Kallpa Securities S.A · Kallpa Securities SAB is a public company whose objective is to develop...

________________________________________________________________________________________ Av. La Encalada 1388 Off. 802, Santiago de Surco, Lima 33

www.kallpasab.com Main Line: (51 1) 627-5220

Anual Report 2009

Kallpa Securities S.A.B

2009 2009 Anual Report and company description

Anual Report 2009



Anual Report 2009

PART I

STATEMENT OF LEGAL RESPONSIBILITY

“The following document contains truthful, sufficient information regarding the development of business at Kallpa Securities Sociedad Agente de Bolsa (SAB) over the course of the year 2009. Company responsibilities and liabilities notwithstanding, signing parties take responsibility for the correct content of this document as established by proper legal dispositions.”

Chairman Chief Executive Officer (Signed in the original copy) (Signed in the original copy) Lima, April 15th, 2010

This statement is issued in compliance with dispositions established by Decree on General Management 040-99-EF/94.11



Anual Report 2009

PART II

BUSINESS SUMMARY

2.1 GENERAL INFORMATION: 2.1.1. Firm legal name:

The firm has been named KALLA SECURITIES SOCIEDAD AGENTE DE BOLSA S.A. - KALLPA SAB since its creation.

2.1.2 Legal address:

Our offices are located at Av. La Encalada 1388, Off. 802, Santiago de Surco. The number for our main phone line is 627-4520; fax number is 628-9471.

2.1.3 Constitution:

KALLPA SAB was constituted on June 25, 2008, starting operations on October 1st, 2008. Its constitution was established in public records by Lima Notary Manuel Noya de la Piedra and is in writing under Certificate 1298762 of the National Superintendence of Public Records in Lima (SUNARP).

2.1.4 Economic Group:

KALLPA Securities Sociedad Agente de Bolsa S.A. does not belong to any economic group. 2.1.5 Paid in Capital, stock generated and issued, number and nominal value of stock

To December 31, 2009, Paid in Capital is represented by 1,350,000 shares, wholly subscribed and paid, whose nominal value was S/. 1.00 per share. To December 31, 2009, total capital rose to S/. 1,350,000 (ONE MILLION THREE HUNDRED FIFTY THOUSAND AND 00/100 SOLES).

2.1.6 Shareholder Structure

The composition of Kallpa Securities SAB, to December 31 2009, is as follows: Alberto Alejandro Arispe Bazán holds 33.25% of shares, Enrique Gerardo Hernández Martínez holds 33.25% of shares, Ricardo Fernando Carrión Kuriyama holds 28.50% of shares, and Pablo Manuel Berckholtz Velarde holds 5.00% of shares.



Anual Report 2009

2.2 DESCRIPTION OF OPERATIONS AND DEVELOPMENT:

2.2.1 Purpose:

Kallpa Securities SAB is a public company whose objective is to develop its bussiness in sales & trading of equities, fixed income and other securities and to investment banking activities. Kallpa SAB is categorized under CIIU 7499, within the division of Other Entrepreneurial Activities.

2.2.2 Duration of bussiness conducted: The company has no end date for its bussiness operations

2.2.3 Evolution of company operations:

Kallpa SAB had a good year in 2009. The company’s Return on Equity was of 33% and market share in volume traded was of 1.5%. The companýs average monthly volume traded was S/. 25 million, far superior to what was recorded in 2008, which was S/. 9 million. The company now has over 500 clients, conducts equity research for over 8 companies quoted in the Lima Stock Market (Bolsa de Valores de Lima - BVL), and actively participates in business in capital markets and corporate finances. In 2009, Kallpa SAB listed RIO ALTO Mining shares (RIO) in the BVL and then placed US$ 6.1 million of RIO shares in the market via a private placement.

2.2.4 Description of main assets

To December 31, 2009, Kallpa SAB has sufficient assets to guarantee the normal development of its operations linked to equity trading. Details of our assets are as follows: Current Assets S/. 6, 890,647 Fixed assets (net depreciation) S/. 226,752 Intangible Assets (net amortization) S/. 155,986 Other Assets S/. 132,353 Total Assets S/. 7, 405,738

2.2.5 Personal employed To December 2009, Kallpa SAB personnel includes the following:

MANAGER EMPLOYEES REPRESENTATIVES TOTAL Dec-09 1 7 3 11



Anual Report 2009

Letter from the Chairman of the Board

Dear Shareholders: 2009 has been a year of great challenges and satisfactions for Kallpa Securities SAB. The effects of one of the worst international financial crisis at the end of 2008 had a number of effects on the Peruvian market, which we had to handle for the greater part of 2009. Over the course of 2009, however, we have grown significantly and we have achieved an important position in the market. We have been fortunate in having a team which has been able to face the challenges of the market and adequately take them as opportunities to benefit our clients. To this effect we have been able to identify and take advantage of investment opportunities in efficient and timely manner. Evidence of our efforts is the fact that we have managed to maintain our clients’ trust and attract new clients all throughout. We believe that the year 2010 will bring many changes to an increasingly competitive--although in many ways attractive--market, for which we will remain on the lookout. In 2009 we brought together an equity research team that not only stands out in the market but has generated a rebirth of financial analysts in various brokerage firms in Peru. It is a significant service we provide to our clients and to the market in general; one that had been left behind for many years. We consider that competition is always healthy for the growth of our country and we expect that it will continue to grow, which will be beneficial to the market. On the other hand, 2009 has been very successful for us with regard to our Capital Markets division. We will thus continue to compete in the market, being ready to assume new challenges and opportunities. Therefore, we believe we are well positioned to continue expanding our business, taking advantage of long term and short term opportunities. We believe in the sustained growth of the company and the development of the stock market in Peru. We are convinced that in the coming years, Kallpa SAB will continue to be one of the main players in the Peruvian market, creating value for its clients and investors in general. Sincerely,

Pablo Berckholtz Velarde Chairman of the Board



Anual Report 2009

Letter from the Chief Executive Officer (CEO) Dear Shareholders, 2009 was an excellent year for Kallpa Securities SAB. In its first full year of operations, the company’s Return on Equity (ROE) was of 33%. The market share of the Firm, according to the volume traded in soles in the Lima Stock Exchange (BVL) in 2009 was at 1.5%. It should be pointed out that in 2008 (after three months of operations), ROE was at -3.0% and market participation was 0.5% during the period of operations. These two ratios show an achievement in the company’s two main goals: to provide an adequate return on equity for shareholders and expand the presence of the “Kallpa SAB” brand in the market. Our two business units, Sales & Trading and Capital Markest, surpassed our objectives. The Sales & Trading division managed to increase the average amount traded monthly by Kallpa SAB from S/. 9 million in 2008 to S/. 25 million in 2009. This represented a spectacular growth of 177%. The number of retail clients also increased, going from 141 to 603, and institutional clients from 0 to 15. At closing of operations in 2009, Kallpa SAB had among its clients 80% of Peruvian institutional investors. Our analysts already cover over 8 companies quoting in the Lima Stock Exchange and the quality of our reports is highly regarded in the market. The Capital Markest division also had an important year. Its greatest accomplishment was structuring the private placing of shares for Rio Alto Mining. First, Kallpa SAB listed stock for the mining company in the Lima Stock Exchange and then, within a month, placed approximately 17 million shares for a total value of US$ 6.1 million among our clients. This private placement was conducted at the end of November of last year, requiring coordinated work between the management of the capital markets and sales & trading divisions. 100% of placement was conducted among Peruvian investors. Kallpa SAB thus not only offered its clients new financial instruments, but made it possible for an enterprising company such as Rio Alto to obtain capital to finance its projects. We expect that these projects will be finalized and will contribute to the growth of GDP, raise employment levels, increase tax revenue, and of course, contribute to the growth of our clients’ portfolios. This is our company’s mission: to contribute to the development of capital marketsin Peru. After the listing, Kallpa SAB has remained Rio Alto’s sponsor at the Lima Stock Exchange.

The success of the business divisiosn would not have been possible without the efficient labor of our operations and administrative departments. They provided the proper support to our business generators. Thus, the number of employees of Kallpa SAB increased in 22% over the course of 2009.

The company also invested in human capital, technology, and information systems. We seek to be efficient and we believe that these three resources are the pillars of our organization. I would like to highlight the optimization of our web page, where we have set up a system for all of our clients to view accounts statements, holdings, policies, profitability of their portfolios, etc, all with the highest level of security and privacy.



Anual Report 2009

In closing, I wish to thank our clients and our employees for the trust they

have placed in us. We work arduously to offer our clients a personalized service experience and to provide the best investment recommendations when handling their portfolios. Furthermore, those of us in management continue to keep our commitment to our employees, not only offering attractive salaries, but also creating a good working environment, providing them with benefits and constantly investing in furthering their training.

We are pleased and proud of our accomplishments in 2009. We expect we will surpass them during the year 2010.

Sincerely,

Alberto Arispe Bazán Chief Executive Officer



Anual Report 2009

Mission To actively contribute to the development of capital markets in Peru, providing efficient financial services, such as commodity and security brokerage, management of portfolios, financial consulting, corporate finances, and other services related to investment banking.

Vision To become leaders in the field of financial services the company provides, constantly seeking to meet our clients’ needs, helping them optimize the allocation of their funds.

Values

1) Honesty 2) Confidentiality 3) Excellent service 4) Innovation 5) Efficiency

Strategic Objetives

• To offer proper return on equity to company shareholders, a minimum 20% per annum.

• To increase the value of the “Kallpa Securities SAB” name in the Peruvian market.

• To continue to gain market share in the markets in which the company competes.

• To become a competitive, efficient company, with proper internal management.

• To promote and spread capital markets culture in Peru, with the goal of contributing to having greater participation of demanders and suppliers in the Peruvian stock market in the long run.



Anual Report 2009

Our Board of Directors Pablo Berckholtz Velarde, Chairman Alberto Arispe Bazán Enrique Hernandez Martínez Ricardo Carrión Kuriyama

Our Management Team Alberto Arispe – Chief Executive Officer Masters in Business Administration (MBA) from the Stern School of Business at New York University in 2000 and Bachelor in Economics from the Pontificia Universidad Catolica del Peru in 1993. Between 2005 and 2008 he was Project Development Manager at the Lima Stock Exchange. Between 2000 and 2005 he was based in New York, where he worked as Vice-President of the Emerging Markets Division of Swiss Re Corp. Since 2005 he has been a hired professor at the Business School of the Universidad de Lima, where he teaches the courses on Capital Markets. Enrique Hernandez – Managing Director, Sales & Trading Division Economist from the Pontificia Universidad Catolica del Peru in 1990. He was General Manager of Sudamericano Bolsa, Head of Management and Finance at Centura SAB Brokerage Firm, Business Manager and Head Trader at Macrovalores SAB Brokerage Firm, Director of the Lima Stock Exchange (BVL), Financial Consultant at Citibank Peru, Head Currency Trader at the Banco Central de Reserva del Peru, and Stock Operator at Argos Brokerage Firm. Since 2006 he has been hired as professor at Bursen, the stock market school at the Lima Stock Exchange. Ricardo Carrión – Managing Director, Corporate Finance and Capital Markets. Bachelors in Business Administration from the Universidad de Lima, with a concentration in Finance. He has over 10 years experience in banking. In the last few years he has worked in the Corporate Finance and Capital Market division of the Banco de Credito del Peru, participating in some of the most significant operations in the Peruvian market, both in banking and the capital market. He possesses ample experience in structuring debt/capital instruments (Corporate Bonds, Title Bonds, Commercial Papers, and issuing stock, among others). During the year 2007 he acted as external consultant for the Lima Stock Exchange (BVL). Karina Santiago – Internal Control Officer Public Accountant, Member of the Association of the Official College of Accounting, graduated from Universidad Ricardo Palma in 1998 with a concentration in Auditing. She has over 10 years experience in the area of Finance and Auditing. She holds the title of Brokerage Business Specialist from the Brokerage Studies Center of the Lima Stock Exchange (BURSEN). Over the last few years she has worked in the Stock department of Atacocha Mining Company, (Atacocha S.A.A.), participating in Capital Increase in B-Class Stock and Public Offer to Exchange Investment-type Stock for B-Class stock).



Anual Report 2009

Board

Internal Control

Alberto Arispe

CEO

Ricardo Sánchez

Accounting Manager

Enrique Hernández

Trading - Head Trader

Ricardo Carrión

Corporate Finance – Managing Director

Trading

- María Belén Vega- Miloban Paredes

Research Analysts

Eduardo Macpherson

Head of Operations

Karina Santiago

Controller

María Belén Vega – Investment Analyst Bachelors in Economics from the Universidad del Pacifico. She has worked as an intern in the area of Structuring and Risk of Titulizadora Peruana, in the area of Treasury and Trade at the Banco de Credito del Peru, worked in transfer price analysis at KPMG, and provided support to the Investment Risk Unit at AFP Profuturo. Currently she works as Investment and Corporate Finance Analyst. Miloban Paredes Derteano – Investment Analyst Bachelors in Economics from the Universidad del Pacifico. He has experience in trading at the ING-Mutual Fund Investment Table. Later on he worked as consultant at the Consulting Center of the Universidad del Pacifico, where he was in charge of a task team. Finally he acted as financial analyst at the Deals and Corporate Finance department at PricewaterhouseCoopers, whereshe appraised, managed, and developed financial models for companies from varying industries on the national and international stages. He has teaching experience in the undergraduate level. Eduardo Macpherson – Head of Operations Industrial Engineer graduated from the Universidad de Lima in 2007. He has experience in custody of assets, stock services and corporate events. Previously, he worked in the Service and Operations area at Cavali ICLV.

Organization Flow Chart



Anual Report 2009

Operations Sales and Trading Division The Sales & Trading Division represented 68% of Kallpa SAB´s revenues in 2009 (98% in 2008). In 2009, Kallpa SAB was ranked 14th among stock brokerage firms, on the basis of amount traded. The average monthly volume traded by Kallpa SAB in 2009 was S/. 25 million, 177% greater than the monthly average observed in 2008, which was S/. 9 million.

Brokerage Firm Ranking by Volume Traded

*Volume negotiated by intermediaries has been calculated taking into account transactions involving buying/selling conducted by the intermediary.

It is also important to highlight the equity research reports including buy/sell recommendations. At closing in 2009, our analysts had published 8 company reports on companies including Credicorp, Southern Copper, Volcan, La Pampilla Refinery, Rio Alto Mining, and Cerro Verde. This marks a difference between Kallpa SAB and the competition. Kallpa bases its investment recommendations on a fundamental analysis of actions, meetings with company management, among other economic/financial variables.



Anual Report 2009

Corporate Finance and Capital Markets Division The Corporate Finance and Capital Markets Division conformed 20% of Kallpa SA´s revenues in 2009 (0% in 2008). Kallpa SAB was the only Brokerage Firm in the market to list shares of a junior company (Rio Alto Mining) in the Lima Stock Exchange. Then, our executives structured the private offering of Rio Alto Mining shares and played a very significant role in the placing process. Likewise, this business division conducted its first company valuation of a Chinese funded fishing group with operations in Peru. We must remark on the fact that the development achieved by the Corporate Finance Division during the year 2009 allowed, over this very same year, the start of various processes and closing of work agreements with different types of companies. These processes include activities such as capital markest operations and financial advisory. We firmly believe that the development of the Corporate Finance Division over the next few years will be an important component of the growth of Kallpa SAB and therefore, we stress that the work performed in this Division is not only focused in generating profit for our company in the short term. We seek to create long term relationships with the various enterprises we work with. To this we also bring the educational work carried out in the local stock market by way of our active participation in initiatives like “Avanza BVL”, directed by the Lima Stock Exchange and through meetings with companies that wish to learn more about the activities that encompass the world of the capital market.



Anual Report 2009

Economic and Financial Landscape 2009 GDP In 2009, the worldwide financial crisis negatively affected the degree of GDP growth. The growth rate of Peruvian GDP was of 0.9% in 2009, compared to 9.8% in 2008. The behavior of internal demand was thus also negatively affected, considering that in the past few years dynamism in internal demand has played a predominant role in the rhythm of the country’s economic growth. Private consumption, in particular, increased by 2.4% in 2009, well below the 7.8% which had been the average over the last three years.

On the other hand, the financial crisis generated a significant decrease in private investment, not only in Peru, but worldwide. In 2009, private investment decreased to 15.2% in comparison to a 25.8% increase the previous period. To compensate, the government applied an anti crisis plan, based on greater public expenditure. In 2008 the growth rate of public investment (41.9%) duplicated with respect to 2007 (18.2%) and in 2009 the growth rate of public investment was 25.9%. The increase in public investment presented this elevated rhythm due to the fiscal policy the government has been putting together to face the effects of the external financial crisis. The economic recovery became visible towards the end of the year, with an improvement in terms of trade and on the scale of commerce, due to an increase in the price of base metals.

2006 2007 2008 2009

GLOBAL DEMAND (1+2) 8.6 10.9 11.6 -2.8

1. Internal Demand 10.3 11.9 12.1 -2.9

a. Private consumption 6.4 8.3 8.7 2.4b. Public consumption 7.6 4.5 2.1 16.5c. Private investment 20.1 23.4 25.8 -15.2d. Public investment 12.8 18.2 42.8 25.9

2. Exports 0.8 6.2 8.8 -2.5

GLOBAL SUPPLY (3+4) 8.6 10.9 11.6 -2.8

3. Gross Domestic Product 7.7 8.9 9.8 0.9

4. Imports 13.1 21.3 19.8 -18.4

Source: INEI and BCR

(True percentile variations)GLOBAL SUPPLY AND DEMAND(2006 - 2009)



Anual Report 2009

FISCAL RESULTS Peru’s fiscal deficit in 2009 was of around 8,400 million soles, representing approximately 1.9% of the country’s GDP. It should be mentioned that the Peruvian national deficit for 2009 was the smallest in the region. It should be expected that for this year the results will continue to be the smallest in Latin America. INFLATION The average rate of inflation for 2009 was of 2.9%. Likewise, Peru closed that year with the least inflation of the last 8 years: in the month of December, inflation reached 0.25%. The activities which presented greatest inflation levels in December were the following six: Transportation and Communication (1.38%). Apparel and Footwear (0.31%), Home Letting, Energy and Power (0.28%), and to lesser extent Food and Drink (0.2%). It should be mentioned that inflation fell inside a greater range of 1.0% to 3.0%, as established by the Banco Central de Reserva.

EXCHANGE RATE In 2009 domestic currency gained value, partially due to measures the Federal Reserve decided to adopt to face the crisis. This decreased the reference indexes, generating a flight to quality toward assets with better return. To this effect, a low demand for dollars was observed, together with a strong input of dollars into the country, which explains the decrease in value of US money.






Anual Report 2009

EXTERNAL CRISIS In 2009, a visible recovery of the market was observed, within the context of an improvement in the national price of base metals in the year’s final trimester. It is expected that the growth rate of Peruvian GDP will accelerate from the 0.9% of 2009 to 5% in 2010, according to a consensus reached among Peruvian analysts. It must be pointed out that all predictions point to the fact that Peru is the country which will see greatest growth in the region during 2010. STOCK MARKET Another factor that demonstrated how the economic recovery was making itself increasingly present was the performance of the National Capital Index (Indice Nacional de Capitalización - INCA), which obtained profitability of over 75% in the year 2009, coming after the 50% loss the index experienced in 2008, following the behavior of the other stock market locations around the world. It must be pointed out that the positive behavior of the Lima stock market was in line with the positive behavior of the price of metals in the last trimester of 2009.

The Lima Stock Exchange also experienced a decrease in the amount traded. On average, in 2009, USD 4,007 million were traded, 21% less than the USD 5,111 million traded in 2008, in the equity market. It is expected that being the first year of the enforcement of taxes on capital earnings, in 2010 the amount traded in variable income in the market will follow the trend presented in 2009.

Source: General Lima Stock Exchange Index (Índice General de la Bolsa de Valores de Lima - IGBVL)

Source: General Lima Stock Exchange Index (Índice General de la Bolsa de Valores de Lima - IGBVL)



Anual Report 2009

2009 Audit opinion and financial statements

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