Letter to shareholders

Dear Shareholders:

On behalf of the Lima Stock Exchange (BVL) Board of Directors, which I have the honor to chair, hereby I attach the annual report, the most relevant financial results and the projects and initiatives of the company in which the BVL worked during 2015.

2015 has been a year of intense work and major breakthroughs, despite the downward trend in our trading volumes of our market and emerging markets in general. The international environment has been complex; however, work has been performed according to a strategic long-term plan, completing important projects for the stock market and the market, optimizing processes along the way, maintaining a level of profit in line with the circumstances of the market.

The most outstanding, last March, the Lima Stock Exchange and CAVALI announced the definitive consolidation of the two institutions as part of their strategy to strengthen our position in the market,

build better infrastructure and contribute to the development of a Capital Market with more robust institutions with greater strategic alignment, focused on providing the market with greater liquidity, more depth, better operating standards and greater business opportunities.

Also, in May, another important milestone was provided to us: the Lima Stock Exchange, after almost seventeen years, changed its operations technology infrastructure by launching the Millennium platform, which is supported by the London Stock Exchange (LSE), providing the Lima market an electronic trading system and high world standards. The implementation of this trading platform is the first in South America and has allowed incorporating improvements to the service BVL provides to the Brokerage Firms (SABs), especially in regard to the technological infrastructure on which market administration is supported in order to improve the efficiency, reliability and transparency levels.

In conjunction with the change of platform, eleven (11) indexes were released and joined the S & P / BVL Peru Select index introduced in December 2014. Thus, the BVL index indicator, General Index (IGBVL) and Selective Index (ISBVL), became the S & P / BVL Peru General and S & P / BVL Lima 25, respectively.

All developments mentioned so far are key and are part of a long-term plan, based on the study done in 2014 with the support of the international consulting firm Oliver Wyman with a view of turning Peru into a regional hub for the capital market by 2025. However, in August 2015, MSCI initiated a consultation process to reclassify Peru, from emerging to Frontier market, due to the growing concern for the falling liquidity of the Lima Stock Exchange in recent years. With no doubt, it was a surprise and a strong shock for our market and efforts, as BVL, we were performing. However, thanks to a quick response, and the work done together with the government, we achieved that, in September the same year, MSCI confirmed our country as an Emerging market, with the caveat that the Peruvian case would be analyzed again in May 2016. To date, we are working actively with the authorities, issuers, brokerage firms and investors to overcome this possible reclassification in June and we are confident that we will succeed.

Regarding the Integrated Latin American Market (MILA), in 2015, some initiatives that would allow its continuous progress were further developed. Mexico was fully incorporated in January. Peru and Colombia were incorporated into the system of global custodians, which facilitates access of foreign investors to operate directly through the MILA platform.

Towards the end of the year a milestone appeared in the MILA: the mexican real estate company Cadú made successfully the first initial public bidding. At year end, adding debt markets within the scope of MILA was approved in the four markets; we have entered the implementation stage.

We are also working and analyzing, within the MILA and the Pacific Alliance scope, challenges and proposals for greater dynamism in terms of cross-border transactions between the four markets.

I would also like to list some other initiatives that were part of our work plan and have been implemented this year:


  • automatic registration of foreign securities was approved in April;
  • in May, the regulatory framework of the new model of Securities Lending was approved;
  • in September, the law that restores the Exemption of Tax on Capital Gain was approved to be in force from 2016, an initiative which we had been pushing since that exemption was removed in 2009. The tax regulation was also approved to allow the operation of Market Creators.
  • Also, in September, SMV authorized the entry of algorithmic orders.

On the other hand, committed to the development of good corporate governance practices for the eighth consecutive year, the BVL presented the portfolio of the Good Corporate Governance Index (IBGC), which recognizes companies with good corporate governance practices and rewards them with the BVL Key provided they comply 100% with these principles.

In this presentation, BVL KEY was awarded to BBVA CONTINENTAL. For the second consecutive year, with the co-leadership of EY, La Voz del Mercado survey was conducted on corporate governance issues within companies listed on the BVL, collecting the views of approximately 400 specialists, among which there are Stockbrokers, Banks, Risk Rating Agencies, Research Entities, institutional investors, academics and specialized journalists. The company Credicorp was recognized by La Voz del Mercado for the second consecutive year. We are convinced that La Voz del Mercado, has not only opened a channel of communication and space to dialogue on the issue of corporate governance with major "stakeholders", but has also helped to generate greater awareness of its importance in the process to add value to issuers and our market in general.

PERUFID (FINANCIAL AND INVESTMENT DAY) was held in November, a discussion forum organized by the Lima Stock Exchange as a space for discussion and a response of the different actors in the Peruvian financial market regarding the definition of a joint and concrete work agenda to allow develop our market and attract new sources of financing and new investment opportunities. This event managed to summon more than 300 participants linked to financial and capital market in the region with top level speakers. This year we will have the second edition to continue with the agenda that we have set.

On the other hand, the BVL continues with a leading role in the inPerú association, which aims to export our country to the world and to present the investment opportunities that Peru offers. During 2015, inPerú conducted two major Road Shows: the VIII Road Show Brazil 2015 and IX Road Show Asia 2015.

In addition, in August 2015, the Lima Stock Exchange joined, as a founding member of the Responsible Investment Program (PIR), with investors, financiers and representatives of the Peruvian Government, in order to further promote the program that seeks to encourage the responsible investment in the financial sector. PIR was launched in December 2014 in conjunction with Grupo Sura and COFIDE; also, it is supported by the Ministry of Environment (MINAM), Carbon Disclosure Project (CDP), Principles for Responsible Investment of the United Nations (UN PRI), Sustainable Stock Exchanges (UN SSE) and the Inter-American Development Bank (IDB).

The BVL assumes its role as an agent of change of the society and its commitment to improve the environment in which it operates; therefore, as in previous years, and as part of its Corporate Social Responsibility program, the BVL actively participated in two of the most representative events of our country: Telethon 2015 -on behalf of disabled children and youth at Clínica San Juan de Dios through the ‘Campanazo de la Economía Peruana’ (Peruvian Economy Bell), since it brought together public and private sector representatives; and, for the first time, two important ministers of our country: Mr. Alonso Segura, Minister of Economy and Finance; and Mr. Piero Ghezzi, Minister of Production.

All of this, aiming the business sector and citizens commit with the development of a culture of solidarity in our country. Similarly, thanks to a solidarity spirit, the BVL and its partners were able to raise the necessary funds to contribute with Operation Smile Foundation and thus change the lives of 32 children with cleft lip and cleft palate.

I consider also important to provide an overview summarizing, above all, the behavior of the international market and how it has affected our economy, more specifically, the Lima Stock Exchange during 2015.

Regarding the behavior of the world economy, it is estimated that in 2015 the overall growth rate would have been 2.4%, similar to 2013, but lower than that of 2014 (2.6%); highlighting the projected growth of the United States (2.5%) and the United Kingdom (2.4%), the decrease in Russia (-3.8%), the recovery of the euro zone (1.5%) and well-known stagnation of Japan (0.8%).

Within the group of developing countries, the expansions achieved by Asian countries of eastern and Pacific led by China (+ 6.9%) and Indonesia (+ 4.7%) and the countries of southern Asia, led by India (+ 7.3%) and Pakistan (+ 5.5%) are compared to the recession projected for Latin America (-0.7%), region where, in 2015, the critical situation of Brazil (-3.7%) and Venezuela (-8.2%) prevailed.

Some events and circumstances that affected the stock markets in the world throughout the year were: the slowdown in China, considered the world's largest economy; the decrease in prices of raw materials (especially oil); expectations on the Federal Reserve decision to raise its benchmark rate; the appreciation of the US dollar; the plight of Greece - which continued to disrupt the stability of the euro zone; and in the case of the BVL and MILA, the possible reclassification to the frontier category of our market.

With respect to the Peruvian economy, by 2015, growth stood at 3.3%, below the target of 4% set by the Ministry of Finance earlier this year. Some of the activities that have contributed the most are: Mining, Other Services, Financial and Insurance, and Trade; on the other hand, construction and manufacturing were the industries that recorded major setbacks in the past year. It is noteworthy that the economy accelerated in the different quarters, reaching an increase above 6.3% in December.

On the other hand, inflation experienced a significant increase, reaching 4.40% - the highest annual rate since 2011, exceeding for the second time the target range of Banco Central de Reserva (between 1% and 3% ).

Also, another factor contributing to the price rise of the economy was the depreciation experienced by our currency, an event that was common worldwide due to the strengthening of the US dollar. Thus, the exchange rate- which ended in 2014 at 2.98 soles- began to rise moderately in the first half (3.16 soles in June), recording a further increase in the second half of the year and closing December at 3.41 soles .

The BVL stock market experienced, in 2015, a severe decrease in price terms, the largest after the collapse of the global financial crisis in 2008. In terms of trading, the figures clearly show the fall of the demand for shares during this period: the amount transacted during 2015 was the lowest in the last eleven years, while the number of operations performed was the lowest since 2002.

According to the above, in 2015, the BVL numbers clearly showed the growing aversion to risk that prevailed in the market, especially in the stock market. The total annual amount negotiated was 3,516 million dollars (-39% compared to 2014), daily average of 14.18 million, almost a third less than the average of 2014 (22.97 million dollars). The most significant reductions occurred in the cash variable income mechanism (-50.6%) and reports (-35.2%). For fixed income, the negotiated amount reached 1,023 million dollars, showing only a slight reduction of 2.64% compared to that obtained in 2014.

The indexes of the Lima Stock Exchange ended the year 2015 experiencing setbacks for the third consecutive year: S & P BVL Peru Select decreased 27.3%, while S & P BVL Peru General, S & P BVL IBGC and S & P BVL Lima 25 did so in greater proportion: -33.4 %, -33.5% and -36.3% respectively. By translating these variations in dollars, losses are quantified between -36% and -44%.

At the end of 2015 the number of issuers with securities listed in the BVL was 276, remaining without much change from the previous year. However, it should be noted the addition of fourteen (14) new issuers, including Banco Agropecuario (Agrobanco), Cosapi S.A., Administradora Jockey Plaza Shopping Center S.A., United Cacao Limited, Crecer Seguros S.A. Cía. de Seguros, Termochilca S.A., Tekton Corp. S.A.C. and Electrovía S.A.C; the last two with fixed income securities listed in the Alternative Investment Market (Mercado Alternativo de Valores, MAV).

If I had to summarize this year I would say that despite the ups and downs suffered in 2015, we are proud of the achievements, because despite the complicated international environment

this year we have managed to settle solid foundation that will allow us to meet not only with short and medium term goals- such as increase the liquidity of our market- but also with the firm commitment to become the financial center of Latin America.

To conclude this report on the management and results for the year 2015, I would like to thank the shareholders for their trust. Also, a special mention to the members of our Board who accompanied me the last 3 years, the General Management and all our employees for the hard work performed in a complex year for all.