, taking into account the
following considerations:
(i)
Available funds elements represent cash or short-term deposits with no
significant credit risk. These funds are deposited in the CRBP and in other
prestigious banks.
(ii) The fair value of negotiable instruments available for sale has been
determined from market prices as at the date of the financial statements.
Investments in debt paper accrue interest at market rates. Book value is
determined in accordance with the criteria established by the SBS.
(iii) The investment in the CAF is recorded at cost, in accordance with SBS
guidelines contained in Official Communication N° 45853-2012-SBS (notes
2.g-2 and 6)
(iv) The fair value of the loan portfolio is similar to the book value given that
most are short term and accrue interest mostly at market rates.
(v) The market value of deposits and obligations is the same as their book
value, principally because of their current nature and because the interest
rates are comparable to those of other similar liabilities.
(vi) The Corporation has granted guarantees and letters of guarantee and has
received guarantees to cover its loans. Based on the level of commissions
currently charged for contingent loans and taking into account the maturity
and interest rates together with the solvent state of the counterparties, the
management does not consider the difference between book value and
reasonable value to be significant. Because of uncertainty regarding the
valuation, probability and timing of the valuation and the lack of an
established market, the Corporation considers that it is not feasible to
estimate the fair value of guarantees received.
(vii) Liabilities in the form of borrowings and financial obligations and security
issues (corporate bonds) are recorded at nominal value adjusted for the
effect of any issue premium or discount. The interest accrued is recorded in
the profit and loss account. Discounts or premiums generated by each issue
are deferred and are amortised during the validity of the related liabilities.
(viii) Financial derivatives for interest rate and currency hedges are recorded at
their estimated market value. The Corporation values its derivative
operations by discounting the respective cash flows from the present value
using market interest rate curves for each currency and calculating the
variations or effects of interest rates and exchange rates in the case of
currency swaps as well as variations or the effects of interest rates for
interest rate swaps, which are calculated for that purpose.
Consequently, in the opinion of the Corporation's management and in
accordance with the above, there are no significant differences between the
book values and reasonable values in the Corporation's financial instruments as
22
at the 30th September 2013 and 31st December 2012.
5.
AVAILABLE
This item includes:
30 09 2013
S/.000
Cash
Banco Central de Reserva del Perú
Current accounts
Yield on available assets
Total
31 12 2012
S/.000
61
59,279
305,951
143
60
45,675
212,804
384
365,434
258,923
As at the 30th September 2013, available funds included (in thousands) US$
19,269 and S/.5,672 (in thousands, US$2,826 and S/.468 as at the 31st
December 2012) of statutory reserve that financial institutions in Peru must
maintain to cover deposits and obligations to third parties. These funds are kept
in the companies' own vaults or are deposited with the CRBP.
Funds representing the minimum statutory reserve do not generate interest. The
additional statutory reserves accrue interest at a rate established by the CRBP.
In accordance with current legislation, statutory reserve funds cannot be seized.
As at the 31st of December 2012, available funds included (in thousands)
S/.38,000 in overnight deposits in the CRBP, which accrued interest at an
effective annual rate of 3.45% in Peruvian currency. As at 30 09 2013, COFIDE
had no outstanding balances for overnight deposits as they had been paid in full
before that date; These overnight operations accrued interest (in thousands) of
S/.268 in the first half of 30 (S/.581 as at the 31st December 2011), which were
included under interest accrued by available funds in the profit and loss account.
6.
INVESTMENTS AVAILABLE FOR SALE
This item consists of:
30 09 2013
S/.000
Structured bonds
Corporate bonds
Securitised bonds
Sovereign bonds
Investment funds
Subordinated securities
Others
Financial leasing bonds
Treasury notes
Commercial paper
CAF shares (note 2.g-2 & 2.w)
Accrued yield
Provision for impairment
Total
31 12 2012
S/.000
412,185
105,377
60,711
55,790
32,532
10,269
1,975
141
45
0
679,025
2,339,156
3,018,181
12,923
3,031,104
(5,013)
520,807
133,771
6,356
52,100
28,535
9,837
1,567
389
0
3,216
756,578
2,339,156
3,095,734
7,042
3,102,776
(5,323)
3,026,091
3,097,453
Interest income from these investments is recorded under “income from
investments available for sale” in the profit and loss account.
23
The investment in the CAF was a contribution by the Peruvian Government
between 1989 and 2000, in the form of class "B" shares in the CAF. The class
"B" shares have a nominal value of US$5,000 each, and enable their holder to
appoint a representative to the board of directors. As at the 30th September
2013 and 31st December 2012, the Corporation had 97,951 class “B” shares
representing 13.285% of the capital of CAF as at 30 09 2013 (13.572% as at 31
12 2012.
As part of the harmonisation process with IFRS (SBS ruling N° 7036-2012) and
taking into account that shares in CAF do not pay cash dividends, have no
active public market, a reasonable estimate of the value of the investment
cannot be made and with reference to SBS official communication N° 458532012-SBS, which requires them to be treated in line with IFRS, as at the 1st of
March 2013 the Corporation maintains these investments as “Investments
available for sale” at cost value, which is equivalent to the last book value
recorded by the Corporation and reported by COFIDE to the SBS on 31 12 2012
(notes 2.g-2 and 2.w).
As at 31 12 2012, this investment was recorded as “Investments in subsidiaries
and associates”, valued using the equity participation method in accordance
with the provisions of official communications 6666-2006-SBS and 15306-SBS2007. See the notes to COFIDE's audited financial statements as at 31 12 2012.
Details of these investments are as follows:
Type of instrument
Interest rate (coupon)
Maturity
As at 30th Sept.
2013
%
Peruvian currency
Structured bonds
Corporate bonds
Investment funds
Subordinated securities
Securitiesd bonds
Treasury notes
Commercial paper
CAF shares (Note 2.g2-2w)
Foreign currency
Structured bonds
Corporate bonds
Sovereign bonds
Investment funds
Securitised bonds
Subordinated securities
Bladex shares
Financial leasing bonds
Between Jan. 2033 and June 2037
Between Dec. 2014 and Sept. 2025
October 2022
Between June 2014 and Dec. 2016
November 2013
-
April 2037
Between Jan. 2014 and Sept. 2020
Between Oct. 2014 and Dec. 2015
February 2021
September 2017
January 2014
Between 5.97 - 8.58
Between 6.625 - 6.9375
7.17
8.50
10.43
Market value
As at 31st Dec.
2012
%
Between 5.97 - 8.75
Between 6.625 - 6.9375
7.17
7.19
5.76
Provision for impairment
As at 30th Sept As at 31st Dec.
2013
2012
S/. 000
S/. 000
330,521
27,780
21,756
2,448
41,636
45
0
424,186
435,519
33,423
20,272
2,670
72
0
3,216
495,172
Unrealised results
As at 30th Sept.
2013
S/. 000
As at 31st Dec.
2012
S/. 000
-
-
As at 30th Sept. As at 31st Dec.
2013
2012
S/. 000
S/. 000
0
0
9,760
5,837
3,695
(198)
757
0
0
19,851
120,035
10,592
2,917
69
(2)
0
(121)
133,490
-
-
2,339,156
2,763,342
2,339,156
2,834,328
0
0
0
0
0
19,851
0
133,490
8.13%
Between L3m+2.5625 - 9.875
Between 7.50-8.00
7.34%
L6m+1.15625
5.95
8.13%
Between L6m+1.71875 - 9.875
Between 7.50-8.00
L3m +2.3125
L6m+1.15625
5.95
89,885
78,793
58,146
10,776
20,137
7,908
1,975
142
267,762
88,566
102,987
53,126
8,263
6,287
7,253
1,567
399
268,448
0
(3,464)
(1,325)
0
(217)
0
(3,591)
(1,195)
37
5,140
5,212
(7,122)
(37)
(529)
886
7
3,594
3,031,104
3,102,776
137,084
Total
24
(7)
(5,013)
(20)
(5,323)
(6,678)
3,600
3,973
(7,489)
400
(404)
1,232
2
(5,364)
(5,013)
(5,323)
14,487
-
(318)
(199)
-
7 LOAN PORTFOLIO
a) The loan portfolio is made up as follows:
Plus:
Accrued yield on loans
Less:
Provision for uncollectables
Deferred interest
Total
Contingent loans - guarantees &
letters of guarantee (Note 15)
135,006
138,095
4,971,789
4,024,033
(597,796)
(4,023)
(601,819)
(600,625)
(5,787)
(606,412)
4,369,970
3,417,621
527,661
462,523
The balance of the loan portfolio, consisting of direct and contingent loans,
mainly in foreign currency, to intermediate financial institutions (IFIs) for their
first tier portfolio.
Loans to banks are guaranteed through clauses in the global contracts for
channelling resources entered into with each debtor, which enable the
Corporation to: i) automatically collect debt instalments by charging the debtor's
current account at the Central Reserve Bank of Peru (CRBP) and/or the
nominated operating bank and ii) through an assignment of rights to the portfolio
of loans financed by the Corporation's funds up to the value of the debt including
interest, commissions, penal interest and other costs; this assignment to take
effect if the bank fails to pay an instalment or when, in the judgement of the
Corporation, special circumstances exist that make collection of the funds
granted difficult. For other IFIs the cover is similar, except that an operating bank
is designated in place of the CRBP.
Financial leasing loans received from certain IFIs as first tier portfolio, are
guaranteed by the assets that are the object of the contracts, in addition to
preferred guarantees. The rest of the contracts making up the first tier portfolio
have additional guarantees required at the time by the IFIs, including preferred
guarantees.
Classification of the loan and contingency portfolios (net of deferred interest) by
risk category, carried out by the management of the Corporation and following
the current rules issued by the SBS, is summarised as follows:
Number of debtors
30 09 2013
31 12 2012
Normal
With potential problems
Deficient
Doubtful
Lost
Total
Total portfolio
30 09 2013
31 12 2012
S/.000
S/.000
133
18
11
5
6
118
16
13
9
5
5,020,306
255,058
80,741
565
3,751
3,978,844
260,128
99,360
801
3,541
173
161
5,360,421
4,342,674
The loan portfolio broken down by type of IFI is classified as follows:
25
30 09 2013
S/.000
%
Second tier portfolio:
Bankz
Financial institutions
Municipal savings & loan institutions
Edpymes
Rural savings & loan institutions
Financial leasing
Factoring
Cooperatives
3,731,262
515,699
332,402
113,200
40,818
35,126
3,372
29,324
4,801,203
First tier portfolio:
Financial leasing & promissory notes
Other loans (i)
23,340
12,240
35,580
Total portfolio
4,836,783
Accrued yield from loans
31 12 2012
S/.000
%
77.1
10.7
6.9
2.3
0.9
0.7
0.1
0.6
99.3
2,591,362
614,131
424,428
92,436
78,147
21,349
1,504
26,291
3,849,648
0.5
0.2
0.7
100.0
135,006
66.7
15.8
10.9
2.4
2.0
0.5
0.1
0.7
99.1
25,362
10,928
36,290
0.6
0.3
0.9
3,885,938
100.0
138,095
(i) Consumer loans and mortgages to employees and former employees.
(b) Rates of interest and guarantees:
The Corporation is free to establish the interest rates applicable to its lending
operations as a function of the cost of funds, type of client, market and currency
in which the loan is denominated.
The effective annual average rates for the main products were as follows:
30 09 2013
Loans in
S/.
US$
%
%
Short-term working capital
COFIDE own resources
Medium-term working capital
Probid II
Structured financial products
(c)
6.73
7.48
9.20
10.60
31 12 2012
Loans in
S/.
US$
%
%
3.77
5.31
6.57
Libor + 4.23
10.15
6.25
7.62
7.98
9.82
3.71
5.38
6.38
Libor + 3.77
10.15
Changes in the provision for non-performing direct and contingent loans were as
follows:
Direct
S/.000
Contingent
S/.000
Total
S/.000
Balances as at 31st Dec. 2011
Provision for fiscal year
Recoveries
Written off
Exchange rate difference
Balances as at 31st Dec. 2012
610,726
121,471
(116,369)
(9,433)
(5,770)
600,625
39,756
3,022
(13,186)
(1,389)
28,203
650,482
124,493
(129,555)
(9,433)
(7,159)
628,828
Provision for fiscal year
Recoveries
Exchange rate differences
Balances as at 30th Sept, 2013
64,453
(79,337)
12,055
597,796
17,680
(27)
2,387
48,243
82,133
(79,364)
14,442
646,039
The balance of provisions for non-performing direct and contingent loans is
made up as follows:
26
Direct
S/.000
Specific
Generic for normal clients
Generic voluntary
Total
30 09 2013
Contingent
S/.000
Total
S/.000
Direct
S/.000
31 12 2012
Contingent
S/.000
Total
S/.000
81,188
77,610
438,998
6,140
42,103
81,188
83,750
481,101
87,666
65,649
447,310
5,384
22,819
87,666
71,033
470,129
597,796
48,243
646,039
600,625
28,203
628,828
As at the 30th of September 2013 and 31st of December 2012, the Corporation
had recorded the total obligatory value required by the SBS for generic
provisions.
As at the 30th of 2013 and 31st of December 2012, the procyclic provision
amounted to (in thousands) S/.20,068 and S/.15,901 respectively. Furthermore,
in the same periods generic provisions amounting to (in thousands) S/.44,331
and S/.86,788, respectively, were created. Voluntary generic provisions as at the
30th of September 2013 and the 31st of December 2012 amount to (in
thousands) S/.481,101 and S/.470,129, respectively.
(d)
(e)
The management considers that the level of provision for non-performing loans
is sufficient to cover future losses in this portfolio as at the date of the financial
position.
As at September 2013, 99,19% of the loan portfolio consisted of operations with
financial institutions (99.03% In December 2012).
The loan portfolio is distributed among the following sectors:
Economic sector
30 09 2013
Commercial loans and loans to microenterprises
Financial intermediation
Hotels & restaurants
Home mortgages
Other community services
Consumer loans
Manufacturing industry
Transport, warehousing & communications
Real estate, business & rental
Farming, hunting & forestry
Trade
Total
(f)
31 12 2012
S/.
%
S/.
%
4,797,831
22,023
8,346
4,890
1,242
1,191
926
188
146
4,836,783
99.19
0.46
0.17
0.10
0.03
0.03
0.02
0.00
0.00
100.00
3,848,144
23,479
8,032
3,229
279
1,106
987
413
171
98
3,885,938
99.03
0.60
0.21
0.08
0.01
0.03
0.03
0.01
0.00
0.00
100.00
The loan portfolio has the following maturities:
30 09 2013
S/.000
%
31 12 2012
S/.000
%
Up to 1 year
More than 1 and less than 2 years
More than 2 and less than 3 years
More than 3 and less than 4 years
More than 4 and less than 5 years
More than 5 years
1,884,459
738,151
458,775
217,040
301,224
1,234,067
39.0
15.2
9.5
4.5
6.2
25.5
-
1,858,019
374,830
399,392
199,897
189,960
860,729
47.8
9.6
10.3
5.1
4.9
22.2
-
Sub Total
Loans overdue & subject to legal action
Total loan portfolio
4,833,716
3,067
4,836,783
99.9
0.1
100.0
3,882,827
3,111
3,885,938
99.9
0.1
100.0
27
g) First tier portfolio (assigned)
In applying the global funding contracts with the IFIs, from 1998 to 2002 the
Corporation has signed complementary agreements with certain IFIs, some of
which have been liquidated or subject to intervention by the SBS. By means of
assignment of rights agreements, these IFIs assigned to the Corporation their
contractual position in a number of loan and financial leasing contracts selected
by the Corporation, in payment of obligations to the Corporation.
Annual changes in this portfolio over the last two years are as follows:
Balances as at 31.12.2011
NBK Bank
Latino
Banco
Leasing
US$
Nuevo Mundo
US$
Banco
Consolidated
Banex
operations
US$
US$
US$
Total
US$
6,249
7,091
904
1,259
1,965
17,468
(998)
(307)
(4,240)
-
(346)
-
(1,220)
-
(411)
-
(7,215)
(307)
4,944
2,851
558
39
1,554
9,946
Equivalent in soles as at 31.12.2012
12,607
7,270
1,423
99
3,963
25,362
Recoveries and others
Unaccrued income
(1,102)
(109)
(86)
-
(142)
-
(39)
-
(78)
-
(1,447)
(109)
Balances as at 30.09.2013
3,733
2,765
416
-
1,476
8,390
10,385
7,692
1,157
-
4,106
23,340
Recoveries and others
Unaccrued income
Balances as at 31.12.2012
Equivalent in soles as at 30.09.2013
8. REAL ESTATE, FIXTURES AND FITTINGS
Changes in the cost and accumulated depreciation of real estate, fixtures and fittings
as at the first quarter of 2013 were as follows:
Initial
balance
S/.000
Cost:
Land
Buildings & installations
Fixtures & fittings
Vehicles
Equipment - various
Total
Accumulated depreciation
Buildings & installations
Fixtures & fittings
Vehicles
Equipment - various
Total
Net
Additions
S/.000
-
Withdrawals
S/.000
-
Final
balance
S/.000
469
22,498
2,582
208
12,922
(1)
469
22,498
2,619
208
13,971
37
1,050
-
38,679
1,087
(1)
39,765
15,088
2,162
165
9,746
480
72
19
774
-
15,568
2,234
184
10,520
27,161
11,518
1,345
-
28,506
11,259
The management periodically reviews forecasts of the results expected for the
remaining years of useful life of fixed assets. In the opinion of the management, the
recoverable values of real estate, fixtures and fittings as at the 30th of September
2013 and the 31st of December 2012 are higher than their book values, therefore it
was not considered necessary to make any provision for losses due to the
deterioration of these assets.
28
The Corporation has taken out insurance policies to cover the risks to which the
different elements of its buildings, Furniture and equipment may be exposed, as well
as possible claims that may arise in the course of its business; these policies provide
sufficient cover for the risks to which they are exposed.
As at the 30th of September 2013, fully depreciated furniture and fittings still in use
amounted to (in thousands) S/.7,800 (S/.15,298 as at the 31st of December 2012).
9. OTHER ASSETS
This item consists of:
30 09 2013
S/.000
31 12 2012
S/.000
906
26,601
23
27,530
2,033
295
2,328
14,792
29,350
1,757
3,423
828
78
9,289
59,517
7,182
21,344
2,321
2,873
855
80
7,609
42,264
Accounts receivable from assigned loan portfolio
NBK Bank
1,969
1,853
Provision for accounts receivable and others (c )
(5,064)
(5,330)
83,952
41,115
Financial derivatives (a)
Interest accrued from currency hedging swaps
Fair value of currency hedging swaps
Interest accrued on interest rate swaps
Other assets Current taxes
Funds under guarantee - margin calls (b)
Commisions receivable
Intangibles (Net)
Operations in progress
Adjudicated assets net of provisions
Various
(a)
Financial derivatives
The Corporation engages in currency and interest rate swaps. The risk arises from
the possibility of the counterparty failing to comply with the agreed terms, and
fluctuations in interest rates.
Accounts receivable and payable for operations involving financial derivatives
contained in the financial position, principally consisting of amounts accrued from
fluctuations in the exchange rates and interest rates applicable to financial
derivatives.
These operations were carried out in order to hedge against risk derived from the
Corporation's borrowings in yen (from American Family Life Assurance of Columbus,
Japan Branch - AFLAC and Japan Bank For International Cooperation – JBIC) as
well as certain debts denominated in United States dollars.
As at the 30th of SEPTEMBER 2013, the net balance payable for exchange rate
differences in currency swap operations amounted to (in thousands) S/.63,673 (net
balance receivable -in thousands- S/.8,247 from hedging and negotiation swaps as at
29
the 31st December 2012), which offsets the reduction in liabilities caused by
depreciation of the yen with respect to the United States dollar.
As at the 30th of September 2013 and 31st of December 2012, the fair value of
financial derivatives for cash flow hedging purposes was (in thousands) S/.42,222
(loss) and S/.60,276 (loss), respectively.
Financial derivatives for cash flow hedging purposes are:
( en miles de nuevos soles)
DESCRIPTION
N°
Oper. ASSET
CURRENCY SWAP - HEDGING YEN/US$
CURRENCY SWAP - HEDGING US$/S/.
CURRENCY SWAP - HEDGING
15
4
19
INTEREST RATE SWAPS - HEDGING
2
531,644
130,587
662,231
45,903 (1)
Position
LIABILITY
Interest accrued
ASSET LIABILITY
NET
Fair
value
Gain / loss
Unrealised
Realised
583,443
142,461
725,904
(51,799)
(11,874)
(63,673)
617
289
906
1,901
1,329
3,230 (2)
(23,720)
(15,676)
(39,396)
29,363
(2,762)
26,601 (2)
45,903
0
23
186 (2)
(2,826)
(2,663) (2)
(63,673)
929
3,416
(42,222)
23,938
0
0
0
-
FINANCIAL DERIVATIVES AS AT 31 12 2012
( in nuevos soles x 1,000)
DESCRIPTION
N°
Oper. ASSET
Position
LIABILITY
Accrued interest
ASSET LIABILITY
NET
Fair
value
Gain / Loss
Unrealised
Realised
CURRENCY SWAPS - HEDGING YEN/US$
CURRENCY SWAPS - HEDGING US$/S/.
CURRENCY SWAPS - HEDGING
13
4
17
513,068
141,183
654,251
494,587
167,911
662,498
18,481
(26,728)
(8,247)
1,692
341
2,033
4,529
2,908
7,437 (2)
(14,927)
(38,686)
(53,613)
(30,571)
(9,391)
(39,962) (2)
SWAPs DE TASA DE INTERES - COBERTURA
4
470,475 (1) 470,475
0
295
949 (2)
(6,663)
(6,009) (2)
(8,247)
2,328
8,386
(60,276)
(45,971)
0
0
0
-
(1) See note 15
(2) See note 13
b) As at the 30th of September 2013, deposits in guarantee amounted to (in
thousands) US$ 10,550 in favour of J. Aron & Company (Goldman Sachs) (US$8,370
as at the 31st of December 2012) for “Margin Calls” agreed in the interest rate and
currency derivative contracts between the Corporation and that institution. It should
be pointed out that up to 31 12 2012, COFIDE was recording these deposits as
restricted funds under "Available", then as part of the process of harmonisation with
the IFRS (SBS ruling N° 7036-2012), the Corporation decided to reclassify these
restricted funds under “Accounts receivable” charged to “Available” (note 2.w)
c) The balance of the provision for uncollectable accounts receivable is made up of:
Specific
Generic voluntary
30 09 2013
S/.000
31 12 2012
S/.000
2,192
2,872
2,141
3,189
5,064
5,330
The following changes took place in the provision for uncollectable accounts
receivable:
30
30 09 2013
S/.000
Initial balances
Provision for fiscal year
Recoveries
Exchange rate difference
Final balances
31 12 2012
S/.000
5,330
1,669
(1,196)
(739)
8,542
1,996
(4,822)
(386)
5,064
5,330
10. OBLIGATIONS TO THE PUBLIC AND DEPOSITS BY FINANCE COMPANIES
(a)
Obligations and deposits from companies in the financial sector are made up
as follows:
30 09 2013
31 12 2012
S/.000
S/.000
Term deposits
Deposits in guarantee
Interest accrued
57,000
23,310
80,310
433
19,645
19,645
-
80,743
19,645
As at the 30th June 2013, term deposits consisted principally of Peruvian currency
funds at the Banco de Credito, which accrue interest at annual market rates of
between 5.68% and 7.05% and mature between December 2013 and June 2014.
As at the 30th September 2013, deposits in guarantee include withholdings from
pledges to the Corporation in order to guarantee lending operations valued at (in
thousands) S/.19,876 and US$1,234 (in thousands S/.19,876 and US$170 as at the
31st December 2012).
Deposits under guarantee accrue annual interest at market rates of 3.45% (Peruvian
currency) and 0.1645% (foreign currency) and mature between October and March
2013.
(b)
Obligations and deposits made by companies belonging to the financial
system have the following maturities:
30 09 2013
S/.000
Up to 1 month
More than 1 month and less than 3 months
More than 3 months and less than 6 months
More than 6 months and less than 12 months
Total
11 BORROWINGS AND FINANCIAL OBLIGATIONS
This item includes:
31
31 12 2012
S/.000
4,000
14,000
23,310
39,000
19,645
80,310
19,645
Creditor's name
Rate
%
Standard Chartered Bank
1.76%
30 09 2013
S/.000
-
BANK OF TOKYO - MITSUBISHI / SINDICADO (*)
1.99675%
556,400
BANK OF TOKYO - MITSUBISHI / BILATERAL (*)
0.9621%
278,200
HSBC BANK USA N.A. (*)
0.9496%
278,200
Japan Bank For International Coopetation - JBIC
1.82%
199,496
AFLAC-American Family Life Assurance of Columbus Japan Branch
3.75%
254,889
Banco Internacional de Desarrollo - BID
1.12%
195,166
Banco Internacional de Desarrollo - BID
2.80%
37,799
Banco Internacional de Desarrollo - BID
2.00%
37,936
Banco Internacional de Desarrollo - BID
1.12%
3,979
Scotiabank Perú
4.60% - 5.23%
452,475
Banco de la Nación del Perú
4.25% - 5.50%
285,185
Corporación de Crédito Oficial - Programa II
2.65%
10,550
Nordic Investment Bank
1.54%
20,865
Kreditanstalt Fur Wiederaufbau - Fase I
2.00%
15,877
Kreditanstalt Fur Wiederaufbau - Fase II
2.00%
19,245
Banco Internacional del Perú - INTERBANK
4.86% - 5.89%
138,231
The Opec Fund For International Cooperation
5.00%
2,319
Corporación de Fomento a la Produccion - CORFO
4.25%
1,143
CHINA DEVELOPMENT BANK
3.68%
16,692
CORPORACION ANDINA DE FOMENTO - CAF
1.07789%-3.2375%
JAPAN INTERNATIONAL COOPERATION AGENCY-JICA
0.01% - 0.6%
250,380
77,769
3,132,796
22,684
(6,132)
3,149,348
CORPORACION ANDINA DE FOMENTO - CAF (Nota 14 y 2.w)
Gastos relacionados (*)
Sub Total
Interest
19,181
Total
3,168,529
Borro
wings and financial obligations (not including interest) have the following
maturities:
30 09 2013
S/.000
Up to 1 month
More than 1 month and less than 3 months
More than 3 months and les than 6 months
More than 6 months and less than 12 months
More than 12 months
Total
31 12 2012
S/.000
297,034
144,836
511,304
182,985
2,013,189
102,060
301,607
918,565
201,093
807,984
3,149,348
2,331,309
The majority of loans from multilateral organisations and government agencies have
been granted to the Republic of Peru or are guaranteed by it. The other loans from
local or international commercial banks do not have specific guarantees except for
loans granted to finance foreign trade operations, which are backed by a loan
portfolio.
32
As at the 30th September 2013 and 31st of December 2012, loans in yen and euros
and certain loans denominated in United States dollars are associated with swap
contracts aimed at reducing exchange rate and interest rate risk (Note 9).
As at the 30th September 2013 and 31st December 2012, the Corporation had not
infringed any compliance requirement concerning capital or interest, or other type of
compliance infringement concerning its liabilities.
Loan contracts entered into with some foreign financial institutions and international
financial entities contain compliance clauses with financial ratios and other specific
conditions that the management of the Corporation considers have been met in full.
Swap operations have been undertaken involving yen-denominated liabilities with the
JBIC and AFLAC in order to offset the risk of a revaluation of this currency compared
with the United States dollar. As at the 30th June 2013, the Corporation recorded net
losses on hedging operations amounting to (in thousands) S/.54,055 (loss of
S/.11,523 as at the 30th June 2012), shown under “Results of hedging operations” in
the results of financial operations - ROF in the statement of results.
12 SECURITIES AND BONDS
This item includes:
Issue
Serie
Date
Value
S/.000
Date of
maturity
Interest
rate
30 09 2013
S/.000
31 12 2012
S/.000
a) In Peruvian currency:
Second programme
Eighth-series A
Eighth-series B
Eleventh-series A
Twelfth-series A
01/06/2007
02/04/2008
16/01/2009
16/01/2009
20,000
10,000
6,400
7,065
15/07/2017
02/04/2018
15/01/2013
15/01/2015
5.90%
6.65%
7.91%
7.94%
16,000
9,500
0
1,775
27,275
19,000
10,000
529
2,656
32,185
Third programme
First-series A
Third-series A
Fourth-series A
Fifth-series A
Ninth-series A
Tenth-series A
Tenth-series A
Eleventh-series A
24/01/2011
30/06/2011
21/07/2011
28/10/2011
27/04/2012
28/06/2012
28/06/2012
30/10/2012
50,000
50,000
45,065
30,000
150,000
50,000
50,000
90,000
24/01/2016
30/06/2014
21/07/2015
28/10/2014
27/04/2027
28/06/2027
28/06/2037
30/10/2042
6.25%
6.70%
7.00%
5.60%
6.65%
6.20%
6.20%
5.63%
50,000
50,000
45,065
30,000
150,000
50,000
50,000
90,000
515,065
50,000
50,000
45,065
30,000
150,000
50,000
50,000
90,000
515,065
Fourth programme
Second-series A
30/04/2013
100,000
30/04/2043
5.35%
100,000
0
642,340
8,267
650,607
547,250
14,256
561,506
Total nominal value
Accrued yield
Total Peruvian currency
b) In foreign currency
Issue
Series
Date
Value
US$/.000
First international issue
08/02/2012
400,000
Reopening 1st int. Issue
03/12/2012
100,000
Total nominal value
Net price difference (under / over par) and related expenses
Accrued yield
Total foreign currency
Date of
maturity
08/02/2022
08/02/2022
Interest
rate
4.75%
4.75%
Total
(a) Bonds in Peruvian currency do not have specific guarantees.
Second bond programme
33
30 09 2013
S/.000
31 12 2012
S/.000
1,112,800
278,200
1,391,000
6,216
9,544
1,406,760
1,020,000
255,000
1,275,000
6,529
20,019
1,301,548
2,057,367
1,863,054
The resources obtained were used principally to finance new intermediation
operations as part of the business through the domestic financial system as well
as to optimise financial results by financing negotiable investments in the capital
market. These bonds are guaranteed in generic terms by the equity of the
Corporation and they have been registered with CAVALI ICLV S.A., and are
therefore represented by account entries and are freely negotiable.
Third Programme - Bonds
This programme has been approved for up to US$200'000,000 or the equivalent
in nuevos soles or any foreign currency. Corporate bonds enjoy the maximum
local risk classification from Apoyo & Asociados Internacionales S.A.C.
Clasificadora de Riesgo and by Equilibrium Clasificadora de Riesgo S.A., AAA
(pe) and AAA, respectively.
Fourth bond programme
This programme has been approved for up to US$400,000 or the equivalent in
nuevos soles or any foreign currency. Corporate bonds enjoy the maximum local
risk classification from Apoyo & Asociados Internacionales S.A.C. Clasificadora
de Riesgo and by Equilibrium Clasificadora de Riesgo S.A., AAA (pe) and AAA,
respectively.
(a)
First issue of senior unsecured notes - due 2022
The AGM held on the 14th of March 2011 approved an international bond issue
valued at up to (in thousands) US$500,000 consisting of the placement of
“senior unsecured notes” valued at (in thousands) US$ 400,000 having a
payment date of the 8th of February 2012; they accrue interest at an annual
coupon rate of 4.75% amortised every six months and with the capital maturing
in 10 years. This issue has an international classification from Standard & Poor’s
and Fitch Rating of “BBB”.
On the settlement date, the 3rd of December 2012, this international issue was
reopened for (in thousands) US$100,000 also maturing in 10 years and with an
international "BBB" rating granted by Standard & Poor’s and Fitch.
13. OTHER LIABILITIES
This item includes:
34
Financial derivatices (see note 9-a)
Fair value of currency hedging swaps
Fair value of interest rate swaps
Interest accrued on currency hedging swaps
Interest accrued on interest rate swaps
Exchange rate difference on currency swaps
Other liabilities
Deferred income tax (note 20 (c))
Taxes payable
Operations in progress
Provision for other contingencies & country risk
Provision for litigation & claims (a)
Deferred sales
Severance pay
Various
30 09 2013
S/.000
31 12 2012
S/.000
2,663
3,230
186
63,673
69,752
39,962
6,009
7,437
949
8,247
62,604
250,493
674
7,107
2,220
874
112
756
5,296
267,532
271,974
746
4,873
2,064
741
73
280
10,455
291,206
337,284
353,810
(a) As at the 30th of September 2013 and 31st of December 2012, the balance
included court cases against the Corporation relating to its activities, which in the
opinion of the management will not generate significant liabilities and, therefore,
do not need any provisions other than those already created for such
contingencies.
14. EQUITY
(a)
Capital
As at the 30th of September 2013 and the 31st of December 2012, the Corporation's
capital was represented by 1,514,401,683 and 1,504,500,863 ordinary shares in
circulation having a nominal value of S/.1.00 each, fully subscribed and paid up.
A general meeting of shareholders held on the 17th of September 2012 agreed,
among other things, that FONAFE would make a cash contribution of (in thousands)
S/.10,000 to be used to bolster equity and stimulate lending on infrastructure projects.
The 2nd of April 2013 saw the simultaneous payment of cash dividends for fiscal year
2012 to FONAFE and its capital contribution amounting to (in thousands) In COFIDE
of (in thousands) S/. 9’901 (note 14 d) as agreed by a general meeting of COFIDE
shareholders on the 22nd March 2013.
Shareholdings in the Corporation were as follows:
35
Share
class
Holder
Class A
Class C
MEF-FONAFE
MEF-FONAFE
Class B (*)
CAF
30 09 2013
Nº of shares
% shareholding
1,044,441,413
454,320,505
1,498,761,918
15,639,765
1,514,401,683
68.967264
30.000000
98.967264
1.032736
100.000000
31 12 2012
Nº of shares
% shareholding
1,037,510,839
451,350,259
1,488,861,098
15,639,765
1,504,500,863
68.509620
29.803867
98.313487
1.032736
99.346222
The class “A” shares are held by the Peruvian State. They cannot be seized or used
as collateral guarantees or for usufruct.
Class "B" shares belong to different Peruvian State entities and companies.
Class "C" shares belong to the Peruvian State. They are freely negotiable and may
be listed on the stock exchange and/or any registry necessary for them to be traded
on the exchange, with the prior approval of the board of directors.
(*) As at the 30th of September 2013 and 31st of December 2012, the Corporation
shows the portion of its shares held by CAF as part of its capital, given that they are
fully subscribed and paid up. However, it should be pointed out that as part of the
process of harmonisation with IFRS (SBS ruling N° 7036-2012), the Corporation
considered recording shares held by Corporación Andina de Fomento - CAF as
financial liabilities in accordance with IAS 32, as they give the holder the right to
require COFIDE to buy these shares automatically. As a result, (in thousands) S/.
15,640 and S/. 7,044 to “Borrowings and financial obligations” charged to the
“Capital” and “Additional capital” accounts respectively, and another, amounting to (in
thousands) S/. 7,599 to “Accumulated results” charged to the “Additional capital”
account (notes 11 and 2.w)
(b) Additional capital
Corresponds to the issue premium for type “B” shares granted to CAF in 1997 (note
2.w, note 11 and note 14 (a) and (d)).
(c)
Reserves
In accordance with current legislation, the Corporation must set aside a statutory
reserve of not less than 35% of its paid up capital. This reserve is created by annual
transfers of not less than 10 percent of net profits.
A general meeting of shareholders held on the 22nd of March 20133 approved a
legal reserve equivalent to 10% of profits for fiscal year 2012.7,411 (in thousands)
S/.7,411.
A general meeting of shareholders held on the 22nd of March 2012 approved a legal
reserve equivalent to 10% of profits for fiscal year 2011 (in thousands) S/.7,212.
(d) Accumulated results and adjustments to equity
Law Nº 23337 created the Public Sector Infrastructure and Counterparty Fund (later
known as the National Fund for Financing State Business Activities - FONAFE)
whose funds consisted of the profits available for distribution earned by state-owned
36
companies (100% of these profits in the case of banks and finance companies),
which were to be transferred to the fund within 60 days of the balance sheets being
approved. Profits available for distribution means the percentage set by the State
after allowing for statutory reserves and capital reserves aimed at maintaining the
solvency and liquidity of these companies.
A general meeting of shareholders in COFIDE held on the 22nd of March 2013
approved dividends payable from the earnings of fiscal year 2012 amounting to (in
thousands) S/.66,699. Furthermore, in virtue of COFIDE's dividend policy,
capitalisation of (in thousands) S/. 9’901; equivalent to 15% of the dividends payable
to FONAFE for fiscal year 2012 was approved. The CAF decided not to make the
contribution corresponding to its proportion of these shares and therefore did not
exercise its right of first refusal to subscribe new shares.
A general meeting held on the 22nd of March 2012 approved dividends payable from
the earnings of fiscal year 2011 amounting to (in thousands) S/.64,911.
From 2003 onwards, dividends payable to shareholders other than companies
domiciled in Peru are subject to income tax at a rate of 4.1%; this tax is withheld and
paid by the Corporation.
Total accumulated results and adjustments to equity consists of:
30 09 2013
S/.000
31 12 2012
S/.000
404,261
(121,279)
282,982
404,261
(121,279)
282,982
14,487
(4,346)
10,141
137,084
(41,125)
95,959
23,939
(7,182)
16,757
309,880
(45,971)
13,791
(32,180)
346,761
Adjustment for deferred profit sharing - IAS 12
Difference in value of COFIDE "B" shares to be redeemed
to CAF (note 2.w and 14(a) y (b)).
Accumulated profit without capital agreement
12,647
12,647
7,599
1,496
7,599
1,496
Total
331,622
368,503
Unrealised gain on change in value of
investment in CAF
Less: deferred income tax
Gains from changes in the value of negotiable
investments available for sale
Less: deferred income tax
Loss - cash flow hedging derivatives
Less: deferred income tax
Sub Total
15. CONTINGENT AND MEMORANDUM ACCOUNTS
This item includes:
37
30 09 2013
S/.000
Contingent accounts
Guarantees granted (note 7 (a))
Swap and forward operations (a)
Other contingent accounts
Memorandum accounts
Loan guarantees (b):
Promissory notes
Mortgages
Deposits in guarantee
Documentary guarantees
Warrants
Other guarantees
Trusts & confidential commissions ©
Funds in trust
Trust and confidential
commission contra-accounts
Funds in confidential commissions
Nominal value - interest rate swaps (a)
Guarantees for trust loan operations
Other memorandum accounts
Total contingent and memorandum accounts
31 12 2012
S/.000
527,661
662,231
24,663
462,523
654,251
29,583
1,214,555
1,146,357
4,060,343
44,945
23,310
7,568
100
445,689
4,282,040
43,561
19,645
8,145
92
235
4,581,955
4,353,718
5,811,433
4,951,137
6,279,154
488,932
45,903
7,154,649
6,717,943
5,658,796
444,433
470,475
5,963,292
5,985,485
31,079,969
27,827,336
32,294,524
28,973,693
Contingent loans
In the normal course of its business, the Corporation takes part in off-balancesheet transactions that involve risk. These transactions expose the Corporation
to credit risk in addition to the amounts shown on the Financial position.
The credit risk involved in contingent operations is related to the likelihood of
one of the participants in the respective contract failing to honour the terms of
the contract. The corresponding contracts include the amounts to be assumed
by the Corporation for losses in contingent operations.
The Corporation uses similar policies to evaluate and grant loans, both direct
and contingent. In the opinion of the management, contingent transactions do
not represent an exceptional credit risk, given that it is expected that a portion of
these contingent loans will expire without having been used; the total value of
contingent loans does not necessarily represent future cash disbursements by
the Corporation.
When, in the judgement of the management, there is a reasonable likelihood of
a contingent operation causing a loss for the Corporation, that operation is
included in the calculation of the loan provision as if it were a direct loan.
The Corporation's management believes that there will be no significant losses
in addition to the amounts for which provision has been made under the heading
provision for contingent loans, covering contingent operations current as at the
30th September 2013 and the 31st December 2012.
(a)
Financial derivatives
38
The Corporation's commitments consist principally of different currency and
interest rate swaps aimed at hedging risks relating to foreign-currencydenominated borrowings (notes 9 and 4(a)).
(b)
Loan guarantees
The balance of this item, guarantees received, is based on the agreed value of
the guarantees as at the date of the loan contract. This balance does not
necessarily represent the market value of the assets used as guarantees for the
Corporation's loans.
(c)
Trusts and confidential commissions
This account includes the account balances of trusts and confidential
commissions administered by the Corporation.
As at the 30th June 2013 COFIDE has guaranteed loans to the Agroindustrial
Cayaltí S.A. Trust by Banco Financiero, Interbank, BBVA Banco Continental,
Banco de Comercio and CMAC Huancayo amounting to (in thousands)
S/.98,091 (in thousands, S/.79,488 as at the 31st December 2012).
16. INCOME FROM FINANCIAL SERVICES
Income from financial services for the periods ended on the 30th of September 2013
and 31st of December 2012 consist principally of commissions for services rendered
by the Corporation in administering funds and securities received mainly from the
State in its capacity as trustee.
17. Cost of personnel and board of directors
This item includes:
30 09 2013
S/.000
Salaries
Bonuses
Additional bonuses
Social charges and others
Severance pay
Holidays
Directors' emoluments
Assignations
Other personnel expenses
Profit sharing (note 20)
Personnel & admin. Expenses - previous fiscal years
Total
18. COST OF SERVICES RECEIVED FROM THIRD PARTIES
This item includes:
39
30 09 2012
S/.000
11,829
2,426
3,392
1,916
1,329
222
282
64
3,750
4,359
0
11,715
2,165
2,635
1,756
1,280
67
248
60
3,568
4,554
133
29,569
28,181
Professional fees
Other services
Consulting services
Electronic processing
Security & protection
Advertising
Repairs & maintenance
Communications
Subscriptions & quotations
Supplies - various
Rent
Electricity & water
Transport
Insurance
Travel expenses
Notaries & registration fees
Electronic transfers
Court costs
Entertainment expenses
Income - various from prev. fisc. years
Total
1,906
3,174
2,373
1,210
726
827
783
638
94
371
249
238
164
136
74
76
52
29
15
-
1,408
3,510
2,821
1,218
678
648
517
570
366
313
242
226
212
79
79
41
54
28
21
(162)
13,135
12,869
19. EARNINGS PER SHARE
The calculation of basic and diluted earnings per share is given below:
30 09 2013
S/.000
Profit (numerator)
Shares (denominator)
Profit per ordinary share and diluted profit
30 09 2012
S/.000
54,448
48,644
1,511,065
1,494,501
0.036
0.033
20. INCOME TAX
(a) Income tax regime
(i)
Tax rates
Income tax payable by corporations domiciled in Peru is 30%.
Companies domiciled in Peru are subject to an additional rate of 4.1%, payable
on all sums considered to be indirect payments of earnings, including amounts
charged to expenditure and undeclared income; this means expenditure that may
have benefited shareholders, among others; private expenditure not connected
with the business; expenditure by shareholders, among others, that are paid by
the corporation.
(ii)
Significant modifications to income tax
40
By means of Law 29884, the Peruvian Congress delegated to the Executive the
power to modify the existing tax regime through legislative decrees, in order to
improve the Peruvian tax system.
Legislative Decrees 1112, 1116, 1120 and 1124 were issued under these
powers, modifying Peru's income tax regime, most of which come into force in
fiscal year 2013. A summary of the most important modifications is given below:
- Accountable costs. Accountable costs should be supported by validly issued
payment receipts.
- Disposal of shares or transferable securities. The market value is determined
by the highest of transaction value, stock market price if applicable, equity
value or any other valuation set forth in the Executive Regulations.
Furthermore it establishes that third category capital losses will not be
deductible when shares or transferable securities of the same type as those
sold are purchased, or purchase options acquired, within a period of 30 days
before or after disposal.
- Transfer Pricing. All transactions with non-arms-length parties in Peru or
abroad; as well as transactions with residents in tax havens are subject to
transfer pricing analysis. Price adjustments only take place when lower taxes
are found in Peru, thus eliminating the possibility of making a negative
adjustment in the event of excess tax that is disadvantageous to the taxpayer.
All transactions generating income or imputed income carried out between
non-arms-length parties, or with parties in tax havens shall be subject to
transfer pricing rules. When non-domiciled parties are involved, adjustments
shall only take place to transactions that generate taxable income from a
Peruvian source and/or deductions for calculating tax payable in Peru. As far
as Advance Pricing Agreements are concerned, SUNAT may enter into such
agreements with the tax authorities of countries with which agreements have
been entered into to prevent double taxation.
Transfer pricing rules no longer apply to VAT calculations.
- Depreciation. Percentage depreciation should be applied to the results of
adding costs incurred to acquisition, production and construction values. This
means the costs incurred with respect to an asset that has generated taxable
income that, in accordance with accounting rules, should be recognised as
costs.
The value deductible or the maximum deductible shall be the value referred to
in the previous paragraph, except when in the previous fiscal year the
deductible value is higher than the residual value of the asset after
depreciation, in which case the latter shall be deducted.
- Donations. When deducting the cost of donations, SUNAT shall decide on the
classification of the recipient and not the Ministry of Finance - MEF. This
change took effect on the 30th of June 2012.
41
- Non-deductible costs. Costs consisting of the difference between the nominal
value of a loan between non-arms-length parties and its transfer value to third
parties that assume the credit risk of the debtor are not deductible.
If such loan transfers generate accounts receivable in favour of the transferor,
the provisions and/or write-downs arising from such accounts being
uncollectable do not constitute deductible expenses.
- Exchange rate differences. From fiscal year 2013 the rules on capitalisation of
exchange rate differences arising from liabilities in foreign currency relating to
inventories and fixed assets are eliminated. Nevertheless, exchange rate
differences generated up to December 2012 activated as a function of existing
legislation, shall continue to be treated as before.
- Costs of training personnel. The cost of training personnel is no longer
deductible.
- Costs of vehicles. Light trucks in categories B1.3 and B1.4 are included in the
limit for the deduction of vehicle costs. Pick-up trucks are excluded.
- Technical aid. With respect to the application of the 15% rate, the need to
obtain a sworn statement from the company providing the service has been
eliminated. The requirement to obtain a report from an auditing company
certifying that the technical aid has been provided applies only to service
costing more than 140 STU at the time the contract was signed. This
regulation will take effect on the 1st of August 2012.
- Monthly payments on account. The applicable percentage has been reduced
from 2% to 1.5% and the system of calculating payments on account has been
modified. The modification implies payment monthly in advance of the sum
calculated using the coefficient system or the amount calculated using the
1.5% figure, whichever is the greater. The legislation now incorporates the
possibility of modifying the percentage after the May monthly payment based
on the profit and loss account as at the 30th of April, using the coefficient
resulting from this financial statement. Specific rules have been issued for the
advance payments for August to December 2012, given that the modification
takes effect for the August payment.
(iii) Tax position of the Company
Income tax returns for fiscal years 2008 and 2010 to 2012 inclusive, are
awaiting review by the tax authority, which can carry out such a review for four
years after the corresponding income tax return has been submitted. The
management believes that no significant liabilities will arise from pending
reviews.
Because legislation applicable to the company can be interpreted in different
ways by the tax authority, it is not possible at this date to say whether
additional tax liabilities will arise as a result of future audits. Any additional tax,
42
fines or interest, if any, will be recognised in the results of the year in which the
difference in interpretation with the tax authority is resolved. The management
believes that no significant liabilities will arise as a result of these possible
audits.
During the second half of 2011 the tax authority carried out an audit of fiscal
year 2009, which revealed an omission of income tax and corresponding fine.
The Corporation did not lodge an appeal, but modified its income tax return for
2009 and made a payment to the tax authority amounting to a total (in
thousands) of S/.2,382.
During the first fortnight of July 2013 the tax authority carried out an audit of
fiscal year 2008, which revealed an omission of income tax and corresponding
fine. The Corporation did not lodge an appeal, but modified its income tax
return for 2008 and made a payment to the tax authority amounting to a total
(in thousands) of S/0.25.
(b) Consequently, the tax base was calculated as follows:
Profit before income tax
Additions for tax purposes:
Provision for loans
Provision for adjudicated assets
Provision for accounts receivable
Provision for temporary investments
Other non-deductible expenses
Deductions for tax purposes:
Exempt income
Reversion - provision for loans
Reversion - provision for accounts receivable
Reversion - provision for adjudicated assets
Various - net
Net taxable income
30 09 2013
S/.000
30 09 2012
S/.000
73,617
76,752
76,289
1,669
11,944
52,270
16
2,234
2,637
14,153
(268)
(73,650)
(1,080)
(1,345)
(427)
(47,760)
(4,664)
(249)
(3,889)
87,176
91,073
Calculation of income tax and current
employee profit sharing:
- Employee profit sharing D.Leg 892 - 5% (Note 17)
- Current income tax - 30%
Total
Income tax expenses include:
43
(4,359)
(4,554)
(24,844)
(25,954)
(29,203)
(30,508)
30 09 2013
S/.000
30 09 2012
S/.000
Current income tax
24,844
25,954
Deferred tax - expenses (paragraph (c))
Total
(5,675)
19,169
2,154
28,108
Estimated current income tax consists of the tax payable calculated using the
rate of 30% of estimated taxable income after deduction of employee profit
sharing, Leg. Decree 892 at 5%.
During the periods ending on the 30th September 2013 and the 31st of March
2012, the effective income tax rate differs from the rate applicable to earnings
before tax. This difference is due to certain items relating to the calculation of
taxable income, whose effects on the applicable tax rate are summarised below
(in percentages of earnings before tax):
30 09 2013
S/.000
%
Income tax calculated using current
tax rate
22,085
30.00
Tax effect on additions (deductions)
Non-deductible expenses
Exempted income
Other permanent differences
3,583
(80)
(6,419)
4.87
(0.12)
(8.72)
Current and deferred income tax recorded
at effective tax rate
19,169
26.04
(c) Deferred income tax - balances
Deferred assets tax and liabilities are made up as follows:
44
30 09 2012
S/.000
%
23,026
4,246
(125)
961
28,108
30.00
5.53
(0.16)
1.25
36.62
Balance as at Accumulated Results
Balance as at Accumulated a Results
Balance as at
01 01 2012 movements of fiscal year 31 12 2012 movements of fiscal year 30 09 2013
S/.000
S/.000
S/.000
S/.000
S/.000
S/.000
Temporary differences assets (liabilities):
Generic provision for loans and contingencies
Other generic provisions
Provision for changes in value
Generic provisions - accounts receivable
Provision for adjudicated assets
Building depreciation
Change in value of CAF and Bladex shares
Unrealised gain (loss) on investments in securities
Unrealised gain (loss) on derivatives
DJ. 2003 - Provisions, write-offs and others
607,594
2,847
3,500
6,319
4,242
(514)
(1,493,724)
(35,673)
30,059
49,406
(101,410)
45,972
-
(12,949)
(41)
1,823
(3,130)
(1,996)
(257)
(8,649)
594,645
2,806
5,323
3,189
2,246
(771)
(1,444,318)
(137,083)
45,972
21,410
122,596
(69,911)
-
19,449
289
(311)
(317)
193
(383)
614,094
3,095
5,012
2,872
2,246
(578)
(1,444,318)
(14,487)
(23,939)
21,027
Temporary differences. Net
(875,350)
(6,032)
(25,199)
(906,581)
52,685
18,920
(834,976)
Deferred income tax (30%) (Note 13)
(262,605)
(1,810)
(7,559)
(271,974)
15,806
5,675
(250,493)
21. TRANSACTIONS WITH NON-ARM'S LENGTH PARTIES
As at the 30th of September 2013 and the 31st of December 2012, the principal
operations carried out with CAF were financing operations for loans to IFIs.
The Corporation's transactions with this non-arm's length company took place in the
normal course of its business and under similar conditions to those that would have
applied to third parties.
Operations carried out with CAF in the periods ending on the 30th June 2013 and
30th June 2012 include interest payments on borrowings and obligations to
international bodies valued (in thousands) S/.3,156 and S/.2,018, respectively.
Directors' and managers' salaries
The amount paid in the third quarter of 2013 and in 2012 for directors' emoluments
was (in thousands) S/.282 and S/.248, respectively.
Managers' salaries
Salaries, other benefits and professional fees paid as at the 30th of June 2013 to
employees of the Corporation with executive responsibility (managers) amounted to
(in thousands) S/.3,607 (S/.3,620 in June 2012).
Loans to personnel
As at the 30th of September 2013 and the 31st of December 2012, the directors,
officials and employees of the Corporation had taken out loans permitted by the
Framework Act, which regulates and establishes certain limits for transactions with
directors, officials and employees of banks in Peru. As at the 30th September 2013
45
and the 31st December 2012, direct loans to employees, directors, officials and key
personnel amounted to (in thousands) S/.6,412 and S/.5,729, respectively.
22. SUBSEQUENT EVENTS
There are no known events occurring after the closing date of these financial
statements and of this report that could have a significant effect on either of them.
46