INSTITUTIONALITY AND BEST PRACTICES

Transcription

1 INSTITUTIONALITY AND BEST PRACTICES Company Profile 80th Anniversary of LarrainVial April 2014

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3 TABLE OF CONTENTS LETTER FROM THE EXECUTIVE CHAIRMAN 4 INTRODUCTION INSTITUTIONALITY AND BEST PRACTICES 6 GOOD GOVERNANCE RISK, CONTROL AND GOOD GOVERNANCE BEST PRACTICES OWNERSHIP AND CORPORATE GOVERNANCE CLIENT SERVICE AND PROTECTION RISK MANAGEMENT CONTROL ENVIRONMENT CORPORATE SERVICES EFFICIENT MANAGEMENT BASED ON TECHNOLOGY OPERATIONAL SUPPORT FOR MARKET ACTIVITY HUMAN RESOURCES TECHNOLOGICAL MODEL

4 LETTER FROM THE EXECUTIVE CHAIRMAN IN TUNE Larraín Vial SA, the parent company of our financial holding, is taking another determined and unfaltering step toward ensuring that the group has the best self-regulatory practices in Corporate Governance. LETTER FROM THE EXECUTIVE PRESIDENT 4 It is not just another step, or any step. Today, our Board has decided to offer our customers, employees, regulators, auditing companies, academic research centers and the general public, access to our Best Practices and Institutionality Policy. This document embodies LarrainVial s continuous commitment. In its 80-year history, our group has endeavored to adhere to the best industry practices to deliver excellent service to those who put their trust in us every day. Guaranteeing transparency, security and fair treatment for our customers through self-imposed governance and internal control norms is essential to the sustainability of a project such as this one: an innovative industry leader with global reach. Good Corporate Governance and best practices require constant improvements. We have to adapt our internal system to the demands of our clients and a rapidly changing world in the face of increasingly demanding standards of service. In that spirit, we present our Policy of Institutionality and Best Practices, in an effort to ensure transparency in our system in areas such as Corporate Governance, Risk Management, Internal Operating Protocols and Investment Policies for Partners and Personnel. Not only do I invite you to read this Policy of Institutionality and Best Practices, but I urge you to comply with it and rigorously guard its proper implementation. Fernando Larraín Cruzat Executive President Larraín Vial S.A.

5 LETTER FROM THE EXECUTIVE PRESIDENT 95 Larraín Vial S.A. Board of Directors Standing, from left to right: Fernando Larraín Cruzat, Executive President, and Aníbal Larraín Cruzat, Director. Seated, from left to right: Francisco León Délano, Fernando Larraín Peña and Juan Hurtado Vicuña, Directors.

6 INTRODUCTION INSTITUTIONALITY AND BEST PRACTICES LarrainVial is committed to incorporating best practices regarding transparency in the management of its business and communications with clients and stakeholders. With this objective in mind, the company is publishing this Institutionality and Best Practices document, which provides a detailed and comprehensive description of the Good Governance model implemented by the Company, subject to an ongoing review and improvement process. This document aims to outline in a unified, structured and accessible manner the most relevant aspects of the Company s institutional structure, including procedures and ways of working implied in the good governance model as well as the operational model that ensures its effective implementation. INTRODUCTION 6 The first section explains the framework of the Company s Corporate Governance policy, which responds to the reality of its business, clients, regulatory environment and the risks inherent in its operations. The four cornerstones on which the Good Governance framework is based Corporate Governance, Model of Customer Service and Protection, Risk Management and Control Environment are described in detail. This part also reviews several Company initiatives undertaken in recent years aimed at achieving greater control over business development, conferring a more detailed view of the risks faced in day-to-day management and, consequently, making it possible to establish or improve necessary controls to mitigate their impact. These include: Review of risks, controls and business processes of the Money Desks, subsidiaries in Peru and Colombia, and the Custody and Treasury units. Improvement in the Comptroller area through increased staffing and material resources, which have made it possible to conduct thorough audits of the Company. Comprehensive assessment of the control and operating model for the Treasury and Custody units, identifying potential improvement opportunities.

7 A second part follows devoted to explaining the centralized model of Corporate Services, which allows LarrainVial to achieve high efficiency in its operations as well as a high-quality level of service. In the first part of this chapter, special attention is paid to critical units that support market operations, such as: Money Desk, Treasury and Custody operations. The rest of the chapter covers the Company s Technology and Human Resources models. INTRODUCTION 9

8 Corporate governance, risk and control best practices GOOD GOVERNANCE

9 GOOD GOVERNANCE GOOD GOVERNANCE FRAMEWORK LarrainVial, in line with its strategic objectives regarding customer focus and a revamped control function, considers the establishment of a framework of good governance to be essential. This business model is based on four cornerstones, which allow LarrainVial to align its activity with international standards of industry best practices and the achievement of these strategic objectives with a high degree of security. The four cornerstones of the Good Governance model, which relate to different aspects of the day-to-day management of the Company, are: Ownership and Corporate Governance: LarrainVial s Corporate Governance model is based on the principles of transparency, and the entire organization s active participation and involvement in regard to internal control and risks. Client Services and Protection: ensuring the effective protection of its clients interests is at the root of LarrainVial s culture in order to define and apply appropriate policies and procedures to achieve the desired level of service. Risk Management: the group s Risk Management model achieves the proper identification and management of the risks faced by the Company, thereby reducing the level of uncertainty in achieving its goals. GOOD GOVERNANCE 9 Control Environment: LarrainVial has the policies, controls and supervisory bodies in place to ensure effective compliance with the regulatory framework, the resolution of conflicts of interest and security in daily operations. For each of these four cornerstones, LarrainVial has adopted international models of best practice in order to achieve a model of excellence in the management of its businesses. CORNERSTONES OF GOOD GOVERNANCE CORPORATE GOVERNANCE Client Services and Protection Risk Management Control Environment

10 OWNERSHIP AND CORPORATE GOVERNANCE OWNERSHIP Ownership Structure OWNERSHIP AND CORPORATE GOVERNANCE 10 LarrainVial a 100% independent company does not belong to any domestic or international, financial or industrial group. Its largest shareholders are the Larraín and Vial families, who have kept alive the same principles and values since the Company s inception. They have run the Company over its 80- year history, making it one of the most important financial groups in the region. In an effort to bring to the group the best professionals in each knowledge area, the main partners have backed the development of a partnership model. Through it, they offer an equity interest to professionals that warrant Partner status based on their excellent track record and, therefore, a stake in the ownership of LarrainVial. This model aligns the Partners objectives with those of the Company, creating better incentives for good performance and, consequently, a virtuous circle of economic growth, culture and identification with the institution. The partners equity interest in the ownership of the Company is structured through the company Asesorías LarrainVial y Asociados, which in turn is controlled by the group s parent company. OWNERSHIP STRUCTURE Larraín family VIAL family PARTNERS

11 Currently, LarrainVial has partners, 11 of which were appointed by the Company s Board at the end of These appointments were made in recognition of these new members careers and their contributions to the expansion of LarrainVial s business on a national and international level alike. Furthermore, they strengthen the Company s partnership model. Before them, the Company s more senior partners developed highly successful careers in the financial industry, raising LarrainVial to the important position it holds in the region s financial markets. INCREASE IN THE NUMBER OF PARTNERS AT THE CLOSE OF 2013, THE NUMBER OF PARTNERS INCREASED FROM 14 TO. Corporate structure The LarrainVial group is structured as a holding company whose parent company is Larraín Vial SA, duly established and lawfully existing in the Republic of Chile, through which all the group companies are directly or indirectly controlled. 14 The development of the group s different lines of business and regulatory requirements in each and every country in which it operates required that LarrainVial duly establish companies or independent legal vehicles. In general, the establishment of new entities responds to the following motives: Intermediation is conducted in different countries through brokerage firms formed especially for this purpose. Financial advisory services, even when they can be provided in regard to certain matters through the same brokerage companies, in some cases, require the establishment of a different legal structure. OWNERSHIP AND CORPORATE GOVERNANCE 11 Third-party fund management activities, in turn, require a completely independent structure, in order to ensure managed assets are handled properly, and conflicts of interest are avoided. In line with the aforementioned, and in the interest of transparency and independence in terms of management, LarrainVial created the following main vehicles for the activities in the group s different lines of business.

12 LARRAINVIAL S MAIN COMPANIES LARRAÍN VIAL S.A. BROKERAGE Wealth management Asset management CHILE Larraín Vial S.A. Corredora de Bolsa Larraín Vial Servicios Profesionales Limitada Larraín Vial Administradora General de Fondos S.A. Corredora de Bolsa de Productos Larraín Vial Servicios Financieros Limitada Larraín Vial ACTIVOS S.A. Administradora General de Fondos ACTIVA S.A. OWNERSHIP AND CORPORATE GOVERNANCE 12 PERU COLOMBIA LARRAÍN VIAL Sociedad Agente de Bolsa S.A. Larraín Vial Colombia S.A.S Larraín Vial Colombia S.A.S Larraín Vial S.A. Sociedad Administradora de Fondos de Inversión Larraín Vial S.A. Colombia S.A.S ESTADOS UNIDOS Larraín Vial Securities US LLC GLOBAL LARRAIN VIAL INVESTMENT INC. (BVI) LARRAIN VIAL INVESTMENT INC. (BVI)

13 CORPORATE GOVERNANCE The Corporate Governance model of the group contained in the Corporate Governance Code is based on four main cornerstones: Chilean regulations and local regulations in each country where the firm operates. The bylaws of the parent company and group s companies. The highest international standards of transparency, control and risk management. Operational needs of independence and flexibility in managing the various businesses of the group. Specifically, in regard to the first two points, governance practices are aligned with: the bylaws of the parent company and its subsidiaries; Law No. 18,046, the Chilean Corporations Act (hereinafter LSA for its initials in Spanish); Law No. 18,045, the Securities Market Act (hereinafter LMV ) and regulations issued by the Superintendency of Securities and Insurance of Chile (hereinafter SVS ). Based on the aforementioned cornerstones, the Governance Code establishes a governance structure that includes the active participation of the entire organization, defining clear roles and responsibilities at each of the management levels. In it, the main axes of LarrainVial s Corporate Governance are identified as: Definition and allocation of functions to the company s various governing bodies, mainly: the Board of Directors, the Executive President and the CEO of the parent company, and Corporate Committees. OWNERSHIP AND CORPORATE GOVERNANCE 13 Creation and dissemination of Policies and Codes of Conduct applicable to the entire organization. GOVERNANCE STRUCTURE BOARD OF DIRECTORS MAIN EXECUTIVES BUSINESS DIRECTORS AND PARTNERS Corporate committees Business committees

14 AMENDMENT TO BOARD OF DIRECTORS: FOLLOWING THE MOST RECENT AMMENDMENT OF THE COMPANY S BYLAWS, THE BOARD EXANDED BOARD OF DIRECTORS Larraín Vial S.A. s board of directors is the Company s highest administrative body, responsible for the smooth functioning of the Group. This board is elected by Larraín Vial S.A. s General Shareholder Assembly and renewed every three years. The main function of the board is to establish general guidelines regarding the proper management of the Group companies. MEMBERSHIP FROM THREE MEMBERS TO FIVE IN TOTAL, TWO OF WHOM ARE INDEPENDENT. The Board s functions, as stated in the Code of Corporate Governance, are the following: Adopt the measures of governance and management of the Group, ensuring respect for all of LarrainVial s clients. Promote compliance with laws and regulations. Know and understand the risks inherent in the business activities that the group carries out. OWNERSHIP AND CORPORATE GOVERNANCE 14 BOARD MEMBERS: Fernando Larraín Peña Fernando Larraín Cruzat (Executive President) Aníbal Larraín Cruzat Juan Hurtado Vicuña (independent) Francisco León Délano (Independent) Establish a suitable organizational structure that includes a proper segregation of duties. Approve annually all internal control and risk management policies and procedures. Ensure proper design, implementation and documentation of policies and procedures. The Board meets monthly to review Company management and performance and receives periodic information that may be of interest. The sessions are held with an absolute majority of the number of directors specified in the bylaws, with resolutions adopted by the absolute majority of the attending directors. Taking into account ordinary and extraordinary meetings, the Board meets 13 times a year on average. The nature of the issues discussed in the meetings is as follows: (i) account for the progress of the current state of business affairs at the time of the meeting; (ii) take note of internal control reports issued by the company s external auditors; (iii) designate and remove attorney-in-fact; and (iv) approve corporate policies. As a result of the most recent amendment to the bylaws conducted by the General Assembly of Shareholders on April 9, 2014, the Board is now comprised of five members, up from three prior to the amendment. At the same Shareholders Assembly, a new Board was named, in which two independent directors were added, increasing transparency in the Company s management. Thus, the Board of the Company consists of five members, including an Executive Chairman and two independent directors. The Board is enhanced by its members vast experience in the financial industry, as well as their qualifications of excellence.

15 Moreover, each entity within the group established as a closely held company must adjust its corporate performance to the provisions of the LSA. Therefore, the administration is carried out by a board, which oversees the company s proper and smooth functioning. In this regard, the case of Larraín Vial SA Corredora de Bolsa is particularly relevant, being the main company of the Group and because it is subject to comprehensive regulation as a member of the stock market. The Brokerage s board, comprised of three members elected by the shareholders, must be renewed on an ongoing basis every three years. According to its bylaws, the board is required to meet at least once every six months to analyze the progress of current business affairs at the time of the meeting, take note of the reports of internal control and adopt all measures necessary to ensure the proper functioning of the Brokerage. However, in practice, given the needs of the company, the board meets more frequently. In parallel, the day-to-day management and deployment of guidelines adopted by the board is handled by the Chief Executive Officer of the Brokerage, a role currently carried out by Manuel Bulnes Muzard. MAIN EXECUTIVES Appointed by the Board, they are LarrainVial s most senior representatives at an institutional level and their mission is the effective management of the group s business in line with the objectives, policies and risk levels established by the Board. OWNERSHIP AND CORPORATE GOVERNANCE 15 Executive Chairman: He presides over the Board and is the chief executive officer of the company and the highest authority in the day-to-day administration and management. His duties are focused on making strategic decisions regarding the company s businesses, the implementation of corporate governance measures or institutional relationships with the various stakeholders. This is a newly created position in line with the changes made to the Board, aimed at strengthening the company s Executive Management. Fernando Larraín Cruzat joined the company in In addition to his role as Executive Chairman of Larraín Vial S.A., he is the chairman of LarrainVial SAFI Peru s board, is a board member of LarrainVial Asset Management and the Santiago Stock Exchange and also serves as director of the companies Watt s SA and Active SpA, and Fundación Las Rosas. He received his degree in Commercial Engineering from the Pontifical Catholic University of Chile and an MBA from Harvard Business School.

16 Chief Executive Officer (CEO): As the legal representative of Larraín Vial SA, the CEO is responsible for the management and administration of the business affairs. He must ensure compliance with all legal requirements that affect the business and its operations. His main functions include daily management and administration of the company, ensuring that the Board s mandate is satisfied. He is appointed by the Board and remains in office as long as the latter so decides. He is also responsible for the corporate services departments that oversee corporate support and control activities. Juan Luis Correa Gandarillas is currently the CEO of Larraín Vial S.A. and board member of LarrainVial Asset Management. Before joining the company, in 1998, he was general manager of the brokerage De la Cerda y Hatton Corredores de Bolsa and the general manager of the mutual fund administrator Moneda SA Administradora de Fondos Mutuos. He holds a degree in Business Administration from the University of Chile, Santiago, Chile with an MBA, from IESE, University of Navarra. OWNERSHIP AND CORPORATE GOVERNANCE 16 THE COMPANY S MANAGEMENT TEAM LarrainVial s management team is comprised by Partners, a structure that ensures an effective alignment of interests, and encourages the pursuit of economic objectives and good governance established by the Board. The management team is led by Managing Directors of the various business and support areas, who rely on the Partners in each area to carry out the day-to-day management of the business. The functions of each are: Managing Directors are responsible for the Group s various lines of business. They are appointed by the Board and are in charge of the daily management of the business and the achievement of the objectives set by the Board for each business. Partners are at the forefront of the different areas of specialization of each line of business in which they have demonstrated their ability and commitment to contribute to the Company s business development. LarrainVial s current management team, broken down by business line, is as follows: LarrainVial Capital-Capital Markets Chief Executive Officer (CEO), LarrainVial Corredora de Bolsa. Manuel Bulnes has been the brokerage s CEO since He began his career as a broker in 1992, working in the Research and Money Desk areas. He received his degree in Business Administration from the Diego Portales University, Santiago, Chile.

17 Institutional Distribution Manager, LarrainVial Corredora de Bolsa. Andrés Trivelli joined the company in Previously, he worked in the commercial area of Compañía Minera Doña Inés de Collahuasi. He holds a degree in industrial engineering from the University of Chile, Santiago, Chile, and an MBA from Cornell University, New York. Institutional Distribution Manager, LarrainVial Corredora de Bolsa. Felipe Errazuriz joined the company in He holds a degree in Commercial Engineering from the Andrés Bello University, Santiago, Chile. Institutional Distribution Manager, LarrainVial Corredora de Bolsa. Claudio Larraín joined the brokerage in He received his degree in Business Administration at the University of Chile, Santiago, Chile, and holds an MBA from the University of Miami in Florida. Equity Trading Manager, LarrainVial Corredora de Bolsa. Ivan Cascales joined the company in Previously he worked at Lloyds TBS Bank and the brokerage Cohen Sociedad de Bolsa in Argentina. He received his degree in Economics from the University of Buenos Aires and a postgraduate degree in Finance from the University of San Andrés, Buenos Aires, Argentina. International Distribution Manager, LarrainVial Corredora de Bolsa. Sebastian Caronni joined LarrainVial in Prior to that, he worked at Santander Investment and Banco Santander in Buenos Aires and Santiago for 16 years. He holds a degree in Business Administration from the Pontifical Catholic University of Argentina and an MBA from the same university. Fixed Income Manager, LarrainVial Corredora de Bolsa. Gabriel Villalobos came to work at LarrainVial in Prior to that, he worked at the Peruvian pension fund administrator AFP Integra, Banco Santander, Santander Investment, Citibank and the Central Reserve Bank of Peru. He holds a degree in Economics from Del Pacifico University in Lima, Peru, and is a Chartered Financial Analyst (CFA) charterholder. OWNERSHIP AND CORPORATE GOVERNANCE 17 LarrainVial Capital Corporate Finances Director of Corporate Finance. José Miguel Barros first joined LarrainVial in He has held the position of Director of Corporate Finance since He holds a degree in Commercial Engineering with a specialization in Economics from the Pontifical Catholic University of Chile, Santiago, Chile. He sits on the board of Stel Chile. Corporate Finance Manager. Felipe Porzio: Before joining the company in 1997, he worked at the national insurance consortium (Consorcio Nacional de Seguros). He holds a degree in Business Administration from the Pontifical Catholic University of Chile and an M.S. in Management from Stanford University, Palo Alto, California.

18 Corporate Finance Manager. Martin Engel joined LarrainVial in 1994 and worked for five years in the area of Corporate Finance. Subsequently, he went to the United States where he worked at hedge fund Bordier & Cie and at JP Morgan in mergers and acquisitions. He came back to work at LarrainVial in 2005 in the position he currently holds. He has a degree in Business Engineering with specialization in Business Administration from the Pontifical Catholic University of Chile and an MBA from New York University, NY. Corporate Finance Manager. Raimundo Silva joined LarrainVial s Corporate Finance area in 2005, after working as a new investments analyst at PPL Corporation. He holds a degree in Industrial Engineering from the Pontifical Catholic University of Chile, and an MBA from the University of California at Berkeley. Wealth Management OWNERSHIP AND CORPORATE GOVERNANCE 18 Commercial Director. Guillermo Undurraga joined the company in 1980 as a desk operator and then a trader. In 1985, he was appointed commercial director of Larraín Vial SA Corredora de Bolsa, a position he still holds today. Before joining the firm, he worked for Banco Colocadora Nacional de Valores and Banco Continental. General Manager of Wealth Management. Gonzalo Cordova began working in LarrainVial s area for high net worth clients in Prior to that, he worked at BCI, Black & Decker in the U.S. and as administration and finance manager for Textiles América and Litco Co. He holds a degree in Commercial Engineering from the Universidad Diego Portales, Santiago, Chile, and an MSF and MBA from Loyola University, Maryland, Delaware. Manager of Wealth Management. Sebastian Wenz joined LarrainVial in 1999 as an analyst in the area of high net worth clients. He assumed the co-management of this area in He holds a degree in Civil Industrial Engineering from the Pontifical Catholic University of Chile. Manager of Wealth Management. Cristian Cardone joined LarrainVial in 2000 in the retail client division, where he has served as asset manager, supervisor and sales manager. He holds a degree in Commercial Engineering from Gabriela Mistral University, Santiago, Chile, and is a graduate of the Advanced Management Program of the ESE Business School of the Los Andes University, Santiago, Chile. Manager of Wealth Management. Juan Carlos Undurraga joined LarrainVial in 2002 to take over the management of the Chilean regional branches. He previously worked at Compass Group in the area dedicated to local and international institutional investors. He holds a degree in Commercial Engineering from the Universidad de los Andes, Santiago, Chile.

19 Manager of LV Estrategia. Benjamin Mackenna joined LarrainVial in 2004 after working in Manquehue Net, where he worked as a strategy analyst, deputy manager of strategy and strategy manager. He holds a degree in Commercial Engineering from Gabriela Mistral University, Santiago, Chile and is a graduate of the Advanced Management Program in Business ESE Business School of Los Andes University, Santiago, Chile. Fund Management Investment Director for LarrainVial Asset Management. José Manuel Silva joined LarrainVial in Prior to that, he was CFO of Santa Carolina, one of the largest food companies in Chile. He was director of the fund manager Toronto Trust Administradora de Fondos de Inversión over the period He holds a degree in Commercial Engineering from the Pontifical Catholic University of Chile. CEO of LarrainVial Asset Management. Ladislao Larraín joined LarrainVial in 2001, working in the area of fixed income; after a stay in China in 2005, he returned to the firm in Prior to coming to LarrainVial, he worked in Citicorp Mutual Funds, the vineyard El Huique and was a professor of economics and finance at the Adolfo Ibáñez, Andes and Catholic universities. He has a degree in Commercial Engineering from the Pontifical Catholic University of Chile and a Masters in Economics from IESE, University of Navarra, Spain. Latin American Equity Manager for LarrainVial Asset Management. Tomás Langlois, a partner of Larraín Vial SA, first joined the firm 15 years ago as an investment analyst in the mutual funds department. He has a degree in Commercial Engineering from the Pontifical Catholic University of Chile. OWNERSHIP AND CORPORATE GOVERNANCE 19 Research Department Chief Economist and Director of Research Department. Leonardo Suarez has been working at LarrainVial since He has held the position of Chief Economist and Director of Research Department since Prior to his work at the firm, he was a consultant in financial, economic and environmental issues, providing services to the Central Bank of Chile and the IDB, among others. He was an Analyst of National Accounts of the Central Bank of Chile from 1986 to He holds a degree in Economics from the Guayaquil University, Ecuador. Corporate Services Operations and Technology Corporate Manager. Ignacio Osorio joined LarrainVial in Prior to that, he was an analyst, and later operations manager, for AIG. He has a degree in Industrial Civil Engineering specialized in Mechanical Engineering from the Pontifical Catholic University of Chile.

20 Committees Likewise, following the best governance practices, in order to ensure the correct execution of processes in various operations and functions performed by the various entities of the group, LarrainVial has various expert Committees that report directly to the Board and are responsible for monitoring Board-approved guidelines and policies. The general functions of the committees are: Support the organization s efforts to manage processes and ensure compliance with the guidelines defined by the Board. Monitor adherence to policies and ensure compliance in process and risk management by responsible parties. Develop policies and establish procedures that improve the management of processes in the organization. Ensure the correct control environment. OWNERSHIP AND CORPORATE GOVERNANCE 20 Ensure a proper understanding of the risks that may affect LarrainVial processes. Define risk tolerance levels according to self-assessment results, registered risk events, as well as levels and trends in key identified indicators. Approve the proposed action plans to mitigate risks and events. They are comprised of members of the Company s management team and are divided into the following categories: CORPORATE In charge of support and control activities encompassing the whole group, these committees are appointed by the Group s Board: Executive Committee: comprised of managing partners from the group, presided by the Executive President of Larraín Vial SA, the committee meets once a week to discuss important events, results and budget-related issues. Risk Committee: meets monthly to discuss the evaluation and monitoring of goals defined by the Risk division and is led by the CEO of Larraín Vial S.A. Operations Committee: convenes weekly to assess, coordinate and monitor goals defined by Operations in conjunction with other areas, i.e., Technology, Human Resources, Risk, Processes and Financial Management. The CEO of Larraín Vial S.A. chairs this committee.

21 Business Innovation and Marketing Committee: chaired by the Manager of Business Innovation & Marketing, this committee meets every other week to present, evaluate, define and coordinate issues related to the scope of the department. Compliance Committee: comprised by the CEO (Larraín Vial S.A.), Head of Retail Distribution, General Counsel, Compliance Manager, Head of Legal and Compliance, and Compliance Officer, this committee meets monthly to manage, approve, monitor and resolve the following issues: crime prevention model, overall compliance (external and internal), conflicts of interest, ethical dilemmas and the handling of client complaints. Products Committee: meets fortnightly with the objective of analyzing, reviewing and determining the profile of existing and new products that will soon be made commercially available to clients. The Committee includes Wealth Management personnel and is chaired by the General Manager of Wealth Management. Human Resources Committee: chaired by the CEO of Larraín Vial S.A., the committee meets every two weeks to review the monitoring and implementation of HR policies. BUSINESS COMMITTEES Appointed by the Board, they are responsible for the development of activities related to each business. Currently: Research Committee: it seeks to align the Research Department s strategic vision. It meets twice a month and is chaired by the director of the Department. Equity Committee: chaired by the Executive Chairman of Larraín Vial S.A., this committee meets fortnightly to oversee Capital Markets department s performance management. Fixed Income and Currencies Committee: presided by the Executive Chairman of Larraín Vial S.A., this committee meets fortnightly to evaluate the fixed income market. Finance Committee: analyzes and follows up Corporate Finance projects/ prospects at a weekly meeting chaired by the Executive Chairman of Larraín Vial S.A. Wealth Management Committee: monitors the performance and management of the Wealth Management business area oriented toward individuals. The Executive Chairman of Larraín Vial S.A. presides over its weekly meetings. COMMITTEES LARRAINVIAL HAS ESTABLISHED CORPORATE AND BUSINESS COMMITTEES RESPONSIBLE FOR MONITORING THE IMPLEMENTATION OF POLICIES APPROVED BY THE BOARD. OWNERSHIP AND CORPORATE GOVERNANCE 21

22 Policies and Code of Conduct The Board has adopted a structure of internal rules (codes of conduct and ethics, in addition to policies and procedures) that inspires the way of conducting business and promotes ethical and transparent behavior across the group s companies: SAMPLE OF COMPANY POLICIES CORPORATE STOCK BROKERAGE AND COMMODITY BROKERAGE ASSET MANAGEMENT AND ASSETS Corporate Governance Code Specific Risk Management Policies LV Asset Management: General Risk Policy OWNERSHIP AND CORPORATE GOVERNANCE 22 MAIN POLICIES Conduct and Good Practices Corporate Code Risk Management Corporate Policy Information Security Corporate Policy Business Continuity Corporate Policy Prevention of money laundering, terrorist funding and bribery Corporate Policy Financial Risk Credit Risk Operational Risk Compliance Information Security Specific Risk Management Policies: LV Asset Management: Market Risk Policy LV Asset Management: Credit Risk Policy LV Asset Management: Legal Risk and Compliance Policy LV Asset Management: Technological Risk Policy / LV Information Security Corporate Policy LV Asset Management: Operational Risk Policy / LV Operational Risk Corporate Policy Ordinary Course of General Transactions General Policy LV Asset Management: Business Continuity Policy Human Resources Corporate Policy Staff Selection Policy Training Policy Suppliers Corporate Policy Financing, Debt and Investments Policy SUPPORT POLICIES Interaction with Public Institutions Policy Acquisitions Corporate Policy Backing and Donations Policy Travels and Expenses Accounting Policy Gifts Policy Compensation and Benefits Policy Data Maintenance and IT Infrastructure Policy

23 CODE OF CONDUCT LarrainVial, in its different business areas, performs functions that involve public trust, its business reputation, as well as that of its directors and executives. For these reasons, it is imperative that all personnel act according to high professional standards in strict observance of applicable legal and regulatory provisions, in addition to pursuing the highest ethical standards, both in their personal and professional behavior. LarrainVial s Code of Conduct and Good Practices incorporates the specific issues related to good practices in laws and regulations of the Securities Market Act released by the SVS, as well as recommendations made by the Regulatory Committee of the Santiago Stock Exchange, and the Self-Regulation Committee of the Chilean Electronic Stock Exchange. The code also addresses topics related to LarrainVial internal regulations and domestic and international industry best practices. The aim of the Code of Conduct and Good Practices is to guide and support all Group personnel so that they can face different ethical dilemmas or conflicts of interest which may arise in the course of their daily work. The Code of Conduct and Good Practices applies to the personnel of all entities that form part of the LarrainVial group. Personnel is defined as all LarrainVial employees plus anyone who acts as director of any of the entities within the group. Given the broad spectrum and complexity of possible situations that may arise involving ethical conflicts, all staff members are responsible for exercising good judgment, applying the code s ethical principles and requesting guidance from their superiors, the Human Resources or Corporate Risk departments in the event that they need to clarify concepts and situations. Faced with an ethical dilemma, LarrainVial personnel should take the time to reflect on the implications of the situation. CODE APPROVED BY THE BOARD GOOD PRACTICES INDICATED BY LAW AND REGULATIONS, INTERNAL POLICY AND INTERNATIONAL BEST PRACTICES. DISSEMINATION OF THE CODE OF CONDUCT ALL GROUP PERSONNEL ARE FAMILIAR WITH THE CODE. OWNERSHIP AND CORPORATE GOVERNANCE 23 The Board has approved the Code of Conduct and Good Practices, and its corresponding updates. All personnel that belong to the group are aware of the Code, which has been published in the corporate handbook on the LarrainVial intranet site.

24 CLIENT SERVICES AND PROTECTION CLIENT SERVICE AND PROTECTION CLIENT SERVICE BASED ON A COMPREHENSIVE UNDERSTANDING OF THEIR NEEDS AND A TRANSPARENT RELATIONSHIP. LarrainVial places client service at the core of its strategy and how it conceives its business, continuously renewing the founding principle that inspired the company s beginnings: provide clients with financial advisory and intermediation services of excellence. LarrainVial fully aware of financial market complexities, the diversity of its clients and the possibility of conflicts of interest deploys every necessary measure to ensure effective protection of its clients interests. Specifically, LarrainVial believes that a comprehensive understanding of Clients and their needs must be achieved; equally, it is crucial that a relationship model based on transparency be defined that incorporates necessary procedures and channels for resolving conflicts of interest and ensuring effective communication with its clients. KNOWING THE CLIENT LarrainVial s wide range of products and knowledge areas enable it to offer its services to more than 50,000 clients spanning various different types and geographies. LarrainVial understands that the basis of an effective client service is to achieve a thorough understanding of each client s needs and preferences, which is why the firm established customer segmentation at the corporate level, a detailed process for opening new accounts, as well as a model for monitoring the level of customer satisfaction. SEGMENTATION LarrainVial s segmentation model is broken down into three main client segments; each one with a distinct business model. This measure reflects the company s goal of resolving the different needs of each client and working with them over the long-term. LarrainVial experts in each client segment engage with the firm s clients with a strong focus on their needs. COMPANIES This segment mainly corresponds to legal entities, such as open and closed companies, corporations, limited partnerships, in addition to management structures (family office).

25 LarrainVial provides financial advisory services of excellence to its company clients. The Corporate Finance team is comprised of individuals with extensive experience and solid training. Mergers and acquisitions (M&A), initial public offerings, capital increases, purchase and sale of shares, public tender offerings and corporate bonds are among the most common operations. The firm offers these customers market making for its shares listed on the stock exchange and trade execution. Family office clients are served by institutional traders who, in close collaboration with our Research Department, provide guidance and recommendations on equities, fixed income and main economic assets. In addition, the firm provides advisory services regarding the formation of family businesses, equity structures and succession. BUSINESS SEGMENTATION THREE CLIENT SEGMENTS TO ENSURE A PERSONALIZED SERVICE THAT ADDRESSES THEIR SPECIFIC NEEDS: COMPANIES, INSTITUTIONS AND INDIVIDUALS. INSTITUTIONS This segment corresponds to entities that manage and/or represent assets of third parties. These include pension fund administrators, general fund administrators, foreign capital investment funds, mutual funds, investment funds, insurance and reinsurance companies, banks and stock brokers, among others. LarrianVial s institutional operators are trained and certified to serve the most sophisticated customers in the market. They are supplied with proprietary research prepared by LarrainVial s Research Department, and they can execute trade orders for various products across different institutional desks: equities, fixed income, foreign exchange and international products. CLIENT SERVICE AND PROTECTION 25 INDIVIDUALS This segment corresponds to individuals and their investment companies. LarrainVial s clients receive advisory services for investing their wealth from expert agents from the firm s Wealth Management division. Among the products available to individual clients are the buying and selling of shares, investment in mutual funds, and domestic and international fixed income, all through expert traders specialized in the different assets and markets. Clients receive periodic information regarding their portfolio performance, in addition to ongoing Internet access to their personal accounts. ACCOUNT OPENING In order to provide financial intermediation in line with the client s level of risk tolerance and knowledge, all LarrainVial clients must provide the required legal and personal documentation and their investor profile. All information submitted is primarily concerned with the client s personal (in case of individuals) and business data, including equity interests in companies and their final beneficiaries. Among the documents that the client must sign is a sworn statement regarding the origin of the funds deposited under LarrainVial custody and their status (or not) as a Politically Exposed Person (PEP).

26 NEW CLIENTS COMPREHENSIVE CONTROL OF MONEY LAUNDERING AND POLITICALLY EXPOSED PERSONS (PEP). One of the main mechanisms for controlling and preventing crimes such as money laundering or terrorist financing is the right knowledge about the client, from the moment that a client requests to be linked to any of the products or services offered by the group. LarrainVial s know-your-customer (KYC) process is designed with the following primary objectives in mind: Aptly identify each client. Obtain information regarding the client s professional and economic activity, including income, expenses and financial performance. Determine the origin and destination of the resources that the client will invest through LarrainVial. Get information about the type of operations that the person intends to perform. Assess your client profile and analyze client operations accordingly. CLIENT SERVICE AND PROTECTION 26 Detect and monitor client transactions that may appear unusual in terms of their financial behavior. Also, the customer must complete a survey in order to determine an investor profile, according to regulations the SVS issued in If clients, of their own volition, request unsuitable products based on their investor profile, they must sign a letter of informed consent, in which they state that they understand and accept the risks associated with the particular instrument. In addition to the above, within the framework of the intergovernmental cooperation agreement signed between Chile and the United States to facilitate Chile s implementation of the FATCA (Foreign Account Tax Compliance Act), LarrainVial completed the registration process before the corresponding organism ( Internal Revenue Service or IRS ). FATCA provides that financial institutions around the world, including those in Chile, have an obligation to collaborate by submitting to the U.S. tax authority ( IRS ) information regarding financial products or accounts held by U.S. taxpayers in Chile, subject to certain obligations of due care, reporting and penalties or retentions for noncompliance. In order to comply with FATCA, LarrainVial conducted an evaluation and assessment aimed at defining the impact of this legislation. In the first instance, an analysis of the Group s ownership structure, and of the main business activity of each one of the affiliates to determine the applicability of the rule to each legal vehicle, was performed. With guidance from KPMG, the classification of group entities that must register with IRS, the impact analysis and definition of implementation plans in business processes and operations were completed. Thus, compliance with the regulations and the terms of the intergovernmental agreement, which comes into full effect on June 30, 2014, is assured.

27 CLIENT SATISFACTION At LarrainVial, satisfaction studies are conducted on an ongoing basis for all three segments individuals, companies and institutions aimed at understanding and identifying opportunities for improvement in our service and to provide advisory services of excellence in tune with their needs. In conducting these studies, LarrainVial works with external consultants recognized for their work, such as Adimark GfK, IPSOS and El Otro Lado Consultores. RELATIONSHIP MODEL In pursuit of excellence in client services, the LarrainVial model has defined a relationship model with its customers based on market best practices. This model is based on corporate policies approved by the Board and is implemented in the necessary entities, procedures and mechanisms to ensure its effective implementation. POLICIES AND PROCEDURES A guiding principle and value at LarrainVial is that honesty is at the heart of its business and therefore, at all times the Company acts honorably and transparently, always prioritizing ethical behavior. The Company takes care to maintain transparent relationships with its clients and protect its image as well that of as its peers, superiors and colleagues. LarrainVial engages with clients through honest communication, not only when its recommendations are correct, with the understanding that we must be able to recognize our mistakes and take responsibility for them. CLIENT SERVICE AND PROTECTION 27 In order to comply with this principle, a framework of policies and procedures has been established, which take into account he following: Proper handling and safeguarding of client information. Suitability of products offered based on client investor profile. Conflict resolution and troubleshooting as a result of operational errors. Restrictions on the acceptance of gifts. INFORMATION HANDLING In terms of the storage and processing of information, LarrainVial is subject to the provisions contained in Law No. 19,628 regarding the protection of personal data.

28 The Act regulates the handling of personal data, understood as that relating to any information pertaining to identified or identifiable natural persons. The handling of personal data comprises various types of use, including collection, storage, release and transfer. In accordance with legal regulations, the accountholder of such data must authorize its use by LarrainVial, along with being fully informed about the purpose of data storage and possible release to the public. Article 9 of Law No. 19,628, in turn, establishes the principle known as the purpose in the processing of personal data under which the personal data should be used only for the purposes for which they were collected unless they originate or were gathered from public sources. Pursuant to the provisions of Law No. 20,575, personal information of an economic, financial, banking or commercial nature can only be used for the assessment of business risk and the credit process. CLIENT SERVICE AND PROTECTION 28 In compliance with the above rules, LarrainVial is careful and diligent in processing clients personal data, and only for the purposes for which they were stored, kept in total confidentiality, except those obtained from public sources. In this respect, only the aforementioned background information is released in the event that it is requested by an administrative or judicial authority, acting within auditing or regulatory processes, and in those cases as required by law. SUITABILITY OF PRODUCTS Advising clients according to their investment profile is inherent in LarrainVial s culture, and recently the firm has taken specific steps to ensure that this is accomplished without exception. Every new customer must complete a profile survey that evaluates the delegation level of their investments and financial literacy, among other variables. There are four investment profiles: very conservative, conservative, moderate and aggressive. Each profile is assigned recommended investment portfolios by LarrainVial s Strategy area. There is also a monthly Suitability meeting with the participation of representatives from the areas of Risk, Wealth Management, LarrainVial Strategy, and Business Innovation & Marketing divisions. At this meeting, warning systems and alerts are being defined for use in the event of a misalignment of clients and their profiles, as well as periodic profile review protocols and prompt advisory services in such cases. In LarrainVial, structured instruments are aimed at qualified client investors or those who possess a profile of aggressive investor, which implies a high level of knowledge in financial instruments. These products, besides their complexity, provide specific financial characteristics, such as term, credit quality and accessibility to diverse markets. All structured notes are carefully studied and reviewed by LarrainVial Strategy s working team before it is offered to clients, and then goes to the Investment Committee and the Product Committee for review and approval.

29 TROUBLESHOOTING POLICIES In the event of an error in the execution of a client s order, the client will not be affected because it will be noted in the error ledger. It will be reported as part of the Company s in-house portfolio to the Stock Exchange and the market. The client will not receive the erroneous order; the order will be executed according to the instructions received. Any cost or loss is assumed by LarrainVial. On occasion, a client may make a mistake issuing an order. Typical errors include the order address (purchase as sale, or the opposite), wrong amount, symbol error (wrong stock) limit order price incorrect or not specified with the order. In the event of one of these scenarios, they are looked at case by case and may be addressed, which is what LarrainVial s clearing ledger is for. In these situations, they are also noted as self-executing, but the costs or losses as well as possible profits gained as a result of reversing the operation correspond to the customer. If due to an action of LarrainVial, delays occur in the settlement of any operation and the seller client is paid late, LarrainVial will incur the financial cost. DISPUTE RESOLUTION MECHANISM In December 2007, in an unprecedented event for the industry, LarrainVial created the completely autonomous figure of a mediator. In the event of any complaint or dissatisfaction with the service provided, clients have free access to the complaints system and client services. As a preliminary instance of conflict resolution, clients express their complaint, concern or suggestion through their executive, who is in charge of offering immediate and direct assistance, in order to propose an effective and efficient solution to the conflict. TROUBLESHOOTING THERE IS A PROCEDURE WITH SEVERAL INSTANCES FOR RESOLVING ISSUES WITH CLIENTS. CLIENT SERVICE AND PROTECTION 29 The executive evaluates the proposed solution to be offered to the client with his/her superior if necessary, or when offering a particular proposal or solution is not within the executive s scope of action. All this with the haste required by the particular situation, while keeping the client informed regarding the progress of the proposal in a timely manner. If the solution proposed by the executive is not satisfactory to the client, the Client Management Unit is informed. This area is responsible for collecting all relevant background in order to assess the client s request or complaint; even meeting with the client if deemed necessary, as to determine the client s position and that sustained by LarrainVial to date, compare them and propose a solution to the client requirements or complaints. The background review prepared by the Client Manager builds on the information gathered internally as well as the background information and statements made by the client. The proceedings before the Customer Management Unit may

30 include meetings at the offices of LarrainVial, telephone conferences with the stakeholders, negotiations, and proposals aimed at ending the conflict. GRIEVANCE COMMITTEE The Grievance Committee is an entity created to assess claims filed by clients, in order to identify areas for improvement and establish measures to prevent potential conflicts or complaints from clients. The committee members include one representative of deputy department of Service Quality, a representative of Risk Management, a representative of the Client Management Unit and a representative of the Legal Department. This ensures matters are assessed and discussed from various perspectives and specialties. CLIENT SERVICE AND PROTECTION 30 In addition, the committee conducts a thorough review of the unresolved cases as to advise the Client Management Unit in the development of the proposals to be submitted for client approval. GIFT POLICY It is forbidden for LarrainVial personnel, their spouses, children, dependents and related companies, to accept any payment from clients. In regard to gifts or presents that can be justifiable in a business relationship, it is important that they are not significant, meaning that they do generate a conflict for the official receiving the gift. That is why gifts received should not have an economic value that exceeds US$50. Exceptions to the ban on accepting gifts are those received from a customer, supplier or other entity that LarrainVial has a business relationship with when they are given in a non-discriminatory manner to broad range of people, within which LarrainVial personnel represent an insignificant share. Invitations to travel within or outside the country extended by a customer, supplier or other entity LarrainVial has a business relationship with are understood as referring to the Company; management for the area to which the employee who receives the invitation belongs will have to decide whether or not to accept the invitation and the person or persons traveling. Gifts to customers are allowed only if they properly reflect the corporate image of the Institution and the destination rests solely with them. The following are not allowed: payments, donations or gifts to individuals, political parties, ministries, public institutions, national or foreign public officials or third parties in general, for

31 the purpose of securing a business deal or influencing their decision. Nor should any compensation, benefit or gift be offered or extended to any outside person or entity that seeks to influence or support the outcome of a business transaction, even if this may have a positive impact on the Company. COMMUNICATION WITH THE CLIENT GIFT POLICY THE COMPANY HAS ESTABLISHED A STRICT POLICY THAT LIMITS THE ACCEPTANCE OF GIFTS FROM CLIENTS. STANDARD CHANNELS OF COMMUNICATION LarrainVial has three main means or channels for maintaining effective communication with clients and delivering information that it must provide them according to regulations. These channels are: Customer Care. It is defined as the Customer Care central telephone system to which customers have direct access. An operator is available Monday through Friday from 8:00AM to 7:00PM. This service allows clients to contact anyone in LarrainVial. It is also used to address common concerns that are not directly related to their investments.this system also operates as an automatic response mechanism in the event that the client dials a direct extension and the call is not answered, ensuring an effective customer care. The system is designed so that almost no calls go unanswered. communication. A second means is the centralized communications channel. This system has a technology platform that makes it possible to track all communications sent via this means. communication is important mainly because it is used to send customers their equity statements with account information and all their operations. This is the channel used to send the reports that must be delivered to clients, according to regulatory standards. Notwithstanding, in cases where the client does not have an address on file, documentation is delivered to the customer s postal address. COMMUNICATION WITH CLIENTS THERE ARE THREE CHANNELS AVAILABLE TO CLIENTS FOR AN EFFECTIVE COMMUNICATION WITH THE COMPANY: CLIENT SERVICES, AND WEB. CLIENT SERVICE AND PROTECTION 31 This channel also allows clients to stay informed in regard to every detail of their transactions through LarrainVial, because in addition to the monthly statements, they receive notices regarding movement in their equity portfolios, mutual funds, voluntary pension savings (APV for its acronym in Spanish) and dividends. They are also sent invoices for purchase and sale of financial assets, and notices of transactions in certain products, such as the Pershing platform. Website. LarrainVial s website contains useful information for both clients and the general public. The site has information regarding products and services offered by the Company, trainings or seminars organized by group entities, and relevant information about LarrainVial s

32 contact channels. In addition to the publicly available information, clients receive a password to access a custom web site within the site, whereby they can access all their account information, including transactions, investments, profitability of products and recommendations made by LarrainVial s Research Department, among other matters, according to the client s products and services. The private site for clients has various functions that directly support the advisory services provided by the Company. From the site, clients can make direct transfers of funds from their banks to LarrainVial, make payments to mutual funds and 100% online direct deposits into their APVs. Other services include monthly online statements and equity movements via , digital signature services for contracts and a confirmation system for client orders. CHANNELS RELATED TO MARKET OPERATIONS CLIENT SERVICE AND PROTECTION 32 LarrainVial always acts in the best interest of its clients and under their mandate. Because the main objective is to add value, the Company follows the highest standards of quality and transparency. This is essential to creating long-term relationships that are built on trust. Equal treatment and management of conflicts of interest are also key elements in safeguarding client relationship. For this, there are clear policies and procedures relating to transactions ordered by the firm s clients. Individual clients usually communicate their orders to agents, either verbally or in writing, depending on the type of order selected in the Client File. After receiving the order, the agent enters an electronic system for its execution by specialized operators. Institutional clients and companies can place orders via , phone, Bloomberg chat or other means for later execution in the marketplace by an institutional trader. Some qualified family offices and institutional clients transmit orders electronically to LarrainVial systems. To do this, they must have more sophisticated terminals and/or a professional trade order management system. For foreign institutional clients, the order is requested from the client s middle office either via or through Omgeo CTM (a system that allows you to receive orders electronically and keep records). After receiving the information from the customer, orders are placed and invoiced in the back office systems. For all institutional clients, order confirmation is always sent on the same day of the operation.

33 Fluid communication with clients is also an essential element of the Company s relationship with them. LarrainVial communicates regularly with different types of clients to keep them informed regarding the status of their investments. As detailed above, this includes regular deliveries, via electronic or physical means, of various useful documents depending on the type of client. These may include equity statements, exclusive reports from the Research Department, and tactical recommendations, among others. CLIENT SERVICE AND PROTECTION 33 INSTITUTIONAL CLIENTS AN ELECTRONIC CONFIRMATION CHANNEL OF OPERATIONS IS AVAILABLE THROUGH OMGEO CTM.

34 RISK MANAGEMENT PRINCIPLES AND A RISK CULTURE One of LarrainVial s hallmarks is the quality of its risk management, which represents a priority axis of action. Thanks to this achievement, risks that may affect the Company are detected in a timely manner, making it possible to generate strategies that anticipate them and turn them into profit opportunities, generating value for customers. RISK MANAGEMENT 34 RISK PROFILE LARRAINVIAL S RISK POLICY IS AIMED AT MAINTAINING A PREDICTABLE MEDIUM- LOW PROFILE FOR ALL OF ITS RISKS. LarrainVial s risk policy is aimed at maintaining a medium-low predictable profile for all of its risks, making its risk management model a key factor to achieving the strategic objectives of the group. This model is governed by the following principles: Independence of the risk function with respect to the business, establishing separate functions between business areas and the risk areas responsible for acceptance, measurement, analysis, control and mitigation of risks, providing sufficient independence and autonomy for adequate risk control. Establishment of policies and procedures, creating a risk culture and constituting the basic legal framework through which risk processes and activities are regulated. Formulation of risk appetite, aimed at defining the levels and types of risk the company is willing to take in regard to the development of its business. Direct involvement of the Board in making decisions. RISKS AND THE BUSINESS MODEL Through the area of Capital Markets unit, LarrainVial provides intermediation services in Equity, Fixed Income and Currencies. Separately, Market Making services, Arbitration and In-house Portfolio also form part of this area. The grouping of all these businesses in the same area creates significant operational and strategic synergies in offering clients a comprehensive and highly

35 specialized service. Also, this form of organization leads to a concentration of Financial Risk and Credit Risk in the same area, facilitating the implementation of comprehensive risk management for both risks. The risks LarrainVial is exposed to are the following: Financial risk: includes the potential economic losses determined by adverse movements in financial market prices such as exchange rates, interest rates, derivatives, stocks, or any other product traded in financial markets. Credit Risk: defined as the probability that the customer does not comply with payment obligations or commitments on the stipulated date or amount due to deterioration in the client s ability or intention to pay. Credit Risk includes risks related to the behavior and rating of the underlying commodity (currencies, bonds, rates, stocks, etc.). RISK: CONTINUOUS IMPROVEMENT LARRAINVIAL IS ENGAGED IN CONTINUOUS IMPROVEMENT PROCESSES AND INCREASING THE EFFECTIVENESS OF ASSOCIATED CONTROLS THANKS TO IMPLEMENTATION OF A RISK CONTROL AND MONITORING SYSTEM. Operational Risk: This type of risk is applicable to all business, management and support processes. Therefore, in accordance with the Basel recommendations, LarrainVial defines Operational Risk as the possibility of capital losses resulting from failures, deficiencies or inadequacies in internal processes, people, systems, or other external events. Liquidity Risk: applies to all LarrainVial activities in the stock market, whether its own or through third parties, as well as businesses that involve resource management. It is defined as the possibility of losses from mismatches between an active position and passive position of a financial product or having to liquidate investments at a loss due to an unexpected liquidity requirement. RISK MANAGEMENT 35 The evaluation and assessment of identified risks enables the Company to generate the necessary action plans to accept risks according to profitability-risk ratio, mitigation, transfer or reduction of risk-related effects. Along these lines, LarrainVial performs continuous improvement of the processes and effectiveness of associated controls thanks to the implementation of a risk control and monitoring system, which verifies on a daily basis with the corresponding reports the suitability of the risk profile in terms of the approved risk policies and established risk limits. CULTURE AND POLICIES LarrainVial s corporate culture incorporates risks in achieving strategic objectives, reducing contingencies and operational losses and improving responsiveness, reflecting the principles of the company s risk management model. This culture

36 CORPORATE RISK POLICY CONSISTENT AND SYSTEMATIC RISK MANAGEMENT ALIGNED WITH THE COMPANY S GOALS. has strong roots throughout the group thanks to specific training given to employees which is shared across all business units. LarrainVial has developed a Corporate Policy for Risk Management which marks the line of action in regard to risk, defining the principles and general guidelines for the management of risks that the group faces. This policy defines an organizational structure of Corporate Governance, which includes the active participation of the entire organization and establishes the roles and responsibilities for each of the actors. This policy allows consistent and systematic risk management, aligned with company objectives. Corporate policy is proposed by the Risk Committee and reviewed and approved by the Board at least once a year. It outlines the general foundations of the structure, management and monitoring of the various types of risk, in addition to determining the existence of the following specific policies: Operational Risk Policy. Credit Risk Policy. RISK MANAGEMENT Financial Risk Policy. Liquidity Risk Policy. 36 These policies reflect the operations and functions of the areas of risk, regardless of the commercial and operational areas that are responsible for identifying, measuring and controlling risk exposures, based on policies approved by the Board and in accordance with industry best practices. RISK APPETITE Risk appetite is defined by LarrainVial as the reasonable quantity and typology of risks to be assumed in terms of business strategy implementation so that the Company can continue to carry out its ordinary activities upon the occurrence of unexpected events. The Board of Directors is the body responsible for establishing and updating risk appetite annually, monitoring its effective risk profile and ensuring consistency between the two. Senior management is responsible for maintaining the desired risk profile and managing day-to-day risks so that a suitable link exists between the limits and management policies implemented for each risk and risk appetite metrics in use. The Risk Committee and the Corporate Risk Management Department verify

37 compliance with the risk appetite both by the business units and at group level. LarrainVial has strengthened the effective implementation of the risk appetite framework through relevant reviews and the setup of Value at Risk (VaR) limits, credit limits and the implementation of insurance or clearing house transactions as risk mitigation measures. Therefore, as an example of how LarrainVial implements the best market practices among its own management, it seeks to be evaluated by the most renown creditrating agencies to deliver to the market a consistent signal about the strength of its financial standing, its solvency and the management practices used for its own risks. LarrainVial is the first and only Chilean broker to be rated BBB+ in terms of international risk. CORPORATE GOVERNANCE IN REGARD TO RISK RATING BROKERAGE STANDARD & POOR S RATED BBB+ FOR INTERNATIONAL RISK IN THE LONG-TERM AND A-2 IN THE SHORT TERM (AFFIRMED ON SEPTEMBER, 2013). HUMPHREYS RATED AA- FOR LOCAL RISK, WITH A LEVEL OF 1+ (AS OF DECEMBER 30, 2011). LarrainVial s governance model is based on Corporate Governance standards. It is a transparent, effective and agile model, consistent with best industry international practices and applicable regulations. The Corporate Governance model in regard to risk creates and disseminates the Corporate Policy on this matter, establishes the risk management function, and attributes functions to the different Governance Bodies: BOARD OF DIRECTORS The Board of Directors is the supreme body responsible for correct corporate and risk policy development. Its responsibilities in regard to the risk function are: FELLER-RATE RATED AA- FOR LOCAL RISK, WITH A STABLE OUTLOOK (RATIFIED ON AUGUST 23, 2013). RISK MANAGEMENT 37 LARRAINVIAL BOARD OF DIRECTORS CREDIT COMMITTEE RISK COMMITTEE CORPORATE RISK MANAGEMENT DEPARTMENT FINANCIAL RISK MANAGEMENT DEPARTMENT CREDIT RISK OPERATIONAL RISK LIQUIDITY RISK FINANCIAL RISK

38 Approve the company s risk policies. Understand and become familiar with the risks inherent to the business and activities developed by the group. Disseminate the risk management culture by approving a risk management methodology. Establish and update risk appetite on an annual basis. COMMITTEES The Corporate Risk Committee and the Credit Committee were formed to ensure suitable risk management practices. Their main function is identifying, measuring, limiting and informing the Board of risk exposure, levels and limits. The Corporate Risk Committee performs the specific functions below: RISK MANAGEMENT 38 Supervise the risk function on a corporate level, including all LarrainVial companies. Control policy compliance and establish suitable procedures and mechanisms to manage and administer the risks to which the Company is exposed. Propose tolerance risk levels according to the results of self-evaluations, registered risk events, and levels and trends of key identified indicators. Approve proposed action plans to mitigate events and risks. Submit a monthly report to the Board of Directors about accomplished tasks, results achieved, and recommendations or concepts the Committee may deem convenient according to the criteria for risk assessment, measurement and control. This committee is formed by representatives of the Risk, Comptroller and Operations areas. Six members are permanent and one is a guest who attends depending on the topics discussed. Anybody whose reports or opinions are of interest to the Company may be invited to attend the Corporate Risk Committee meetings and shall have voice but no vote. The Corporate Risk Committee holds ordinary meetings once a month; extraordinary meetings can be called by two of its members. Meetings last 90 minutes and are convened by electronic mail two business days before the meeting date. In addition, a Credit Committee was set up to manage credit risk only, with the following responsibilities:

39 Support the organization s efforts to manage credit risk. Verify overall risk management, estimating and monitoring the actual degree of exposure to risks in order to find coverage against possible changes that may cause losses. Understand thoroughly the risks associated to the different financial instruments and products. Approve and/or deny credit applications according to the policies applicable to the different instruments involved. Approve proposed action plans for credit risk mitigation. CORPORATE RISK MANAGEMENT DEPARTMENT The Corporate Risk Management Department monitors the implementation of excellence in regard to the Company s risk management. Risk is thus identified, measured and controlled, and it is further verified that business processes are administered according to best industry practices, considering the risks and regulatory implications involved. This mission is accomplished through the following functions: Implement the risk management strategy and process approved by the Board of Directors, covering the different risks that are relevant to LarrainVial s goals. Monitor the implementation of risk management policies and procedures, and their application by designated personnel. RISK MANAGEMENT 39 Produce regular reports on risk status or immediate reports in the case of serious default about the management of risk-derived incidents, faults or errors. Verify the actual development and efficient implementation of risk mitigation measures, and the consistency between adopted actions and the defined procedures according to procedure limits and controls. The Corporate Risk Management Department includes two specific units to carry out a more specific control pursuant to the highest market standards: Operational Risk Unit: it defines the Operational Risk Policy in order to establish the general bases for the organization s operational risk structure, management, monitoring and mitigation in compliance with regulations in force. It manages and updates the operational risk documentation through an Incident Log, which is a tool designed to record, follow up, and investigate events that became or may become operational losses. In addition, the Operational Risk Unit deals with risk analysis for new

40 products and processes, operational risk training management and operational risk policy exception management. The Operational Risk Unit is formed by a highly qualified team composed of one manager, one deputy manager and two analysts. Credit Risk Unit: it defines the Credit Risk Policy based on consistent and systematic risk management aligned to the organization s goals in compliance with legal regulations and applicable rules. Therefore, it takes care of credit risk assessment and credit risk identification, monitoring and mitigation. Consequently, this unit manages and updates the Credit Risk documentation, credit line application analyses and credit risk policy exceptions. The Credit Risk Unit is composed of one manager, one unit head and one analyst, all with ample international risk management expertise. RISK MANAGEMENT 40 In the past year, the Corporate Risk Management Department implemented a series of action plans intended to improve operational risk and credit risk management: Risk management implementation in Peru and Colombia. Creation of a new Credit Approval Memorandum (CAM). Development of quarterly credit risk management reports. Update of risk management policies. FINANCIAL RISK MANAGEMENT DEPARTMENT The Financial Risk Management Department plays an independent support role to monitor the financial risks that are present in LarrainVial s business. Its goal is to keep financial risks within risk appetite levels, while maintaining historical records of positions and results that can validate the models used, and can explain and analyze the risk profile evolution and portfolio rates of return. Its main functions are: Identify the relevant financial risks present in the business units or subunits operated by LarrainVial. Keep suitable and detailed documentation of all tasks, processes and procedures executed by the Financial Risk Management Department and/or under its responsibility. Keep historical records of positions and results in order to validate the models used and perform a suitable analysis of the evolution of risk profiles and the rate of return on monitored portfolios.

41 Monitor that risk exposures or levels are within the levels accepted by the Board of Directors, and implement regularization procedures for any excess in a timely and effective manner. In the case of portfolios and/or business administered on behalf of third parties, this control will also cover business and contractual obligations undertaken with clients relative to financial risks. In the past year, the Financial Risk Management Department has implemented the following initiatives: Automation of the daily financial risk control at the local Fixed Income desk. Daily report on aggregate financial risk. With vast international risk management experience, the Financial Risk Management Department is composed of one manager, one deputy manager and two analysts who participate in the validation and formulation of valuation methodologies for the operated financial instruments and products. This Department further helps the Board of Directors to define its investment, liquidity and balance sheet administration policies. RISK IDENTIFICATION AND MEASUREMENT OPERATIONAL RISK This section will explain the process to administer Operational Risk, including a series of activities intended to identify, assess, monitor and control operational risks to comply with current regulations. In addition, the actions adopted by LarrainVial to minimize risk occurrence and mitigate risk severity are detailed below. RISK MANAGEMENT 41 OPERATIONAL RISK ADMINISTRATION PROCESS Communicate and consult Treat risks Asses risks Analyze risks Identify risks Establish context Monitor and review

42 LarrainVial distinguishes different areas of impact where operational risks materialize: Economic context: risks that, if materialized, generate equity, monetary or financial losses to the organization. Functional context: the risk is associated to operational errors in the implementation of processes or product operations. Quality of service context: the risk affects directly the client perception about the quality of the service offered. Regulatory and legal context: non-compliance with in-house rules or rules issued by regulatory or legal agencies. Image and reputation context: damage to the intangible asset brand that directly affects the public perception of the Company. The Operational Risk management model is based on the best market practices and the compliance with in-house and external rules while measuring risks; it further analyzes the following aspects of risks identified in the contexts above: RISK MANAGEMENT 42 OCCURRENCE AND IMPACT The criteria to determine operational risks are defined on the basis of the variables Occurrence and Impact in order to identify risks according to their classification and generate risk mitigation action plans. The following axes are defined: Occurrence axis: quantity or likelihood of materialized events during one year. Four levels of occurrence will be defined (likely, possible, improbable, almost never). Impact axis: threshold of economic losses associated to a materialized risk event. Impact levels are defined as catastrophic, significant, moderate and mild. RISK LEVEL It is a combination of the elements Occurrence and Impact that streamlines the understanding of the risk entailed by these factors. According to the different levels achieved for the identified risks, priorities are established for risk mitigation through steps such as action plan execution, the implementation of indicators that are manageable by the organization and risk exposure monitoring.

43 RISK LEVEL MATRIX Impact Occurrence Mild Moderate Significant Catastrophic Almost never Low Low Low Medium Improbable Low Medium Medium High Possible Low Medium High High Likely Medium High High High Before new products and services start to be operated or new processes or systems are implemented, the responsible units are required to assess the level of risk jointly with the Operational Risk Unit in order to include the mitigating actions necessary to manage change within acceptable risk exposure levels. When the risk is identified and measured, the Operational Risk Unit implements a series of action plans oriented to mitigate, transfer and monitor risk through active Operational Risk management steps. MANAGING LOSS EVENTS Organizational units report to the Corporate Risk Unit through dedicated information technology systems any materialized risk event that generates operational losses so that these events may be analyzed, assessed and registered to establish an event and operational penalty record. RISK TRANSFER RISK MANAGEMENT 43 LarrainVial is subject to regular reviews by international insurance companies (Mapfre, Chubb and ACE) in order to take out the following coverage and mitigate the impact of losses through risk transfer: Professional Liability for Errors and Omissions (E&O), and Directors and Officers Liability Insurance Policy (ACE) These are voluntary insurance policies covering the LarrainVial group against errors and omissions by their directors or officers. Professional Liability Insurance Policy (Mapfre and CESCE Chile). To guarantee the correct fulfillment of LarrainVial brokerage obligations. Employee Fidelity (Chubb). For company losses caused by dishonest or fraudulent actions by employees acting alone or in collusion with others. It further includes material and physical losses of financial instruments as a result of robbery, theft, assault, mysterious disappearance, forgery or adulteration.

44 INSURANCE LARRAINVIAL HAS A LARGE VARIETY OF INSURANCE TYPES FOR EFFECTIVE RISK COVERAGE, PROVIDED BY WORLD-CLASS INSURANCE COMPANIES. In addition, there is other voluntary insurance coverage delivered by Penta to protect technical and operational environments: Electronic Equipment: covers large computing equipment, including facilities. Fire-Earthquakes: covers damage and deterioration suffered by furniture, partition panels, cabling, lighting appliances, carpets, electrical appliances, office supplies, personal belongings, etc., caused by fire, heat, smoke, vapor or extinction and demolition elements. Third-party liability: tort liability for material damage or personal injury for which the insured may be held liable as a consequence of its typical business activities. EFFECTIVE RISK MITIGATION Another Operational Risk mitigating element developed by LarrainVial is a set of controls established to keep risk within the level of tolerance defined by the Board of Directors. The effectiveness of these controls is evaluated annually through a self-evaluation process. RISK MANAGEMENT 44 RISK MONITORING Operational risk is monitored by the Corporate Risk Management Department through the coordination and management of corporate operational risk reports. Organizational units inform to the Corporate Risk Unit the result of their management, monitoring and follow-up tasks in regard to implemented controls. The information received is reported to the Risk Committee and senior management according to the timeframe below: Quarterly: indicators and losses. Half-yearly: indicators, losses and materialized events. Annual: indicators, losses, materialized events and risk self-assessment. SELF-EVALUATION PLAN Every year, LarrainVial carries out a risk and control self-evaluation process in order to identify task risks and the effectiveness of implemented control plans. The overall results from the self-evaluation performed in 2013 are the following:

45 RISK DISTRIBUTION PER MACRO-PROCESS HUMAN RESOURCES MANAGEMENT SALES MANAGEMENT CLIENT MANAGEMENT LEGAL MANAGEMENT SALES AND TRADING MANAGEMENT ADMINISTRATIVE MANAGEMENT OPERATIONS MANAGEMENT STRATEGIC DIRECTION CLIENT SERVICE MANAGEMENT IT MANAGEMENT ACCOUNTING MANAGEMENT Based on LarrainVial s activities, the macro-process with the highest inherent risk exposure is Operational Management, with Securities Custody/Administration Management and Operational Treasury being its highest exposed processes. This is mainly due to the activities related to the handling of clients securities and money. The second macro-process with the highest level of risk exposure is Sales/Trading Management and investments, with Negotiation being the highest exposed process as it places orders on the market. The self-evaluation process captures all the risks identified by the processes and these are then entered in the Brokerage s Risk Matrix. This analysis identified 974 risks, classified as follows according to their causes as defined by the Basel Committee: RISK MANAGEMENT 45 NUMBER OF RISKS IDENTIFIED BY TYPOLOGY Internal fraud External fraud Labor practices and safety at work Clients, products and business practices Damage to physical assets Business discontinuation and system faults Process implementation, delivery and management

46 The main cause of the identified risks is process implementation, delivery and management errors, for a total of 667 identified risks. They are first quantified and then classified according to their level (High, Medium or Low) to analyze the effectiveness of implemented controls. This analysis shows inherent risks, those faced by the Company when there are no actions in place to change their occurrence and impact, and residual risks, which are those that remain after control and mitigation plans are executed. DETAILED RISK DISTRIBUTION RISK MANAGEMENT 46 MACRO-PROCESS Sales management Client management Trade / transactional and investments management Operations management Client service management Accounting management IT management Strategic direction Administrative management Legal management Human resources management INHERENT RISK RESIDUAL RISK HIGH MEDIUM LOW HIGH MEDIUM LOW % % % % % % It can be observed that inherent risks concentrate mainly as Medium risks, while residual risks are mostly found as Low risks. These data reinforce the quality of risk management deployed by LarrainVial since the self-evaluation process data demonstrate that controls are adequate and effective to decrease risk exposure:

47 EFFECTIVENESS OF CONTROLS Suitable Satisfactory Insufficient Does not mitigate CREDIT RISK LarrainVial s objective in the matter of Credit Risk management and control focuses on risk identification, measurement, management and mitigation. Therefore, LarrainVial s priority is to identify the different focuses of the risks inherent to its business activity and establish risk severity mitigation measures. The services offered by LarrainVial to all its clients represent a Credit Risk focus attributed to the approval/denial of credit applications and the management of positions by requiring collaterals for the loans. In addition, asset transactions generate a settlement risk that is mitigated by the settlement of products in a central counterparty clearing house. RISK MANAGEMENT 47 COUNTERPARTY RISK WITH CLIENTS The Credit Risk Unit manages the correct credit assessment of clients to approve credit lines appropriately. It also defines the criteria to monitor and control the behavior of credit lines, positions, collaterals, and sends reports to the organization about the counterparty risk run by the Company. This risk applies to the following products: Forwards. Simultaneous transactions. Short sales. Invoices. Exchange-rate financing resulting from different market time zones.

48 Options. Other products developed during the fiscal year. The different counterparty risk focuses related to the services offered by LarrainVial are: Credit-line related risk: this is the calculation of the repayment capacity associated to liquidity, solvency, and possibility of default by the client made when a client submits an application to operate with certain instruments. These values calculate the maximum loss that the Company is ready to tolerate according to predefined limits. Collateral risk: this represents the deficit of required or delivered collaterals. Upon identification of the risk focus, the Credit Risk Unit develops a series of action plans for integral Credit Risk management through the evaluation, resolution, monitoring and continuous review of the credit line allocation process: RISK MANAGEMENT CREDIT RISK ADMINISTRATION PROCESS FEEDBACK 48 EVALUATION DECISION MONITORING CONTINUOUS REVIEW EVALUATION Before a loan is granted, LarrainVial performs a credit assessment of the client, involving a qualitative and quantitative client analysis. This analysis is submitted to the Credit Committee for approval or denial. Some basic requirements for applicants are: Be a LarrainVial client without any outstanding contracts to be signed. Be a qualified investor with an aggressive profile or have an informed signed consent letter to operate leveraged instruments. Have enough equity that can be secured to cover the transaction or send financial background information for evaluation (audited financial statements of recent years).

49 Send a complete credit line application, including relevant background data. The credit line application for individuals will include, among others, contact details, number of years the individual has been a client, job/economic activity, tax information and proposed use for the credit line if approved. In addition, related companies, affiliates, brands, suppliers and customers, if applicable, will also be identified. Companies applying for a credit line are required to submit their balance sheets and financial statements, comptrollers, main shareholders (individuals), and directors and executive officers. The Credit Risk Unit further analyzes the business status in order to determine the relative position of the company on its market and its capacity to keep that position unaltered. After the evaluation is performed, all the information is submitted to the Credit Committee, which approves or denies the credit line. The following information is also analyzed: Current equity held at LarrainVial. The client s history of transactions with the product. DECISION The Equifax report. Credit lines are unanimously approved and when exceptionally some members disagree with this decision, approval is escalated to the next level, to a Director or the Risk Manager. If the credit line is denied, the Credit Committee may evaluate the application again if the circumstances that determined the denial change radically. An approval also entails the enforcement of a term according to the evaluation that was performed, which may not exceed one year. RISK MANAGEMENT 49 The Credit Committee, after approving a credit line, evaluates the client s creditworthiness by setting a top limit for the transaction. The top amount for credit lines granted to individuals or group customers will never exceed 10% of the Brokerage s equity. According to product type and financial characteristics, different limits are established: Forwards: Credit lines are controlled in risk equivalent terms, which depends on the underlying risk, the current exchange rate and the transaction term, plus potential losses (accrual) for credit line use. Simultaneous transactions and short sales: A 10% collateral in addition to the guarantees required by the Santiago Stock Exchange is required and alerts are triggered under that limit.

50 All transactions are bonded by default, and these bonds are a required hedge to cover for any defaults by clients. The financial instruments delivered as collateral are taken at the value they have on the market where they are normally traded. If not traded, a weight and a settlement value are estimated according to their term, repayment plan and interest rate conditions, and approved by the Corporate Risk Management Department. When the collateral coverage required at market value decreases to two-thirds its initial value for 100% of the amount at risk, new guarantees to regain the initial secured position will be required. Until these new guarantees are submitted, the client is restricted to the existing transactions and no new transactions will be allowed. Similarly, if the required collateral coverage decreases to one-third the initial value for 100% of the amount at risk, new guarantees will be required or positions will be closed to regain the originally required guarantee coverage. If this does not happen within hours, positions are closed and pledged assets sold, unless the Risk Manager or a sufficiently empowered higher officer authorizes an alternative action plan. If the client has unpledged assets at LarrainVial, these can be used as collateral and new guarantees required for the difference, if any. RISK MANAGEMENT 50 UNIT ACTIVITY IN 2013 APPROVED LINES SECURED FORWARDS: 144. UNSECURED FORWARDS: 140. SIMULTANEOUS TRANSACTIONS: 133. SHORT SALE: 76. REJECTED LINES FORWARDS: 67. SIMULTANEOUS TRANSACTIONS: 34. SHORT SALES: 22. MONITORING To monitor and control credit lines, LarrainVial developed the Electronic Credit Approval Memorandum (ECAM), an advanced software package developed inhouse to suit the needs of the Unit, which is under continuous improvement. This program administers the credit lines granted to LarrainVial clients and their positions in multicurrency forwards, simultaneous transactions and short sales. It is an online application that, every 45 minutes, updates credit exposure, percentage of line usage, accrual, percentage of coverage, and breakdown of transactions, among other items. It also checks every product daily, analyzing a breakdown of positions per client, per share summary, type of exchange, client type, larger positions, and regulatory limits, among others. As part of the monitoring process, if a client line has expired or is exceeded and the situation is not regularized within 30 days, or the client has a bad record in terms of internal and external payments, the Credit Risk Unit may suspend this client, disabling him/her from performing any additional transactions. This suspension will remain effective until the Credit Committee evaluates the client and decides to whitelist it again. CONTINUOUS REVIEW The Credit Risk Unit performs a continuous review of the clients financial indicators and information in order to ensure that the conditions under which

51 a credit line was approved have not varied significantly. This measurement is performed at least every six months and the results are submitted to the Credit Committee and then entered on the ECAM system. The life of approved lines is monitored through a weekly report sent to the operational unit supporting money desks and investment areas that shows the lines due and about to expire in the next 30 days so that the information needed for credit line renewal is gathered. SETTLEMENT RISK LarrainVial is a brokerage of fixed-income sovereign and corporate bonds issued in local currency or USD on the Chilean, Peruvian and Colombian markets, traded both at organized markets and OTC. The vast majority of local market, fixed-income transactions are performed at the Santiago Stock Exchange or the Chilean Electronic Exchange, and are settled through the central counterparty clearing house (CCLV) in the safekeeping accounts of the Central Securities Depository (Depósito Central de Valores), mitigating counterparty risk and ensuring the fulfillment of obligations. Moreover, brokerage of international issues is carried out through OTC transactions closed directly with the counterparty or through an Inter-Broker-Dealer. In line with its commitment to excellence and control in the execution of operations, LarrainVial uses the Cash on Delivery (COD) system, which ensures product delivery to one party and payment to the other, further mitigating the settlement risk. This system is provided in Chile by the ComBanc s Switch DVP system and on international fixed-income markets by custodians, such as Euroclear. RISK MANAGEMENT 51 FINANCIAL RISK LarrainVial places special emphasis on all activities related to financial risk, identifying the different types and sources of risk. As detailed on the first pages of this document, the Company concentrates the Sales & Trading business for Shares, Fixed Income, Foreign Currencies and Arbitration in the Capital Markets area. All products traded under these lines of business have different risk factors, and therefore, different metrics for measurement. In order to calculate financial risk, first the market variables that affect the value of the instruments in the portfolio are recognized and then the financial risk is measured through the Value at Risk (VaR) metrics and an analysis of positions. Finally, the Financial Risk Management Department actually manages financial risk by setting and monitoring limits and administering alerts. SETTLEMENT RISK THIS RISK IS MITIGATED BY CONDUCTING SETTLEMENT THROUGH THE CCLV CLEARING HOUSE, FURTHER ENSURING FULFILLMENT OF OBLIGATIONS.

52 RISK IDENTIFICATION The parameters determining the market value of the different financial instruments are the starting point to identify the risk factors to which they are exposed. In the case of LarrainVial s product portfolio, the main risk factors are: Interest Rates: these identify the possibility that variations in interest types may adversely affect the value of a financial instrument, a portfolio or the Company as a whole. They affect most assets in LarrainVial s portfolio. Exchange Rate: it is defined as the sensitivity of the value of a position in a currency other than the base currency to a potential exchange rate variation. Positions affected by this risk are, among others, investments in affiliates in different currencies, loans, ADRs and fixed-income products denominated in foreign currency. Share price: it is the sensitivity of the value of open positions in Equities to adverse movements in their market prices or expectations of future dividends. It includes positions in shares, ADRs and Forwards. RISK MANAGEMENT 52 FORWARDS USD exchange rate Credit Spreads: they identify the sensitivity of the value of open positions in fixed income securities to movements in credit spread curves or recovery rates associated to specific types of issuers and debt. The spread is the difference between financial instruments that trade at a margin over other reference instruments, mainly the rate of return on government securities and interbank interest rates. INTERNATIONAL FIXED INCOME USD-Ext interest rates SHARES, ADRS Price of shares/adrs LOCAL FIXED INCOME CLP interest rates ADDED BOOKS USD exchange rate RISK CLP interest rates Credit spreads USD exchange rate UF interest rates UF interest rates CLP interest rates USD-Loc interest rates USD exchange rate Credit spreads USD-Ext interest rates USD-Loc interest rates Credit spreads CONTROL MEASURES FX position DV01 position VaR FX position DV01 position VaR FX position Position of shares/adrs VaR DV01 position, VaR FX position, DV01 position, Position of shares/adrs, VaR RISK MEASUREMENT LarrainVial uses a series of methods aimed at measuring risk once the sources of financial risk have been identified:

53 VALUE AT RISK (VAR) The standard trading methodology within LarrainVial is Value at Risk (VaR), which measures the maximum expected loss with a specific confidence level and time horizon. The historical simulation standard with a 99% confidence level and a one-day time horizon is used as a basis. Specifically, a four-year time window or 1,000 daily data are used, starting from the VaR calculation reference date and going back in time. One of the advantages of the historical simulation VaR is that it summarizes in a single figure the market risk of a portfolio based on actual market movements without the need to use assumptions of functional forms or a correlation between market factors. LarrainVial implements continuous improvement on all its processes; since July 2013, the VaR calculation, performed up to then individually for each desk type (International Fixed Income, Local Fixed Income, Shares, Forwards and Arbitration), has been performed on an aggregate basis for the entire Capital Markets area. USDk Valor en Riesgo (VaR 99%) USDk VALUE AT RISK (VaR) Cambios Changes Shares Acciones Rates Tasas Spreads LV Capitales Markets Jul-13 Aug-13 Ago-13 Sep-13 Oct-13 Nov-13 Dec-13 Dic-13 RISK MANAGEMENT 53 In order to validate the implemented VaR model in-house, the Financial Risk Management Department carries out regular analyses and contrast tests on the accuracy of the model, attaining results that confirm the model s dependency. The objective of these tests is to determine whether the implemented model should be accepted or rejected to estimate the maximum loss of a portfolio for a certain confidence level and time horizon. FINANCIAL RISK USING VALUE AT RISK (VAR) WITH A 99% HISTORICAL SIMULATION METHOD, A DAILY TIME HORIZON AND BASED ON 1000 MOBILE OBSERVATIONS.

54 The most important test is the back-testing exercise, which compares the predicted VaR measurements within a certain confidence level and time horizon, against the theoretical and financial results that were validated and supported for the different desks during the same time horizon. LV CAPITALS THEORETICAL BACKTEST Theoretical result VaRt Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 RISK MANAGEMENT 54 From July to December, 2013, there was no exception to the 99% VaR (days when the daily loss exceeded the VaR), which met the expectations on the performance of the VaR calculation model. ANALYSIS OF POSITIONS The daily follow-up of positions requires a thorough control of changes in the portfolios in order to detect their possible effect for immediate correction. Positions are used to quantify the market value of portfolio transactions net volume, and these market values are then grouped by major risk factor. All risk positions are stated in the base currency of the unit and the information standardization currency. RISK MANAGEMENT LarrainVial manages financial risk by setting limits for the different risk measuring metrics. Specific limits have also been defined for individual risk factors, product portfolios and global limits for the whole Brokerage. Setting limits requires compliance monitoring and LarrainVial has a daily metrics

55 and limits follow-up system in place that uses alert levels set up by the Corporate Risk Committee. Any alert level excess is reported to the officer immediately higher in rank to the head of the Desk incurring the excess for approval and the applicable regularization term. All current excesses, whether authorized or not, are included in the daily reports, showing the levels of excess with the relevant approval and regularization term issued by the incumbent executive. Daily reports also exhibit the excesses that were actually regularized on that closing date. TECHNOLOGICAL SUPPORT As an expression of its commitment to risk management quality, LarrainVial has made an investment to develop a Financial Risk System (FRS) in-house. This system will obtain market prices from external and internal sources and will calculate, record, and report daily information on financial risks. The purpose of this system is to automate financial risk management, consistently with the high risk management standards of LarrainVial. The FRS will keep the Board of Directors duly informed about the levels of exposure and risk of the Company s daily transactions. LIQUIDITY RISK AND FINANCING Liquidity and financing management has always been a core element of LarrainVial s business strategy. However, in recent years liquidity management has become particularly relevant because of the tension in financial markets, becoming a key determining factor element between survival and bankruptcy. Against this scenario, strengthening the liquidity risk management system and the financing structures that ensure LarrainVial s intermediation activity became extremely important. LarrainVial, in its permanent commitment to implementing Risk Management best practices, has revised its Liquidity Risk Policy to adjust it to the reality of today s market. This policy applies to all activities LarrainVial develops in the securities market on its own account or on behalf of third parties, and to business involving the management of resources such as Collective Investments, Third- Party Portfolio Management and, in general, all products and services that have a potential exposure to liquidity risk. FINANCIAL RISK SYSTEM IT AUTOMATICALLY CALCULATES, RECORDS AND REPORTS DAILY INFORMATION ON FINANCIAL RISK. RISK MANAGEMENT 55 The Company faces two types of liquidity risk in the development of its business: Market liquidity risk: it is associated to the need to liquidate investments by incurring losses as a consequence of an unexpected liquidity requirement.

56 LIQUIDITY RISK LIQUIDITY MANAGEMENT HAS BECOME PARTICULARLY RELEVANT BECAUSE OF THE TENSION IN FINANCIAL MARKETS. Funding liquidity risk: it results from incorrect management by administrators, which can lead to mismatches between the active and the passive position of a financial product. Regarding Corporate Governance, the Corporate Risk Management Department is responsible for developing the tools to analyze, monitor and report the risks associated with the Company s liquidity. RISK MANAGEMENT LarrainVial manages liquidity risk by developing an annual plan setting the limits associated to the needs of the lines. Any set limit is then analyzed for effectiveness to ensure proper monitoring of lines and positions. LarrainVial also delivers liquidity risk reports through a dedicated system in order to keep risk within predefined levels. RISK MANAGEMENT 56 A detailed explanation is provided below: ANNUAL PLANNING Annual plans are developed at the beginning of each year; they are approved by the Board of Directors and include the following activities: Determine annual requirements for bank credit lines. Renew existing bank lines as needed. Open new bank lines and increase existing lines. Set line use and liquidity limits. Update overdraft limits for the different areas and business units. All these activities are interrelated and developed according to LarrainVial s financing model, which consists of a Matrix and autonomous affiliates in terms of liquidity. Each affiliate is responsible for meeting the liquidity needs that result from their activity by allocating capital originating from paid capital and capitalized earnings on an annual basis. Consistent with this financing model, financial ratios are also defined by each affiliate individually taking into account laws, external and internal regulations,

57 policies or mandates from their respective Boards, whose behavior is monitored by each affiliate. The performance and evolution of these indices is reported to the Matrix Board so as to define any necessary changes to strategic guidelines. LarrainVial s strategy and financing model is characterized by a diversification of funding sources, providing LarrainVial s affiliates the opportunity to choose between internal or external funding. With regard to LarrainVial s own equity, the Capitalization of Earnings Policy is the main source of internal funding within the affiliates. On the other hand, external funding considers the following items: Clients: The main source of external funding is repurchase agreement transactions. Financial system: As a secondary source of funding, daylight overdraft lines associated to specific products are used, granted by different commercial banks. LIMIT ANALYSES LarrainVial conducts a series of analyses focused on the limits of use of bank lines for the different business areas in order to protect and measure liquidity: Analysis of tolerable limits against liquidity indicators and use of lines. Analysis of liquidity indicators and their trends over time. MONITORING LINES AND POSITIONS LARRAINVIAL S FINANCING MODEL LIQUIDITY RISK CAN BE EFFICIENTLY MANAGED VIA LIMITS ASSOCIATED TO THE NEEDS OF EACH LINE. RISK MANAGEMENT 57 The Treasury is responsible for monitoring financing transactions, and the positions and use of the lines of each desk and business unit, verifying that they are within the limits established by senior management. As part of the monitoring process conducted by the Treasury area, any transaction involving overdraft and financing for desks and business areas should be informed to and previously approved by the Treasury. In this way, the capacity to cover the transaction can be analyzed in advance from the point of view of liquidity ratios.

58 REPORTING LIQUIDITY-ASSOCIATED RISKS The Corporate Risk Management Department coordinates and manages the corporate reports on liquidity risks. The following reports should be highlighted: Liquid assets: a daily report on the available amount of liquid assets and ratio to the minimum established amount. Limits: a daily report including limits. Positions: a daily report on the current use of lines and limits. Fees and expenses: a report that is updated at least once a year. RISK MANAGEMENT 58

59 CONTROL ENVIRONMENT LarrainVial understands that the establishment of an effective control environment originates in how policies are developed, goals are set up and risks are managed. Additionally, the control function should be supported by an organizational structure that ensures compliance with policies and processes for the suitable management of inherent business risks. The control function is further reinforced by the active participation of the whole Company in controlling activities. Along these lines, LarrainVial has established a control framework that consists of five axes of internal performance and an external oversight plan. The five control axes are described below; they are defined at a corporate level and cover all activities carried out by the Company: Internal audit of all activities performed by the company carried out by the Comptroller division, which reports directly to the Board. Compliance with regulations, aimed at ensuring that LarrainVial activities meet mandatory rules. CONTROL ENVIRONMENT INTERNAL CONTROL FRAMEWORK BASED ON FIVE AXES: COMPTROLLER, COMPLIANCE WITH REGULATIONS, RESTRICTION OF TRANSACTIONS, INFORMATION SECURITY AND SELF-REGULATION OF THE RESEARCH DEPARTMENT RISK MANAGEMENT 59 Restrictions on employee transactions, definition and effective control of statutory limitations on market transactions carried out by Company employees. Information security, aimed at safeguarding the information used by the Company for business development and ensuring business continuity. Self-regulation of the Research Department, self-imposed measures that seek to optimize LarrainVial s transparency, credibility and integrity while ensuring corporate independence. In addition to the strict internal control that LarrainVial imposes across the company, and in compliance with current legislation, the Company is monitored by the SVS, which is an autonomous institution related to the Government of Chile through the Ministry of Finance. It supervises the activities and entities involved in the Chilean insurance and securities markets to ensure that settlement transactions of people and supervised

60 institutions comply from start to end with applicable laws, regulations, bylaws and other provisions governing market transactions. In addition, on account of the nature of its business, LarrainVial must abide by the regulations issued by the Santiago Stock Exchange, the Electronic Exchange, the Central Bank, banks, insurance companies and other agencies that set forth rules applicable to LarrainVial s activities. Finally, in order to ensure the highest possible transparency of policies, processes and controls developed by LarrainVial s companies, an annual review by world-class external auditors, such as the multinational companies KPMG and EY, is also carried out. Superintendency of Securities and Insurance CONTROL ENVIRONMENT BROKERAGE MARKET Supervision, regulation and rules 60 In addition, LarrainVial s international affiliates are subject to review and supervision by other agencies: In the USA: the SEC, as well as auditing and monitoring by FINRA. In Peru: the Securities Market Superintendency; the Bank, Insurance and Pension Fund Administrators Superintendency; and the Peruvian National Oversight Agency for Companies and Securities. In Colombia: the Financial Superintendency, the Securities Exchange, and the Securities Market Self-Regulating Agency.

61 RECENT INITIATIVES LarrainVial performs a continuous review of the control environment according to relevant international best practices and current regulations. To this end, it has developed a series of initiatives to improve the control environment and ensure that it works with a high level of efficiency. Comptroller Segregation. As an important milestone, from 2012 the Company has performed a functional segregation of the Comptroller Unit in order to avoid conflicts of interest, report directly to the Board and have a range of autonomous actions to cope with an increasing international growth context. With a more complete team, consisting of one Comptroller and several internal auditors, the Comptroller Unit is very well connected with all LarrainVial s operational and business areas. Review of procedures, risks and controls. The main initiative in 2013 was an exhaustive review of procedures of the most sensitive LarrainVial divisions, aimed at verifying current controls. A team of external consultants was hired, which conducted personal interviews with the key people within each business unit. The information gathered was validated by each business unit head and consolidated into a working document that was used as a basis for procedure manuals, which include the following items: Process flowcharts. Description of activities and procedures. Output. Detected risks categorized by risk typology and valued according to impact and severity axes. CONTROL ENVIRONMENT 61 Test cases used to verify the efficacy of current controls. Following this review, LarrainVial has increased its awareness of process risks and opportunities to improve current controls, leading to an efficient monitoring of all its activities.

62 CONTROL ENVIRONMENT 62 Macro-processes and processes of the different affiliates and business units COLOMBIA Strategic direction (1) Risk management Risk management (33) Internal control (3) Client management Investing creation (3) Investing maintenance (4) Document management (3) Business management Negotiation characteristics Equity (3) Correspondents (10) Proprietary equity position (3) Operations management Clearing and settlement (13) Operational treasury (12) Close process characteristics (7) Supplementing process characterization and procedure (14) Client service management (5) HHRR management Recruiting and selection (2) Payroll administration (5) Quality of life at work (1) Development and training (3) Well-being (2) Accounting management (4) Technology management Internal audit (1) Systems administration (11) Change management (10) Security management (5) Data administration (6) Administration of facilities (7) Quality management (7) Consumer protection (1) Compliance officer (1) Account audit (1) CHILE Custody Capital events (3) Collateral management (3) Transaction management (8) Movement of securities (4) Tasks (4) Treasury Income and Withdrawals by Clients (3) Transaction management (5) Capital events (2) Liquidity management (3) Square positions (1) Tasks (6) Capital markets Finance money desk Management of proprietary portfolio (4) Capital market intermediation (2) Pre-Settlement (1) Operating support (3) DP3 desk Product selection (2) Capital market intermediation (2) Client support (2) Business support (2) Capital market intermediation (1) Relationship with the Manager (3) Client support (5) FX desk Capital market intermediation (2) Pre-Settlement (3) Operating support (1) Capital market intermediation (4) Operating support (1) RF desk Capital market intermediation (4) Pre-Settlement (4) Operating support (1) Capital market intermediation (4) Corporate transactions (1) Operating support (1)

63 CHILE ADR desk Arbitration operations (2) PERU SAB Transaction management (3) Pre-Settlement (4) Internal control (1) Market maker services (3) Fund distribution (1) Arbitration operations (2) Support (1) Operating support (4) Custody (1) Equity desk Capital market intermediation (7) Corporate operations (1) Pre-Settlement (5) Operating support (2) Business activity (3) Client support (2) SAFI Reporting (1) Transaction management (1) Administration of funds (3) Support (1) Reporting (2) Administration of funds (1) Active involvement in control actions. During 2013, a work system was designed to work in an orderly, transparent, consistent and easy to monitor manner with the support of standardized planning and audit management systems, and report and workflow design models. This purpose was achieved as all LarrainVial employees are fully aware of the control tasks applicable to their processes and the benefits they generate, which helps them promote a culture of adherence and an active participation of the Company as a whole in the control function. LarrainVial has achieved this goal by reinforcing training for all employees, as reflected in the 20 in-person class sessions delivered in the past year to a total of 250 employees on asset laundering crime prevention. CONTROL ENVIRONMENT 63 INTERNAL AUDIT Internal audit, the first axis of the control environment model, is an activity performed by the Comptroller Unit which reports directly to the Board. From an organizational standpoint, the Comptroller departments of each international delegation depend on the Comptroller Unit of the parent company to operate, regardless of specific regulations applicable to their business. The Audit Committee reports directly to the Board and supervises and monitors internal control activities within LarrainVial. As part of its functions, the Comptroller Unit determines the content, scope and periodicity of the work to be done by submitting an Annual Audit Plan to be approved by the Audit Committee. In addition, it submits to the Board an annual assessment of the internal control system.

64 LarrainVial s Comptroller Unit defines and formalizes specific procedures for each of the phases that make up its activity: planning, job execution, communication of conclusions, follow-up on recommendations, and management and quality control of jobs performed. All these procedures comply with the Company policies and include, but are not limited to, the following: Audit activities are planned on an annual basis and describe the objectives and scope of the proposed work. The Annual Audit Plan must be approved by the Board. In addition, any changes to the original planning need to be ratified by the Board. CONTROL ENVIRONMENT 64 The work performed by the Comptroller Unit is supported by specific programs tailored to the peculiarities of the different types of processes and business lines. The conclusions reached after the work performed by the Comptroller Unit are reflected in reports, which include an overall rating and an assessment of the risks of the different audited topics, as well as recommendations based on the most significant identified issues. At present, the reports produced by the Comptroller Unit are the following: audit of full processes by department, audits on specific matters or tasks, research audits, unplanned audits, and audits to follow up and monitor observations from past reports. For the Comptroller function to be effective, the recommendations resulting from each assignment are discussed with the various audited areas. These recommendations are subject to regular follow-up under a detailed action plan, including scheduled dates for issue resolution and leading implementation officers. The Comptroller Unit has a management and quality control system in place that facilitates the gathering of information needed to evaluate the effectiveness and efficiency of its function. The Comptroller Unit has a management and quality control system in place that renders information gathering easy to evaluate the effectiveness and efficiency of its function. The Comptroller Unit is composed of the Corporate Comptroller and five internal auditors. Within this organizational structure, the Comptroller is required to carry out a consistent review, examination and evaluation of administrative and financial management results in order to keep the Board informed. At the close of each year, the Comptroller submits a report of its own management performance and an evaluation of conducted audits, providing appropriate recommendations to improve effectiveness and performance.

65 SPECIFIC ACTIVITY LarrainVial s Comptroller Unit has undertaken a series of initiatives in order to monitor compliance and effective control of activities across the Company. Its main action has been the development of a web platform, hosted on the corporate intranet, to make observations found in internal and external audits available to the different areas throughout the company. These observations can be followed up on this platform and stakeholders can enter comments and documentation related to their respective areas. In this way, the whole Company can participate actively in the control function. COMPTROLLER S INITIATIVES DEVELOPMENT OF A WEB PLATFORM IN ORDER TO MAKE THE COMMENTS FOUND IN INTERNAL AND EXTERNAL AUDIT PROCESSES AVAILABLE TO THE DIFFERENT AREAS WITHIN THE COMPANY In addition, the 2013 Audit Plan included a review of the Custody Unit since it is a fundamental component of the Administration and Operations Management Department. The audit covers domestic and international operations of the Custody Unit, which protects the ownership of securities in custody and the correct settlement of market transactions and capital events. Audit activities include the following: Develop a specific Work Plan for the Unit, including a detailed description of the work to be performed by auditors, such as audit tasks, tests, objectives and methods. Analyze the procedures developed by an external consultant for the Custody Unit. Analyze the documentation and information provided by the Custody Unit. Analyze the information contained on the corporate systems: SEBRA CB (P35), SIGA, FWD Platform, etc. Do several Audit tests with samples of the total population. This review concluded that the documentary support of processes and transactions under analysis are adequately controlled, that information found on analyzed and backup documents matches that on IT systems, and that there is an adequate segregation of functions under the analyzed processes. CUSTODY UNIT AUDIT THERE IS ADECUATE CONTROL OF THE DOCUMENTARY SUPPORT OF ANALYZED PROCESSES AND OPERATIONS, ADECUATE CORRELATION BETWEEN THE INFORMATION CONTAINED IN ANALYZED DOCUMENTS AND BACKUPS WITH THAT ON IT SYSTEMS, AS WELL AS A SUITABLE SEGREGATION OF FUNCTIONS IN THE ANALYZED PROCESSES. CONTROL ENVIRONMENT 65 In 2013, the Comptroller Unit approached other relevant issues for the Company, such as the adjustment to provisions under title XXI of the Securities Market Law regarding privileged information.

66 COMPLIANCE UNIT LARRAINVIAL HAS A UNIT TO ENSURE REGULATORY COMPLIANCE AND PREVENTION OF ASSET LAUNDERING AND FINANCING OF TERRORISM. REGULATORY COMPLIANCE The functions performed by LarrainVial s business units involve public trust, the Company s brand image and the personal reputation of its executive officers and directors. Therefore, the company requires that all of its staff act according to the highest professional standards, abiding by the legal provisions and rules applicable in each jurisdiction, responding to the local regulatory agencies as appropriate and displaying at all times a conduct based on the highest ethical standards. It is of utmost importance, then, to have robust Corporate Governance in place, as well as a suitable internal control environment, where the Compliance Unit plays a fundamental role. The purpose of this Unit is to establish a management and control process ensuring compliance with internal and external laws and rules, and managing activities for the prevention of money laundering, terrorist funding and bribery. Administratively, the Compliance Unit reports directly to the Corporate Risk Management Department. CONTROL ENVIRONMENT 66 Within the above organizational structure, the functions of the Compliance Officer should also be highlighted, acting as a Crime Prevention Officer for LarrainVial. This activity will be performed by the Corporate Risk Manager, who will be ratified by the Board of Directors and the boards of companies providing information. LEGAL AND REGULATORY COMPLIANCE At LarrainVial, regulatory compliance is an employee responsibility across all corporate levels. This responsibility is fulfilled with the support of the Compliance Unit, the Audit Unit (especially to analyze new regulations) and the Comptroller Unit (in regard to process regulatory compliance reviews). The main aspects of applicable laws and regulations and their requirements (available information, regulatory limits, sending of reports, etc.), as well as the area responsible for the action, need to be established in an executive manner. By way of example, the main legislation that currently governs LarrainVial s operations is listed below: COLOMBIA Law No. 964 of 2005 (Securities Framework Law) Decree Nº 2555 of 2010 (Regulations for financial, insurance and securities market industry) Law Nº 1328 of 2009 (Financial Reform) BVC (BVC Sole Circular)

67 CHILE Companies Law No. 18,046 (Framework for operation in virtue of the type of company) Law No. 20,393 (Establishes criminal responsibility for companies for asset laundering, financing of terrorism, and bribery) Securities Market Law No. 18,045 (the LMV for its initials in Spanish) Title VI LMV Stock Brokers and Securities Agents (Sole purpose and Complementary Activities) Title VI LMV Stock Brokers and Securities Agents (Registration in Stock Brokers Registry) Title VI LMV Stock Brokers and Securities Agents (SVS Reporting Duties) Title VI LMV Stock Brokers and Securities Agents (Manual for handling of information of interest to the market) EE.UU. Title VI LMV Stock Brokers and Securities Agents (Fulfilment of closing of operations) Circular No of the SVS (Issues instructions regarding internal control and risk management for securities intermediaries) Circular No of the SVS (Issues instructions regarding prevention of asset laundering and financing of terrorism) SEC Regulation D (Exemptions from SEC registration for private securities offerings) CONTROL ENVIRONMENT 67 9 SEC Rule 144 (Securities operations subject to restrictions) SEC Regulation S (Sale of securities and transnational offers to foreign persons and entities ) FINRA Rules 2310 and 2810 (Best practices for carrying out due diligence of all potential issuers) FINRA Rule 5310 (Best execution and interpositioning) FINRA Rule 5121 (Supervision, keeping of records and filing of requests) PERU Legislative Decree No (Securities Market Law that regulates access to and transparency of the securities markets, as well as adequate protection of the investor)

68 REGULATORY COMPLIANCE CONTINUOUS REVIEW OF NEW REGULATIONS, ANALYZING THE IMPACT ON COMPANY OPERATIONS. SMV 862 (Law for Investment Funds and their Administrating Companies, is the legislative framework of the investment funds, as vehicles of investment) Conasev Resolution No EF/94.10 (Regulation of Intermediation Agents, provides legal framework of action for those entities that participate in the securities market) UIF (Law that creates the Financial Intelligence Unit) SMV 033 (Regulations for the Prevention of Asset Laundering and Financing of Terrorism) CONTROL ENVIRONMENT 68 CRIME PREVENTION AUTOMATED CLIENT EVALUATION AND MANAGEMENT OF ALERTS OVER INTERNATIONAL PLATFORMS: PERSHING, USB, AND PICTET. When new regulation emerges LarrainVial analyzes its scope and requirements and generates an implementation schedule, which identifies its key planning milestones. Thus, the time period for implementation, the fulfillment of milestones and the verification of the effectiveness of the correct execution of the regulation can be examined in accordance with the defined processes. This information is used to determine the degree of progress and generate alerts that indicate compliance or non-compliance with the established time periods. PREVENTION OF ASSET LAUNDERING, TERRORIST FINANCING AND BRIBERY Given the prominent role that LarrainVial plays as a financial institution, it is necessary to establish a specific management area for the prevention of asset laundering and terrorist financing, independent of the rest of the applicable regulatory framework. For this purpose, a review of client operations that present unusual, irregular or abnormal elements is carried out in regard to activities that may be indicative of an illegal origin of resources used in the transaction, negotiation or operation itself. The Compliance Unit investigates these operations based on the data collected; if well-founded suspicions are detected regarding an operation, the unit reports its findings to the Financial Analysis Unit (FAU). To reinforce the increased requirement of complementary and necessary client information (income, related parties, assets, etc.) to evaluate whether transactions handled at LarrainVial have apparent economic justification, a know-your-customer (KYC) form has been automated, and the sales force has been made aware of its importance. Additionally, the Compliance Unit also manages the alerts received regarding asset laundering, terrorist financing (AML) and those in regard to Politically Exposed People (PEPs), using our international platforms provided by Pershing, UBS and Pictet. When analyzing a case with warning signs, it is important to have the information regarding the accounts, transactions and balance in a consolidated manner. LarrainVial has a series of computer tools that facilitate this task, which are:

69 Monitor Plus: is a software package purchased from Plus Technologies that analyzes data from different sources and detects in an intelligent manner the occurrence of fraud and money laundering-related events. World-Check: is a software package that verifies clients against sanctions lists, by creating and updating a database of Politically Exposed People (PEPs) and higher-risk individuals. This database is used to help identify and manage regulatory and reputational risks. In 2013, new versions of both tools were implemented, making it possible to manage risk levels by client. As a result, it is possible to prioritize case analysis actions, adequately support the Compliance Unit and information requirements from executives and, at the same time, keep track of each stage in a way that data can be audited and recovered through client history. CONTROL OVER EMPLOYEE TRANSACTIONS LarrainVial s integrity and high standards of loyal competition represent two of the Company s most cherished values. To protect this hard-earned reputation, minimum global standards have been established to ensure that investments made by Company employees are carried out in compliance with the applicable laws and regulations, avoiding and/or adequately resolving any conflicts of interest in regard to these investments. All transactions of a personal nature carried out by employees are handled exclusively through the LarrainVial group and its different companies, and comply with pertinent laws and standards and avoid conflicts of interest. The definition of Employee includes the employee, their investment companies, their related dependents, to be understood as their spouse, children and any other relative or person that lives under the same roof or is financially dependent on them. CONTROL ENVIRONMENT 69 POLICY FOR EMPLOYEE TRANSACTIONS To ensure this control, LarrainVial applies general policies and procedures to employee transactions, which can be more restrictive depending on the regions, divisions, locations, or specific business units. For information purposes, all of LarrainVial s branches and/or affiliates comply with the following requirements for carrying out employee transactions: Disclosure of accounts used for personal employee transactions. Minimum holding periods. Prohibition of transactions that generate conflicts of interest and possession of confidential or privileged information. Prior authorization for employee transactions.

70 The Compliance Unit, in particular the Compliance Officer, is in charge of controlling compliance with general regulations as well as specific regulations for the various business units of the group. Operations in countries where LarrainVial is not present are done via international operational platforms with which the Company has established a contractual relationship, such as Pershing and UBS, or those that the group has given prior authorization for investment purposes. On the other hand, all operations performed in any country where the Company is present are carried out exclusively by means of a LarrainVial Company, following a strict global investment policy. GLOBAL INVESTMENT POLICY FOR LARRAINVIAL EMPLOYEES CONTROL ENVIRONMENT 70 Investments in general Only through LarrainVial Buy (B), Sell (S), Short Sale (SS) Employees in general (holding period and operations) 30 Days Yes B, S and SS Corporate Finance (maintenance period and operations) 30 Days Yes B, S and SS Research Department (holding period and operations) 30 Days Yes, B and S, NOT SS Specific and/or additional restrictions No analyst can invest in shares of the area they cover. The Manager and Director cannot invest in shares handled by the department. No analyst can operate in a share 30 days before or 60 days after the initiation of coverage or change of recommendation. Initial public offerings (IPO s) LarrainVial is underwriter LarrainVial is not underwriter 30 Days 30 Days 60 Days 30 Days 30 Days 30 Days 50% guarantees. Enter Day 1 and 2 of the book. Orders cannot be modified, only eliminated. Market Price Only. General Restrictions for each process. LarrainVial is underwriter. 30 Days 60 Days 60 Days 50% guarantees. Enter Day 1 and 2 of the book. Orders cannot be modified, only eliminated. Only Limited Price. Buy, Sell, Short sale Yes, B and S, NOT SS Yes, B and S, NOT SS Yes, B and S, NOT SS Capital increases LarrainVial is underwriter 30 Days 30 Days 30 Days General Restrictions for each process Buy (B), sell (S), short sale (SS) Yes B, S and SS Yes B, S and SS Yes, B and S, NOT SS

71 SECURITY AND CONTINGENCY Bearing in mind the complexity of the technological environment within which LarrainVial operations are carried out, and considering the magnitude and diversity of the processes, every decision or course of action is highly dependent on its computer resources. Consequently, LarrainVial recognizes the need for preservation of these resources, which means the necessary measures have been taken to ensure that they are adequately protected against natural, human or technical threats (non-authorized use, fraud, sabotage, espionage, fire, earthquakes, etc.) regardless of the media used, the environments in which the operations are processed and the products or platforms that support all operations. SECURITY AND CONTINGENCY LARRAINVIAL HAS EXTENSIVE CONTROL OVER INFORMATION SECURITY AND A BUSINESS CONTINUITY PLAN UNDER CONSTANT REVIEW. This is why LarrainVial has developed an organizational structure that ensures compliance with regulations and policies related to Security and Contingency. Within this structure, the Security Committee is the main body in charge of maintaining the Business Continuity Plan in force, of safeguarding the accessibility and confidentiality of the information and defining and maintaining user profiles. This committee is comprised of a chief executive, the IT Manager, the Processes Manager, the Risk Manager, the Controller, the Systems Manager, and the head of Security. PHYSICAL SECURITY OF THE INFORMATION LarrainVial has developed a series of controls that reinforce the physical security of its installations as well as the security of all the information contained in its information systems. These controls include personal access cards to control office access, Chinese walls to avoid the flow of privileged information, and roles and profiles that regulate Internet access. CONTROL ENVIRONMENT 71 Areas that require different forms and measures of protection in order to protect the sensitivity of the information or equipment containing this information, such as the money desk, have been defined. For the purpose of exercising greater control, a system of intelligent cards acting as nontransferable personal access identity cards, was developed. The system controls access to LarrainVial offices in general and exercises stricter controls for restricted areas. In order to protect confidential information and prevent its misuse, LarrainVial has established certain barriers to the flow of information known as Chinese Walls or Information Walls. These walls are in place in several areas, including Stock Brokerage, General Fund Administration, the Research Department and Corporate Finance. Employees from these areas are prohibited from sharing nonpublic information with employees from other areas. Likewise, physical separations are in place to ensure the aforementioned areas are completely separate from each other. Each member of LarrainVial has the

72 obligation not to disclose privileged and/or confidential information to third parties outside the group, or to other staff members. In terms of technology security, there is Internet access control through various roles and profiles and a telephone recording system. These measures are reinforced with a systemic tool that controls compliance with regulations: Websense Triton DLP: is a software package from the provider Websense designed to prevent and detect information leaks that may occur through the various electronic media such as local network, Internet, removable media, printers, among others. BUSINESS CONTINUITY PLAN (BCP) CONTROL ENVIRONMENT 72 LarrainVial created the Business Continuity Plan (BCP) to ensure that the company maintains the continuity of its critical processes. This plan is a compilation of instructions and procedures to be executed by employees in the event of a contingency, from the moment it occurs until normal functioning or operation is reestablished. The various recommendations regarding the detailed execution of a Business Continuity Plan are supported by the Business Continuity Institute (BCI) and by ISO and BS25999 standards. The BCP contemplates the recovery of the critical business functions or processes based on the analysis of the impact that the interruption of each process would mean for LarrainVial, through the identification and evaluation of the risks that can affect the resources that these processes use. BUSINESS CONTINUITY: IT IS TESTED ON A RECURRING BASIS, ENSURING IN-DEPTH KNOWLEDGE OF ALL EMPLOYEES WITHIN THE COMPANY The following plans have been defined in order to carry out this analysis: Contingency Plan: a subset of the BCP that contemplates how to react to a contingency that may affect the availability or the services offered by the information systems. A contingency can be a data corruption problem, electric supply problem, a software or hardware problem, human error, hacking problems, etc. Disaster Recovery Plan: the part of the Contingency Plan and the BCP that addresses those contingencies that, due to their seriousness, fully interrupt services or require they be relocated to a new location. This plan contemplates the reversal of the situation once the consequences of the disaster are repaired and services are resumed normally. In this context, LarrainVial has established a contingency location, equipped with all the technological and operative resources necessary to ensure adequate service, for the purpose of guaranteeing the functioning of its activity in the event that extraordinary circumstances take place.

73 Business Impact Assessment (BIA). The purpose of the BIA is to create a document that helps understand the impact that a disaster has on the business of the group and how to prioritize critical business processes. For this, a recovery time objective is established (maximum time that the recovery should take) and a recovery point objective (how old the recovered information can be). Call Tree, or contact tree, is a structured list with the main contacts of the Company to take into account in the event of a contingency. The BCP is periodically tested in order to guarantee that the Company clearly understands how it should be executed, evaluate its viability and guarantee that the employees are familiarized with the plan and its procedures. In this way LarrainVial can reinforce one of its trademarks, the active participation of all employees in the control function of the Company, and thereby offer the highest standard of professionalism in the market. SELF-REGULATED RESEARCH DEPARTMENT In addition to specific restrictions on transactions for Research Department employees, LarrainVial has defined and implemented technical and ethical guidelines for this area of the Company aimed at obtaining the greatest possible transparency, credibility and integrity. The Department s commitment is to maintain its independence, offering a professional analysis of excellence, based on empirical facts, with specialized sources and responding always to the dynamism of the economic scenario, in accordance with the depth of the assessment of the key factors that condition the behavior of the market. CONTROL ENVIRONMENT 73 These guidelines cover the following aspects: Publication process of a Target Price (TP). Exceptions for the continuity of coverage, recommendations, TP and publication of reports. Ownership of the information. Each one of these aspects is explained in a detailed manner below.

74 CONFIDENTIALITY THE CONTENT OF A REPORT AND THE RECOMMENDATION REGARDING THE PRICE OF THE ASSET UNDER ANALYSIS IS STRICTLY CONFIDENTIAL UNTIL THE DATE OF PUBLICATION, AND ONLY AT THAT MOMENT CLIENTS LEARN OUR OPINION. PUBLICATION PROCESS FOR TARGET PRICE The content of a report and the recommendation regarding the price of the asset under analysis is strictly confidential until the date of publication; furthermore, its target price (TP) is only known by the analyst, the Equity Research Manager and the Director. All other LarrainVial executives regardless of their rank cannot know a new target price or a recommendation change prior to the publication of the report. When a share is under analysis, it is discussed with the company in question, with the aim of understanding its vision and the capacity of management to react to the industry scenario that the analyst is forecasting. However, the company is not informed of the recommendation and the new target price of the covered share. The Research Department publishes its projection of the Development Plan of the company and estimated future flows in function of its own analysis and regardless of what the company proposes or visualizes. CONTROL ENVIRONMENT 74 LARRAINVIAL EQUITY PARTNERS, EXECUTIVES AND EMPLOYEES DO NOT KNOW THE CONTENT, FUNDAMENTALS, PROJECTIONS OR RECOMMENDATIONS CONTAINED IN REPORTS BEFORE THEIR PUBLICATION AND CIRCULATION AMONG CLIENTS. The analyst proposes the recommendation and the TP of the share in the report. However, the approval of the recommendation, of the TP proposal and the decision to publish and its timing falls upon the Equity Research Manager who discusses the relevance of the recommendation with the analyst and with the Director of Research. In the majority of cases the analyst s proposal is approved, but it is also good to be prepared for differences that may arise, which can be generated as a result of variations in market visions held by the Director and the analyst. In any case, there is always an effort to reach a consensus after a dynamic discussion. These decisions can be driven by the Director when the Director deems it pertinent to change the objective multiples or the capital cost rates used in the models, in function of contingent changes with medium-term implications in the behavior of the market. If the Director and the analyst cannot reach a consensus, the report is not published. All sector or share reports can be published only with the prior approval of the Equity Research Manager or the Director of Research. However, in the case of some reports, the Director of Research can require that the report have the additional approval of the Equity Research Manager, to give the final green light before proceeding to circulate the report among clients. The analyst is strictly prohibited from publishing and sending a report to internal and external clients with a change of recommendation without the Research Director s express authorization by . EXCEPTIONS FOR THE CONTINUITY OF COVERAGE, RECOMMENDATIONS, TP AND PUBLICATION OF REPORTS The Research Department enters a Silent Period for the recommendation of shares or forecast of the Target Price (TP), every time the Capital Markets

75 division (LarrainVial Capital) carries out an operation that entails the publication of a prospectus. In this context, operations associated with the publication of this document and their respective restrictions are the following: Initial Public Offering (IPO): The Research Department shall not cover or issue a recommendation or TP for a share for which the Capital Markets division is acting as placement agent. It should wait for the publication of the first Uniform Codified Statistical Form (FECU for its acronym in Spanish) once the operation has concluded. Capital increase by the Capital Markets division of LV: coverage of shares by the Research Department shall continue, including analysis, flow projections and ratios, suspending the recommendation and TP forecast, until the company has filed a FECU after completing the capital increase. Only in exceptional cases, the Director may authorize that coverage be reinitiated before the FECU is published following a capital increase. SILENT PERIOD THE RESEARCH DEPARTMENT DOES NOT ISSUE TARGET PRICES WHEN THE CAPITAL MARKETS DIVISION IS CARRYING OUT AN OPERATION THAT ENTAILS THE PUBLICATION OF A PROSPECTUS. As such, even during the Silent Period associated with the capital increase of shares of a listed company, the Research Department will continue to analyze the sector, the scenario and the projections for ratios and profits for the company in question, but shall specifically advise in a disclaimer that the Corporate Finance division of LarrainVial is doing business with said company and, in this context, shall refrain from issuing buy/sell or Target Price recommendations. Sale of a block of shares by one of the controlling companies through the Capital Markets division of LV: if the sale of the block of shares is being handled by the Capital Markets division and there is a prospectus drafted by them, the Research Department will continue to cover the share, including analysis, flow and ratio projections, but suspend TP forecast and recommendations until the next FECU is published. As an exception, the Director can authorize coverage to resume before the FECU is published following a capital increase. If there is no prospectus or the sale of the block of shares is being handled by the Sales Desk, the Director shall evaluate whether to enter into a Silent Period. However, coverage can resume a week after the block placement. CONTROL ENVIRONMENT 75 OWNERSHIP OF INFORMATION The information that each employee generates in his/her capacity as Analyst/ Economist is the property of LarrainVial; complying with this is strictly necessary and the analyst is required to generate a complete copy of all their models and/ or analysis in the institutional directory. A file should be created with the analyst s name where all the information used to generate the report is backed up and kept

76 OWNERSHIP OF INFORMATION ALL INFORMATION PRODUCED BY AN ANALYST BASED ON THE PROCESSING OF EXTERNAL AND INTERNAL DATA, AND AS A RESULT OF HIS/HER OWN ANALYSIS, SHALL BE CONSIDERED CONFIDENTIAL. up-to-date. Nevertheless, Research personnel are allowed to keep a personal file of the material that they produce. Each analyst shall carefully handle all information gathered, obtained and processed in his/her capacity as Analyst/Economist of the Research Department. Information that is privileged, reserved or confidential cannot be used and/ or provided for their own benefit or related third parties, whether individuals or companies. For such purposes, all information that the analyst produces based on the processing of external and internal data even if it comes from public sources and as a result of his/her own analysis, must be considered confidential. CONTROL ENVIRONMENT 76

77 CONTROL ENVIRONMENT 77

78 Efficient management based on technology CORPORATE SERVICES

79 CORPORATE SERVICES EFFICIENCY, SPECIALIZATION AND TECHNOLOGY LarrainVial has a centralized Corporate Services model that allows it to have a comprehensive vision of the operative needs of the different business group areas, propose efficient solutions that provide an effective response to these needs and obtain high business productivity. Corporate Services operate by means of a model organized around corporate management departments that provide the following services: Administration & Operations, Planning & Management Control, Business Innovation & Marketing, Systems & Technology, Human Resources, Corporate Risk, Compliance, Legal Advice and Internal Auditing. These management departments have a global strategy and oversee local teams in each of the countries. Providing these services via specialized and homogenous units that rely on standard procedures increases the level of expertise while reducing the Group s operational risk. CORPORATIVE SERVICES 79 9 ORGANIZATION OF CORPORATE SERVICES CORPORATE SERVICES SERVICIOS CORPORATIVOS OPERATIONS AND TECHNOLOGY HUMAN RESOURCES COMPLIANCE CORPORATE RISK BUSINESS INNOVATION AND MARKETING MANAGEMENT AND PLANNING AUDIT LEGAL FINANCIAL RISK

80 ADMINISTRATION & OPERATIONS DEPARTMENT This area delivers global support to the business units daily operations, providing Middle and Back Office services and General services to the areas of Capital Markets, Wealth Management and Asset Management. The Administration & Operations area carries out the following functions: FUNCTIONS CLIENT ON-BOARDING Operational support for clients: management of systems, contracts, etc. CORPORATIVE SERVICES 80 CUSTODY TREASURY Control of the securities deposited in escrow and the correct settlement of operations and management of capital events. Confirmation and management of the market settlements, transactions with the clients, collections and payments of the companies of the group. INVOICING Invoicing of operations ADMINISTRATION AND ACQUISITIONS Maintenance and management of the installations and spaces of the entity. Purchase of materials and consumables. FUND OPERATIONS Calculation of NAV and accounting for every fund that is managed. Drafting of financial statements and sending of information to the SVS and other regulatory entities, if applicable. Share and APV register. ANALYSIS OF OPERATION Create reconciliation and custody reports for national and international markets.

81 HUMAN RESOURCES DEPARTMENT Its main mission is to attract and hire the best professionals so as to ensure the group s leadership in each market. It focuses on individuals, seeking to develop the organization, in addition to employees professional growth. This area handles the selection, hiring and immersion processes, compensation policies, training and employee development, performance management and employee benefits. LarrainVial conveys through this department its value proposition to candidates from universities, business schools and worldwide professional networks. Communication is enhanced through all media, including social networks such as LinkedIn, where it has a global profile with almost 7,000 followers. LarrainVial has implemented corporate policies and processes to identify the employees within the Group with the greatest potential by means of tools such as performance management for all professionals. TECHNOLOGY DEPARTMENT Responsible for projects (such as software development), this area is dedicated to technological infrastructure (hardware and communications). Additionally, it ensures the Company s technological platform remains operational, overseeing servers, communications equipment, telephone switchboard systems, communications links, the opening of new accounts, among others. LarrainVial, through the Technology Department, is making a firm commitment to computer systems with a strong vocation for technological innovation. For this purpose, there is a team of more than 50 professionals with a high degree of expertise working to implement a combined strategy of acquisition of technological platforms from leading suppliers and a methodology of proprietary software development based on recognized quality standards. CORPORATE RISK AND COMPLIANCE DEPARTMENT It ensures the implementation of and compliance with the Company s Risk Management and Internal Control System, which identifies, measures and controls risks, and verifies that the business processes are managed in an appropriate manner in line with best practices. With regard to the compliance function, the Corporate Risk Manager acts at the same time as Compliance Officer of the group, which allows him to rely on technological tools, human and physical resources that enable him to provide HUMAN RESOURCES LARRAINVIAL HAS IMPLEMENTED CORPORATE POLICES AND PROCESSES TO IDENTIFY THOSE PROFESSIONALS OF THE GROUP WITH THE GREATEST POTENTIAL BY MEANS OF TOOLS SUCH AS PERFORMANCE MANAGEMENT FOR ALL PROFESSIONALS. TECHNOLOGY THE METHODOLOGY OF IN-HOUSE DEVELOPMENT HAS OBTAINED THE CARNEGIE MELLON SOFTWARE ENGINEERING INSTITUTE CMMI LEVEL 2 QUALITY CERTIFICATION. TECHNOLOGICAL PLATFORMS FROM LEADING SUPPLIERS IN THE INDUSTRY: SAP, T, BLOOMBERG, VMWARE, HP, CISCO AND MICROSOFT. CORPORATIVE SERVICES 81 9

82 CORPORATE RISK AND COMPLIANCE THE COMPLIANCE OFFICER POSITION IS APPOINTED BY THE BOARD OF LARRAINVIAL, GRANTING IT A HIGH HIERARCHICAL LEVEL AND DECISION- MAKING AUTHORITY REGARDING ITS DUTIES full coverage of the different areas and operations carried out by the group. The Compliance Officer or Crime Prevention Manager is responsible for the implementation of the Asset Laundering Prevention System, establishing a model that prevents the use of the group s companies as a means to perpetuate asset laundering crimes, terrorist financing and bribery crimes. LarrainVial s Board appoints the Compliance Officer, conferring the position a high hierarchical level and decision-making authority. FINANCIAL RISK DEPARTMENT CORPORATIVE SERVICES 82 FINANCIAL RISK MAINTAINS HISTORICAL RECORDS OF POSITIONS AND RESULTS, ENABLING IT TO CONTINUALLY VALIDATE THE MODELS USED, AND EXPLAIN AND ANALYZE THE RISK PROFILE AND RETURNS ON PORTFOLIOS. BUSINESS INNOVATION & MARKETING A BUSINESS INTELLIGENCE UNIT CONTRIBUTES TO THE GENERATION OF VALUE THROUGH IN-DEPTH ANALYSIS OF CLIENT INFORMATION DEPLOYING BUSINESS INTELLIGENCE METHODOLOGIES. Fulfills a highly specialized support function independent of the commercial area that consists of identifying, measuring and limiting financial risks of the group s businesses, especially those that are executed directly on a transactional level by the legal vehicles that LarrainVial controls, in accordance to the risk appetite defined by Upper Management for its individual and consolidated businesses. In addition, the Financial Risk Department actively participates in the validation and formalization of the market valuation methodologies for traded financial instruments and products, in addition to advising Upper Management on the definition of investment policies, liquidity and balance sheet management. BUSINESS INNOVATION & MARKETING DEPARTMENT This department ensures the correct delivery of content, tools, messages, services and knowledge that reach the LarrainVial environment. The division contributes towards innovation, positioning, loyalty, brand image, client satisfaction and knowledge of all LarrainVial clients. This is done by means of internal and external communication strategies, ongoing monitoring of clients and the competition, implementation of differentiated service models, the tracking of worldwide trends, and the development of tools and activities with differentiated value propositions. The department is responsible for the sub-areas of Marketing, Quality Service, Communications, Internet and Digital Channels, as well as the Social Projects and Corporate Intelligence units. MANAGEMENT CONTROL & PLANNING DEPARTMENT This department delivers information and indicators, so as to provide timely guidance that supports the carrying out of actions and the strategy. In addition, it clarifies and simplifies LarrainVial s strategy by providing management with precise and timely information. The corporate accounting area of the entity also reports to this department.

83 INTERNAL AUDITING This is an independent and impartial unit with corporate scope that reports directly to the Board regarding the level of compliance with procedures, policies and both internal and external regulatory requirements, of the various entities that make up LarrainVial. Additionally, it verifies the correct functioning of the internal control activity. LEGAL DEPARTMENT Provides advice to the different areas of LarrainVial in all matters of a legal and regulatory nature. It advises the Board and upper management to ensure that those who make decisions are properly informed about the regulatory aspects of their decisions, so as to promote compliance with institutional and strategic objectives, decreasing at the same time the exposure to possible contingencies. AUDITING THE AUDITING UNIT HELPS THE ORGANIZATION FULFILL ITS OBJECTIVES, PROVIDING A SYSTEMATIC AND DISCIPLINED EVALUATION APPROACH, AND IMPROVING THE EFFICIENCY OF CONTROL, GOVERNANCE AND RISK MANAGEMENT PROCESSES. LEGAL THE LEGAL DEPARTMENT IS A STRATEGIC PARTNER OF THE VARIOUS INTERNAL CLIENTS IN THE GENERATION AND STRUCTURING OF NEW BUSINESSES. CORPORATIVE SERVICES 83 9

84 Operational support for market activity OPERATIONAL SUPPORT FOR MARKET ACTIVITY 84 The Administration & Operations department oversees the main operational units that support business activities within Capital Markets, Asset Management and Wealth Management. These units provide operational support to the money market desk (Desk Operations Unit), the management of the Treasury (Treasury Unit), and Securities Custody (Custody Unit). DESK OPERATIONS UNIT The Money Desk Operations Unit is an independent support unit. Among its duties are two main functions: the assignment and confirmation of orders, and the instruction of the settlement of operations. LarrainVial has defined the following criteria for the assignment of orders in accordance with the General Regulation No. 12 of July 27, 1982 of the SVS: Market price orders, including among others limit price orders when these are within the market price. In the case of various market price orders, the chronological order prevails. ORDER ALLOCATION THE SEGMENTATION ESTABLISHED IN THE FUNCTION ASIGNING ORDERS, GUARANTEES INDEPENDENCE AND EQUAL TREATMENT OF ALL CLIENTS. Limit price orders, by price order, only in the event that a single order remains within the market price. In the event that more than one order at limit price remains within the market price, their chronological order shall prevail. The assignment of orders entered at the same time shall be done using a proportionality criterion, that is, each order prorated with respect to the total. The systems implemented by LarrainVial automatically assigns all the direct market orders delivered by electronic channels that allow the recipient of the

85 operation to be unequivocally identified. Orders that do not comply with these characteristics are manually assigned, according to the defined criteria, by a team of assigners who distribute orders by type of instrument: Fixed Income and Variable Income, and by client type: Retail, Domestic and International Institutions. This break down separates the order channels, guaranteeing the independence and the equal treatment of all the clients. After orders are executed and allocated, the unit confirms the operations made by the money market desk, placing emphasis on and verifying that the instructions in the system are not incorrect or incomplete, ensuring their settlement. This activity is critical, given that incorrect control systems can lead to improper operations or costly failures in the settlement. CONFIRMATION OF OPERATIONS THE COMPANY HAS OMEGO ALERT AND CTM FOR CONFIRMING OPERATIONS, AS INADEQUATE CONTROL SYSTEMS CAN LEAD TO IMPROPER OPERATIONS OR COSTLY SETTLEMENT ERRORS. In order to maximize the efficiency of these post-trade processes, LarrainVial has one of the most internationally recognized technological platforms for the centralized verification of cross-border and domestic operations in equities, fixed income, repos and exchange traded derivatives (futures and traded options): Omgeo Alert and CTM of the DTCC group. TREASURY UNIT LarrainVial s Treasury Unit centrally manages the collection and payment of the Group companies transactions and obligations, allowing for an efficient use of the entity s liquid resources. OPERATIONAL SUPPORT FOR MARKET ACTIVITY 85 9 The functions range from operational settlement of markets to client deposits and withdrawals, and are the following: MARKET SETTLEMENTS CLIENT TRANSACTIONS SUPPLIER PAYMENTS AND COLLECTIONS Settlement of operations with counterparties and house through the different payment methods available. Verification of the correct settlement of Capital Events. Management of settlements associated with client deposits and withdrawals, and with both discretionary and periodic mutual fund investments and withdrawals (PAC and PreviRed) Payment of banking commissions for the use of credit lines and collection and payment services for the affiliates of the group. LIQUIDITY CONTROL AND BANKING MANAGEMENT The control and management activities focus on the following aspects: Control of the liquidity, overdrafts and credit lines for the intraday operations of the brokerage as well as funds. Ensuring the correct calculation of banking commissions. Negotiation of credit lines and operating conditions with financial entities.

86 LarrainVial operates with the 16 main Chilean and international Banks that operate in Chile for the management of its Treasury and has assigned credit lines for a total amount of 78 billion pesos, using the Central Securities Depository (CSD) settlement services of three of these banks: Banco de Chile, BICE and BBVA. The use of credit lines is systematically measured by the Treasury Unit, which records a monthly average use of less than 40%. These usage levels of credit lines and their ongoing monitoring allow LarrainVial to guarantee its liquidity and to effectively mitigate the risks of liquidity associated with its operations. BANKS THAT WORK WITH US OPERATIONAL SOPORTE OPERATIVO SUPPORT FOR A MERCADOS MARKET ACTIVITY CHILEAN Banco Bice Banco Consorcio BCI Banco de Chile Banco Internacional Corpbanca Banco Estado Banco Falabella Banco Security Banco Penta 86 INTERNACIONAL BBVA Chartered Bank Citibank Deutsche Bank HSBC Bank Santander Scotiabank JPMorgan

87 CUSTODY UNIT The Custody Unit is in charge of ensuring the ownership of the titles deposited in custody, as well as the correct settlement of market operations and capital events. It provides support to the Chilean and international operations of both the Brokerage and LarrainVial Asset Management. The daily functions of the Custody Unit are the following: Two main areas are covered in the market operation: Market Settlements Collateral Management Equity Control Settlement of national and international market operations, instructing the orders to the custodians when necessary. Control of the correct calculation and application of capital events of the securities in custody. Management of guarantees for the operations that require them. Certification of the movements of securities in client accounts, deposits and withdrawals of securities in custody and control of securities in depositaries and external custodians. OPERATIONAL SOPORTE OPERATIVO SUPPORT FOR A MERCADOS MARKET ACTIVITY 87 9 The daily functions of the Custody Unit are the following: LarrainVial as member of the local markets has an account in the central securities depositories of each one of the countries where it operates and by means of which it conducts the clearance of the local securities transactions. Central Securities Depository (CSD): domestic custody services for Chilean securities. Securities Clearing and Settlement Institution (ICLV for its initials in Spanish): CAVALI is responsible for the registration, transfer, custody, settlement and clearance of securities for the operations carried out in the Lima Securities Market. Centralized Securities Depository in Colombia (DECEVAL for its initials in Spanish): is the Colombian institution in charge of the custody, management, settlement and clearance of securities. Central Securities Depository, Banco de la República (Central Bank of Colombia).

88 LARRAINVIAL WORKS WITH LEADING CUSTODIANS IN EACH MARKET For the markets where the group does not offer securities custody services, LarrainVial works with leading custodians specialized in the different types of instruments. EUROCLEAR For the custody of international fixed income. OPERATIONAL SOPORTE OPERATIVO SUPPORT A FOR MERCADOS MARKET ACTIVITY 88 CITIBANK JPMORGAN BANK OF NEW YORK For the custody of equities securities from the U.S., Peru, Colombia, Mexico and Brazil. For the custody of North American ADR and ETF. For the custody of mutual fund quotes, ADR, ETF, international variable income and fixed income. PERSHING For the custody of international variable income, fixed income and mutual fund quotes. BBH For the custody of Brazilian variable income and international fixed income.

89 HUMAN RESOURCES HUMAN RESOURCES 850 employees LarrainVial has a team of 850 people with a median age of 37 and average seniority in the Company of five years. Within this team of professionals, spanning different nationalities, there are 60 members with post-graduate degrees, 23 certified employees in one or more series issued by the Financial Industry Regulatory Authority (FINRA) and five who have fulfilled the requirements of the Chartered Financial Analyst (CFA) program AVERAGE SENIORITY (YEARS) MEDIAN AGE (YEARS) EMPLOYEES WITH POSTGRADUATE DEGREE EMPLOYEES CERTIFIED BY FINRA EMPLOYEES WITH CFA CERTIFICATION LarrainVial s Human Resources department collaborates with the entire organization to improve employee satisfaction, reinforce their commitment to the Company, and strengthen their client orientation through a host of policies, processes and people management tools. This department focuses all its efforts on attracting and hiring the best professionals, identifying those employees with the greatest potential and providing them with the best opportunities for professional development, investing in the professional growth of all employees by offering a broad training program based on academic excellence and aimed at supporting the business, and finally, disseminating a culture of best practices regarding the business, the code of conduct and the client relationship as a basis for the reputational excellence pursued by LarrainVial. HUMAN RESOURCES 89 9 For this purpose, LarrainVial has defined and implemented corporate policies and procedures regarding employee selection, training, performance evaluation, remunerations and the promotion of corporate Best Practices. HUMAN RESOURCES POLICIES AND PROCEDURES EMPLOYEE SELECTION The objective of this process is to identify and attract the most qualified candidates to fill the vacancies that arise in LarrainVial. To carry this out, the selection is conducted in accordance with the employee selection policy defined and approved by upper management, taking into account the profile required for the position.

90 HUMAN RESOURCES POLICIES - EMPLOYEE SELECTION - ORIENTATION AND RECEPTION - PERFORMANCE EVALUATION - TRAINING PROGRAM - REMUNERATION POLICY The objective of this policy is to ensure that the individuals that come to work for LarrainVial have the right profile for performing their functions, as well as the capabilities and values considered necessary within the Company s culture. It is hoped that by complying with this policy the recruitment and selection processes and hiring decisions are conducted with objectivity and impartiality. This process is basically comprised of three sequential steps: Recruitment Selection Hiring In order to carry out the Recruitment and Selection Process, the decision as to whether the process will be outsourced or conducted internally must be taken. In the event that it is carried out internally, the Selection Area carries out the entire recruitment and selection process of candidates (including a Psychological Evaluation). HUMAN RESOURCES 90 In the event that the process is outsourced, the person in charge of the Selection Process contacts a Consultant specialized in the type of profile required and actively monitors the search through direct contact with the consultant throughout the entire process. After the search process is concluded, the consultant sends a shortlist of candidates, who are interviewed by the person in charge of the Selection Process, who then forwards the candidates that best fit the profile to the person looking to fill the position. The employee selection process evaluates various specific capabilities for the responsibilities sought as well as corporate capabilities transversal to the whole group. Among these capabilities are client information, orientation, and service. For LarrainVial it is fundamental that its employees understand client needs: they should take responsibility for satisfying, and even surpassing, client expectations as well as establishing and maintaining efficient and cordial working relationships with them. ORIENTATION AND RECEPTION The goal of this welcoming process is to disseminate the role and responsibilities of the different areas in LarrainVial, and inform the new employees of how they function within the group. There are two mandatory things for carrying out this orientation and reception: E-learning course: about LarrainVial, offered through a virtual platform in which the functions of each of the areas of the Company is described, specifying the importance each has in regard to clients. In-person reception, conference at which the main executives introduce themselves and their roles, those of their team and the importance of their area. This activity allows new employees to clarify

91 doubts and become familiar with the vision and mission of LarrainVial. In addition, it allows them to be immersed in the culture of the Company by learning about its projects and relevant milestones. PERFORMANCE EVALUATION LarrainVial has designed a Performance Management process in order to enhance the organizational practice, which is aimed at improving employee performance, motivating those being evaluated to improve their achievements, identifying training needs and making those being evaluated aware of their strengths and weaknesses; providing a means of formal communication between the manager and the employee being evaluated, gathering updated information for promotions and/or internal movements that contribute to his/her professional development, and establishing an opportunity to set goals and work plans. E-LEARNING PLATFORM LARRAINVIAL HAS A VIRTUAL E-LEARNING PLATFORM WHICH ALLOWS OUR EMPLOYEES EASY AND FLEXIBLE ACCESS TO FORMATIVE RESOURCES. According to this procedure, supervisors evaluate the proposed functions and objectives for each year, along with the necessary skills for the responsibilities of each one of his/her subordinates. Among these skills, special emphasis is placed on client service skills, placing particular emphasis on the following: Discretion, where the care required in handling client information is evaluated, identifying effective measures to safeguard the information. Customer orientation, where the concern shown in the identification and understanding of client demands is evaluated, as well as the initiative to provide effective solutions to the problems that arise. HUMAN RESOURCES 91 9 TRAINING PROGRAM Training is a strategic action aimed at strengthening LarrainVial s capacity to respond to cultural, technological and business changes that occur in the environment. This is achieved through employee training and skills development, so as to increase the performance of each person in his/her function and prepare them to carry out tasks of greater responsibility or eventually, assume other positions within the group. In 2013, the training program reached a total of 565 registered participants, while 7,970 hours of training were completed. Language training is included within the program, representing an annual investment of million pesos. All training activities carried out are geared towards achieving the Company s strategic objectives. Training is planned and conducted always within the framework of developing people, and is aimed at identifying and strengthening the knowledge and skills that LarrainVial requires. For this purpose, a performance needs detection procedure is followed, which requires management to clearly identify training needs once the annual performance evaluation has been completed. These training needs can be based on four major categories:

92 TRAINING PROGRAM ,970 TRAINING HOURS HAVE BEEN COMPLETED BY MORE THAN 500 EMPLOYEES, WITH AN ANNUAL INVESTMENT OF MORE THAN MILLION PESOS IN LANGUAGE TRAINING ALONE. Technical skills. They are unique to each position, representing those skills individuals need to achieve a higher performance within their roles. Technological skills. They are specific and company-wide skills, related to knowledge of platforms or computer programs necessary for optimal performance. Language skills. The level of specificity depends on each position and the responsibilities that the position entails. These include skills in languages such as English, Portuguese and Spanish (in the case of some non-spanish speakers). Soft skills. Complementary to other skills, they focus on aspects such as communication, assertiveness, empathy, leadership, among others. REMUNERATION POLICY HUMAN RESOURCES 92 In order to comply with its institutional objectives, LarrainVial incorporates as employees those people with a high degree of excellence, for which high levels of remuneration and incentives have been set that take into account the existing realities of professional markets. Employee remuneration consists, on the one hand, of a taxable monthly basic salary for the respective position and, on the other, of a variable salary, which is stipulated in accordance with the job performed. The taxable monthly basic salary is established in accordance with the position held by the employee, based on a market study carried out by Human Resources. The variable salary is established in accordance with the type of job performed by the employee and is directly related to Company results. Additionally, LarrainVial has a series of Corporate Benefits that are applicable to all employees of the Group with the objective of contributing to the employees well-being and quality of life. Some of these benefits are: Payment of daycare. Marriage bonus. Wedding gift from the company. Assistance in the event of the death of a spouse, child or parent. Life and health insurance. Flexible post-natal leave. Uniforms for secretaries, custodial services, security guards and assistants. Lunch tickets (in some cases).

93 Academic scholarship for employee s school age children. Annual Christmas party for all employees and their families, including gifts for employees young children (up to 15 years old). Affiliation with the Los Andes Compensation Fund, with access to all the benefits and support offered. COMMITMENT AND PROMOTION OF BEST PRACTICES ACCREDITATION OF KNOWLEDGE FOR SECURITIES INTERMEDIATION (ACIV for its initials in Spanish) LarrainVial complies with SVS General Regulation No. 295 of 2010, which states that anyone who works directly or indirectly for a stock brokerage house should be certified by means of a test that seeks to evaluate knowledge in four subjects: Regulatory framework of the stock market. Stock market products. Management and control of stock market business risks. Financial mathematics. Human Resources is in charge of registering applicants, as well as providing employees with the necessary training so that they can successfully obtain accreditation for the following profiles, which due to their functions comply with the requirements: HUMAN RESOURCES 93 9 Directors, administrators and general manager, managers and heads of divisions related to client service and the development of new products. Managers, division heads and executives or professionals linked to analysis, research and investment recommendations for the market and client portfolios. Managers and division heads linked to documentation, registration, accounting, auditing, settlement of operations, custody, treasury, management control and in general all areas that provide operational support. Managers and division heads tied to sales force support functions and with management of finances and resources. Desk operators. Account executives, sales executives and investment advisors.

94 ACIV CERTIFICATIONS LARRAINVIAL HAS 311 EMPLOYEES WHO ARE ACIV CERTIFIED. Currently, all employees who perform the functions listed above have passed the ACIV accreditation test. ONGOING PROMOTION OF CODE OF CONDUCT The Human Resources division, together with the Corporate Risk and Compliance divisions, assumes an advisory and educational role in terms of Best Practices. When a LarrainVial employee believes he/she is facing a conflict of interest in doing his/her job, the employee must report it immediately to the aforementioned divisions; the case will be reviewed and a solution proposed. It is the employee s responsibility to participate in training programs and dissemination campaigns of Best Practice and Ethics manuals, as well as those referring to conflicts of interest and money laundering, terrorist financing and bribery promoted by LarrainVial s Human Resources and Corporate Risk divisions. In order to achieve this, at least once a year, these divisions organize an employee training activity to address these subjects and other necessary regulations regarding ethics, honesty and Best Practices in general. HUMAN RESOURCES 94 The Code of Conduct and Best Practices Code contain specific guidelines for ethical behavior to be adopted in certain situations and activities of special concern. CORPORATE CULTURE OF FOSTERING CLIENT RELATIONSHIPS AND REPUTATIONAL EXCELLENCE LarrainVial seeks to promote and cultivate those corporate attributes that allow employees to work towards obtaining the highest quality standards in their relationships with clients. This is done through different internal communication channels and bulletins published in the Corporate Intranet. All employee work contracts refer to matters contained in the Code of Conduct and Best Practices manual, in the Corporate Manual for asset laundering and others of substantial importance for complying with the objectives of excellence and quality of service established by LarrainVial. As a result of these efforts, employees understand that LarrainVial s reputation is one of its main assets that must be continuously and rigorously safeguarded.

95 HUMAN RESOURCES 95 9

96 TECHNOLOGICAL MODEL TECHNOLOGICAL MODEL 96 TECHNOLOGY AREA ACHIEVES THE OBJECTIVE OF SOFTWARE QUALITY AND USER CONFIDENCE SUPPORTED BY THREE PILLARS: -STAFF -TOOLS -PROCEDURES AND METHODS One of the main strategies driven by LarrainVial s upper management most recently has been constant investment in technology and systems, which has allowed the Company to have an innovative technological model that meets the competitive demands of the market. LarrainVial s technological model is based on two main components that define the organizational framework for the IT area and its technology investment strategy. ORGANIZATIONAL FRAMEWORK The organizational framework for the Technology area is defined in the Policy handbook established by the organization for the achievement of its main objectives: Quality of Systems Maintain control over projects in a systematic manner through the use of a defined methodology and effective tools. Implement mechanisms for continuous improvement that enhance and improve the maturity of the systems process. User Confidence Comply with the time periods and agreed costs. Fulfill client requirements, by means of solutions that satisfy commitments and implement their implicit needs. The Technology area seeks to achieve these objectives by relying on three fundamental pillars: Employees with skills, training and the motivation required to comply with their role in the systems process. Tools that efficiently and effectively support the systems process. Procedures and methods that define how the systems process is carried out.

97 Within the scope of procedures and methodology, a series of corporate IT and Project Management policies have been established, including the following: Corporate Policies Systems Process Policy defines the commitment to continual improvement of its processes. Training Policy ensures that the necessary skills for each technical and administrative role defined in the methodology are provided to the members of the area according to its needs. Quality Control Policy, establishes the responsible parties for quality control of the end product and the defined processes. Capacity Analysis Policy defines the way in which the metrics of the systems process used to support management are identified, defined, generated and kept up to date. Project Policies Systems Requirements Policy establishes how company users should capture and document systems requirements. Project Planning Policy defines all aspects related with the project plan and its planning process. Project Monitoring and Control Policy determines the procedure to follow for the monitoring and control of projects. Supplier Agreement Management Policy establishes the basis of the relationship with IT providers. Quality Assurance Policy identifies the people responsible for reviewing compliance with defined quality levels. TECHNOLOGICAL MODEL 97 9 Configurations Management Policy establishes the methodology for the management of configurations. Measurement and Analysis Policy defines the metrics and measurement procedures regarding systems quality and process performance. INVESTMENT IN TECHNOLOGY The technology investment strategy is based on two pillars: the acquisition of technological platforms from leading suppliers and a methodology of proprietary software development based on high quality standards. In 2013, LarrainVial had a total technology budget of CLP $7.535 billion, which implies a 10% increase with respect to the previous year.

98 2013 IT BUDGET LARRAINVIAL INVESTED $7.535 BILLION ON TECHNOLOGY, UP 10% FROM THE PRIOR YEAR. Software investment is one of the main budget items, 63% of the total for this item was spent on the acquisition of platforms from external suppliers; 22% on the development of proprietary software solutions and 15% on the implementation of strategic projects, mainly for the T system. SOFTWARE INVESTMENT Strategic projects 15% External supplier platforms 63% 22% Inhouse development TECHNOLOGICAL MODEL 98 The distribution of investment in technology for each one of the areas of the Company is shown below, the Corporate Services area being the one that has had the greatest role due to its cross cutting service activity to all areas of the Company, its dependence on technological resources and the increase in the return on investment that is obtained for the Company in this area. INVESTMENT BY AREA Risks and Internal Control 1,6% Research Department. 1,9% 1,5% Corporate Finance Capitals Markets 29,2% 34,1% 1,9% 31,6% Corporate Services 31,6% Wealth Management

99 ACQUISITION OF LEADING TECHNOLOGICAL PLATFORMS LarrainVial has some of the best technological platforms existing in the market to provide support to its operations and businesses, such as: SAP, SEBRA, T, Bloomberg, Market Trader and Tower. SAP The Enterprise Resource Planning system (ERP) used by the Company for the purpose of integrating all the group s companies in order to centralize information and optimize the business processes is SAP R/3 Version 6.0. Currently the modules implemented in Chile, part of Peru and Colombia are: Finance Module. Controlling Module. Materials Management Module. Human Resources Module. Business Warehouse Module. Business Planning and Consolidation Module. The implemented SAP platform allows for improvement in the business processes results, with the support of a reliable and flexible system. TECHNOLOGICAL MODEL 99 9 SEBRA LarrainVial uses SEBRA, the integrated systems platform of the Santiago Stock Exchange for the business areas of intermediation in Chilean financial instruments. SEBRA is the leading platform in the Chilean market that was implemented in The Company s trading systems are executed using this platform. These systems make and receive in real time all Chilean stock market information regarding transactions, prices, amounts, number of transactions, indexes, essential facts, financial statements, dividends, issuances and other information sent by the issuers that trade their securities in the Santiago Stock Exchange markets (Stocks, Fixed Income, Financial Intermediation, Investment Fund Quotes, Currencies, Futures and Options).

100 T The implementation process for Front to Back (T) core banking was started by the international company Temenos in This internationally recognized platform, which is the most technologically advanced of those currently available, allows for all operations of companies within the group regardless of their geography or market focus to be grouped into a single application. Bloomberg TOMS In 2014, Bloomberg TOMS, the undisputed leading platform in international fixed income, was acquired for the integral management of operations. This purchase reflects the Company s commitment to excellence and upper management s commitment to providing the different areas with the best tools available. TECHNOLOGICAL MODEL 100 This platform is in the process of being implemented and is expected to be fully operational in June 2014, providing the Sales & Trading (S&T) Fixed Income area with important functional improvements in the processing of operations, P&L calculations, confirmation processes, risk management and the generation of reporting information. MARKET TRADER Market Trader, the solution for the order management and execution from the supplier SS&C, is one of the trading platforms that LarrainVial has made available to its S&T Equities area for the capture and efficient execution of international client orders. This tool provides centralized access to execution in all markets in which the area operates. Tower Tower is TechRules technological solution which is capable of responding to the entire financial advisory process. This application allows LarrainVial s financial advisors and wealth managers to offer a differential service, optimizing processes such as the generation of investment proposals and the creation, management and monitoring of portfolios as well as the drafting of reports. PROPRIETARY SOFTWARE PLATFORM The second pillar of LarrainVial s IT investment strategy is its methodology for proprietary software development based on the highest quality standards for software and well-maintained infrastructure for computer systems. LarrainVial has defined a series of policies and procedures regarding quality management, data management, change control, and computer system installation management.

101 In 2007, this continuous improvement in quality earned the Company the Level 2 Capability Maturity Model Integration (CMMI) certification in the area of software development, awarded by the Software Engineering Institute of Carnegie Mellon University of the United States. SOFTWARE DEVELOPMENT POLICIES The CMMI maturity model is applicable to all the Ordinary and Strategic Projects that consist of more than 80 hours of effort, that comply with the CMMI methodology requirements in the following areas: QUALITY MANAGEMENT DATA MANAGEMENT Requirements management CHANGE CONTROL Project planning Project control and monitoring MANAGEMENTOF COMPUTER SYSTEM INSTALLATIONS. Supplier agreement management Measurement and analysis Process and product quality assurance Configuration management Currently, in addition to using the defined methodology, LarrainVial creates and incorporates quality control testing in its software development processes applying quality practices in accordance with the ISO9000 standard. This work methodology has made it possible for LarrainVial to have a centralized proprietary software platform, called corporate desk, accessible via its Intranet with almost 50 available applications that provide services to the different areas within the group, including LarrainVial Asset Management, Wealth Management, the various units within Capital Markets, Corporate Risk, Marketing and various other support areas. CERTIFICATIONS THE SOFTWARE DEVELOPMENT AREA IS CMMI LEVEL 2 CERTIFIED TECHNOLOGICAL MODEL This deployment of applications is supported by a systems infrastructure with a high degree of productivity based on virtualization technologies for servers on high-end equipment. LarrainVial uses VMWARE vsphere 5.1 located on HP Blades and Storage HP 3Par servers for its virtualization platform. This combination of virtualization and consolidation of servers provides an annual savings of around 30% in comparison to the cost of physical servers with the same computational capacity due to infrastructure and energy consumption. The performance obtained with this type of solution is highly positive in comparison with physical environments, due to among other characteristics, the scalability and high availability of this type of solution.

102 TRADING INFRASTRUCTURE THE TRADING INFRASTRUCTURE HAS A CAPACITY OF ROUTING OF UP TO 3,000 ORDERS PER SECOND AT SPEEDS OF LESS THAN A MILLISECOND. LARRAINVIAL S ELECTRONIC TRADING INFRASTRUCTURE LarrainVial, adapting to the reality of current markets where almost half of the transactions are carried out by means of electronic trading, can feel proud of its electronic trading infrastructure that allows its clients to access the main markets of Latin America and the United States electronically, routing orders under the Financial Information Exchange (FIX) standard protocol. The main objectives that led LarrainVial to create this infrastructure are: Provide Latin American clients connectivity and routing of orders to the most important markets. Become Latin America s preferred channel for the flow of transactions to and from the world. Attract investors to the Latin American markets. Offer authorized clients direct access to these markets. TECHNOLOGICAL MODEL 102 Allow institutional clients to handle their transactions on their own systems and algorithms. Offer Trading algorithms to clients electronically. Eliminate operative tasks of the desk Traders. Currently this infrastructure offers Direct Market Access (DMA) to stock markets in Chile, Peru, Colombia, and the United States. LarrainVial s clients can access this electronic trading infrastructure through multiple trading networks and connections for which this infrastructure has obtained certification and authorization for the interchange of electronic orders.

103 DMA ACCESS TO TRADING MARKETS United States Colombia Peru Chile TECHNOLOGICAL MODEL TRADING NETWORKS

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