Market Profiles

FII Market Entry Requirements for Peru

RBC IS operates a segregated account structure in this market.

Please refer to 'Market Account Opening Requirements' for information on the market requirements. Clients are requested to refer to the requirements for information purposes only.

For further information or support around accessing this market, please contact your RBC IS representative.

The Bolsa de Valores de Lima (BVL) 
Lima Stock Exchange (BVL) is a for-profit organisation and was incorporated in 1970, and privatised in 1992. Through an Extraordinary General Shareholder Meeting held on November 2002, shareholders approved to change the status of the BVL to a public company. Since January 2003 the BVL is considered a public company. Trading on the BVL is done through the Electronic Trading System called Millennium. Brokers can access Millennium through workstations either in their offices or on the floor of the BVL. Equity and fixed income instruments can be traded on the BVL. Centralised Trading Mechanism (MIENM), a board of the BVL, trades short-term fixed income instruments.

The Electronic Trading System of the Lima Stock Exchange is Millennium. Open outcry is used only as the back-up mechanism. The previous Elex trading platform is no longer available since the implemention of Millennium system in the market.

(*)The cut off times of the Opening Session and the Closing Session for securities traded in Peru are subject to a random range that extends up to 120 seconds before and after the time indicated above.

ISIN (International Securities Identification Numbering): Yes

Other: Proprietary numeric and alphanumeric codes

Superintendencia de Mercados de Valores (SMV): The main regulator in the market is the National Supervisory Commission for Companies and Securities, previously namedthe Comisión Nacional Supervisora de Empresas y Valores (CONASEV).

Effective from July 28, 2011:

• The SMV will be a specialised technical body under the Ministry of Economy and Finance (MEF), with functional, administrative, economic, technical and budgetary autonomy.
• The SMV will aim to ensure investors protection and market efficiency for those under their supervision, and also to lookout for the correct formation of prices.
• The functions of the SMV are to regulate, supervise and promote the Peruvian stock market, and to monitor the completion of auditing standards by the audit firms authorised by a College of Public Accountants of Peru and hired by people supervised by the SMV. For this, the SMV can provide general rules which must be compatible with international auditing standards.
• The SMV will have a board chaired by a superintendent, who shall be appointed by the Executive for a period of six years (non- renewable for the immediate following term).
• The Board of the SMV will consist of five members, one being the superintendent. The other four are appointed by the Executive: one nominated by the MEF, one nominated by the Central Bank and one nominated by the SBS, and one independent director.
• The powers of the board of the SMV are to approve, modify or extend the annual budget of the SMV, as well as control it. It is also possible to propose, through the MEF, bills on matters within its institutional competence.
• The Act also states that the SMV and the Superintendencia de Banca, Seguros y AFP (Superintendence of Banks, Insurance Companies and Pension Funds - SBS) will share the information they have regarding corporate entities and individual people under their jurisdiction, including information protected by bank secrecy and condition of anonymity.

Banco Central de Reserva del Perú (BCRP): The Banco Central de Reserva del Peru (BCRP or Peruvian Central Bank) regulates currency, foreign exchange, and interest rates through several monetary policy instruments such as the purchase and sale of foreign currency, bids of local currency certificates of deposit, and credit facilities.

Superintendencia de Banca y Seguros (SBS): The Superintendencia de Bancos y Seguros (SBS), the Superintendency of Banks and Insurance Companies, supervises all banks & insurance companies operating in the market, including the provision of custodial services, as well as consumer credit companies & private pension funds. The SBS is an autonomous institution and reports through the Ministry of Finance.

Securities can be in either dematerialised or physical form. However, the Exchange Floor Operations Regulation indicates that securities traded in the BVL must be dematerialised. Therefore, any investor wishing to trade its securities in the BVL must have its securities dematerialised, and held in CAVALI's book entry system.

There is no standard trade size for equities with nominal value equal to or greater than PEN 1.00. For those equities with nominal value less than PEN 1.00, trading is done in lots of minimum PEN 1.00. For those equities whose market price is so low that they have minimum allowed price variance (currently equivalent to PEN 0.01), the negotiation is in lots. The minimum negotiation unit for the selected securities are in sets of 10 shares, however, negotiation is possible in trading units of 100, 1,000, 10,000, 100,000 or 1 million.

Trades that involve 5% of the company's capital have to be informed to the BVL and published to the market prior to its execution.

For equities, the minimum price variation is PEN 0.01.

* There is no formal "money market". Trades usually settle the same day.

The securities involved in the implementation of the change from T+3 to T+2 settlement cycle on September 5, 2017 are as follows:

Products in scope

Equity:
- All stocks listed
- Common shares
- Investment shares
- Foreign companies

Placements:
- IPO
- Tender Offer

REPOs:
- REPOs (1st leg)
- Securities Lending
(1st leg)

ADRs on exchange
ETFs on exchange
Subscription
Certificates

Products not in scope

Fixed Income & Money Market:
- T-Bills
- CDs
- Commercial Paper
- Corporate bonds
- Sovereign bonds

PEN & USD

Equities and fixed income instruments can be traded in both physical and book-entry form. Trade terms are negotiated directly between the counterparties.

Trading hours: Monday to Friday: 09:30 – 14:00 (Office hours)

Book-Entry:Settlements processed through CAVALI do not require transfer documents. Once trades are matched, on settlement date, when the selling party complies with the delivery of the securities and the corresponding payment is executed by the counterparty broker, a book-entry transfer is processed immediately through the subcustodian's master account at CAVALI. Over-the-counter trades executed at the exchange must also be settled through CAVALI.

Banco Central de Reserva del Peru (BCRP) announced the implementation of mandatory versus-payment settlement for all of its issued securities. Effective from May 23, 2011, in order for the versus-payment settlement to take place, the seller and purchaser must have either the securities or funds available in the accounts at the BCRP on settlement day (through a financial institution that holds an account with the BCRP). As part of the settlement process funds and securities will be available for settlement in the BCRP account, however, according to the regulation set forth by the BCRP, settlement can occur within three business days from the date when the settlement instructions are sent by the local participant. As a result, during this period the purchaser or seller of BCRP CDs will have made securities / funds available to the BCRP but will not receive securities / funds until actual settlement takes place.

There is a proposal to require investors execute sovereign bond transactions on a DVP gross basis via the authorised participants of the Centralised Trading Mechanism of Sovereign Debt. The implementation is still pending.

NB the BCRP typically issues Certificates of Deposit (CDs), which should not be confused with Sovereign bonds that are issued by the Ministry of Economics and Finance (MEF).

Physical: Dematerialised securities can be traded OTC. Physical certificates must be dematerialised with CAVALI prior to trading, a process that can take two or three days depending on the issuer.

Foreign investors can perform short selling with shares listed in Lists 1 & 2 of both Common and Investment shares of the Securities Reference table (TVR orTabla de Valores Referenciales), which indicates the most liquid securities. For an updated list of securities listed in the TVR table, please refer to the following link:http://www.bvl.com.pe/valores_ref.html

Same day turnaround transaction was implemented on the BVL as a new mechanism of negotiation called Day Trade, which allows the investor to buy securities through short selling during the same exchange trading session and with the same local broker. This strategy can only be used with those shares and securities representatives of rights over shares, which are allowed to execute short selling.

All transactions of a Day Trade must be executed during the same exchange trading session, under the same investor and through the same Brokerage House. The transactions involved in a Day Trade strategy will be executed through Millennium as any other exchange floor transaction. In addition, settlement of these transactions will be handled by CAVALI in the same cycle (T+2) and procedures as any other exchange floor transaction.

Day Trade transactions cannot be settled through a custodian in the Peruvian market. Local Brokers register Day Trade in the Millennium system as a "Normal Settlement" rather than a "Custodian Settlement". Therefore, custodians do not register this type of transactions.

To avoid fails in turnaround trades, investors should ensure that the brokers insert the order in the system as a day trade.

CAVALI S.A. ICLV is the independent securities clearing house.

Banco Central de Reserva del Perú (BCRP)was appointed the new clearing bank for CAVALI on November 22, 2005.

CAVALI S.A. ICLV - CAVALI acts as a record-keeper and central registrar for securities issued in book entry form. Securities held at CAVALI are dematerialised. All securities are eligible to be deposited into CAVALI, with the exception of BCRP CDs and CDRs, which are held in book-entry form at the BCRP itself.

CAVALI also acts as the settlement agent for book-entry form securities and cash movements, transactions executed on the stock exchange between brokers, and OTC transactions for book-entry form securities.

BIS is an international organisation which fosters cooperation among central banks and other agencies in pursuit of monetary and financial stability. The Committee on Payments and Market Infrastructures (CPMI) uses three common structural approaches, or models, to categorise the links between delivery and payment in a securities settlement system.

Peru uses BIS Model 2 - Gross simultaneous settlement of securities followed by net settlement of funds, with finality at 13:30, 15:45 and 17:45.

Book-Entry: CAVALI maintains registration records for all shares traded on the exchange. Matched positions are registered in the buyer's cavali code as a ledger balance on trade date. Securities are dematerialised. CAVALI's record keeping system identifies both the investor and local brokerage house that performed the transaction in the market.

Provided that the pre-match is successful, on T+2 the custodian bank representing the selling party will authorise the release of the securities through an electronic link with CAVALI.

During the financial clearing process brokers have to cover any negative net cash position with the clearing bank, which is the Central Bank (BCR):

Settlement is done through three processes: settling banks with net debtor position fund CAVALI's settling account in the BCR, in the first process (15:00) in the second process (17:30) and in the third process (18:00).

Transfer of funds for cases in which the net positions are modified due to counterparty delivery failure. (1st process: 15:00, 2nd process: 17:30 and 3rd process to 16:30).

Transfer of funds for cases in which the net positions are modified due to operations withdrawals (1st process: 15:00, 2nd process: 17:30 and 3rd process 16:00).

Transactions must comply with two requirements in order to be considered in the clearing process run by CAVALI:

• availability of funds must be confirmed with the cash clearing bank to perform the cash clearing process, and;
• availability and delivery of securities from the selling party must be confirmed in order to perform the securities clearing process.

After confirming the availability of funds, CAVALI performs the settlement of securities by making available the securities held as a ledger balance, crediting the buying party's account.

The broker representing the selling party will transfer the sale proceeds to the selling party's custodian. Most broker/custodian payments are effected through interbank transfers which have same day value (based on an informal agreement among market participants, but it is not formally regulated).

Physical: Physical certificates can be requested directly from the issuing company.

CAVALI acts as a central registrar. On trade date, CAVALI automatically performs a ledger transfer of the securities from the selling party's CAVALI account to the buying party's CAVALI account. Entitlements are based on settled positions. Registration is done under the name of the final registration and transfer of the beneficial owner associated with the CAVALI code. Registration in general terms has no associated costs.

Ownership is granted on T+2 once financial settlement occurs, and the securities are available for onward delivery.

Share holdings may be required to be disclosed by the beneficial owner, particularly when holdings reach or exceed prescribed disclosure limits. Investors must ensure that they comply in full by reporting such holdings to the appropriate organisations for this market, within the timeframe required. If you have any questions regarding this issue we encourage you to consult your legal counsel.

Failure to comply with reporting requirements may lead to penalties and/or other sanctions.

The Peruvian Law recognises beneficial ownership, thus all the securities registered at the Depository are registered by beneficial owner. However, the reporting of shareholders, or if a prescribed limit has been reached, is mandatory for the issuer and not the final investor.

SMV, the local securities market regulator, requires local companies (listed) to disclose its shareholders with more than 0.5% participation each quarter. There are no reporting requirements on behalf of shareholders.

Failed trades are reported by CAVALI to the counterparty broker who must make a decision by 17:30 on T+2 to enforce or surrender the trade. Buy-ins occur on T+4 and follow the normal settlement cycle.

Securities lending was approved by SMV Resolution 021-99-EF/94.10 on January 26, 1999, and implemented on February 8, 2002 for stock exchange only. Currently there is little activity on securities lending transactions.

Securities Lending can only be done with securities defined by the Lima Stock Exchange in the "Tabla de Valores Referenciales" (TVR) or Securities Reference Table.

Securities Lending are done exclusively through the Millennium system of the Lima Stock Exchange, in the regular trading session in the continuous negotiation modality.

The lender of securities is entitled to the economic rights of such securities.

Cavali's Settlement Fund - Cavali maintains a settlement fund, "Fondo de liquidacion", which as of December 31, 2012 was equal to USD 5.631 million. The fund is designed to protect direct participants from the risks derived from the failure in the delivery of securities, funds and fixed income instruments.

SMV will publish on its website information on brokers who do not comply with the fund.

The fund covers the differences resulting from the buy-in operations for equities resulting from the failure in the delivery of funds or shares. In addition it covers interest on arrears that may have been accrued as a consequence of the settlement failure. The amount an investor can reclaim from the fund is PEN 100,000.

Effective from May 9, 2006 CAVALI has modified the section regarding the settlement fund of its Internal Regulation to incorporate fixed income trading in the calculation of the settlement fund. As a result of this modification, the calculation of the amount of the settlement fund and the coverage of the fund in case of a failed transaction will incorporate fixed income transactions.

To ensure compliance with Anti-Money Laundering legislation, the subcustodian has established a global policy to ensure that its business' are in compliance with all applicable U.S. and local regulatory requirements. This global policy requires that all local businesses world-wide operate an anti-money laundering program that provides for detailed local practices, procedures and internal controls to effect compliance with applicable law, and to implement the standards set forth in the global policy. Details of local practices, procedures and internal controls must cover, as a minimum:

• Introduction, validation and ongoing review of customers ("Know Your Customer").
• Appropriate methods of monitoring so that suspicious customer activity can be detected, appropriate actions can be taken, and reports can be filed with government authorities in accordance with applicable law.
• Provision of Anti-Money Laundering training to all appropriate staff.

This is an FII market. Please contact your RBC Investor Services' Client Manager before making portfolio investments.

There are no Market Entrance requirements in the Peruvian market.
However for trading securities listed at CAVALI, foreign investors must be registered and obtain a CAVALI code (RUT). The CAVALI code must be quoted for each trade. This identification is obtained when opening safekeeping accounts in the Peruvian market.

In general terms there are no restrictions on the type of instruments or sectors in which foreign investors can participate. However, there are exceptions for those industries which are considered to be of a strategic or of national interest:

• Aeronautic: at least 51% of the company's capital must belong to Peruvian entities or individuals.
• Telecommunications: includes media such as TV and radio. Foreign companies interested in providing services in Peru must appoint a domiciled legal representative, or become domiciled entities.
• Oil: foreign companies interested in Peru must constitute either a local branch or society.
• The Depository (CAVALI) has a maximum ownership limit per investor (resident or non resident) of 10%.
• Any individual investor or entity wishing to hold 10% or more of the shares of the Lima Stock Exchange (Bolsa de Valores de Lima) must obtain prior authorisation from SMV.

There are no restrictions on the repatriation of sale proceeds and income entitlements.

Effective from September 1, 2010, the Peruvian Central Bank has increased the rate of the mandatory reserve requirement (MRR) from 65% to 120% to be applied to deposits and obligations in Peruvian Sol (PEN), held by non-resident financial institutions in the local banking system. The MRR is the reserve that local banks must have at the Central Bank with balances exceeding the 120% attracting fees, which will be recharged to clients.

An operational limit (bank limit) will only apply to those cash balances that exceed the reserve balance as held by the local subcustodian as at August 26, 2010 or the average balance held in the name of non-resident financial institutions during the month of August 2010, whichever is greater. The bank limit is handled as a portfolio, meaning that it is applicable to the total balance held at the subcustodian rather than the individual balances held by each individual client account. Any balances that remain under this bank limit, will remain at the current 65% reserve requirement, and therefore have no impact to foreign investors.

There are two limits of which investors should be aware:

• The first limit is equal to our subcustodian's operational limit as of December 31, 2007 and will have no impact on non-resident financial institutions.
• The second limit will be determined by choosing the lower value between RBC Investor Services' subcustodian's closing balance as of August 26, 2010 and their August average balance held in the name of non-resident financial institutions. If this limit is exceeded the 20% fee will apply.

If the average monthly portfolio balance exceeds the bank limit, our subcustodian will need to comply with the 120% reserve requirement on the excess balance over the limit. In this case, a fee will be applied based upon the average total monthly balance over the whole portfolio and each client will be charged a pro-rated amount based upon the percentage of their individual account balance to the total portfolio. The fee is based upon the average overdraft interest rate as published by the Peruvian Bank Superintendence on a daily basis and will be calculated as follows:

Fee = (Average Interest Rate x Excess of Second Limit x 20% x number of calendar days in the month)/360

The Peruvian Sol (PEN) is freely convertible. Free remittance of funds denominated in foreign currency into the country is allowed based on Supreme Decree No. 094-88-EF issued in 1988 by the Ministry of Economy and Finance. Peruvian foreign exchange rates are established on a free floating exchange rate mechanism based on current demand and supply.

Central Bank's BCRP's electronic clearing system, Liquidación Bruta en Tiempo Real(LBTR) became operational on February 1, 2000. This interbank cash transfer system allows real-time processing for payments greater than PEN 50,000 and USD 15,000. Payments below these thresholds are processed by the Camara de Compensación Electronica S.A. (CCE S.A.).

With the authorisation of the Superintendencia de Bancos y Seguros (SBS), the Camara de Compensación Electronica S.A. (CCE S.A.) or the Electronic Cheque Clearinghouse began operations as of November, 2000. Therefore the BCRP no longer exchanges or clears cheques. Payments via cheque take 24 hours to clear electronically. This means that the funds will be posted to the beneficiary's account after 13:00 on T+1, and funds will be available in the beneficiary's cash account for further use. This payment method is commonly used in the market for small and medium size payments that do not reach the minimum amount for Interbank transfers (PEN 15,000 or USD 5,000).

Yes, overdrafts are permitted in the Peruvian market. However, credit facilities must be in place in order to do so. Overdraft rates are defined freely by each service provider.

By Resolution 145-98-EF/94.10 dated November 4, 1998, SMV established a new entitlement process based on three mandatory dates for all corporate events agreed on or after December 1, 1998.
According to this resolution, the entitlement of income and corporate actions is based on the following dates:

• Ex-Date : is the first trading date without rights.
• Ex-Date - 1, the last trading date with rights (established between 10 and 57 business days after the corporate event is agreed by the company.).
• Record Date : two business days after Ex-Date (represents the date on which rights are entitled on settled positions) (based on a T+2 settlement cycle).
• Pay Date for Fixed income instruments is Record Date + 1

Payments are received net of applicable taxes.

Variable depending on the issuer

Quarterly, semi-annual, annual

Actual/360-day basis or actual/365-day basis.

According to local market practices, entitlements are based on traded position.

Entitlements are paid according to settled positions as of close of Record Date.

Foreign and local investors are granted the same rights and privileges for their investments.

In general terms there are no restrictions on the type of instruments or sectors in which foreign investors can participate. However, there are exemptions on industries considered strategic or of national interest: Aeronautic, Telecommunications and Oil.

No

General Meetings Notices/Agendas are published in the official newspaper "El Peruano" and in the financial press. All companies listed on the exchange must announce their meetings through the BVL Daily Bulletin.

A meeting act detailing the results of the meeting is required by law. The act must be prepared within five days of the meeting, approved, signed and made available to the shareholders within 10 days.

Company Reports are made available in the ending of the first quarter each year, usually after the General Shareholders Meeting. Most, if not all, are only available in Spanish. Listed companies must sent reports to the regulator SMV and are made available through its website.

Required at beneficial owner level - it can be Permanent or Specific.

Not applicable

5% from January 1, 2017

Dividends distributed as a result of revenues, generated between January 1, 2015 and December 31, 2016, will remain subject to a withholding tax rate of 6.80%. The dividend withholding tax rate of 4.10% is applicable for any revenue generated 31 December 31, 2014.

For dividend's distributions of utilities generated as of December 31, 2014, the applicable rate will remain 4.1%.

4.99%
The Income Tax applicable to interest received from corporate bonds, other debt instruments and from deposits in the Peruvian financial system by non-resident individuals or corporate entities is a rate of 4.99%. Sovereign debt is tax exempt.

Rates applicable to non-resident investors:

• On exchange trades (i.e. changes of ownership performed in Peru on the Lima Stock Exchange): 5% CGT (CGT – DTT applicable: South Korea, Switzerland and Portugal).
• OTC (i.e. changes of ownership performed outside Peru or outside of the Lima Stock Exchange): 30% CGT (CGT – DTT applicable: South Korea, Switzerland and Portugal).
• Foreign securities including ADRs and Exchange Traded Funds (ETFs): 0%
• Government securities including Sovereign Bonds and Central Bank CDs: 0%
• Interest: 30% applicable to interest received on corporate bonds and credit interest on cash accounts

Peruvian Congress has approved an extension for the exemption of CGT derived from certain transfers of shares or securities representing shares until December 31, 2023 only for individual investors, not for entities.

None

18% VAT is applied to registration and exchange fees, broker commissions and custody fees. (The VAT rate will be reduced to 17% from July 1, 2017).

FTT
Financial Transaction Tax (FTT) - this tax is applied to all financial transactions in Peru. This tax affects any debit or credit made into any account of the financial system. However, credits, debits or transfers made between accounts of the same account holder are not subject to FTT. The current rate of FTT is 0.05%.

The following rounding methodology applies for decimals on Financial Transaction Tax charges:

• If the digit corresponding to the third decimal place is lower, equal or higher than five it must be suppressed.
• If the digit corresponding to the second decimal place is lower than five it must be adjusted to zero, and if it is higher than five it must be adjusted to five.

For example:
From PEN 0.011 to PEN 0.019 - FTT charge is rounded to 0.01
From PEN 0.01 to PEN 0.04 - FTT charge is rounded to 0.00
From PEN 0.05 to PEN 0.09 - FTT charge is rounded to 0.05

CDs
The Peruvian Central Bank (BCR) charges the following fees on Central Bank Certificate of Deposit (CD) transactions:

• 0.1% (of the face amount of the security), in the registration fee which is applicable to both parties (buyer and seller) in a CD transaction when one party is a non-resident investor
• 4% registration fee applicable to local financial institutions when selling a BCR CD to a third party.

Peru Holiday Calendar

• Lima Stock Exchange www.bvl.com.pe
• CAVALI S.A. ICLV www.cavali.com.pe
• SMV www.smv.gob.pe
• Superintendencia de Banca y Seguros del Perú www.sbs.gob.pe
• Banco Central de Reserva del Perú www.bcrp.gob.pe