COMBINING STRENGTHS Annual Report 2006  Dear Shareholders LETTER FROM I am pleased once again, as every year, to present to the Shareholders’ General Meeting THE CHAIRMAN the Annual Report of the management activities undertaken last year by Credicorp’s Board of Directors.

The Results First of all, I would like to express my deep satisfaction with the outstanding results obtained in 2006. As you have already been informed, net income after deducting minority interest reached US$ 230.0 million, which is 26.5 percent higher than that of the previous year. This result is even more significant if we consider that throughout 2006 some important non-recurring expenses occurred, due to the start-up of Prima AFP’s operations and its merger with AFP Unión Vida, a company that was acquired in September of last year.

The rise in profits is mainly a result of an increase in net interest income, a null provision charge for the credit portfolio and the sustained growth in non-financial income. In 2006, the business also made a significant contribution to the results of Credicorp, since it tripled its contribution to Credicorp’s earnings for 2005, a year in which we experienced a strong loss due to high claims rates.

The year 2006 was outstanding, not only because of the profits that were obtained, but also because we reached significant achievements in the growth and quality of the assets we manage, in the attainment of the specific objectives of each of our lines of business and in the improvement of efficiency. This Report contains detailed information regarding the unfolding of our company’s activities.

In order to illustrate the successful development of our Corporation, please allow me to look back into the recent past. I would like to mention just two relevant concepts: the continuous improvement in profitability and the substantial growth in value generated for our shareholders.

Regarding profits, we have gone from US$ 42.4 million in 2002 to US$ 230 million in 2006; i.e. in a period of four years, profit has increased more than fivefold, and last year Letter from the Chairman

RETURN ON EQUITY 18.4%

Regarding profits, Credicorp has gone from US$ 42.4 million in 2002 to US$ 230 million in 2006, reaching a return on average equity of 18.4%

we reached a return on average equity of 18.4 percent, whereas four years ago, in 2002, it   expenses for the start-up of our company, which, as we all know, started affiliating workers amounted to only 5.3 percent. in August 2005.

Equally successful has been the creation of value for shareholders. The stock exchange The acquisition of AFP Unión Vida was a sound decision, which I am pleased to emphasize. value of our company increased more than five times between December 31, 2002 and Through this acquisition and later integration, our subsidiary, Prima AFP, has become an December 31 of last year, when it reached the price of US$40.94. Thus, based on its important company in the business of pension fund management in Peru, and one of market capitalization, Credicorp has become the third largest company listed in the Lima the leaders in this market. Stock Market. After the merger, in November, we started managing a US$4,206 million fund, belonging Such positive evolution in the results and operations of Credicorp has been influenced to approximately one million affiliated workers. With such figures, our share in the private by the favorable economic scenario of the past years in Peru. We have seen a strong pension system has reached 29.2 percent in managed funds and 25.7 percent in the expansion in our production activities, a constant stability of internal prices, organized number of affiliated individuals. foreign and fiscal accounts, and overall macroeconomic policies directed towards fostering private business. Such policies have brought about a favorable business environment and, It should also be noted that, in this short period of operations, the funds managed by particularly in the last year, have also generated optimism in the future development of our Prima AFP have always been placed among the two with the highest profitability. country, which, I am sure will further increase investment and economic growth. Our presence in the pension fund market has contributed to the dynamism of the sector, Dividends as it leads to greater competition, not only in terms of lower commissions, but also in Continuing with our policy on dividends, at its meeting on February 28, the Board decided setting higher service standards for the affiliated workers. to distribute a cash dividend of US$ 1.3 per share, 18.2 percent higher than that of last year. BCP Since its foundation in 1995, Credicorp has always distributed dividends, even in its most Banco de Credito BCP, our most important subsidiary, last year contributed a US$238.9 difficult years, since we believe that the shareholder must be adequately compensated, while million profit to Credicorp. Such a contribution to Credicorp’s profits is 34.5 percent higher the company is capitalized to maintain high solvency and guarantee its growth. than that of 2005, thus allowing for a return on average equity of 28.6 percent, the highest The Subsidiaries recorded so far. However, profit in nuevos soles, measured according to local standards, I shall now present a brief summary of the results and operations of our main subsidiaries came to S/. 661.6 million, 4.4 percent below that of the previous year, mainly because 2006 saw the appreciation of the Nuevo Sol, while the opposite occurred in 2005. Prima AFP As I have already mentioned, the new pension fund management activity has had a The improvement in BCP’s results can be explained by the increase in net interest income negative contribution. Prima AFP has posted a net loss of US$20.7 million according to as a result of a 21.4 percent growth in loan disbursements, as well as to the higher international accounting principles. Such loss is mainly due to non-recurrent expenses of non-financial income, that rose by 15.9 percent compared to 2005. An additional factor approximately US$12.0 million for the merger with AFP Unión Vida, as well as to the contributing to such positive results was the fact of not allocating provisions to cover the Letter from the Chairman

Pacífico Peruano Suiza’s contribution to Credicorp increased from US$ 5.6 ROE BOLIVIA 21.7% million in 2005 to US$ 14.5 million Banco de Crédito de Bolivia recorded net profits of US$ 14.1 million, reaching a return on average equity of 21.7% in 2006

loan portfolio, due to the steady improvement in credit risk. In this regard, it should be   noted that past-due loans account for only 1.3 percent of the total, and are 249.5 percent covered by provisions.

Banco de Crédito de Bolivia Despite the political and social circumstances prevailing in Bolivia in 2006, the year was also outstanding for our subsidiary in this country. Profits reached US$14.1 million, compared to US$10.2 million in the previous year, thus reaching a very satisfactory profit of 21.7 percent measured on average equity.

We are very proud of the evolution of Banco de Crédito de Bolivia. After facing a difficult period due to problems in its loan portfolio, during the last three years it has shown positive results in profitability, a growth in its business and substantial improvement in the quality of its assets. Regarding this last item, we should point out that past-due loans represented only 3.6 percent of its loan portfolio at the end of last year, compared to 20.7 percent in 2003, and the provision coverage reached 164 percent.

As a result of the soundness of such indicators, the growth in deposits and loans and the quality of the service rendered to our clients, Banco de Crédito de Bolivia is currently the leading institution in the Bolivian financial market.

Atlantic Security Holding In 2006, Atlantic Security Holding continued presenting a highly dynamic pattern of development in its operations. The total funds entrusted to us by our clients, both in the way of deposits as well as in the management of funds, continued rising at a very high rate - 31.6 percent - reaching a figure close to US$ 2,600 million, thus duplicating the funds managed three years ago.

Regarding the financial results, Atlantic continues to increase its contribution to Credicorp’s Letter from the President

In order to support the growth of the retail sector and continue modernizing our operations, we are estimating

investments of US$ 80 million for the current year

profits. In 2006, this amounted to US$ 15.4 million, compared to US$ 13.5 million in the   In order to support the growth of the retail sector and continue modernizing our operations, previous year. we are estimating investments of US$80 million for the current year, especially in the IT area, while at the same time, strengthening our physical infrastructure. For 2007, we Pacífico Peruano Suiza plan to significantly broaden the ’s network to serve our customers by opening 26 In the case of Pacífico Peruano Suiza, 2006 was a year for restructuring its organization and branches, installing 75 ATMs and setting up 170 new Agents BCP, which will bring us to internal processes, although it also presented a significant improvement in profit generation. a total of 720 Agents by the end of this year. The comparison of this figure with our 240 Its contribution to Credicorp increased from US$ 5.6 million in 2005 to US$ 14.5 million in traditional branches gives a clear dimension of the magnitude of our efforts in order to be 2006. This result was obtained by a 14.8 percent increase in the net premiums earned, closer to our customers, to serve them better and contribute to the growth of the country’s a reduction of the claims rate resulting from the recomposition of its risk portfolio and the banking activities. higher financial income generated by the positive evolution in the capital markets. The expansion in infrastructure and operations also means an increase in BCP’s labor force. The Strategies In the year reported, 1,120 employees joined BCP and this year 500 more will be hired. I would like to take advantage of this opportunity to reiterate and emphasize the overall guidelines that will direct our future management. They aim towards sustained and organized The investment I have mentioned and the increase in the number of workers is growth in the businesses we manage, maintaining our leadership in each one of them and indispensable to maintain or improve the quality of services we render. As I have generating value for our shareholders, while contributing to the development of the country. mentioned on another occasion, we must be coherent with the mission we have set for ourselves, i.e. Serving the Customer. This shall be our number one objective, not only due Retail Banking: our priority to our responsibility and position in the Peruvian market, but also because of our desire to In the banking business, we shall continue to prioritize operations with individuals and serve the community in an efficient manner. small companies. We are convinced that this sector of the market will continue being the most dynamic one in the future and will also become the area contributing more highly to Management of Funds profits. In 2006, Retail Banking was already responsible for more than half of BCP’s profits. The management of third party funds is another area of business we would like to prioritize. After entering the pension fund business area in Peru, this activity has become The activity of Retail Banking accounts for significant income generated not only by fundamental for our Corporation. As of December 31st 2006, we were responsible for interest on loans, but also as a result of the bank services offered to the large number managing third party funds for the amount of US$ 6,900 million. We are certain that of customers, whom we have the privilege of serving, and who generate more than 24 such funds, which have grown vigorously, will continue to do so in the future. This is an million operations monthly. Revenues from services rendered to medium-sized and large important source of income and together with bank commissions; helps diversify and companies are equally important. Therefore, some years ago, we set out to create new complement financial revenues. services for such companies, as well as to update the existing ones. In order to achieve efficient management of such funds, we are adapting our organization Our goal, which we believe has been reached, was to become the bank in which most and internal processes so as to offer our customers quality service, including adequate and Peruvian citizens carry out their banking transactions. timely information plus high profitability. Letter from the President

As of December 31st 2006, we were responsible for managing third party funds for the amount of US$ 6,900 million

Insurance 10 11 In the last few years and in order to mitigate operational risk, we have worked extensively In the insurance business, the completion of the restructuring that started in 2006 will take on analyzing and adapting our processes, a task that has taken us to the forefront of place this year. Such restructuring deals with the improvement of the key aspects of our financial activities in Peru. operation: distribution channels and risk management by sector. Our company’s top management is convinced that applying and maintaining a cautious The first item demands working very closely with our insurance brokers so that service policy in managing risk is the key to long term growth and this, at the same time, will to our customers, whether it refers to issuing policies or settling claims, will improve protect the net worth of our customers and shareholders. significantly. In the risk management area, we have set up a qualified professional team that Outlook will be responsible for analyzing the risk portfolio and creating new products applying best practices in selection, operations and marketing. Probably few other times in Peruvian history, we have seen an environment of such optimism regarding the development of the country. The expectation of a better future is increasingly At the same time, we have initiated a process to change the profile of our risk portfolio, by spreading to wider sectors of the population. In this highly positive scenario, our operations lowering our share in the most volatile branches, as marine hull, and increasing it in the will undoubtedly continue growing in the current year. more predictable and profitable ones, as for example automobiles. New mass products have also been added and are presently being launched in the market. I must stress that in the banking business, there is ample margin for growth since financial intermediation is still low. It has been demonstrated that at a time of high growth in domestic Responsible Risk Management income, deposits and loans rise more than proportionately. Therefore, we must take Caution is one of the basic pillars of Credicorp’s management. For this reason, the business advantage of this period of expansion, and to do so, we are investing heavily to widen our strategies we have set are supported by a conservative risk management that limits the operating capacity and generate a competitive advantage for our participation in the larger losses that may arise due to unexpected changes in market conditions. and more innovative business activities expected.

In this regard, we shall continue with our policy of matching assets and liabilities based on Insurance activities will also grow in 2007 and in the following years. Penetration of the terms and currencies, in order to reduce the risks in liquidity, interest rates and exchange rate. insurance services in the economy is very low if compared to the other countries in the region, For credit risk, we will continue applying our caution standards in credit granting. We will particularly for insurance to protect families and small companies. also continue being conservative in our policy of building reserves to support our liabilities For the management of third party funds, 2007 will also be a year of rapid growth, as a in the insurance business and to cover any possible deterioration of our loan portfolio and result of the rise in employment and individual income. other assets. Letter from the Chairman

In few other times in Peruvian history, we have seen an environment of such optimism regarding the development of the country. In this highly positive 12 13 To end this letter, I would like to say that I am optimistic about the development of our company, and that the good results of 2006 will be surpassed in 2007. The benefit of scenario, our operations will having strong economic, technical and professional support, the loyalty of our customers and the efforts of our talented personnel, highly committed with the company, will allow us to take advantage of the opportunity created by the current cycle of growth, undoubtedly continue growing in and continue with the process of maximizing value for our shareholders. On behalf of the Board, I would like to thank you, shareholders, for your trust; thank our customers for their support and loyalty, and thank our employees for their effort and the current year commitment.

Thank you,

Dionisio Romero Seminario Chairman of the Board COMBINING STRENGHTS Corporate Strategy Corporate Strategy

A group strategy, a strategy of team work, of interchange of capacities and talents, and of sharing intelligence, with a view

CREDICORP, A STRATEGY THAT COMBINES STRENGTHS to guaranteeing our leadership

The purpose of creating Credicorp was to form a financial group capable of benefiting from the synergies between the group’s companies 16 17 and becoming the leader in each of the market segments in which it operates. With this objective in sight, and following both positive and negative experiences during the course of Credicorp’s existence, we defined a corporate strategy for 2006, based on past experience that recognized the corporation’s growth opportunities and established the guidelines for taking advantage of the synergies that can be generated within the group. This is why we have chosen the theme “Combining Strengths” for our annual report, given that this was the essence of the 2006 strategy and that it will continue to be in effect in the near future.

Looking at our market… capitalizing on our strengths Credicorp, as the country’s largest and strongest financial group, still has major growth opportunities within our market. Thus, the main objective of our Credicorp strategy is to focus in our existing investments and improve the returns from each one of them, so that they may reflect or exceed international expectations for each line of business.

The underlying principle of our strategy is to focus on growth opportunities within our market, on the identification of synergies that will enable high levels of efficiency in our business and on the definition of individual “roadmaps” that enhance the profitability and improve the returns of each and every one of Credicorp’s investments. To this end, we try to combine knowledge, resources, experience, technology and capabilities to exploit our strengths as much as possible for the benefit of the group as a whole.

Thus, in 2006 we focused on:

(i) Expanding our main business, which is BCP, through strong Retail and transactional business expansion (ii) Restructuring our PPS insurance business (iii)Achieving the positioning of our Prima AFP pension funds management business; and. (iv) Improving the management of the assets held by our Credicorp companiesempresas de Credicorp.

Sustainability in sight Our objective of improving the group’s profitability as a whole and of achieving its sustainability can only be attained through the disciplined implementation of a well-grounded long-term strategy. We feel that 2006 results confirm that our strategy is correct. Therefore, it will continue to follow this path. This is also why many of the strategic measures designed for 2007 are based not only on focusing on certain business areas, but also on better use of the information, capacities and strengths of the group’s companies for the group’s benefit …combining strengths. Corporate Strategy

The progress experienced in the economic and financial environment also sets the trend of the business and defines its

strategy not only where BCP is concerned, but also regarding the group’s other companies

Still, the progress experienced in the economic and financial environment also sets the trend 18 19 Asset Management Business of the business and defines its strategy not only where BCP is concerned, but also regarding The development of Asset Management strategies on a global basis is the first main effort to the group’s other companies. reap the effects of synergy within the Credicorp group. The strategy established that all the companies will share and benefit from the market intelligence, experience and information This is how the strong development of the retail market in Peru determines the growth localized in the different groups that focus on this activity, defining policies, norms, guidelines potential of all the group’s businesses. Thus, future individual strategies are defined as a and investment parameters for each entity according to its needs and its own regulations. result of this and of potential synergies. This encompasses group companies such as BCP’s Credifondo, the ASHC and PPS Asset Management section and, of course, Prima AFP, the company of the group whose essence Individual strategies that add up lies in this business.

Banking Business Prima AFP Banco de Crédito del Perú - BCP Strategy focused on reducing the high cost of sales of the pensions system in order to The strategy is based on four pillars: (i) Growth focusing on all the products of the retail make the investment more profitable and achieve the expected returns as well as winning segment; (ii) Investment in increasing banking penetration (innovative and profitable new groups of investors, as employment grows and broad economically active sectors are channels / development of suitable products); (iii) Growth of income from transactional formalized. services; and (iv) Investment in simplifying processes and strengthening the security of (i) Building customer loyalty to achieve lower sales costs, offering the best profitability at support systems. a lower cost (lower commission); (ii) Achieving the best profitability in the management of funds; and (iii) Searching for synergies with other Credicorp companies. This strategy is also applicable to BCB, where we have learnt to capitalize on BCP experi- ence to position ourselves as the best bank in Bolivia. All of these individual strategies of the group’s companies target the achievement of the outlined objectives, which include maintaining an excellent and highly capable team and Insurance Business achieving high levels of profitability, according to the business segment in which they operate: Pacífico Peruano Suiza - PPS We hope our strategy leds us to raise Credicorp’s ROE to levels that reflect this sum of IEqually focused on strategies for improving the profitability of each branch of the strengths, maximizing Credicorp´s value to stakeholders. insurance business and attaining growth, especially in the retail segment: (i) Costs control / increasing the profitability by segment (ii) Focusing on the retail sector with better margins / Designing new and appropriate products;(iii) Focusing on differentiation through excellence of service; and (iv)Pursuing know-how synergies between the insurance business (with AIG partner), the distribution business (with BCP) and the management of investments and information (with the Credicorp group – Asset Management – Data Base).

COMBINING CAPACITIES Economic & Financial Environment Economic & Financial Environment

The World Economy continued showing a positive performance, as Real Estate Indicators (Jan=100)

160 a result of some emerging countries’ 140 120 dynamism and the major activity of 100 80 00 01 02 03 04 05 06

Building Permit New Housing Sales developed countries Source US Department of Commerce, US Census Bureau

23 North American economy reached The Global Economy Following the USA’s 2005 growth of 3.2%, during 2006 the economy posted a slightly 3.4% growth in 2006 superior performance and reached +3,4% growth. The evolution of last year was strongly influenced by the cooling of the property segment, which continued to contract, and considerably affected the North American economy. It is expected that this performance in the residential market continues, even during 2007. Thus, the economy’s good growth during the first quarter of 2006 (5.6%) contrasted with the weaker performance during the second and third quarters, which even generated expectations as to a possible USA recession. However, it is still expected that the growth remains moderate during

the next quarters, due to the risks persistence, although the indexes may show that the real state sector would begin to stabilize and its fall would have reached bottom ground. The factors that may be preventing the performance of the real state sector from expanding to all the economy, may be the performance of areas such as consumer credit, which still remains stable, motivated by the available incomes growth, corporate results and a labor market that keeps low levels of (4.5% in 2006).

Economic & Financial Environment

USA FED Rate and 10 - year US Treasury bonds (%)

8

6

4

2

0 D-98 D-99 D-00 D-01 D-02 D-03 D-04 D-05 D-06

FED 10 Y Source Bloomberg

USA GDP and Inflation (% Change annual) 24 25 Both EU and Japan achieved, In turn, inflationary pressures are at work in the world economy. Thus, in the case of the USA, underlying inflation is still higher than the FED’s trust status of 1 to 2%, while total

6 in 2006, high levels of growth inflation reached 2.5% at the end of 2006. Though the FED considers that inflationary risks and that the pressure continues to exist, it expects that both the impact of the previous 4 interest rate hikes and moderate growth will manage to hold back price increases in the medium-term. Thus, the FED has maintained its prime rate steady during the second 2 semester of 2006, after several consecutive increases in the last years.

0 Within this framework, the USA’s external and fiscal unbalances persisted. As for the trade D-96 D-98 D-00 D-02 D-04 D-06 balance deficit, during 2006 it grew 6.5% compared to the similar period of the previous

GDP Inflation year. Thus, this deficit reached US$ 763.6 billion at the end of the year. On the other hand, Source BEA, BLS at the end of the fiscal year, the public sector’s deficit posted a recovery, driven by higher corporate and personal earnings, having reached US$ 248 billion, the lowest since 2002.

Nonetheless, the outlook for the other parts of the world is favorable, both EU and Japan Main metal price indexes (Jan04=100) achieved, in 2006, high levels of growth, while China reached 10.7% growth, a very

460 similar figure to its 2005 one. In the case of Japan, what seems to stand out is the ending of a period of deflation; this enabled the monetary authorities to break away, after five 365 consecutive years of stability, from their “zero interest rate” policy and increase the prime

270 rate once, closing the year with 0,25%. Within this global growth context, the price of commodities was driven up strongly by international demand, as well as by the limitation 175 of supply of certain metals during 2006. This situation benefited the emerging economies 80 that export such commodities. Still, one must not forget that part of the price increase may D-04 M-05 J-05 S-05 D-05 M-06 J-06 S-06 D-06 have a speculative component. Copper Gold Zinc Source Bloomberg Economic & Financial Environment

Aggregate Demand Components (4Q moving total, % annual change)

20 16 8 0 -8 -16 -20 01 02 03 04 05 06

GDP Consumer Investment Exports Imports Source BCRP

Economic Sectors Growth (% annual change)

26 27 The Peruvian Economy The peruvian economy recorded Economic Sectors 2001-2004 2005 2006 The economy recorded 8.03% growth in 2006, the highest rate in the last ten years, mainly 8.03% growth in 2006, the highest Agriculture and Livestock 2.6 4.8 7.2 due to the dynamic pace of non-primary sectors such as building (+14.7%), commerce Agriculture 0.8 4.0 7.6 (+12.1%), services (+8.3%) and non-primary manufacturing (+7.7%), which responded to rate in the last ten years Livestock 5.0 6.6 6.6 the drive of domestic demand, mainly. This is clearly reflected in the growth of consumption Fishing 4.1 1.2 2.7 Mining and Fuel 8.1 8.1 1.0 and private investments, which reached rates over the average of the last years, in the case Mining and non-metalic mining 8.9 7.4 0.5 of private consumption, while private investments have increased so much that they have Fuel 0.4 23.4 5.7 become the main dynamic component of aggregate demand. Thus, exports, that had been Manufacturing 4.3 6.5 6.6 the main factor driving the economy’s dynamic performance, decelerated in real terms, as is Based on Raw Matirials 3.3 2.1 2.1 also the case of the mining sector’s production volumes, especially where main metals such Non-primary manufacturing 2.6 7.7 7.7 as copper and zinc are concerned. Electricity and Water 4.0 5.3 6.9 Construction 2.6 8.4 14.7 Thus, the deceleration of exports in real terms confirms that the trade balance’s sustained Commerce 3.3 5.2 12.1 growth in current dollars mainly responded to the high international price of metals, which Other Services 3.1 6.3 8.3 accounted for 62% of total exports, whereas imports recorded 23.4% growth, driven by Gross Added Value 3.6 6.2 8.2 buoyant domestic demand. Thus, the current accounts balance has reached 2006 with a Taxes on Products and Import positive result (+2.6% of GDP), given that the hard currency inflow due to the trade balance Duties 3.8 8.5 6.3 surplus and remittances from abroad is offset only in part by the outflow of dollars connected Gross Domestic Product 3.6 6.4 8.0 with the remittance of earnings. Source BCRP, BCP

O-06 Economic & Financial Environment

Trade Balance (12m moving total, US$ billions)

22

17

12

7

2

-3 D-94 D-96 D-98 D-00 D-02 D-04 D-06

Trade Balance Imports Exports Mining Source BCRP

Central Government Fiscal Result (12m moving total, US$ billions) 28 29 In 2006, the inflation closed at On the other hand, tax collections reached record levels in 2006, thanks to favorable metal prices, which led to higher Income Tax collections and the tax regularization of mining 6 45 1.14%, below the Central Bank’s companies. The greater volume of funds was important for the achievement of a positive 4 economic result of the public sector finances this year (2.1% of GDP) and will be used 40 target range 2 by the current government to drive its main social programs aimed at social inclusion of 0 35 poorer sectords of the population, including the infrastructure shock with which it plans to -2 30 restructure public spending in order to prioritize capital expenditures, while reducing the -4 weigh of current expenses as a result of its announced austerity program. -6 25 D-01 J-02 D-02 J-03 D-03 J-04 D-04 J-05 D-05 J-06 D-06 As for prices, inflation picked up steam in the first few months of the year due to a shortage

Economic Result Non Financial Expenses Current Revenues of agricultural products, which caused the price of staple foods to rise, with strong impact Source BCRP on the consumption basket. Nevertheless, as the months went by, inflation dropped while agricultural production recovered; there was also a correction of fuel prices, the appreciation of national currency and more structural factors such as a productivity growth. Thus year infla- tion closed at 1.14%, percentage below the Central Bank’s target range. This combination of BCRP Net Purchases vs. Exchange Rate (US$ MM, Soles/US$) good growth and low inflation allowed the BCR to hold the basic interest rate at 4.5% during most of the year, as a result of which the pace of the expansion of monetary primary issues 1,500 Exchange volatility and 3.44 depreciation - electoral period was more moderate than the growth observed during 2005. The local currency, in turn, once

1,000 3.39 elections were over (during which time there were strong devaluation pressures), reflected a rising trend, lined up with favorable exchange terms, closing the year at levels of S/.3.196. 500 3.34

0 3.29 Decreasing dollar and growing BCR purchases -500 3.24

-1,000 3.19 D-04 M-05 J-05 S-05 D-05 M-05 J-05 S-06 D-06

US$ BCRP Purchases Exchange Rate Source BCRP Economic & Financial Environment

Potential for growth of the financial system is very significant, especially in microfinance segment, which is essential to achieve higher bank penetration

The Financial System’s direct loans Financial System 30 31 Finally, the financial system continued showing signs of expansion in 2006. The process reached US$18,226 billion of developing the banking system for retail segments that are ill-served continued, as the network of customer service points grew and new competitors entered the market. Thus, the Financial System’s direct loans1 reached US$ 18,226 bllion, a sum 23.9% greater than in 2005, growth being due essentially to more credit in retail segments such as consumer loans (+39.2%) and very small businesses (+35%). Therefore, the important process of bringing into the banking system people who previously did not use bank services continued, as well as the inclusion of new segments that has been observed over the last few years. The dynamic behavior of credit also allowed for the recovery of commercial loans, that grew 19.5%, and for a similar progress of mortgage loans (+18.3%). The said dynamic behavior came hand in hand with a major reduction of past due loans, which reached the record level of 1.9% of gross loan placements.

In the same period, the banking system’s dollar loans increased 13.3%, whereas loans grew at a faster pace (+39.5%), continuing the process of de-dollarization of credit that we have been witnessing over the last few years. Thanks to this, dollar loans, which represented 71.5% of the total at the end of 2005, dropped to 65.5% al cierre del 2006, within a context of greater exchange rate volatility (during the elections period), of relatively more expensive credit in foreign currency and of incentives for local currency loans with extended payment terms, as is the case, for instance, of Mivivienda.

1 Financial System includes , municipal savings banks, land banks, financial companies, financial leasing companies and EDPYMES (Entities for the Development of Small and Very Small Companies). Economic & Financial Environment

AVERAGE LENDING INTEREST RATE IN DOMESTIC CURRENCY 23.9%

Regarding interest rates, they continued falling in local currency for all types of loans, in such a way that TAMN (Domestic

Currency Lending Rate - Peruvian market) registered 23.9%

Financial System Intermediation (% of GDP) 32 33 Regarding interest rates, they continued falling in local currency for all types of loans, in such a way that TAMN (Domestic Currency Lending Rate - Peruvian market) registered 23.9%

40 in 2006, below the 2005 average (25.5%), whereas TAMEX (Foreign Currency Lending Rate – Peruvian market) registered 10.6%, a higher level compared to 2005 (9.8%). 30 On the other hand, banking system deposits reached US$ 17,553 million, reflecting an 20 annual growth rate of 15.6% vs. 2005. During this time, the dollarization of deposits 10 remained almost stable, having fallen from 67.2% to 62.7%. This presumably reflects that

0 there is still a greater preference for dollar-denominated savings. TIPMN (Average Deposit 94 95 96 97 98 99 00 01 02 03 04 05 06 Rate in Domestic Currency – Peruvian market) increased from 2.6% in 2005 to 3.2% in

Credit Liquidity 2006, whereas TIPMEX (Average Deposit Rate in Foreign Currency – Peruvian market), in Source BCRP the same time, increased from 1.5% to 2.0%.

Outlook The Peruvian economy’s outlook continues to be largely positive for two reasons: (i) trust Financial System Credit to the Private Sector (% an nual change) in the government’s current economic and monetary team; and (ii) the dynamic behavior of domestic demand and a good set of international circumstances, which have been key

80.0 factors for the positive results achieved, especially regarding the trade and fiscal balances. Although a scenario of moderate global slow down could materialize next year, leading to a 60.0 lower growth of exports, the dynamic recent behavior of private investments, as well as the 40.0 higher International Reserves and the lower external debt, are good signs that the economy is better prepared to amortize the effects of a possible external shock. The greatest risk is 20.0 the possibility of a strong international adjustment driving a fast interest rate rise and a 0.0 massive outflow of capital from emerging markets; nevertheless, this would be an Banks B Nación Microfinance Institutions Leasing Total improbable scenario. 2004 2005 2006 Source BCRP Economic & Financial Environment

The Peruvian economy’s outlook continues to be largely positive because the trust in the government’s current economic and monetary team, and the dynamic

Banking and Financial System Dollarization 34 35 behavior of domestic demand

90

70

50

30 94 95 96 97 98 99 00 01 02 03 04 05 06

Credit BS Credit FS Liquidity BS Liquidity FS Source BCRP

Average Lending Rates of the Banking System (%)

Domestic Currency

Commercial SME Consumer Mortgage ALRDC

2002 12.6 58.1 47.9 16.7 20.8 2003 10.2 54.8 41.8 16.2 21.0 2004 9.2 51.2 39.0 16.7 24.7 2005 9.1 45.8 37.0 14.5 25.5 2006 8.8 41.8 36.2 11.1 23.9

Foreign Currency

Commercial SME Consumer Mortgage ALRFC

2002 8.6 18.1 21.6 12.3 10.0 2003 8.2 23.6 21.5 11.0 9.7 2004 7.6 28.8 19.5 10.4 9.1 2005 8.5 27.7 18.0 10.2 9.8 2006 9.6 25.9 16.9 10.0 10.6

Source BCRP COMBINING INTELLIGENCE Financial Results

Financial Results

FINANCIAL HIGHLIGHTS GRAPHICAL OVERVIEW OF FINANCIAL RESULTS In US$ millions

38 Credicorp reached a record net In an economic and financial environment with outstanding domestic and international 2004 2005 2006 performance, Credicorp achieved unprecedented results in 2006. This improvement Profitability income of US$ 230.0 million, 26.5% encompassed all of its business units, such as the commercial bank, the investment bank and the insurance market. Nevertheless, it is especially in the commercial bank, and Net Income attributable to Credicorp 130.7 181.9 230.0 greater than the 2005 figure Net income per share (US$ per share) 1.64 2.28 2.88 in Retail in particular, that the greatest progress was made in terms of loan growth and Return on average equity1 13.6% 16.4% 18.4% mainly in profitability, as we may see further on. In the insurance market, the restructuring Return on average assets1 1.50% 1.90% 1.95% of the business conducted during 2006 bore fruit quickly, also yielding a significant recovery of profitability. In this sense, it is important to mention that it is again the retail Operating Ratios segment that points to a future growth of the insurance business. The performance Operating costs over total income 2,3 50.3% 42.9% 45.4% of the pension funds suffered strong competitive pressures at the root of Credicorp’s 1 Operating cost over average assets 4.5% 4.0% 3.8% incursion into the market through its Prima AFP subsidiary. Still, Credicorp can also report Balance Sheet (end of period) major progress in this field that should lead to improved returns for its stockholders Assets 9,121 11,036 12,882 Net loans 4,335 4,817 5,737 Deposits 6,341 7,093 8,839 Net equity 1,065 1,190 1,397 Loan Portfolio Quality Past due loans over total loans 3.5% 1.9% 1.3% Provisions over past due loans 158.0% 202.8% 247.9% Other Information Number of shares, net 4 (in millions) 79.8 79.8 79.8 Average price per share 5 (in US$) 12.1 21.1 32.7 Number of employees 11,322 11,958 15,002

1 Averages determined from the average of the beginning, quarterly and final balances in each year. 2 Operating expenses include salaries and employee’s benefits (net of mandatory employee profit sharing expenses), general and administrative expenses, depreciation and amortization. 3 Total income includes net interest income, commissions from banking services, net gain on foreign exchange transactions and net premiums earned. 4 Net of treasury shares. The total number of shares was of 94.38 million. 5 Average prices of the year, adjusted for dividends. Financial Results

Earnings per Share Assets & ROAA (US$MM, %)

1.95% 2.88 3.0 14,000 1.90% 2.00%

2.28 1.50% 10,000 1.50% 2.0 1.64 1.00% 6,000 1.00% 12,882 1.01 11,036 1.0 0.69 9,088 0.53 2,000 8,322 0.50% 0.22 0.0 0 0.00% 2000 2001 2002 2003 2004 2005 2006 2003 2004 2005 2006

Source BCP - Finance Division Total Assets ROAA Source BCP - Finance Division

Net income & ROE(US$MM, %) 40 41 Breakdown of assets (US$MM)

250.0 18.4 20% 2006 12,892 16.4 200.0 13.6 15% 2005 11,036 150.0 9.4 10% 230 100.0 5.2 182 2004 9,088 5% 50.0 131 81 45 0.0 0% 2003 8,322 2002 2003 2004 2005 2006 0 4,000 8,000 12,000 16,000

Net income ROE Cash and banks Trading Investment portfolio Net loans Prop., plant &eq. Source BCP - Finance Division Other assets Source BCP - Finance Division

The profitability measured as the return Overall, Credicorp reached a record net income attributable to the parent holding The accrued provisions dropped 3.7%, Thus, BCP results underscore Credicorp’s consolidated results, the banking business’ company. At US$ 230.0 million, it was 26.5% higher than the US$ 181.9 million achieved expansion underpinning the total growth of Credicorp assets, which reached on average equity (ROAE) greatly in 2005. Thus, net earnings per share rose to US$ 2.8, vs. US$ 2.3 in 2005. The main thanks to portfolio quality improvement US$ 12,881.5 million, a figure that reflects a 16.7% increase vs. December 2005. It is factors that led to this result were: i) the strong expansion in the BCP banking business, important to mention that net loan portfolio had an outstanding growth of 19.1% in improved and reached 18.4%, vs. only where a major improvement of profitability was recorded, thanks to the robust loan growth 2006, reaching US$ 5,737 million, compared to US$ 4,816.8 million in 2005. Growth 16.4% in 2005 achieved and the restructuring of the portfolio towards more profitable segments, which of the economic activity and recovery of the business segments was also remarkable, generated greater net financial income; ii) the recovery of portfolio quality, which led and generated significant liquidity in the market and in BCP. This excess cash flow was to a need for fewer provisions and important recoveries of loans previously written-off basically directed to short term investments during the first half of the year, due to the and iii) the emphasis on transactional services, which resulted in greater commissions uncertainty that the elections generated. Later, these surpluses, together with a high level for . This evolution confirms Credicorp’s strategy, which focuses on of fund raising through the growth of deposits and indebtedness, supported the growth of the development of its banking operations, based on the expansion of its customer loan portfolio. It is important to stress that while loan placements significantly increased, base and on directing its attention to a larger number of customers that have not been the accrued provisions dropped 3.7%, thanks to portfolio quality improvement, which incorporated into the financial system yet and that represent the more profitable segments. translated into a major reduction of late payments and in turn a greater coverage of This strategy led not only to loan volume growth, but also to a proportionally greater the past-due portfolio. Moreover, the important recoveries of loan write-offs in previous growth of the income generated by such volume as the focus was on segments and years reduced the level of net provisions to a figure almost null for the year 2006. products with greater margins. Therefore, the profitability measured as the return on average equity (ROE) greatly improved and reached 18.4%, vs. 16.4% in 2005. Likewise, the return on average assets (ROA) rose to 1.95% in 2006 from 1.90% in 2005.

Financial Results

Breakdown of Liabilities (US$MM)

2006 12,882

2005 11,036

2004 9,088

2003 8,322 0 4,000 8,000 12,000 16,000

Deposits Due to banks bonds & others Equity Source BCP - Finance Division BUSINESS LINES

Efficiency Ratio 42 43 BCP contributed US$238.9 million The Banking Business The important profitability improvement of the Credicorp banking business and above all to Credicorp’s income and 1200 52% of BCP, was the engine driving these highly positive results. BCP contributed US$ 238.9 50.3% 50% 1000 reached an all-time high ROE million to Credicorp’s income, after minority interests are discounted, and maintained a 45.4% 48% clearly upward trend during the last few years, fundamentally due to: (i) the growth of 800 44% of 28.6% the loan portfolio, which in turn generated greater net interest income; (ii) the substantial 42.9% 400 42% quality improvement of the said portfolio, which allowed for lower provisions, and greater recoveries of the distressed portfolio of prior years; and, finally, (iii) the strategy based on 0 38% 2004 2005 2006 focusing on more profitable segments not yet served by the financial system and on the transactional activity that encouraged the growth of non-financial income. As a consequence Income (US$MM) Cost (US$MM) Operating Efficiency (%) Source BCP - Finance Division of this favorable evolution of results, BCP posted a major growth of profitability as a percentage of its average net equity; this figure reached an all-time high of 28.6%, far better than the levels attained in prior periods. Asset growth was based on the growth of liabilities and equity, which increased 16.5% and The increase in deposit base 2006 was an excellent year in terms of loan growth, given that, in addition to the dynamic 18.7%, respectively. The attraction of deposits continued being a strength for BCP, behavior of the retail segment of the country’s economy and therefore of BCP’s Retail continued being a strength for BCP, guaranteeing an important and efficient funding source to sustain loan growth. Thus, Banking unit, which reached 29% of growth; Wholesale Banking also experienced deposits grew 24.6%, reaching US$ 8,839.0 million by the end of 2006. Still, Credicorp’s guaranteeing an important and substantial growth during this year, increasing 17%. This was a consequence both of net equity reached US$ 1,397 million, 17.4% above the US$ 1,292 million achieved in 2005. pre-electoral uncertainty, which led the companies to take on loans to assure their future efficient funding source to sustain The recovery of the insurance business also contributed to improved Credicorp results. The liquidity, and of election results, which generated trust in the continuity of the economic growth of net premiums earned as well as the better technical results and therefore policies, enabling the financing of major long and medium term projects. loan growth contribution to Credicorp income, helped Credicorp to recover profitability.

A constant focus on more profitable lending products, especially in Retail Banking, coupled with suitable offerings of savings products with more competitive interest rates and accessible and efficient distribution channels for our customers were, the key factors for enhancing the net interest income, which, in conjunction with higher income by fees coming from the transactions volume growth, resulted in improved profitability. The strong growth described needed to be accompanied by higher expenses, which grew moderately. However, the strong operating expenses that resulted from Prima AFP’s aggressive incursion in the pension funds management business generated an increase in Credicorp operating expenses, which slightly reduced the efficiency ratio of 42.9% in 2005 to 45.4% in 2006. Financial Results

Net Income & ROE (US$MM, %)

300 40% 250 28.6% 30% 200 23.4% 150 17.1% 20% 248 100 184 10% 50 116 0 0.0% 2004 2005 2006

Net Income ROE Source BCP - Finance Division

Distribution Channel Growth 44 45 It is important to highlight the strong growth of the transactional operations in 2006, a situation that was made possible by the expansion of the different distribution channels. In 800 fact, 19 new branches were inaugurated, reaching a total of 237, and 104 ATM machines 655 were added, resulting in a total of 655. The massive impulse of an efficient and innovative 600 517 551 551 channel had greater significance during 2006, the Agent BCP, which is a modified and 400 significantly less expensive version of an automated teller, supported by an association with 212 218 237 200 commercial establishments. Thus 490 new points were opened, totaling 551. This enabled 61 an expansion of about 75% in the bank distribution network. Together with this initiative, 0.0 in 2006, new savings products, the zero account and the free account were successfully Branches ATM BCP Agents introduced. All of this reflects BCP’s efforts to serve a greater number of people, increasing 2004 2005 2006 Source BCP - Finance Division its inclusion in the banking system and encouraging the use of banking services among people who previously did not use them. In short, to increase banking penetration.

As for BCP’s assets, they totaled US$ 10,672 million, a sum 15% greater than that of December 2005. However, as indicated above, the important and very superior loan growth Breakdown of Retail and SME Loans (US$ MM) of 21.4% in 2006 is remarkable, reaching a loan book of US$ 5,678 million, representing 53% of BCP’s assets compared to 50% in 2005, thus providing improved profitability for 2006 such assets. This loan growth, measured in average daily balances for the year, is even higher and reaches 17.2%. As previously mentioned, Retail was the main contributor to BCP’s results, posting the best performance among all segments, reaching a 29% growth. 2005 Within this segment, mortgage credits continue to be the most important product in terms of portfolio share, with 47%, folowed by PYME (small companies) credits that represent

2004 30%. However, the product with greater dynamism and growth was the credit card, which 0 600 1,200 1,800 2,400 showed a remarkable increase of 39% during 2006, reaching a total of US$ 234.5 million,

Mortgage SME Consumer Credit Cards followed by PYME credits, which grew 38% and consumer credits, which also expanded Source BCP - Finance Division strongly, reaching a 36% growth. Mortgage credits still have space to develop, despite the 20% growth compared to 2005. Thus, the Retail Banking has become the force of growth and recovery of BCP profitability, thanks to the better margins that this market allows.

On the other hand, deposits posted growth of 25.1%, reaching a total of US$ 8,356 million as of December 2006. It is important to highlight that the greater deposits were mainly due to the growth of time deposits, which expanded 33.9%. However, demand deposits, savings and CTS deposits (related to severance payments) also reached a good performance, growing 23.9%, 17.8% and 18.4% respectively. Financial Results

Efficiency Net income & ROE Bolivia (US$MM, %)

800 65% 16.0 25% 21.7% 16.7% 59.9% 61% 20% 600 12.0 57% 15% 400 8.0 53% 8.4% 10% 51.8% 50.5% 4.0 200 49% 5%

0 45% 0.0 0% 2004 2005 2006 2004 2005 2006

Core Revenues (US$MM) Operating Expenses (US$MM) Efficiency Ratio (%) Net income ROE Source BCP - Finance Division Source Banco de Crédito Bolivia, BCP Finance Division

As for the quality of the portfolio measured by the ratios of coverage and default: these 46 47 In 2006, system’s expenses of credit risk management strategy was maintained, with non-performing loans totaling 3.6%, registered excellent levels. Past due loans reached a historical low, at 1.31%, and coverage while coverage stood at 163.6% These figures indicate that BCB had the best performance of provisions on non-performing portfolio reached 249.5%. These ratios reflect the excelent over US$ 41 million were incurred, within the Bolivian banking system, whose ratios stood at 8.7% and 90.7% respectively. evolution that resulted in very low provisions requirements and the continuation of the Therefore, BCB’s return over average equity reached 21.7%, the highest in the bank´s history. especially in Computing Hardware, portfolio write-off recoveries, thus benefiting results. As for BCB’s market share, the gross portfolio stood at 14.0% in 2006 while deposits totaled Finally, the level of the efficiency ratio was in line with expectations: at 50.5% in 2006, it was Software and Infrastructure 14.8%, making BCB the third bank within the system when measured by these levels. lower than the 51.9% reached in 2005, result of the strong growth in operating income, Mirroring the BCP business model, in 2006 BCB focused on high margin segments, while the operating expenses were well controlled, only growing 11.6%. A component of including Retail, Commercial Banking and the recently created Banca Consolidada, which the operating expenses is the Personnel Expenses, which rose 14% as an answer to the focuses in businesses with annual sales below US$ 1 million. The PYME segment was also need to improve customer service, through larger branches, longer service hours and the strengthened, and major progress was attained in this market segment. All of these segments hiring of service promoters. In fact, 1,120 jobs were added, headcount rising from 7,740 have high growth potential in the Bolivian market and BCB is positioned as the institution with in 2005 to 8,860 in 2006. Additionally, General Expenses grew 11.7% due to stronger the best infrastructure and corporate knowledge to serve them. marketing campaigns and customer loyalty-building programs, as well as Systems expenses such as maintenance, licenses, and projects. Thus, in 2006, system’s expenses of over These good BCB results were in line with the recovery of the BCP banking business and also US$ 41 million were incurred, especially in Computing Hardware, Software and Infrastructure. contributed to its outstanding consolidated results.

Overall, BCP results are very satisfactory and have led to a remarkable recovery of profitability Regarding Atlantic Security Holding Corporation - ASHC, results reached US$ 31.5 million, for the holding company and its shareholders. a figure 25% greater than in 2005. The main factors that drove this growth included higher income from Credicorp dividends and the ASHC strategy of focusing more strongly on its BCB consolidated its position in the Bolivian market, achieving income of US$ 14.1 million, asset management business, which caused fee income to grow 24.7% and led to greater 38.2% greater than 2005 income. investment gains. Dividend income increased 40.6% vs. 2005 as a result of Credicorp’s As for the business in the Bolivian market, Banco de Crédito de Bolivia consolidated its higher income. Nevertheless, this income is eliminated in the consolidation, so that ASHC’s position in 2006, reaching levels that exceeded our expectations, given the political contribution to Credicorp’s results reached US$ 15.4 million, 14.2% more than in 2005, circumstances, and producing US$ 14.1 million in income, a figure 38.2% better than the reflecting ASHC excellent core business growth. 2005 one. This was achieved thanks to BCB continuing to successfully implement the BCP business model, with portfolio quality ratios better than the market’s. In 2006, the conservative Financial Results

The reorganization of PPS has generated the expected results with the recovery of its contribution to Credicorp, totaling US$14.5 million in 2006

The Insurance Business 48 49 The reorganization of PPS has generated the expected results with the recovery of its contribution to Credicorp, totaling US$ 14.5 million in 2006. Within a new competitive scenario, PPS, with the support of its strategic partner AIG – the world’s most important in- surance company – has reorganized the company around two key areas of management: the distribution channels and risk management by areas.

Regarding the distribution channels to attend our customers, special emphasis has been placed on the relationship with the insurance brokers by assigning them specialized employees to improve their service, both in the issuing of policies and the settling of claims. Above all, they are receiving operational support to maximize the use of the technological platform through online services, as for example the web.

In the case of the specialization by areas, as fire, automobiles, health and fraud, among others, a specialized team has been formed for the analysis of risk. This team is responsible for improving the technical results through a study of the risk portfolio by area, applying best practices in selection, operations and marketing, and for creating new products aligned with our economic and social reality.

At the same time, PPS has worked ahead of the changes that will occur as a result of the adoption of the Basel II and Solvency II recommendations. This has been achieved by reinforcing and adding new investment practices, in order to maximize profitability for our shareholders, respecting an appropriate match of currency and terms for our assets and liabilities and above all, supporting technical obligations. In this line of action, during the second half of the year, a significant part of PPS’s investment portfolio in the Stock market was sold, particularly the stake of PPS in Banco de Crédito del Perú, which generated substantial capital gains. The reorganization of the investment portfolio improved the asset & liabilities management, not only in terms but in currencies as well. Financial Results

Underwriting Results (US$MM)

40 34.8 31.1 UNDERWRITING 30 RESULT 20 19.6 12.5% 10

0 The underwriting result attained US$ 22.4 million, representing 12.5% of total premiums, a figure that is 7.1% higher 2004 2005 2006

Source BCP - Finance Division than that reported for the same period in the previous year.

In this scenario, leading the market based on service excellence was defined as a competitive 50 51 new businesses in more predictable and profitable areas, as automobiles. strategy, which led to a new mission, i.e. ‘serving the customer’. For this reason, the company’s The net earned loss ratio for the year reached 64.1%, with a slight improvement compared production process was redesigned in order to offer our customers, brokers and insured to the 67.5% figure obtained the previous year. Pacífico Seguros is seeking to achieve the parties a simple, easy and tangible experience in the purchase of insurance policies. international standard of 60% and, for this purpose, it will continue making the necessary adjustments in its risk portfolio. As for the financial results, under international accounting standards for financial reporting, for the year of 2006, Pacífico Grupo Asegurador, which encompasses Pacífico Seguros, The underwriting result attained US$ 22.4 million, representing 12.5% of total premiums, Pacífico Vida and Pacífico Salud EPS, posted a total production of US$ 372.6 million, 3.8% a figure that is 7.1% higher than that reported for the same period in the previous year. higher than that of the previous year. However, as was mentioned before, in 2006 Pacífico Likewise, the ratio of technical result on total premiums was very similar to the figure of Seguros reported very significant extraordinary financial gains, which increased net income 12.1% reported in 2005, what is a positive sign, taking into consideration the fall in to US$ 53.3 million, well above the amount of US$ 7.0 million obtained in 2005. Such premiums in the industry. extraordinary financial gains reached approximately US$ 40 million and resulted of the sale of BCP and Alicorp shares, which are largely eliminated (approx. US$ 34 million of gains on During 2006, general expenses and provisions represented 30.1% of net premiums earned, the sale of BCP shares) in the consolidation process, since the BCP shares were sold within a percentage higher than that of 2005. However, it should be mentioned that non-recurrent the Credicorp Group. Thus, for our purpose, the recovery in the PPS contribution to Credicorp provisions and expenses occurred during this year due to the reorganization of the company, is more representative of the better results of Pacífico Grupo Asegurador, which increased in order to face competition. from US$ 5 million in 2005 to a US$ 14.5 million contribution to Credicorp in 2006. Finally, the contribution of non-recurring financial revenues brought profits for the year to Furthermore, the effects of the change of strategy are already noticeable in the growth of US$ 40.3 million, a figure well above that of US$ 0.9 reported in 2005. consolidated net premiums earned for the group, which increase at the rate of 6.2%, and Pacífico Vida, in the life insurance market, had a favorable performance with a production even more so in the evolution of the technical results for the group, which have recovered of US$ 117.2 million and a rise of 6.1% compared to the previous year. The increase in significantly, reaching a growth of 78% on the previous year. This has led to an improvement individual life insurance sales, through Sales Consultants, has been one of the main pillars in the ratio of technical results as a percentage of total premiums to 9.3% in 2006, for such growth. A new product, Premium Life, was launched during the year, and has compared to 5.5% in 2005. contributed greatly to the rise in revenues. Pacífico Seguros, in general risks, reached a total of US$ 178.4 million in premiums, show- On the other hand, in the life annuity business, we have reduced our market share as a ing an increase of 3.2% compared to the previous year. However, net premiums earned, result of a conservative investment policy and the adjustment of survivorship charts for which give a better picture of the insurance business, totaled US$ 116.3 million, with an the different market segments. This policy aims to protect the company’s net worth and impoirtant rise of 13.4%. It should be noted that this level of production was achieved in a provides better support for our customers. highly competitive environment, in which average premiums charged for insurance cover- age underwent a reduction between 8% and 12%, benefiting the insured parties and the Pacífico Salud EPS, the Health Maintenance Organization (HMO) business, also had a economy as a whole. positive performance. Contributions for the year reached US$ 77.8 million, an increase of During the current year, a process of change in the risk portfolio profile was initiated, in 3.3% compared to 2005. In this segment, high competition led to a drop in insurance order to improve the technical result and lower earnings volatility. Thus, there has been a costs, favoring customers. Despite this, the annual benefits rendered reached 79.4% of the reduction of our participation in more volatile areas, as for example fishing vessels, seeking total premium contributions, a figure that reflects an improvement of 6 percentage points compared to the previous year. Financial Results

Credicorp´s Subsidiary 2005 2006 Growth Credicorp´s Subsidiary 2005 2006 Growth (US$MM) (US$MM) (US$MM) (US$MM) ASHC 997 1,375 38% ASHC 521 739 42% Credifondo BCP y BCB 1,070 1,291 21% Consolidated BCP 1,726 1,933 12% Prima AFP 255 4,206 1549% Pacifico Insurance Group 593 729 23%

Third party funds 2,3212 6,872 196% Proprietary Investments 2,840 3,401 20%

Throughout 2006, significant efforts were made in order to improve the quality of services 52 53 and are supervised by strict corporate control that regulates and rendered to customers through the different networks, as well as to improve plans and minimizes the conflicts of interest that are inherent to the business. coverage. Thus, Credicorp’s Asset Management area comprises four main pillars:

The Asset Management Business 1 Portfolio Management In the last years, the Credicorp Group has consolidated an important line of business, 2 Financial Management namely, Investment Management for its customers. The growth of this business resulted 3 Brokerage from several major factors, the most outstanding one being the Credicorp Group’s incursion 4 Risk Analysis into the business of managing Peruvian private pension funds in August 2005, through Prima AFP, and the subsequent acquisition of AFP Unión Vida in August 2006. Still, one Regarding Portfolio Management, Credicorp seeks to consolidate the good performance of should highlight the growing penetration of Mutual Funds in Peru during the last years. Our its portfolios and funds through strict risk control and a suitable level of diversification. To mutual fund company, Credifondo, currently leads the market, with a share of some 47.8% achieve this, it focuses on improving three key aspects: investment policies, investment assets under management. Finally, another relevant factor was the high and sustained processes and management metrics. growth of the business of International Mutual Funds and Financial Advisory Services offered The Brokerage strategy is based on providing a timely and high quality service, offering by Atlantic Security Bank to its Private Banking customers. In December 31, 2006, the sum competitive execution costs, channeling a greater proportion of the assets traded by the of the market value of the Assets under Management in these three businesses stood at Group’s companies and identifying opportunities for joint action (better prices), besides US$ 6,872 million. improving controls to avoid possible conflicts of interest.

Because of the size of these businesses, the importance of the commissions they As for Financial Administration, Credicorp focuses on providing quality financial advisory generate and above all the fiduciary responsibility they entail, the Credicorp Group has services, to build customer loyalty and encourage them to invest not in one single instrument been developing a corporate supervision project called Asset Management, whose main but in a combination of securities according to their risk profile, thereby generating objectives are to establish homogeneous risk control and investment policies, evaluate commissions. The objective is to improve the standards of the advisory services that the the management and results of the portfolios under management according to the best commercial bank offers, differentiating the levels of service by identified segment. international practices and offer the best financial planning and advisory services to the different customer segments in which the Credicorp Group is a player. Finally, Risk Analysis, at the corporate level, has the purpose of identifying, quantifying and following up on the main focuses of operating, credit, market, liquidity, legal, conflict It is equally important to highlight that the Credicorp Group manages proprietary investment of interests and other risks, to regulate and minimize them. It also has the objective of portfolios involving significant amounts relative to its other assets. The main investment establishing corporate investment limits, a portfolio investments risk manual and strict portfolios of BCP, Atlantic Security Bank, Pacífico Insurance Group amount to US$ 1,933 control of compliance with the rules. million, US$ 739 million and US$ 729 million, respectively. The sum of these portfolios at their market value on December 31 2006 totaled US$ 3,401 million. Similarly, due to the Thus, all Credicorp efforts are geared toward providing disciplined and efficient Asset rising relative importance of this business for the Credicorp Group, corporate supervision of Management with appropriate management of conflicts of interest. policies and risk control as well as the measurement or results are being increased. These investment portfolios are managed independently from our customer’s investment vehicles Financial Results

Managed Fund Market Share

Prima Profuturo AFP 15.0% 29.2%

Horizonte 23.9% Integra 31.9% In 2006, Prima AFP acquired and merged with Union Vida, placing itself as a strong company in the pension fund

Source SBS market. Total funds under management reached US$ 4,206 million

During 2006, ASHC continued ASHC Asset Management 55 This strategic decision implied in Prima AFP absorbing the cost of the merger in On the other hand and as we said before, ASHC’s strategy of focusing more strongly on its one go, in order to begin 2007 with a consolidation strategy in the market and growing in deposits and in third asset management business enabled fee income growth of 24.7%. The growth of funds the recovery of profitability. Thus, Prima AFP reached the end of 2006 with losses under management was 38%, thanks to the increase in value of our customers’ stock of US$ 20.7 million, higher than initially expected before the acquisition. party fund management, reaching a portfolios, while the direct increase of funds trusted to us was driven, at first, by the uncer- This is because Prima AFP, being in a growth stage and continuing to increase its tainties surrounding the election in the first half of the year. The funds under management, total of US$ 2,541 million income base with an aggressive offer to the market, faced high commercial expenses, together with deposits, totaled US$ 2,541 million. On the other hand, recomposition in in particular commissions and the basic salaries of the sales force for the solicitation favor of safer assets, together with greater income from dividends and the fund manage- of new clients and retention of clients. Additionally, as a result of the acquisition of ment business led to improved profitability, which reached 6.31% in December 2006. Unión Vida, Prima AFP absorbed major merger expenses, including the burden of Prima AFP the Unión Vida IT systems, the value write-off of the brand “Unión Vida”, the cost of In 2006, Prima AFP acquired and merged with AFP Unión Vida, gaining a sound position in discharging staff and the loss in part of a company’s accrued income from tax savings. the pension funds market. The funds managed totaled US$ 4,206 million. Thanks to its own growth and the growth provided by the Unión Vida acquisition, Prima In the pension funds business, Prima AFP reported a move with great strategic importance AFP reached the year-end as the system’s second pensions manager, with 997,963 for its consolidation and for wining over a leading position in the AFP market: the acquisition affiliates, total funds under management of US$ 4,206 million, and more than 17,000 of AFP Unión Vida, an operation in the Peruvian market formerly held by . pensioners. It also extended its geographical coverage to 11 service points and 19 points This acquisition enabled Prima AFP to position itself as the second ranking company in market of sale, placing itself strategically as the most aggressive and solid managing company. share terms, and as a leader in the segment, since it is the company with the best offer: among the two highest returns for the funds managed and the lowest commissions for investors. Financial Results

The subsidiaries’ contributions constitute Credicorp’s Net Income that reached US$230 million and represented an essential recovery THE SUM OF ITS PARTS - CONTRIBUTIONS FROM of profitability, reaching a return on ITS SUBSIDIARIES equity of 18.4% 56 57 Thanks to the excellent development and growth of Credicorp’s business, its final results reflect a strong recovery of profitability.

As we explained previously, the BCP contribution reached US$238.9 million. ASCH’s contribution remained fairly stable, posting moderate growth, while PPS showed a strong recovery in this first year of business restructuring. However, in 2006, Prima AFP was a negative contributor due to its initial phase of investment and recent acquisition and the ensuing merger costs, a situation that is expected to turn around next year.

Nevertheless, an explanation is required for the negative charge of Credicorp Ltd., given that it is at this level (holding company) that withholding tax corresponding to the dividends contributed to Credicorp by the Peruvian subsidiaries is booked. In 2006, Credicorp had to face a double withholding tax charge due to a change in accounting practices. Thus, 2006 includes the tax on 2005 dividends, paid in 2006. Moreover, it started the practice of recording a provision of the payment of tax on future dividends, resulting in a provision for 2006 expected dividends, to be paid in 2007. This explains most of the loss at Credicorp Ltd., which also included a loss connected with a foreign exchange coverage contract during the period of uncertainty surrounding the elections, when there was strong volatility of the local currency vs. the US dollar. Financial Results

Cash Dividend & Dividend Payout

1.5 1.3

1.1 1.0 0.80 58.5% 58.5% 48.8% 48.2% 45.1% 0.5 45.1% 0.40 0.40 39.6% 0.30 0.10 0.0 2000 2001 2002 2003 2004 2005 2006 Cash Dividend Dividend Payout

Source BCP - Finance Division MARKET VALUE AND SHAREHOLDER STRUCTURE

Net income attributable to Credicorp 58 59 Credicorp’s good performance through its Business Units caused its shares to raise in the markets in which they are traded, namely, the New York Stock Exchange and the Lima Stock Exchange. Credicorp shares closed 2006 at US$ 40.94, having risen 80% vs. their Earning Contributions (US$ MM) Change Change 2005 closing price. 2004 2005 2006 2005/2004 2006/2005

Banco de Crédito BCP (1) 123.1 176.5 238.9 43% 35% Consequently, the market capitalization, at the end of the year, stood at the impressive BCB 3.7 10.2 14.1 178% 38% figure of US$ 3,265 million Atlantic 13.3 13.5 15.4 1% 14% The Board meeting held in February of this year agreed to pay out dividends of US$ 1.30/ PPS 9.4 5.6 14.5 -40% 159% share, to a total of US$ 122.7 million for the fiscal year of 2006. This amount reflects an Grupo Crédito (2) 1.9 (5.5) (12.4) -388% 125% Prima - (7.6) (20.7) 0% 173% increase of 18.2% vs. 2005. Others 2.0 2.1 8.3 6% 296% Credicorp’s shareholder structure remained almost unchanged compared to the previous Credicorp and Others (3) (17.0) (8.2) (26.4) -52% 223% year. Thus, Romero Family’s share (16.0%) and ASHC (15.5%) maintained the same Credicorp Ltd. (18.9) (7.9) (27.0) -58% 240% composition weight. The number of outstanding shares that belongs to the funds under 130.7 181.9 230.0 39% 26% management, by the pension funds companies, had a slightly reduction; although continues representing an important percentage of 30.3%. In addition, the acquisition of 1Includes Banco de Crédito de Bolivia. AFP Unión Vida by Prima AFP generated a re-composition of the shareholder structure. 2 Includes Prima AFP and Servicorp. 3 2006 includes US$ 16.4 Mn expenses for taxes on dividends and mainly US$ 6.0 Mn loss in a FX hedging position over dividends. 2004 includes US$ 1.9 Mn of Tequendama´s net income and US$ 0.71 Mn for contingencies and expenses on Tequendama´s investment. Financial Results

Stock performance price (US$)

50 40 Credicorp shares closed the year at 30

20 10 US$ 40.94, having risen 80% vs. their 0 2000 2001 2002 2003 2004 2005 2006 Source Bloomberg 2005 closing price

Market Capitalization 60 61

3500 3,265

2500 1,716 1500 1,077 829 656 715 677 500

0 2000 2001 2002 2003 2004 2005 2006

Source BCP - Finance Division

Shareholder Structure

Private & Inst. Investors 38.2%

16.0% Romero Family

Prima AFP 9.3% 15.5% ASHC

AFP Horizonte 7.0%

AFP Profuturo 4.0% 10.0% AFP Integra

Source BCP - Finance Division COMBINING SKILLS Corporate Governance and Social Responsibility

Corporate Governance & Social Responsibility

Credicorp seeks to transmit responsibility, transparency and commitment through its companies, using sustainable policies in CORPORATE GOVERNANCE AND SOCIAL RESPONSIBILITY compliance with local and international guidelines 64 65 Beyond the financial role Credicorp has through all the companies it owns, where stability, efficiency and profitability characterize them as market leaders, the group’s commitment with its shareholders, clients and employees is clear, and leads Credicorp to get closer to the community, deeply involving itself in the country’s aspirations and development. Thus, Credicorp seeks to transmit responsibility, transparency and commitment through its companies using sustainable policies in compliance with the guidelines that are being developed in the local and international markets. This is how the Group attempts to build a new organizational group culture that involves a complete and joint development for the companies.

The results and main policies adopted by some of the most important companies of the Group are presented below.

Banco de Crédito del Perú

To BCP, Good Corporate Governance is a key element for managing all the areas of the organization. Thus, BCP guarantees its transparency and reinforces the trust of its shareholders and the community as a whole.

BCP’s Good Corporate Governance is based on an organizational culture of ethical and moral behavior, translated into a set of policies all the associates are demanded to be compliant with. In that regard, BCP has a number of corporate governance policies in place, listed in the Internal Regulation and in the Annual Report on Corporate Governance and Social Responsibility, available on our webpage www.viabcp.com. You can find the detailed standards and policies connected with the six basic pillars of BCP’s good Corporate Governance: shareholders, board of directors, internal administration, customers, our people and information transparency.

It is important to highlight that BCP received an award for best Board of Directors’ policies in a good corporate governance contest organized for the first time in Peru by Pro- Capitales and UPC Escuela de Postgrado. It was a very important acknowledgement to the efforts made by our institution to implement good corporate governance policies in all areas. Moreover, through the holding Credicorp, BCP has a large number of shareholders. Therefore, we have an Investor Relations area whose main role is to keep our shareholders, institutional investors, risk rating organizations and the public in general fully informed Corporate Governance & Social Responsibility

Some Figures... 15,000 free books distributed 352 benefited schools 212,510 benefited children Participated 1,900 teachers received training 6,200 girls 6 million visits at 20enmate.com 11,200 boys 31, 000 Piloto 20 cards 7 cities were the venue for the event

about the activities conducted and the results achieved by the organization. Furthermore, 66 67 Awards ceremony. Moreover, BCP participated in the SIP Annual Meeting and the in compliance with the Sarbanes Oxley Act, BCP implemented a Reporting System through Symposium Peru 2021, to consolidate alternatives to implement a proper social which the employees can report, anonymously, any non-compliance with the Bank’s ethical responsibility policy. code and regulations. Banco de Crédito de Bolivia In terms of Social Responsibility, in 2006 BCP sustained its social commitment by organizing In the past few years, BCB has included Corporate Governance and Social Responsibility and participating in a number of actions, and making strategic partnerships with several as part of its strategic guidelines. Such initiative, which initially emerged as a way to meet institutions whose goals and actions are similar to the company’s, in order to achieve established regulations, has increasingly become more relevant due to the importance common objectives. The detailed actions can also be found in the Annual Report on achieved by the bank, whose responsibility surpasses the limits of the company. Therefore, Corporate Governance and Social Responsibility. such good practices are considered basic for the long term image of the institution, as they also affect the trust and recognition of the community. BCP’s Social Responsibility is based on five pillars: Educational Promotion, Cultural Promotion, Social Well-Being, Institutional Activities and BCP Volunteers. Regarding As such, BCB counts among its most important commitments: serving its customers by Educational Promotion, for the fifth consecutive year we developed the Program ratifying the quality of its service; offering its employees the best conditions to support their Matemáticas para Todos [Maths for All], complementing that task with the webpage professional, personal and economic development; and finally, reiterating the commitment 20enmate.com and with the new educational project Tarjeta Piloto20, to stimulate the with the community by contributing to its development and well-being. study of mathematics by granting awards to students who accumulate points when they solve the problems presented on 20enmate.com. Pacífico Grupo Asegurador During 2006, several actions have been implemented to improve the relationship with To BCP, practicing sports is a key element for the integral development of future shareholders, suppliers and clients in the important corporate governance field. generations. Therefore, partnered with El Comercio newspaper and the Patronato Nacional, BCP organized once more the Semilleros de Vóleibol y Atletismo [Volleyball and Athletics Pacífico Grupo Asegurador totally complies with the “Good Corporate Governance competitions]. Principles” that are being promoted in the capital market through several institutions. These principles are a very important part of the organizational culture the company has, as for Firm in our commitment towards our national identity and values, Banco de Crédito, as example the shareholders rights, the equal treatment to shareholders, the transparency in part of the Cultural Promotion, continued publishing and presenting books and art works, the communication with the stock market and the clear definition of the board of directors’ besides promoting, like every year, the Marinera National Contest and the Caballos de Paso responsibilities. Official National Contest. The exhibit “Información sobre el cumplimiento de los principios de Buen Gobierno para As part of the support to the community and the Social Well-Being pillar, our Bank actively las Sociedades Peruanas” (Information about the Compliance with the Good Governance participated in several events to help needy people, such as Teleton, Ponle Corazón, Bazar Principles for Peruvian Companies) has been amended, pursuant to the indications of de Navidad and El Rastrillo. Moreover, BCP is an active member of the National Volunteers Conasev General Management Resolution No. 140-2005-EF/94.11, issued on December Center and, thus, reinforces the social responsibility policy we have implemented, already 28, 2005, so that the investors are better informed about the level implementation of Good counting one year of work in our BCP Volunteers Program, in Lima and in other cities. Corporate Governance practices.

Finally, as part of the Institutional Activities pillar, we organized, once again, partnered with It is important to mention that the Shareholders General Meeting held in February 2006 ADEX [Association of Exporting Companies], the Mercurio de Plata and Mercurio de Oro Corporate Governance & Social Responsibility

Principles of Pacífico Insurance Group: Shareholders rights Equal treatment to shareholders Transparency and Board of Director’s responsibilities

Pacífico Insurance Group resolved on the adoption of some important recommendations from CONASEV, the 68 69 Peruvian Securities and Exchange Commission, incorporating them to the Company’s totally complies with Corporate Bylaws.

Governance Principles The Organization’s Code of Behavior, known by all the employees, incorporates the Good Corporate Governance practices that should be taken into consideration with respect to the shareholders and regulatory institutions. The statement of principles undersigned by all the employees of Pacífico includes the principles that are the base on which the Organization management relies on, and that are directly related to the concepts which are part of good corporate governance. Thus, during 2006, the Board of Directors approved the progressive adoption of the Corporate Policies of Credicorp Group.

The performance management system has consolidated as a fair way to recognize the variable compensations of our employees, according to the performance of corporate or individual objectives, previously established and disclosed in the company. Thus, the company’s employees are committed with productivity, profitability and service quality.

The Code of Behavior principles related to Money Laundering Prevention, arising from the resolutions issued by UIF - Financial Intelligence Unit of Peru and by SBS - Superintendence of Banking and Insurance were carried out and disclosed properly. COMBINING RESULTS Financial Statements 2006 CONTENTS

72 73

Consolidated Financial Statements 2006

Credicorp Ltd. and Subsidiaries

Report of Independent Auditors 74 Consolidated Balance Sheet 76 Consolidated Income Statements 78 Consolidated Statements of Changes in Shareholders’ Equity 80 Consolidated Cash Flow Statements 82 Notes to the Consolidated Financial Statements 84

US$ United States Dollars

As of December 31, 2006 and December 31, 2005 and for three year period ending on December 31, 2006, 2005, 2004. 74 75 Consolidated Balance Sheets As of December 31, 2006 and 2005

Assets Note 2006 2005 Liabilities and Equity Note 2006 2005

US$(000) US$(000) US$(000) US$(000)

Deposits and obligations 13 Cash and due from banks 4 Non-interest bearing 1,989,564 1,671,621 Non-interest bearing 474,859 364,947 Interest bearing 6,849,427 5,421,807 Interest bearing 2,258,671 2,295,868 8,838,991 7,093,428 2,733,530 2,660,815 Due to banks and correspondents 14 570,989 1,023,371 Bankers’ acceptances outstanding 45,129 45,423 Investments Accounts payable to re-insurers and co-insurers 12 25,134 36,580 Trading securities 5 45,136 60,785 Technical, insurance claims reserves and reserves for unearned premiums 15 628,221 546,094 Investments available-for-sale 6 3,450,711 2,810,705 Borrowed funds 14 370,612 280,000 Bonds and subordinated notes issued 16 512,572 429,224 3,495,847 2,871,490 Other liabilities 11 356,113 290,000 Loans, net 7 76 77 Total liabilities 11,347,761 9,744,120 Loans, net of unearned income 5,927,101 5,014,255 Allowance for loan losses (190,278) (197,495) Equity 17 Capital and reserves attributable to Credicorp’s equity holders 5,736,823 4,816,760 Capital stock 471,912 471,912 Treasury stock (73,107) (73,107) Premiums and other policies receivable 61,279 57,301 Capital surplus 140,693 140,693 Accounts receivable from re-insurers and co-insurers 12 35,181 35,288 Reserves 479,902 269,527 Property, furniture and equipment, net 8 255,478 248,299 Other reserves 147,409 83,302 Due from customers on acceptances 45,129 45,423 Retained earnings 230,013 298,113 Assets seized, net 9 29,427 39,373 Intangible assets and goodwill, net 10 215,647 58,217 1,396,822 1,190,440 Other assets 11 273,188 203,109 Minority interest 136,946 101,515

Total assets 12,881,529 11,036,075 Total equity 1,533,768 1,291,955

Total liabilities and equity 12,881,529 11,036,075

The accompanying notes are an integral part of these Consolidated Balance Sheets. Consolidated Income Statements For the years ended December 31, 2006, 2005 and 2004

Note 2006 2005 2004 Note 2006 2005 2004

US$(000) US$(000) US$(000) US$(000) US$(000) US$(000)

Interest and dividend income Insurance premiums and claims Interest on loans 537,671 447,392 426,537 Net premiums earned 21 251,261 218,955 192,672 Interest on deposits in banks 93,886 37,127 20,146 Net claims incurred for property and casualty insurance contracts 22 (46,587) (42,569) (34,791) Interest from trading securities and investments available-for-sale 135,705 117,242 81,276 Net claims incurred for life and health insurance contracts 22 (139,935) (132,931) (119,534) Dividend income 9,140 3,553 2,256 Other interest income 5,600 7,118 12,627 Total premiums earned less claims 64,739 43,455 38,347 Other expenses Total interest and dividend income 782,002 612,432 542,842 Salaries and employees benefits (303,332) (236,347) (202,729) Interest expense (189,552) (119,138) (95,965) Administrative expenses 8(a) and (172,304) (138,294) (153,096) Interest on deposits and obligations (25,282) (24,332) (27,651) Depreciation and amortization 10(a) (50,317) (38,728) (41,742) Interest on bonds and subordinated notes issued Provision for assets seized 9(b) (6,387) (16,959) (14,639) Interest on due to banks and correspondents and borrowed funds (56,634) (20,288) (16,366) Merger expenses 2(a) and (d) (5,706) - (3,742) Other interest expense (12,010) (9,401) (20,316) Goodwill amortization 10(b) - - (4,853) 78 79 Other 23 (52,718) (46,745) (42,869) Total interest expense (283,478) (173,159) (160,298) Total other expenses (590,764) (477,073) (463,670) Net interest and dividend income 498,524 439,273 382,544 Income before translation result and income tax 315,636 277,996 184,969 Provision for loan losses 7(f) 4,243 6,356 (16,131) Translation result 15,216 (9,597) 2,040 Net interest and dividend income after provision for loan losses 502,767 445,629 366,413 Income tax 18(b) (83,587) (73,546) (45,497) Net income 247,265 194,853 141,512 Other income Banking services commissions 243,778 206,163 201,474 Attributable to: Net gain on foreign exchange transactions 41,638 29,286 24,165 Equity holders of Credicorp 230,013 181,885 130,747 Net gain on sales of securities 27,281 8,965 10,135 Minority interest 17,252 12,968 10,765 Other 23 26,197 21,571 8,105 247,265 194,853 141,512 Total other income 338,894 265,985 243,879 Basic and diluted earnings per share for net income attributable to equity holders of Credicorp (in United States dollars) 24 2.88 2.28 1.64

The accompanying notes are an integral part of these Consolidated Financial Statements. Consolidated Statements of Changes in Equity For the years ended December 31, 2006, 2005 and 2004

Attributable to the equity holders of Credicorp Attributable to the equity holders of Credicorp

Number of shares Capital Treasury Capital Other Retained Minority Total issued, note 24 stock stock surplus Reserves reserves earnings Total interest net equity

(En miles de unidades) US$(000) US$(000) US$(000) US$(000) US$(000) US$(000) US$(000) US$(000) US$(000)

Balances as of January 1st, 2004 94,382 471,912 (73,177) 140,500 269,527 20,750 81,218 910,730 72,841 983,571 Changes in equity for 2004 Net unrealized gains from investments available-for-sale, note 6(c) - - - - - 56,746 - 56,746 9,762 66,508 Transfer of net realized gain the operations results, net of realized gains, note 6(c) - - - - - (1,365) - (1,365) 53 (1,312)

Income for the year recognized directly in equity - - - - - 55,381 - 55,381 9,815 65,196 Net income ------130,747 130,747 10,765 141,512

Total recognized income for the period - - - - - 55,381 130,747 186,128 20,580 206,708 Decrease in treasury stock - - 70 193 - - - 263 - 263 Cash dividends, note 17(d) ------(31,900) (31,900) - (31,900) Dividends of subsidiaries and other ------(24) (24) (8,168) (8,192)

Balances as of December 31, 2004 94,382 471,912 (73,107) 140,693 269,527 76,131 180,041 1,065,197 85,253 1,150,450

Changes in equity for 2005 Net unrealized gain from investments available-for-sale, note 6(c) - - - - - 7,121 - 7,121 4,764 11,885 Transfer of net realized gain the operations results, net of realized gains, note 6(c) - - - - - (1,572) - (1,572) (165) (1,737) Net gain on cash flow hedge, note 20(d) - - - - - 1,622 - 1,622 - 1,622

Income for the year recognized directly in equity - - - - - 7,171 - 7,171 4,599 11,770 Net income ------181,885 181,885 12,968 194,853

Total recognized income for the period - - - - - 7,171 181,885 189,056 17,567 206,623 Cash dividends, note 17(d) ------(63,810) (63,810) - (63,810) Dividends of subsidiaries and other ------(3) (3) (1,305) (1,308)

Balances as of December 31, 2005 carried forward 94,382 471,912 (73,107) 140,693 269,527 83,302 298,113 1,190,440 101,515 1,291,955

Changes in equity for 2006 Net unrealized gain from investments available-for-sale, note 6(c) - - - - - 69,411 - 69,411 20,728 90,139 Transfer of net realized gain the operations results, net of realized gains, note 6(c) - - - - - (6,620) - (6,620) (379) (6,999) Net gain on cash flow hedge, note 20(d) - - - - - 1,316 - 1,316 - 1,316

Income for the year recognized directly in equity - - - - - 64,107 - 64,107 20,349 84,456 Net income ------230,013 230,013 17,252 247,265

Total recognized income for the period - - - - - 64,107 230,013 294,120 37,601 331,721 Transfer of retained earnings to reserves, note 17(c) - - - - 210,375 - (210,375) - - - Cash dividends, note 17(d) ------(87,738) (87,738) - (87,738) Dividends of subsidiaries and other ------(2,170) (2,170)

Balances as of December 31, 2006 carried forward 94,382 471,912 (73,107) 140,693 479,902 147,409 230,013 1,396,822 136,946 1,533,768

The accompanying notes are an integral part of these Consolidated Financial Statements. Consolidated Cash Flow Statements For the years ended December 2006, 2005 and 2004

2006 2005 2004 2006 2005 2004

US$(000) US$(000) US$(000) US$(000) US$(000) US$(000)

Cash flows from operating activities Cash flows from financing activities Net income 247,265 194,853 141,512 Issuance of bonds and subordinated notes 167,247 74,985 35,235 Redemption of bonds and subordinated notes (91,925) (57,469) (30,719) Add (deduct) Sales of treasury stocks - - 263 Provision for loan losses (4,243) (6,356) 16,131 Increase in borrowed funds 90,612 348,500 140,500 Depreciation and amortization 50,317 38,728 41,742 Payments of borrowed funds - (68,500) (114,054) Amortization of goodwill - - 4,853 Cash dividends (87,738) (63,810) (31,900) Provision for assets seized 6,387 16,959 14,639 Provision for sundry risks, note 23 6,461 5,567 9,819 Net cash provided by (used in) financing activities 78,196 233,706 (675) Deferred income tax, note 18(b) (4,786) (11,502) (6,325) Translation gain (loss) on cash and cash equivalents 14,114 (15,060) (6,787) Net gain on securities available-for-sale (27,281) (8,965) (10,135) Loss (gain) on sales of property, furniture and equipment, note 23 (169) (1,875) 4,525 Net increase in cash and cash equivalents 72,715 815,354 230,401 Translation result (15,216) 9,597 (2,040) Purchase (sale) of trading securities, net 15,649 22,843 (3,788) 82 83 Cash and cash equivalents at the beginning of the year 2,660,815 1,845,461 1,615,060 Purchase of loan portfolio, note 2(b) - (353,769) - Cash and cash equivalents at the end of the year 2,733,530 2,660,815 1,845,461

Changes in assets and liabilities Supplementary cash flows information Increase (decrease) in loans, net (871,970) 90,521 (142,316) Cash paid during the year for Decrease (increase) in other assets (104,091) (15,062) 52,049 Interests 265,838 171,495 158,414 Increase in deposits and obligations, net 1,632,960 648,648 296,094 Income tax 96,284 47,760 43,866 Increase (decrease) in due to banks and correspondents, net (455,381) 540,824 130,369 Cash received during the year for Increase (decrease) in other liabilities, net 114,717 149,920 139,626 Interests 810,266 628,508 554,205 Net cash provided by operating activities 590,619 1,320,931 686,755

Cash flows from investing activities Acquisition of subsidiaries net of cash received, notes 2(a) and (d) (140,085) - (4,900) Disposal of subsidiaries, net of cash disposed, note 2(c) - 17,977 - Net purchase of investments available-for-sale (433,702) (712,879) (410,693) Purchase of property, furniture and equipment (43,973) (48,769) (41,087) Sales of property, furniture and equipment 7,546 19,448 7,788

Net cash used in investing activities (610,214) (724,223) (448,892)

The accompanying notes are an integral part of these Consolidated Financial Statements. Notes to the Consolidated Financial Statements As of December 31, 2006 and 2005

1 Operations The intangible assets recognized correspond mainly to “client relationships” and it has an assigned useful life of 20 years. Management of the Group has Credicorp Ltd. (hereinafter “Credicorp” or “the Group”) is a limited liability company incorporated in Bermuda in 1995 to act as a holding company and to valued these intangible assets using the method of “Multiple Excess Earnings Method”. The goodwill generated is attributed to the high profitability of the coordinate the policy and administration of its subsidiaries. It is also engaged in investing activities. acquired business and the significant synergies that are expected to be obtained after the acquisition of AFP Union Vida by the Group, note 10(b).

Credicorp Ltd., through its banking and non-banking subsidiaries, provides a wide range of financial services and products throughout Peru and in selected In January 2007, the final purchase price determination was completed with the result of the arbitration proceeding between both parties. As result the Group international markets. At December 31, 2006, the major subsidiary of the Group is Banco de Crédito del Perú (hereinafter “BCP” or the “Bank”), a received a reimbursement of approximately US$ 4.5 million, which have been record as a reduction of the goodwill. Peruvian universal bank. The address of Credicorp’s main office is Claredon House 2 Church Street Hamilton, Bermuda; likewise, the Management and its The acquired business (AFP Union Vida S.A.) has contributed with gross revenues to the Group of approximately US$8.0 million and a net loss of administration offices are located in Calle Centenario Nº156, La Molina, Lima, Perú. approximately US$0.4 million for the period between the acquisition date (August 24, 2006) and December 31, 2006. If this acquisition had been Credicorp is listing in both Lima and the New York Stock Exchanges. completed at January 1, 2006 and 2005, respectively, the gross revenues (pro-forma) of the Group would had been increase by US$27.5 and US$49.9 million, respectively, the net income attributable to Credicorp’s shareholders (pro-forma) would have been increase by approximately US$2.7 and US$15.6, The consolidated financial statements as of and for the year ended December 31, 2005 have been approved in the General Shareholders’ Meeting dated million and the net earning per share (pro-forma), basic and diluted attributable to Credicorp’s shareholders would have been increased by US$0.04 and March 31, 2006. The accompanying consolidated financial statements as of and for the year ended December 31, 2006, have been approved by the US$0.20, respectively. This information is presented solely for comparison purposes and it does not mean to be an indicator of the results that would have Auditing Committee and Management in February 22, 2007 and will be submitted for approval at the Board of Directors and the General Shareholders’ been produced in the case the acquisition had occurred at the beginning of the period or neither be an indicator of future possible consolidated results. Meeting that will occur within the period established by law. As of December 31, 2006, the number of participants in the fund managed by Prima, including those that come from AFP Union Vida, is 997,963 (51,838 as In Management’s opinion, the accompanying consolidated financial statements will be approved without modifications. 84 85 December of 31, 2005, without considering those of AFP Union Vida) and the fair value of the funds under its administration amounts to approximately 2 Business developments US$ 4,163.4 million (US$ 252.7 million as December of 31, 2005), note 3(b) (iv). During 2006 and 2005, the Group incorporated new companies; acquired subsidiaries recorded as business combinations, according to the guidelines of (b) Acquisition of the loan portfolio of Bank Boston N.A. Peru Subsidiary IFRS 3, and sold subsidiaries. The description of such transactions are described below: On January 2005, the BCP and the Bank of America, principal shareholders of United States Fleet Boston agreed to buy-sale the loans portfolio of the Bank Boston N.A. Peruvian branch and the loan portfolio of Peruvians in United States Fleet Boston N.A., registering this operation at the acquisition cost. BCP paid (a) Incorporation of a Private Pension Fund Management and acquisition of AFP Unión Vida S.A. in cash approximately US$353.8 million for the loan portfolio, which comprised commercial loans, mortgage and leasing operations. The acquisition date of Credicorp’s Board of Directors Meeting held on November 25, 2004, approved that its subsidiary Grupo Crédito S.A. will take part, as the principal shareholder, the portfolio was January 24, 2005. in the start-up of a new private pension fund management company, Administradora de Fondos de Pensiones - AFP, Prima AFP S.A. (hereinafter “Prima AFP”), which was incorporated on March 4, 2005. (c) Sale of Banco Tequendama S.A. In March 2005, after the approval of the Colombian authorities, the Group completed the sale transaction of its 99.99 percent interest in its subsidiary Banco On August 24, 2006, Credicorp, through its subsidiary Prima AFP, acquired from Grupo Santander Perú S.A., the shares that this Company had in AFP Unión Vida S.A. Tequendama S.A., for approximately US$ 32.5 million. The effective date for this transaction was January 1st, 2005 and as result of the transaction, the Group (a pension fund management company that operates in Peru), which represented 99.97 of its capital stock and made a Public Offering for the minority shareholders did not record any significant gain. In the year 2004, the subsidiary operated in the banking segment and contributed US$ 1.9 million to net income. in order to acquire the remaining 0.03 percent of the capital stock. The amount paid for the purchase amounted to approximately US$ 141.5 million. (d) Acquisition of Corporación Novasalud Perú S.A. At the General Shareholder’s Meeting of Prima AFP, held on September 6, 2006, the merger with AFP Unión Vida S.A. was approved, with effective date of In March 2004, El Pacífico Peruano-Suiza Compañía de Seguros y Reaseguros S.A.A. (hereinafter “PPS”), a subsidiary of the Group, acquired a 100 percent December 1st, 2006. interest in Corporación Novasalud S.A., proprietary of a 100 percent of Corporación Novasalud Perú S.A. - Entidad Prestadora de Salud (hereinafter “Novasalud The acquisition of AFP Unión Vida S.A. was recorded using the purchase method, as required by IFRS 3, Business Combinations. The assets and liabilities EPS”). The amount paid for this purchase amounted to approximately US$6.5 million, generating goodwill of approximately US$ 5.9 million, note 10(b). On were recorded at their estimated market values at the acquisition date and the intangible assets acquired were identified. The book value and the fair values March, 2004, the company was merged with Pacífico S.A. Entidad Prestadora de Salud. for the identified assets and liabilities of the entity at acquisition date were as follows: 3 Significant accounting policies Significant accounting principles used in the preparation of Credicorp’s consolidated financial statements are set out below.

Book value of the Fair value Fair value of the (a) Basis of presentation and use of estimates entity acquired recognition entity acquired The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS). The consolidated financial US$(000) US$(000) US$(000) statements have been prepared under the historical cost convention, unless otherwise stated.

Assets The financial instruments of the Group, assets and liabilities, are recorded at the amortized cost; except for: Cash and cash equivalents 1,428 - 1,428 Restricted mutual fund 32,265 - 32,265 -The trading securities, the derivatives and the financial instruments with embedded derivatives (see the paragraphs (h) and (u) below), which are recorded as Client relationships - 88,378 88,378 financial assets at their fair value through profit or loss. Other Intangibles 3,424 9,603 13,027 Property, furniture and equipment 2,060 - 2,060 -The investments available-for-sale, as it is indicated in the paragraph (h) below. Goodwill - 49,047 49,047 The preparation of the consolidated financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the Other assets 5,605 - 5,605 reported amounts of assets and liabilities, revenues and expenses and disclosure of significant events in notes to the consolidated financial statements. Liabilities Trade accounts payable 4,688 - 4,688 Other accounts payable 5,352 - 5,352 Other liabilities 7,433 32,824 40,257

Net acquired assets 27,309 114,204 141,513 (*)

(*) Cash paid for the acquisition and related direct cost Notes to the Consolidated Financial Statements (continued)

Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that The net equity and the net income attributable to the minority interest are shown separately on the consolidated balance sheets and income statements. are believed to be reasonable under the current circumstances. Actual results could differ from those estimates. The most significant estimates comprised Associates in the accompanying consolidated financial statements are related to the computation of the allowance for loan losses, the measurement of the financial Associates are all the entities over which the Group has significant influence but not control. Generally investment in these entities represents shareholding instruments, the technical reserves for claims and premiums, the provision for assets seized and the valuation of derivatives. The accounting criteria used for between 20 and 50 percent of the voting rights. The investments in associates are recognized initially at cost and then are accounted for by the equity each of these items are described below. method. The Group does not maintain a significant investment in associates; therefore these investments are recorded in the caption “Other assets” in the The accounting policies adopted are consistent with those of the previous year, except that the Group has adopted those new IFRS and revised IAS mandatory consolidated balance sheets and in the caption “Other income” of the consolidated income statements. for years beginning on or after January 1st, 2005. The adoption of the new and revised standards did not have a significant effect in the consolidated financial Minority interest statements of Credicorp and, as result, it has not been necessary to amend the comparative figures. In summary: The Group applies a policy of treating transactions with minority interests as transactions with parties external to the Group. Disposals to minority interests -IAS 1 (revised in 2003) has affected mainly the presentation of minority interest as part of the net equity. result in gains and losses for the Group that are recorded in the consolidated income statement. Purchases from minority interests result in goodwill, being the difference between any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary. -IAS 8, 10, 16, 17, 27, 28, 32, 33 (all revised in 2003) and IAS 39 (revised in 2004) had no material effect on the Group’s policies. The companies that comprise the Group as of December 31, 2006 and 2005, with an indication of the percentage owned directly and indirectly by -IAS 21 (revised in 2003) had no material effect on the Group’s policy. The functional currency of each of the consolidated entities has been re-evaluated Credicorp as of those dates, as well as other relevant information, based on the financial statements in accordance with IFRS and before the eliminations for based on the guidance to the revised standard. All the Group entities have the same functional currency as used in previous years. consolidation, except for the elimination of Credicorp´s treasury shares and the related dividends, are as follows: -IAS 24 (revised in 2003) has affected the identification of related parties and other related-party disclosures. 86 87

-The adoption of IFRS 2 had no material effect for the consolidated financial statements. Entity Percentage of Assets Liabilities Equity Net income (loss) participation -The adoption of IFRS 3, IAS 36 (revised in 2004) and IAS 38 (revised in 2004) resulted in a change in the accounting policy for goodwill. In accordance with the provisions of IFRS 3, see paragraph (m) below: 2006 2005 2006 2005 2006 2005 2006 2005 2006 2005 i The Group ceased the amortization of goodwill from January 1st, 2005. % % US$(000) US$(000) US$(000) US$(000) US$(000) US$(000) US$(000) US$(000) Banco de Crédito del Perú and ii Accumulated amortization as of December 31, 2004 has been eliminated with a corresponding decrease in the cost of goodwill. Subsidiaries (i) 97.24 96.98 10,802,737 9,262,352 9,838,881 8,402,202 963,856 860,150 247,756 184,156 iii From the year ended December 31, 2004 onwards, goodwill is tested annually for impairment. Atlantic Security Holding Corporation and Subsidiaries (ii) 100.00 100.00 1,320,535 1,052,386 1,200,170 949,757 120,365 102,629 15,402 13,483 -The adoption of IFRS 4 does not require significant changes in the Group’s accounting policies. El Pacífico Peruano-Suiza Compañía de Seguros y -The Group has reassessed the useful lives of its intangible assets in accordance with the provision of IAS 38 (revised in 2004). No adjustment resulted from Reaseguros and this reassessment. Subsidiaries (iii) 75.72 75.72 1,002,358 833,573 712,430 613,978 289,928 219,595 59,087 13,117 Grupo Crédito S.A. (b) Consolidation and Subsidiaries (iv) 99.99 99.99 314,540 61,832 115,702 4,877 198,838 56,955 (12,380) (5,491) Subsidiaries CCV Inc. (v) 99.99 99.99 ------(244) Subsidiaries are all entities (including special purpose entities) over which the Group has the power to govern the financial and operating policies. This is CCR Inc. (v) 99.99 99.99 382,930 282,124 380,000 280,000 2,930 2,124 121 (197) generally evidenced by a shareholding of more than one half of the voting rights. Credicorp Securities Inc. (vi) 99.99 99.99 1,503 1,019 18 21 1,485 998 487 203 Subsidiaries are fully consolidated from the date on which effective control is transferred to the Group and are no longer consolidated from the date that control ceases. The consolidated financial statements include the assets, liabilities, income and expenses of Credicorp and its Subsidiaries. Inter-company i Banco de Crédito (BCP) is a universal bank, incorporated in Peru in 1889, authorized to engage in banking activities by the Superintendence of Banking, transactions between Group Companies as balances, gains or losses are eliminated. The unrealized gains and losses between companies from the Group are Insurance and AFP (SBS), the Peruvian banking, insurance and AFP authority. On November 2006, Credicorp acquired equivalent to 0.25 percent of BCP eliminated, except for the losses that indicate an impairment in the value of the asset transferred. shares owned by minority interest. See (iii) below. Accounting policies of subsidiaries have been changed when necessary to ensure consistency with the policies adopted by the Group and the IFRS. ii Atlantic Security Holding Corporation (ASHC) is incorporated in the Cayman Islands. Its main activity is to invest in the capital stock of companies. Its most The Group uses the purchase method of accounting to register the acquisition of subsidiaries. The cost of an acquisition is measured as the fair value of significant subsidiary is Atlantic Security Bank (ASB). ASB is also incorporated in the Cayman Islands and began operations on December 1981, carrying the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. The out its activities through branches and offices in Grand Cayman and the Republic of Panama, its main activity is private and institutional banking and trustee excess of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets and intangible assets acquired is recorded as goodwill. administration. If the acquisition cost is lower than the fair value of the net asset of the acquired subsidiary, the difference is recognized directly in the consolidated income iii El Pacífico Peruano-Suiza Compañía de Seguros y Reaseguros (PPS) is a Peruvian corporation, whose main activity is the issuance and administration statement. of insurance for property and casualty and related activities, and also provides insurance for life, health and personal accidents. Its main subsidiaries are El Assets in custody or managed by the Group, the investment funds and the pension funds managed by the Group, are not part of the consolidated financial Pacífico Vida Compañía de Seguros y Reaseguros S.A. and Pacífico S.A. Entidad Prestadora de Salud (EPS), in which maintain a share of 61.99 percent and statement of the Group, note 3(w). 100.00 percent, respectively. On November 2006, PPS sold to Credicorp 1.02 percent of BCP shares that maintained to that date, generating a goodwill for the purchase of the corresponding percentage of minority interest (0.25 percent) amounted to approximately US$ 7.2 million, note 10(b). Notes to the Consolidated Financial Statements (continued)

iv Grupo Crédito S.A. is a company incorporated in Peru on February 1987, whose main activity is to invest in listed and not listed securities in Peru. Since In the case of life insurance, the claims reserves are calculated taking into account an estimation of the mortality (for life insurance), survival (life annuities, 2005, Group Crédito incorporated Prima AFP, a new subsidiary engaged in fund management activities. On August, 2006, Prima AFP acquired 99.97 percent death and disability pension system insurance and complementary Insurance for work risk), (a type of life insurance for certain types of higher risk of the representative capital shares of AFP Unión Vida S.A., which was merged on December 2006, note 2(a). As of December 31, 2006, Prima AFP total occupations)) or incidence (personal injury) and the interest established when the product was designed. The reserves are calculated as the present value assets amount approximately US$233.9 million, liabilities for US$115.4 million and a net loss of US$20.7 million (US$18.3 million, US$2.8 million and of the probable cash flows for pension payments, using mortality tables for the policyholders, beneficiaries and disabled who are covered at the consolidated US$7.6 million, respectively, as of December 31,2005). Additionally, the Company owns 100.00 percent of the shares of Soluciones en Procesamiento S.A. balance sheet date as well as interest rates determined based on the performance of the corresponding portfolio of investments. In the case of individual life (Servicorp), an entity specialized in collection services. insurance, the reserves are determined according to the mortality tables adjusted in variable percentages according to the product characteristics, as well as the established interest and the type of investment involved according to the type of product. v CCV Inc. and CCR Inc., are special purposes entities incorporated in Bahamas in 2001, whose main activity is to manage the loans granted to BCP from foreign financial entities, note 14(b). These loans are collateralized by transactions realized by the Bank. The reserves corresponding to the universal life insurance policies form part of the technical life insurance reserves. The additional benefits granted to the policyholders originating from this type of policy are shown in the footnote net premiums earned for life and health insurance contract (note 21) which vi Credicorp Securities Inc., an entity incorporated in the United States of America on January 2003, whose main activity is to be engaged in brokerage include the surplus and interest accrued during the period which are credited to the balance of the policyholder. activities in the securities market, directed principally to retail customers in Latin America. The insurance claims are recorded when the event occurs. The incurred but non-reported claims (IBNR) are estimated and included in the provision (c) Foreign currency translation (liabilities). The reserves for IBNR at December 31, 2006 and 2005 have been estimated considering generally accepted actuarial methods, which take into Functional and presentation currency consideration the statistical analysis of the recorded loss history, the use of projection methods and when appropriate, qualitative factors used to reflect the The Group considers that its functional and presentation currency to be the United States dollar (U.S. Dollar), because it reflects the economic substance of effect of the present conditions or trends that affect historical data. Management considers that the estimated reserve is sufficient to cover liability for IBNR the underlying events and the circumstances relevant to the Group; insofar as its main operations and/or transactions in the different countries where the 88 89 occurred at December 31, 2006 and 2005. Group operates, such as, loans granted, financing obtained, sale of insurance premiums, interest income and expenses, an important percentage of salaries and purchases, are established and liquidated in U.S. Dollars. To determine the reserves for life, property and casualty and health insurance, the Group carries out a continuous review of its overall position as well as its techniques for computing the claim reserves and its reinsurance. The provisions are reviewed periodically by qualified actuaries contracted by the Group. Financial statements of each of the Credicorp’s subsidiaries are measured using the currency of the country in which each entity operates. Their financial Additionally, for those cases the Group considers an additional reserve is necessary, a calculation based on the claims past experience using the chain-ladder statements are translated into U.S. Dollars (functional and presentation currency) as follows: methodology or a percentage of the related premium is carried out. The technical provisions recorded are subject to a liability adequacy test to determine its -Monetary assets and liabilities for each balance sheet presented are translated at the free market exchange rate at the date of the consolidated balance sheet. sufficiency based on the future cash flow projections of the contracts in force. If as a consequence of this test, the reserves prove to be insufficient, they are adjusted and the amounts are included in the results of operations for the period. -Non-monetary accounts for each balance sheet presented are translated at the free market exchange rate at the date of the transactions. The costs for acquiring the policies (commissions) that are variable and that are primarily related to the acquisition and renewal of insurance contracts -Income and expenses, except for those related to non-monetary assets which are translated at the free market exchange rate at the date of the transaction, (universal life) are deferred and amortized during the period of the policy. The recoverability of these deferred acquisition costs are reviewed annually. are translated monthly at the average exchange rate. Based on the periodic reviews of the client portfolio, Management determines the provision for bad debt related to premiums and quotas receivable. All resulting translation differences are recognized in the consolidated income statement. (f) Loans and allowance for loan losses (d) Income and expense recognition from banking activities Direct loans are recorded when disbursement of funds to the clients are made. Indirect (off-balance sheet) loans are recorded when documents supporting Interest income and expense are recognized in the income statement for all instruments measured at amortized cost using the effective interest method. It such facilities are issued. Likewise, Credicorp considers as refinanced or restructured those loans that change their payment schedules due to difficulties in the is a method of calculating the amortized cost of a financial assets or a financial liability and allocating the interest income or interest expense over the relevant debtor’s ability to repay the loan. period on an accrual basis. Interest rates are determined based on negotiations with clients. An allowance for credit loss is established if there is objective evidence that the Group will not be able to collect all amounts due according to the original Interest income is suspended when collection of loans become doubtful, such as when overdue by more than 90 days or when the borrower or securities’ contractual terms of the loan. For such purpose, Credicorp classifies all its loans into one of five risk categories, depending upon the degree of risk of issuer defaults, if earlier than 90 days, and such income is excluded from interest income until received. Uncollected income on such loans is reversed against nonpayment of each loan. The categories used by Credicorp are: (i) normal, (ii) potential problems, (iii) substandard, (iv) doubtful and (v) loss. income. When Management determines that the debtor’s financial condition has improved, the recording of interest thereon is reestablished on an accrual basis. Credicorp reviews its loan portfolio on a continuing basis in order to assess the completion and accuracy of its classification. For commercial loans, the classification takes into consideration several factors, such as the payment history of the particular loan, the history of Credicorp’s dealings with the borrower’s Interest income includes coupons earned on fixed income investment and trading securities and the accrued discount and premium on financial instruments. management, operating history, repayment capability and availability of funds of the borrower, status of any collateral and guarantee, the borrower’s financial Dividends are recognized as income when they are declared. statements, general risk of the sector in which the borrower operates, the borrower’s risk classification made by other financial institutions in the market and other relevant factors. For micro-business, consumer and residential mortgage, the classification is based on how long payments are overdue. Commission income is recognized on an accrual basis when earned. All other revenues and expenses are recognized on an accrual basis as earned or incurred. The allowance for loan losses is established based in the risk classifications and taking into consideration the guarantees and collateral obtained by the Group. Only collateral received and classified as “preferred”, “highly liquid preferred” or “self-liquidating preferred” is considered acceptable. Such collateral must be (e) Recognition of income and expenses of insurance activities relatively liquid, have legally documented ownership, have no liens outstanding and have updated independent appraisals. The premiums related to life insurance policies and others, of both long and short duration, are recognized as income when they accrue. A reserve for unearned premiums is recorded for the unexpired portion of the premiums. In the case of borrowers in countries where there is an increased risk of difficulties in servicing external debt, an assessment of the political and economic situation is made, and an additional country risk provisions provided. The claims reserves are constituted under different methodologies depending on the type of reserve, line of business, type of product and type of coverage. Notes to the Consolidated Financial Statements (continued)

All loans considered impaired (the ones classified as substandard, doubtful and loss) are analyzed by the Groups’ management, taking into consideration the (j) Property, furniture and equipment present value of their expected cash flows, including the recoverable amounts of the guarantees and collateral, discounted at the original effective interest rate Land and buildings comprise mainly branches and offices. All property, furniture and equipment are stated at historical acquisition cost less depreciation. of each loan. The calculation of the present value of the estimated future cash flows of a collateralized financial asset reflects the cash flows that may result Historical acquisition costs include expenditures that are directly attributable to the acquisition of the items. Maintenance and repair costs are charged to the from foreclosure, less cost for obtaining and selling the collateral. consolidated statement of income, and significant renewals and improvements are capitalized when it is probable that future economic benefits, in excess of the originally assessed standard of performance, will flow for the asset. The methodology and assumptions used for estimating future cash flows are reviewed regularly by the Group in order to reduce any differences between loss estimates and actual loss experience. Land is not depreciated. Depreciation of other assets in this caption is computed on a straight-line to assign a cost at their residual value during its estimated useful lives as follows: The allowance for loan losses also covers the estimated losses for impairment loans not specifically identified.

When a loan is uncollectible, it is written off against the related provision for loan impairment. Such loans are written off after all the necessary procedures have been completed and the amount of the loss has been determined. Subsequent recoveries of amounts previously written off decrease the amount of Years the provision for loan impairment in the consolidated income statements. Buildings and other construction 33 Installations 10 (g) Leases Furniture and fixtures 10 Operating leases Computer hardware 4 Leases in which a significant portion of the risks and relative benefits of the property are hold by the lessor are classified as operating leases. By this concept, Vehicles and equipment 5 the Group maintains principally leases used as offices and agencies for the Bank. 90 91

When an operating lease is terminated before the lease period has expired, any payment required to be made to the lessor by way of penalty is recognized as an expense in the period in which termination takes place. The asset’s residual value, the useful life and the selected depreciation method are periodically reviewed to ensure that the method and period of depreciation chosen are consistent with the economic benefits and life expectations for use of property, furniture and equipment items. Finance leases The Group grants loans through finance leases; therefore, recognizes the present value of the lease payments as a loan. The difference between the gross (k) Assets seized receivable amount and the present value of the loan is recognized as unearned interest. Lease income is recognized over the term of the lease using the Assets seized are recorded at the lower of cost or the estimated market value obtained from valuations made by independent appraisals. effective interest method, which reflects a constant periodic rate of return. Changes in market values are recorded in the consolidated income statements. (h) Investments (l) Intangible assets The purchases and sales of investments are recognized at the date of the negotiation (trade date) that corresponds to the date in which the Group commits Comprise mainly internal development and acquired software licenses used by the Group. The software licenses acquired by the Group are capitalized on itself to buy or sell the assets. basis of the incurred cost to acquire or used a specific program. These intangible assets are amortized using the straight-line method over their estimated Investments acquired, including those directly from the issuer, mainly with the purpose of generating profits based on short-term price fluctuations, and are useful life (between 3 and 5 years). considered as financial assets at fair value through profit or loss (hereinafter “trading securities”). Investments available-for-sale are those intended to be held Additionally, it includes other intangible assets identified as consequence of the acquisition AFP Unión Vida, note 2(a), principally the “Client relationships”. for an indefinite period, which may be sold in response to liquidity needs or changes in the interest rates, exchange rates or equity prices. Such intangibles are recognized on the consolidated balance sheet at their fair values determine on the acquisition date and are amortized using the straight Trading investments and investments available-for-sale are initially recognized at cost, including the inherent costs of the transaction and are subsequently line method over their estimated useful life of 20 years, for the “Client relationships” and 5 years for the other identified intangible assets. adjusted to their estimated fair value. (m) Goodwill Estimated fair values are based primarily on quoted prices or, if quoted market prices are not available, discounted expected cash flows using market rates Goodwill represents the excess of the cost of acquisition of a subsidiary over the fair value of the net identifiable assets of the acquired subsidiary undertaking commensurate with the credit quality and maturity of the investment. All related realized and unrealized gains and losses of trading securities are included at the date of acquisition. Goodwill is tested annually for impairment to assess whether the carrying amount is fully recoverable. An impairment loss is in the income statement. Unrealized gains and losses arising from changes in the fair value of securities classified as investments available-for-sale are recognized if the carrying amount exceeds the recoverable amount. Goodwill is allocated to cash-generating units for impairment testing purposes. recognized in equity, net of the related deferred income taxes. Unrealized gains or losses are recognized in income of the year when the investments In accordance with the disposals of IFRS 3, since January 1st, 2005, the Group has ceased the amortization of goodwill. The accumulated amortization as of available-for-sale are sold. December 31, 2004 has been eliminated with a corresponding decrease in the cost of goodwill. The Group determines that an available-for-sale investment is impaired when there has been a significant or prolonged decline in the fair value below its As of December 31, 2004, goodwill amortization was calculated using the straight-line method, with the followings estimated useful life: cost. The determination of what is significant or prolonged requires the Management’s judgment. In making this judgment, the Group evaluates among other factors, the normal volatility in share price, evidence of deterioration in the financial health of the investee, industry and sector performance, changes in technology, and operational and financing cash flows. When a permanent impairment is present, the related unrealized loss is recognized in the consolidated Years income statement. ASHC and PPS 20 (i) Offsetting financial instruments Banco de Crédito del Perú 5 Corporación Novasalud Perú S.A. EPS 7 Financial assets and liabilities are offset and the net amount is reported in the consolidated balance sheet when there is a legally enforceable right to offset the recognized amounts and Management has the intention to settle on a net basis, or realize the assets and settle the liability simultaneously. Notes to the Consolidated Financial Statements (continued)

(n) Due from customers on acceptances Derivative financial instruments are initially recognized in the consolidated balance sheet at cost and subsequently are re-measured at their fair value. Fair Due from customers on acceptances corresponds to accounts receivable from customers for importation and exportation transactions, whose obligations have values are obtained based on the market exchange rates and interest rates. All derivatives are carried as assets when fair value is positive and as liabilities been accepted by the banks. The obligations that must be assumed by the Group for such transactions are recorded as liabilities. when fair value is negative. Gain and losses for changes in their fair value are recorded in the consolidated income statements.

(o) Bonds and subordinated notes issued Hedge Liabilities arising from the issuance bonds and subordinated notes are recorded at their amortized cost and the corresponding interest is recognized in the To qualify as a hedge, a derivative must be highly effective in offsetting the risk designated as being hedged. The Group documents, at the inception of the consolidated income statements on an accrual basis. Bond discounts or premiums determined at issuance are deferred and amortized over the term of the transaction, the relationship between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking the hedge bonds using the effective interest method. transactions.

(p) Provisions The Group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions Provisions for legal claims are recognized when the Group has a present (legal) or constructive obligation as a result of past events, it is probable that an are highly effective in offsetting changes in fair values or cash flows of hedged items. If a hedge relationship is found to be ineffective, it no longer qualifies outflow of resources will be required to settle the obligation; and the amount has been reliably estimated. The amount recorded as a provision is equal to the as a hedge and any excess gains or losses attributable to such ineffectiveness, as well as subsequent changes in fair value, are recognized as income in the present value of future payments expected to be needed to settle the obligation. consolidated financial statements.

(q) Contingencies As of December 31, 2006, the Group has only one derivative that qualifies for hedge purposes, see note 20(d), which is an interest rate swap, classified as a Contingent liabilities are not recognized in the consolidated financial statements. They are disclosed in notes unless the possibility of an outflow of resources cash flow hedge. The effective portion of changes in the fair value of this derivative is recognized in equity, the gain or loss relating to the ineffective portion is remote. 92 93 is recognized immediately in the consolidated income statements. Amounts accumulated in equity are recycled to the income statement in the periods in which the hedged item affects profit or loss. (r) Income tax and workers’ profit sharing Income tax and workers’ profit sharing and are computed based on individual financial statements of Credicorp and each one of its subsidiaries. Embedded derivates On 2006, the Group has acquired certificates indexed to its shares price that will be settled off in cash, note 11(c). These instruments have been classified Deferred income tax and deferred workers’ profit sharing reflect the effects of temporary differences between the carrying amounts of assets and liabilities for by the Group as a “financial asset at fair value though profit or loss”, because they reduce the liability exposure for the stock appreciation rights granted to the accounting purposes and the amounts determined for tax purposes. Deferred assets and liabilities are measured using the tax rates expected to be applied workers. These instruments have been accounted at their fair value and are presented in the caption “Other assets” of the consolidated balance sheets. to taxable income in the years in which temporary differences are expected to be recovered or eliminated. The measurement of deferred assets and deferred liabilities reflects the tax consequences that arise from the manner in which Credicorp and its Subsidiaries expect, at the consolidated balance sheet date, to (v) Segment reporting recover or settle the carrying amount of its assets and liabilities. The Group considers business segment as a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different from those of other business segments. A geographical segment is engaged in providing products or services within a particular economic Deferred tax assets and liabilities are recognized regardless of when the timing differences are likely to reverse. Deferred tax assets are recognized when it is environment that are subject to risks and return that are different from those of segments operating in other economic environment, note 25. more likely than not that future taxable profit will be available against which the temporary difference can be utilized. At the consolidated balance sheet date, Credicorp assesses unrecognized deferred assets and the carrying amount of recognized deferred assets. (w) Fiduciary activities, management of investment and pension funds The Group provides custody, trustee, investment management and advisory services to third parties that result in the holding of assets on their behalf. These Credicorp determines its deferred income tax considering the tax rate applicable to its undistributed earnings; any additional tax on dividends distribution is assets and income arising thereon are excluded from these consolidated financial statements, as they are not assets of the Group. recorded on the date a liability is recognized. The commissions generated for these activities are included on the caption “Other income” in the consolidated income statements, note 26. (s) Earnings per share Basic and diluted earnings per share are calculated by dividing the net profit attributable to Credicorp’s equity holders by the weighted average number of (x) Sale and repurchase agreements ordinary shares outstanding during the year, excluding the average number of ordinary shares purchased and held as treasury stock. For the years ending Securities sold subject to repurchase agreements (‘Repos’) are presented as pledged assets when the transferee has the right to sell or repledge the December 31, 2006, 2005 and 2004 Credicorp has no financial instruments with dilutive effects. Therefore, basic and diluted earnings per share are the collateral; the counterparty liability is included in the caption “Due to banks and correspondents”, or “Deposits and obligations”, as appropriate, in the same for all years presented. consolidated balance sheet.

(t) Stock appreciation rights The difference between sale and repurchase price is treated as interest and accrued over the life of the agreements using the effective interest method. The Group has granted supplementary profit sharing participation to certain executives and employees who have at least one year of service in Credicorp (y) Operations with reinsurers and coinsurers or any of its subsidiaries, in the form of stock appreciation rights (SARs) over a certain number of Credicorp’s shares. Such SARs options are granted at the During the normal course of business, PPS, a subsidiary of Credicorp, is dedicated to insurance activities and cedes reinsurance to other insurance and market price of the shares of Credicorp on the date of the grant and are exercisable at that price, allowing the worker to obtain a gain from the difference reinsurance companies to distribute the risks of its insurance contracts and to limit the potential losses that might arise from the coverages. PPS is ultimately between the fixed exercise price of the share at the date of execution and the fixed exercise price, see note 19. responsible for the payment of benefit payments to the policy holders if the reinsurer is not capable of fulfilling said obligation. The recorded expense in each year for these participations corresponds to the estimated market value of the rights that can be exercised by the beneficiaries The reinsurance and coinsurance include quota share of the excess of loss and facultative (voluntary) types of contracts. The amounts recoverable from the at the consolidated balance sheets date. When Credicorp changes the price or the terms of the SARs, the additional compensation expense is recorded for an reinsurers and coinsurers are estimated in a manner consistent with the liabilities of the related claims and are presented as a component of reinsured and amount equal to the difference between the new exercise price and the market price of the underlying shares. coinsured assets. (u) Derivative financial instruments Trading Most transactions with derivatives, while providing effective economic hedges under Group’s risk management positions, do not qualify for hedge accounting under the specific rules of IAS 39 and are therefore treated as trading derivatives. Notes to the Consolidated Financial Statements (continued)

The accounts receivable from reinsurers and coinsurers originate from the incurred claims in which PPS assumes the responsibility for the indemnity in favor 4 Cash and due from banks of the policyholder for the ceded reinsurance and coinsurance contracts; these accounts receivable are recognized based on contracts or coverage notes (with (a) This item is made up as follows: reinsurers) and clauses of coinsurance.

The allowance for bad debt for accounts receivable from reinsurance and coinsurance contracts is determined on the basis of a specific evaluation of the 2006 2005 claims liquidated and paid by PPS that are pending reimbursement from the reinsurers and coinsurers. US$(000) US$(000) The accounts payable to reinsurers and coinsurers are based on the evaluation of the assumed risk, which is determined by PPS (reinsurance) and also Cash and clearing 470,584 361,490 includes the policyholder’s consent; and are based on contracts or notes of coverage with the reinsurer and/or clauses of ceded coinsurance. Deposits in Peruvian Central Bank - BCRP 1,405,853 1,599,153 Claims originating from accepted reinsurance contracts and executed clauses of coinsurance are recognized each time a note of collection is received from Deposits in banks 853,203 693,601 reinsurance companies. 2,729,640 2,654,244 Accrued interest 3,890 6,571 (z) Cash and cash equivalents For the purposes of the consolidated cash flow statement, cash and cash equivalents comprise balances of less than three months from the date of Total 2,733,530 2,660,815 acquisition, including cash and balances with central banks, overnight deposits and amounts due from banks.

(aa) Reclassifications 94 95 (b) As of December 31, 2006 and 2005, cash and due from banks balances include approximately US$ 1,675.1 and US$ 1,288.9 million, respectively, mainly When it is necessary, the comparative figures have been reclassified to conform with the current year presentation. The main reclassifications to the report as from Banco de Crédito del Perú, which represent the legal reserve that the Peruvian banks must maintain for its obligations with the public. These funds are of December 31, 2006 are the following: deposited in the vaults of the Bank and in the BCRP, and are within the limits established by prevailing legislation. In addition, as of December 31, 2006, the i At December 31, 2005, the intangibles assets and goodwill were shown as part of the caption “Other assets” on the consolidated balance sheet. As of cash and due from banks caption includes US$ 70.0 million and S/120.0 (equivalent to US$ 37.5 million), corresponds to overnight operations deposited in December 31, 2006, these concepts are shown separately of the caption “Other assets” due to the increase of the balances, due to the purchase of AFP the BCRP, these operations earned interest at a nominal rate of 4.97 percent and an effective rate of 3.75 percent and had a 4 day maturity (approximately Unión Vida S.A., note 2(a). US$ 450.0 million, interest at an annual nominal rate of 3.97 percent and 3 day maturity as of December 31, 2005). ii At December 31, 2005, the borrowed fund were presented in the consolidated balance sheet together with due to banks and correspondents. Since 2006, Reserve funds kept in BCRP do not earn interest, except for the part of the demandable reserve in foreign currency that exceeds the minimum legal reserve. these concepts have been shown separately for a better presentation of the long term borrowed funds of the Group. As of December 31, 2006, this excess amounts to approximately US$1,068.9 million and earns interest in U.S. Dollars at an annual average rate of 2.67 percent (approximately US$ 975.8 million and earned interest in U.S. Dollars at an annual average rate of 2.25 percent as of December 31, 2005). Management considers that these reclassifications result in a better presentation of the Group activities. 5 Trading securities (ab) Recently issued International Financial Reporting Standards but not yet effective (a) This item is made up as follows: The Group has chosen not to early adopt the IFRS 7 - Financial Instruments - Disclosures, effective January 1st , 2007. The objective of this IFRS is to provide disclosures in the financial statements that enable users to evaluate the significance of financial instruments for the entity’s financial position and performance; to understand the nature and extent of risk arising from financial instruments to which the entity is exposed and how the entity manages those risks. The 2006 2005 Group will adopt this standard on January 1st , 2007. Because this standard does not modify any criteria of recognition or measurement, it will not have any US$(000) US$(000) effect on the net income and the equity of Credicorp and its Subsidiaries. Shares Also, the Group has decided not adopted the following standards and interpretations that have been issued but not have been effective as December 31, Listed equity securities (b) 34,692 45,487 2006. Bonds and similar instruments -IFRS 8, Operating Segments (effective for accounting periods beginning on or after January 1st , 2009). Participation in mutual funds 6,456 655 Corporate and leasing bonds 2,260 8,442 -IFRIC 7, Applying the Restatement Approach under IAS 29 (effective for annual periods beginning on or after March 1st , 2006). Bank certificates 1,726 662 Peruvian treasury bonds (c) - 5,361 -IFRIC 8, Scope of IFRS 2 (effective for annual periods beginning on or after May 1st , 2006). Other - 17 -IFRIC 9, Reassessment of Embedded Derivatives (effective for annual periods beginning on or after June 1st , 2006). 10,442 15,137 -IFRIC 11 and IFRS 2 - Group Treasury Share Transactions (effective for annual periods beginning on or after March 1st , 2007). 45,134 60,624 Accrued interest 2 161 The Group is in process of assessing the impact, if any, that the application of these standards may have on their financial statements. Total 45,136 60,785 Notes to the Consolidated Financial Statements (continued)

(b) Correspond mainly to shares listed in the Peruvian stock market, which included US$ 12.5, US$ 3.5 and US$ 3.2 million of the companies Refinería la The fair value and the gross unrealized losses of investment available-for-sale that are not considered as a permanent loss, classified by the date of such Pampilla S.A., Cementos Lima S.A. and Energía del Sur S.A., respectively (as of December 31, 2005, included approximately US$ 25.9, US$ 9.2 and US$ 3.2 losses: million of Energia del Sur S.A.A., Cementos Lima S.A., and Mineras del Sur S.A., respectively).

(c) The Peruvian treasury bonds represent sovereign debt issued in Peruvian currency (S/) by the Economic and Financial Ministry of Peru; they have an active Investments available for-sale 2006 market quotation in the Peruvian market and are traded daily with third parties. As of December 31, 2005, these bonds accrued interest at annual rates that Up to 12 months More than 1 year Total ranged between 1.53 and 5.96 percent and have maturities between August 2006 and January 2035. During 2006, the bonds held as of December 31,

2005 were totally sold. Estimate Gross Estimate Gross Estimate Gross fair value unrealized loss fair value unrealized loss fair value unrealized loss 6 Investments available-for-sale (a) This item is made up as follows: US$(000) US$(000) US$(000) US$(000) US$(000) US$(000) Fixed maturity 571,882 3,686 214,752 2,757 786,634 6,443 Shares 1,957 29 793 236 2,750 265 2006 2005

Unrealized gross amount Unrealized gross amount Total 573,839 3,715 215,545 2,993 789,384 6,708 Estimated Estimated Amortized market Amortized market 96 97 Cost Gain Losses (b) value cost Gain Losses (b) value Investments available for-sale 2005 US$(000) US$(000) US$(000) US$(000) US$(000) US$(000) US$(000) US$(000) Up to 12 months More than 1 year Total Fixed maturity 1,276,503 1,143 (33) 1,277,613 1,148,303 184 (2,672) 1,145,815 BCRP deposit certificates (d) Estimate Gross Estimate Gross Estimate Gross Corporate, leasing and subordinated fair value unrealized loss fair value unrealized loss fair value unrealized loss bonds (e) 845,644 15,769 (3,179) 858,234 599,191 9,835 (5,133) 603,893 US$(000) US$(000) US$(000) US$(000) US$(000) US$(000) Government treasury bonds (f) 476,036 59,564 (1,620) 533,980 365,820 22,080 (746) 387,154 US Government - Sponsored Fixed maturity 1,474,665 9,288 96,092 1,942 1,570,757 11,230 Enterprises (f) 153,867 1,661 (1,299) 154,229 177,925 3,651 (1,617) 179,959 Shares 3,343 474 1,496 275 4,839 749 Participation in mutual funds 86,422 9,920 (104) 96,238 82,038 6,000 (691) 87,347 Total 1,478,008 9,762 97,588 2,217 1,575,596 11,979 Bonds from international financial institutions (g) 64,578 89 (24) 64,643 112,184 213 (213) 112,184 Participation in RAL’s funds (h) 51,204 - - 51,204 56,073 - - 56,073 (c) The movement of “Other reserves” in equity includes the net change in the realized and unrealized gains and losses, net of deferred taxes, and the Restricted mutual funds (i) 43,152 6,085 - 49,237 2,531 - (33) 2,498 provision for impairment. This caption is as follows: Negotiable deposit certificates 47,225 1,104 - 48,329 36,872 762 (12) 37,622 Central Banks of Bolivia deposit certificates 27,833 189 (1) 28,021 - - - - 2006 2005 2004 Commercial papers 15,712 35 (6) 15,741 5,519 - (4) 5,515 US$(000) US$(000) US$(000) Other 26,930 2,015 (150) 28,795 13,818 278 (109) 13,987 Net unrealized gains, net of taxes 69,411 7,121 56,746 3,115,106 97,574 (6,416) 3,206,264 2,600,274 43,003 (11,230) 2,632,047 Net realized gains, net of taxes 6,620 1,572 1,365

Shares Listed securities (j) 78,649 112,025 (235) 190,439 52,741 87,141 (336) 139,546 (d) BCRP deposit certificates are discounted Peruvian currency instruments with maturities due within one year. These certificates have been acquired in Non-listed securities 17,837 7,964 (57) 25,744 19,477 3,972 (413) 23,036 public auctions. Annual interest rates in Peruvian currency range between 4.53 and 5.78 percent as of December 31, 2006 (between 3.75 and 6.35 percent 96,486 119,989 (292) 216,183 72,218 91,113 (749) 162,582 as of December 31, 2005) with maturities between January 2007 and December 2009 (between January 2006 and June 2008 as of December 31, 2005). As of December 31, 2006 and 2005, the Group has entered into BCRP - Repo transactions in Peruvian currency with its clients using these securities, for 3,211,592 217,563 (6,708) 3,422,447 2,672,492 134,116 (11,979) 2,794,629 approximately US$167.7 and US$592.5 million, respectively. As of December 31, 2006, these operations earn an effective annual interest rate range between Accrued interest 28,264 16,076 4.08 and 5.26 annual percent and with maturities between January and June 2007 (interest rate between 3.55 and 6.23 annual percent and maturities between January 2006 and February 2008 as of December 31, 2005). Total 3,450,711 2,810,705 (e) As of December 31, 2006, comprise corporate bonds by US$849.9 million, leasing bonds by US$3.9 million and subordinated bonds by US$4.4 million (US$598.1, US$1.8 and US$4.0 million, respectively, as December 31, 2005), with maturities between January 2007 and May 2049 (between January 2006 (b) The Group has determinate that the unrealized losses as of December 31, 2006 and 2005, are originated by the variation of the interest rates and not for and November 2035 as of December 31, 2005). These bonds accrue interests at annual effective rates that range between 3.36 and 7.71 percent for the changes in the risk classification of the investment. Moreover, the Group has decided and has the capacity to maintain these investments until the recovery of bonds denominated in Peruvian currency (between 2.92 and 8.00 percent in 2005), and between 2.88 and 11.00 percent for the bonds denominated in their fair value which can occur at their maturity; therefore, the Group has concluded that no impairment exists on the value of these investments. U.S. Dollars (between 2.23 and 12.03 percent in 2005). Notes to the Consolidated Financial Statements (continued)

(f) Includes principally debt instruments for US$154.2, US$425.1, US$72.0 and US$14.0 million issued by US Government - Sponsored Enterprises, the 7 Net loans Peruvian Government, the Colombian Government and the Government of El Salvador, respectively, as of December 31, 2006 (US$179.9, US$308.9 (a) This item is made up as follows: and US$18.7 million issued by US Government - Sponsored Enterprises, the Peruvian Government and the Government of El Salvador, respectively, as of December 31, 2005). Their maturities are between February 2007 and August 2038 (between January 2006 and August 2038 as of December 31, 2005) at annual interest rates that range between 2.38 and 11.75 percent (between 1.83 and 11.25 percent in 2005). 2006 2005 US$(000) US$(000) As of December 31, 2006, the Group has entered into Repo transactions with its clients using part of the debt instruments issued by the Peruvian Government for approximately US$19.8 million with maturity in September 2007. Direct loans Loans 4,224,102 3,567,970 (g) Comprise mainly of US$55.1 and US$9.5 million of debt instruments issued by Corporación Andina de Fomento - CAF and by The World Bank, Leasing receivables 675,804 564,575 respectively (mainly of US$90.8 and US$18.7 million issued by Corporación Andina de Fomento - CAF and by Fondo Latinoamericano de Reservas - FLAR, Credit card receivables 438,628 297,673 respectively, as of December 31, 2005). Such bonds have maturities between January 2007 and July 2009 (between February 2006 and January 2023 as Discount notes 256,534 213,232 of December 31, 2005). Annual interest rates are between 5.32 and 5.92 percent (between 4.08 and 5.26 percent in 2005). Refinanced and restructured loans 126,006 175,211 Factoring receivables 89,171 87,757 As of December 31, 2006, the Group has entered into Repo transactions with its clients using these securities for approximately US$40.1 million. These Advances and overdrafts 84,262 49,283 operations earn an effective annual interest rate range between 5.32 and 5.92 annual percent and with maturity in January 2007. Past due and under legal collection loans 76,770 95,769

(h) The participation quotas in the Fund “Requirement of Cash Assets” (RAL for its Spanish denomination), stated in Bolivian pesos, comprises investments 98 99 5,971,277 5,051,470 made by the Group in the Central Bank of Bolivia as collateral for the deposits maintained with the public. Such fund has restrictions for its use and it is Add (less) required for all the banks established in Bolivia. The fund accrues interest at an average annual rate of 5.61 percent (4.31 percent in 2005). Accrued interest 49,740 41,280 Unearned interest (93,916) (78,495) (i) The restricted mutual funds comprise participation quotas on the pension funds managed by the Group as required by the legal standards of Peru and Allowance for loan losses (f) (190,278) (197,495) they have a restricted disposal. The profitability obtained is the same as the obtained for the funds managed. The amount as of December 31, 2006, approximately US$32.3 million comes from the purchase of AFP Unión Vida S.A. as mentioned in note 2(a). Total direct loans, net 5,736,823 4,816,760

(j) As December 31, 2006, the unrealized gains on trade shares comes principally from the shares of Banco de Crédito and Inversiones de Chile - BCI Indirect loans, note 20(a) 1,455,376 1,220,946 Chile and Alicorp S.A.A., which amounted to US$60.2 and US$ 26.9, respectively (amounted to US$48.8 and US$18.0 million as December 31, 2005, respectively). (b) Interest rates on loans are set considering the rates prevailing in the markets where the Group’s subsidiaries operate. (k) The amortized cost and market value of the investments available-for-sale classified by maturity are as follows: (c) As of December 31, 2006 and 2005, the Group’s direct loan portfolio is distributed among the following economic sectors:

2006 2005

Sector 2006 % 2005 % Amortized Market Amortized Market US$(000) US$(000) cost value cost value

US$(000) US$(000) US$(000) US$(000) Manufacturing 1,624,765 27.2 1,430,559 28.3 Mortgage loans 883,736 14.8 767,341 15.2 Up to 3 months 766,650 781,657 544,449 549,215 Commerce 686,291 11.5 625,908 12.4 From 3 months to 1 year 866,811 868,452 1,005,977 1,003,580 Consumer loans 539,077 9.0 373,447 7.4 From 1 to 3 years 458,796 460,967 346,577 345,970 From 3 to 5 years 222,215 228,805 149,422 150,520 Micro-business 306,869 5.1 224,122 4.4 Over 5 years 800,634 866,383 553,849 582,762 Mining 303,238 5.1 223,156 4.4 Without maturity (shares) 96,486 216,183 72,218 162,582 Electricity, gas and water 256,541 4.3 192,096 3.8 Communications, storage and Total 3,211,592 3,422,447 2,672,492 2,794,629 transportation 255,730 4.3 210,002 4.2 Leaseholds and real estate activities 236,445 4.0 216,095 4.3 Financial services 163,946 2.7 105,484 2.1 Fishing 152,538 2.6 117,104 2.3 Agriculture 150,020 2.5 153,410 3.0 Education, health and other services 75,376 1.3 69,468 1.4 Construction 74,482 1.2 68,217 1.4 Other 262,223 4.4 275,061 5.4

Total 5,971,277 100.0 5,051,470 100.0 Notes to the Consolidated Financial Statements (continued)

(d) As of December 31, 2006 and 2005, the credit risk classification of the Group’s loan portfolio is as follows:

2006 2005

Direct Indirect Direct Indirect Risk category credits credits Total credits credits Total

US$(000) % US$(000) % US$(000) % US$(000) % US$(000) % US$(000) %

Normal 5,386,566 90.3 1,398,662 96.2 6,785,228 91.4 4,352,214 86.2 1,137,033 93.1 5,489,247 87.5 Potential problems 341,187 5.7 33,787 2.3 374,974 5.0 397,387 7.9 68,333 5.6 465,720 7.4 Substandard 62,504 1.0 17,668 1.2 80,172 1.1 82,858 1.6 9,284 0.8 92,142 1.5 Doubtful 122,216 2.0 3,565 0.2 125,781 1.7 146,898 2.9 4,694 0.4 151,592 2.4 Loss 58,804 1.0 1,694 0.1 60,498 0.8 72,113 1.4 1,602 0.1 73,715 1.2

Total 5,971,277 100.0 1,455,376 100.0 7,426,653 100.0 5,051,470 100.0 1,220,946 100.0 6,272,416 100.0

(e) As of December 31, 2006 and 2005, the Group’s structure of its direct loan portfolio by the country in which its clients are located is as follows:

2006 2005

Country US$(000) US$(000)

Peru 5,481,003 4,601,400 Bolivia 397,197 366,945 Colombia 34,370 10,955 Ecuador 15,571 30,265 Republic of El Salvador 14,249 9,382 United States of America 13,393 5,373 Republic of Panama 3,986 8,860 Other 11,508 18,290

Total 5,971,277 5,051,470 Notes to the Consolidated Financial Statements (continued)

(f) The movement in the allowance for loan losses (direct and indirect credit) is shown below: 8 Property, furniture and equipment, net (a) The movement of property, furniture and equipment and accumulated depreciation, for the years ended 2006 and 2005, is as follows:

2006 2005 2004

US$(000) US$(000) US$(000) Buildings Balances as of January 1st 218,636 271,873 326,677 and other Furniture Vehicles Provision (4,243) (6,356) 16,131 construc- Installa- and Computer and Work Recoveries of written-off loans 44,284 35,032 32,287 Land tion tions fixtures hardware equipment in progress 2006 2005 Allowance disposal related to the sale of US$(000) US$(000) US$(000) US$(000) US$(000) US$(000) US$(000) US$(000) US$(000) Banco Tequendama, note 2(c) - (9,024) - Loan portfolio written-off (49,859) (71,405) (105,267) Cost Translation result 1,768 (1,484) 2,045 Balance as of January 1st 29,729 255,351 80,990 65,521 168,784 13,999 11,946 626,320 610,239 Balance as of December 31 (*) 210,586 218,636 271,873 Additions 3,451 1,879 6,171 2,905 17,842 3,498 8,227 43,973 48,769 Merger additions, (*) The movement in the allowance for loan losses includes the allowance for direct and indirect credits for note 2(a) 292 452 - 2,068 2,900 84 - 5,796 - approximately US$190.3 and US$20.3 million, respectively, as of December 31, 2006 (approximately US$197.5 102 103 and US$21.1 million and US$253.4 and US$18.5 million, respectively, as of December 31, 2005 and 2004). The Sales and transfers (2,690) (6,865) 1,540 (1,429) (4,053) (458) (2,800) (16,755) (22,307) allowance for indirect loan losses is included in the “Other liabilities” caption of the consolidated balance sheet, Assets retired related to the note 11(a). sell of Banco Tequendama ------(10,381)

In Management’s opinion, the allowance for loan losses recorded as of December 31, 2006, 2005 and 2004 has been established in accordance with IAS 39 Balance as of December 31 30,782 250,817 88,701 69,065 185,473 17,123 17,373 659,334 626,320 and it is sufficient to cover the losses on the loans portfolio, note 3(f). Accumulated depreciation (g) An important part of the loan portfolio is collateralized with guarantees received from clients, which mainly consist of mortgages, trust assignments, credit Balance as of January 1st - 129,630 51,291 51,980 140,103 5,017 - 378,021 363,527 instruments, financial instruments, industrial pledges and mercantile pledges. Additions - 7,074 6,512 3,522 12,870 1,499 - 31,477 30,559 (h) As of December 31, 2006 and 2005, the direct gross loan portfolio classified by maturity, based in the remaining period to the repayment date is as Merger additions, follows: note 2(a) - 158 - 1,465 2,056 57 - 3,736 - Sales and transfers - (3,064) (795) (1,496) (3,572) (451) - (9,378) (6,633) Assets retired related to the 2006 2005 sell of Banco Tequendama ------(9,432)

US$(000) US$(000) Balance as of December 31 - 133,798 57,008 55,471 151,457 6,122 - 403,856 378,021

Outstanding loans Valor neto en libros 30,782 117,019 31,693 13,594 34,016 11,001 17,373 255,478 248,299 Up to 1 year 3,774,711 3,029,773 From 1 to 3 years 797,458 762,834 From 3 to 5 years 464,718 474,294 Over 5 years 857,620 688,800 (b) Banks, financial institutions and insurance companies located in Peru are not allowed to pledge their fixed assets.

(c) As of December 31, 2006, Credicorp and its Subsidiaries have property available for sale for US$ 25.2 million approximately, net of its accumulated Past due loans Up to 4 months 20,655 3,644 depreciation amounted US$ 7.7 million approximately (US$ 27.1 and US$ 9.8 million, respectively, as of December 31, 2005). Over 4 months 21,613 44,664 (d) Management periodically review the assets´ residual value, the useful life and the method of depreciation to ensure that the method and period of Under legal collection loans 34,502 47,461 depreciation chosen are consistent with the economic benefits and life expectations for use of property, furniture and equipment items. In Management’s Total 5,971,277 5,051,470 opinion, there is no evidence of impairment of property, furniture and equipment as of December 31, 2006 and 2005.

Interest on past due loans and loans in legal collection are recognized when collected.

The interest income that would have been recorded for these credits in accordance with the terms of the original contract amount approximately US$28.1 and US$25.8 million as of December 31, 2006 and 2005, respectively.

(i) As of December 31, 2006 and 2005, 51 percent of the direct and indirect loans portfolio of the BCP was concentrated on approximately 443 and 313 clients, respectively. Notes to the Consolidated Financial Statements (continued)

9 Assets seized, net 10 Intangibles and goodwill, net (a) As of December 31, 2006 and 2005, this caption includes land, buildings, machinery and equipment received in payment of loans. Assets seized were (a) Intangibles recorded at the lower of cost or estimated fair values determined on the basis of technical third party appraisals. This item is made up as follows: Comprise mainly the identified intangible assets as result of the acquisition of the “client relationships” and other in the purchase of AFP Union Vida, note 2(a) and the incurred cost on the development and acquisition of software licenses used in the Group operations.

2006 2005 The movement of intangible assets for the years ended December 31, 2006 and 2005 is as follows:

US$(000) US$(000)

Assets seized 52,432 71,469 Description Reserve (23,005) (32,096) Client Total 29,427 39,373 Relationships Software Developments Others 2006 2005 US$(000) US$(000) US$(000) US$(000) US$(000) US$(000)

(b) The changes in the reserve for assets seized as of December 31, 2006, 2005 and 2004 are summarized as follows: Cost Balance as of January 1st - 26,618 23,950 514 51,082 81,969 Additions - 10,848 8,919 - 19,767 11,933 2006 2005 2004 104 105 Incorporated by business com- bination, note 2(a) and 3(b) 88,378 8,542 - 10,922 107,842 - US$(000) US$(000) US$(000) Retirements and write - off - (5,091) (422) (1,153) (6,666) (42,820) Balances as of January 1st 32,096 34,666 35,047 Balance as of December 31 88,378 40,917 32,447 10,283 172,025 51,082 Provision 6,387 16,959 14,639 Assets retired related to the sell of Accumulated amortization - (1,678) - Banco Tequendama, note 2(c) Balance as of January 1st - 11,277 14,667 478 26,422 61,058 (15,478) (17,851) (15,020) Sold assets Amortization of the year 1,473 9,022 4,190 4,155 18,840 8,169

Balances as of December 31 23,005 32,096 34,666 Incorporated by business com- bination, note 2(a) and 3(b) - 5,360 - 1,077 6,437 - Retirements and write - off - (4,994) (418) (1,067) (6,479) (42,805)

Balance as of December 31 1,473 20,665 18,439 4,643 45,220 26,422

Net book value 86,905 20,252 14,008 5,640 126,805 24,660

In September 2005, the Group wrote off certain intangibles assets fully amortized and out of use for US$42.3 million.

(b) Goodwill The following is the composition of the caption by subsidiary:

2006 2005

US$(000) US$(000)

Goodwill Prima AFP (AFP Unión Vida S.A.), note 2(a) 49,047 - El Pacífico Peruano - Suiza 13,007 13,007 Banco de Crédito del Perú, note 3(b) (iii) 12,300 5,062 Atlantic Security Holding Corporation 10,660 10,660 Coporación Novasalud Perú S.A. EPS, note 2(d) 3,828 4,828

Book value, net 88,842 33,557

Goodwill is annually assessed by impairment by Management and the assumptions used for the impairment analysis are consistence with previous years. As of December 31, 2006 and 2005, it was not necessary to record a provision for impairment of goodwill on the Group. Notes to the Consolidated Financial Statements (continued)

The movement of goodwill for the years 2006, 2005 and 2004 as follows: (b) As of December 31, 2006, this caption mainly comprises the Value-Added-Tax credit related to the purchases for leasing operations for approximately US$6.2 million and prepaid for US$10.5 million (US$14.1 and US$8.6 million, respectively, as of December 31, 2005).

2006 2005 2004 (c) In July 2006, BCP signed a contract with Citigroup Global Markets Holdings Inc., Citigroup Capital Limited and Citigroup Capital Market Inc., with the

purpose of implementing an economic hedge to offset the volatility generated by the liabilities and related expenses that result from stock appreciation rights US$(000) US$(000) US$(000) (SARs) of Credicorp, note 19. Cost Initial balance 33,557 33,557 55,922 This transaction consists of the purchase of up to 1,500,000 certificates indexed to the performance of the shares of Credicorp Ltd. (BAP), in the form of Acquisition of Subsidiaries, notes 2 (a) and 3(b) 56,285 - 5,900 “warrants”, issued by Citigroup, which are equivalent to the same number of shares of Credicorp Ltd.. These certificates will be settled in cash only. At maturity, Decreases (1,000) - - these certificates will pay a US$ amount equal to the final settlement price minus the strike price (US$ 0.0000001) plus the accrued dividend adjustment amount, minus the annual fee amount multiplied by the number of warrants underlying the certificate. The final settlement price is equivalent to the daily Final balance 88,842 33,557 61,822 volume-weighted average of the per share price for the underlying equity on each business day, on which the Citigroup or an affiliate of the Citigroup effects Accumulated amortization any transactions with respect to the underlying equity in order to unwind its position established and maintained to hedge its price and market risk with Initial balance - - 23,412 respect to the certificate issued. Additions - - 4,853 This program has a maturity of 5 years but can be settled at anytime before its maturity, partially or totally. As of December 31, 2006, the Group has acquired Final balance - - 28,265 106 107 1,297,414 certificates at a total cost of US$ 49.7 million (US$38.3 per certificate on average). The estimated market value, established under the same Cost, net 88,842 33,557 33,557 methodologies and assumptions used to determine the fair value of the SARs detailed in note 19, adding up to US$ 53.1 million (US$41.0 per certificate on average). The difference between the cost and the estimated market value of approximately US$3.5 million has been recorded in the caption “Other income” of the consolidated statements of income, according to the accounting principles described in note 3(u).

11 Other assets and other liabilities (d) Operations in process include deposits received, loans disbursed, payments collected, funds transferred and other similar types of transactions, which are (a) These items are made up as follows: realized at the end of the month and not reclassified to their final balance sheets accounts until the beginning days of the following month. These transactions do not affect the Group’s net income.

2006 2005 (e) The movement of the provision for sundry risks for the years 2006, 2005 and 2004 is summarized as follows: US$(000) US$(000)

Other assets 2006 2005 2004 Indexed certificates Citigroup (c) 53,116 - Accounts receivable 48,149 40,370 US$(000) US$(000) US$(000) 40,941 36,890 Deferred expenses (b) Balance as of January 1st 18,768 19,379 10,078 38,016 32,966 Deferred income tax asset, note 18(c) Provision, note 23 6,461 5,567 9,819 29,752 37,347 Operations in process (d) Applications (8,050) (6,178) (518) Derivatives receivable, note 20(d) 19,134 8,829 Income tax prepayments, net 14,509 11,024 Balances as of December 31 17,179 18,768 19,379 Deferred fees 11,339 10,588 Investment in related companies 5,657 16,968 Other 12,575 8,127 This provision mainly comprises the provision for probable losses to complement insurance coverage corresponding to claims not covered by insurance companies. Total 273,188 203,109

Other liabilities Additionally, due to the nature of the business, Credicorp and its Subsidiaries have some pending legal claims (lawsuits) related to their activities. The Group Payroll salaries and other personnel expenses 104,635 67,230 records a provision for such cases when, in Management’s and its legal advisor’s opinion, they will result in additional liabilities for the Group and the amount Accounts payable 79,039 57,185 of the provision can be fairly estimated. Regarding the other legal claims against the Group which have not been provided for, in Management’s and its legal Deferred income tax liability, note 18(c) 65,810 30,734 advisor’s opinion, they will not have a material effect on the Group’s financial statements. Operations in process (d) 41,606 46,359 Provision for sundry risks (e) 17,179 18,768 Allowance for indirect loan losses, note 7(f) 20,308 21,141 Contributions 12,154 30,781 Derivatives payable, note 20(d) 7,774 8,019 Other 7,608 9,783

Total 356,113 290,000 Notes to the Consolidated Financial Statements (continued)

12 Accounts receivable and payable to re-insurers and co-insurers 13 Deposits and obligations The movement and balance of accounts receivable and payable to reinsurers and coinsurers are as follows: (a) This item is made up as follows:

(a) Accounts receivable: 2006 2005

2006 2005 US$(000) US$(000)

US$(000) US$(000) Non-interest bearing deposits and obligations In Peru 1,577,315 1,248,113 Balance as of January 1st 35,288 35,453 In other countries 412,249 423,508 Premiums assumed 11,022 13,642 Reported claims 16,273 15,804 1,989,564 1,671,621 Collections and other (27,402) (29,611) Interest bearing deposits and obligations Balance as of December 31 35,181 35,288 In Peru 5,213,044 4,031,231 In other countries 1,596,526 1,364,902

6,809,570 5,396,133 (b) Accounts payable: 108 109 8,799,134 7,067,754 Interest payable 39,857 25,674 2006 2005 Total 8,838,991 7,093,428 US$(000) US$(000)

Balance as of January 1st 36,580 23,612 Premiums ceded to reinsurers 70,067 66,415 The Group has established a policy to remunerate demand deposits and savings accounts according to an interest rate scale, based on the average balance Co-insurance granted 6,430 12,673 maintained in such accounts. Additionally, according to such policy, it was established that the balances that were lower than a specified amount, for each Payments and other (87,943) (66,120) type of account, do not bear interest.

Balance as of December 31 25,134 36,580 (b) As of December 31, 2006 and 2005, the balance of deposits and obligations by type of transaction is made up as follows:

(c) The accounts receivable as of December 31, 2006 include an amount to US$14.4 million (US$21.4 million as of December 31, 2005) which correspond 2006 2005 to the portion not accrued of the ceded premiums to the reinsurers. US$(000) US$(000)

(d) The accounts payable to reinsurers are primarily related to automatic non-proportional contracts (excess of loss) and the proportional facultative Time deposits 3,218,157 2,459,907 (voluntary) contracts for ceded premiums. For the facultative contracts, the Company transfers to the reinsurers a percentage or amount of an insurance Demand deposits 2,564,268 1,729,114 contract or individual risk, based on the premium and the coverage period. Saving deposits 1,951,978 2,105,364 Severance indemnity deposits 775,027 654,791 Client - Repurchase agreements 228,165 72,200 Bank and Deposit negotiable certificates 61,539 46,378

Total 8,799,134 7,067,754

(c) As of December 31, 2006, the total amount of individual time deposits and bank certificates that exceed US$100,000 are approximately US$2,722.6 and US$35.9 million, respectively (US$1,095.7 and US$7.9 million, respectively, as of December 31, 2005).

(d) Interest rates applied to different deposits and obligations accounts are determined by the Group considering interest rates prevailing in the market in which the subsidiaries operate. Notes to the Consolidated Financial Statements (continued)

(e) The time deposits balance classified by maturity is made up as follows: These international funds and other received by the Group, are carried out mainly to financing foreign trade operations and working capital. As of December 31, 2006 these loans have maturities between January 2007 and May 2007 (between January 2006 and May 2006 as of December 2005). The interest rate range between 3.73 and 5.76 (between 2.55 and 4.95 as of December 2005). 2006 2005 ii The promotional credit lines represent loans granted to BCP by Corporación Financiera de Desarrollo (COFIDE) and Banco Interamericano de Desarrollo US$(000) US$(000) (BID), to promote the development of Peru, have maturities between January of 2007 and December of 2021 and their interest rates fluctuated Up to 3 months 2,219,948 1,362,929 between 5.65 and 7.90 percent annual (between January as 2006 and December 2021 and their interest effective rate fluctuated between 4.41 and From 3 months to 1 year 799,584 591,601 7.25 percent annual as of December 31, 2005). These credit lines are secured by a loan portfolio amounting to US$177.9 and US$212.1 million From 1 to 3 years 163,283 192,117 as of December 31, 2006 and 2005, respectively. These lines include covenants specifying the use of the funds, financial conditions that the borrower From 3 to 5 years 29,226 174,959 must maintain and other administrative matters. In Management’s opinion, these covenants do not limit the Group’s operations and the Group is in More than 5 years 6,116 138,301 compliance at the balance sheet date. Total 3,218,157 2,459,907 iii As of December 31, 2005, the Group had BCRP - Repo transactions with the Peruvian Central Bank (BCRP), which earned annual interest rates between 3.23 and 3.32 percent, with 3 day maturities.

14 Due to banks and correspondents and borrowed funds (b) Borrowed funds (a) Due to bank and correspondents 110 111 The balance of the borrowed funds corresponds to the following operations: This item is made up as follows:

2006 2005 2006 2005 US$(000) US$(000) US$(000) US$(000) CCR Inc. MT-100, Payment rights master Trust International funds and others (i) 346,945 220,027 2005 Series A and B (i) 280,000 280,000 Promotional credit lines (ii) 177,900 212,133 2006 Series A (ii) 90,612 - Inter-bank funds 41,077 78,542 BCRP - Repo transactions (iii) - 510,593 Total 370,612 280,000

565,922 1,021,295

Interest payable 5,067 2,076 i Amount represents the loan transaction made by the BCP in November 2005 for US$230.0 million, related to Series 2005-A Floating Rate Certificates due 2012, and US$50.0 million related to Series 2005-B Floating Rate Certificates due 2009. The loan is secured by the collection of BCP’s future inflows Total 570,989 1,023,371 from electronic messages sent through the Society for Worldwide Interbank Financial Telecommunications network and utilized within the network to instruct correspondent bank to make a payment of a certain amount to a beneficiary that is not a financial institution. In this transaction, Wilmington Trust Company acted as Trustee under the trust agreement and Bank of New York as Indenture Trustee and administrator of the contract. The certificates bear a variable i The balance of international funds and others corresponds to the following operations: interest rate of one month Libor plus 0.21 percent for the 2005-A Series and one month Libor plus 0.60 percent for the Series 2005-B. As of December 31, 2006 and 2005, the balance of this obligation amounts to US$280.0 million. A portion (70 percent), of the loan, subject to variable interest rate risk, has been hedged through an interest rate swap hedge operation for a notional amount of US$196.0 million, note 20(d). 2006 2005

US$(000) US$(000) In addition, for the US$100.0 million of the Series 2006-A and the US$230.0 million of the Series 2005-A, BCP has signed an insurance policy with AMBAC Assurance Corporation, which guarantees the timely payment of scheduled principal and certain accrued interest to pay the monthly payments with maturities Banco Latinoamericano de Exportaciones - BLADEX 105,000 100,000 through November 2016 and November 2012, respectively. The insurance policy cost is equivalent to an annual fixed interest rate of 0.80 and 0.75 percent Corporación Andina de Fomento - CAF 85,000 50,000 of the principal, that is recorded as part of the interests cost. Wachovia Bank 65,200 - Peru 36,000 24,874 ii Amount represents the loan transaction made by the BCP in March 2006 for US$100.0 million, related to Series 2006-A Floating Rate Certificates due Standard Chartered 15,000 - 2016. The loan is secured by the collection of BCP’s future inflows from electronic messages sent through the Society for Worldwide Interbank Financial Other 40,745 45,153 Telecommunications network and utilized within the network to instruct correspondent bank to make a payment of a certain amount to a beneficiary that Total 346,945 220,027 is not a financial institution. In this transaction, Wilmington Trust Company acted as Trustee under the trust agreement and Bank of New York as Indenture Trustee and administrator of the contract. The certificates bear a variable interest rate of one month Libor plus 0.29 percent. As of December 31, 2006, the balance of this obligation amounts to US$90.6 million.

The loans obtained by the Group include “covenants” which in Management’s opinion, the Group is in compliance at the consolidated balance sheet date. Notes to the Consolidated Financial Statements (continued)

(c) As of December 31, 2006 and 2005, maturities of due to bank and correspondents and borrowed funds are shown below, based in the remaining period The reserves for claims represent the reported claims and the reserve for the incurred and non-reported claims by the policyholders chargeable to the to the repayment date: Group and its Subsidiaries. The reported claims are adjusted on the basis of the technical reports received from the adjusters. The claims to be paid by the reinsurers and coinsurers are shown as ceded claims.

2006 2005 The reserves for direct claims include reserves for incurred and non-reported claims for the three types of risks that the Group manages; such amounts at December 31, 2006 were US$ 27.6 million (US$24.2 million as of December 31, 2005), of which US$ 11.7 million correspond to life risks, US$ 8.2 million US$(000) US$(000) to property and casualty and US$ 7.7 million to health risks (US$8.7, US$3.8 and US$11.7 million, respectively, as of December 31, 2005). The IBNR reserves Due to bank and correspondents for property and casualty and health risks have been determined on the basis of the Bornhuetter - Ferguson methodology - BF, which is applied to compare statistical occurrences of claims, excluding payments made to the policyholders. Up to 3 months 279,802 864,966 From 3 months to 1 year 126,447 13,271 During 2006 and previous years, the differences between the estimations for the incurred and non-reported claims and the liquidated and pending liquidation From 1 to 3 years 23,457 20,963 claims have not been significant. In the case of property and casualty and health risks, the amounts provisioned are greater than the liquidated claims and From 3 to 5 years 22,001 28,402 those pending liquidation by a percentage that does not exceed 10% of the reserve. More than 5 years 114,215 93,693 The movement for the years 2006 and 2005 of technical and insurance claims reserves is as follows: Total 565,922 1,021,295 (a) Reserves for insurance claims: Borrowed Funds 112 113

From 1 to 3 years 61,217 8,025 2006 From 3 to 5 years 166,817 124,139 More than 5 years 142,578 147,836 Property Life and casualty Health Total 370,612 280,000 insurance insurance insurance Total

US$(000) US$(000) US$(000) US$(000)

(d) As of December 31, 2006, the Group has credit lines granted by several local and foreign financial institutions amounted to US$ 1,162.5 million Initial balance 36,839 30,690 15,139 82,668 (US$ 787.3 million as of December 31, 2005) that are available for future operating activities or to settle capital commitments. Claims 52,713 60,285 89,797 202,795 Payments (49,369) (49,386) (86,119) (184,874) 15 Technical, insurance claims reserves and reserves for unearned premiums Translation result 2,543 4 244 2,791 This item is made up as follows: Final balance 42,726 41,593 19,061 103,380

2005

2006 Property Life and casualty Health insurance insurance insurance Total Technical Reserves for Claims US$(000) US$(000) US$(000) US$(000) reserves direct claims assumed Total Initial balance 35,846 29,293 11,561 76,700 US$(000) US$(000) US$(000) US$(000) Claims 41,650 56,539 93,115 191,304 Life insurance 442,172 41,932 794 484,898 Payments (38,732) (54,660) (89,537) (182,929) Property and casualty insurance 67,640 39,429 2,164 109,233 Translation result (1,925) (482) - (2,407) Health insurance 15,029 19,053 8 34,090 Final balance 36,839 30,690 15,139 82,668 Total 524,841 100,414 2,966 628,221

2005

Technical Reserves for Claims reserves direct claims assumed Total

US$(000) US$(000) US$(000) US$(000)

Life insurance 383,158 35,792 1,047 419,997 Property and casualty insurance 63,976 30,125 565 94,666 Health insurance 16,292 15,139 - 31,431

Total 463,426 81,056 1,612 546,094 Notes to the Consolidated Financial Statements (continued)

(b) Technical Reserves: The sensitivity of the estimates used by the Group to measure its insurance risks is represented primarily by the life insurance risks, the main variables at the balance sheet date being the interest rates and the mortality tables. The Group has evaluated the changes of the reserves related to life insurance (Life immediate annuities) of +/- 100 bps of the interest rates and of +/- 5% of the mortality factors, being the results as follows: 2006

Property Life and casualty Health Variables Amount of Variation of the reserve insurance insurance insurance Total the reserve Amount Percentage US$(000) US$(000) US$(000) US$(000) US$(000) US$(000) % Initial balance 383,158 63,976 16,292 463,426 Accretion expenses and other 12,683 - - 12,683 Portfolio in US$ - Basis amount 251,036 Unearned premium reserves and Changes in interest rates: + 100 bps 228,443 (22,593) (9.00) annual variation, net - 3,664 (1,263) 2,401 Changes in interest rates: - 100 bps 277,843 26,807 10.68 Insurance subscriptions 60,227 - - 60,227 Changes in Mortality tables to 105% 248,278 (2,758) (1.10) Payments (23,356) - - (23,356) Changes in Mortality tables to 95% 253,951 2,915 1.16 Translation result 9,460 - - 9,460 Portfolio in S/ - Basis amount 9,491 Final balance 442,172 67,640 15,029 524,841 114 115 Changes in interest rates: + 100 bps 8,540 (951) (10.02) Changes in interest rates: - 100 bps 10,643 1,152 12.14 2005 Changes in Mortality tables to 105% 9,462 (29) (0.31) 38 0.40 Property Changes in Mortality tables to 95% 9,529 Life and casualty Health insurance insurance insurance Total The effect of the changes previously indicated, is not significant to the net income and net equity attributed to Credicorp´s shareholders US$(000) US$(000) US$(000) US$(000)

Initial balance 322,629 59,624 12,703 394,956 16 Bonds and subordinate notes issued Accretion expenses and other 14,832 - - 14,832 (a) This item is made up as follows: Unearned premium reserves and annual variation, net - 4,352 3,589 7,941 Insurance subscriptions 70,366 - - 70,366 Weighted average Maturity 2006 2005 Payments (19,130) - - (19,130) annual interest rate Translation result (5,539) - - (5,539) 2006 2005

Final balance 383,158 63,976 16,292 463,426 % % US$(000) US$(000)

Bonds As of December 31, 2006 and 2005, no additional reserves were needed as a result of the liability adequacy test. The main assumptions used in estimation Corporate bonds (i) 6.23 5.89 Between January 2007 of annuities, disability and survivor reserves as of December 31, 2006 and 2005, were the following: and March 2013 90,173 86,413 Leasing bonds (ii), (iii) 5.53 5.59 Between January 2007 and November 2010 177,952 219,564 Modality Mortality Table Technical rates Mortgage bonds (iii) 7.70 7.70 Between January 2007 and April 2012 23,610 27,620 Life immediate annuity RV2004 and B - 85 3% - 5.45% Subordinated bonds 6.89 6.83 Between August 2007 Dead an Disability Pension System insurance RV 85 MI - 85H y 85M 3% and October 2013 96,758 92,014 Individual Life SOC 80 adjustable 4% - 5% 388,493 425,611

Subordinated notes The mortality tables are recommended by the regulators in Peru. Subordinated negotiable certificates notes (iv) 120,000 -

508,493 425,611

Interest payable 4,079 3,613

Total 512,572 429,224 Notes to the Consolidated Financial Statements (continued)

i During 2006, the bank issued corporate bonds, for US$ 47.2 million (US$ 35.0 million during 2005) and redeemed bonds for US$ 43.4 million (b) The bonds and subordinate bonds issued as of December 31, 2006 and 2005, classified by maturity are shown below: (US$ 24.0 million during 2005) representing a net increase of US$ 3.8 million (US$ 11.0 million during 2005). The details of the new issuance are the following: 2006 2005

US$(000) US$(000) Amount Currency Maturity Up to 3 months 19,316 - US$(000) From 3 months to 1 year 56,701 43,488 From 1 to 3 years 177,873 246,254 Issue 2006 From 3 to 5 years 110,224 92,167 Sixth issuance - Series B 6,258 Peruvian 08/08/2008 Over 5 years 144,379 43,702 Sixth issuance - Series A 6,258 Peruvian 27/02/2008 Eight issuance - Series B 10,951 Peruvian 06/09/2010 Total 508,493 425,611 Eight issuance - Series C 7,822 Peruvian 21/09/2010 Eight issuance - Series D 5,006 Peruvian 11/10/2010 Ninth issuance - Series B 7,822 Peruvian 03/03/2011 Tenth issuance - Series B 3,129 Peruvian 24/03/2013 17 Equity 116 117 (a) Capital stock Total 47,246 As of December 31, 2006, 2005 and 2004, 94,382,317 shares of capital stock were issued with a par value of US$ 5 per share.

Issue 2005 (b) Treasury stock Third issuance - Series B 8,746 Peruvian 29/05/2007 Treasury stock corresponds to the par value of Credicorp’s shares owned by the Group’s companies, which amounts 14,620,842 shares as of December 31, Seventh issuance - Series A 4,373 Peruvian 21/11/2009 2006 and 2005. The difference of US$ 113.4 million, between the acquisition cost of US$ 186.5 million and their par value (US$ 73.1 million), is recorded as Seventh issuance - Series B 5,831 Peruvian 21/11/2012 Eight issuance - Series A 5,831 Peruvian 24/11/2008 a reduction of the “Capital surplus”. Ninth issuance - Series A 5,831 Peruvian 24/11/2010 (c) Reserves Tenth issuance - Series A 4,373 Peruvian 06/12/2008 In accordance with the local laws that regulate financial and insurance activities of the Group’s subsidiaries in Peru, a reserve of up to at least 35 percent of Total 34,985 their paid-in capital is required to be established through annual transfers of at least 10 percent of net income. As of December 31, 2006 and 2005, these reserves were approximately US$ 214.8 and US$ 209.3 million respectively.

The Shareholders Meeting dated on October 26, 2006 agreed to transfer from “retained earnings” to “other reserves” an amount of US$ 210.4 million. ii In 2005, Crédito Leasing S.A., a subsidiary of Credicorp, issued the Third Program of Leasing Bonds Series “A” and “B” amount to US$ 15.0 million and US$ 25.0 million with maturities between February 2007 and July 2008, respectively. Likewise, during 2006, Crédito Leasing S.A. redeemed bonds for (d) Dividends distribution US$ 41.6 million (US$ 40.9 million during 2005). During 2006, 2005 and 2004, Credicorp paid cash dividends amount to approximately US$ 87.7, US$ 63.8 and US$ 31.9 million, respectively. iii Leasing and mortgages bonds are collateralized by the fixed assets financed by the Group with these resources. In accordance with current Peruvian legislation, there is no restriction for overseas remittance of dividends or the repatriation of foreign investment. The dividends paid by the Peruvian subsidiaries to Credicorp are subject to a withholding tax of 4.1 percent. iv On August, 2006, the Board or Directors of BCP approved the issuance of subordinated debt of up to US$ 175 million, with the aim to meet the requirement of the regulatory capital of the Group in Peru. The issuance will be realized in parts in 2006 and 2007 on the international and local market. (e) Equity for legal purposes (Regulatory capital) As of December 31, 2006 and 2005, the regulatory capital for the subsidiaries engaged in financial and insurance activities amounted to approximately In November 2006, BCP through its Panama branch, issued Subordinated Negotiable Certificates Notes amounted to US$ 120 million on the international US$ 1,008.0 and US$ 915.0 million, respectively. This regulatory capital has been determined in accordance with the Superintendencia de Banca, Seguros market with maturity on 2021. These certificates accrued a fixed annual interest rate of 6.95 percent for the first 10 years (until November 2016), with y AFP del Perú regulations in force as of such dates. According to the Superintendencia de Banca, Seguros y AFP regulations, the Group’s regulatory capital payment each six months. After the first 10 years, the interest rate is change to a variable interest rate, established as Libor plus 2.79 percent, with quarterly exceeds in approximately US$157.0 million the minimum regulatory capital required as of December 31, 2006 (approximately US$166.6 million as of payments. At the end of the first 10 years, the Bank can redeem 100 percent of the debt, without penalties. This subordinated debt has certain financial and December 31, 2005). operating covenants which in Management’s opinion, the Group is in compliance at the consolidated balance sheet date. 18 Taxes (a) Credicorp is not subject to any type of income taxes, nor taxes on capital gains, equity or property. The Peruvian subsidiaries are subject to corporate taxation on income under the Peruvian Tax system. The statutory income tax rate payable in Peru is 30 percent of taxable profits in 2006, 2005 and 2004.

ASHC and its Subsidiaries are not subject to taxes in the Cayman Islands nor Panama. For the years ended December 31, 2006, 2005 and 2004, no taxable profits were generated from its operations in the United States of America. Notes to the Consolidated Financial Statements (continued)

A reconciliation of the differences between the statutory income tax rate and the effective tax rate for the Group is shown as follows: (c) The following table shows a summary of the Group’s deferred income taxes:

2006 2005 2004 2006 2005

% % % US$(000) US$(000)

Peruvian statutory tax rate 30.00 30.00 30.00 Assets Increase (decrease) in the statutory tax rate due to: Allowance for loan losses, net 13,642 12,177 (i) Increase (decrease) arising from net income of Stock appreciation rights provision 11,047 6,428 subsidiaries not domiciled in Peru 4.08 1.05 1.60 Reserve for sundry risks, net 3,412 6,788 (ii) Non-taxable costs (income), net (4.86) (6.23) (3.86) Tax loss carry-forward 3,244 3,287 (iii) Translation results not considered for tax purposes (3.96) 2.58 (3.42) Non-accrued interest 1,830 1,613 Other 4,841 2,673 Effective income tax rate 25.26 27.40 24.32 Deferred income tax asset 38,016 32,966

Liabilities (b) The deferred income tax has been calculated on all temporary differences applied at an income tax rate of 30 percent. The income tax expense analysis 118 119 Unrealized net gains (28,330) (19,094) as of December 31, 2006, 2005 and 2004, is as follows: Intangibles assets, net (26,168) (592) Leasing operations, net (2,758) (3,257) Fixed assets, net (2,304) (5,369) 2006 2005 2004 Other (includes assets seized) (6,250) (2,422)

US$(000) US$(000) US$(000) Deferred income tax liability (65,810) (30,734)

Current Net deferred income tax liability (asset) (27,794) 2,232 Peruvian 85,413 80,630 49,386 In other countries 2,960 4,418 2,436

88,373 85,048 51,822 A portion of the Group’s deferred tax asset arises from part of the provisions for sundry risks and for loan losses, which are not deductible for income tax purposes until they comply with all the requirements established by the tax authorities. Therefore, the Group has recorded an accumulated deferred tax asset Deferred to reflect the future tax benefit of the deduction of these provisions. Peruvian (4,786) (11,502) (6,325) Credicorp and its Subsidiaries have recorded deferred income taxes directly in other reserves in the statement of changes in equity of US$9.2, US$1.5 and Total 83,587 73,546 45,497 US$10.4 million, for 2006, 2005 and 2004, respectively. Such amounts represent the income tax effects of unrealized gains and losses on securities available for sale. Likewise, in 2006, the Group has registered the deferred tax liability corresponding to the acquisition of AFP Union Vida (note 2(a)) by approximately US$25.6 million.

(d) The Peruvian tax authorities have the right to review and, if necessary, amend the annual tax returns of the Peruvian subsidiaries up to four year after its presentation. The most important subsidiaries subject to these reviews are BCP and PPS. In BCP, the fiscal years 2001, 2002 and 2003, have been reviewed by the tax authorities. As a result of such revisions, no significant additional taxes have arisen in excess of the previously accounted for in the Group consolidated financial statements.

The years 2004 to 2006 for BCP and PPS, are pending of review. Any additional tax arising as a result of the tax authority examination will be charged to income in the year when such tax is determined. At present, it is not possible to estimate the adjustments that the tax authorities may determine; however, in Management’s opinion, it is not expected that any additional assessments will be determined in amounts considered significant to the consolidated financial statements as of December 31, 2006 and 2005.

19 Stock appreciation rights As indicated in note 3(t), Credicorp has granted stock appreciation rights (SARs) to certain key executives and employees who have at least one year’s service in Credicorp or any of its subsidiaries. The SARs expire after eight years and 25 percent of them may be exercised during each of the first four years of the plan.

At the end of the fourth year and until the expiration date of the SARs, all of the unexercised SARs may be exercised at any time. As of December 31, 2006 and 2005, 948,925 and 662,200 SARs had been exercised under this plan for an approximate amount of US$29.3 and US$9.6 million, as of December 31, 2006 and 2005, respectively, plus the income tax or behalf of the executives and employees that is assumed by the Group and corresponds 30 percent of the amount paid. Notes to the Consolidated Financial Statements (continued)

The number of SARs issued and not exercised as of December 31, 2006 and 2005 and the prices of such rights as of said dates are as follows: The liabilities recorded for this plan are included in “Payroll taxes, salaries and other personnel expenses”, in the caption “Other liabilities” of the consolidated balance sheets (note 11 (a)); and the expenses in the caption “Personal expenses” on the consolidated income statements. In 2006, 2005 and 2004, the SARs prices were modified and informed to the executives of the Group. Number In the fiscal year 2006, the Group signed a contract with Citigroup by which has acquired certificates linked to the yield of Credicorp’s shares, to obtain an of outstanding Number of Vested SARs economic hedge of the SARs granted to its executives and employees, note 11(c). SARs issued as as of December 31 Exercise price Year of of December 31, 20 Off-balance sheet accounts issuance 2006 2006 2005 2006 2005 (a) This item is made up as follows: US$ US$

1999 - - 110,000 7.64 8.34 2000 68,750 68,750 187,250 8.80 9.50 2006 2005 2001 81,500 81,500 192,550 5.60 6.30 US$(000) US$(000) 2002 117,500 117,500 285,225 7.28 7.98 2003 220,000 220,000 359,844 8.47 9.17 Contingent credits 2004 352,750 317,984 294,375 11.29 11.99 Guarantees and stand by letters (c) 1,204,500 982,044 2005 457,600 281,038 229,688 16.30 17.00 120 121 Import and export letters of credit (c) 250,876 238,902 2006 560,250 215,156 - 25.62 - 1,455,376 1,220,946 1,858,350 1,301,928 1,658,932 Responsibilities under credit lines agreements (e) 814,746 531,816 Forward contracts - sell (d) 561,111 654,841 Forward contracts - buy (d) (592,081) (343,897) Credicorp’s Management has estimated the fair value of the SARs as of December 31, 2006 and 2005, using the binomial option pricing model, with Swap contracts (d) 543,041 572,160 assumptions obtained from the relevant available market information, including the assuming for practical purposes that all contracts can only be exercised at the end of their term. The key assumptions used are as follows: Total 2,782,193 2,635,866

(b) In the normal course of its business, the Group’s banking subsidiaries are party to transactions with off-balance sheet risk. These transactions expose the Key assumptions 2006 2005 Group’s banking subsidiaries to credit risk in addition to the amounts recognized in the consolidated balance sheets. Expected volatility 31.31% 28.24% Risk free interest rate 1.05% 1.04% Credit risk for off-balance sheet financial instruments is defined as the possibility of sustaining a loss because any other party to a financial instrument fails to Expected lifetime 5.05 years 4.70 years perform in accordance with the terms of the contract. Quoted price of Credicorp shares US$40.94 US$22.79 The exposure to losses under commitments to guarantees, stand by letters, extend credit, provide export and import letters of credit and guarantees is represented by the contractual amount specified in these instruments. The Group applies the same credit policies in making commitments and conditional The movement of the SARs for the years 2006 and 2005 are as follows: obligations as it does for on-balance sheet instruments, including the requirement to obtain collateral to support off-balance sheet financial instruments (note 7(a)) when it is deemed necessary. Collateral held varies, but may include deposits held in financial institutions, securities or other assets.

Because the fact that many of the contingent transactions are expected to expire without any performance being required, the total committed amounts do 2006 2005 not necessarily represent future cash requirements. Outstan- Outstan- ding SARs Vested SARs ding SARs Vested SARs (c) Export and import letters of credit and guarantees and stand by letters are conditional commitments issued by the Group to guarantee the performance of a customer to a third party. Export and import letters of credit are mainly issued as credit enhancements for overseas commercial transactions. Risks Number Number Amount Number Number Amount associated with these credits are reduced by the participation of third parties. US$(000) US$(000) (d) As of December 31, 2006 and 2005, Credicorp has foreign currency forwards derivatives and a minor position on options for exchange rates (the total Balance as of January 1st 2,201,275 1,658,932 22,813 2,278,475 1,759,601 11,700 amount as of December 31, 2006 is US$8.7 million). Foreign currency forwards are commitments to buy or sell currency at a future date at a contracted Granted and vested 621,000 600,046 12,838 585,000 561,531 7,448 price. Risk arises from the possibility that the counter-party to the transaction does not perform as agreed and the change in the prices of the underlying Exercised (948,925) (948,925) (29,292) (662,200) (662,200) (9,614) currencies. As of December 31, 2006 and 2005, forward foreign currency purchase and sale agreements referred to above include nominal amounts of Decrease (15,000) (8,125) (232) - - - approximately US$1,153.2 million and US$998.7 million, respectively, which have maturities of less than a year. These agreements are executed to satisfy Increase in the option fair value - - 32,634 - - 13,279 client requirements and are recognized in the financial statements at their fair market value. As of December 31, 2006, the forward contracts net position is Balance as of December 31 1,858,350 1,301,928 38,761 2,201,275 1,658,932 22,813 an overbuy of U.S. Dollars of approximately US$31.0 million (oversell of approximately US$310.9 million as of December 31, 2005).

In accordance with the signed contracts, Credicorp assumes the payment of the income tax of this benefit on behalf of its executives and employees, which corresponds to 30 percent of the benefit. Credicorp estimates the amount over the basis of the liability recorded for the vested benefits and records it in the same caption of this plan. Notes to the Consolidated Financial Statements (continued)

Interest rate swaps are derivatives contracts, where counter parties exchange variable interest rates for fixed interest rates, in the terms and conditions 22 Net claims incurred for property and casualty, life and health insurance contracts established at the contract inception. The risk arises each time the projected level of the variable rate during the term of the contract is higher than the swap The expenses for claims at December 31, 2006, 2005 and 2004 include the following items: rate, as well as from non-compliance with contractual terms by one of the parties. As of December 31, 2006, the notional amount of open interest rate swap contracts was approximately US$543.0 million (approximately US$572.2 million as of December 31, 2005). These contracts are recorded at fair value, recording both realized and unrealized gains and losses in the consolidated income statements. 2006 Property As of December 31, 2006, the Group held one interest rate swap contract for a notional amount of US$196.0 million designated as a cash flow hedge, Life and casual- Health because it reduces the exposure to the variable interest rate risk of a portion of the loan transaction entered by the Group on November 2005, note 14(b). In insurance ty insurance insurance Total accordance with the hedge operation, the Group pays a fixed rate of 4.57 percent and receives a variable rate equal to the monthly Libor interest rate over the notional amount and the settlements are made on a monthly basis; the instrument matures November 2012. The loan and the interest rate swap have the US$(000) US$(000) US$(000) US$(000) same critical terms. Gross insurance claims 52,713 60,285 89,797 202,795 Ceded claims (823) (13,698) (1,752) (16,273) The fair value of the asset and liability forward contracts and swaps as of December 31, 2006 amounted approximately US$19.1 and US$7.8 million, respectively (approximately US$8.8 and US$8.0 million as of December 31, 2005) and are included under the caption “Other assets and other liabilities” of Net insurance claims 51,890 46,587 88,045 186,522 the consolidated balance sheets, respectively, note 11. As of December 31, 2006 and 2005, the fair value of the cash flow hedge amounts to US$2.9 and 2005 US$1.6 million, respectively, and is recorded in the net equity. 122 123 Property (e) The responsibilities under credit line agreements do not correspond to commitment of obtain credit; and includes credit lines and other consumer loans Life and casual- Health that are cancelable upon notification to the consumer. insurance ty insurance insurance Total

21 Net premiums earned US$(000) US$(000) US$(000) US$(000) Premiums earned net of insurance contract ceded to re-insurer for the three years ended December 31, 2006, 2005 and 2004 are as follows: Gross insurance claims 41,650 56,539 93,115 191,304 Ceded claims (870) (13,970) (964) (15,804)

Net insurance claims 40,780 42,569 92,151 175,500

Ceded to Assumed Percentage 2004 reinsurers from other Net pre- of amount Gross and coinsu- companies, miums assumed on Property Premiums (*) rers, net net earned net premiums Life and casual- Health insurance ty insurance insurance Total US$(000) US$(000) US$(000) US$(000) % US$(000) US$(000) US$(000) US$(000) As of December 31, 2006 Life insurance 66,477 (2,923) 1,228 64,782 1.90 Gross insurance claims 40,625 52,707 81,198 174,530 Accident and health insurance 111,295 (2,377) 1,526 110,444 1.38 Ceded claims (1,954) (17,916) (335) (20,205) Property and casualty insurance 138,964 (64,767) 1,838 76,035 2.42 Net insurance claims 38,671 34,791 80,863 154,325 Total premiums 316,736 (70,067) 4,592 251,261 1.83

As of December 31, 2005 Life insurance 46,239 (2,537) 965 44,667 2.16 Accident and health insurance 111,785 (2,745) 1,531 110,571 1.38 Property and casualty insurance 126,377 (61,133) (1,527) 63,717 (2.40)

Total premiums 284,401 (66,415) 969 218,955 0.44

As of December 31, 2004 Life insurance 35,998 (2,865) 683 33,816 2.02 Accident and health insurance 108,739 (2,947) 1,481 107,273 1.38 Property and casualty insurance 107,937 (60,131) 3,777 51,583 7.32

Total premiums 252,674 (65,943) 5,941 192,672 3.08

(*) Includes the annual variation of the technical and unearned premiums reserves. Notes to the Consolidated Financial Statements (continued)

23 Other income and expenses In addition the Group, since 2005, maintains activities related to pension fund management, note 2(a). Other operations of the Group comprise brokerage, The items are made up as follow: fund management and trusteeship.

Transactions between the business segments are realized on normal commercial terms and conditions. 2006 2005 2004 The following table presents the Group’s financial information by industry (primary segment) and geographical area (secondary segment) for the three years US$(000) US$(000) US$(000) ended December 31, 2006, 2005 and 2004:

Other income i Business segments by industry (amount expressed in million of U.S. Dollars): Income (loss) from the sale of assets seized 9,244 6,202 (3,411) Real estate rental income 3,031 1,941 1,224 Recoveries of other accounts receivable and Deprecia- other assets 1,763 4,512 1,429 Income Operating tion and Other Valuation of indexed certificates Citigroup, note 11 (c) 3,521 - - a External from other Elimina- Total income Total Fixed amortiza- provisions Other 8,638 8,916 8,863 income segments tions income (*) (**) assets assets tion (***)

Total other income 26,197 21,571 8,105 2006 Banking 975 24 (24) 975 447 11,090 197 36 (2) Other expenses 124 125 Insurance 316 2 (2) 316 115 989 47 4 - Commissions in insurance 25,555 19,289 19,693 Pension funds 23 - - 23 - 227 11 10 - Sundry technical insurance expenses 10,910 8,183 5,931 Brokerage and other 58 1 (1) 58 1 576 - - - Provision for sundry risks, note 11(e) 6,461 5,567 9,819 Provisions for other account receivables 3,163 7,112 1,435 Total consolidado 1,372 27 (27) 1,372 563 12,882 255 50 (2) Loss (gain) from sale of fixed assets (169) (1,875) 4,525 2005 Loss from fake currencies - 1,960 - Banking 712 11 (11) 712 400 9,893 199 35 11 Other 6,798 6,509 1,466 Insurance 219 14 (14) 219 80 786 46 3 - Total other expenses 52,718 46,745 42,869 Pension funds - - - - - 18 2 1 - Brokerage and other 166 3 (3) 166 3 339 1 - -

Total consolidado 1,097 28 (28) 1,097 483 11,036 248 39 11 24 Earnings per share 2004 The net earnings per ordinary share have been determined over the net income attributable to equity holders of Credicorp as follows: Banking 671 25 (25) 671 346 8,083 215 38 (2) Insurance 193 10 (10) 193 73 700 31 3 - Pension funds ------2006 2005 2004 Brokerage and other 115 4 (4) 115 2 305 1 1 - US$(000) US$(000) US$(000) Total consolidated 979 39 (39) 979 421 9,088 247 42 (2) Number of shares in issue Ordinary shares, note 17(a) 94,382,317 94,382,317 94,382,317 Less - weighted average treasury ii Segment information by geographical area (amounts expressed in million of U.S. Dollars): shares, note 17(b) (14,620,842) (14,620,842) (14,624,392)

Weighted outstanding average number of ordinary shares 79,761,475 79,761,475 79,757,925 2006 2005 2004 Net income attributable to equity holders of Credicorp (in thousands of U.S. dollars) 230,013 181,885 130,747 Total Operating Total Operating Total Operating Income Income Total Income Income Total Income Income Total Basic and diluted earnings per share for net income attri- (*) (**) assets (*) (**) assets (*) (**) assets butable to equity holders of Credicorp (in U.S. Dollars) 2.88 2.28 1.64 Perú 1,131 518 9,271 947 438 8,336 809 352 6,566 Panamá 55 7 839 28 3 593 20 3 293 Cayman Islands 81 14 1,364 55 13 1,238 52 20 1,004 25 Business segments Bolivia 62 28 654 50 23 493 45 24 459 The Group is organized on two main lines of business: Colombia ------51 19 411 i Banking business - incorporating corporate and private banking services, corporate, consumer, micro-business and mortgage loans, credit and debit cards, United States of América 43 (4) 754 17 6 376 2 3 355 savings, deposits, overdrafts, foreign currency and derivative products, structure financing, corporate leasing, custody, among others. Total consolidated 1,372 563 12,882 1,097 483 11,036 979 421 9,088 ii Insurance business - incorporating the issuance of policies of insurance to cover claims, such as fires, vehicles, transport, personal accidents and life (*) Include total interest and dividend income, other income and net premiums earned from insurance activities. insurance, among others. (**) Operating income includes the net interest income from banking activities and the amount of the net premiums earned, less insurance claims. (***) Correspond to reserves for assets seized and the allowance for loan losses. Notes to the Consolidated Financial Statements (continued)

26 Financial instruments The insurance companies of the Group control the liquidity risk through the exposure of the maturity of their assets and liabilities. Therefore, the investment By their nature, the Group’s activities are principally related to the use of financial instruments, including derivatives. The Group accepts deposits from plan has been structured according the maturities in order to hedge the risk of fund requirements to cover insurance claims and others, in addition to the customers at both fixed and floating rates, for various periods, and seeks to earn above-average interest margins by investing these funds in high-quality assets. Group support. The Group seeks to increase these margins by consolidating short-term funds and lending for longer periods at higher rates, while maintaining sufficient The notes to the financial statements include an analysis of the main assets and liabilities of the Group by maturities based on contractual maturity dates. liquidity to meet all claims that might fall due. Cash flow and fair value risk due to changes in the interest rates The Group also seeks to raise its interest margins by obtaining above-average market margins, net of allowances, through lending to commercial and retail Cash flow interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate due to changes in market interest rates. Fair value borrowers with a range of credit standing. Such exposures involve not just on-balance sheet loans and advances; the Group also enters into guarantees and interest rate risk is the risk that the value of a financial instrument will fluctuate due to changes in market interest rates. other commitments such as letters of credit and performance. The Group takes on exposure to the effects of fluctuations in the prevailing levels of market interest rates on both its fair value and cash flow risks. Interest The Group also trades in financial instruments where it takes positions in traded and over-the-counter instruments, including derivatives, to take advantage margins may increase as a result of such changes, but may reduce or create losses in the event that unexpected movements arise. The Group’s Management of short-term market movements in equities, bonds, currency and interest rates. The Management places trading limits on the level of exposure that can be sets limits on the level of mismatch of interest rate reprising that may be undertaken, which is monitored periodically. taken in relation to both overnight and intra-day market positions. Foreign exchange and interest exposures associated with these operations are normally offset by entering into counterbalancing positions, thereby controlling the variability in the net cash amounts required to liquidate market positions. Resources for investing are mainly obtained from short-term liabilities, the interests of which are agreed at fixed and variable interest rates prevailing in the international markets. Loans, customer deposits and other financing instruments are subject to risks derived from interest rate fluctuations. The relevant Market risks contract maturity characteristics and interest rates of such financial instruments are disclosed in notes 7, 13, 14 and 16. The Group takes on exposure to market risks. Market risks arise from open positions in interest rate, currency and equity products, all of which are exposed 126 127 to general and specific market movements. The Group applies a ‘Value at Risk’ methodology to estimate the market risk of main positions held and the Currency risk maximum losses expected, based upon a number of assumptions for various changes in market conditions. The Management sets some limits on the value The Group takes on exposure to effects of fluctuations in the prevailing foreign currency exchange rates on its financial position and cash flows. The of risk that may be accepted, which is monitored on a daily basis. Management sets limits on the level of exposure by currency and in total for both overnight and intra-day positions, which are monitored daily. Most assets and liabilities are maintained in U.S. Dollars. The daily market value at risk measure (VAR) is an estimate of the maximum potential loss that might arise if the current positions were to be held unchanged for one trading session taking into account a specific significance level. The measurement is structured so that daily losses exceeding the VAR figure should Foreign currency transactions are made at the free market exchange rates of the countries where Credicorp’s Subsidiaries are established. As of December 31, occur, on average, not more than one trading session out of one hundred. Actual outcomes are monitored regularly to test the validity of the assumptions and 2006 and 2005, the Group’s assets and liabilities by currencies were as follows: parameters used in the VAR calculation.

As VAR constitutes an integral part of the Group’s market risk control regime, VAR limits are established by the Management for some trading and portfolio 2006 2005 operations. The actual exposure against limits, together with a consolidated Group-wide VAR, is reviewed daily by the Management; however, the use of this approach does not prevent losses outside the limits established in the event of more significant market movements. U.S. Peruvian Other cu- U.S. Peruvian Other cu- Liquidity risk Dollars currency rrencies Total Dollars currency rrencies Total The Group is exposed to daily calls on its available cash resources from overnight deposits, current accounts, maturing deposits, loans draw-downs, guarantees US$(000) US$(000) US$(000) US$(000) US$(000) US$(000) US$(000) US$(000) and other calls. The Group does not maintain cash resources to meet all of these needs, as experience shows that a minimum level of reinvestment of Monetary assets maturing funds can be predicted with a high level of certainty. The Management of the Group’s subsidiaries sets limits on the minimum proportion of funds Cash and due from banks 2,250,111 396,238 87,181 2,733,530 2,337,939 268,416 54,460 2,660,815 available to meet such calls and on the minimum level of inter-bank and other borrowing facilities that should be in place to cover withdrawals at unexpected Trading securities 14,144 30,800 192 45,136 39,045 21,740 - 60,785 levels of demands. Available-for-sale investments 1,493,043 1,904,535 53,133 3,450,711 1,583,201 1,218,424 9,080 2,810,705 Loans, net 4,181,558 1,492,681 62,583 5,736,822 3,758,385 1,032,481 25,894 4,816,760 The matching and controlled mismatching of the maturities and interest rates of assets and liabilities is fundamental to the management of the Group. It Other assets 269,504 129,268 6,242 405,014 192,148 121,348 4,277 317,773 is unusual for banks to be completely matched, as transacted business is often based on uncertain terms and of different types. An unmatched position potentially enhances profitability, but also increases the risk of losses. 8,208,360 3,953,522 209,331 12,371,213 7,910,718 2,662,409 93,711 10,666,838

The maturities of assets and liabilities and the ability to replace, at an acceptable cost, interest-bearing liabilities as their mature are important factors in Monetary liabilities Deposits and obligations (6,098,199) (2,588,864) (151,928) (8,838,991) (5,315,364) (1,684,149) (93,915) (7,093,428) assessing the liquidity of the Group and its exposure to changes in interest rates and exchange rates. Due to bank and correspondents and Liquidity requirements to support calls under guarantees and standby letters of credit are considerably less than the amount of the commitment, because the borrowed funds (883,979) (53,193) (4,429) (941,601) (728,161) (573,665) (1,545) (1,303,371) (334,608) (177,964) - (512,572) (278,461) (150,763) - (429,224) Group does not generally expect the third party to draw funds under the agreement. The total outstanding contractual amount of commitments to extend Bonds issued Other liabilities (662,946) (378,473) (13,178) (1,054,597) (615,561) (293,732) (8,804) (918,097) credit does not necessarily represent future cash requirements, as many of these commitments will expire or terminate without being funded. (7,979,732) (3,198,494) (169,535) (11,347,761) (6,937,547) (2,702,309) (104,264) (9,744,120) The insurance companies of the Group are exposed to requirements of cash available, mainly for contracts of insurance claims of short term. The liquidity risk is the risk that the cash may not be available to pay obligations at their maturity at a reasonable cost. The Group settles limits over the minimal proportion of 228,628 755,028 39,796 1,023,452 973,171 (39,900) (10,553) 922,718 the maturity funds available to meet these requirements and in a minimal level of credit lines available to cover the maturity and unexpected claims. Forwards position, net 30,970 (22,368) (8,602) - (310,946) 310,946 - -

Net monetary position 259,598 732,660 31,194 1,023,452 662,225 271,046 (10,553) 922,718 Notes to the Consolidated Financial Statements (continued)

Credit risk The factors considered in the evaluation of insurance risks are the frequency and severity of the claims, the sources of uncertainty in the calculation of The Group takes on exposure to credit risk, which is the risk that a counterparty will be unable to pay amounts in full when due. Impairment provisions are payments for future claims and the mortality tables for life insurance. provided for losses that have been incurred at the balance sheet date. Significant changes in the economy or in the health of particular industry segment that For this reason, for life insurance, the Group estimates conservatively and carries out a careful selection of the risks at the moment of issuing the policies to represents a con centration in the Group’s portfolio could result in losses that are different from those provided for at the balance sheet date. Management, estimate the degree of risk that each policyholder presents. therefore, carefully manages its exposure to credit risk. At the renewal of the policies, the terms and conditions are revised according to risk changes and its results (claims past experience) and the Company may The Group structures the levels of credit risk it undertakes by placing limits on the amount of risk accepted in relation to one borrower or groups of borrowers, impose deductibles and other conditions in order to mitigate the risks. The insurance companies are responsible for all insured events that occurred during and to geographical and industry segments. Such risks are monitored on a revolving basis and subject to an annual or more frequent review. Limits in the the duration of the contract even if the final amount of the loss is determined after the contract period. level of credit risk by product, industry sector and by country are approved by the Board of Directors. The subsidiaries of the Group that operate in the insurance segment have automatic reinsurance coverage contracts that protect them against frequency and Exposure to credit risk is managed through regular analysis of the ability of borrowers and potential borrowers to meet interest and capital repayment severity losses. The reinsurance includes coverage for excess claims and catastrophes. The objective of the reinsurance is that the total net insurance loss obligations and by changing these lending limits where appropriate. Exposure to credit risk is also managed in part by obtaining collateral and corporate and does not affect the net worth and liquidity of the Company in any given year. personal guarantees, but there is a significant portion in personal lending where no such facilities can be obtained. In addition to the total Company’s reinsurance program, it is possible to buy additional reinsurance protection under the automatic or facultative (voluntary) As of December 31, 2006, Group’s management has estimated that the maximum credit risk at which is exposed the Group amounts to approximately contract modality and for any situation the risk evaluation process considers it necessary. US$11,541.2 million (US$9,602.8million as of December 31, 2005), which comprise financial assets subject to credit risk, including mainly deposits in banks, trading securities, investments available-for-sale, loans and indirect loans, without taking into consideration the market value of the guarantee or collateral. The 128 129 The treatment of benefits as well as the sufficiency of the reserves is a principal concern of the insurance management. The technical reserves are estimated exposure for any specific part, including banks, is further structured by sub-limits covering on and off-balance sheet exposures, and daily delivery risk limits to by actuaries of the insurance segment and are reviewed by independent experts. The insurance segment permanently monitors the claim trends, which trading items such as forward foreign exchange contracts. Real exposures against limits are monitored daily. allows estimates to be carried out for incurred and non-reported claims based on recent information. These estimations are also reviewed by independent experts. Risk of the insurance activity The risk under any insurance contract is the possibility that the insured event occurs and the uncertainty of the amount of the resulting claim. By the very In reference to reinsurance risks, the policy of the Group is to only enter into contracts with companies that are qualified as investment grade by qualified nature of an insurance contract, this risk is random and therefore unpredictable. international ratings agencies.

For a portfolio of insurance contracts where the theory of probability is applied to pricing and provisioning, the principal risk that the Group faces is that the The insurance products do not contain particularly relevant terms or clauses that could have a significant impact or represent important uncertainties to the actual claims and benefit payments exceed the carrying amount of the insurance liabilities. This could occur because the frequency or severity of claims and cash flows of the insurance segment. benefits are greater than estimated. Insurance events are random and the actual number and amount of claims and benefits will vary from year to year from the level established using statistical techniques. Fiduciary activities and management of investment and pension funds The Group provides custody, trustee, investment management and advisory services to third parties. The Group makes allocations and purchase and sale Experience shows that the larger the portfolio of similar insurance contracts, the smaller the relative variability about the expected outcome will be. In addition, decisions in relation to a wide range of financial instruments. Those assets that are held in a fiduciary capacity are not included in these financial statements. a more diversified portfolio is less likely to be affected by a change in any subset of the portfolio. The Group has developed its insurance underwriting strategy These services give rise to the risk that the Group will be accused of poor administration or under-performance. to diversify the type of insurance risks accepted within each of theses categories to achieve a sufficiently large population of risks to reduce the variability of the expected outcome. As of December 31, 2006 and 2005, the assigned value of the financial assets under administration (in millions of U.S. Dollars) is as follows:

Factors that aggravate insurance risk include lack of risk diversification in terms of type and amount of risk, geographical location and type of industry covered. 2006 2005 The Group is liable for all insured events that occurred during the term of the contract, even if the loss is discovered after the end of the contract term. As a result, liability claims are settled over a long period of time and a larger element of the claims provision relates to incurred but non-reported claims (IBNR). Investments funds 1,124 829 There are several variables that affect the amount and timing of cash flows from these contracts. These mainly relate to the inherent risk of the business Pension Funds 4,163 253 Equity managed 1,689 1,417 activities carried out by individual contract holders and the risk management procedures they adopted.

The estimated cost of claims includes direct expenses to be incurred in settling claims, net of the expected subrogation value and other recoveries. The Group Total 6,976 2,499 takes all reasonable steps to ensure that it has appropriate information regarding its claims exposures. The liability for these contracts includes a provision for reported claims not yet paid and a provision for unexpired risks at the balance sheet date.

However, given the uncertainty in establishing claims provisions, it is likely that the final outcome will prove to be different from the original liability established. 27 Fair value This could occur as the frequency or severity, or both, of the claims and benefits are greater than the calculated. In the particular case of the survival business Fair value is defined as the amount for which an asset could be exchanged or a liability settled, between knowledgeable, willing parties in an arm’s length life (life annuities), the risk assumed by the Group consists in that the real life expectancy of the insured population is greater than the estimated at the time transaction, assuming an on-going enterprise. of issuing the policy, which would mean there would be a deficit in the reserves to carry out the pension payments. When a financial instrument is traded in an active and liquid market, its quoted market price in an actual transaction provides the best evidence of its fair value. When a quoted market price is not available, or may not be indicative of the fair value of the instrument, to determine such fair value, the current market value of another instrument that is substantially similar, discounted cash flow analysis or other estimation techniques may be used, all of which are significantly affected by assumptions used. Although Management uses its best judgment in estimating the fair value of these financial instruments, there are inherent weaknesses in any estimation technique. As a result, the fair value may not be indicative of the net realizable or liquidation value. Notes to the Consolidated Financial Statements (continued)

A significant portion of the Group’ assets and liabilities are short-term financial instruments, with a remaining maturity of under one-year. These short-term (c) The loans, contingent operations and derivative contracts with related parties are made in accordance with the normal market conditions available to other financial instruments are considered to have a fair value equivalent to their carrying value at the balance sheet date. customers. Outstanding loans balances at the year-end are granted by collaterals given by the related part. The loans to related companies as of December 31, 2006 had a maturity between January 2007 and August 2012 and an accrued interest average of 7.71%. As of December 31, 2006, the provision The methodologies and assumptions used to determine fair values depend on the terms and risk characteristics of the various financial instruments and for doubtful debts due to related parties amounts to US$0.1 million (US$1.4 million as of December 31, 2005). This amount is established based on an include the following: assessment performed on a continuous basis in the financial position of the related party and the market where it operates. -Cash and due from banks represent cash and short-term deposits that do not represent significant credit or interest rate risks; in consequence, their book (d) As of December 31, 2006 and 2005, directors, officers and employees of the Group have been involved, directly and indirectly, in credit transactions with value is equivalent to their fair value. certain subsidiaries of the Group, as permitted by Peruvian Law Nº26702, which regulates and limits certain transactions with employees, directors and officers -Trading securities and available-for-sale investments are recorded at their estimated fair value on the consolidated balance sheet. of a bank or an insurance company in Peru. As of December 31, 2006 and 2005, direct loans to employees, directors and key management amounts to US$59.5 and US$25.1 million, respectively and are paid monthly during their loan enforce and earn interest at similar market rates for these loans. -The fair value of loans is similar to their book value, because such loans are mainly of a short-term nature or with variable interest rates and are shown net of their respective allowance for loan losses, which are considered by the Management as the approximate recoverable amount at the date of the consolidated The Group does not maintain loans to the directors and key personnel which are guaranteed with shares of Credicorp or other companies of the Group. financial statements. (e) The Group key executives compensation as of December 31, 2006 and 2005, comprises the following captions: -The fair value of deposits and obligations is similar to their book value; mainly because of their liquid nature and that the interest rates are comparable with the interest rates of other similar liabilities at the consolidated balance sheet date. 130 131 2006 2005 -Due to banks and correspondents, borrowed loans, bonds and subordinated rates generate interest contracted at variable interest rates and/or preferred rates US$(000) US$(000) similar to the actual rates in the market. As a result, it is considered that their book value approximates their fair values. Stock appreciation rights, note 19 23,206 7,284 -As disclosed in note 20, the Group has various commitments to extend credit, open documentary credits and outstanding guarantees and has received Salaries 4,824 4,357 guarantees in endorsement of the granted credits. Based on the level of fees currently charged from granting such commitments and open documentary Directors compensations 1,173 1,115 credits, taking into account maturity and interest rates, together with the present creditworthiness of the counterparties, the difference between the book value Other 6,962 2,185 and the fair value is not deemed to be material. Total 36,165 14,941 -Except for currency forwards, options over exchange rates, interest rate swaps and the certificate indexed of Citigroup, as indicated in note 20(d), and 11(a), the Group does not enter into other agreements, generally described as derivative transactions. The Group records these derivatives in the consolidated balance sheets at their fair market value. The Group key executives compensation comprises all the payments received by them, including the taxes assumed by the Group.

Based in the aforementioned analysis, as of December 31, 2006 and 2005, the management of the Group considers that book values of the financial instruments do not differ significantly from their estimated market value.

28 Transactions with related parties (a) The consolidated financial statements of the Group as of December 31, 2006 and 2005 include the transactions with related parties of the companies mentioned in note 3(b). For its 2006 and 2005 financial statements, the Group defines related parties as related companies, the Board of Directors, the

Group’s key executives (defined as the management of Credicorp’s Holding) and enterprises which are controlled by these individuals through their majority shareholding or their role as chairman or CEO in those companies.

(b) The following table shows the main transactions with related companies as of December 31, 2006 and 2005:

Related companies

2006 2005

US$(000) US$(000)

Direct loans 70,636 48,533 Unrealized gain from investments 34,226 23,393 Investments available por sale 27,899 21,815 Deposits 25,074 21,305 Contingent operations 13,925 8,379 Interest income related to loans 2,097 1,991 Interest expense related to deposits 1,505 991 Derivatives (market value) 179 388 Other income 953 546 RISK CLASSIFICATIONS BOARD OF DIRECTORS, MANAGEMENT AND AUDIT COMMITTEE

132 133 Banco de Crédito del Perú Board of Directors Apoyo & Asociados Internacionales S.A.C. Classification Category Definition Dionisio Romero S. Chairman

Luis Nicolini Vice Chairman Common Shares 1ª (pe) Highest solvency level and stability Fernando Fort Director in the issuer’s economic results. Reynaldo Llosa Director Juan Carlos Verme Director Equilibrium Clasificadora de Riesgo S.A. Classification Category Definition Luis Enrique Yarur Director Felipe Ortiz de Zevallos Director Germán Suárez Director Common Shares 1ª Highest solvency level and higher stability in the issuer’s economic results. Management Dionisio Romero S. Chief Executive Office

Raimundo Morales Chief Operating Office Carlos Muñoz Executive Vice President Walter Bayly Chief Financial and Accounting Officer José Luis Gagliardi Senior Vice President Administration

David Saettone Senior Vice President Insurance Audit Committee Luis Enrique Yarur President

Luis Nicolini Director Reynaldo Llosa Director Juan Carlos Verme Director

CONTACTS

134 135 Credicorp

Head Office Lima, Perú Calle Centenario 156, La Molina, Lima 12, Perú Telephone numbers (511) 3132000, (511) 6252000 Foreign Branches Miami, United States of America: 121 Alhambra Plaza, Suite 1200, Coral Gables, Florida 33134 Estados Unidos de America/ Telephone number (305) 4480971, Fax (305) 4480981 Panamá, República of Panamá: Calle 50 y Aquilino de la Guardia, Torre Banco Continental, piso 29, Apartado 6-8934 El Dorado, Panamá, República de Panamá/ Telephone number (507) 2157311, Fax (507) 2157323 Banco de Crédito de Bolivia

Esquina Calle Colón y Mercado Nº 1308, La Paz, Bolivia Telephone number (5912) 2330444, Fax (5912)2391044 Atlantic Security Holding Corporation

Calle 50 y Aquilino de la Guardia, Torre Banco Continental, piso 29, Apartado 6-8934 El Dorado, Panamá, República de Panamá Telephone number (507) 2157311, Fax (507) 2157323 Pacífico Grupo Asegurador

Juan de Arona 830, Lima 27, Perú Telephone number (511) 5184000 Credicorp Securities Inc.

121 Alhambra Plaza, Suite 1200, Coral Gables, Florida 33134 Estados Unidos de América Telephone number (305) 4464446, Fax (786) 9991624

Prima AFP Calle Chinchón 986, San Isidro, Lima 27, Perú Telephone number (511) 6157250, Fax (511) 6157270 FINANCIAL HIGHLIGHTS In US$ millions*

137 2004 2005 2006 BANCO DE CREDITO BCP Profitability Net Income 116.1 184.2 247.8 Net income per share (US$ per share) 0.09 0.14 0.19 Return on average equity1 17.1% 23.4% 28.6% Return on average assets1 1.7% 2.3% 2.5% Operating Ratios Operating costs over total income 2 59.9% 51.8% 50.5% Operating costs over average assets 1 4.6% 4.3% 4.1% Balance Sheet (end of period) Assets 7,311 9,284 10,672 Net loans 3,857 4,675 5,678 Deposits 5,553 6,676 8,356 Net equity 800 877 965 Capital Adequacy (Nº of times) Total assets over equity 9.1 10.6 11.1 Risk-weighted assets over regulatory capital 3 7.7 9.1 8.5 Loan Portfolio Quality Past due loans over total loans 3.7% 1.9% 1.3% Provisions over past due loans 159.8% 207.6% 249.5% Other Information Number of shares, net (in millions) 1,226 1,287 1287 Average price per share (in S/.) 2.2 4,3 7.1 Number of employees 9,458 9,148 10,771

* Unaudited information, prepared in accordance with International Financial Reporting Standards (IFRS). 1 Averages determined from the average of the beginning, quarterly and final balances in each year. 2 Total income includes net interest income, commissions from banking services and net gain on foreign exchange transactions. 3 Risk-weighted assets include market risk assets. Banco de Crédito BCP

Net Income & ROE (US$ MM) (%)

250 28.6% 30%

200 23.4% 17.1% 20% During 2006, BCP´s earnings 150 248 100 184 10% 50 116 reached a historical record of 0 0.0% 2004 2005 2006

Net Income ROE US$247.8 million, which represented Source BCP - Finance Division a 34.5% increase FINANCIAL RESULTS

138 139 BCP´s average return on equity Graphical Overview of Financial Results Results Such increased earnings resulted reached 28.6%, an unprecedented During 2006, BCP’s earnings – according to international accounting practices – reached level in the bank history a total of US$ 247.8 million, a 34.5% increase compared to US$ 184.2 million reached from the considerable growth of our in the previous year – a record in BCP’s history. Such increased earnings resulted from the considerable growth of our loan portfolio, which lead to higher net interest income; from the growth of our transactional services, that contributed to an important increase of non-financial income; and from a better quality of our portfolio, that lead to a lower loans, of our transactional activity level of provisions for loans of doubtful collection and important rebounds. As a result of such positive developments, BCP showed an important increase of profitability measured as a return on the average equity, which also reached a historic record of 28.6%. and from the increase of non- Operating Income Core earnings, including net interest income, bank commissions and net earnings in foreign exchange operations, had a 14.6% increase compared to the previous year. The net financial income interest income that remains the principal share (62%) of our core earnings, grew 15.1%, reaching US$ 443.7 million in 2006. Such growth results not only from the robust growth in investments and loans, but also from the leverage given to more profitable Retail Banking products leading to relevant growth in credit cards, consumer credits, small business, and mortgages. This focus on the retail segment is generating a new composition of the loan portfolio which is shifting to more profitable segments, therefore being accountable for BCP’s significantly increased profitability. Nevertheless, this year the Wholesale Banking business also contributed to growth in net interest income, by means of an unusual strong rise of loan placements that reached approximately 17% measured in average daily balances. That is a result from both the pre-electoral uncertainties that generated liquidity requirements, and the final result of the election, which generated confidence in continued economic policies and allowed financing large medium and long-term projects. Confirming the transactional approach of the corporate strategy, income from commissions – that accounts for 32.4% of our core earnings today – had a 10.2% increase compared to the previous year as a result of a larger number of operations through the different distribution channels of the bank. The monthly average number of transactions in 2006 reached 24.6 million – up 19.7% compared to the previous year, confirming the effectiveness 2 The Wholesale Banking is comprised of two major segments: Company Banking and Corporate Banking, including the Institutional Banking as a specialized segment. Such segments are supported by specialized units: Leasing, Corporate Finances, International Business and Services to Companies, which support all BCP’s business units. Banco de Crédito BCP

Core Revenues (US$ MM)

2006

2005

NEW BCP AGENTS 2004 490 0 200 400 600 800

Net Interest Income Fee Income Net gain on foreign exchange transactions Source BCP - Finance Division In 2006, 19 new branches were opened, 104 new ATMs were installed, and 490 new BCP Agents were implemented.

Total Transactions (Thousands of Transactions) 140 141 Channel Development

25,000 800 655 20,000 600 517 551 551 15,000 400 10,000 212 218 237 200 5,000 61 0 0.0 2004 2005 2006 Branches ATM BCP Agents

Teller Alternative Channels Other Channels 2004 2005 2006 Source BCP - Finance Division Source BCP - Finance Division

The monthly average number of of BCP’s strategy of reducing certain commissions in order to promote volume growth implemented, reaching a total of 551 by the end of 2006. With such expansion of and contribute to increase bank penetration. Larger monthly averages of transactions the customer service network, which resulted in a 75% growth of points of sale of the transactions in 2006 reached 24.6 in 2006 could be seen in: Teller transactions, growing 9.5%,; Electronic and alternate bank network, BCP is increasing its efforts to serve people who were not included in Channels (including ATM, Balance Modules, Phone Banking, Internet Banking, and the banking system up to now and to encourage the use of banking services among million – up 19.7% compared to the BCP Agent) growing 27.8% compared to 2005, and finally, Other Channels (including people who previously did not use them. It is also important to point out that, besides previous year Telecredit, Automatic Debit, POS and ATMs of other banks), that grew 19.4%. those distribution channels, the bank designed products in line with the needs and The larger number of transactions was a result of the expansion of the various distribution expectations of its customers. For that reason, BCP successfully launched in 2006 new channels. BCP worked on the expansion not only of traditional channels, but also in savings products, such as la Cuenta Cero [the zero account] and la Cuenta Libre [the free the development of new and innovative distribution channels. Following this strategy, account], that attracted and inserted a larger number of customers in the financial system. 19 new branches were opened, for a total of 237, and 104 new ATMs were installed, Credifondo and Credibolsa, cash management operations and corporate financial increasing from 551 to 655. However, the most impacting action in 2006 was the services also contributed to the increased income from financial services. They stood massive introduction and development of an efficient and innovative channel, the “BCP out in 2006 as a result of a stable post-election scenario that led to higher profitability in Agent”, a modified and significantly less costly version of an automated teller machine negotiated securities. Operations such as electronic collection, factoring, money orders based on partnerships with commercial establishments. Thus, 490 new agents were and transfers, foreign trade and contingency operations also grew above expectations. Banco de Crédito BCP

Asset Composition (US$ MM) Corporate & Middle Market Loans (US$ MM)

2006 10,672 4,000

3,000

2005 9,284 2,000

1,000

2004 7,311 0 0 4,000 8,000 12,000 2004 2005 2006

Net loans Investments Cash and due from banks Others Corporate Middle Market Source BCP - Finance Division Source BCP - Finance Division

Wholesale vs. Retail 142 143 Breakdown of Retail and SME Loans (US$ MM)

80% 2006 78% 78% 74% 40% 69% 66% 64% 20% 0% 2005 22% 22% 26% 31% 34% 36% 20% 40% 80% 2004 2001 2002 2003 2004 2005 2006 0 600 1,200 1,800 2,400

Retail Wholesale Mortgage SME Consumption Credit Cards Source BCP - Finance Division Source BCP - Finance Division

Total Loans grew 21.4%, as Assets Growth of Assets and Loans Wholesale Banking grew 17%, in dollars to placements in soles, thus reducing the related foreign exchange rate risk. BCP’s total assets, on December 31, 2006, were US$ 10,672 million, an increase of 15% The overall loan growth of both Wholesale and Retail Banking, based on daily average totaled US$ 10,672 million compared to December 2005. Net loans rose to US$ 5,678 million, an increase of 21.4% whereas Retail Banking expanded balances, was 17% and 29%. compared to 2005, increasing their share in the total assets from 50% in 2005 to 53% 29%, contributing to a re-allocation in 2006, and improving the returns on BCP’s total assets. This growth differential is leading to a reorganization of the portfolio, where Retail Banking continues its trend to increase its share, reaching 36% on the bank’s total loan portfolio. Increased growth in the lending activity took place mainly in the Retail Banking segments, of the loan portfolio This reflects a trend towards more profitable assets, thus contributing to the remarkable which were the main contributors to BCP’s net earnings and generated the highest profitability. recovery of returns on the banking services. The dynamism of loan growth is better measured when analyzing the daily average balances On the other hand, as we have mentioned before, the important growth of Wholesale of loan portfolio for the whole year. In fact, it reached US$ 5,318.6 million (includes BCB), Banking in 2006 was also influenced by the pre- and post-electoral scenarios, since major 17.2% higher compared to 2005. On the other hand, BCP’s liquidity reflected by the corporations seeked higher liquidity levels in order to properly deal with potential concerns volume of funds available for sale reached a level similar to 2005, although in the first half as a result of an unexpected political outcome, and then, after overcoming the uncertainties of the year BCP had to keep high liquidity levels due to the election process. of the first half of the year, major investment projects continued moving forward. The “de-dollarization” process in progress Concerning the Retail Banking3 portfolio, mortgage credits remain the most important The de-dollarization process continued during 2006, reaching a share of local currency product in terms of volumes, with a 47% share of total retail loans, followed by credits to loans in the loan portfolio of 26% compared to 22% in 2005. small companies, which represent 30% of total retail loans. However, the most dynamic This development occurred mainly through higher loan placements in soles for commercial and fastest growing product is the credit card, showing a remarkable volume increase of credit and for small companies. In mortgage credits, new products at combined (fixed 39% during 2006, reaching a total portfolio of US$ 198.9 million. Also credits to small and variable) rates were offered in local currency, generating a shift of mortgage credits 3 The data is measured in daily average balance of the year. Banco de Crédito BCP

Breakdown of Deposits (US$ MM) Past due Ratio

2006 10%

8%

6% 2005 4%

2%

2004 0% 0 2,000 4,000 6,000 8,000 10,000 2001 2002 2003 2004 2005 2006

Time Demand Savings Severance indemnity BCP Banking System Source BCP - Finance Division Source BCP - Finance Division

Deposits increased 25.1% compared businesses (PYME) and consumer credits witnessed a strong growth compared to 2005. 144 145 Coverage Ratio Thus, those products grew 38% and 36%, respectively, totaling a loan book of US$ 508.2 to the previous year million for small companies and US$ 199.7 million for consumer credits. Mortgage credits 250%

have an enormous growth potential and have risen 20% compared to 2005, totaling 200%

US$ 803.4 million as of December 2006, leaving room for stronger growth. Thus, the 150% higher growth rates and higher margins achieved in the Retail sector have become the main 100% driver for growing and recovering BCP’s profitability. 50%

Composition of Liabilities and Deposits 0% On the other hand, deposits showed a 25.1% growth, totaling US$ 8,356 million as of 2001 2002 2003 2004 2005 2006

December 2006. It is important to highlight that the growth in deposits was mainly due to BCP Banking System growth of time deposits which were up 33.9%. However, demand deposits and savings Source BCP - Finance Division deposits also had good performance, growing 23.9% and 17.8%, respectively. In addition, CTS –our severance payments related deposits, increased 18.4% compared to 2005. It is interesting to observe a slight decrease in dollarization of the deposit base, which reached BCP’s non-performing loans recorded also improved, reaching 3.1% in 2006 versus 3.6% in the previous year. Only the credit card 69% in 2006, down from 72% in 2005. This was a result of some increase in rates paid segment was slightly affected, rising from 2.3% to 2.5%. for local currency deposits. the lowest level of its history at 1.31%. Coverage Altogether, BCP’s asset growth is supported by liability growth of 15%, and also a 10% Coverage on past due loans reached The coverage ratio (provisions over past due loans) kept its sustained growth, reaching larger net equity base. 249.5% in 2006 versus 207.7% in 2005. It is important to point out that a better coverage 249.5% ratio was achieved despite lower provisioning levels, as a result of the improved portfolio quality. Risks Past Due Loans Furthermore, BCP is benefiting not only from lower provisioning requirements following the Concerning the quality of the portfolio, the healthy financial situation of companies and improvements in the quality of the portfolio, but also from recoveries of previously individuals, coupled with a favorable environment and sustained growth of healthy loans, charged-off portfolio, which reached in 2006 US$ 37.9 million. led to a substantial improvement of the credit portfolio, which accelerated the reduction of past due loans, falling from 1.90% in 2005 to 1.31% in 2006. Total past due loans dropped from US$ 94 million in 2005 to US$ 75 million in December 2006.

In terms of delinquencies in individual products, the results within Retail products were also very positive. Mortgage and consumer credit delinquencies fell from 2.7% and 2.3% in 2005 to 2.5% and 1.8% in 2006, respectively. Credits for small and very small businesses Banco de Crédito BCP

NEW JOBS 1,120

1,120 new jobs mainly for service promoters and system personnel

In 2006, expenses of over US$ 41 Operating Expenses and Efficiency 146 147 Operating Expenses (US$ MM) The strong growth in the portfolio and the retail sector expansion had to be supported million were incurred, mainly in with an increase in expenses. The highest expansion occurred in Personnel Expenses, 2006 which grew 14% in order to meet our customers’ needs by opening new branches, Computer Hardware, BCP Agents working longer hours, improving customer service levels, and hiring service promoters. 2005 Implementation, software and There were also increased expenses with System personnel in order to support users’ requirements and the larger sales force for retail banking services. Thus, in order infrastructure to support 2006 growth, 1,120 new jobs were created, increasing from 7,740 in 2004 2005 to 8,860 in 2006, mainly for hiring service promoters and systems personnel. 0 100 200 300 400 Additionally, major expenses were incurred under General Expenses, which grew Salaries Administrative, general and tax expenses Depreciation and Amortization 12%, due to stronger marketing campaigns and customer loyalty-building programs, Source BCP - Finance Division as well as Systems expenses such as maintenance, licenses, and projects.

It is important to highlight that 2006 was a starting point of the expansion process, which will be reinforced with larger investments in 2007. That is why over US$ 41 million were spent, mainly in purchasing computer hardware, software, infrastructure, and implementing Efficiency BCP Agents. The investment strategy will reflect an immediate reduction of profitability in the short run, due to the increased expenses, in order to achieve major medium and 800 65% 59.9% 61% long-term profitability growth. 600 57% 400 Despite the described increase in expenses, these grew on the overall 11.6%, less than 51.8% 53% generated income growth of xx%, resulting in an improvement of BCP’s efficiency ratio 50.5% 200 versus the previous year. Thus, the ratio decreased from 51.9% in 2005 to 50.5% in 2006. 49% 0 45% 2004 2005 2006

Core Revenues (US$MM) Operating Expenses (US$MM) Efficiency Ratio (%) Source BCP - Finance Division Banco de Crédito BCP

Corporate Strategy 148 149 Growing with Efficiency and Quality BCP, A Sound Strategy for Sustained Growth To be more concrete, our strategy is based on:

Looking at Our Market Approaching our customers Based on the deep changes that have occured in the financial system and the economic We intend to broaden our distribution network through traditional channels, such as environment, as well as on the experience of the recent years, we have defined a strategy branches, newer channels such as ATMs, but we are mainly focusing on innovative, more capable to take the banking business to a higher level, in line with our market potential, cost-effective channels, such as our new “BCP Agent”. We have strongly betted on this and, furthermore, to improve profitability and reach sustainable growth of our net income. channel and the results have been so positive that we are going to continue investing heavily on this channel in 2007, by doubling the point of sales of our network in two years. Precisely the sustained growth and the resulting stability of the local economy and currency have opened broad opportunities to develop business, starting a new cycle of expansion. Offering attractive products Such expansion reaches the income generation capability, the purchasing and saving An indispensable complement to the growth of our network through the “BCP power of economic players, as well as the gradual inclusion in the labor market of some Agents” is to design products according to the needs and expectations not sectors of the population that did not have access to the financial system. only of our current customers, but also of potential ones. For that reason, our strategy includes the permanent development of accessible and innovative This evolution led us in BCP to get adapted to the new environment, starting the process of products that help overcoming the obstacles to banking services access and, growing and developing our institution’s retail banking services by offering products, prices thus, improving the indicators of banking service penetration in the country. and distribution channels suitable to our customers’ needs. Broadening the need for transactional services Building on Our Foundations The transactional approach is another pillar of our strategy. It is our goal to provide excellent BCP has historically been recognized by its soundness and excellence. Thus, it has been and efficient services at all levels, by broadening the transaction opportunities that facilitate capable to build on that position to develop the soundest franchise of the country’s banking the financial management of both companies and individuals and, thus, generating a system, traditionally focused on corporate / commerce banking services. Based on this wide range of operations related to financial services. We can consolidate our positioning image of soundness, our present strategy is focused on (i) the aggressive expansion of Retail as the market’s soundest financial franchise and generate sustainable low-risk income. Banking Services, based on action plans targeted at accelerating the inclusion process of The achievements have been remarkable so far and confirm this strategy to the future. those sectors that have no access to the financial system yet, in order to achieve said growth by expanding our customer base (ii) to maintain the leadership in the Wholesale Banking, Making no concessions in Quality based on financial consulting and transactional support high quality, efficient and creative As a support to these corporate strategies, we have to consider the necessary services, which capitalize our deep client knowledge, and finally, (iii) the services expansion investments, meaning investments for broadening our network with the necessary in all the Company, generating an important income growth arising from transactional services. human and technical resources, as well as reinforcing our institution’s systems to Thus, the bank will develop the focus of its strategy, giving special attention to generate minimize the risks associated to the growing operation volumes we are expecting QUALITY in all its business lines, basically reflected in products and services that contribute to reach and simplifying the processes. The investment strategy will reflect an with the system development and therefore provide the best benefit for its clients. immediate reduction of profitability in the short term, due to the increase in expenses, targeted at achieving major medium and long-term profitability increases. Banco de Crédito BCP

“The Best Bank of the Corporate Sector“ (Comparative 2004-2006)

80% 68% 60%

40%

20% 12% 5% 3% 0% BCP Competitor 1 Competitor 2 Competitor 3

2004 2005 2006 Source Apoyo Opinión y Mercado - Base 251 Enterprises

Besides the large market share Keeping Our Commitments 150 151 In 2006, BCP was considered as 17% higher than in 2005. This result was achieved despite BCP’s already large market Last, but not least, is the focus on our people and our relationship with the community. share, conquered throughout the years and which restrains growth, the aggressive conquered by BCP in Wholesale It is extremely important to count on employees that are motivated and committed with “The Best Bank of the Corporate competition, and the financial disintermediation caused by a strong development of the BCP’s corporate objectives and identity, as it is indispensable to reinforce our commitment local capital market. Banking through the years, loans Sector” by the most important towards the community and its well-being. Net interest income achieved in the Wholesale Banking sector reached US$ 119 million. grew a solid 17% in 2006 The achievements so far reinforce our conviction regarding this strategy and motivate us to companies of that sector This growth mainly resulted from the higher business volume that compensated the continue on this path. Our main goal is to strongly develop the retail sector, based on a broad trend to reduce lending rates. However, income from financial services is more and more access of more and more people to banking services, on innovative products and services, important, contributing with 43% of the total income generated by the wholesale and on the development of transactional services throughout all BCP’s areas. We strongly banking sector. believe that the key to our organization’s sustained growth is in the expansion of our In spite of the significant growth of the Wholesale Banking sector, the reorganization of the economy and increased efforts of bancarization, that is, in the inclusion of people that are portfolio towards more dynamic and profitable retail segments continues its trend, being not inserted in the financial system yet. 64% the share of the Wholesale Banking sector in the total loan placements. Nevertheless, Business Units Wholesale Banking deposits continue to be strong contributors to the bank’s deposits, with a Wholesale Banking 37% share in total deposits. BCP has traditionally been a corporate bank, developing a strong franchise in this sector As a consequence of our service orientation, we have been considered by the most during its existence. Thus, it maintains a very high market share, which it has been able to important companies of the Corporate and Middle Market Banking sectors, including both defend despite the strong competition originated by international banks operating in our BCP’s clients and non-clients, as the “Best Bank of the Corporate Sector” (according to a country. We at BCP serve our wholesale banking customers in two main segments: Middle Multiclient research conducted by APOYO Opinión y Mercado on a yearly basis), reaching Market Banking and Corporate Banking, which includes the Institutional Banking as a the highest score in the last four years and strongly overcoming its closest competitor. This specialized segment. Such segments are supported by specialized units: Leasing, Corporate achievement makes us very proud and encourages us to continue working day after day Finance, International Business and Corporate Services, which support all BCP’s business units. in order to improve our own results and to provide better services to our customers. During 2006, the Wholesale Banking sector kept the positive trend in loan placements started in the previous years, posting average portfolio levels of US$ 2,976 million in 2006, Banco de Crédito BCP

Direct Loans - Middle Market (US$ MM)

1,200 1,171 963 859 800

400 Middle Market Banking

Net earnings of US$44,4 million 0 22% growth in loan portfolio 2004 2005 2006 Interest spread increased 11% Source BCP - Finance Division Non-financial income of 39%

Non-Financial Income - Middle Market (US$ MM) 152 153 With US$ 38.2 million, non-financial Middle Market Banking Loans for the Middle Market Banking sector kept growing in 2006, increasing 22% compared 38 38.2 income represented 39% of to 2005, reaching average portfolio level of US$ 1,171 million, thanks to the good growth rate of the economy. Nonetheless, due to the strong competition on this segment against 36 the total income of the Middle 34.5 other financial institutions, the margins (spreads) of our loans posted a downward trend. 34 Market Banking sector Within this context, BCP’s priority is to focus on the market requirements, by assuring a 32.1 32 credit process with quality, efficiency and on a timely basis.

30 As a natural consequence of the significant growth in loan placements, there was a net 2004 2005 2006 provision of US$ 4.0 million - which represents a low 6.8% of net interest income - Source BCP - Finance Division reflecting the excellent credit quality of the portfolio.

The transactional approach of our institution at a global level is also reflected on this Total Income Composition-Middle Market business segment. That’s how non-financial income is more and more important in relation to total income, so that in 2006 it represented 39% of the total income (both financial and Fee Income Interest Income non-financial), reaching levels of US$ 38.2 million. US$ 38.2 MM US$ 41.3 MM 39% 43% With that, net income of the Middle Market segment was US$ 44.4 million, 22% higher that the amount reached in 2005.

Interest Expense US$ 17.5 MM 18%

Source BCP - Finance Division Banco de Crédito BCP

Direct Loans-Corporate Banking (US$ MM)

1,850 1,805 CORPORATE 1,750 LOAN GROWTH 1,650 +14% 1,584 1,550 1,511 For the third consecutive year, corporate loan growth increased, reaching a 14% growth in 2006, compared to the 1,450 2004 2005 2006 previous year Source BCP - Finance Division

Corporate Banking 154 155 47% of total income came from Non Financial Income-Corporate Banking (US$ MM) Our important franchise and corporate image keep on stimulating the business growth

in this BCP’s traditional segment. Corporate banking loans grew for the third consecutive non-financial income 60.0 53.051,8 year, reaching an average portfolio balance of US$ 1,805 million, which represents a 14% 44.444,4 increase compared to the previous year. That increase is important given the typically small 40.0 growth recorded in this segment, due to larger financing alternatives in the capital market, 37,37.66 reflecting this way corporate preferences. 20.0

As in the Middle Market Banking sector, the Corporate Banking segment is facing a very 0.0 aggressive competitive environment in terms of rates, which caused a sustained reduction 2004 2005 2006

of the lending spreads. Source BCP - Finance Division

On the deposit side, corporate deposits kept growing accounting for approximately 28% of BCP’s total deposits.

The corporate loan book increase required a net provision of US$ 2.0 million, which represents Total Income Composition-Corporate Banking only 3% of net interest income, reflecting the very high quality of its credit portfolio. Fee Income Interest Income Our organization’s transactional approach has leveraged the services provided by BCP to its US$ 53.0 MM US$ 35.2 MM 47% 31% wide corporate customer base, designing those services to provide simple and quick solutions to their financial needs. That’s why non-financial income from banking services on this segment have become increasingly important in terms of total income, totaling US$ 53.0 million in 2006, representing 47% of total income (from both financial and Interest Expenses non-financial services). US$ 25.3 MM 22% Thus, the corporate segment’s net earning was US$ 51.6 million, 14% higher than the figure in 2005. Source BCP - Finance Division Banco de Crédito BCP

Total Income Composition-Institutional Banking

Fee Income Interest Income US$ 6.7 MM US$ 1.97 MM 39% 12%

Interest Expenses US$ 8.4 MM BCP branches in Miami and Panamá help developing the international operations of their selective corporate client 49% portfolio Source BCP - Finance Division

Institutional Banking 156 157 Letters of Credit-Monthly Average Balance - International Business(US$ MM) This segment provides specialized services to private and public non-profit organizations,

among which governmental bodies, international organizations, educational institutions, 400 and NGOs are included. Services offered are according to their specific needs. 300 The Institutional Banking sector was able to capture deposits, mutual funds and investment 200 194 portfolios to be administered for an amount of US$782 million, loans for US$55.7 175 148 million, and posted a significant 7% growth in income from services at national level. 100 129 73 80 In 2007, the Institutional Banking sector will continue focusing on leveraging the 0 2004 2005 2006 institutional business in Lima and developing the institutional segment in other cities. Imports Exports International Business Sources BCP - Finance Division BCP has currently wide credit lines for foreign trade operations, working capital financing and medium and long term project investments. Said credit lines are not fully used due to the liquidity surplus managed by BCP and to the high reserve requirements for funds borrowed abroad. Foreign Trade Operations Income-International Business (US$ MM)

BCP maintains operations abroad through its branches in Miami and Panama, that support 11,0 corporate clients with foreign trade business. In a smaller scale, it also finances companies 10.7 in several Latin-American countries in the corporate, financial and sovereign debt markets, 10,5

under supervision of the Country-Risk Committee. 10,0 9.6

The strategies for increasing non-financial income continue being a priority in 2006. As a 9,5 result, this segment grew 11%, reaching a level of US$ 1.1 million. 9,0 In 2006, BCP launched to the market a new product to support exporters whose sales to 2005 2006 other countries are conducted with no bills of credit or documentary collection. Thus, by Source BCP - Finance Division creating Factoring Internacional, BCP got affiliated to the world’s largest chain in this product – “Factor Chain International” – FCI, BCP can presently acquire export invoices and relieve the exporters’ working capital needs. Banco de Crédito BCP

MARKET SHARE -LEASING 35.5%

35.5% of market share makes BCP the leading bank on the leasing segment

Market Share-Leasing BCP (US$MM) 158 159 Leasing Since 2001, we are market leader of this segment, with a 35.5% market share among all 800 the other banks and financial institutions of the country.

600 The market has been significantly growing since September 2004, so that only in 2006

400 the leasing placements went up 29.8% (by December 2006) compared to the previous year, totaling US$ 1,948 million (December 2006). This is a result of a higher awareness 200 level of customers regarding the tax benefits the product offers for all kinds of investments

0 in fixed assets and to the stability in the laws that regulate the product. 2001 2002 2003 2004 2005 2006 In 2007, BCP’s Leasing sector will continue focusing its efforts to maintain the leadership Crédito American Leasing 2nd bank 3rd bank 4th bank 5th bank Source SBS among corporate clients and very small businesses, as well as to rapidly serve retail banking customers by simplifying the product and the processes.

Corporate Services This supporting unit of the Wholesale Banking sector, has become a cornerstone of BCP’s Business Services-Non Financial Income Share efforts to preserve its important corporate franchise, developing transactional services in order to strengthen its relationship with its customers. This is successfully done by reducing

Non-Financial income (Business Services) Other Non-financial income our clients’ costs by means of offering the use of electronic media, assuring their loyalty and 36% 64% reciprocity in conducting business with BCP. Such services are divided into four groups according to their purpose: (i) collection management services, (ii) information services, (iii) payment services, and (iv) liquidity management services.

Said services considerably contributed to increasing the segment’s non-financial income. In 2006, the accrued growth in commissions from such services was 12%. Today, the wholesale banking sector has increased the transactional service volume significantly, therefore, the focus of future efforts will be in developing small and very small business Source BCP, income avarage January-December 2006 markets. Banco de Crédito BCP

Non Financial Income by Type - Business Services

2,500,000 91% 2,000,000

1,500,000 98% 93%

1,000,000 45% 76% 500,000 7% 0

and loans Current Account Transfers

Bonds Financial Structuring payments Drafts and Drafts and Collections Credit Card Commercial Concesionaria Trasvase Olmos US$ 100 millions Collections

Compañia minera El Platanal US$ 120 millions Total Income BCP Business Services Income Pluspetrol US$ 150 millions Source BCP - Finance Division

Corporate Finance again led the Corporate Finance 160 161 Fixed - Income Market Share - Corporate Finace (US$ MM) y (%) The development and strong growth of capital markets caused us to further develop this structuring of primary debt offerings unit, which is specialized in investment and financing services, in order to capitalize on the 1,200 disintermediation process that takes place due to the broader access of our corporate clients 1,000 in the local market to the capital market, through the commissions connected to the intermediation between 800 35% the markets and our customers. The income associated to this area comes from three 600 37% 46% 32% 47% 400 35% major activities: (i) structuring fees on fundraising transactions placed in the capital market, 22% 35% (ii) medium-term financing, and (iii) . 200 18% 0 Among its main operations, it was particularly important the structuring of the private bond 1998 1999 2000 2001 2002 2003 2004 2005 2006

offering of Concesionaria Trasvase Olmos for US$ 100 million. Additionally, in December BCP Others we successfully completed the consulting services to Odebrecht for financing IIRSA Sur. On Source BVL as of December 31, 2006 the other hand, we structured the financing of Compañía Eléctrica El Platanal for US$ 120 million. Lastly, we were able to place Pluspetrol bonds for US$ 150 million by means of a public bond offering. Thus, Corporate Finance again led the structuring of primary debt offerings in the local market. Fixed - Income Market Share - Corporate Finance(%)

For 2007, we will look for structuring opportunities in new market segments with a slightly 40.00% 38.3% higher risk level versus that of current issuing companies, trying to insert clients from the 30.00% 26.1% middle market and institutional banking segments. Furthermore, we are planning to develop 21.0% the stock exchange market and actively take part in potential infrastructure concessions by 20.00% the Government as well as in private companies’ projects. 11.5% 10.00% 3.1% 0.00% BCP 2nd Bank 3rd Bank 4th Bank Other

Source BVL as of December 31, 2006 Banco de Crédito BCP

Loans & Deposits (US$ MM)

5,000 4,659 4,033 4,000 3,417

3,000 2,000 1,711 RETAIL BANKING 1,329 1,049 1,000 SECTOR CONTRIBUTION 0 52% Loans Deposits

2004 2005 2006 Source BCP - Finance Division With a total US$ 129 million of earnings, the Retail Banking sector contributed with 52% to BCP’s overall earnings

The Retail Banking Sector represents Retail Banking 162 163 Past due Loans The Retail Banking sector is focused on serving individuals and companies with revenues 35% and 59% of BCP’s total loans under US$ 1.5 million a year. Such customers are clustered in Exclusive Banking, Consumer 1.8% 1.68% Banking, Business Banking, and Small Business Banking (PYME) segments. BCP tries to and deposits, respectively address the retail banking clients’ needs with a wider and newer distribution 1.4% 1.24% 1.20% network and infrastructure, a wide range of products with agile sales and service processes, an efficient use of commercial intelligence and risk management, and an effective marketing 1.0% of our value proposition. 0.6% In 2006, we kept capitalizing on the sustained economic growth and achieved outstanding 2004 2005 2006 results. The volumes of loans and deposits, measured in daily average balances, at the end Source BCP - Finance Division of 2006, had grown 29% and 16% versus the previous year, totaling US$ 1.7 and US$ 4.7 billion, respectively. These results represent 35% and 59% of BCP’s total loans and deposits. Net Income-Retail (US$ MM) During fiscal year 2006, the Retail Banking sector posted earnings of US$ 129 million, 45% higher than the one achieved in 2005. This result translates into a great contribution 200 to BCP’s overall earnings, from 47% in 2004 to 48% in 2005 and 52% in 2006. 247.8 150 On the other hand, the provision for our loan book continued shrinking in relative terms, 184.2 dropping from 1.24% in 2005 to 1.20% in 2006. The income from services posted a 100 128.0 129.1 60.4 89.1 significant growth, reaching US$ 139.9 million, which is 11% higher than in 2005, fueled by 50 a higher volume of acquisitions and operations of our traditional products as well as some 0 other investment products, foreign remittances and national money orders. That improved 2004 2005 2006 income level is coupled with higher efficiency in expense management, which had a positive Source BCP - Finance Division impact on the results.

Banco de Crédito BCP

FREE ACCOUNT AND ZERO ACCOUNT 50%

BCP´s Free Account and Zero Account constitute more than 50% of our savings accounts clients

BCP maintains its market leadership The bank posted a growth of 21% in deposits, increasing its market share from 35.8% to 164 165 In 2006, the bank strove for strengthening its positioning regarding credit cards – the most 36.5% and consolidating its leading position. We also have to consider the 22% increase profitable product in the business, where it is consolidating its leadership. In this regard, we with: 36.5% Market Share in Deposits, of mutual funds balance, of which we have 47.8% of market share. In both cases, the continued improving our capabilities to assess risk and manage our customer portfolio, Retail Banking sector’s contribution has been crucial for achieving those results. In that putting more emphasis in getting new users with products such as our cards shared with Lan 30.9% Market Share in Loans regard, it is important to point out some achievements: (i) the great adherence to our Airlines and the gas station network Primax. Thus, in order to preserve our position in the new savings programs launched early in the year (such as Cuenta Libre and Cuenta high-income market, which is extremely competitive, we decided to build partnerships with Cero), (ii) the strategy to provide comprehensive consulting to wealthy customers, the best airline and Peru’s largest gas station chain, in order to add more value to the product (iii) the remarkable results in account opening to receive workers’ wages and (iv) the offered to this customer. support provided by the advertising campaigns, that underlined some of our attributes such as diversification, accessibility and reliability. The new savings programs achieved It is important to highlight the growth of nearly 43% in Credit Cards balance for individuals unprecedented success that was reflected in account migration, capturing customers, and compared to 2005, reaching a 350-thousand-customer portfolio. Of this growth, 40% was increasing customer satisfaction. Over 50% of our savings account customers have one achieved in the market with monthly income average below $400, confirming the potential of the new accounts. There were also some significant improvements in the main loyalty of the low-income segment, and our interest and commitment in penetrating this segment indicators: “the products are suited to my needs”, “the bank is engaged with its customers’ to broaden the access of the population to banking services. Additionally, a significant development” and “it offers all products one might need”. It is important to highlight that in number of those cards were sold to people without previous credit experience. Our three 2006 we reduced in 90% the number of claims on savings accounts upon the launching credit card loyalty-building programs (Travel, Bonus and Lan) reached record levels both of the new programs. in accumulated points (largest card use) and in exchange ratios (largest program use). As of the second half of the year, the product called Crédito Efectivo [Cash Credit] gained Although loan book as a whole grew 24%, the better economic position of families and small importance and doubled the sales at year end. We worked hard to reposition the offer in businesses drove the market growth in consumer, mortgage and small-business credit. Those terms of price, term and size, as well as to fine tune the scoring models in order to also segments posted much higher growth levels, reaching 36%, 20% and 38%, respectively. maximize the benefits and sales by means of a pricing policy based on risks. The balance Credit Cards and Consumption growth versus 2005 was 44%. The consumer credit market continued very competitive, with its many and diversified players A major boost was given to the Crédito Vehicular [Car loans] product in a market where showing great dynamism. It concentrates today a portfolio of US$ 3,347 million, out of which sales of new vehicles totaled 32,876 units (41% higher than in 2005), out of which 61% 42% are credit card loans and 58% are installment loans. The bank’s market share in the corresponds to non-commercial vehicles (the ones that can be financed through vehicle consumer credit market reached 14.6% in 2006. Banco de Crédito BCP

Vehicle Loan Sales-Main Events (US$ MM) Channel Development

8.0 11.9 800 655 6.0 600 551 551 7.6 517 4.0 400 4.2 3.1 237 2.0 212 218 200 61 0.0 0.0 Auto Show Motor Show Branches ATM BCP Agents

2004 2005 2006 2004 2005 2006 Source BCP - Finance Division Source BCP - Finance Division

An increase of 284% was achieved in credit). Furthermore, vehicle credit sales significantly increased in our own event Autoshow, 166 167 37.5% is BCP’s market share in the Among the alternatives for real estate project financing, we have to highlight the high reaching $7.6 million (81% higher than in 2005) as well as in the event MotorShow, share of credits the bank grants to government projects in the building sector, approximately Vehicle Credit during the MotorShow, organized by Araper, reaching $11.9 million (284% higher compared to 2004). Lastly, this mortgage sector, with nearly US$ 859 70% in 2006. year we conquered a 38.8% market share in loan disbursements, and 37.6% in financed units. compared to 2004 million dollar in credits. The bank BCP has the widest array of mortgage products: Mortgage Credit with Mixed or Variable It is noteworthy that non-performing loans of our consumer product were below 2.2%. Rates, Mortgage Credit in Soles or Dollar, Mortgage Credit with Remittance, Mortgage Credit with the greatest variety of mortgage with Savings, Mortgage Credit 3rd Category Income, Mi Vivienda and Self Building. It is Credit to Small Businesses important to point out that non-performing mortgage credits dropped from 2.7% to 2.5%. The economic growth of small businesses was impressive, which translated into a fast products growing market, whose estimated portfolio balance is US$ 1,665 million. BCP consolidated Customer Service Channels its leading position in that sector, supported by an effective management of the distribution The economy’s dynamism translated into increased operations with the resulting growth of channels, a sound risk assessment, broader use of commercial intelligence tools and more our customer service channels. Our operations grew 20% particularly those that are conducted in other channels than tellers. Thus, noteworthy growth of 25% was achieved in effective collection methods. The bank’s market share in credit for the small businesses operations conducted in ATMs, as a result of the new savings programs, which free them of reached 22.4%, two percent higher than in the previous year. Sales in the small business charge; growth of 40% was achieved in Internet banking operations, boosted by a successful market advertising campaign on TV and the definite consolidation of BCP Agents as a service increased 31% compared to 2005, since there was a focus on the Tarjeta Solución Negocios channel that is accessible and close to our customers was also achieved. The infrastructure [Business Solution Card] and a supporting working capital line that enables the customer to growth has largely exceeded the investments made in previous years, not only offering more have great flexibility and withdraw cash at the time he/she needs it. Non-performing loans in services to our present customers, but also attracting new customers that had no access to this segment were 3.1% during this period. banking services yet. During 2006, BCP increased its infrastructure by means of: 19 Branches, Mortgage Credit 104 ATMs, and 237 BCP Agents. In the first half of the year, the mortgage credits business was impacted by the uncertain Generating Value pre-electoral scenario and by the changes introduced in the Mivivienda Fund. In the second In terms of generating value, the bank continues developing strategies to approach different half of the year that trend was reverted, increasing the market’s operations and dynamism. customer groups. The increasing use of CRM (Customer Relation Management) tools in all Thus, in 2006, BCP financed nearly US$ 859 million in mortgage credits, which represent of our segments and products enable us to reach customers providing personalized offers 37.5% of the market share and a dream come true for more than 26,000 families now and conditions in a timely manner. Our interest in building a profitable long-term relationship owning a house. is evidenced in the boost we have given to development and coaching activities, particularly in the Small Business segment, by conducting training programs with small-business owners Therefore, in spite of the difficulties experienced in the first half of the year, the bank supported by Universidad del Pacífico, the fair organization ExpoNegocios, Bodegas y has been able to maintain its high market share (the nearest competitor has 28.2%, which Mercados, and the intensive seminars conducted in 10 different cities. Another key-element represent nearly US$ 210 million less than our balances). for creating value is innovation, manifested, among others, in the overall financial advisory It is important to point out that we launched our products during the year at a mixed rate. service provided to very wealthy customers, the benefit program for customers that receive This was well received, as they replaced the traditional variable-rate products. Important their wages at BCP, and the development of the Línea Múltiple de Negocios [Multiple efforts were also made to replace mortgage loans in dollar with those in soles, anticipating Business Line] that allows our business banking service customers to meet their financial possible negative effects caused by any devaluation process. needs with a complete, easy-to-use product. Banco de Crédito BCP

“Trust that generates trust”, “The same trust yesterday, today and forever” In 2006, BCP won the Gran Effie award, the

highest award granted in Peru for advertising effectiveness

Tumbes Cajamarca Amazonas Loreto 168 169 Retail Banking Service Quality 1 2 6 3 7 9 2 2 2 3 5 6 Quality in service is a permanent goal for the Retail Banking sector. On this field, it is

Piura San Martín important to highlight the progress made as a result of complying with the new regulation 6 11 22 3 4 7 related to the Consumer Protection Law in terms of Financial Services, according to which significant investments have been made in order to keep our customers better informed Lambayeque Huánuco about our product and service offer. It is also pertinent to point out the positive impact 4 10 19 2 3 4 generated by our longer working hours in branches as well as the installation of ATMs with La Libertad Ucayali S/.20-bills dispensers. 7 17 24 2 3 6 Improved processes and supporting tools have enabled us to follow up and leverage Ancash Junin growing businesses. The new commercial loan disbursement process (Promissory Notes, 5 7 19 8 11 23 Loans, Advances and issuing Bank Guarantees nationwide) was successfully implemented

Pasco Madre de Dios by using CAPS as a tool. This allowed us to improve our customer service timing and to 2 1 5 1 1 1 reduce our business consultants’ and assistants’ workload. We also received less general complaints, dropping 22%, as a result of permanent efforts to improve processes as well as Lima Cuzco of an effective feedback and training of our contact persons. 153 490 293 5 21 13 The efforts conducted to improve our service quality and, therefore, the value the bank Huancavelica Apurimac 1 1 3 2 2 4 delivers to the customer, has been communicated in successful advertising campaigns on TV that focus on our mutual trust airing messages such as “trust that generates trust” Ica Puno and “the same trust yesterday, today and forever” in order to strengthen the close and 7 12 20 2 2 8 permanent links we have with our customers. Those campaigns have obtained important

Ayacucho Arequipa Moquegua Tacna awards such as the Gran Effie 2006, the highest award granted in Peru for advertising 1 3 4 9 30 42 4 5 5 4 5 6 effectiveness and the Communication Award in Financial Marketing granted by the

Branches (237) ATM (655) BCP Agents (551) Latin-American Bank Federation. Source BCP - Finance Division Capital Market Stock Intermediation In Credibolsa, income from commissions in 2006 grew 36.2% compared to 2005, highlighting the commissions from stock intermediation, which grew 76.2%. This performance was achieved due to the performance of the Lima Stock Exchange – the most profitable throughout the region, benefiting from the high prices of metals in international markets. One of the most remarkable facts within this service was the increase of individual investors, particularly in on-line operations, growing 238% compared to 2005. Banco de Crédito BCP

CREDIBOLSA FIXED INCOME MARKET SHARE 67%

Credibolsa achieved a 67% market share in fixed income investments

Regarding the secondary fixed income market, again Credibolsa became the market 170 171 Credifondo reached US$ 1,234 million operations volumes in other currencies have increased in the recent years. In 2006, BCP reference, with nearly 67% market share. We must also highlight the primary placements estimates a transaction volume in other currencies for US$ 380 million, higher than of commercial papers and bonds, of over US$ 600 million, being BCP, again, the volume under management, which US$ 305 million of 2005, evidencing the dynamism of the Peruvian economy in 2006. number one in the market, with 38% market share. Among the most important primary corresponds to 81,774 participants In the forwards market we maintain the leadership, reaching record levels of negotiated placements preferred by the new issuers, we can mention the bond placement of volumes of US$ 13,220million and earnings for US$ 8.56million in 2006. Our average US$ 100 million for the Olmos project, the first of its kind in the Peruvian market as well forwards stock reached US$ 1,140million in 2006, US$ 490 million more than 2005’s average as placements of US$ 150 million for Pluspetrol Camisea, US$ 100 million for Minera stock, becoming market leader with a 35% market share. Yanacocha, and multiple placements of Telefónica Móviles, as part of a program of up to US$ 350 million. In the spot market, BCP posted a leading 35% market share in the customer segment in 2006, as a result of our efforts in quality service through our Distribution Desk and our specific strategies Asset Management for different products and customer segments. During 2006, our Corporate segment grew nearly BCP’s Asset Management business is conducted through the subsidiary Credifondo SAF, 40% in spot negotiation volumes, the middle market banking sector grew 50% and private specialized in Mutual Fund management. The Mutual Fund industry continued posting banking sector over 50%. Very important volumes were negotiated in branches throughout the important growing indicators in 2006, closing the year with a volume of US$ 2,470 million country. Additionally, the Distribution Desk processes a very significant share of the volume and under management, corresponding to 161,000 participants. That represents a volume income from other products, such as the negotiation of other currencies (euros, pounds, growth of US$ 474 million (24%) and a participant growth of 45,500 (40%). In that regard, yens, etc.) and derivative operations such as Forwards and Swaps of rates and currencies, being Credifondo preserved its leading position with a volume of US$ 1,234 million (49.2% of leaders of the local market. the market in comparison with 50.8% in 2005) and 81,774 participants (49.9% of market share in comparison with 56.2% in 2005) under management. Additionally, in 2006, Treasury Credifondo maintained the best risk rating of local mutual funds made by risk rating BCP’s Treasury has several functions: it defines short and long term interest rates based on companies, also obtaining the best profitability / market risk ratio. which a “base rate” is set for the different business unit operations; manages special credit lines and, more importantly, manages the liquidity risk and the interest rate risk based on the Foreign Exchange, Treasury and Investments exposure it is willing to accept, taking into consideration the interest and exchange rates Foreign Exchange projected. Additionally, it manages the liquidity flow needed to be compliant with the reserve The political scenario in the first half of the year caused a higher volatility in the dollar requirements, derivative coverage and funds required to cover the maturity of liabilities and exchange rate, which favored the increase in volume of FX operations. This volume growth, disbursements of new investment and loan placement operations. coupled with the economic growth and the favorable trade balance, enabled us to generate income for nearly US$ 42 million in the Sol/Dollar market. The re-pricing risks taken by the Treasury in terms of interest rates are restricted by the limits defined by the Assets and Liabilities Committee (ALCO), by means of indicators controlled on In today’s globalized world, BCP provides its customers with a savings alternative for a daily and monthly basis. amounts above EUR25.000, offering them time deposits at competitive rates in Euros. Additionally, now they can buy Euros in cash at BCP’s most important branches and Our treasury unit also monitors the liquidity situation of our branches abroad and of our make transfers to other countries in several currencies at preferred exchange rates. The subsidiaries, in order to provide funds to the unit that requires them and to take advantage of the Money Market lines set for Credicorp. Banco de Crédito BCP

New forecast models of non-compliance probability have been designed, taking into account the requirements of the

New Capital Agreement, Basel II

Permanent monitoring through the Investments 172 173 Wholesale-Default of Payment The treasury’s monetary surplus are invested in a wide range of financial instruments in Assets and Liabilities Committee Peru and also in the most important international financial markets, trying to diversify in 300 25%

order to obtain a very good credit quality, appropriate liquidity levels and high returns. 250 20% (ALCO) 200 15% During 2006, investments were mainly oriented to instruments in nuevos soles, becoming 150 10% BCP’s Treasury the number-one investor in this kind of instruments in Peru. It invested over 100 5% S/.4,500 million both in BCR’s Certificates of Deposit and Sovereign Bonds, and actively 50 participated in the successful program of market makers. 0 0% AAA AA A BBB+ y BBB BB+ y BB B+ y B CCC CC

Risk Management Customers Default of Payment BCP believes that an adequate risk management is a key element to achieve its strategic Source BCP - Finance Division goals. In that regard, the Risk Management Area accounts for the development, implemen- tation and permanent improvement of the Bank’s risk management infrastructure, by adopting and adapting good international practices on that field. To accomplish that goal, The new version of the PI model is able to determine default likelihood that can be distributed the area has 25 professionals specialized in the analysis and management of different kinds in risk rating categories. The default event has been carefully defined in order to have a of risks an organization such as BCP might face. proper anticipation calculation that enables us to take preventive actions in a timely manner.

Managing Credit Risks Eleven rating bands were defined for non-default debtors - from the lowest risk, AAA, During 2006, the area’s efforts in that regard were oriented to developing analytical tools through the highest risk, CC - and two levels for default debtors. On the graph, you can see to support the credit risk management at BCP. The main activities took place in risk modeling, an example of customer distribution and the initial default likelihoods estimated per exchange credit risk management and portfolio management. rating band on the Wholesale Banking major customer segment.

Risk Modeling The new PI model is based on logistics regression techniques, for which important pieces In 2006, important progress was made in developing risk assessment tools for Wholesale of historical information were gathered. The database developed for the modeling can Banking customers (internal ratings). The unit focused on the implementation of the new also be used for meeting the highest and most demanding reporting standards defined by release of the default likelihood (PI) estimate model and on the development of a new model the SBS [Bank and Insurance Superintendence, acronyms in Spanish] in order to simplify for estimating the loss caused by the default (PDI). the implementation of Basel II.

Among the applications that benefit from the new models, we highlight the calculation of prices and returns adjusted according to the risks of loans made to Wholesale Banking companies. Additionally, the models were designed by taking into account the requirements of the New Capital Agreement, Basel II. Banco de Crédito BCP

Loan Distribution by Economic Sector - Wholesale Banking (US$ Thousands)

1,400

1.200

800 Credit-Exhange Risk 400

80% 0

60% Other Mining Fishing

40% Commerce Agriculture Construction Manufacturing 20% Fanancial Intermediation

0% TTransport, Storage and TTransport, Real Estate, Business an Real Estate, Jun 06 Sep 06 Dec 06 Electricity Gas and Water

Non-Exposed Exposed Unidentified Dec 05 Dec 06 Source BCP - Finance Division Source BCP - Finance Division

Foreign Exchange Credit Risk 174 175 Past due Loans Evolution (% delay more than 30 days) The Foreign Exchange Credit Risk (RCC) is associated to credit losses caused by the default of debtors affected by the volatility of the exchange rate. In 2005, SBS defined that all financial 8.0% institutions should develop and implement methodologies and processes to identify, 6.0% measure, control and report the RCC of their credit portfolio. BCP met that requirement by developing RCC estimating methodologies based on the type of customer and the type of 4.0%

credit. Additionally, the Management defined that RCC assessment was part of the integral 2.0% assessment of the customer. During the second half of 2006, there was a slight reduction of 0.0% our customers’ exposure to the exchange credit risk. 2001 2002 2003 2004 2005 2006

Managing the Portfolio Mortgage Personal Loans SME Credit card During 2006, a new project was implemented in order to develop a multidimensional Source BCP - Finance Division analysis platform for the credit portfolio. The development achieved so far helps us manage counterpart, transfer, concentration and exchange credit risks considering the dimensions of the industry, risk levels and coverage. Said tool enables the visualization of other aspects the loss estimates, in order to make the necessary adjustments and contribute to a better associated to risks, defined according to the possibility to obtain the information all the way decision-making process. to the customer level, follow up its monthly evolution and obtain several indicators per In the consumer credit assessment for new customers, statistic scoring models are applied banking sector, rating, commercial appeal and industry, among others. Once implemented, as a decision-making tool to grant the credits. In the case of credits already granted to the platform is expected to be a useful tool for all bank areas connected with credit risk individuals, behavior statistic models are used to predict future risk level of a given customer management. group. The small businesses customer group assessment is based on the field visits or calls Managing Retail Banking as a validation tool and better understanding the customer’s specific characteristics. Thus, Retail Banking Risk Management contributes to maximizing the Retail Banking business for this customer group we have designed behavior predictor models to facilitate increasing profitability by means of a suitable credit risk control. For that purpose, we permanently the credit lines required by our customers. The commercial banking sector customer group assess the credit policies for the various customer segments of the Retail Banking sector is assessed based on a rating model that, if necessary, can be reinforced with the field visit. (individuals, small businesses and commercial banking services); processes for assessing During 2006, the indicators of non-performing loans for products such as credit cards, and granting credits; special campaigns for good-behavior customers; and models or credit in cash, mortgage, housing, small businesses were stable compared to 2005, being methodologies that help to conduct a better segmentation of customer’s risk. Additionally, considerably lower than in the precedent years. we follow up the past due loans per customer group and product as well as its impact in Banco de Crédito BCP

Back Testing - VaR Total (2005-2006)

,000 ,000 ,000 ,000 1,000 -1,000 -1,000 -,000 -,000 1 Jul 1 Jul 1 Jan 20 Jan 1 Jun 0 Jun 2 Jun 0 Jun 2 Oct 0 Oct 2 Oct 02 Oct 22 Dec 01 Dec Apr 10 Apr 0 Apr 0 Apr 2 Feb 0 Feb 0 Feb 2 Nov 11 Sep 1 Sep 12 Mar 01 Mar 21 Dec 06 Dec 26 Aug 0 Aug 2 Aug 0 Aug 2 Nov 16 Mar 16 May 20 May 1 In the first quarter of 2006, BCP already had over 30 plans oriented to early detection and timely response to

Gain/Loss VaR Source BCP - Finance Division disaster events

Managing Market Risks 176 177 Managing Operating Risks During 2006, we conducted an overall review of our methodologies of stress tests for BCP’s During 2006, BCP consolidated its operating risk management throughout the entire investment portfolio. Said tests measure the potential market value loss of the portfolio in organization by deploying an intensive risk analysis and control process of its main case of exceptionally adverse changes of risk factors (interest rates, exchange rate, stock processes. With that purpose, we defined the regulation, made the communication to all exchange, etc.), being a complement to the risk value calculation, which is a risk measurement the areas responsible for the analysis and developed a piece of software to support the under normal market situations. Said tests are conducted on a regular basis and include documentation and self-evaluation tasks. This major effort was applied in all subsidiary recommendations in order to mitigate the adverse effects of such scenarios. companies of our Holding, Credicorp, and enabled us not only to identify the main risks to which the corporation is exposed, but also to prepare the Holding for the compliance of the In terms of controlling the effectiveness of our risk measurements, the unit improved our Sarbanes-Oxley Act, Section 404, to which Credicorp is subject. As shown in the chart, we back-testing procedures on the risk value calculation of the investment portfolio. The results reviewed a total of 132 processes in four subsidiaries during 2006. are reported on a regular basis and include the number and statistical significance of surpluses detected. Additionally, we regulated, communicated and conducted the risk analysis of the main initiatives undertaken, such as launching of new products and services and significant Regarding the financial instrument valuation of our various portfolios, a valuation system changes in critical processes. During 2006, the Operating Risk Management team was implemented that generates a price vector for over 500 fixed and variable income coached several business units in assessing their commercial initiatives, for a total of eleven instruments on a daily basis. The purpose of such vector is to homogeneously value the assessments, among which are products as the launching of some financial derivatives, the investments for the bank and other Credicorp’s subsidiaries. new transactional channel “BCP Agent”, the new security device for on-line transactions or TOKEN, etc. On the other hand, in order to detect operations that might be conducted at off-market prices, we implemented daily price control procedures for foreign exchange spot and On the other hand, BCP has supervised the design and implementation of a loss-event forward operations. Future developments will enable us to implement similar procedures for database which is going to be used for monitoring the risk materialization and the definition fixed and variable income operations. of the corresponding corrective and improvement measures.

Additionally, we developed an application for calculating the credit risk equivalent to swap Finally, BCP has put more emphasis to Business Continuity management by developing and other derivative operations. Such application is implemented by the unit responsible for a formal corporate discipline that proposes the institutionalization of contingency those products. That calculation is based on simulations using curves of the historic rates of management within the corporation. Said vision considers not only designing plans for the analyzed instrument’s market value, being an estimate, as accurate as 99%, of its specific events, but also creating a conceptual framework, a regulation framework and an maximum potential market value. organizational framework with specific resources, that encourage the adhesion of the discipline, giving it more importance, and assuring its validity in time. Lastly, concerning asset and liability risk management, we reviewed the behavior premises Thus, in the first quarter of 2006, BCP already had over 30 plans outlined oriented to early of the balance accounts. We conducted meetings with the business units involved and/or detection and timely response to disaster events such as failures in technological systems, analyzed the behavior in time of the main accounts. The result of such process was the massive bill falsification, unusual cash demand, etc. At the same time, also in 2006, BCP update of various assumptions according to which reports on sensitiveness and liquidity started the business continuity management as a Bank’s regular process. In that regard, a gaps and interest rates are issued. first maintenance cycle was implemented, in order to assure the full efficacy of the plans. The cycle includes tasks such as: Banco de Crédito BCP

Proposal

Risk Analysis and Control Process Date Center La Molina New Data Center

140 132

44 City of Lima Decentralized 100 34 Call Center Out from Lima 60 39

20 15 Subscription Service Subscription Service

0 USA Arequipa Credicorp BCP BCB PPS ASB 24 Hours Interruption Source BCP - Finance Division Non interruptions and loss data (distance < 40 KM)

1 Updating - all plans shall be reviewed and approved at least once a year. 178 179 The integration of Prima AFP and comprehends the credit card sales process. With the new system, we can interact with the customers on line, informing them – as soon as they present their request – whether their 2 Tests and simulations - all plans are approved or simulated on an annual planning basis. Unión Vida’s systems was achieved cards have been approved. That being the case, the amount of the credit line will also be During 2006, six application tests, 4 communication simulations and 7 branch simulations approved. In 2007, the new MIC system will be expanded to other products such as personal were executed at national level. The latter assess a real short failure of the technological with success credits, in order to respond to customers at the contact point. systems in a branch of the network during working hours. Finally, between September and December, major efforts were made to integrate Prima AFP 3 Training - all the staff involved in Business Continuity takes at least two courses a year. systems with those of AFP Unión Vida, as part of the merger process of both AFPs. This project Finally, in 2007 BCP has the ambitious challenge to strengthen its technological infrastructure demanded the joint efforts of a team comprised of Prima AFP, AFP Unión Vida and BCP, by upgrading its two local computing centers, regarding the computing capacity and the completing the system and information integration of both AFPs in only three months, supporting infrastructure. Furthermore, it is willing to open a third computing center outside thereby achieving successful results and meeting the deadlines defined by Grupo Crédito’s the region for processing all critical business processes. top management. Systems, Human Resources Development The ECO Program Systems and Organization The ECO Program (Excellence in Operational Continuity, acronyms in Spanish) will guarantee During 2006, the System and Organization Division continued playing its main role by to our customers a quality and seamless service. Therefore, we are changing the location designing and improving processes, managing strategic projects and providing coaching in of our data processing center in La Molina, so as to guarantee a redundant, highly available the technology and organization areas. A total US$ 62.2 million was spent, out of which 48.5 electrical system. The alternate computing center (in Downtown Lima) will be completely million correspond to recurrent expenses and 13.7 million to the development of several reinstalled and redesigned in a new location within Lima’s metropolitan area, using the most projects targeted at meeting the Bank’s strategic goals. One of the most important objectives modern and efficient techniques available in the market. With these two renewed processing is the growth of the channel “BCP Agent”, including new tasks such as service payments, centers we will be able to support any local incident without interrupting the service. issuing and collection of payment orders and foreign remittances. Another important project In order to face an incidental major event in Lima, we are considering the possibility of was the modernization of the Contact Center in order to improve the efficiency in terms of enhancing our processing capability with asynchronous data copy technologies, in order to operational availability and stability of the Phone Banking services. In 2006 we also made preserve our customers’ financial information and provide services through our distribution some major steps towards the technological renewal of the Bank’s branches, putting more channel even in the case of a serious event. emphasis on sales and more modern processes and systems, easier and faster for the customer. In these first steps, the main contributions were: the implementation of the new All these technological changes must be based on support and data retrieval processes, “Servimatic”, with new and more modern ticketing devices; the Customer’s File, showing the besides a very efficient communication network, with redundancy capability, dynamic routing customer’s information and facilitating the commercial work on the platform, on the teller and failure tolerance. The project will be completed and operating by the second half of 2008. and also the business consultant; and the new Balance and Activity Consultation equipment, CMMI more modern and technologically more robust in order to provide stable and efficient In September 2006, the System and Organization Division obtained the CMMI (Capability consultation services to customers. Maturity Model Integration) Maturity Level 3 certification, developed by the Software One of the projects aiming at increasing the loans on the Retail Banking area started to Engineering Institute, an international software engineering organization sponsored by the be used by the year end – the implementation of the new MIC system, whose first phase United Sates Department of Defense and operated by the Carnegie Mellon University, Banco de Crédito BCP

In september 2006, the System and Organization Division obtained the CMMI (Capability Maturity Model Integration) How many are we? Employees 10,771 Maturity Level 3 Certification, becoming the first Latin-American bank and the first Peruvian company to receive such Working positions 8,859 Female % 52% recognition Male % 48%

becoming the first Latin-American bank and the first Peruvian company to receive 180 181 a best-practices development and application center on the human capital management such recognition. area that enables the company to count on highly qualified and motivated personnel.

The model describes the capabilities a software development organization should have to In that regard, our efforts aim at consolidating the BCP Culture, for which one of the most obtain consecutive excellence levels, based on the principle that the quality of a system or important actions of the Culture Committee in 2006 was to build the Internal Communication product is highly influenced by the quality of the processed used to develop and maintain Committee, comprised of the following areas: Human Resource Development, Marketing, it. CMMI, based on the TQM (Total Quality Management) discipline and compliant with the Institutional Relations, Quality and Service Banking. Said Committee has already executed ISO requirements, has turned into a global standard used by the world’s largest companies. specific actions, such as the Internal Communication Research, whose outcomes and recommendations enabled us to detect some improvement areas and work on: Centenario Technological Center As part of the Bank’s evolution, business keeps growing and diversifying. Therefore, the 1 Communication management – by means of a comprehensive and integrated program, demand for new systems and improvement of the present applications also grows for the with the same objective. new products offered to our customers. In order to support in a timely manner the increase 2 Target-audience segmentation (needs, requirements, information relevance). of new services, the increase of over 100 new jobs was approved. 3 Integration of the BCP Culture contents related to internal communication, by focusing the Considering the lack of physical space for this purpose, coupled with the needs identified communication on “people” as a fundamental element of the corporation, its culture and results. by the ECO project, we had the idea to use the rooms where the Centenario Technological Center is located today, in Melgarejo. After that first stage, that space accommodates 220 It is important to highlight that a work environment survey was carried out from August 7th people. However, a total of 450 people is expected by the end of the second investment stage. to August 15th. For the first time an external consulting company, the Hay Group, conducted the survey. Within that context, we received 6,612 valid responses, which represent a With the new Technological Center, the Division will be able to increase its service capability, participation of 75% of the full universe. An important piece of data is that we received over achieving more success in future projects. 4,700 comments to the open question of the questionnaire. Human Resource Development In August 2006, we started a project to define the “BCP Competence Model”, whose first The Human Resources Development Division has the mission of being a strategic partner deliverable is our leaders’ profile. Competence management crosses and integrates all of the organization by providing integral services and coaching in the area of human Human Resource Development processes, defining the set of critical behaviors to achieve resources management, within a comfortable environment consistent with the employees’ the environment, culture and expected results. professional and personal development expectations. Our vision is to be recognized as Banco de Crédito BCP

Working Environment 2006

100

80

60

40

20

0 Commitment Management Style Corporative Process Companies Management % Unfavorable % Neutral % Favorable Source BCP - Finance Division

182 183 BCP Volunteers Committee expanded Moreover, we have continued designing and implementing new variable compensation Financial Medical systems in several BCP units and started the design of an Incentive System with the Important Changes Alternative Family Medical Plan: Plan Line 1 of S/.29.00. its activities throughout the country by aim to standardize different assessment and compensation systems to integrate them Service flow improvement for loan applications. Inclusion of Inkafarma drugstore chain in the Family Medical Insurance at national level. in one that comprehends the teams’ achievements and enables the compensation to building decentralized committees in Flexibility of the credit guidelines coordinated by Life Insurance basic coverage improvement: be a useful tool to achieve our branches’ goals in a balanced and sustained fashion. the areas of Marketing Individual Banking Risk and Natural death: from 16 to 20 salaries Human Resources Development. Chiclayo, Arequipa and Trujillo As part of the communication programs of the Human Resource Development policies, Accidental death: from 32 to 40 salaries we continued conducting Compensation Workshops oriented to the bank managers, Credit advisory services improvement through Línea Total and permanent disability due to accident: from 32 to 40 salaries de Consulta Gremio 94 (Gremio 94 Advisory Line). including the policies, methodology and techniques BCP applies to determine each job First Aid Course (Organization of the first aid squad). Oncomedic (Cancer Insurance) with a monthly premium of US$ 3.62 per person. valuation, carry out researches on the wage market and design total compensation programs, Credit Cards Preventive program for members (Clinical, Gynecologic, Urine, Cholesterol, Triglycerides, Glucose, Prostate, including the elements of fixed and variable compensation. Credit cards upgrade. Antigen, Thorax X-ray, Vision and Dental Examinations) and for no members (Clinical, Thorax X-ray, Vision Concerning turnover, we conducted a research focused on Service Promoters through Balance Transfer (debt purchase at 0% rate), and Dental Examinations in Lima). 36-month revolving credit facility. which we were able to identify causes and implement actions to correct it. Occupation risk tests in Financial Management Process Service (SPAF) and Service Process of Information Preferential cash: in both currencies, 36-month (SPIN) for the employees ergonomic well-being. Regarding Benefits, in 2006 we consolidated the progress made in terms of assisting BCP revolving credit facility. Implementation of the alimentary security management system for cafeterias, in order to improve the food staff, by offering advantages in different products and services to our employees. Reduction of the consumption credit rate for process and quality, in compliance with the minimum levels of service. contract employees credit cards. Regarding Social Responsibility, BCP Volunteers Committee expanded its activities throughout Others the country by building decentralized committees in Chiclayo, Arequipa and Trujillo. Said Mortgage Credit RPM Mobile Phone System committees have conducted at least one activity in each respective region. The participation, Reduction of the minimun family gross income from Soat (Traffic Accident Obligatory Insurance) motivation and satisfaction levels generated in the people involved was amazing; the actions US$ 1,000 to US$ 400, to have the right to apply for Vehicle Insurance will continue in 2007. mortgage credit. Computers Technologic Campaign Reduction of mortgage credit rates in soles. Gold’s Gym and Sport Life (Gyms) Concerning Leadership Development, we continued executing the Transformational Change of cars to the dual system: gas/GLP Migration of mortgage credits from dollars to soles. Leadership initiatives started in 2005 with the support of the international consultants of Orus Praxis Internacional. Two workshops were conducted – one in January and one in August. El Comercio (Newspaper) Cash Credit School supplies The first workshop was attended by 80 leaders of the Central Administration and the Service Free availability credit at preferential rate Useful Vacation Banking Division, and the second was also attended by managers from all bank’s divisions (soles and dollars). and areas. Additionally, we designed and implemented the Leader Skills Development Sitel – Fixed-Line Services at lower costs Program for Managers and Chiefs, involving individual and group coaching programs. Vehicle Credit Preferential rate according to campaign. Banco de Crédito BCP

Net Income & ROE (Bolivia)

16.0 25 21.7% 16.7% 20 12.0 Scope 15 Action Duration (h) Senior Managers Chiefs 8.0 8.4% 10 Acknowledgement and feedback 7 40 160 4.0 5 Systematic thoughts 6 40 160 0.0 0 Emotional Intelligence 8 40 160 2004 2005 2006

Recluting Interviews 4.5 30 Net Income ROE Source BCP - Finance Division

On the other hand, in terms of Internal Development and Talent Management, we were able 184 185 Banco de Crédito de Bolivia reached the Bolivian exports and promoting the use of the local currency. In 2006, the boliviano to consolidate the “Job Offers” module, with 42 processes published in 2006, out of which revalued 0.5% versus the US dollar. 16 are open and 26 completed. Moreover, only that year we reached 62% of BCP’s net earnings of US$ 14.1 million, The macroeconomic scenario has positively impacted the Bolivian financial sector, situation employees in terms of process coverage. We contacted 30 universities and achieved 76% of 38.2% higher compared to 2005 that is reflected in an overall improvement in the banking system’s assets. The banking MBA returns considering those of 2006. system’s past due loans rate was 8.7%, improving from 11.3% reached in 2005, though In 2006 we made important progress in Planned Training, by outsourcing the training. still higher than BCB’s own portfolio quality ratio. The banking system direct portfolio Today we have: increased by US$ 226.4 million, which implies a growth ratio of 9.8%, and deposits, grew by US$ 444.8 million, increasing 15.6% from 2005. 1 Banking specialization program – with Universidad del Pacífico 2 Training course for Small and Medium Size Businesses – with Centrum Results 3 Training course for Service Promoters – with Instituto de Formación Bancaria Banco de Crédito de Bolivia reached a US$ 14.1 million net income, 38.2% higher than that of 2005. The higher profit figures came as a result of: i) the improvement of all Banco de Crédito de Bolivia business lines, particularly Retail Banking, which generated a greater number of deposits Banco de Credito de Bolivia (BCB) showed an outstanding performance during 2006, mainly and investment and thus a higher financial margin; ii) the growth of non-financial incomes, in terms of business growth and profitablility, which exceeded expectations and contributed basically as a result of higher gains in foreign currency operations; iii) the broadening of with the institution’s consolidation as one of the most important in the Bolivian market. service channels with the customers; and finally, iv) the improvement in the quality of the The consolidated strategy, along with a very healthy economic environment, improved the portfolio, which resulted in a lower level of reserves for doubtful collections of investments. conditions for the bank’s development and impacted directly on the loan portafolio quality, though the social and political environment still shows certain instability. Due to this result, BCB presented a substantial improvement in its level of profitability, reaching a return on equity (ROE) of 21.7%, the highest in its history. Bolivian GDP growth rate reached 4.5% for 2006. Such growth is a result of the exports increase of natural gas and mining products, taking advantage of the higher prices in the The financial margin increased by 14.9%, as a result of an 11.7% growth in net portfolio international market. Additionally, as a result of the increased exports, the Bolivian Central and 20% in individual deposits. This increase, in general terms, was maintained throughout Bank’s international reserves grew 85%, reaching over US$ 3 billion in 2006. The inflation the year, although the number of deposits increased in the second half of the year, due to rate is stable compared to 2005 reaching 5% by the end of fiscal year 2006. Tax collection the successful launching of new savings plans. has benefited from the favorable macroeconomic situation and, particularly, for the On the other hand, non-financial incomes rose by 20.7% compared to the previous year. increased tax in the oil sector, resulting in a historic surplus of the non-financial public sector This growth was mainly concentrated in currency exchange operations; this business shows estimated in 5.5% by the end of 2006. Finally, the foreign exchange policy implemented a 76.2% increase of income compared to last year’s figures. It should be noted that non- by the Bolivian Central Bank has been stable and focused in keeping the competitiveness of financial incomes accounted for 43.9% of total income. Banco de Crédito BCP

As a percentage of loans, past due loans were 3.6%, whereas provisions percentage in relation to delayed portfolio reached 2006 results show BCB growing in all its businesses with a solid balance, figures that registered historical records and

163.6%. These figures are some of the best in the history of Banco de Crédito BCB the capacity of a sustainable development in the future

As was mentioned before, BCB has shown growth in all its business lines. However, the 186 187 Acknowledgements for Banco de Crédito de Bolivia largest increase occurred in the area of Retail Banking, which has become the largest Global Finance and the one with the highest profitability. During 2006, the main products managed by In the 13th version of “The best Latin-American emerging banks”, the US Global Finance this segment presented significant increases in the balance of their investments. Thus, magazine chose Banco de Crédito BCP as the best in Bolivia.

mortgages and credit card investments grew by 12.5% and 17.3%, reaching a market share The criteria considered to choose the winners include assets increase, earnings, of 21.4% and 29.2%, respectively. At the same time, loans to small companies rose by strategic relations, customer service, competitive prices and innovative products 157.8% compared to the figures of December 2005. Euromoney, The Best Bank in Bolivia The increase in the business related with personal banking has been one of the strongest bets of BCB in the past few years. It is expected that this niche of the market will be extremely The UK Euromoney magazine, specialized in financial market and dynamic, since there are many segments that do not use banking services and wonderful international business analysis, chose Banco de Crédito BCP as the opportunities exist for their inclusion in the financial system. Best Bank in Bolivia, in its annual Excellence Award 2006.

Part of the drive in the business with individuals and small companies has been Euromoney is published on a monthly basis by Euromoney Institutional Investor PLC and supported by the plan to invest in broadening service channels with our customers. the award is granted considering an appropriate financial risk exposure management During 2006, 12 new ATMs were installed as well as 9 new branches countrywide. This The Banker, The Best Bank in Bolivia effort simply underlines our commitment based on our mission to serve the client. For the second consecutive year, in 2006 the prestigious English Undoubtedly, the growth in profit is also a result of the steady improvement in the quality magazine selected us as the Best Bank in Bolivia. of the asset portfolio managed by the bank. Thus, post-due accounts, as a percentage of investment, fell from 5.8% in 2005 to 3.6% in 2006, having reached 21.6% in 2002. The The Banker awards granted in each country consider the best-performing financial Furthermore, the percentage of provisions for the outstanding portfolio had a significant institutions around the world. The winners are chosen by a global publishing team that improvement, reaching 163.6% in 2006 compared to 129.9% in 2005. As in the case takes into account the last year assets as well as the financial information provided by the of profit, these figures are some of the best in the history of Banco de Crédito BCB. banks. They also consider the technology use, the innovation level and the development of a strategy that influences the long-term positioning of the financial organization. Banco de Crédito BCP

BOARD OF DIRECTORS AND MANAGEMENT CORPORATE GOVERNANCE AND SOCIAL RESPONSIBILITY

188 189 Guaranteeing transparency Board of Directors Corporate Governance To BCP, Good Corporate Governance is a key element for managing all the areas of the and strengthening the trust of Dionisio Romero S. Chairman organization. Thus, BCP guarantees its transparency and reinforces the trust of its Luis Nicolini Vice Chairman its shareholders and of the shareholders and the community as a whole. Benedicto Cigüeñas Director BCP’s Good Corporate Governance is based on an organizational culture of ethical and Fernando Fort Director community in general moral behavior, translated into a set of policies all the associates are obliged to be compliant Reynaldo Llosa Director with. In that regard, BCP has a number of corporate governance policies in place, listed Raimundo Morales Director in the Internal Regulation and in the Annual Report on Corporate Governance and Social Juan Carlos Verme Director Responsibility, available on our webpage www.viabcp.com. You can find the detailed Management standards and policies connected with the six basic pillars of BCP’s good Corporate Gianfranco Ferrari General Manager Governance: shareholders, board of directors, internal administration, customers, our people and information transparency.

It is important to highlight that BCP deserved an award for best Board of Directors’ policies in a good corporate governance contest organized for the first time in Peru by Pro- Capitales and UPC Escuela de Postgrado. It was a very important acknowledgement to the efforts made by our institution to implement good corporate governance policies in all areas. Moreover, through the holding Credicorp, BCP has a large number of shareholders. Therefore, we have an Investor Relations area whose main role is to keep our shareholders, institutional investors, risk rating organizations and the public in general fully informed about the activities conducted and the results achieved by the organization. Furthermore, in compliance with the Sarbanes Oxley Act, BCP implemented a Reporting System through which the employees can report, anonymously, any non-compliance with the Bank’s ethical code and regulations. Banco de Crédito BCP

Some numbers... 115,000 free delivered books 352 benefited schools 212,510 benefited children Volleyball and Athletics “seedbed“ (semillero) 1,900 teachers received traning 6,200 girls 6 million visits to the web site 20enmate.com 11,200 boys 31,000 Piloto 20 cards 7 Cities were the venue for this event

Corporate Governance at our Bolivian Subsidiary 190 191 project Tarjeta Piloto20, to stimulate the study of mathematics by granting awards to students In the past few years, BCB has included Corporate Governance and Social Responsibility who accumulate points when they solve the problems presented on 20enmate.com. as part of its strategic guidelines. Such initiative, which initially emerged as a way to meet To BCP, practicing sports is a key element for the integral development of future generations. established regulations, has increasingly become more relevant due to the importance Therefore, partnered with El Comercio newspaper and the Patronato Nacional, BCP achieved by the bank, whose responsibility surpasses the limits of the company. Therefore, reorganized the Semilleros de Vóleibol y Atletismo [Volleyball and Athletics “Seedbed”]. such good practices are considered basic for the long term image of the institution, as they also affect the trust and recognition of the community. Firm in our commitment towards our national identity and values, Banco de Crédito, as part of the Cultural Promotion, continued publishing and presenting books and art works, As such, BCB counts among its most important commitments: serving its customers by besides promoting, like every year, the Marinera National Contest and the Caballos de Paso ratifying the quality of its service; offering its employees the best conditions to support their Official National Contest. professional, personal and economic development; and finally, reiterating the commitment with the community by contributing to its development and well-being. As part of the support to the community and the Social Well-Being pillar, our Bank actively participated in several events to help needy people, such as Teleton, Ponle Corazón, Bazar Social Responsibility de Navidad and El Rastrillo. Moreover, BCP is an active member of the National Volunteers In terms of Social Responsibility, in 2006 BCP sustained its social commitment, by organizing Center and, thus, reinforces the social responsibility policy we have implemented, already and participating in a number of actions, and making strategic partnerships with several counting one year of work in our BCP Volunteers Program, in Lima and in other cities. institutions whose goals and actions are similar to ours, in order to achieve common Finally, as part of the Institutional Activities pillar, we organized, once again, partnered with objectives. The detailed actions can also be found in the Annual Report on Corporate ADEX [Association of Exporting Companies], the Mercurio de Plata and Mercurio de Oro Governance and Social Responsibility. Awards ceremony. Moreover, BCP participated in the SIP Annual Meeting and the Symposium BCP’s Social Responsibility is based on five pillars: Educational Promotion, Cultural Promotion, Peru 2021, to consolidate alternatives to implement a proper social responsibility policy. Social Well-Being, Institutional Activities and BCP Volunteers. Regarding Educational Promotion, for the fifth consecutive year we developed the Program Matemáticas para Todos [Math for All], complementing that task with the webpage 20enmate.com and with the new educational AUDITED FINANCIAL STATEMENTS

192 193 Content

Audited Financial Statements

Banco de Crédito del Perú and Subsidiaries

Report of Independent Accountants 194 Consolidated balance sheets 196 Consolidated Statements of Income 197 Consolidated Statements of Changes in Shareholders’ Equity 198 Consolidated Statements of Cash Flows 200 Notes to the Consolidated Financial Statements 202

US$ United States Dollars

As of December 31, 2006 and December 31, 2005 and for three year period ending on December 31, 2006, 2005, 2004. 194 195 Consolidated balance sheets Consolidated balance sheets As of December 31, 2006 and 2005 As of December 31, 2006 and 2005

Assets Note 2006 2005 Liabilities and Equity Note 2006 2005

S/(000) S/(000) S/(000) S/(000)

Cash and due from banks: 5 Liabilities and shareholders’ equity Cash and clearing 1,493,727 1,189,287 Deposits and obligations 11 26,704,353 22,899,525 Deposits in Peruvian Central Bank 4,493,105 5,485,095 Interbank funds 121,541 259,316 Deposits in local and foreign banks 2,000,972 1,686,851 Due to banks and correspondents 12 1,443,875 3,153,897 Accrued interest on cash and due from banks 10,001 8,557 Bonds and subordinated notes issued 13 1,704,545 1,541,387 Other liabilities, net 10 877,754 823,802 7,997,805 8,369,790 Total liabilities 30,852,068 28,677,927 Interbank funds 80,030 500 Trading, available-for-sale and held-to-maturity Shareholders’ equity 15 investments, net 6 6,008,501 5,573,466 Capital stock 1,286,528 1,286,528 Loans, net 7 18,144,725 16,029,984 Legal reserve 546,519 546,519 Permanent investments, net 8 98,820 98,835 Special reserve 366,258 258,965 Retained earnings 661,574 699,096 Property, furniture and equipment, net 9 625,775 645,849 196 197 Other assets, net 10 757,291 750,611 Total shareholders’ equity 2,860,879 2,791,108 Total assets 33,712,947 31,469,035

Off-balance sheet accounts 19 Total liabilities and shareholders’ equity 33,712,947 31,469,035 Contingent operations 10,419,963 9,438,226 Other 104,317,311 100,683,842 Off-balance sheet accounts 19 Contingent operations 10,419,963 9,438,226 Total 114,737,274 110,122,068 Other 104,317,311 100,683,842

Total 114,737,274 110,122,068

The accompanying notes are an integral part of these consolidated balance sheets. Consolidated statements of income Consolidated statements of changes in shareholders’ equity For the years ended December 31, 2006, 2005 and 2004 For the years ended December 31, 2006, 2005 and 2004

Note 2006 2005 2004 Number of Capital Legal Special Retained Total outstanding stock Reserve reserve earnings S/(000) S/(000) S/(000) shares

Financial income and expenses (in thousands) S/(000) S/(000) S/(000) S/(000) S/(000) Financial income 20 2,250,418 1,791,436 1,493,523 Financial expenses 20 (810,418) (518,756) (414,377) Balances as of January 1st, 2004 1,202,385 1,286,528 546,515 186,067 325,159 2,344,269 Shares issued by the restatement of the capital stock, note 15(a) 24,048 - - - - - Gross financial margin 1,440,000 1,272,680 1,079,146 Transfer to special reserve - - - 72,898 (72,898) - Cash dividends, note 15(d) - - - - (245,287) (245,287) Provision for loan losses, net 21 (147,532) (95,643) (101,884) Other - - 4 - - 4 1,292,468 1,177,037 977,262 Net income - - - - 319,260 319,260 Gain (loss) for exchange difference (77,105) 35,814 (59,185) Balances as of December 31, 2004 1,226,433 1,286,528 546,519 258,965 326,234 2,418,246 Net financial margin 1,215,363 1,212,851 918,077 Shares issued by the restatement of the capital stock, note 15(a) 60,095 - - - - - Non financial income (expense) Cash dividends, note 15(d) - - - - (318,872) (318,872) Commissions from banking services, net 22 755,002 700,982 651,122 Net income - - - - 691,734 691,734 Net gain (loss) on securities 23 25,087 26,032 (5,023) 198 199 Net gain on foreign exchange transactions 136,559 100,241 81,050 Balances as of December 31, 2005 1,286,528 1,286,528 546,519 258,965 699,096 2,791,108 Other income 24 222,015 180,467 181,432 Transfer to special reserve, note 15(c) - - - 107,293 (107,293) - 1,138,663 1,007,722 908,581 Cash dividends, note 15(d) - - - - (591,803) (591,803) Net income - - - - 661,574 661,574 Operating expenses Salaries and employees’ benefits 25 (757,584) (586,120) (522,672) Balances as of December 31, 2006 1,286,528 1,286,528 546,519 366,258 661,574 2,860,879 Administrative expenses (424,216) (384,156) (409,047) Depreciation and amortization 9(a) y 10(d) (120,667) (123,473) (132,098) Provision for assets seized 10(c) (9,668) (50,469) (93,508) Taxes and contributions (48,273) (42,054) (44,467) Merger expenses - - (13,213) Goodwill amortization 10(e) (5,880) (5,880) (5,880) Other operating expenses 24 (54,835) (81,212) (70,371)

(1,421,123) (1,273,364) (1,291,256)

Income before the result from exposure to inflation, workers’ profit sharing and income tax 932,903 947,209 535,402 Loss from exposure to inflation 3(a) - - (53,985) Workers’ profit sharing 14(b) (35,504) (35,629) (21,930) Income tax 14(b) (235,825) (219,846) (140,227)

Net income 661,574 691,734 319,260

Basic and diluted earnings per share (in Nuevos Soles) 26(c) 0.5142 0.5377 0.2482

Weighted average number of shares outstanding, adjusted by stock splits (in thousands) 26(a) 1,286,528 1,286,528 1,286,528

The accompanying notes are an integral part of these consolidated statements. The accompanying notes are an integral part of these consolidated statements. Consolidated statements of cash flows Consolidated statements of cash flows (continued) For the years ended December 31, 2006, 2005 and 2004 For the years ended December 31, 2006, 2005 and 2004

2006 2005 2004 2006 2005 2004

S/(000) S/(000) S/(000) S/(000) S/(000) S/(000)

Cash flows from operating activities Cash flows provided by investing activities Net income 661,574 691,734 319,260 Gain on sales of property, furniture and equipment 42,386 48,625 66,392 Gain on sales of assets seized 95,735 92,700 203,899 Adjustments to reconcile net income to net cash provided by operating activities: Additions in property, furniture and equipment (103,174) (108,799) (108,102) Provision for loan losses, net of recoveries 147,532 95,643 101,884 Depreciation and amortization 120,667 123,473 132,098 Net cash provided by investing activities 34,947 32,526 162,189 Goodwill amortization 5,880 5,880 5,880 Deferred income tax and workers’ profit sharing (18,336) (47,407) (39,536) Cash flows (used in) provided by financing activities Provision for assets seized 9,668 50,469 93,508 Net increase (decrease) in deposits and obligations 3,804,828 4,673,511 (1,159,967) Net loss (gain) from sale of securities (25,087) (26,032) 5,023 Net purchase in trading and available-for-sale securities (409,948) (1,950,587) (400,191) Recovery of provision for buildings impairment, net (14,540) - - Net sale (purchase) in permanent investments 15 8,063 (51,524) Provision for buildings impairment - (15,146) - Net increase (decrease) in due to banks and correspondents (1,847,797) 2,669,894 369,597 Net loss (gain) from sale of property, furniture and equipment 163 378 9,979 Net increase (decrease) in bonds issued 163,158 91,963 (75,124) Net gain from sale of assets seized (41,075) (43,980) (57,972) 200 201 Net decrease (increase) in loan portfolio (2,348,799) (2,274,274) 1,023,449 Changes in asset and liability accounts: Cash paid for purchase of loan portfolio, note 7(c) - (1,152,100) - Other assets (43,560) (95,992) (212,463) Cash dividends (591,803) (318,872) (245,287) Other liabilities 100,058 232,380 125,198 Net cash (used in) provided by financing activities (1,230,346) 1,747,598 (539,047) Net cash provided by operating activities 902,944 971,400 482,859 Net (decrease) increase in cash and cash equivalents (292,455) 2,751,524 106,001 Cash and cash equivalents at the beginning of year 8,370,290 5,618,766 5,512,765

Cash and cash equivalents at the end of year 8,077,835 8,370,290 5,618,766

Supplementary cash flow information Cash paid during the year for: Interest 770,897 492,974 440,391 Income taxes 251,702 149,802 132,779

The accompanying notes are an integral part of these consolidated statements. Notes to the consolidated financial statements As of December 31, 2006 and 2005

1 Operations Banco de Crédito del Perú (hereinafter “the Bank” or “BCP”) was incorporated in 1889 and it is a subsidiary of Credicorp Ltd. (a holding incorporated in Bermuda in 1995), which owns 97.24 percent of its capital stock as of December 31, 2006 (96.22 percent of its capital stock as of December 31, 2005).

The address of Bank’s main office is Calle Centenario N°156, La Molina, Lima, Peru. As of December 31, 2006, the Bank and its Subsidiaries had 235 branches and agencies in Peru and 2 branches abroad (218 branches and agencies in Peru and 2 branches abroad as of December 31, 2005).

The Bank, whose operations are governed by “Ley General del Sistema Financiero y de Seguros y Orgánica de la Superintendencia de Banca, Seguros y AFP” (General Law of the Financial and Insurance Systems and Organic of the SBS – Law 26702), hereinafter the “Banking Law”, is authorized by the SBS to operate as an universal bank, in accordance with prevailing Peruvian legislation. The Bank is authorized to receive third-party deposits and invest them, together with its own capital, in loan placements and securities acquisitions; likewise, the Bank may grant guarantees and letters of credit, engage in any type of financing transaction or banking service and other activities as allowed by law. Furthermore, the Bank may engage in underwriting and brokerage activities related to the stock exchange and may establish and manage mutual funds, among other similar activities, provided those activities are carried out by Subsidiaries organized for such purposes.

The accompanying consolidated financial statements include the Bank’s financial statements and those of its subsidiaries in which the Bank has more than 50 percent of direct or indirect participation. The main summary financial information of the Bank and its Subsidiaries, which are included in the consolidation as of December 31, 2006 and 2005, before the eliminations for consolidation purposes are as follows:

Entidad Activity and country Percentage of participation Assets Liabilities Shareholders’ equity Net income (losses) 2006 2005 2006 2005 2006 2005 2006 2005 2006 2005

S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000)

Banco de Crédito del Perú Banking, Peru - - 31,674,583 29,300,002 28,813,704 26,508,894 2,860,879 2,791,108 661,574 691,734 Banco de Crédito de Bolivia and Subsidiaries Banking and financial, Bolivia 95.91 95.91 2,088,905 1,964,354 1,864,116 1,739,045 224,789 225,309 44,294 35,111 Inversiones BCP Ltda. Holding Chile 99.99 99.99 82,412 79,397 - - 82,412 79,397 8,431 7,450 Crédito Leasing S.A. Financial, Peru 100.00 100.00 826,680 782,189 762,237 715,193 64,443 66,996 13,738 16,290 Credifondo S.A.F. - Sociedad Administradora de Fondos - SAF Mutual Funds, Peru 100.00 100.00 55,069 59,455 5,320 6,910 49,749 52,545 13,077 16,203 Creditítulos Sociedad Titulizadora S.A. Securitization management, Peru 100.00 100.00 30,498 26,281 974 8,798 29,524 17,483 12,041 2,168 Credibolsa - Sociedad Agente de Bolsa S.A. Brokerage, Peru 100.00 100.00 35,101 23,943 14,669 7,991 20,432 15,952 11,180 7,975 Solución Financiera de Crédito del Perú S.A. Financial, Peru 100.00 100.00 91,968 14,135 77,416 137 14,552 13,998 510 287 Inmobiliaria BCP S.A. Real estate, Peru 100.00 100.00 8,154 16,082 23 120 8,131 15,962 (1,309) (1,265) Inversiones Conexas S.A. Real estate, Peru 100.00 100.00 5,596 2,865 64 95 5,532 2,770 2,762 1,538 BCP - Sociedad de Propósito Especial Securitization management, Peru 100.00 100.00 4,554 5,789 - 10 4,554 5,779 3,946 6,766

The consolidated financial statements as of December 31, 2005 and for the year then ended, have been approved in the General Shareholders’ Meeting dated March 31, 2006. At the date of this report, the accompanying consolidated financial statements as of December 31, 2006, have been approved by the Audit Committee and the Management on February 22, 2007, and will be submitted to the final approval by the Board of Directors and the General Shareholders’ Meeting within the period established by law. In Management’s opinion, the accompanying consolidated financial statements will be approved by the Board of Directors and the General Shareholders’ Meeting without modifications. Notes to the consolidated financial statements (continued) Notes to the consolidated financial statements (continued)

2 Acquisition of the loan portfolio from the Peruvian Branch of Bank Boston N.A. The accounting records of the companies of the BCP Group comply with the information requirements established by SBS and by the central banks of the In January 2005, BCP agreed to purchase from Bank of America the main shareholder of United States Fleet Boston, the loan portfolio of the Peruvian countries where its subsidiaries are located. The BCP Group’s financial statements, that are included in annual reports and other public financial information, Branch of Bank Boston N.A. and the loan portfolio of Peruvian clients abroad maintained in the United States Fleet Boston, for approximately US$289.2 are presented in accordance with these requirements. million and US$64.3 million, respectively (equivalent to S/942.5 million and S/209.6 million, respectively, as of the incorporation date). The transaction The accounting records of the subsidiaries and branches abroad are maintained in the local currency of each country. For consolidation purposes, their was carried out at market prices. The portfolios were incorporated to the Bank during February 2005. balances have been translated into Nuevos Soles, the reporting currency, by using the current exchange rate as of the date of each balance sheet. All the The acquired loan portfolios comprise mainly corporate loans, mortgage loans and lease operations, note 7(c). translation differences have been recorded in the income statements.

3 Significant accounting policies (c) Financial instruments In the preparation and presentation of the accompanying consolidated financial statements, the Bank and its Subsidiaries’ Management has complied with Financial instruments are classified as assets, liabilities or equity according to the substance of the contractual agreement that originated them. Interest, the regulations established by the SBS in force in Peru as of December 31, 2006 and 2005. Significant accounting principles and practices used in the dividends, gains and losses relating to financial instruments classified as assets or liabilities are recorded as income or expense. Financial instruments are preparation of the consolidated financial statements of the Bank and its Subsidiaries are described below: offset when the Bank and its Subsidiaries have a legally enforceable right to offset them and the Management has the intention to settle them on a net basis or to realize the assets and settle the liability simultaneously. (a) Basis for presentation, use of estimates and accounting changes - Financial assets and liabilities carried in the consolidated balance sheet correspond to cash and due from banks, interbank funds, trading, available-for-sale i Basis for presentation and use of estimates and held-to-maturity securities, loans, accounts receivable, (presented in “other assets” caption) permanent investments and other liabilities, except for the The accompanying consolidated financial statements have been prepared from the accounting records of the Bank which are maintained in nominal Peruvian 204 205 deferred income tax and worker’s profit sharing. In addition, all derivative instruments and indirect loans are considered to be financial instruments. The currency (Nuevos Soles), in accordance with SBS regulations, and supplementary maintained in accordance with International Financial Reporting Standards specific accounting policies on recognition and measurement of these items are disclosed in the accounting policies described in this note. - IFRS approved and in force in Peru as of December 31, 2006 and 2005. (d) Recognition of revenues and expenses The accounting records of the subsidiaries and branches established abroad are kept in the currency of the country of incorporation and the balances are Financial revenues and expenses for interests are recognized on an accrual basis over the related contract period for the transaction and the interest rates translated into Nuevos Soles for calculating the value of the equity share using the current exchange rate as of the date of each balance sheet. The resulting determined based on negotiations with clients, except for interest generated from past due, refinanced, restructured or under legal collection loans, and translation differences are recognized in the consolidated statement of income. loans classified in the categories of doubtful and loss. The interests related to such loans are recognized as received on a cash basis. When Management determines that the debtor’s financial condition has improved and the loan is reclassified as current and/or in the categories of normal, with potential The preparation of consolidated financial statements requires Management to make estimates that affect the reported amounts of assets and liabilities, problems or substandard, the interest is again recorded on an accrual basis. income and expenses and disclosure of material contingencies in the notes to the consolidated financial statements. Actual results could differ from those estimates. The most significant estimates used in the preparation of the accompanying consolidated financial statements are related to the computation of Interest revenues include the income on fixed income securities and trading securities, as well as discount and premium recognition on financial instruments. the allowance for loan losses, the valuation of investments, the provision for assets seized, and the valuation of derivatives. The accounting criteria used for each of these items are described below. Dividends are recognized as income when they are declared. ii Accounting changes Commissions on financial services are recognized as income when collected, except for commissions related to the issuance of credit cards, which are recorded on an accrual basis. Adjustment for inflation As of December 31, 2004, the financial statements of the Bank have been adjusted to reflect the effects of variations in the acquisition power of the Other revenues and expenses are recorded for in the period in which they are accrued. Peruvian currency in accordance with the methodology approved by the National Accounting Standards Board. According to official statistics, the variation (e) Loans and allowance for loan losses in the purchasing power of the Peruvian currency with reference to the National Wholesale Price Index in the years ended on December 31, 2004 was 4.9, Direct loans are recorded when disbursement of funds to the client is made. Indirect (off-balance sheet) loans are recorded when documents supporting recording a loss from exposure to inflation of approximately S/54.0 million. such facilities are issued. Likewise, loans with changes in their payment schedules due to difficulties in the debtors’ compliance with original payment terms By means of Resolution No 031-2004-EF/93.01, the National Accounting Standards Board suspended, beginning from January 1st 2005, the application are considered refinanced and restructured. of the financial statements inflation adjustment. The adjusted book balances as of December 31, 2004, have been considered as the initial balances as of Leasing operations are registered as financial leases, recording as loans the principal of the installments pending collection. Financial revenues are based on a January 1st, 2005. This accounting treatment has also been adopted by the tax authorities to determine the income tax starting from the year 2005. pattern that reflects a constant interest rate over the leasing period. Assets seized The Management of the Bank and its Subsidiaries determines the allowance for loan loss in accordance with the guidelines established by the SBS. In As explained in further detail in paragraph (j) below, since October 31, 2005 the accounting criteria to estimate the allowance for these assets was changed. accordance with such criteria, the Management periodically conducts a formal review and analysis of the loan portfolio; all the loans are classified under the This change was applied prospectively according to the SBS accounting rules. following categories: normal, potential problem, substandard, doubtful or loss, based on their economic and financial situation, and other relevant information (b) Consolidation of each client. Subsidiaries are all entities (including special purpose entities) over which the Bank has the power to govern the financial and operating policies. This is For commercial loans, the classification takes into consideration several factors, such as the payment history of the particular loans, the history with the generally evidenced by a shareholding of more than one half of the voting rights. borrower’s management, operating history, repayment capability and availability of funds to the borrower, status of any collateral and guarantee, the borrower’s Subsidiaries are consolidated from the date on which effective control is transferred to the Bank and are no longer consolidated from the date that control financial statements, the borrower’s risk classification made by other financial institutions in the market and other relevant factors. For micro-business, ceases. The consolidated financial statements include the financial statements of the entities described in note 1, which are part of the Banco de Crédito del consumer and residential mortgage, the classification is based on how long payments are overdue. Perú Group or “BCP Group”. All subsidiaries have been consolidated for the years ended December 31, 2006, 2005 and 2004, or from the date on which In accordance with the established regulations, the computation of the allowance is made considering the classifications assigned and using specific they were incorporated or acquired. percentages, which vary depending on whether the client’s debts are secured or not with highly liquid preferred guarantees (cash deposits and rights on All inter-company transactions, balances and unrealized surpluses and deficits between companies of the BCP Group have been eliminated in the credit certificates), or readily preferred guarantees (treasury bonds issued by the Central Government, securities used to determine the Lima Stock Exchange consolidation process. The minority interest resulting from the consolidation process is not significant and, for such reason, is not presented as a separate Selective Index, among others) or preferred guarantees (primary lien/pledge on financial instruments, securities and property, first agriculture or mining pledge, caption in the consolidated financial statements. insurance on export credits, among others), considered at their net realizable value as determined by an independent appraisal. Likewise, the provision’s Notes to the consolidated financial statements (continued) Notes to the consolidated financial statements (continued)

computation must consider the guarantor’s classification, in cases of credits with subsidiary responsibilities of an entity in the financial or insurance system The consolidated results of the year are not affected by the fluctuations in the market price of the securities classified within this category, except when a (loans affected to substitution of credit counter part). significant reduction in the security price takes place.

The allowance for loan losses also includes estimated losses for loans with problems and that have not been specifically identified. The allowances for direct If a held-to-maturity security is sold, any securities acquired again from the same issuer must be recorded in this category within the term of one year, since credits are presented deducting their balances in the assets, while allowances for indirect credits are presented as liabilities, note 10. the date on which the sale takes place, unless expressly authorized by the SBS.

In the case of borrowers in countries where there is an increased risk of difficulties in servicing external debt, an assessment of the political and economic The difference between the proceeds received from the sale of investment securities and their book value is recognized in the consolidated statements of situation is made, and an additional country risk provisions provided. income.

The allowance for loan losses is established based in the risk classifications and taking into consideration the guarantees obtained by the Bank and its In any of the aforementioned cases, if the SBS deems necessary to constitute a provision for any investment, such provision must be determined based on Subsidiaries. The only guarantees (collateral) accepted are those ones received and classified as “preferred”, “highly liquid preferred” or “readily preferred”. each individual security and recorded in the consolidated result of the year. Such collateral must be relatively liquid, have legally documented ownership, have no liens outstanding and have updated independent appraisals. (h) Permanent investments (f) Foreign currency transactions and derivative financial instruments Comprise investments maintained for long term in companies considered of interest for the Bank. The investments in shares are recorded at the equity’s Assets and liabilities denominated in foreign currency are recorded by applying to the foreign currency amount the exchange rate at the transaction date and participation method or at the stock-market price, the lower, less the provision for impairment estimated to be other than temporary. are expressed in Peruvian currency at the end of each month using the exchange rates established by the SBS at that date, as explained in note 4. Exchange The equity value must be determined according to SBS requirements. In the case of investments listed on security exchanges, when market value gains or losses generated from the restatement of foreign currency transactions at the exchange rates prevailing as of the dates of the consolidated balance demonstrate a loss tendency resulting from non-temporary circumstances, the SBS is able to require the recording of an allowance for such fluctuation by the sheets, are recorded in the consolidated income statement of the year. 206 207 amount of the difference between the market value and the equity value. Forward foreign currency and swap operations are presented at their fair value, with an asset or a liability being recognized in the consolidated balance sheet (i) Property, furniture and equipment and depreciation and any related gain or loss being recognized in the consolidated statements of income. Forward and swap contracts are also recorded in the off-balance Property, furniture and equipment are recorded at acquisition cost, less accumulated depreciation. Maintenance and repair costs are charged to the sheet accounts at their face value, see note 19(d). consolidated statement of income and significant renewals and improvements are capitalized, when the expenditures improve significantly the asset During 2006, the Bank has acquired certificates indexed to Credicorp’s shares price that will be settled off in cash. These instruments include an embedded condition more than the original performance. The cost and the corresponding accumulated depreciation of assets sold or retired are eliminated from the derivative and have as objective to reduce the liability exposure for the stock appreciation rights granted to the workers, see note 17. As established by the corresponding accounts and the related gain or loss is included in the consolidated statements of income. SBS, these instruments are classified as “Investments available-for-sale”, recorded at their acquisition cost or estimated market value, the lower, considering the Work in progress and in transit units are accounted at their acquisition cost. These goods are not depreciated until they are received or finished and placed investments global portfolio (see next paragraph and note 6(h)). into service. (g) Trading, available-for-sale, and held-to-maturity investments Lands are not depreciated. Depreciation is computed on a straight-line basis over the following estimated useful lives as follows: Initially, the Bank records these investments at the acquisition cost and afterwards at their classification value in accordance with the SBS Resolution N°1914- 2004 dated November 23, 2004

According to their classification, the investment valuation criteria are as follows: Years

-Trading securities – Investments maintained for sale in the short term and updated daily at their market value through individual valuation, recognizing gains Buildings and other constructions 33 Installations 10 and losses generated in the consolidated statements of income. Furniture and fixtures 10 The interest income from these investments is recognized when accrued and the dividends when declared. Computer hardware 4 Equipment and vehicles 5 -Available-for-sale securities – These are investments that are not maintained for sale in the short term, nor are they guaranteed to be held until their maturity. These investments are valued based on the global portfolio at the lower of the average acquisition cost or the estimated market value. The allowances recorded for these investments do not affect the results of the period. These allowances are recorded in a specific equity account established for The useful life assigned and the selected depreciation methods are periodically reviewed to ensure that the method and period of depreciation chosen are investment fluctuation until the sale of these investments takes place. When sold, the unrealized losses originated from the impairment, previously recognized consistent with the economic benefit and useful life expectations of property, furniture and equipment items. as a part of the equity, are included in the result of the year. In the same way, when the Bank estimates that unrealized losses recorded are due to other than temporary impairment circumstances, such amount should be recorded affecting the results of the year. (j) Assets seized Assets seized included in “other assets” of consolidated balance sheet, are initially recorded at the value assigned to them through legal proceeding, out The interest income from these investments are recognized when accrued and the dividends when declared. of court settlement; market value or at the unpaid value of the debt, the lower. Simultaneously to the establishment of value, a provision equivalent to 20 percent of the legal settlement or recoverable asset value should be recorded; for this purpose is permitted to use the allowance for loan losses that was In the case of debt securities, the entities must update the accounting value of such instruments every month through the accrual of capital discounts or originally provided for the related loan. premium. By means of SBS Resolution No.1535-2005, dated October 2005; the SBS has made additional modifications and refinements to the Regulation for the -Securities held-to-maturity - They represent those securities that the Bank has decided to maintain until their maturities. They are recorded at their acquisition Treatment of Assets Seized and Recovered and their provisions and to the Accounting Manual for Financial Entities. Therefore, the constitution and recording of cost, which may be adjusted for downgrades in the issuer’s credit rating affecting the corresponding allowance. Interest accrued on, as well as any premium provisions for this property was modified since October 2005. or discount amortizations related to these investments, are recognized monthly as part of the cost and in the consolidated statement of income. Until September 30, 2005, the following criteria were used to determine the provision that must be recorded for such property: Allowance is recorded individually for changes in the loan capacity of the issuer similar to the treatment for direct loans. These allowances directly affect the -Property that is not real estate property – it constituded from the date seized, additional to the initial provision a provision for the decrease in the results of the year. realization value of the property below net book value. Beginning in such date, it started provisioning on a monthly basis equivalent to one twelfth of the book value of the property, net of the aforementioned provision. A full provision is established for property not sold or surrendered under financial lease after twelve months as of its recovery or allocation. Notes to the consolidated financial statements (continued) Notes to the consolidated financial statements (continued)

-Real estate – at the end of the twelfth month after it is seized, the Bank must obtain an appraisal of the immediate realization value and constitute, if In accordance with the accounting standard, the Bank determines its deferred tax and worker’s profit sharing based on the tax rate applicable to its non- applicable, a provision for devaluation. If the appraisal value is higher than the net book value, such higher value is not recognized. In addition, as of distributed profits recognizing any additional tax for the distribution of dividends on the date on which the liability is recognized. the thirteenth month after the allocation of the property, uniform monthly provisions equivalent to one twelfth of the net book value as of such date are (o) Supplementary plan for workers’ profit sharing constituted until the full value is reached. The Bank has a supplementary plan for worker’s profit sharing, that grants stock appreciation rights (SARs) over certain number of Credicorp´s shares (the Since October 2005, the Bank and its Subsidiaries recomputed the amount of the accumulated provision at such date and comply with the new provision Bank’s main shareholder); this plan is granted to certain executives of the Bank, with at least one year of service. According to the conditions of the plan, such requirements according to the following criteria: SARs are granted at the market price of the shares of Credicorp on the date of the grant and are exercisable at that price, allowing the employee to obtain a gain from the difference between the market price of the shares at the date of the execution and the fixed exercise price, note 17. The cost of such profit -Property that is not real state property – a monthly provision equivalent to one twelfth of the book value of the property will be provided starting from the sharing is recorded as a component of the services accrued at the balance sheet date, multiplied by the difference between the market price of the options as first month of seizure or recovery, less the initial provision recorded when it is seized, until completing 100 percent of the seized value or recovery value of of such grant date and the exercise price. The price of the SAR’s is estimated using a binomial method in accordance with IFRS 2 – Share-based payments. such property is provisioned. When the Bank revises or amends the terms of the SARs’ the effect of such changes is recognized in the consolidated results of the year. -Real estate - after three and a half years, uniform monthly provisions must be provided for at the end of each month over the net book value obtained in the eighteenth or twelfth month, depending on whether the approval of the extension by the SBS was obtained or not, respectively, up to completing the amount (p) Impairment equivalent to one hundred percent of the book value of the property not sold. When changes on certain events indicate that the value of an asset could not be recoverable, the Bank and its Subsidiaries review the value of property, furniture and equipment, goodwill and intangible assets in order to verify if there is no permanent impairment in their values. When the book value of The update of the appraisals of such property, which should not be older than 1 year, necessarily implies the constitution of provisions for impairment, when the asset exceeds its recoverable value, a loss for impairment is recognized in the consolidated income statement for each caption mentioned above. The the net realization value of the property is lower than its net book value. If the net realization value is higher than the net book value, the higher value will not 208 209 recoverable value is the greater amount between the net sale price and its useful value. The net sale price is the amount that can be obtained from the sale be recognized for accounting purposes. of an asset in a free market, while the useful value is the present value of the estimated future cash flows by the continuous use of an asset and its disposal at According to SBS standards, the excess in the provision, determined by recomputation of the provision, can not be recognized as income and must be used in the end of its useful life. The recoverable amounts are estimated for each asset or, if not possible, for the cash generating unit. the future for provisions that the Bank and its Subsidiaries’ assets may require, note 10(c). (q) Fiduciary activities (k) Intangible assets Assets and revenues from trust operations in which there is a commitment to return said assets to the clients and in which the Bank and its Subsidiaries Intangible assets included in the “Other assets” caption of the consolidated balance sheets are comprised principally of software acquisition and development participate as trustees, have been excluded from these consolidated financial statements, because the Bank and its Subsidiaries are not owners of such used in Bank and its Subsidiaries’ operations. The software licenses acquired by the Bank and its subsidiaries are capitalized on basis of the incurred cost to assets and do not assume the risk and rewards that have these assets. The Bank and its Subsidiaries record these operations in the caption “Off-balance acquire or used a specific program. These assets are amortized using the straight-line method based on their estimated useful lives, which are from 3 to 5 sheet accounts” of the consolidated balance sheets and the commissions for these activities are include in the caption “Other income” of the consolidated years. statements of income.

The useful life and the amortization method are reviewed periodically to ensure that the amortization period and the method are consistent with the (r) Provisions anticipated pattern of economic benefits from intangible assets. Provisions are only recognized when the Bank and its Subsidiaries have a present (legal) obligation as a result of past events, it is probable that an outflow of resources will be required to settle such obligation, and the amount has been reliably estimated. Provisions are reviewed in each period and are adjusted (l) Goodwill to reflect the best estimate as of the consolidated balance sheet date. When the effect of the time value of money is significant, the amount recorded as a Goodwill included in the “Other assets” caption of the consolidated balance sheets, results from the difference between the estimated market value of the net provision is equal to the present value of future payments required to settle the obligation. assets acquired from the minority shareholders of Solución Financiera de Crédito del Perú S.A. (subsidiary of the Bank), and the amount paid for such assets, on March 2003. Goodwill is amortized using the straight-line method over its estimated useful life, which is 5 years. (s) Contingencies Contingent liabilities are not recognized in the consolidated financial statements. They are disclosed in the notes unless the possibility of an outflow of (m) Bonds and subordinated notes issued economic resources is remote. Include the liability from the issuance of different types of bonds and subordinated notes, which are recorded at their face value, recognizing the accrued interest in the consolidated results of the year. Discounts granted or premiums generated in their placement are deferred in the other assets and other Contingent assets are not recognized in the financial statements; however, they are disclosed when their contingency degree is probable. liabilities captions of the consolidated balance sheets, respectively, and are amortized during the term of each bond. (t) Earnings per share (n) Income tax and workers’ profit sharing Basic and diluted earnings per share are computed based on the weighted average number of shares outstanding at the consolidated balance sheet date. Income tax and worker’s profit sharing are computed based on taxable income determined for tax purposes, based on income tax principles that differ from Additional shares that should be retired or issued due to the restatement of the capital stock due to the adjustment for inflation of the consolidated financial accounting principles used by the Bank. Therefore, the accounting for income tax and workers’ profit sharing in accordance with IFRS are both in accordance statements and the capitalization of retained earnings, (note 26), are deemed to be stock splits; thus, for the computation of the weighted average number of with the principles of IAS 12. shares, such shares are considered as if they had always been retired or issued, respectively. They are not considered in the computation the shares resulting from restatement that have not been retired or issued as of December 31, 2006. Deferred income tax and workers’ profit sharing reflect the effects of temporary differences between the carrying amounts of assets and liabilities for accounting purposes and the amounts determined for tax purposes. Deferred assets and liabilities are measured using the tax rates expected to be applied to As of December 31, 2006 and 2005, the Bank and its Subsidiaries do not have financial instruments with dilutive effects; therefore, basic and diluted earnings taxable income in the years in which temporary differences are expected to be recovered or settled. The measurement of deferred tax assets and deferred tax per share are the same. liabilities reflects the tax consequences that arise from the manner in which the Bank and its Subsidiaries expect to recover or eliminate the carrying amount of (u) Sale and repurchase agreements its assets and liabilities at the consolidated balance sheet date. Securities sold subject to repurchase agreements (‘Repos’) are presented as pledged assets when the transferee has the right to sell or repledge the Deferred tax assets and liabilities are recognized without taking into consideration the time in which it is estimated that temporary differences will be written collateral; the counterparty liability is included in the caption “Due to banks and correspondents”, or “Deposits and obligations”, as appropriate, in the off. Deferred assets are recognized when sufficient future tax benefits are probable for applying the deferred assets. As at the date of the balance sheet date, consolidated balance sheet. Management evaluates the non-recognized deferred assets and the balance of the recognized assets, recording deferred assets not previously recognized to The difference between sale and repurchase price is treated as interest and accrued over the life of the agreements using the effective interest method. the extent that probable future tax benefits will allow their recovery, or reducing the deferred assets to the extent that it is not likely that sufficient future tax benefits will be available to use part or all of the deferred assets recognized in the accounting records. Notes to the consolidated financial statements (continued) Notes to the consolidated financial statements (continued)

(v) Cash and cash equivalents -IFRS 8, Operating Segments (effective for accounting periods beginning on or after January 1st, 2008). Cash and cash equivalents presented in the consolidated statements of cash flows correspond to deposits with less than a three-month maturity as of the -IFRIC 7, Applying the Restatement Approach under IAS 29 (effective for annual periods beginning on or after March 1st, 2006). acquisition date, including funds deposited in central banks, overnight deposits and inter-bank funds. -IFRIC 8, Scope of IFRS 2 (effective for annual periods beginning on or after May 1st, 2006). (w) Consolidated financial statements as of December 31, 2005 When it has been necessary, the comparative amounts have been reclassified to make them comparable with the current year presentation. The main -IFRIC 9, Reassessment of Embedded Derivatives (effective for annual periods beginning on or after June 1st, 2006). reclassifications to the balances of the financial statements as of December 31, 2005, are as follows: -IFRIC 11 and IFRS 2 - Group Treasury Share Transactions (effective for annual periods beginning on or after March 1st, 2007). Reclassification in the consolidated balance sheet i In 2005, the income tax assumed by the Bank corresponding to the stock appreciation rights (SARs) amounted to S/(000) 23,821 was presented net of its related deferred asset for income tax and workers’ profit sharing in the caption “Other liabilities”. Since 2006, these concepts have been presented separately in the captions “Other liabilities” and “Other assets”, respectively. ii As of December 31, 2005, the caption “Other liabilities” included S/(000) 44,404 of operations in process related to automated-teller machines (ATMs), which have been presented net of the related cash balance.

Reclassifications in the consolidated statements of income i In 2005, the expense presented from the stock appreciation rights (SARs) amounted to S/(000)105,950, was presented as part of the “Workers’ profit 210 211 sharing” caption. In 2006, this concept has been presented in the caption “Salaries and employees benefits”.

Management considers that these reclassifications result in a better presentation of the Bank’s financial statements.

(x) New accounting pronouncements i New accounting standards issued by SBS By means of Resolution SBS N° 1737 -2006, dated December 28, 2006, the SBS has approved the “Regulation for Trading and Accounting of Derivatives for Financial Entities”. This regulation establishes accounting rules to record derivatives, which are consistent with the accounting principles established by IAS 39, Financial Instruments: Recognition and Measurement, in force in Peru. This standard is in force since January 1st, 2007 and it has a transition period for its application until March 31, 2007, and it has to be applied prospectively.

Management of the Bank and its Subsidiaries has assessed the impact of this regulation and consider that it will not have a material effect on their consolidated financial statements. iii New accounting pronouncements approved in Peru by the National Accounting Standards Board Up to date, the standards indicated in the following paragraph have been approved in Peru by the National Accounting Standards Board and its application is mandatory in Peru since January 1 st, 2006; however, because these standards only apply in a supplementary manner to the accounting rules established by the SBS in its Accounting Manual, they will not have any significant effect in the preparation of the consolidated financial statements of the Bank and its Subsidiaries.

A summary of the changes is as follow:

-IASB Improvements Project, that has reviewed the IAS 1, 2, 8, 10, 16, 17, 21, 24, 27, 28, 31, 32, 33 and 40 (revised on 2003) and the IAS 39 (revised on 2004).

-In addition, as a result of the revision of the standard related to business combination, it was issued IFRS 3 – Business Combinations, and were reviewed the IAS 36 – Assets Impairment and IAS 38 - Intangible Assets.

-Also, there have been issued the following International Financial Reporting Standards: IFRS 2- Shared-Based Payment, IFRS 3 – Business Combinations, IFRS 4 – Insurance Contract, IFRS 5 – Non-current Assets Held for Sale and Discontinued Operations, IFRS 6 – Exploration and Evaluation of Mineral Resources. iii Recently issued International Financial Reporting Standards (IFRS) but not yet effective There are several IFRS issued at international level and in force since and after January 1st, 2007; nevertheless, in Peru have no been approved yet; therefore, these standards do not have a local effective date. Likewise, due to the Bank and its Subsidiaries are regulated by the accounting rules established by the SBS, in the case that their application became in force in Peru, Management considers that will not have any effect on the net income and the net equity of the Bank and its Subsidiaries. For information purposes, the IFRS issued but not yet effective as of December 31, 2006 are as follows:

-IFRS 7 - Financial Instruments - Disclosures, effective at international level since January 1st, 2007. The objective of this IFRS is to provide disclosures in the financial statements that enable users to evaluate the significance of financial instruments for the entity’s financial position and performance; to understand the nature and extent of risk arising from financial instruments to which the entity is exposed and how the entity manages those risks. Notes to the consolidated financial statements (continued) Notes to the consolidated financial statements (continued)

4 Foreign currency transactions and exposure to exchange risk In prior years, the devaluation (revaluation) of Peruvian currency with respect to the US Dollar and inflation (deflation) in accordance with the National Transactions in foreign currency are completed using exchange rates prevailing in the market. Wholesale Price Index published by the Instituto Nacional de Estadística e Informática - INEI (National Institute of Statistics and Informatics) in shown as follows: As of December 31, 2006, the weighted average exchange rate in the market published by SBS for transactions in US Dollars was S/3.194 for buying and S/3.197 for selling (S/3.429 and S/3.431 as of December 31, 2005, respectively). As of December 31, 2006, the exchange rate established by SBS to record assets and liabilities in foreign currencies was S/3.196 for each US Dollar and S/0.403 for each Bolivian Peso (S/3.430 and S/0.411, as of December Devaluation 31, 2005, respectively). A detail of the Bank and its Subsidiaries’ foreign currency assets and liabilities is shown below: Year (revaluation) Inflation

2002 2.3 1.7 2006 2005 2003 (1.5) 2.0 2004 (5.2) 4.9 U.S. Bolivian U.S. Bolivian 2005 4.5 3.6 Dollars Peso Dollars Peso 2006 (6.8) 1.1

US$(000) US$(000) US$(000) US$(000)

Assets Cash and due from banks 2,096,422 69,338 2,180,289 49,754 212 213 5 Cash and due from banks Trading, available-for-sale, and held-to-maturity securities, net 378,994 40,564 631,361 9,080 As of December 31, 2006, cash and due from banks include approximately US$1,433.2 million and S/773.0 million (US$1,228.9 million and S/466.0 million Loans, net 4,129,605 61,120 3,618,507 25,894 as of December 31, 2005) which represent the legal reserve that the Bank and its Subsidiaries must maintain related to its obligations with the public. These Other assets 94,909 4,584 98,907 4,277 funds are deposited in the vaults of the Bank and its Subsidiaries and in the Central Reserve Bank of Peru – BCRP, and are within the limits established by prevailing legislation. Additionally, as of December 31, 2006, cash and due from banks includes two overnight operations with the Central Reserve Bank of 6,699,930 175,606 6,529,064 89,005 Peru – BCRP amounted to S/120.0 million and US$70.0 million, equivalent to S/223.7 million (an operation amounted to US$450.0 million, equivalent to Liabilities S/1,543.5 million, as of December 31, 2005), these operations have earned interests with an effective and nominal annual rates of 3.75 and 4.97 percent, Deposits and obligations (5,581,861) (138,435) (4,903,593) (89,380) respectively, and had a maturity of 4 days (3.97 percent of annual nominal rate and maturity of 3 days as of December 31, 2005). Due to banks, correspondents and interbank funds (453,354) (2,962) (434,301) (1,545) Bonds and subordinated notes issued (354,099) - (298,610) - Reserve funds kept in BCRP do not earn interest, except for the part of the demandable reserve in foreign currency that exceeds the minimum legal reserve. Other liabilities (201,863) (8,863) (197,665) (8,685) As of December 31, 2006, this excess amounts to approximately US$1,068.9 million, equivalent to approximately S/3,416.2 million, and earns interest in US Dollars at an annual rate of 2.67 percent (US$975.8 million equivalent to approximately S/3,346.9 million, and earned interest in US Dollars at an annual rate (6,591,177) (150,260) (5,834,169) (99,610) of 2.25 percent as of December 31, 2005).

Derivative operations – net short position 30,970 - (477,835) - Deposits in local and foreign banks correspond mainly to balances in Peruvian currency, Bolivian Pesos and US Dollars, as well as minimal amounts maintained in other currencies. All deposits are unrestricted, and bear interest at market rates. As of December 31, 2006 and 2005, the Bank and its Net asset (liability) position 139,723 25,346 217,060 (10,605) Subsidiaries do not have significant deposits in any specific financial institution.

The derivatives net short position as of December 31, 2006, corresponds to foreign currency forward purchase and sale operations for approximately US$592.1 million and US$561.1 million equivalent to S/1,892.3 and S/1,793.3 million, respectively, (US$343.8 million and US$821.7 million equivalent to S/1,179.6 and S/2,818.4 million, respectively as of December 31, 2005), note 19(d).

As of December 31, 2006, the Bank and its Subsidiaries have contingent operations in foreign currency for approximately US$2,344.1 million, equivalent to approximately S/7,491.7 million (approximately US$2,138.8 million, equivalent to approximately S/7,336.2 million, as of December 31, 2005,), note 19. Notes to the consolidated financial statements (continued) Notes to the consolidated financial statements (continued)

6 Trading, available-for-sale and held-to-maturity investments, net entered into BCRP- Repo transactions in Peruvian currency with its clients using these securities for approximately S/535.7 million (approximately S/2,032.2 (a) This item is made up as follows: million as of December 2005). Such operations accrued effective annual interest rates that range between 4.39 and 5.45 percent (3.55 and 6.23 percent as of December 2005 with maturity between January 2007 and June 2007 (between January 2006 and February 2008 as of December 31, 2005).

(d) As of December 31, 2006, includes mainly US$29.7 million, equivalent to S/94.9 million, corresponding to securities issued by US Government 2006 2005 - Sponsored Enterprises and US$50.6 million, equivalent to S/161.6 million, corresponding to instruments issued by the Colombian Government S/(000) S/(000) (approximately US$55.1 and US$12.8 million, equivalent to S/189.0 and S/43.9 million, respectively, as of December 31, 2005). Such bonds have maturities between February 2007 and January 2017, and accrue interest at annual rates that ranges between 3.01 and 5.27 percent (between 3.68 and 6.97 Trading securities percent as of December 31, 2005). Listed equity securities 88,316 19,520 Corporate and leasing bonds 20,623 29,555 (e) As of December 31, 2006 and 2005, the Bank holds corporate bonds for the amount of S/243.3 and S/261.1 million, respectively, with maturities Mutual funds participation 7,221 2,248 between January 2027 and May 2030 as of December 31, 2006 (between January 2006 and May 2030 as of December 31, 2005). As of December 31, Sovereign bonds – Republic of Peru (b) - 18,390 2006, these bonds accrue interests at annual effective interest rates that range between 2.91 and 6.31 percent for bonds in Peruvian currency (between 2.92 Other 5,516 2,267 and 7.65 percent as of December 31, 2005) and between 1.12 and 7.95 annual percent for bonds in US Dollars (between 3.12 and 6.27 annual percent as 121,676 71,980 of December 31, 2005).

Investments available-for-sale 214 215 As of December 31, 2006 and 2005, the Bank also holds leasing bonds issued by local financial entities in US Dollars for the approximate amount of BCRP negotiable certificates of deposit (c) 4,080,213 3,938,559 S/2.2 and S/1.9 million, respectively, with maturities between January 2007 and May 2008 as of December, 2006 (January 2006 and January 2007 as Public Treasury bonds of foreign governments (d) 272,521 247,502 of December 2005). Such bonds earn interest at annual effective rates that range between 4.24 and 6.36 percent (between 4.06 and 4.24 percent as of Sovereign bonds – Republic of Peru (b) 262,551 202,539 December 31, 2005). Corporate and leasing bonds (e) 245,528 262,987 Bonds of international financial entities (f) 206,392 376,054 (f) As of December 31, 2006, bonds of international financial entities comprise mainly USS$55.1 (equivalent to S/176.4 million) corresponding to debt Participation in Bolivia’s RAL fund (g) 163,648 192,332 instruments issued in US Dollars by Corporación Andina de Fomento - CAF (approximately US$82.7 and US$18.8 million, issued by “Corporación Andina de Peruvian treasury bonds (b) 157,637 - Fomento - CAF” and by “Fondo Latinoamericano de Reservas - FLAR” equivalent to S/283.7 and S/64.5 million, respectively, as of December 31, 2005). As Indexed certificates – Citigroup (h) 150,157 - of December 31, 2006, such bonds have maturities between January 2007 and July 2009 (between February 2006 and July 2009 as of December 31, Mutual funds participation 121,397 96,767 2005). Annual interest rates range between 4.19 percent and 5.91 percent (between 4.08 percent and 6.26 percent as of December 31, 2005). Treasury notes from other countries 90,778 - 34,499 40,111 Securitization instruments As of December 31, 2006, the Bank has entered into Repo transactions in U.S. Dollars with its clients using these securities for approximately S/128.0 million. Listed equity securities 10,495 26,530 These operations accrue interests at effective rates between 5.45 and 5.51 percent and with maturity in January 2007. Non - listed equity securities 5,193 8,706 Negotiable certificates of deposit - 26,709 (g) The participation quotas in the Fund “Requirement of Cash Assets” (RAL for its Spanish denomination) stated at Bolivian Pesos, comprises investments made 619 5,332 Other by Banco de Crédito de Bolivia in the Central Bank of Bolivia as a collateral for the deposits maintained with the public. Such fund has restrictions for its use and 5,801,628 5,424,128 it is required for all the banks established in Bolivia. The fund accrues interest at an average annual rate of 5.6 percent (4.3 percent as of December 31, 2005).

Held-to-maturity securities 69,897 72,877 (h) During 2006, as previously coordinated and authorized for the SBS, the Bank signed a contract with Citigroup Global Markets Holdings Inc., Citigroup Capital Limited and Citigroup Capital Market Inc. (hereinafter “Citigroup”), with the purpose of acquire indexed certificates to the performance of the shares 5,993,201 5,568,985 of Credicorp Ltd. and implementing an economic hedge to offset the volatility generated by the Bank’s liability that result from the stock appreciation rights Allowance for investments available-for-sale and held-to-maturity (SARs) of Credicorp’s shares, note 17, granted to its employees. This transaction consists of the purchase of up to 1,500,000 certificates indexed to the securities (i) (8,966) (10,195) performance of the shares of Credicorp Ltd. (BAP), in the form of “warrants”, issued by Citigroup, which are equivalent to the same number of shares of Credicorp Ltd. These certificates have a maturity of 5 years but can be settled at anytime before its maturity, partially or totally. Balance of trading, available-for-sale and held-to-maturity securities, net 5,984,235 5,558,790 As of December 31, 2006, the Bank has acquired1,212,023 certificates at a total cost of US$47.0 million, equivalent to S/150.2 million (US$38.7, per

Accrued interest of investments available-for-sale and held-to-maturity 24,266 14,676 certificate on average); which, in accordance to SBS rules, has been recorded as investments available-for-sale. Likewise, as of that date, the estimated market value of the indexed certificates amount to US$ 49.6 million, equivalent to S/158.6 million. Total trading, available-for-sale and held-to-maturity investments, net 6,008,501 5,573,466

(b) The Sovereign bonds – Republic of Peru are issued in Peruvian Currency by the Economic and Financial Ministry. As of December 31, 2006, these bonds accrue interest at annual rates that range between 4.38 and 7.21 percent (between 4.37 and 5.96 percent as of December 31, 2005), with maturities between February 2007 and August 2026 (between August 2006 and August 2017, as of December 31, 2005).

The Peruvian Treasury bonds correspond to global bonds issued in foreign currency by the Peruvian Government. As of December 31, 2006, these bonds accrued interest at annual effective interest rates that range between 5.06 and 8.04 per cent with maturity between January 2008 and May 2018.

(c) BCRP negotiable certificates of deposit are freely negotiable financial instruments issued at discounts, denominated in Peruvian currency and with current maturities. These certificates have been acquired in public auctions and negotiated in the Peruvian secondary market. As of December 31, 2006, annual interest rates in Peruvian currency range between 4.39 and 6.35 percent (between 3.75 and 6.35 percent as of December 31, 2005), with maturities between January 2007 and December 2009 (between February 2006 and June 2008 as of December 31, 2005). As of December 31, 2006, the Bank has Notes to the consolidated financial statements (continued) Notes to the consolidated financial statements (continued)

(i) The movement in the allowance for investment in trading and held-to-maturity securities fluctuation is shown below: 7 Loans, net (a) This item is made up as follows:

2006 2005 2006 2005 S/(000) S/(000) S/(000) S/(000) Balance as of January 1st 10,195 10,529 Provision of the year, note 23 5,766 314 Direct loans Recoveries (949) (169) Loans 13,273,575 11,728,101 Used for sale (6,046) (479) Leasing receivables 2,201,037 1,967,541 Credit cards 1,401,855 1,021,018 Balance as of December 31 8,966 10,195 Discounted notes 819,883 731,386 Factoring receivables 284,991 301,007 Advances and overdrafts 269,100 168,931 The allowance recorded by the Bank and its Subsidiaries corresponds to specific investments for which Management estimates other than temporary Refinanced and restructured loans 397,689 595,403 impairment. As of December 31, 2006 and 2005, there are no additional allowances to be recorded that would affect the net equity of the Bank and its Past due and under legal collection loans 240,438 321,487 Subsidiaries as to such date. 216 217 18,888,568 16,834,874 (j) As of December 31, 2006 and 2005, the reconciliation between the book value and the market value of available-for-sale and held-to-maturity securities is as follows: Add (less) Accrued interest from standing credits 157,019 136,494 Deferred interest on discounted notes and leasing receivables (297,290) (269,238) 2006 2005 Allowance for credit losses (g) (603,572) (672,146)

S/(000) S/(000) Total direct loans 18,144,725 16,029,984

Book value 5,871,525 5,497,005 Indirect loans, note 19(a) 3,887,738 3,467,076 Unrealized gains 52,046 32,169 Unrealized losses (5,776) (13,393) (b) As of December 31, 2006 and 2005, 51 percent of the direct loan portfolio was concentrated in 443 and 313 clients, respectively. Estimated market value 5,917,795 5,515,781 (c) As indicated in note 2, in January 2005, the Bank acquired the loan portfolio of Peruvian clients abroad maintained in the Peruvian Branch of Bank Boston N.A. for approximately S/1,152.1 million. The acquired loan portfolios are comprised principally of corporate loans, mortgage loans and financial lease operations. The Management has estimated the market value of its available-for-sale securities using market price quotations available in the market or, if a price is not available, market value is estimated by discounting the expected future cash flows at an interest rate that reflects the risk classification of the financial instrument.

(k) As of December 31, 2006 and 2005, the balance of investment in trading, available-for-sale and held-to-maturity securities classified by maturity date is as follows:

2006 2005

S/(000) S/(000)

Up to 3 months 1,968,711 1,564,064 From 3 months to 1 year 2,547,742 2,926,671 From 1 to 3 years 570,591 577,375 From 3 to 5 years 323,184 135,884 More than 5 years 478,969 310,235 Without maturity (shares) 104,004 54,756

Total 5,993,201 5,568,985 Notes to the consolidated financial statements (continued) Notes to the consolidated financial statements (continued)

(d) As of December 31, 2006 and 2005, the Bank’s loan portfolio is distributed among the following economic sectors: (f) Financial entities in Peru should constitute their allowance for credit losses based on the aforementioned risk classification and using the following percentages, which differ depending upon if the loans are: Loans Without Guarantees (LWG), Loans With Preferred Guarantees (LWPG) or Loans With Readily Preferred Guarantees (LWRPG) or Loans with Highly Liquid Preferred Guarantees (LWHLPG): Sector 2006 2005

S/(000) % S/(000) % Risk category LWG LWPG LWRPG LWHLPG Manufacturing 5,077,126 26.9 4,768,884 28.3 % % % % Mortgage loans 2,824,420 15.0 2,631,980 15.6 Commerce 2,138,017 11.3 2,075,883 12.3 Normal 1.00 1.00 1.00 1.00 Consumer loans 1,717,971 9.1 1,276,487 7.6 Potential problems 5.00 2.50 1.25 1.00 Micro-business loans 980,753 5.2 768,739 4.6 Substandard 25.00 12.50 6.25 1.00 Mining 926,835 4.9 761,027 4.5 Doubtful 60.00 30.00 15.00 1.00 Electricity, gas and water 819,874 4.3 658,843 3.9 Loss 100.00 60.00 30.00 1.00 Communications, storage and transportation 801,698 4.2 687,585 4.1 Leaseholds and real estate activities 730,914 3.9 730,499 4.3 (g) The movement in the allowance for credit losses (direct and indirect loans) is shown below: Financial services 703,774 3.8 279,797 1.7 218 219 Community services 561,100 3.0 617,349 3.7 Fishing 473,399 2.5 383,776 2.3 2006 2005 Agriculture 440,613 2.3 490,077 2.9 Education, health and other services 233,359 1.2 233,758 1.4 S/(000) S/(000) Construction 214,038 1.1 212,324 1.3 Other 244,677 1.3 257,866 1.5 Balance as of January 1st 739,933 852,184 Net provision, note 21 130,404 86,877 Total 18,888,568 100.0 16,834,874 100.0 Allowance for purchase of loan portfolio, note 2 - 26,413 Loan portfolio sold and written-off (h) (153,142) (259,371) Exchange rate difference (48,719) 33,830

(e) As of December 31, 2006 and 2005, the credit risk classification of the Bank and its Subsidiaries’ loan portfolio, according to SBS standards, is as follows: Balance as of December 31(*) 668,476 739,933

(*) As of December 31, 2006, the movement in the allowance for credit losses includes direct and indirect 2006 2005 credits for approximately S/603.6 and S/64.9, respectively (approximately S/672.1 and S/67.8, respectively, as of December 31, 2005). The allowance for indirect credits is shown in the “Other liabilities” caption of the Risk category consolidated balance sheet, note 10(a). Direct loans Indirect loans Total Direct loans Indirect loans Total In Management’s opinion, the allowance for credit losses recorded as of December 31, 2006 and 2005 has been established in accordance with SBS S/(000) % S/(000) % S/(000) % S/(000) % S/(000) % S/(000) % regulations in force as of those dates, note 3(e). Normal 17,029,781 0.2 3,699,927 5.2 20,729,708 1.0 14,448,984 5.8 3,158,559 1.1 17,607,543 6.7 Potential problems 1,090,434 5.7 111,996 2.9 1,202,430 5.3 1,363,037 8.1 238,688 6.9 1,601,725 7.9 (h) In 2006, the Bank and its Subsidiaries sold fully provisioned portfolio of past due loans to an affiliate for approximately S/29.9 million (two affiliates for Substandard 199,761 1.1 58,797 1.5 258,558 1.1 284,203 1.7 31,844 0.9 316,047 1.6 approximately S/90.4 million in 2005). The sale price generated gain of approximately S/2.7 million (approximately S/7.4 million in 2005). In addition, in Doubtful 385,578 2.0 11,855 0.3 397,433 1.8 498,290 3.0 16,100 0.5 514,390 2.5 2006, the Bank and its Subsidiaries made a write-off of a fully provided for portfolio for approximately S/123.2 million (approximately S/169.0 million in 2005). Loss 183,014 1.0 5,163 0.1 188,177 0.8 240,360 1.4 21,885 0.6 262,245 1.3 (i) The loan portfolio is collateralized with guarantees received from clients, which are a principally in the form of mortgages, stand-by letters, financial Total 18,888,568 100.0 3,887,738 100.0 22,776,306 100.0 16,834,874 100.0 3,467,076 100.0 20,301,950 100.0 instruments, and industrial and commercial pledges.

(j) Interest accrued on the loan portfolio is determined considering current interest rates prevailing in the market. Notes to the consolidated financial statements (continued) Notes to the consolidated financial statements (continued)

(k) As of December 31, 2006 and 2005, the gross direct loan portfolio has the following maturity schedule: 8 Permanent investments, net (a) This item is made up as follows:

2006 2005

S/(000) S/(000) 2006 2005

Outstanding loans Estimated Estimated Up to 1 month 5,363,666 3,628,261 Book Market Unreali- market Book Market Unreali- market Up to 3 months 2,602,690 2,655,687 value Provision value zed gains value value Provision value zed gains value From 3 months to 1 year 3,823,887 3,695,305 S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) From 1 to 3 years 2,638,902 2,616,517 From 3 to 5 years 1,424,111 1,548,153 Listed equity More than 5 years 2,794,874 2,369,464 securities (b) 82,320 - 82,320 192,473 274,793 79,397 - 79,397 167,405 246,802 Investments in Past due loans non financial Up to 4 months 66,010 12,498 institutions (c) - - - - - 13,099 (10,163) 2,936 659 3,595 More than 4 months 64,160 146,197 220 221 Investments Loans under legal collection 110,268 162,792 in financial institutions (d) 18,196 (1,696) 16,500 - 16,500 17,869 (1,367) 16,502 - 16,502 Total 18,888,568 16,834,874 100,516 (1,696) 98,820 192,473 291,293 110,365 (11,530) 98,835 168,064 266,899

Allowance for impairment of permanent investments (1,696) (11,530)

Balance of permanent investments, net 98,820 98,835 Accrued interest from permanent investments - -

Total permanent investments, net 98,820 98,835

(b) This caption comprises 2.93 percent participation in shares maintained by Inversiones BCP Ltda. on Banco de Crédito e Inversiones de Chile – BCI Chile. As of December 31, 2006 and 2005, the market price of each share according to its quotation in the Santiago’s stock exchange is equivalent to approximately US$29.66 and US$24.95, respectively. The gains obtained when this investment will be sold are subject to the applicable taxes in Chile and Peru.

(c) This caption comprised 13.78 percent of BCP participation in Peru Privatization Fund – PPF, which was sold on October 2006 with a market value of approximately S/3.2 million, generating an earning of approximately S/0.4 million, which is recorded in the caption “Net gain (loss) on securities” of the consolidated statements of income.

(d) As of December 31, 2006, this caption principally comprises S/6.2 and S/3.4 million corresponding to 35.66 and 27.27 percent of the participation of Banco de Crédito in Visanet del Perú S.A.C, and Corporación de Servicios de Información – Infocorp S.A respectively (as of December 31, 2005, approximately for S/5,8, S/4.0 and S/2.7 million which represent the 35.32, 15.77 and 28.27 percent of the participation the Bank in Visanet del Perú S.A.C, Edificaciones Macrocomercio S.A. (sold during 2006 to Grupo Crédito S.A. a related party) and Corporación de Servicios de Información – Infocorp S.A. respectively. Notes to the consolidated financial statements (continued) Notes to the consolidated financial statements (continued)

9 Property, furniture and equipment, net 10 Other assets and other liabilities (a) The movement of property, furniture and equipment and accumulated depreciation for the years ended 2006 and 2005 is as follows: (a) These items are made up as follows:

Buildings 2006 2005 and other Furniture Equipment Work in pro- construc- Installa- and Computer and gress and in S/(000) S/(000) Land tions tions fixtures hardware vehicles transit units 2006 2005 Other assets S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) Operations in process (b) 161,613 133,453 Deferred income tax and workers’ profit sharing, note 14(a) 137,218 123,250 Cost Accounts receivable 113,357 111,867 63,743 621,554 248,382 184,489 53,716 7,582 1,708,758 1,842,490 Balance as of January 1st 529,292 Assets seized, net (c) 86,072 91,644 - 832 19,524 5,452 11,146 12,732 103,174 108,799 Additions 53,488 Intangible assets, net (d) 84,506 59,792 Provision for buildings Derivatives assets, note 19(d) 51,259 20,115 ------(15,146) impairment - VAT credits, net 41,594 48,204 Recovery of provision for Deferred expenses 28,749 36,514 - 15,146 - - - - 15,146 - buildings impairment - 222 223 Income tax prepayments, net 28,058 27,217 (8,382) (53,561) 2,163 (2,326) (1,111) (9,334) (80,805) (227,385) Retirements and transfers (8,254) Goodwill (e) 6,860 12,740 Trustee in warranty - 68,600 Balance as of December 31 55,361 583,971 270,069 187,615 574,526 63,751 10,980 1,746,273 1,708,758 Other 18,005 17,215 Accumulated depreciation Total 757,291 750,611 Balance as of January 1 st - 302,023 153,961 146,114 437,494 23,317 - 1,062,909 1,143,948 Depreciation of the year - 18,958 20,594 10,652 40,733 4,908 - 95,845 97,343 Other liabilities Retirements and transfers - (24,808) (4,093) (973) (7,166) (1,216) - (38,256) (178,382) Payroll taxes, salaries and other personnel expenses payable 270,061 207,627 Accounts payable 164,302 124,580 Balance as of December 31 - 296,173 170,462 155,793 471,061 27,009 - 1,120,498 1,062,909 Operations in process (b) 117,631 114,337 Net book value 55,361 287,798 99,607 31,822 103,465 36,742 10,980 625,775 645,849 Provision for sundry risks (f) 105,028 97,909 Transfers received in process (g) 81,702 - Allowance for indirect credit losses, note 7(g) 64,904 67,787 (b) Banks in Peru are not allowed to pledge their fixed assets. Derivatives liabilities, note 19(d) 25,776 27,884 Deferred income tax and workers’ profit sharing, note 14(a) 14,997 19,365 (c) As of December 31, 2006, the Bank has property available for sale for approximately S/23.4 million, net of accumulated depreciation which amounts to Allowance for regulation changes of assets seized (c) 11,022 39,563 approximately S/16.1 million, (approximately S/40.7 million net of accumulated depreciation which amounts to approximately S/24.2 as of December 31, Minority interest 9,176 9,197 2005). Deposit Insurance Fund 9,001 8,575 Contributions, net 4,154 106,978 (d) Management periodically review the assets´ residual value, the useful life and the selected depreciation method to ensure that are consistent with the Total 877,754 823,802 economic benefits and life expectations for use of property, furniture and equipment items. In Management’s opinion, there is no evidence of impairment of property, furniture and equipment as of December 31, 2006 and 2005. (b) Operations in process include deposits received, loans disbursed and/or collected, funds transferred and other similar types of transactions, which (e) As of December, 31 2006, the Bank and its Subsidiaries have sold part of its land, buildings and other constructions for approximately S/37.6 million, are realized at the end of the month and only reclassified to their final balance sheets accounts until the beginning days of the following month. These which had a net cost of S/21.9 million (S/45.0 and S/35.1 million, respectively, as of December 31, 2005). Some of these sales were carried out to related transactions do not affect the Bank and its Subsidiaries´ net income. companies for approximately S/35.2 million as of December 31, 2006 (S/17.0 million as of December 31, 2005). Notes to the consolidated financial statements (continued) Notes to the consolidated financial statements (continued)

(c) As of December 31, 2006 and 2005, this caption includes land, buildings, machinery and equipment received in payment of loans. The movement for (d) The movement of intangible assets for the years ended December 31, 2006 and 2005, is as follows: the caption, as of December 31, 2006 and 2005, is summarized as follows:

Other deve- Description Software lopments 2006 2005 2006 2005 S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) Cost Cost Balance as of January 1st 57,155 90,851 148,006 270,979 Balance as of January 1st 254,439 332,696 Additions 21,197 27,914 49,111 25,283 Additions 86,526 55,503 Retirements (*) - (5,512) (5,512) (148,256) Retirements (127,299) (133,760) Balance as of December 31 78,352 113,253 191,605 148,006 Balance as of December 31 213,666 254,439 Accumulated amortization Provision Balance as of January 1st 29,612 58,602 88,214 210,335 Balance as of January 1st 162,795 236,929 Amortization of the year 10,017 14,805 24,822 26,130 Provision of the year 9,668 50,469 Retirements (*) - (5,937) (5,937) (148,251) Reversal of provision for changes in regulations (*) 27,770 (39,563) 224 225 Provision used for sales (72,639) (85,040) Balance as of December 31 39,629 67,470 107,099 88,214

Balance as of December 31 127,594 162,795 Net book value 38,723 45,783 84,506 59,792

Net book value 86,072 91,644 (*) In September 2005, the Bank wrote off certain intangible assets fully amortized and out of use for S/145.1 million. (*) As explained in note 3(j), in October 2005, the procedure to compute and record the provisions for assets seized was modified. BCP has recalculated such provisions according to new regulations, estimating an excess (e) Corresponds to the difference between the estimated fair market value of the net assets acquired from the minority shareholders of Solución Financiera in its provision for approximately S/43.8 million amount transferred to caption “Other liabilities”. According to de Crédito del Perú S.A. (subsidiary of the Bank note 1) and the price paid for such assets on March 2003. As of December 31, 2006, the original purchased SBS regulations, this excess can not be reversed and must be used to cover future losses in the value of other assets. As of December 31, 2006, the Bank has been using such excess to provide the additional requirements value of goodwill amounts to approximately S/ 29.4 million and the accumulated amortization to S/22.6 million (S/29.4 and S/16.7 million, respectively as of of provisions for assets seized, using approximately S/28.6 million from such provision (S/4.2 million as of December 31, 2005). December 31, 2005) and has transferred the remaining amount of S/11.0 million under the caption “Other (f) As of December 31, 2006 and 2005, comprise the allowance related to the adjustments to the market value of the acquired liabilities in the merge with liabilities” (S/39.6 million as of December 2005). Banco Santander Central Hispano - Perú (in 2002) and Solución Financiera de Crédito del Perú (in 2004), the allowance for the estimated losses in the legal claims against the Bank and other similar obligations that have been recorded based on Management’s and its legal advisors’ best estimates. As of December 31, 2006, the net book value mainly includes land and buildings for S/14.1 and S/39.1 million, respectively (S/23.8 and S/72.3 million as of December 31, 2005, respectively). (g) Correspond to cash transfers received from other local banks to customers of BCP that were not processed during the last day of the year 2006 due to problems in the BCRP system used by the banks for these transactions. Such operations were regularized during the first days of January 2007, without any In 2006 and 2005, the Bank and its Subsidiaries have sold assets seized for approximately S/95.7 and S/92.7 million, respectively, with a net gain of effect on the Bank’s results. approximately S/41.1 million and S/44.0 million, respectively, which is included in the caption “Other not financial Income” of the consolidated statements of income, note 24.

In the Management’s opinion, the provision for assets seized as of December 31, 2006 and 2005, is according to the SBS Regulations in force as of such dates. Notes to the consolidated financial statements (continued) Notes to the consolidated financial statements (continued)

11 Deposits and obligations (f) The balance of time deposits classified by maturity is as follows: (a) This item is made up as follows:

2006 2005

2006 2005 S/(000) S/(000)

S/(000) S/(000) Up to 3 months 5,660,207 4,456,143 From 3 months to 1 year 1,744,795 1,382,249 Non-interest bearing deposits and obligations - From 1 to 3 years 767,333 376,926 In Peru 5,009,007 4,307,308 From 3 to 5 year 616,205 543,343 In other countries 1,212,705 1,434,309 More than 5 years 224,792 473,960 6,221,712 5,741,617 Total 9,013,332 7,232,621 Interest bearing deposits and obligations - In Peru 16,826,188 13,820,194 In other countries 3,544,013 3,256,435 12 Due to banks and correspondents (a) This item is made up as follows: 20,370,201 17,076,629 226 227

26,591,913 22,818,246 2006 2005 Interest payable 112,440 81,279 S/(000) S/(000) Total 26,704,353 22,899,525 By type Promotional credit lines (b) 568,569 727,615 Due to banks and correspondents with local and foreign financial The Bank and its Subsidiaries have established a policy to remunerate demand deposits and savings accounts according to sliding interest rate scale, based on institutions (c) 862,496 669,287 the average balance maintained in those accounts. Additionally, according to such policy, it was established that the accounts having balances that were lower BCRP - Repo transactions (d) - 1,751,333 than a specified amount, for each type of account, do not bear interest. 1,431,065 3,148,235 (b) As of December 31, 2006 and 2005, the balance of deposits and obligations by type of transactions is made up as follows: Interest payable 12,810 5,662

Total 1,443,875 3,153,897 2006 2005 By term S/(000) S/(000) Short -term debt 926,749 2,657,537 Long-term debt 504,316 490,698 Time deposits 9,013,332 7,232,621 Demand deposits 7,925,903 7,251,273 Total 1,431,065 3,148,235 Saving accounts 6,238,889 5,681,697 Severance indemnities deposits 2,476,985 2,245,932 Repurchase agreements with clients 729,215 247,646 (b) Promotional credit lines represent loans granted to BCP by Corporación Financiera de Desarrollo (COFIDE) to promote the development of Peru, have Bank certificates in foreign currency 207,589 159,077 maturities between June of 2007 and December of 2021 and their interest rates fluctuated between 5.65 and 7.90 percent annual (between January as Total 26,591,913 22,818,246 2006 and December 2021 and their interest effective rate fluctuated between 4.41 and 7.25 percent annual as of December 31, 2005). As of December 31, 2006 and 2005, these credit lines are secured by a loan portfolio amounting to US$177.9 million and US$212.1 million, equivalent approximately to S/568.6 million and S/727.6 million, respectively. These lines include covenants specifying the use of the funds, financial conditions that the borrower must maintain (c) Interest rates applied to different deposits and obligations accounts are determined by the Bank and its Subsidiaries considering interest rates prevailing in and other administrative matters. the local markets. (c) As of December 31, 2006 and 2005, due to banks and correspondents with local and foreign financial institutions, comprise mainly loans to fund foreign (d) As of December 31, 2006, time deposits and bank certificates above US$100,000 amount to approximately to S/10,698.0 and S/114.7 million, trade operations and working capital, granted by 8 foreign entities (5 as of December 31, 2005); of which 7 represent 42 percent of the balance as of respectively, equivalent to approximately US$3,347.3 and US$35.9 million, respectively (S/2,652.1 and S/27.2 million respectively equivalent to approximately December 31, 2006 (1 represent 51 percent of the balance as of December 31, 2005). Due to foreign financial institutions bear interests in accordance with US$773.2 and US$7.9 million, respectively, as of December 31, 2005). domestic and international market rates and do not have specific guarantees. Certain loan agreements include standard clauses requiring the Bank to comply (e) As of December 31, 2006 and 2005, approximately S/8,562.9 million and S/7,448.1 million of the total deposits and obligations, respectively, are with financial ratios, use of funds criteria and other administrative matters. In Management’s opinion, such standard clauses do not limit the normal operation covered by the “Fondo de Seguro de Depósitos” (Deposit Insurance Fund). of the Bank and are substantially fulfilled in the application of standard international banking practices.

(d) As of December 31, 2005, BCP had BCRP - Repo transactions with the Peruvian Central Bank (BCRP), which earned annual interest rates that fluctuated between 3.23 and 3.32 percent, with 3 day maturities. Notes to the consolidated financial statements (continued) Notes to the consolidated financial statements (continued)

(e) As of December 31, 2006 and 2005, the balance of this caption, classified by maturity, is as follows: i During 2006, the Bank issued corporate bonds for S/151.0 million (S/120.0 million during 2005) and redeemed bonds for S/168.7 million (S/82.3 million during 2005); representing a net decrease of S/17.7 million (net decrease of S/37.7 million during 2005). The detail of the new issuances is the following:

2006 2005 Issue 2006 Amount Currency Maturity S/(000) S/(000) S/(000) Up to 3 months 762,964 2,612,017 From 3 months to 1 year 163,785 45,520 Sixth issuance - Series B 20,000 Nuevos Soles 08/08/2008 From 1 to 3 years 68,970 99,428 Sixth issuance - Series A 20,000 Nuevos Soles 27/02/2008 From 3 to 5 years 70,315 69,893 Eight issuance - Series B 35,000 Nuevos Soles 06/09/2010 More than 5 years 365,031 321,377 Eight issuance - Series C 25,000 Nuevos Soles 21/09/2010 Eight issuance - Series D 16,000 Nuevos Soles 11/10/2010 Total 1,431,065 3,148,235 Ninth issuance - Series B 25,000 Nuevos Soles 03/03/2011 Tenth issuance - Series B 10,000 Nuevos Soles 24/03/2013

13 Bonds and subordinated notes issued 151,000 (a) This item is made up as follows: 228 229

Issue 2005 Amount Currency Maturity Weighted ave- S/(000) rage annual interest rate Third issuance - Series B 30,000 Nuevos Soles 29/05/2007 Seventh issuance - Series A 15,000 Nuevos Soles 21/11/2009 2006 2005 Maturity 2006 2005 Seventh issuance - Series B 20,000 Nuevos Soles 21/11/2012 Eight issuance - Series A 20,000 Nuevos Soles 24/11/2008 % % S/(000) S/(000) Ninth issuance - Series A 20,000 Nuevos Soles 24/11/2010 Bonds Tenth issuance - Series A 15,000 Nuevos Soles 06/12/2008 Corporate bonds (i) 6.23 5.89 Between January 2007 and 301,000 318,692 120,000 March 2013 Leasing bonds (ii) Between January 2007 and and (iii) 5.53 5.59 November 2010 600,300 779,183 ii During 2005, Crédito Leasing S.A., a subsidiary of the Bank, issued the Third Program of Leasing Bonds Series “A” and “B” amount to US$15.0 million and Mortgage bonds (iii) 7.69 7.70 Between January 2007 and US$25.0 million (equivalent to approximately S/51.4 million and S/85.8 million, respectively), with maturities between February 2007 and July 2008 and April 2012 80,429 99,470 accrue interest at an annual rate of 4.34 percent. Subordinated bonds 6.82 6.83 Between August 2007 and October 2013 325,264 331,179 iii Leasing and mortgages bonds are collateralized by the fixed assets financed by the Group with these resources. Mortgage certificates 326 369 iv On August, 2006, the Board or Directors of BCP approved the issuance of subordinated debt up to US$175 million, with the aim to meet the requirement 1,307,319 1,528,893 of the regulatory capital of the Bank. The issuance will be realized in parts in 2006 and 2007 on the international and local market. Subordinated notes In November 2006, BCP through its Panama branch, issued Subordinated Negotiable Certificates Notes amounted to US$120 million on the international Subordinated market with maturity on 2021. These certificates accrued a fixed annual interest rate of 6.95 percent for the first 10 years (until November 2016), with negotiable certificates notes (iv) 383,520 - payment each six months. After the first 10 years, the interest rate is change to a variable interest rate, established as Libor plus 2.79 percent, with quarterly payments. At the end of the first 10 years, the Bank can redeem 100 percent of the debt, without penalties. This subordinated debt has certain financial and 383,520 - operating covenants which in Management’s opinion, the Bank is in compliance at the consolidated balance sheet date.

1,690,839 1,528,893

Interest payable 13,706 12,494

Total 1,704,545 1,541,387 Notes to the consolidated financial statements (continued) Notes to the consolidated financial statements (continued)

(b) The issued bonds balance classified by maturity is as follows: Consolidated statements Workers’ Income tax of income profit sharing

2006 2005 2006 2005 2006 2005

S/(000) S/(000) S/(000) S/(000) S/(000) S/(000)

Up to 3 months 64,186 65,092 Current 38,419 42,851 251,246 260,031 From 3 months to 1 year 200,478 241,673 Deferred (2,915) (7,222) (15,421) (40,185) From 1 to 3 years 589,996 737,457 From 3 to 5 years 361,930 277,951 35,504 35,629 235,825 219,846 More than 5 years 474,249 206,720

Total 1,690,839 1,528,893 (c) Reconciliation of effective tax rate to statutory tax rate for the years 2006 and 2005 is as follows:

14 Deferred income tax and workers’ profit sharing 2006 2005 (a) Deferred assets and liabilities from workers’ profit sharing and income tax are made up as follows: 230 231 % %

Income before workers’ profit sharing and taxes 100.00 100.00

2006 2005 Theoretical expense 30.00 30.00 Effect on taxable income S/(000) S/(000) Non-taxable financial revenues (13.34) (7.37) Deferred assets Allowance for credit losses 41,613 41,780 Effect of non-deductible expenses Stock appreciation rights provision, note 17 36,265 23,852 Non-deductible financial expenses 5.22 1.73 Provision for diverse expenses 22,780 15,390 Amortization of goodwill 0.20 0.19 Allowance for assets seized 21,398 23,924 Other 4.20 (0.43) Provision for sundry risks 8,286 11,801 Past due interests 6,876 6,503 Current and deferred workers’ profit sharing and income tax 26.28 24.12

Total deferred assets, note 10(a) 137,218 123,250

Deferred liabilities 15 Net shareholders’ equity Leasing operations, net (9,165) (4,900) (a) Capital stock Intangible assets (1,309) (11,138) As of December 31, 2006 and 2005, the capital stock of the Bank is composed by 1,286.5 million fully subscribed and paid common shares, each with a Exchange difference (4,523) (3,327) face value of one Peruvian Nuevo Sol. Total deferred liabilities, note 10(a) (14,997) (19,365) The General Shareholders’ Meeting held on March 26, 2004, approved an increase of the capital stock for 24.0 million shares, corresponding to the Net balance 122,221 103,885 restatement of capital stock due to inflation as of December 31, 2003.

The General Shareholders’ Meeting held on March 31, 2005, approved an increase of the capital stock for 60.1 million of shares, corresponding to the restatement of capital stock due to the inflation as of December 31, 2004. On the other hand, by means of the Resolution N°031-2004-EF/93.01, the (b) Amounts presented in the balance sheets as of December 31, 2006 and 2005, as well as the consolidated statements of income for the years then National Accounting Standards Board suspended, beginning from January 1 st 2005, the application of the financial statements inflation adjustment, note 3(a). ended are shown below: (b) Legal reserve Pursuant to legislation in force, the Bank and its subsidiaries must reach a legal reserve of at least 35 percent of its paid-in capital. This reserve is to be funded Consolidated balance sheets Consolidated balance sheets Deferred liabilities through an annual appropriation of at least 10 percent of the Bank’s net income. 2006 2005 2006 2005 As of December 31, 2006 and 2005, the Bank and its Subsidiaries have reached the minimal amount required by the legislation in force at such date. S/(000) S/(000) S/(000) S/(000) The subsidiaries of the Bank also must recognize this reserve in their individual financial statements. As of December 31, 2006 and 2005, the report of legal Income tax 117,225 106,083 (13,644) (17,923) reserves of the subsidiaries amounts to approximately S/79.1 and S/74.3 million, respectively. Workers’ profit sharing 19,993 17,167 (1,353) (1,442) (c) Special reserve 137,218 123,250 (14,997) (19,365) The special reserve has been funded with the appropriation of accumulated results and is considered to be unrestricted. Notes to the consolidated financial statements (continued) Notes to the consolidated financial statements (continued)

The General Shareholders’ Meeting held on March 31, 2006, approved an increase of the special reserve for approximately S/107.3 million. The number of SARs issued and not exercised as of December 31, 2006 and 2005 and the prices of such rights as of said dates are as follows:

(d) Dividend distribution The General Shareholders’ Meetings held on March 31, 2006, March 31, 2005 and March 28, 2004, agreed to distribute dividends in the amount of Number Number of Vested SARs approximately S/591.8, S/318.9 and S/245.3 million, respectively. of outstanding SARs as of December 31 Exercise price Year of issued as of Decem- Under current legislation, there is no restriction for overseas remittance of dividends or repatriation of foreign investment. Individual persons and corporations issuance ber 31, 2006 2006 2005 2006 2005 not domiciled in Peru must pay an additional tax of 4.1 percent on dividends received. US$ US$ (e) Shareholders’ equity for legal purposes (Regulatory capital) 1999 - - 110,000 7.64 8.34 As of December 31, 2006 and 2005, contingent assets and indirect loans weighted by credit risk and the minimal equity required for market risk applicable 2000 53,750 53,750 172,250 8.80 9.50 to currency risk, determined by the Bank according to current legal regulations, amounted to approximately S/18,904.8 and S/77.3 million, respectively 2001 74,000 74,000 185,050 5.60 6.30 (S/16,010 and S/87.4 million as of December 31, 2005, respectively), generating a global leverage ratio for credit and market risk that is approximately 84.6 2002 97,500 97,500 258,975 7.28 7.98 times the regulatory capital of the Bank (9.11 times the regulatory capital of the Bank and its Subsidiaries according to regulations in force as of December 31, 2003 196,250 196,250 317,344 8.47 9.17 2005). According to the Banking Law, this ratio cannot be more than 11 time higher the regulatory capital. 2004 311,500 283,453 261,250 11.29 11.99 2005 400,100 246,194 199,688 16.30 17.00 16 Tax situation 2006 477,500 186,406 - 25.62 - 232 233 (a) The Bank and its Subsidiaries are subject to Peruvian Tax Law. As of December 31, 2006, 2005 and 2004 the statutory income tax was 30 percent on 1,610,600 1,137,553 1,504,557 taxable income, including the result from exposure to inflation for 2004, note 3(a).

(b) Article 8 of the Legislative Decree N°970 extended up to December 31, 2008, the exemption from Income Tax on capital gains derived from the transfer of securities registered in the Stock Exchange Public Record through centralized trading mechanisms, as well as the interest accrued by these instruments. Bank’s Management has estimated the fair value of the SARs as of December 31, 2006 and 2005, using the binomial option pricing model, with assumptions (c) For income tax and value added tax purposes, the prices and amounts of considerations agreed to in transactions between related parties or from, to or obtained from the relevant available market information, including the assuming for practical purposes that all contracts can only be exercised at the end of through low or zero tax countries or territories require the presentation of supporting documents and information on the valuation methods and criteria applied their term. The key assumptions used are as follows: for valuation determination. The Tax Administration is entitled to request such documents and information from the Bank and its Subsidiaries. Based on the analysis of the operations of the Bank with its Subsidiaries, Management and its internal legal counsels are of the opinion that no significant contingencies will emerge for the Bank as consequence of the application of such provisions as of December 31, 2006 and 2005. Key assumptions 2006 2005 Superintendence Resolution N° 008-2007-SUNAT excluded, for fiscal years 2006 and 2007, the obligation to have a technical study of transfer prices with Expected volatility 31.31% 28.24% respect to the transactions made by taxpayers domiciled in the country with their domiciled related companies. Risk free interest rate 1.05% 1.04% (d) The tax authorities are entitled to review and, if applicable, to make a new determination of the income tax during the four years following the filing of the Expected lifetime 5.07 años 4.70 años income tax return calculated by the Bank and its Subsidiaries. The income tax returns of the Bank for 2004 and 2005, and from 2001 to 2005 in the case of Quoted price of Credicorp shares US$40.94 US$22.79 its Subsidiaries, with the exception of Crédito Leasing for 2001, are pending control by the tax authorities.

Because the potential interpretations that the tax authorities may give to legal rules in force, it is not possible to determine to date whether the reviews will generate liabilities for the Bank and its Subsidiaries. Therefore, any higher tax, penalty interest and sanction imposed as a result of such fiscal reviews would be applied to the results of the year in which they are determined. Nevertheless, in the opinion of Management and its internal legal counsels any possible additional tax assessment would not have any significant consequences on the financial position or results of operations as of December 31, 2006 and 2005.

As indicated in note 18(b), in the case of the Bank, the 2001, 2002 and 2003 fiscal year have been reviewed by the tax authorities in 2005 and 2006. Likewise, in the case of Crédito Leasing S.A., the tax authorities have completed the review of the fiscal year 2001. The results of such reviews have not generated any major additional liabilities for both the Bank and its Subsidiaries.

17 Stock appreciation rights As indicated in note 3(o), the Bank has granted options over Credicorp’s (the Bank’s majority shareholder) stock appreciation rights (SARs) to certain key executives and employees who have at least one year’s service in the Bank. The SARs expire after eight years and 25 percent of them may be exercised during each of the first four years of the plan.

At the end of the fourth year and until the expiration date of the SARs, all of the unexercised SARs may be exercised at any time. As of December 31, 2006 and 2005, 819,425 and 428,450 SARs had been exercised under this plan for an approximate amount of US$26.4 and US$7.0 million (equivalent to S/84.4 and S/24.1 million), as of December 31, 2006 and 2005, respectively, plus the income tax or behalf of the executives and employees that is assumed by the Group and corresponds 30 percent of the amount paid. Notes to the consolidated financial statements (continued) Notes to the consolidated financial statements (continued)

The movement of the SARs for the years 2006 and 2005 are as follows: -The fiscal years 2001, 2002 y 2003 have been reviewed by the tax authorities during the years 2005 and 2006; as a result of such revisions, no important additional expenses have arisen in excess to the previously accounted for in the Bank.

2006 2005 -Also, as of December 31, 2006 and 2005, according to assessments by the Tax Authority, the review of the 2001 income tax of Crédito Leasing S.A., a subsidiary of the Bank, has determined a lower balance in favor of the income tax for approximately S/3.4 million. Crédito Leasing S.A. has filed an appeal Outstan- Outstan- ding SARs Vested SARs ding SARs Vested SARs including an objection to the fine for S/3.8 million as of December 2006. Management and its internal legal counsels consider that the decision on the appeal should be favorable for Crédito Leasing S.A. Amount Amount Number Number S/(000) Number Number S/(000) -In addition, the Bank and its Subsidiaries have several pending legal claims (law suits), related to their activities which, in Management’s and its legal advisors’ Balance as of January 1st 1,961,275 1,504,556 71,200 2,042,725 1,595,413 35,140 opinion, will not result in additional liabilities to the ones already registered by the Bank and its subsidiaries; therefore, the Management has not consider Granted and vested 535,000 503,280 32,356 505,000 492,624 18,017 necessary to make an additional provision to those ones already recorded for these contingencies, note 10(f). Exercised (819,425) (819,425) (86,281) (428,450) (428,450) (23,214) Decrease (66,250) (50,859) (5,122) (158,000) (155,031) (7,556) 19 Off-balance sheet accounts Increase in the option fair value - - 96,102 - - 48,813 (a) This item is made up as follows:

Balance as of December 31 1,610,600 1,137,552 108,255 1,961,275 1,504,556 71,200

234 235 2006 2005 In accordance with the signed contracts, the Bank assumes the payment of the income tax of this benefit on behalf of its executives and employees, which S/(000) S/(000) corresponds to 30 percent of the benefit. The Bank estimates the amount over the basis of the liability recorded for the vested benefits and records it in the same caption of this plan. Contingent operations Guarantees and stand-by letters of credit (c) 2,929,141 2,492,883 The liabilities recorded for this plan are included in “Payroll taxes, salaries and other personnel expenses”; in the caption “Other liabilities” of the consolidated Import and export letters of credit (c) 814,828 818,392 balance sheets; and the expenses in the caption “Personal expenses” on the consolidated income statements. In 2006 and 2005, the SARs prices were Due from bank acceptances 143,769 155,801 modified and informed to the executives of the Bank. 3,887,738 3,467,076

In the fiscal year 2006, the Bank signed a contract with Citigroup by which has acquired certificates linked to the yield of Credicorp’s shares, to obtain an Financial derivative contracts (d) 3,685,606 3,998,104 economic hedge of the SARs granted to its executives and employees, note 6(h). Responsibilities under credit line agreements 2,603,927 1,824,130 Foreign currency swap contracts 156,231 - 18 Commitments and contingencies Other contingent operations 86,461 148,916 (a) Commitments Total contingent operations 10,419,963 9,438,226 -In January 2001, the Bank entered into an agreement with a related company of Credicorp Ltd. for the transfer of rights to the future collection of payment orders from foreign bank members of the Society for Worldwide Interbank Financial Communications (“Swift”). The agreement was used for the securitization Other off-balance sheet accounts of the aforementioned rights for up to US$ 100 million with maturity up to 2007. The proceeds from the securitization were delivered in January 2001 to Securities in custody 35,239,348 32,096,031 Credicorp Ltd. related companies. In November 2005, the related company cancelled such securitization with the payment of US$38.1 million (equivalent Guarantees received (e) 19,994,412 20,057,996 approximately to S/130.7 million). The cancellation of this operation did not require the payment of any penalty or commission by BCP. Qualification of assets and contingents 19,629,686 16,385,446 Securities in collection 5,610,583 5,059,050 -In November 2005, Panamanian Branch entered into an agreement with a foreign related party in which guarantees the collection of BCP’s future inflows Written-off loans 2,988,345 3,179,986 from electronic messages sent through the Society for Worldwide Interbank Financial Telecommunications and utilized within the network to instruct Securities granted as warranties 2,896,756 4,173,932 correspondent bank to make a payment of a certain amount to a beneficiary that is not a financial institution. For this transaction the related party had a loan Securities in stock 2,752,798 3,209,199 with guarantee of the mentioned rights for US$280.0 million (equivalents to S/960.4 million), with a maturities up to 2012. Insurance coverage 2,531,165 1,325,977 Letter of credit advised 1,515,929 1,251,683 -Also, in March 2006, the Panamanian Branch, entered into another agreement with the same foreign related party in which guarantees the collection of Trust and debt trust commissions (f) 449,185 498,005 BCP’s future inflows from electronic messages sent through the Society for Worldwide Interbank Financial Telecommunications and utilized within the Other 10,709,104 13,446,537 network to instruct correspondent bank to make a payment of a certain account to a beneficiary in Peru that is not a financial institution; obtaining the related Total other off-balance sheet accounts 104,317,311 100,683,842 party a loan for US$100.0 million with a maturity in 2016. Total 114,737,274 110,122,068 (b) Contingencies -As of December 31, 2006 and 2005, the Bank has received tax assessments from the Tax Administration as a result of the review of the income tax corresponding to the year 1999. In this respect, the Tax Administration determined a lower credit balance corresponding to the income tax for approximately (b) In the normal course of its business, the Bank and its Subsidiaries take part on transactions with off-balance sheet risk exposure. These transactions S/5.9 million. The Bank has filed the corresponding claim, which also includes the claim for the respective fines amounting to approximately S/10.1 million as expose the Bank and its Subsidiaries to additional credit risk in addition to the amounts recognized in the consolidated balance sheets. Credit risk for off- of December 31, 2006. The Management and its legal advisors believe that the claim filed will have a favorable result for the Bank. consolidated balance sheet financial instruments is defined as the possibility of sustaining a loss because any other party of a financial instrument fails to perform in accordance with the terms of the contract. The Bank’s exposure to losses under commitments to extend credit, provide export and import letters of credit and guarantees is represented by the contractual amount specified in these instruments. The Bank and its Subsidiaries use the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments, including the requirement to obtain collateral to support off- balance sheet financial instruments when it is deemed necessary. Collateral held varies, but it may include deposits held in financial institutions, securities or other assets. Notes to the consolidated financial statements (continued) Notes to the consolidated financial statements (continued)

Because most of the contingent transactions are expected to expire without any performance being required, the total committed amounts do not necessarily 20 Financial income and expenses represent future cash requirements. This item is made up as follows:

(c) Export and import letters of credit and guarantees and stand by letters are conditional commitments issued by the Bank and its Subsidiaries to guarantee the performance of a customer to a third party. Export and import letters of credit are mainly issued as credit enhancements for overseas commercial 2006 2005 transactions. Risks associated with these credits are reduced by the participation of third parties. S/(000) S/(000) (d) As of December 31, 2006 and 2005, the derivative operations maintained by the Bank and its Subsidiaries are related to purchase and sale agreements for forward foreign currency operations, and interest exchange (swap) operations. Foreign currency forwards are commitments to buy or sell currency at Financial income a future date at a contracted price and the seller commits to pay at a determined date a specific foreign currency amount. Risk arises from the possibility Interest on loan transactions 1,707,434 1,431,196 Interest from available and inter-bank funds 257,973 110,932 that the counter-party to the transaction does not perform as agreed and from the variations in the exchange rates in the currencies in which transactions Interest from investments in trading and held-to-maturity securities 228,386 222,537 are done. As of December 31, 2006 and 2005, forward foreign currency purchase and sale agreements referred to above include nominal amounts of Fluctuation for derivative financial instruments position - forward 23,736 8,270 approximately S/3,685.6 and S/3,998.1 million, respectively (equivalent to US$1,153.2 and US$1,165.5 million, respectively, note 4), with maturities not Commission on loans and other financial transactions 14,440 15,223 longer than one year. These agreements are executed to satisfy client requirements and are recognized in the consolidated financial statements at fair market Other 18,449 3,278 value. As of December 31, 2006, exchange interest rates transactions were realized for a face value amounting approximately to S/1,173.1 million, equivalent 2,250,418 1,791,436 approximately to US$367.1 million (approximately S/1,290.2 million, equivalent to US$376.2 million as of December 31, 2005), which are included in the “Other off-balance sheet accounts” caption in this note. 236 237 Financial expenses Interest for deposits and obligations (419,390) (263,481) The fair value of forward and swap assets and liabilities as of December 31, 2006, amount approximately to S/51.3 and S/25.8 million, respectively Interest and commissions for deposits from local financial entities and (143,445) (65,045) (approximately S/20.1 and S/27.9 million, respectively, as of December 31, 2005), which are included in the “Other assets” and “Other liabilities” captions, international organizations (108,053) (48,624) respectively, of the consolidated balance sheets, note 10(a). Interest on loans from banks and correspondents (94,585) (106,469) Interest from bonds and subordinate notes issued (36,216) (32,228) (e) The balance of the caption “Guarantees received” is stated at the value of the guarantee agreed as of the date of the loan contract. This balance does not Premiums for the Deposit Insurance Fund 929 5,673 necessarily represent the market value of guarantees received by the Bank and its Subsidiaries. Fluctuation for derivative financial instruments position - swap (9,658) (8,582) Other (f) The Bank and its Subsidiaries provide custody, trust, corporate administration, investment management and consulting services to third parties. Assets kept as trust are not included in the financial statements. As of December 31, 2006 and 2005, assets managed on behalf of the Bank’s clients amounted S/223.5 (810,418) (518,756) and S/216.6 million, respectively. Gross financial margin 1,440,000 1,272,680 In addition, as of December 31, 2006 and 2005, the net equity of the investment mutual funds managed by a subsidiary of the Bank amount approximately to S/3,941.9 and S/3,511.7 million, respectively. 21 Provision for credit losses, net This item is made up as follows:

2006 2005

S/(000) S/(000)

Provision (recovery) for: Loan losses, note 7(g) 130,404 86,877 Country risk 17,489 3,790 Leasing accounts (361) 4,976

Total 147,532 95,643 Notes to the consolidated financial statements (continued) Notes to the consolidated financial statements (continued)

22 Commissions from banking services, net 23 Net gain (loss) on securities This item is made up as follows: This item is made up as follows:

2006 2005 2006 2005

S/(000) S/(000) S/(000) S/(000)

Commissions from banking services Gain from trading securities measurement 20,874 3,448 Transfers, collections and excess transactions services 223,487 206,238 Gain from purchase and sale of securities and participation on permanent Commissions to establishments affiliated to VISA network 55,591 46,350 investments 11,482 24,744 Insurance commissions 84,265 74,252 Provision for impairment of investments, note 6(i) (5,766) (314) Maintenance of accounts 128,496 96,919 Other, net (1,503) (1,846) Credit and debit card services 93,011 86,916 Total 25,087 26,032 Commissions for contingent operations 62,217 57,056 Commissions for consulting and technical studies 19,588 26,859 Withholding and collection services 20,666 18,277 24 Other income and other operating expenses Commissions for checks issuance 12,465 12,295 238 239 Trust commissions 33,869 30,357 These items are made up as follows: Services related to leasing income 7,522 7,017 Commissions for brokerage activities 17,069 12,570 Other 107,105 113,337 2006 2005

865,351 788,443 S/(000) S/(000)

Expenses related to commissions from banking services Other income Insurers expenses (48,988) (42,410) Recoveries of loans previously written-off 112,764 78,705 Credit and debit card expenses (29,136) (21,238) Net gain from sales of assets seized, note 10(c) 41,075 43,980 Consulting and technical studies expenses (5,580) (5,974) Recovery of provision for buildings impairment, net of depreciation, note 9 14,540 - Expenses related to VISA network (5,071) (3,763) Recoveries of interest previously written-off 11,686 20,689 Expenses of checks issuance (3,674) (3,036) Income from lease of own assets 4,526 4,046 Expenses related to leasing commissions (8,164) (7,145) Income from technical outsourcing services 3,155 1,158 Other (9,736) (3,895) Other 34,269 31,889

(110,349) (87,461) Total other income 222,015 180,467

Balance, net 755,002 700,982 Other operating expenses - Provision for legal and client claims (6,904) (5,870) Collection expenses (4,193) (3,864) Provision for accounts receivable (3,812) (5,346) Provision for sundry risks (5,629) (14,398) Maintenance of assets seized (3,310) (4,143) Expenses from outsourcing services (1,837) (3,400) Provision for counterfeit money - (6,432) Provision for buildings impairment, nota 9 - (15,146) Other (29,150) (22,613)

Total operating expenses (54,835) (81,212) Notes to the consolidated financial statements (continued) Notes to the consolidated financial statements (continued)

25 Salaries and employees´ benefits (c) The computation of basic and diluted earnings per share as of December 31, 2006, 2005 and 2004, is shown below: This item is made up as follows:

Year Income Shares (de- Earnings 2006 2005 (numerator) nominator) per share S/(000) (en miles) S/ S/(000) S/(000) 2006 661,574 1,286,528 0.5142 Salaries 328,142 298,440 2005 691,734 1,286,528 0.5377 Stock appreciation rights 158,703 51,504 2004 319,260 1,286,528 0.2482 Supplementary worker’s profit sharing 67,880 54,447 Gratifications 57,266 48,689 Social security 37,360 25,689 27 Risk Evaluation Severance indemnities 29,250 34,678 The Bank and its Subsidiaries’ activities are mainly related to the use of financial instruments including derivatives. The Bank and its Subsidiaries accept Vacations, medical assistance and others 78,983 72,673 deposits from their customers at both fixed and floating rates and with different terms, with the intention of obtaining profit from interest margins by investing Total 757,584 586,120 those funds in high-quality assets. 240 241 Average number of employees 10,023 9,329 The Bank and its Subsidiaries seek to increase these margins by consolidating its short-term funds and lending at longer periods at higher rates, while maintaining sufficient liquidity to comply with any withdrawals that may be made. 26 Earnings per share The Bank and its Subsidiaries seek to raise its interest margins by obtaining above average margins, net of provisions, through lending to commercial and retail (a) The calculation of the weighted average number of shares and basic and diluted earnings per share is shown below: borrowers with a range of credit standings. The exposure not only comprises loans and non-contingent advances but also any other loans, such as credit letters and stand-by letters of credit.

Weighted The Bank and its Subsidiaries also trades financial instruments in and out of the securities market, including derivative instruments for benefiting from the short Base used average term market of shares and bonds, and the fluctuations of the exchange and interest rates. Management establishes limits to the exposure to market positions Outstan- for the number of during the daily and overnight operations. The exposure to the exchange and interest rates related to these operations is normally offset and controlled ding computa- Days as of common through the fluctuations in the net cash amounts required to settle market positions. shares (in tion (in the end of shares (in thousands) thousands) the year thousands) Market risks Fiscal Year 2004 The Bank and its Subsidiaries are exposed to market risks. Market risks arise from open positions in interest rate currency equity products, all of which are Balance as of January 1 st, 2004 1,202,385 1,202,385 365 1,202,385 exposed to general and specific market movements. The Bank and its Subsidiaries apply the “Value at Risk” methodology to estimate the market risk of main Capitalization of the capital positions held and the maximum losses expected, based upon a number of assumptions for various changes in market conditions. The Management sets restatement in 2004 24,048 24,048 365 24,048 certain limits on the value of risk that maybe accepted, which is monitored on a daily basis. Capitalization of the capital restatement in 2005 - 60,095 365 60,095 The daily market value at risk (VAR) is an estimate of the maximum potential loss that might arise if the current positions were to be held unchanged for one trading session taking into account a specific significance level. The measurement is structured so that daily losses exceeding the VAR figure on average occur, Balance as of December 31, 2004 1,226,433 1,286,528 1,286,528 on average not more than one trading sessions out of one hundred. Actual outcomes are monitored regularly to test the validity of the assumptions and Fiscal Year 2005 parameters used in the VAR calculation. Balance as of January 1 st, 2005 1,226,433 1,226,433 365 1,226,433 As VAR constitutes an integral part of the Bank and its Subsidiaries’ market risk control regime, VAR limits are established by the Management for some trading Capitalization of the capital restatement in 2005 60,095 60,095 365 60,095 and portfolio operations. The actual exposure against limits, together with a consolidated Group-wide VAR, is reviewed daily by the Management; however, the use of this approach does not prevent losses outside the limits established in the event of more significant market movements. Balance as of December 31, 2005 1,286,528 1,286,528 1,286,528 Liquidity risk Fiscal Year 2006 The Bank and its Subsidiaries are exposed to daily calls on its available cash resources from overnight deposits, current account, maturing deposits, loans Balance as of January 1 st, 2006 1,286,528 1,286,528 365 1,286,528 drawdown, guarantees and other calls. The Bank and its Subsidiaries do not maintain cash resources to meet all of these needs, as experience shows that a Balance as of December 31, 2006 1,286,528 1,286,528 1,286,528 minimum level of reinvestment of maturity funds can be predicted with high level of certainty. The Bank and its Subsidiaries’ Management sets limits on the minimum proportion of funds available to meet such calls and the minimum level of inter-bank and other borrowing facilities that should be in place to cover withdrawals at unexpected levels of demands.

(b) The base used for share computation includes the capital stock restatement effect and the capitalization of income, as indicated in note 3(s). The matching and controlled mismatching of the maturities and interest rates of assets and liabilities is fundamental to the Management of the Bank and its Subsidiaries. It is unusual for banks to be completely matched, as transacted business if often based on uncertain terms and of different types. An unmatched position potentially enhances profitability, but also increases the risk of losses. Notes to the consolidated financial statements (continued) Notes to the consolidated financial statements (continued)

The maturities of assets and liabilities and the ability to replace, at an acceptable cost, interest-bearing liabilities as they mature are important factors in A significant portion of the Bank and its Subsidiaries’ assets and liabilities are short-term financial instruments, with a remaining maturity of under one-year. assessing the liquidity of the Group and its exposure to changes in interest rates and exchange rates. These short-term financial instruments are considered to have a fair value equivalent to their carrying value at the balance sheet date.

The liquidity requirements to support calls under guarantees and standby letters of credit are considerably less than the amount of the commitment, because The methodologies and assumptions used to determine fair values depend on the terms and risk characteristics of the various financial instruments and the Bank and its Subsidiaries do not generally expect the third party to draw funds under the agreement. The total outstanding contractual amount of include the following: commitments to extend credit not necessarily represents future cash requirements, as many of these commitments will expire or without being funded. -Cash and due from banks represent cash and short-term deposits that do not represent significant credit or interest risks; in consequence, their book value is The notes to the consolidated financial statements include an analysis of the main assets and liabilities of the Bank and its Subsidiaries by maturities based on equivalent to their market value. contractual maturity dates. -Trading securities are recorded at their estimated fair value on the balance sheet; in consequence, their book values are the same to their fair value. Cash flow and fair value interest rate risk -Available-for-sale investments are recognized at the lower of the cost or estimated market value; in consequence, the un-realized potential gains have been The Bank and its Subsidiaries are exposed to the effect of fluctuations in the prevailing levels of market interest rates on both its fair value and cash flow risks. considered in such estimated market value, determined on the basis of the stock-market prices or on the investment’s measurement; thus its book value is Interests margins may increase as a result of such changes, but may reduce or create losses in case of unexpected movements arise. The Management of the different form the market value as indicated in note 6(i). Bank and its Subsidiaries sets limits on the level of mismatch of interest rate reprising that may be undertaken, which is monitored periodically. -The fair value of loans is similar to their book value, because such loans are mainly of a short-term nature and/or at variable rates; and are shown net of Resources for investing are mainly obtained form short-term liabilities, the interest of which are agreed at fixed and variable interest rates prevailing in the their respective allowance for loan losses, which are considered by the Management as the approximate recoverable amount at the date of the consolidated international markets. Loans, customer deposits and other financing instruments are subject to risk derived from interest rate fluctuations. The relevant financial statements. contract maturity characteristics and interest rates of such financial instruments of the Bank and its Subsidiaries are disclosed in Notes 7(j) y (k), 11(c) y (f) 12 242 243 y 13. -Management considers that the book value of the permanent investments approximates their fair value, because most of them are not trading securities and are recorded at its equity’s participation value, except for the participation in Inversiones BCP Ltda, which estimated market value is indicated in note 8(b). Currency risk The Bank and its Subsidiaries take on exposure to effects of fluctuations in the prevailing foreign currency exchange rates on its financial position and cash -The market value of deposits and obligations is similar to its book value due, mainly, to the current maturities that most of them have, and interest rates which flows. The Management sets limits on the level of exposure by currency and in total for both overnight and intra-day positions, which are monitored daily. are comparable to other similar liabilities in the market at the date of the consolidated balance sheets.

Most assets and liabilities are maintained in US Dollars. Foreign currency transactions are made at the free market exchange rates of the countries where the -Due to banks and correspondents generate interest contracted at variable interest rates and/or preferred rates similar to the market rates. As a result, it is Bank and its Subsidiaries’ branches are established. As of December 31, 2006 and 2005, the Bank and its Subsidiaries’ assets and liabilities by currencies are considered that their book value approximates their fair values. shown in note 4. -Bonds and subordinated notes accrue interest at fixed or variable rates according with the issuance. The book value do not differ to the market value due Credit risk mainly to theses bonds are recorded at the lower of their cost or estimated value, therefore, such values are approximately to their acquisition value. The Bank and its Subsidiaries take on exposure to credit risk, which is the risk that a counterparty will be unable to pay amounts in full when due. The Bank and its Subsidiaries provide impairment provisions for losses that have been incurred at the balance sheet date. Significant changes in the economy or in the -As disclosed in note 19, the Bank and its Subsidiaries have various commitments to extend credit, open documentary credits and outstanding guarantees health of a particular industry segment, that represents a concentration in the Bank and its Subsidiaries’ portfolio, could result in losses that are different from and it has received guarantees in endorsement of the granted credits. Based on the level of fees currently charged from granting such commitments and those provided for at the balance sheet date. Management, therefore, carefully manages its exposure to credit risk. open documentary credits, taking into account maturity and interest rates, together with the present creditworthiness of the counterparties, the Bank and its Subsidiaries has estimated that the difference between the book value and the fair value is not significant. The Bank and its Subsidiaries structure the levels of credit risk that they undertake by placing limits on the amount of risk accepted in relation to one borrower or groups of borrowers, and to geographical and industry segments. Such risks are monitored on a revolving basis and subject to an annual or more frequent -Except for currency forwards and interest rate swaps, the Bank and its Subsidiaries do not enter into other agreements, generally described as derivative review. Limits in the level of credit risk by product, industry sector and by country are approved by the Board of Directors. transactions. The Bank and its Subsidiaries record these derivatives in the balance sheet at their fair market value.

Exposure to credit risk is managed through regular analyses of the ability of borrowers and potential borrowers to meet interest and capital repayment In consequence, as of December 31, 2006 and 2005, the Management considers that the estimated market values of the financial instruments do not differ obligations and by changing these lending limits when appropriate. Exposure to credit risk is also managed in part by obtaining corporate and personal significantly from their book value, except for the fair values indicated in notes 6(j) and 8(b). guarantees, but there is a significant portion in personal loans where no such guarantees can be obtained.

As of December 2006, the Management of the Bank ant its Subsidiaries consider that financial assets which show a potential credit risk are mainly cash and cash equivalents, interest bearing deposits in banks, trading securities, investments available-for-sale, loans and other assets. The exposure for each borrower, including banks, is further restructured by sub-limits covering on and off balance sheet exposures, and daily delivery risk limits to trading items such as forward foreign exchange contracts. Real exposures compared against established limits are monitored daily.

28 Fair value Fair value is defined as the amount for which an asset could be exchanged or a liability settled, between knowledgeable, willing parties in an arm’s length transaction, assuming an on-going enterprise.

When a financial instrument is traded in an active and liquid market, its quoted market price in an actual transaction provides the best evidence of its fair value. When a quoted market price is not available, or may not be indicative of the fair value of the instrument, to determine such fair value, the current market value of another instrument that is substantially similar, discounted cash flow analysis or other estimation techniques may be used, all of which are significantly affected by assumptions used. Although Management uses its best judgment in estimating the fair value of these financial instruments, there are inherent weaknesses in any estimation technique. As a result, the fair value may not be indicative of the net realizable or liquidation value. Notes to the consolidated financial statements (continued) Notes to the consolidated financial statements (continued)

29 Financial information by geographical area Loans and other contingent credits with related entities, not subsidiaries of Bank’s Group, are summarized as follows: As of December 31, 2006 and 2005, segment information by geographical area (amounts expressed in million of Nuevos Soles) of the Bank and its Subsidiaries is as follows: 2006 2005

S/(000) S/(000) 2006 2005 Direct loans 216,694 193,054 Deprecia- Property, Deprecia- Property, Contingent loans 185,591 50,630 Gross tion and furniture Gross tion and furniture Derivatives, market value 567 1,331 Total financial amortiza- and equip- Total Total financial amortiza- and equi- Total income margin tion ment assets income margin tion pment assets Total 402,852 245,015

Peru 2,952 1,302 113 581 27,859 2,479 1,162 114 596 26,184 Panama 173 24 - - 2,681 96 11 - - 2,034 Likewise, as of December 31, 2006 and 2005, the Bank and its Subsidiaries have securities available-for-sale in related companies amounting S/2.0 and Bolivia 197 88 8 43 2,090 172 79 9 48 1,964 United States of S/12.0 million, respectively. America 67 26 - 2 1,083 52 21 1 2 1,287 The Bank’s Group signed up insurance coverage with El Pacífico-Peruano Suiza (PPS), which premiums amounted to S/74.9 million in 2006 (S/49.4 million 244 245 Total 3,389 1,440 121 626 33,713 2,799 1,273 124 646 31,469 in 2005). The Bank also receives Pacífico Vida S.A’s fees for the selling of life insurance, through its Bank’s offices and agencies to customers who have saving accounts, which balances amounted to approximately S/4.3 and S/4.2 million in 2006 and 2005, respectively.

According to Peruvian legislation, loans granted to related parties cannot be done on terms no more favorable than would been offered to general public. The 30 Transactions with related parties and related companies Bank’s Management considers that they have carried out all the established requirements in current legal disposals for the transactions with related companies (a) During the years 2006 and 2005, the Bank and its Subsidiaries have acquired bonds, granted loans, supplied and solicited banking services, or persons. The loans have guarantees and collaterals given by the related party. The loans to related parties as of December 31, 2006, have maturities correspondent relationships and other operations with related subsidiaries to Credicorp Group which balances are shown below: between February 2007 and August 2012 and accrue interest at an average interest rate between 5.0 and 9.5 percent. As of December 31, 2006, the allowance for loan losses with related parties amounts to US$0.1 million (US$1.4 million as of December 31, 2005). This amount is established based on an assessment performed on a continuous basis in the financial position of the related party and the market where it operates. 2006 2005 (b) The Bank and its Subsidiaries grant loans to their employees and officers for periods according to the different types of loans that maintain the Bank with S/(000) S/(000) third parties. The loans are mainly mortgage loans and are shown in the caption “Loans, net” of the consolidated balance sheets. Generally, the interest rates Assets applied are lower than the market interests rates; however, others terms of the loans are the same as the market. As of December 31, 2006 and 2005, the Cash and due form banks 2,209,983 1,801,364 balance of the loans and other facilities for employees, directors and key executives of the Bank and its Subsidiaries amounted to S/97.2 and S/105.4 million, 289,465 66,597 Loans, net respectively. Other assets 7,396 6,297 (c) The Bank and its Subsidiaries key executives compensation for the years 2006 and 2005, considering all the payments granted, is as follows: Liabilities Deposits and obligations 2,220,894 1,791,232 Due to banks and correspondents 289,465 76,726 2006 2005 Other liabilities 225,724 81,572 Contingent liabilities 154,575 716,074 S/(000) S/(000) Other off-balance sheet accounts 5,225,137 3,438,321 Stock appreciation rights, note 17 72,559 24,672 Salaries 14,750 14,228 Income Directors compensation 2,500 2,444 Financial income 147,521 71,293 Other 21,768 7,401 Financial expenses 148,208 75,230 Other income 96,721 71,395 Total 111,577 48,745 Other expenses 96,033 63,493

31 Explanation added for translation into English The accompanying translated financial statements originally issued in Spanish are presented on the basis of accounting principles generally accepted in Peru. Certain accounting practices applied by the Bank that conform to generally accepted accounting principles in Peru may not conform in a significant manner with generally accepted accounting principles applied in other countries. In the event of a discrepancy, the Spanish language version prevails. NOTES TO THE READER FINANCIAL STATEMENTS NIIF (PRO FORMA - UNAUDITED) Of the Pro forma financial information

The pro forma consolidated balance sheets, income statements and 246 247 Content supplementary exhibits shown below are related to Banco de Crédito del Perú and its Subsidiaries and have been prepared with the purpose of be included in the Credicorp’s consolidated financial statements. In the preparation of these pro forma consolidated financial statements, the US dollar Financial Statements IFRS (International Financial Reporting Standards) has been considered as the functional currency and have been used the International Financial Reporting Standars – IFRS applicable to their operations; in addition, the Banco de Crédito del Perú and Subsidiaries elimination adjustments made in the consolidation process have been included in such financial statements with Credicorp, with the objective to assess the Bank’s Consolidated Pro forma balance sheets - Unaudited 248 contribution to the consolidated net assets and results of Credicorp. Consequently, the Consolidated Pro forma income statements - Unaudited 250 pro forma consolidated financial statements of Banco de Crédito del Perú are an analysis Supplementary exhibits to the Pro forma information - Unaudited 253 management tool of its results and do not intend to reflect its consolidated financial position and results of its operations as a separated entity in accordance with IFRS.

These pro forma consolidated financial statements and exhibits have not been audited.

In thousands of US Dollars Consolidated balance sheets (Pro forma - Unaudited) Consolidated balance sheets (Pro forma - Unaudited) As of December 31, 2006 and 2005 As of December 31, 2006 and 2005

Assets Exhibit 2006 2005 Exhibit 2006 2005

US$(000) US$(000) US$(000) US$(000)

Cash and due from banks: 1 Liabilities and Equity Non-interest bearing 470,480 348,465 Deposits and obligations: 6 Interest bearing 2,057,015 2,091,853 Non-interest bearing 1,946,718 1,673,941 Interest bearing 6,408,831 5,002,304 2,527,495 2,440,318 8,355,549 6,676,245 Investments: Trading securities 2 38,078 21,007 Due to banks and correspondents 7 489,805 995,105 Investments available-for-sale 3 1,894,563 1,704,911 Bankers’ acceptances outstanding 44,984 45,423 Bonds and subordinated notes issued 8 533,337 449,230 1,932,641 1,725,918 Other liabilities 5 282,943 240,254 Loans, net: 4 Total liabilities 9,706,618 8,406,257 Loans, net of unearned income 5,865,278 4,869,429 Allowance for loan losses (187,689) (194,586) 248 249 Shareholder’s equity Capital stock 364,706 364,706 5,677,589 4,674,843 Reserves 242,889 210,928 Property, furniture and equipment, net 197,724 201,122 Unrealized gain 53,447 37,205 Due from customers on acceptances 44,984 45,423 Retained earnings 304,091 264,579 Assets seized, net 29,427 39,373 Total shareholder’s equity 965,133 877,418 Other assets 5 261,891 156,678 Total liabilities and shareholder’s equity 10,671,751 9,283,675 Total assets 10,671,751 9,283,675 Consolidated income statements (Pro forma - Unaudited) Consolidated income statements (Pro forma - Unaudited) (Continued) For the years ended December 31, 2006 and 2005 For the years ended December 31, 2006 and 2005

2006 2005 2006 2005

US$(000) US$(000) US$(000) US$(000)

Interest income Other expenses Interest on loans 530,396 437,297 Salaries and employees benefits (226,750) (188,349) Interest on deposits in banks 78,999 33,453 Administrative expenses (143,670) (128,532) Interest from trading securities and investments available-for-sale 69,380 67,283 Depreciation and amortization (35,113) (34,932) Other interest income 12,136 2,614 Provision for assets seized (6,387) (16,959) Other (33,616) (17,887) Total interest income 690,911 540,647 Total other expenses (445,536) (386,659) Interest expense Interest on deposits and obligations (174,727) (105,279) Income before translation result and income tax 303,821 264,062 Interest on bonds and subordinated notes issued (26,944) (25,765) Interest on due to banks and correspondents and borrowed funds (33,020) (14,755) Translation result 13,323 (9,759) Other interest expense (12,492) (9,362) Income tax (69,388) (70,147) 250 251 Total interest expense (247,183) (155,161) Net income 247,756 184,156

Net interest income 443,728 385,486 Basic and diluted earnings per share. 0,19 0,14

Provision for loan losses (1,948) (127)

Net interest income after provision for loan losses 441,780 385,359

Other income Banking services commissions 232,226 210,769 Net gain on foreign exchange transactions 42,005 30,144 Net gain on sales of securities 8,692 6,162 Other 24,654 18,287

Total other income 307,577 265,362 Conciliation between Net income in Soles according to SBS Standards Banco de Crédito and Subsidiaries and net income under International Financial Reporting Standards (in thousands) Complementary exhibits to the information (Pro forma - Unaudited)

1 Cash and due from banks 2006 2005 This item is made up as follows: (000) (000)

Net income in Soles according to SBS Standards S/.661,574 S/.691,734 2006 2005

Average exchange rate 3,265 3,304 US$(000) US$(000)

Expressed net income in dollars to exchange rate SBS US$ 202,626 US$ 209,363 Cash and clearing 467,012 346,731 Deposits in Peruvian Central Bank - BCRP 1,405,852 1,599,153 Translation result from monetary accounts in nuevos soles 23,614 (10,840) Deposits in banks 651,492 491,939 Translation result from monetary accounts in US dollars 13,323 (9,759) Adjustments that would be required to determine the net income under NIIF’s instead of under SBS standards 8,193 (4,608) 2,524,356 2,437,823

Net income in US dollars according to International Financial Reporting Standards US$ 247,756 US$ 184,156 Accrued interest 3,139 2,495

Total 2,527,495 2,440,318

252 253 2 Trading securities This item is made up as follows

2006 2005

US$(000) US$(000)

Shares Listed equity securities 27,633 5,709

Bonds and similar instruments Corporate and leasing bonds 2,260 655 Participation in mutual funds 6,457 8,459 Bank certificates 1,726 661 Peruvian treasury bonds - 5,362

10,443 15,137

Total Shares, Bonds and similar instruments 38,076 20,846

Accrued interest 2 161

Total 38,078 21,007 Banco de Crédito and Subsidiaries Banco de Crédito and Subsidiaries Complementary exhibits to the information (Pro forma - Unaudited) Complementary exhibits to the information (Pro forma - Unaudited)

3 Investments available-for-sale (b) The amortized cost and market value of the investments available-for-sale are classified by maturity (a) This item is made up as follows: as follows:

2006 2005 2006 2005 Unrealized Unrealized Amortized Market Amortized Market gross amount Estimated gross amount Estimated Amortized Market Amortized Market Cost Value Cost Value Cost Gains Losses value Cost Gains Losses value US$(000) US$(000) US$(000) US$(000)

US$(000) US$(000) US$(000) US$(000) US$(000) US$(000) US$(000) US$(000) Up to 3 months 647,257 647,541 462,618 462,585 From 3 months to 1 year 756,172 757,193 867,609 865,276 Fixed maturity From 1 to 3 years 176,915 177,171 168,331 167,687 BCRP deposit certificates 1,276,503 1,143 (33) 1,277,613 1,148,303 184 (2,672) 1,145,815 From 3 to 5 years 53,634 55,146 25,560 25,537 Government treasury bonds 208,839 4,876 (1,540) 212,175 152,396 429 (494) 152,331 Over 5 years 151,020 155,322 87,265 88,242 Corporate, leasing and subordinated bonds 76,084 2,730 (511) 78,303 75,645 1,054 (299) 76,400 Without maturity (shares) 27,274 94,600 36,806 93,207 Bonds from international financial institutions 64,577 89 (24) 64,642 109,639 130 (213) 109,556 254 255 Participation in RAL’s funds 51,203 - 1 51,204 56,073 - - 56,073 Total 1,812,272 1,886,973 1,648,189 1,702,534 Participation in mutual funds 37,817 171 - 37,988 28,129 (89) - 28,040 US Federal Agencies bonds 29,189 9 (19) 29,179 - - - - Central Banks of Bolivia deposit certificates 27,833 189 (1) 28,021 - - - - 4 Loans, net Commercial papers 168 - (6) 162 - - - - (a) This item is made up as follows: Negotiable deposit certificates 160 - - 160 27,788 15 (12) 27,791 Instruments Securitization 11,249 438 (130) 11,557 11,694 11,694 Other 1,376 4 (11) 1,369 1,717 59 (149) 1,627 2006 2005 1,784,998 9,649 (2,274) 1,792,373 1,611,384 1,782 (3,839) 1,609,327 US$(000) US$(000) Shares Listed securities 25,245 62,998 - 88,243 30,579 56,643 (57) 87,166 Direct loans Non-listed securities 2,029 4,384 (56) 6,357 6,226 224 (409) 6,041 Loans 4,153,183 3,417,271 Leasing receivables 688,685 575,630 27,274 67,382 (56) 94,600 36,805 56,867 (466) 93,207 Credit card receivables 438,628 297,673 Discount notes 256,534 213,232 1,812,272 77,031 (2,330) 1,886,973 1,648,189 58,649 (4,305) 1,702,534 Factoring receivables 89,171 87,757 Accrued interest 7,590 2,377 Advances and overdrafts 84,198 49,251 Refinanced and restructured loans 124,434 173,587 Total 1,894,563 1,704,911 Past due and under legal collection loans 75,231 93,728

5,910,064 4,908,129

Add (less) 49,130 39,795 Accrued interest (93,916) (78,495) Unearned interest (187,689) (194,586) Allowance for loan losses

Total direct loans, net 5,677,589 4,674,843

Indirect loans 1,171,460 965,389 Banco de Crédito and Subsidiaries Banco de Crédito and Subsidiaries Complementary exhibits to the information (Pro forma - Unaudited) Complementary exhibits to the information (Pro forma - Unaudited)

(b) As of December 31, 2006 and 2005, direct loan portfolio is distributed among the following 5 Other assets and other liabilities economic sectors: (a) This item is made up as follows:

2006 2005 2006 2005

US$(000) % US$(000) % US$(000) US$(000)

Manufacturing 1,588,587 26,9 1,390,345 28,3 Other assets Mortgage loans 883,736 15,0 767,341 15,6 Operations in process 50,580 25,565 Commerce 668,967 11,3 605,214 12,3 Indexed certificates Citigroup 49,620 - Consumer loans 537,538 9,1 372,154 7,6 Deferred income tax asset 36,851 22,167 Electricity, gas and water 256,531 4,3 192,083 3,9 Accounts receivable 35,926 32,526 Micro-business 306,869 5,2 224,122 4,6 Intangibles 25,530 21,361 Leaseholds and real estate activities 228,697 3,9 212,973 4,3 Derivatives receivable 16,038 5,865 Mining 289,998 4,9 221,874 4,5 Value Added Tax 13,004 2,308 Communications, storage and transportation 250,844 4,2 200,462 4,1 Income tax prepayments, net 8,437 3,803 Agriculture 137,864 2,3 142,880 2,9 256 257 Deferred expenses 7,829 17,745 Financial services 220,205 3,7 81,573 1,7 Deferred workers’ profit sharing 6,252 3,960 Construction 66,970 1,1 61,902 1,3 Goodwill 5,060 5,060 Fishing 148,122 2,5 111,888 2,3 Investment in related companies 2,911 3,551 Education, health and other services 73,016 1,2 68,151 1,4 Other 3,853 12,767 Communitarian services 175,563 3,0 179,985 3,7 Other 76,557 1,4 75,182 1,5 Total 261,891 156,678

Total 5,910,064 100,0 4,908,129 100,0

2006 2005 (c) As of December 31, 2006 and 2005, the credit risk classification of the loan portfolio is as follows: US$(000) US$(000)

Other liabilities 2006 2005 Tax, payroll salaries and other personnel expenses 84,499 52,432 Accounts payable 56,807 45,824 Risk Category Direct Indirect Direct Indirect Operations in process 36,834 32,784 credits credits Total credits credits Total Deferred income tax liability 30,576 25,500 US$(000) % US$(000) % US$(000) % US$(000) % US$(000) % US$(000) % Transfers received in process 25,564 - Allowance for indirect loan losses. 20,308 21,141 Normal 5,328,465 90,1 1,114,887 95,2 6,443,352 91,0 4,212,538 85,8 881,475 91,2 5,094,013 86,7 Provision for sundry risks 15,178 18,768 Potential problems 341,187 5,8 33,787 2,9 374,974 5,3 397,387 8,1 68,333 7,1 465,720 7,9 Derivatives payable 8,065 8,129 Deposit Insurance Fund 2,816 2,683 Substandard 62,504 1,1 17,668 1,5 80,172 1,1 82,858 1,7 9,284 1,0 92,142 1,6 Contributions 2,296 32,993 Doubtful 120,644 2,0 3,565 0,3 124,209 1,8 145,274 3,0 4,694 0,5 149,968 2,6 Loss 57,264 1,0 1,553 0,1 58,817 0,8 70,072 1,4 1,603 0,2 71,675 1,2 Total 282,943 240,254

5,910,064 100 1,171,460 100 7,081,524 100 4,908,129 100 965,389 100 5,873,518 100 Banco de Crédito and Subsidiaries Banco de Crédito and Subsidiaries Complementary exhibits to the information (Pro forma - Unaudited) Complementary exhibits to the information (Pro forma - Unaudited)

6 Deposits and obligations (c) Time deposits are classified by maturity as follows: (a) This item is made up as follows:

2006 2005 2006 2005 US$(000) US$(000)

US$(000) US$(000) Up to 3 months 1,771,029 1,299,168 From 3 months to 1 year 545,930 402,988 Non-interest bearing deposits and obligations From 1 to 3 years 240,092 109,891 In Peru 1,567,273 1,255,775 From 3 to 5 years 192,806 158,409 In other countries 379,445 418,166 More than 5 years 70,334 138,181 1,946,718 1,673,941 Total 2,820,191 2,108,637 Interest bearing deposits and obligations - In Peru 5,264,759 4,029,211 In other countries 1,108,890 949,398 7 Due to banks and correspondents This item is made up as follows: 6,373,649 4,978,609 258 259

8,320,367 6,652,550 2006 2005 Interest payable 35,182 23,695 US$(000) US$(000) Total 8,355,549 6,676,245 International funds and others 269,867 195,145 Promotional credit lines 177,900 212,133 (b) As of December 31, 2006 and 2005, deposits and obligations are classified by type as follows: BCRP - Repo transactions - 510,593 Inter-bank funds 38,015 75,160

485,782 993,031 2006 2005 Interest payable 4,023 2,074 US$(000) US$(000) Total 489,805 995,105 Time deposits 2,820,191 2,108,637 Demand deposits 2,479,944 2,114,073 Saving deposits 1,952,087 1,656,470 Severance indemnity deposits 775,027 654,791 Client - Repurchase agreements 228,165 72,200 Bank and Deposit negotiable certificates 64,955 46,379

Total 8,320,367 6,652,550 Banco de Crédito and Subsidiaries Complementary exhibits to the information (Pro forma - Unaudited)

8 Bonds and subordinate notes issued (a) This item is made up as follows:

Weighted average annual interest rate %

2006 2005 Maturity 2006 2005

US$(000) US$(000)

Bonds Corporate bonds 6.23 5.89 Between January 2007 and March 2013 94,180 92,913 Leasing bonds 5.53 5.59 Between January 2007 and November 2010 187,800 227,167 260 261 Mortgage bonds 7.70 7.70 Between January 2007 and April 2012 25,270 29,108 Subordinated bonds 6.82 6.83 Between August 2007 and October 2013 101,799 96,554

409,049 445,742

Subordinated notes Subordinated negotiable certificates notes 120,000 0

529,049 445,742

Interest payable 4,288 3,488

Total 533,337 449,230

(b) The bonds and subordinate bonds issued as of December 31, 2006 and 2005, classified by maturity are shown below:

2006 2005

US$(000) US$(000)

Up to 3 months 20,056 18,977 From 3 months to 1 year 62,728 70,458 From 1 to 3 years 184,605 215,002 From 3 to 5 years 113,247 81,035 Over 5 years 148,413 60,270

529,049 445,742 Banco de Crédito BCP

RISK RATINGS

262 263 Banco de Crédito del Perú Apoyo & Asociados Internacionales S.A.C. Rating Category Definition Equilibrium Clasificadora de Riesgo S.A. Clasificación Category Definition Institutions with the highest capability Financial Strength A+ The organization has a sound financial of paying their obligations according to and economic structure. High capability the terms and conditions agreed upon. to pay its financial obligations according Company Rating A+ Said capability wouldn’t be affected in to the terms and conditions agreed upon. case of possible changes within the Said capability wouldn’t be affected in institution, the industry, or the economy. case of possible changes within the institution, the industry, or the economy. Short-Term Time Deposits CP-1+(pe) Higher capability to timely pay its financial obligations. Lowest credit risk. Short-Term Time Deposits EQL 1+ Highest quality level. It is certain they are 1st. Program of Negotiable Certificates of Deposit CP-1+(pe) going to pay interests and capital according Negotiable Certificates of Deposit Short-Term EQL 1+ 2nd. Program of Negotiable Certificates of Deposit CP-1+(pe) to the terms and conditions agreed upon

Leasing Bonds AAA (pe) Higher capability to timely pay financial Medium Long-Term Deposits AAA Highest capability of paying capital obligations. Lowest credit risk. Said and interests according to the terms Medium Long-Term Deposits AAA (pe) Negotiable Certificates of Deposit Long-Term AAA capability is highly unlikely to be and conditions agreed upon. Mortgage Certificates AAA (pe) affected by unforeseen events. Corporate Bonds AAA

Corporate Bonds AAA (pe) Leasing Bonds AAA

Mortgage Bonds AAA (pe) Mortgage Bonds AAA

Subordinated Bonds Very high capacity to timely pay Subordinated Bonds AA Very high capacity of paying capital financial obligations. Very low credit and interests according to the terms AA+ (pe) risk. Said capacity is not significantly and conditions agreed upon. There vulnerable to unforeseen events. are very slight differences between this rating and the previous one. Common Shares Highest solvency level and stability 1ª (pe) in the issuer’s economic results. Common Shares 1ª Highest solvency level and higher stability in the issuer’s economic results. Banco de Crédito BCP

BOARD OF DIRECTORS AND MANAGEMENT Management

Raimundo Morales General Manager

264 265 Carlos Muñoz Deputy General Manager Board of Directors Central Management Dionisio Romero S. Chairman José Luis Gagliardi Central Administration Manager Walter Bayly Central Planning and Finance Manager Luis Nicolini Director Jorge Camet Director Divisions Fernando Fort M. Director Pedro Rubio Wholesale Banking Eduardo Hochschild Director Reynaldo Llosa Middle Market Banking Juan Bautista Isola Director Miguel del Mar Region Lima 1 Reynaldo Llosa Director Luis Bouroncle Region Lima 2 Benedicto Cigüeñas Director Diego Cavero Corporate Banking Dionisio Romero P. Director Christian Laub Corporate Finance Juan Carlos Verme Director Gonzalo Alvarez Calderón International Business Luis Enrique Yarur Director Andrés Ferrand Leasing Felipe Ortiz de Zevallos Director Augusto Pérez Cash Management Services Germán Suárez Director Maritza Podestá Institutional Banking Executive Committee Javier Otero Retail Banking Division Dionisio Romero S. Executive Chairman Lionel Derteano Commercial Banking Lima1 Luis Nicolini Vice-Chairman Renzo Ricci Commercial Banking Lima 2 Fernando Fort M. Director Enrique Rizo Patrón Commercial Banking Lima 3 Reynaldo Llosa Director Fernando Fort G. Commercial Banking Lima 4 Juan Carlos Verme Director Carlos Morante Banking Provinces 1 Benedicto Cigüeñas Director Javier Maggiolo Capital Market Division André Figuerola Treasury and Foreign Exchange Operations Andrés Milla Intermediation - Credibolsa Piero Travezán Asset Management - Credifondo Pablo Rojas Private Banking

Jorge Ramírez del Villar Finance Division José Luis Muñoz General Accounting Aida G. Kleffmann Investor Relations Banco de Crédito BCP

Management Luis Eduardo Romero Process Banking Division CONTACTS Luis Verástegui Alternative Distribution Channels José Ortiz Central Process César Ríos Retail Banking Collections 266 267 Banco de Crédito BCP Ricardo Bustamante System and Organization Division Headquarters - Lima Italo Muñoz Business Solutions Calle Centenario 156, La Molina, Lima 12, Perú Dusan Luksic System Production Telephone (511) 313-2000, (511) 625-2000 Carlos Herrera System Development Offshore Branches Patricia Canales Information Technology Miami,United States of America Architecture and Integration 121 Alhambra Plaza, Suite 1200, Coral Gables, Florida 33134 Ivana Osores Process and Information Management Estados Unidos de America Telephone (305) 448-0971, Fax (305) 448-0981 Roberto Andrade Credit Management Division Panamá, República de Panamá Alicia Franco Foreign Bank Risk and Calle 50 y Aquilino de la Guardia, Torre Banco Continental, Corporate Credit Risk pisos 28 y 29, Apartado 6 8934 Alvaro García Middle Market Banking Risk - Lima El Dorado, Panamá, República de Panamá Alfonso Gavilano Middle Market, Provinces Telephone (507) 215-7311, Fax (507) 215-7323 and Business Banking Risk Luis Rivera Credit Review Banco de Crédito de Bolivia Pedro Bordarampé Work Out Unit Headquarters - La Paz Esquina Calle Colón y Mercado Nº 1308, La Paz, Bolivia Franco Giuffra Management and Human Telephone (5912) 233-0444, Fax (5912)239-1044 Development Division

Mario Ferrari Legal Division

Jorge Bellido Audit Division

Other Areas Fernando Dasso Marketing Pablo Miñán Risk Management Roberto Spada Retail Banking Credit Risk Alvaro Correa BCP Miami Branch Alcides Portocarrero Anti-Money Laundering Prevention Agustín Pestana Central Administration Alvaro Carulla Public Relations and Institutional Image José Ignacio Maúrtua Quality Juan Baldoceda Compliance Fernando Palao Corporate Secretary FINANCIAL HIGHLIGHTS In US$ millions*

269 2004 2005 2006 ATLANTIC SECURITY HOLDING CORPORATION Profitability Net Income 19.1 25.2 31.5 Net income per share (US$ per share) 0.32 0.42 0.52 Return on average equity 1,2 14.5% 15.9% 18.7% Return on average assets 1 2.3% 2.5% 2.5%

Operating Ratios Operating costs over total income 27.6% 21.6% 19.6% Operating cost over average assets 1 1.0% 0.7% 0.6% Balance Sheet (end of period)

Assets 880 1,115 1,380 Net loans 149 158 131 Trading securities and investments 3 519 582 800 Deposits 686 932 1,166 Net equity 151 165 180 Managed funds 721 997 1,375

Capital Adequacy (Nº of times) Total assets over equity 5.8 6.8 7.7

Loan Portfolio Quality Past due loans over total loans 0.2% 0.0% 0.0% Provisions over past due loans 2.1% 1.8% 1.9% Other Information Number of shares, net (in millions) 60.1 60.1 60.1 Number of employees 53 62 62

* Unaudited information, prepared in accordance with International Financial Reporting Standards (IFRS). 1 Averages determined from the average of the beginning, quarterly and final balances in each year. 2 Equity does not include gains on the investment in Credicorp. 3 Includes investments available for sale and long-term investments. Atlantic Security Holding

The expectation of a deceleration, coupled with the high levels of global Latin America Country Risk (bps.) vs. US Treasury 10-year Rate(%) 800 5.3

600 4.8 liquidity have increased global 400 4.3 200 demand for US Treasury Bonds and 0 3.8 2003 2004 2005 2006

UST 10 Brasil Colombia Mexico Peru have maintained an inverted yield curve Source Bloomberg

270 271 Comments on the Market 2006 was an important year for the global economy, since lower US economic growth could have led to a change process whereby emerging economies or the European markets might have gained importance in the international economic balance.

Thus, the expectations of moderate US growth, driven by the slowing down of the real estate sector, led the FED to interrupt its monetary policy after more than two years of increases, even though the levels of underlying inflation continued to be high. Nevertheless, and despite the under-performing residential sector, it was private consumption, coupled with the strength of the job market and personal earnings, that supported US economic growth.

Despite this modest growth, the markets were strongly driven by good consumption performance, which translated into good corporate results, pushing the S&P 500 index up to a level that had not been attained in more than six years, with accrued gains of 13.6% in 2006.

On the other hand, the expectations of an economic cool down coupled with high global liquidity raised global demand for US treasury bonds and kept the earnings curve inverted. Thus, the 10-yr US treasury rate posted a marked downward trend as of the middle of the year. The behavior of these rates produced a global reduction of spreads that, coupled with the lower US growth estimates for 2007, caused the US dollar to be depreciated by 11.4% vs. the euro and 13.7% vs. the pound.

The Latin-American markets posted good results, impelled by the high prices of the main commodities, which helped to generate a current account surplus in most of the region’s countries, especially those that focus on metal exports. The debt market was positively affected by these circumstances and the LEI index (Latin Eurobond Index) rose 10.5% in 2006.

For 2007, we expect markets to be influenced by the evolution of inflation as a major determinant of global monetary policy decisions. The evolution of global commercial imbalance and their possible adjustment will also be relevant, as well as greater participation of emerging countries, such as China, India and Russia in the new international economic equilibrium. Atlantic Security Holding

Portfolio Distribution 2006

Investment Grade Non-Investment Grade 73% 19% PROFITABILITY Hedge Funds 8% 6.31%

Equity 2% The profitability of Atlantic’s managed funds reached 6.31% in December 2006, a similar yield to that of a hedge fund Others 0% in the USA Source ASB

The contribution of ASHC to Assets Under Management and Deposits (US$MM) 272 273 In this way, a conservative increase was obtained in net interest margin; which was offset by a significant increase in the balance of interest-bearing assets, which increased 26.1% Credicorp’s results reached the figure 3,000 vs. the end of 2005. The said expansion was basically due to greater investments being 2,541 available for sale (excluding investment in equity assets and mutual funds) and higher of US$ 15.4 million, which remains 1,929 2,000 deposits in banks, which increased 45.2% and 19.6%, respectively, while net loans 1,375 1,407 1,166 dropped by 16.7%, totaling US$ 131million. 14.2% above its contributions in the 1,000 932 997 686 721 On the other hand, the ASHC strategy of focusing on its asset management business previous year 0 enabled fee income to grow 24.7%. The growth of funds under management was 38%, Deposits Investments Total partly driven by the rise in the price of customers’ shares, but also by direct fund raising which was initially fueled by the elections period, which caused savings to be transferred 2004 2005 2006 into investments abroad, a flow that persisted after the said period ended. Thus, one must Source ASB highlight the 25.2% increase in deposits from the public (+25.7% in long time deposits), which reached US$ 1,166 million. The profitability of Atlantic’s managed funds reached Financial Results 6.31% in December 2006, a similar yield to that of a hedge fund in the USA. During 2006, the Atlantic Security Holding Corporation (ASHC) had accrued income of The improved results were reflected in the financial ratios. Thus, ROAE increased from US$ 31.5 million, a figure 25% higher than the last year. The main factors influencing this 15.9% in 2005 to 18.7% at the end of 2006, while return on average assets remained at result include, essentially, the greater income from dividends and commissions, as well as 2.5% during the same period. Similarly, operating expenses increased less than income greater investment gains. totals (+9.4% vs +20.6%), helping to improve the efficiency ratio, which stood at 19.6% The greater income from dividends resulted from Atlantic’s permanent investment at the end of the year, having reached 21.6% in 2005. in Credicorp stock. This year, such dividend income was 40.6% above that of the In 2007, ASHC will maintain its low-risk investment strategy, trying to extend the duration preceding year due to Credicorp’s improved 2006 income vs. 2005. However, the of its portfolio while waiting for a yield curve with a slightly positive slope. As for asset income from dividends deriving from Credicorp is eliminated in the consolidation, management, the funds under its management are expected to continue growing, through as a result of which ASHC’s contribution to Credicorp’s results totaled US$ 15.4 new funds and products. Thus, Atlantic aspires to become the best investment manager in million, a sum, nevertheless, 14.2% above what it contributed during the last year. its field, with the best offerings of global products, to meet the needs of the profile of each Net interest income posted a lower increase (+7.2%) due to two factors, mainly: (i) customer by offering good profitability, diversification and risk control, as well as a good lower margins, which resulted from the dollar earnings curve maintaining a negative financial advisory team. slope during most of the year and (ii) the conservative investment policy, which continued to reduce the portfolio’s exposure to risk. This is confirmed when one observes that the share of investment grade fixed income securities in Atlantic’s portfolio rose from 52% at the end of 2005 to 73% in 2006, whereas speculative investments dropped from 36% of the portfolio to 19% during the same period. Atlantic Security Holding

Atlantic aspires to become the best investment manager in its field, with the best offerings of global products, to meet the needs of the profile

CONSOLIDATED BALANCE SHEET of each customer by offering good As of December 31, 2006 and 2005*

274 275 profitability, diversification and risk 2006 2005 Assets US$(000) US$(000)

Cash and due from banks 429,833 359,300 control, as well as a good financial Cash and due from banks 62 36 Deposits with banks (interest earning) 378,771 280,264 advisory team Overnight funds sold 51,000 79,000 Investments available for sale - net 738,565 520,530 Investments available for sale ASB 738,565 520,530

Loans, net 131,162 157,502 Loans 133,751 160,410 Less: provision (2,589) (2,909)

Other Investments 61,838 61,838 Premises and equipment, net 207 180 Other assets 18,196 15,208 Total assets 1,379,801 1,114,557 Liabilitites and Shareholders’ equity Deposits 1,166,114 931,701 Demand deposits 105,121 87,961 Time deposits 1,060,992 843,741

Borrowed funds 18,063 6,336 ASB 18,063 6,336

Other liabilities 15,993 11,720 Total liabilities 1,200,170 949,757 Shareholders’ equity 179,631 164,800 Capital Stock 60,605 60,605 Retained earnings at the begining 95,616 80,436 (-) Dividends paid (21,500) (10,000) Net income 31,485 25,180 Net unrealized gain / losses on investment 13,425 8,579

Total liabilitites and shareholders’ equity 1,379,801 1,114,557

* Unaudited information, prepared in accordance with International Financial Reporting Standards (IFRS). Atlantic Security Holding

CONSOLIDATED INCOME AND EXPENSES STATEMENT BOARD OF DIRECTORS AND MANAGEMENT For the years ended December 31, 2006 and 2005*

276 277 2006 2005 Board of Directors US$(000) US$(000) Dionisio Romero Chairman Interest Income and Expense Interest income 70,853 46,586 Luis Nicolini Vice Chairman Dividend income 16,687 11,866 Fernando Fort Director Interest expense (57,278) (33,921) Reynaldo Llosa Director Fernando Montero Director Financial Margin 30,261 24,531 Raimundo Morales Director Juan Carlos Verme Director Non-interest income (expenses) Commissions and fee income 6,136 4,922 Management Gains on investments 5,210 3,887 Carlos Muñoz Executive Chairman Net gains (losses) on foreign exchange transactions (717) 418 Javier Maggiolo General Manager Other income 774 798 11,403 10,025

Provision for marketable securities (1,856) (1,900)

Administrative expenses Salaries and employee benefits (3,993) (3,791) General and administrative expenses (4,008) (3,522) Depreciation and amortization (157) (142) Other expenses (166) (22) (8,324) (7,477)

Net Income 31,485 25,180

* Unaudited information, prepared in accordance with International Financial Reporting Standards (IFRS). FINANCIAL HIGHLIGHTS In US$ millions*

279 PACIFICO INSURANCE 2004 2005 2006 GROUP Profitability Net Income 13.2 7.0 53.3 Net income per share (US$ per share) 0.55 0.28 2.10 Return on average equity1 8.1% 3.9% 25.4% Return on average assets1 2.0% 0.9% 5.8%

Operating Ratios

Technical results over total premiums 9.0% 5.5% 9.3% Net rate of earned claims 72.4% 78.9% 72.0% Equity over total assets 24.5% 21.9% 23.8% Increase of Technical Reserves 27.7% 23.5% 16.2% Combined ratio2 96.7% 106.3% 104.4% Net claims / Earned net premiums 68.2% 76.1% 69.6% Operating expenses and fees/ Earned net premiums 28.5% 30.2% 34.8% Operating costs over earned net premiums 22.1% 21.5% 23.6% Operating costs over averange assets1 7.0% 6.2% 6.7%

Balance Sheet (end of period)

Assets 718 834 996 Investment in securities and real estate 524 639 776 Technical reserves 471 546 629 Net equity 176 183 237

Other Information Number of shares, net (in millions) 24.2 25.4 25.4 Number of employees 1,102 1,194 1,467

* Unaudited information, prepared in accordance with International Financial Reporting Standards (IFRS). 1 Averanges determined from the average of the beginning, and end period balances. 2 Combined Ratio does not include Pacífico Vida. Pacífico Insurance Group

Premiums and Contributions Development (US$ M) Life Risk Distribution by Branch Dec 2006

800,000 3.76% Burial 600,000 Individual Annuities 47.66% 3.78% Compulsory Group Life 3.84% Group Life 400,000 5.59% Group Life (Worker’s Compensation) 200,000

5.62% Credit Life 0 Disability and Survivorship 15.87% Dic 03 Dic 04 Dic 05 Dic 06 13.88% Ordinary Life Property and Cassualty Life Insurance Health Care Source SBS Source SBS

Property and Casualty Risk Distribution by Branch 280 281 Health Risk Distriution by Branch

Fire 21.94% 2.6 3% Others Individual Insurance Sds. Automobile 14.74% 3.55% Aviation 2.76% 3.85 % Personal Liability Group Insurance Group Life (Worker’s Compensation) 4.89% Transportation 87.13% 10.11% Medical Assistance 14.64% 4.91% Hull Marine 5 .00% Dishonesty and Robbery 6.75 % Personal Accidents SOAT 10.27% 6.84% Tecnical / Engineering Lines

Source SBS Source SEPS

The market’s total premiums and Comments on the Market Due to higher than expected interest One should mention that among the lines that posted a reduction in this market, Aviation stood out (-4.7%), basically as a result of an adjustment of premiums calculated on The total premiums of the insurance market up to December 2006 reached US$ 1,109 contributions up to December 2006 rates and the major capital gains the basis of actual hours flown. million, 10.2% above the figure for the same period in 2005. General insurance premiums reached US$ 1,109 million, 10.2% grew 12.1%, to US$ 612.4 million, while premiums for the Life, Private Welfare and Life provided by the stock exchange in In terms of net risk undertaken by the local insurance /industry, the system’s net premiums Annuity businesses amounted to US$ 496.6 million, a figure 8.0% greater than the previous earned increased 22.3% vs. the same period last year, due basically to fewer assignments to above the same period in 2005 year’s. Similarly, health insurance contributions up to December 2006 increased 11.6%, most markets, the Peruvian insurance reinsurers abroad. The market’s technical result ratio stood at 5.1% up to December 2006. totaling US$ 145.9 million system’s financial income posted a In terms of paying claims to insured parties, General Insurance net claims earned reached In the general risks segment, on December 31, 2006, the premiums for the Technical Lines 61.7%, slightly greater than the 60.6% reached in December 2005, due basically to a loss grew 27.4% vs. the same period last year, thanks to the economy’s greater buoyancy, 29.7% growth increase in all segments, excepting Civil Responsibility, Medical Assistance and Accidents, especially in the building, mining and manufacturing sectors. among other smaller ones.

Similarly, car insurance premiums grew 27.2%, driven by the growth of automobile sales Moreover, the system’s ratio of General Expenses over Net Premiums Earned, taking into financed largely by the banking sector. Transportation premiums increased 23.8%. account general and life insurance, reached 26.1% basically due to the 13.5% increment in administrative expenses. Personal Accident insurance increased some 19.7%, thanks to the possibility of one taking insurance out through alternative channels. Due to higher than expected interest rates and the major capital gains provided by the stock exchange in most markets, the Peruvian insurance system’s financial income posted a The growth of only 5.2% regarding Fishing Vessel Hull premiums was due mainly to the 29.7% growth. rates having been lowered, despite the previous years’ claims increase. Pacífico Insurance Group

Breakdown of Pacífico Loans Portfolio - General Risks (US$ MM)

50 27.7% 30%

40 25% 19.0% 20% 30 13.3% 15% 20 8.2% 10% 6.8% 6.1% 6.1% 4.9% 4.1% 3.8% 10 5% 0 0%

Fire NET PREMIUMS EARNED Others

Automobile +13.4% Hull Marine Transportation Personal Liability Personal Personal Accidents Personal Medical Assistance Medical Net Premiums Earned reached US$ 116.3 million, 13.4% greater than in the previous year, our Company’s greater retention Dishonesty and Robbery Source Pacífico Vida Line Tecnical/Engineering of the different risks having influenced this

Based on our target of being the Pacífico Seguros 282 283 In 2006, we also inaugurated our Transportation (21%), SOAT (Mandatory Insurance for Traffic Accident) - (20%), Personal Liabilities (15%) and Dishonesty and Theft (11%), whereas Hulls and Fire posted a drop As communicated in 2005, in the face of a changing local and international competitive customer service quality leaders, we new Institutional Headquarters, Torre of 24% and 12%, respectively, in the production of premiums. environment, Pacífico Seguros decided to modify its business strategy. This included defined a new mission: to serve the restructuring its management staff. Pacífico’s strategy for the 2006-2009 period was broken Pacífico, positioning it as the country’s Net Premiums Earned reached US$ 116.3 million, 13.4% greater than in the previous year, down into stages. our Company’s greater retention of the different risks having influenced this. customer most modern customer service center The first measures taken in 2006 consisted of defining the business’ key success factors On December 31, 2006, our General Insurance market share stood at 29.03%. and implementing a reorganization to develop competitive advantages around them. The Our portfolio’s net claims earned reached 64.1%, a lower figure than the 67.5% posted business model of our strategic partner AIG was used as the basis for this, as well as the in December 2005, due to the application of selective subscription criteria based on a best international risk management practices. permanent analysis of the portfolio and of the risks undertaken. All of this was part of the To face the challenges imposed by the new competitive scenario, to the company’s professional operations profit maximization strategy. and experienced team of insurers and risk subscribers, highly qualified professionals from a Pacífico Seguros Generales’ technical results equaled 12.5% of Total Premiums, a figure range of related fields of expertise were added, so as to form a work team capable of similar to the 12.1% achieved in 2005. combining the best practices of the banking, financial and risk control industries. At the closing of December 2006, Pacífico Seguros Generales posted Net Income of US$ 40.3 We have defined that the excellence in services will be our competitive strategy to be the million, a figure that doesn’t take into account its participation in the Life and Health market leaders, reason why we announced our new mission: “To serve the customer”. The insurance business; this amount equals 22.6% of total premiums and results in a return corporate philosophy we have developed explains this new path, as well as the attitudes over equity of 25.3%. that our staff should embrace. As part of its reorganization, the company changed its investments policy in order to employ With this new strategy, greater dynamic competitiveness was generated in the market, for the best international risk management practices and tools, incorporating the the benefit of the insured parties, as well as an improvement in the technical results of the recommendations of Solvencia II and Basel II, trying to develop a better match regarding business, maintaining our market share. The service campaign that we initiated, designed both terms and currencies vs. the company’s liabilities, especially in connection with to build on our image of soundness and good backing, and adding new differentiating obligations vis-à-vis our insured customers. The financial profitability earned during the year attributes (customer service, accessibility and closeness) to it, was very successful and highly is due to (i) the sale of an important shares package, mainly from Banco de Crédito, recalled during 2006. We also inaugurated our new Institutional Headquarters, Torre Pacífico, generating extraordinary gains of approximately US$ 40 million, with the objective of positioning it as the country’s most modern customer service center. improving our currencies matching between assets and liabilities, to (ii) the interest rates Going forward, we are sure that an impeccable implementation of the strategic plan developed growth of the last year and to (iii) the increase in the stock market value of our for Pacífico will enable the achievement of all of the established objectives and targets. investments in shares.

Pacífico Seguros Generales’ total premiums increased to US$ 178.4 million in December Pursuant to the Sarbanes-Oxley Act, which applies to Pacífico Seguros as a subsidiary of 2006, reflecting growth of 3.2% vs. the previous year. The segments that posted Credicorp Ltd., a company listed on the New York Stock Exchange, during this period the the greatest growth in premiums were Automobiles (37%), Technical Lines (25%), company undertook to adjust its internal reporting and management processes in order to properly manage operating risk and produce reliable financial statements, in line with Pacífico Insurance Group

Total Production by Branch (US$M)

60,000

40,000

20,000

0 2003 2004 2005 2006

Ordinary Life and Personal Accidents Group Life Compulsory Group Life Credit Life Individual Annuities Disability and Survivorship Group Life (Worker’s Compensation) Source Pacífico Vida

Both Apoyo Clasificadora de Riesgo international reporting standards. Thus, in 2006 the company has fulfilled the objectives 284 285 Our Premium Life product, launched Pacífico Vida that were set out and has become one of the few local companies to achieve such The total volume of premiums was US$ 117.2 million, 6.1% greater than for the same pe- and PCR Credit Rating have confirmed reporting and control standards. in mid-2005, continued to account riod of the previous year, which enabled the company to maintain a Life Insurance market Pacífico Seguros’ “A” Category The results of our company’s Risk Rating under the scheme established by the Banking and for a major portion of the company’s share of 23.03%. Insurance Superintendence have remained in the first risk category; thus, both Apoyo The Individual Life line of business grew 21.0%, mainly due to the greater productivity of within the Peruvian insurance market Clasificadora de Riesgo and PCR Credit Rating have confirmed Pacífico Seguros’ “A” Category earnings growth in 2006 the advisors, as well as of an expansion of the sales force. We expect this growth to be within the Peruvian insurance market. ongoing and, to this end, we are recruiting more experienced advisors in order to improve The investments on December 31, 2006 were distributed as follows: persistence and productivity (Management Development Programs) in the business. It is worth mentioning the mid-2005 launch of a new product called Premium Life, which contributed substantially to the increase in company earnings. Pacífico Vida maintains its leadership in the Individual Life market with a 38.0% market share. Investments (US$M)* Pacífico Seguros US$ % The annuities business line posted a 16.0% decrease in its gains and a reduction in the Stocks 39,597 18.24 market share from 21.0% to 17.7%, basically due to a conservative investment policy Premises 40,736 18.76 and to an adjustment in the survivorship charts for the different market segments. Trading Securities 85,799 39.51 The diversification of distribution channels is still in process of consolidation. Thus, in Time deposits 48,086 22.15 addition to financial system companies, we are distributing insurance plans through Mutual funds 2,914 1.34 department stores and public service companies.

217,131 100 We are committed to continue leading our products development by means of our alternative channels, through strategic actions that we have been implementing. Also, we are *Net of the investment in our subsidiaries, Pacífico Vida and Pacífico Salud. Source Pacífico Seguros. convinced that these actions are the vehicle that will complement the market development.

We continued to manage the survival and disability insurance of parties insured by Prima AFP, in addition to renewing the contract with AFP Unión Vida, currently merged with Prima AFP. Thus, Private Welfare grew by 26.0% vs. the same period the year before.

Similarly, the Group Life and Credit Life lines continued growing strongly thanks to new business with Banco de Crédito, such as credit cards and mortgages. In 2006, Vida Grupo increased its production in 27.3%, whereas Vida Crédito was the higher growth business line, reaching an increase of 30.0% compared to last year. It is important to mention that the dynamism presented by the country credit market contributed to the good performance showed by this business line during 2006. Pacífico Insurance Group

Total Contribution by Branches (US$M)

80,000

60,000

40,000

20,000

Income from investments helped improve our income this year. The new investments portfolio considers safer 0 2003 2004 2005 2006 long-term assets, with a substantial allocation of investments being made abroad with top rated issuers Group Insureds Group Life (Worker’s Compensation) Individual insureds Source Pacífico EPS

As for the investment management, the financial income generated by our investment 286 287 Pacífico Salud recorded contributions Pacífico Salud EPS portfolios continued growing and represent around 30% of the company income by the Pacífico Salud recorded contributions totaling US$ 77.8 million on December 2006, achieving end of 2006. The income growth by investment has allowed the improvement of net totaling US$ 77.8 million on 3.3% growth vs. the previous year. earnings and the increase of our equity value, as in previous years. December 2006, achieving 3.3% These business volumes have enabled us to reach a 54.7% share of the market of Health On the other hand, the investment portfolios value grew 16% in the year. Said assets correspond to local and international financial instruments issued by first level institutions growth vs. the previous year Providing Entities. This, coupled with Pacífico Seguros’ share of health insurance, allowed us which have the best credit quality. Thus, our investment quality allowed us to ensure the to consolidate our leadership of private health insurance, with a total market share of 48.7%. payment of our future commitments with our clients. In addition, the said portfolios are On the other hand, this year Pacífico Salud EPS’ total claims earned reached 79.4%, invested in different time terms, according to the expected payment date of our insurances. percentage below the net claims level of 85.6% for the same period the previous year, In December 2006, Pacífico Vida’s Net Income, before minority interest, reached US$ 15.1 basically due to lower net claims (-3.3%) and a 4.2% increase in total net contributions. million, which represents 12.9% of the total premiums generated at the end of the year During this year, our objectives were to consolidate the results of the business portfolio and and a 10.8% ROE. Thus, the company will continue to focus on markets and segments improve the service quality offered to the insured through the different care networks to that provide appropriate profitability for its shareholders. which they are entitled.

In December 2006, Pacífico Salud EPS’s Net Income stood at US$ 4.0 million, due mainly to the increase of premiums, a lower claims rate and a higher financial return. We will continue to pursue the analysis and implementation of practices that will allow us to stabilize results during the course of next year.

It is expected that new opportunities will arise for the development of our company, as we are prepared as an organization to face the growth of the market and the competition, with the support of our quality of service, the added value of our products and the comparative advantages that we can provide. Pacífico Grupo Asegurador

CONSOLIDATED BALANCE SHEET CONSOLIDATED INCOME STATEMENTS As of December 2006 and 2005* As of December 2006 and 2005*

288 289 2006 2005 2006 2005 Assets US$(000) US$(000) US$(000) US$(000)

Cash and due from banks 78,012 65,730 Total premiums 372,599 359,031 Investment, net 728,934 592,672 Premiums ceded 63,493 68,010 Property, furniture and equipment, net 46,986 46,179 Adjustment to thecnical reserves 50,020 68,483 Receivable and other assets 142,274 128,992 Net premiums earned 259,086 222,538 Total Assets 996,205 833,572 Net claims 186,522 175,500

Liabilities and Shareholder’s Equity Commissions, net 26,902 19,289 Technical income and expenses (-10,910) (-8,181) Technical reserves 629,405 546,093 Accounts payable and other liabilities 76,872 67,883 Underwriting result 34,752 19,568 Financial income, net 89,395 42,687 Total Liabilities 706,277 613,976 General expenses and provisions 61,239 47,924 Total Shareholders’ Equity 236,705 182,848 Translation result 1,591 262 Capital stock 71,665 71,665 Income tax and employee profit sharing 5,412 1,476 Unrealized gains 61,984 50,849 Net income for the year 53,343 7,018 Net Income Before Minority Interest 59,087 13,117 Other shareholders’ equity accounts 49,713 53,316 Minority interest 5,744 6,099 Minority interest 53,223 36,748 Net Income For The Year 53,343 7,018 Total Liabilities and Shareholders’ Equity 996,205 833,572 Contribution to Credicorp 14,538 5,617

* Unaudited information, prepared in accordance with International Financial Reporting Standards (IFRS). *Unaudited information, prepared in accordance with International Financial Reporting Standards (IFRS). Pacífico Insurance Group

BOARD OF DIRECTORS AND MANAGEMENT

290 291 Board of Directors

Calixto Romero Chairman

Dionisio Romero S. Vice Chairman Maximiano Lemaitre Director Reynaldo Llosa Director José Miguel Morales Director Luis Nicolini Director José Antonio Onrubia Director Carlos Palacios Director Arturo Rodrigo(*) Director Ricardo Rizo Patrón Director Dionisio Romero P. Director Eduardo Hochschild Director Management David Saettone General Manager

(*) Until September 2006 FINANCIAL HIGHLIGHTS In US$ millions *

293 2005 2006 PRIMA AFP Profitability Revenues 0.5 23.4 Net Loss -7.6 -20.7 Operating Ratios Operating costs over total income -1855% -288% Balance Sheet (end of period) Current Assets 9.8 4.5 Assets 18.3 230.6 Total liabilities 2.8 112.1 Net Equity 15.5 118.5 Other Information Funds under management (in millions) 255 4,206 Number of employees 893 2,489 Number of affiliates 51,838 997,963 Sales Force 821 2,225

* Unaudited information, prepared in accordance with International Financial Reporting Standards (IFRS). Prima AFP

Private Pensions System: Main Figures - December 2006

2004 2005 2006 Affiliates MM 3.397 3.637 3.882 % Change 6.4% 7.1% 6.7% Contributors MM (1) 1.304 1.367 1.423 % Change 4.7% 4.9% 4.1% Contributor-to-Affiliate Ratio (2) 40% 39% 38%

Sales Force 1,115 3,989 5,647 Assets under management US$ MM 7,894 9,494 14,404 % Change 24.1% 20.3% 51.7%

(1) Average contributors - 12 months (2) Calculated on average affiliates

Private Pensions System: Main Financial Indicators (1,2,3) As a consequence of the greater Comments on the market 294 295 2004 2005 2006 contributions and the good In the first half of 2006, the behavior of the private pensions system was underscored by the main events of 2005: Prima AFP’s entry and the start-up of the multi-funds system. Income US$ MM 196.5 198.7 185.9 profitability result, the portfolio under In the second half of the year, the most relevant fact was Prima AFP’s acquisition of Operating expenses US$ MM 90.4 114.7 182.9 AFP Unión Vida and the merger of these two concerns. Operating income US$ MM 106.0 83.9 3.1 management of the system reached Net Income US$ MM 76.4 69.3 25.3 In commercial terms, we witnessed major and growing transfer activity, led by a progressively increasing sales force, as companies sought to offset the outflowing transfer of insured (1) Financial system’s information based on local accounting standards. US$ 14 billion, 51.7% above the 2005 (2) Union Vida’s results as of August 2006 included in December 2006. customers with a larger number of inflowing transfers. As a result, the total number of (3) Results adjusted to Wholesale Index Price. closing figure inter-company transfers changed from roughly 48,160 per/month in January to more than 60,000 in certain months. On the other hand, competition for market share in terms of affilliated customers and the Private Pensions System larger sales force generated a high level of new affilliations during the first half of 2006 Based on the above, we conclude that 2006 was a year in which the pension system became (147,283), a figure 18.4% greater than for the same period during the previous year. stronger, with high growth and competition levels plus a high increase in the levels of funds, However, in the second half of the year, the competitive focus centered again on the which provides a stronger backing for future retirement requirements. transfers originated by the Unión Vida and Prima AFP merger. Taking into account the said 4 period’s deceleration, the system closed December 2006 with 3,882,185 affilliated parties, In financial terms, the companies’ income closed at US$ 185.9 million , 6.4% below the 6.7% above the December 2005 figure. About 78% of the new affiliates of 2006 were previous year, largely due to lower levels of average commissions, the product of lower basic pay-roll employees, vs. 81.4% in 2005. commissions and the application of permanence plans. Nevertheless, the income generation base increased following the increase of wages in dollar terms and the strong efforts The ratio of contributors closed the year at 38%, vs. 39% in 2005. This reduction continued undertaken to collect and generate greater contributions, supported by the progress of Peru’s the trend of previous years generated by the entry of large numbers of affilliates that are economy, avoiding a lower fall. largely non-contributing. Nevertheless, at the same time, we witnessed a major increase in the contributions of the system’s participants. A large part of this was due to an increase The increased competition continued to put pressure on operating expenses through higher in the contribution rate from 8% to 10%, but these results were also backed by the commercial expenditures, specifically on sales force commissions, and higher administrative economy’s advancing formalization, the dynamic behavior of collections and the growth spending in connection with commercial and marketing activities. Due to the above, the of voluntary contributions. system’s operating loss was US$ 3.1 million. Nevertheless, due to he good returns on reserve requirement funds, net earnings reached levels of US$ 25.3 million, though 63.5% As a consequence of the greater contributions and thanks, especially, to the good profitability below 2005. result of the portfolios under management, which were especially favored by the strong rise of local floating income securities, the portfolio under management reached US$ 14 billion, 51.7% above the 2005 closing figure. Companies’ stronger efforts to make their profitability outstanding, as an effect of Prima AFP’s entry and the Multi-funds system, were just as striking as this level of funds. 4 Comparisons include AFP Unión Vida results from january to august. Prima AFP

Prima strategies: to maintain a suitable body of highly trained salespeople, focus on the bidding CUSTOMERS FROM TRANSFERS 115,000 market, develop services for In 2006, Prima AFP achieved major commercial and operating success, as reflected in 115,000 new customers from employers, attain investment transfers and another 23,000 customers from affiliations, maintaining the highest levels of active contributors leadership in terms of profitability 296 297 Prima AFP Growth and Merger with Unión Vida Prima AFP was established in 2005 with the mission of obtaining the best conditions for guaranteeing the best pensions for its affiliates and with the vision of being the pension / risk, through active management funds management leader, attaining high levels of service, advice and profitability. On this basis, it developed a value proposal that includes four pillars: of the portfolio, and successfully (i) The backing of Credicorp, including BCP, which boasted a successful history covering more than 116 years in Peru; (ii) Sound investment experience; (iii) The system’s lowest administration commission: 1.50% with no conditions; and implement its operating system (iv) The proposal of providing better customer service and information.

Prima AFP’s main strategies to meet this proposal and reach the market with it were to maintain a suitable body of highly trained salespeople, focus on the bidding market, develop services for employers, attain investment leadership in terms of profitability / risk, through active management of the portfolio, and successfully implement its operating system.

Efficiency of the sales force, which was expanded in line with market requirements, coupled with effective communication to the market through physical means and advertising, enabled the company to consolidate its value offering in customers’ minds.

Thanks to the above, in 2006 Prima AFP achieved major commercial and operating performance, as reflected in 115,000 new customers from transfers and another 23,000 customers from affiliations, maintaining the highest levels of active contributors (estimated in approximately 90% vs. 38% for the industry) and average wages.

Commercial success replicated itself in the field of investments, in which the company fulfilled its profitability promises. Thus, in the first reporting opportunity, after the first year of the history of its funds was completed, Fund Two, the bigger one, attained the system’s highest profitability. Success continued in this and in other funds, which posted highly attractive results.

Continuing to pursue its strategy of fast growth and positioning in the market, on August 24, 2006 Prima AFP reached an agreement with Grupo Santander Perú S.A for the acquisition of 99.97% of Unión Vida AFP. The operation was conducted for a total of US$ 141 million. Of this amount, US$ 112 million came from a capital increase and US$ 29 million came Prima AFP

Prima AFP: Main Indicators

Dec-05 Jun-06 Sep-06 Dec-06 Funds under management US$ MM 255 713 929 4,206 Affiliates (1) 51,838 97,068 125,840 997,963 Contributors (2) 19,401 72,152 93,352 379,308 Adjusted contributor - to - affiliate ratio (3) 84% 89% 89% 38% Fund 1 Structure by Type of Asset December 2006 (1) Source: SBS. It doesn’t include month’s sales. (2) Company’s estimation. (3) Takes into account the transfer process. Fix Income (Lorng Term) Equity (Domestic) 76.02% 10.03%

Fixed Income (Short Term) Main post-merger indicators 8.52%

Current Operation + Current Accunts Number % Share 5.43%

Affiliates 997,963 25.7% Equity (Foreign Overseas) Contributors 379,308 25.5% 0% FUM 4,206 29.2% Source Prima AFP

form a BCP loan. Later, the company engaged in a Public Offer for the Acquisition of Shares 298 299 Fund 2 Structure by Type of Asset December 2006 directed at the minority shareholders.

In this operation an opportunity was identified for continuing to pursue fast growth toward Equity (Domestic) Equity (Foreign Overseas) 43.24% 1.58% market leadership, by merging Prima AFP’s technology, human capabilities and experience Fixed Income (Short Term) with those of Unión Vida. 12.32%

The merger period implied important operating and commercial challenges successfully Current Operation + Current Accunts 1.63% met by the company. In operating terms, an added effort involving another 225 people, who worked more than 60,000 hours, was needed. Commercially, Unión Vida resisted competitive pressure, reaching between September and November 36,974 Fix Income (Lorng Term) 41.22% gross transfers and 8,907 affiliations, with an income net result of 707 affiliates. Source Prima AFP The merger was successfully completed on December 1, giving rise to a company with greater human and technological capabilities and a consolidated market position.

Thus, the merged company has the following characteristics: Fund 3 Structure by Type of Asset December 2006 1 A sound team of professionals, the result of combining the capacity and experience of the staff of both companies, totaling, at the time of the merger, 275 administrative employees, Equity (Domestic) Fix Income (Lorng Term) 126 service and maintenance employees, 113 commercial supervision employees and 77.55% 17.55% 2,081 sales force employees. Equity (Foreign Overseas) 2 Being one of the largest companies in the market: the merged concern had as of 0.01%

December 997 thousand affiliates, and 25.7% of the system (ranking 2nd in the market). Current Operation + Current Accunts Its larger size will allow Prima AFP to benefit from the intrinsic synergies of the pension 4.14%

administration business. Similarly, the company totaled US$ 4.2 billion under management in Fixed Income (Short Term) December 2006; in other words, 29.2% of the system’s funds (ranking 2nd in the market), 0.75% a measurement that better reflects the portfolio’s quality and the income generating base Source Prima AFP than the number of affiliates . The fund composition after the merger is on the next page.

3 A company with more than 17,000 pensioners who will benefit, as well as the active affiliates and potential customers, of a broad national presence, after extending its coverage geographically by a total of 11 points of service and 19 points of sale. Prima AFP

Following the merger, Prima reached the end of 2006 consolidated as one Main Financial Indicators (US$ M) of the system’s largest companies, Dec-05 Dec-06

Earnings 459 23,425 Operating Loss (11,086) (44,149) with 997,963 affiliates, funds under Net Loss (7,597) (20,724) Total Assets 18,315 230,560 Total Liabilities 2,845 112,079 Net Equity 15,470 118,481 management totaling US$ 4,206

Financial Results 300 301 millions and more than 17,000 At the close of 2006, the company posted losses of US$ 20.72 million on income of US$ 23.42 million. This was the case because the company continued to expand its income base progressively while it was still in a growth stage and faced high commercial pensioners. Likewise, it extended its expenses. Similarly, following the acquisition, it absorbed Unión Vida incomes since September and also assumed its expenses and substantial merger charges. The main commercial charges were the basic wages and commissions paid to the sales force coverage geographically with for the acquisition of customers. As for merger expenses, what stands out in particular are the Unión Vida system write-offs, staff lay-off costs and the effect (loss in part) on the company’s accrued tax savings. Their impact was partly offset by the deferment of US$ 6.8 million in expenses connected with acquisition of the portfolio obtained during 11 points of service and 19 points the year, carried out according to the international financial reporting standards. In balance sheet terms, the capital increase of US$ 112 million stands out; this, coupled of sale with indebtedness amounting to US$ 29 million extended by BCP, enabled the company to acquire 99.97% of AFP Unión Vida shares. This operation mainly explains the increase in assets, liabilities and equity. Additionally, the company purchased the properties that were converted into the corporate headquarters where the staff will convene and gather. This implied in borrowing US$ 11.3 million in the form of a loan from BCP. Due to additional operating debt requirements, the year-end debt figure stood at US$ 55.4 million. Considering the company’s future flows and the support of its shareholders, this level of indebtedness does not put Prima AFP’s operation at risk, but rather makes it more efficient.

As for the investment in Unión Vida, after discounting Unión Vida adjusted equity, US$ 98.0 million intangible assets were recorded, to be amortized in the next years. After the US$ 32.8 million discounts regarding deferred taxes and interest, US$49.0 million were recorded as goodwill. From the amount recorded as intangible assets, US$3.7 million corresponding to the Unión Vida brands were written-off, taking into consideration that the company will not use them.

The potential for generating income was reflected in December, when the merged company tripled its November income, reaching over US$ 3.5 million. This high growth was reflected in the December collection of funds from contributors, which reached US$ 34.6 million, 32% of what was collected in the entire pensions system. Prima AFP

CONSOLIDATED BALANCE SHEET As of December 31, 2006 and 2005*

Concerning the merged company’s operating expenses, one should highlight that, 302 303 2006 2005 given the short amount of time since the merger process took place, they cannot be Assets US$(000) US$(000) taken yet as an indicator of future company expenses. Nevertheless, as of December, a downtrend began to manifest itself, confirming the synergies potential of the merger. Cash and due from banks 2,487 6,992 Legal reserves 49,237 2,531 Future Outlook Property, furniture and equipment 11,422 1,631 Other assets 20,337 3,638 In 2006, we expect a favorable economic context, based on the potential for growth Intangibles generated by Unión Vida’s acquisition 92,370 0 of formal employment and wages. Goodwill 49,047 0 Concerning Prima AFP, the company must consolidate its operations during 2007, though it Income tax and employee profit sharing, deferred 5,660 3,522 is being estimated that only by the end of the first quarter the main activities of the merger Total assets 230,560 18,315 process will have been completed. The company will continue to tender its attractive commercial offerings of service, price and profitability and, thanks to this, it expects to Liabilitites and Shareholders’ equity achieve good market share where the gain of new affiliates is concerned. Financially, the Deposits and obligations 2,613 299 company will maintain strong expense control so as to be able to reach satisfactory Due to banks 54,596 income levels. Income tax and employee profit sharing, deferred 42,491 Other liabilities 12,379 2,546

Shareholders’ equity Capital Stock 142,755 23,068 Unrealized gains 4,047 Retained earnings (7,597) 0 Net income for the year (20,724) (7,597)

Total liabilities and shareholders’ equity 230,560 18,315

* Unaudited information, prepared in accordance with International Financial Reporting Standards (IFRS). Prima AFP

INCOME AND EXPENSES STATEMENT BOARD OF DIRECTORS AND MANAGEMENT For the years ended December 31, 2006 and 2005*

304 305 2006 2005 Board of Directors US$(000) US$(000) Raimundo Morales Dasso Chairman Interest Income 174 173 Interest on bank deposits 174 173 Arturo Rodrigo Santistevan Vice Chairman Benedicto Cigüeñas Guevara Director Interest Expenses (1,274) (3) Walter Bayly Llona Director Interest on due to banks (1,264) Javier Otero Nosiglia Director Interest on securities (3) Fernando Dasso Montero Director Other interest expenses (7) (3) Management Net interest income (1,100) 170 Ruben Loaiza Negreiros General Manager Other Income 23,079 286 Alberto D’Angelo Dañino Commercial Manager Commissions 21,996 415 Ignacio Aguirre Rey Investment Manager Net gains on foreign exchange transactions 240 (102) Jaime Vargas Galdós Central Process Manager Net gain on sales of securities (30) (33) Julio Bravo Torrontegui Operations Manager Other income 872 5 Fernando Díaz Camacho Systems Manager Claudia Subauste Uribe Legal Manager Other Expenses (46,326) (11,575) Bruno Zapata Mansilla Risks Manager Personnel expenses (17,931) (6,340) Rossina Castagnola Vásquez Human Resources Manager Administrative expenses (11,466) (5,002) Michel Flit Pait Management and Finances Manager Depreciation and Amortization (10,246) (230) Other expenses (978) (2) Merger costs (5,705) 0

Employee profit sharing 751 368 Income tax 2,872 3,154

Net income (20,723) (7,597)

* Unaudited information, prepared in accordance with International Financial Reporting Standards (IFRS).