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INDEX
LETTER FROM THE CHAIRMAN........................................................................................................2
COMPANY DETAILS............................................................................................................................5
COMPANY OWNERSHIP.....................................................................................................................6
BOARD OF DIRECTORS.....................................................................................................................8
CORPBANCA SENIOR MANAGEMENT...........................................................................................10
MANAGEMENT AND PERSONNEL..................................................................................................11
BUSINESS AND ACTIVITIES ............................................................................................................13
MANAGEMENT REPORT ..................................................................................................................20
INVESTMENT AND FUNDING POLICIES .........................................................................................29
PATENTS AND OTHER RIGHTS.......................................................................................................29
PRINCIPAL ASSETS..........................................................................................................................30
SUBSIDIARIES AND SUPPORT COMPANIES.................................................................................30
STOCK EXCHANGE TRANSACTIONS.............................................................................................34
DIVIDEND POLICY.............................................................................................................................35
REMUNERATION ...............................................................................................................................35
BOARD OF DIRECTORS COMMITTEE ............................................................................................35
MATERIAL EVENTS ..........................................................................................................................36
FINANCIAL STATEMENTS................................................................................................................37
STATEMENT OF LIABILITY ...........................................................................................................67
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LETTER FROM THE CHAIRMAN
The year 2004 was a period of favorable evolution for CORPBANCA and for the
implementation of its business strategy. Maximizing growth while not forgetting the
strict commitment maintained on loan quality and expense efficiency, was the central
line of this process, as it has been during previous fiscal years. Due to this,
CORPBANCA, once again, expanded over industry levels, with a risk level below the
banking sector average and as market leader in efficiency ratios. Nevertheless, a new
achievement must be added to the above, associated with our view on solvency and
the soundness of the institution’s equity, as is reflected by the cost of borrowings that
operated in 2004 fiscal year-, which is, by any measure, one of the lowest in the
Chilean financial system. Moreover, CORPBANCA investors received a new
demonstration of our commitment and transparency when the American Depositary
Receipts (ADRs) were listed on the New York Stock Exchange, which were previously
maintained as a private placement (144-A).
Loans, net of interbank -, grew by 13.2% in real terms, which is consequent with the
Bank’s historical trajectory recorded since its creation. This entailed an expansion of
Ch$ 282,820 million and a new growth in the market share, which stands at 6.5% at
the end of 2004.
CORPBANCA has continued its expansion towards more profitable operating
segments, catering to its customers with innovative products and services. Regarding
the Retail Banking Division, consumer loans and housing mortgages grew by more
than 34.4% during 2004. This was possible thanks to the significant expansion of
mass banking, through Bancondell, as well as to the new record sales figures in
mortgage operations, reaching Ch$ 100,952 million, mainly through the form of
”flexible mortgage loans”. The expansion strategy on mortgage operations, with a
leading price product, has complemented other products such as current accounts,
credit lines for overdrafts, credit and debit cards, as well as others that have enabled
to take cross services to the client base level and therefore generating an increase in
CORPBANCA’s fee net income.
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Likewise, the Medium-Sized Company Banking , measured through products such as
commercial loans, foreign trade, factoring and leasing, recorded an approximate
14.3% expansion, equal to Ch$ 190,190 million, helped develop new projects in this
area, the basis of CORPBANCA´s long term strategy.
Unlike other years, financial investments rose significantly during 2004 as a result of
interesting new perspectives in international markets, which translated into an
increase of approximately 11.4%, equating to Ch$ 51,683 million. It is important to
highlight that the new instruments represent a protection alternative for the high –
capital level held by CORPBANCA, in the form of safe investments geared towards
well rated companies and governments, protected from fluctuations in interest rates
and potential effects that could arise from unexpected volatility in exchange rates.
Loan portfolio quality continued to improve during 2004 (as revealed by the evolution
of the past due loan portfolio), representing 0.8% of loans, contrasting with 1.2% as
of December 2003. Complementarily, coverage of provisions over past due loans also
improved by increasing from 170.8% in 2003 to 211.8% in 2004. However, the most
outstanding area refers to the evolution of the risk index, measured as total provisions
for loan losses over total loans, which even when incorporating the regulatory
changes that elevated the categories of loan classifications used by CORPBANCA
from five to eleven, presented a noticeable improvement on passing from 2.1% in
2003 to 1.7% in 2004.
The strong growth experienced in revenues during the last three years, redounded in
the extinction, during 2004, of the tributary benefit that was originated, at the time, by
the subordinated debt that the institution held with Chilean Central Bank. The
constitution of a tax provision, translating real tax rate from 17% to 11.4%, entailed a
net income of Ch$ 50,767 million in 2004, similar to the one recorded the previous
year. Earnings before taxes in 2004 reached Ch$ 57,279 million, increasing 7.1%
when compared to previous year. Likewise, return on equity reached 15.6%, which,
before taxes, was17.6%.
CORPBANCA’s expansion program implied an increase in the number of operations
within a framework of control and improvement in efficiency levels. In this way, the
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Institution continued with the adaptation of its organizational structure, by creating, in
the commercial area, the Sales Channels Division in order to strengthen the
performance of retail and massive banking. Support areas continue centralizing
processes and taking better advantage of the recently implemented integrated
banking system (IBS). All of the above entailed maintaining the efficiency level in
strategic standards, reaching 39.2%. Therefore, once again in 2004, the Bank
emerges as one of the most efficient institutions in the financial system and is clearly
the most efficient among its peers.
CORPBANCA ended 2004 as one of the banks that enjoys the most solid capital base
of the industry, as shown by a 14.5% Basle Index, result of the significant capital
increase carried out during 2002 and the capital-raising policy the Institution has
maintained.
CORPBANCA’s credit standing presented to the institutional market has permitted it
to obtain the investment category (BBB+) granted by important international risk
classifiers such as Standard & Poors and Fitch Ratings.
In conclusion, 2004 was a period of continuity in CORPBANCA’s strategic orientation,
seeking as always the best relationship between shareholders, employees and clients
in a context characterized by an adequate level of profitability, portfolio quality,
efficiency and excellence of service.
Carlos Abumohor T.
Chairman
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COMPANY DETAILS
Trading name : CORPBANCA
Domicile : Huérfanos 1072, Santiago
Tax I.D. : 97.023.000-9
Type of Company : Publicly Quoted Bank
Telephone, fax and web-site : (+562) 687-8000;
(+562) 672-6729;
www.corpbanca.cl
Organization Details : CORPBANCA was constituted by public
deed submitted at the notary public office in
Concepción of Nicolás Peña on August 7th, 1871.
The Supreme Decree allowing its existence was
published in the journal El Araucano on Tuesday
February 20th, 1872. The latest version was
consolidated at an extraordinary shareholders
meeting and transcribed to public deed at the
Santiago notary public office of Gonzalo de la
Cuadra Fabres on May 28th, 1992.
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COMPANY OWNERSHIP
The twelve main shareholders of CORPBANCA as of December 31, 2004 and their
respective weight in the total outstanding shares, which comprise the bank’s capital,
are:
SHAREHOLDER SHARES WEIGHT (%)
Corp Group Banking S.A. 111,029,019,740 48.93%
Cia. Inmobiliaria y de Inversiones Saga S.A. 17,826,423,251 7.86%
The Bank of New York 13,626,260,000 6.01%
Manufacturas Interamericana S.A. 5,413,342,266 2.39%
UCB Bancshares S.A. 4,285,534,265 1.89%
Citibank NA por Cta. Terceros Cap. XIV 3,897,905,927 1.72%
AFP Habitat S.A. para Fondo Pensión C 2,991,324,715 1.32%
Inversiones y Valores S.A. 2,919,740,749 1.29%
AFP Provida S.A. para Fondo Pensión C 2,918,220,816 1.29%
Inmob. e Inversiones Boquiñeñi Ltda. 2,294,225,537 1.01%
Larraín Vial S.A. Corredores de Bolsa 2,263,528,244 1.00%
Banchile Corredores de Bolsa S.A. 2,161,928,672 0.95%
As of December 31st, 2004 Corp Group Banking S.A. is the main shareholder of
CORPBANCA and owns 48.93% of the outstanding shares comprising the capital
base of the Bank. The only individual or legal entity that holds 10% or more of the
shares, either directly or indirectly is Mr. Alvaro Saieh B., who owns 33.44% of the
share capital.
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Major Changes in Ownership
The following are the major changes of CORPBANCA’s ownership during 2004:
As of 12/31/2003 As of 12/31/2004 Shareholders Tax I.D.
N° of Shares Weight N° of Shares Weight
UCB Bancshares S.A. 96.885.120-9 0 0.0% 4,285,534,265 1.9%
Manufacturas Interamericana S.A. 92.171.000-3 0 0.0% 5,413,342,266 2.4%
Banchile Corredores de Bolsa S.A. 96.571.220-8 1,678,179,655 0.7% 2,161,928,672 1.0%
AFP Provida S.A. para fondo Pension C 98.000.400-7 2,362,227,984 1.0% 2,918,220,816 1.3%
AFP Santa Maria S.A. para fondo Pension C 98.000.000-1 1,360,185,915 0.6% 1,635,649,916 0.7%
AFP Cumprum S.A. para fondo Pension C 98.001.000-7 1,426,532,035 0.6% 1,707,362,088 0.8%
AFP Habitat S.A. para fondo Pension C 98.000.100-8 2,515,475,545 1.1% 2,991,324,715 1.3%
Larrain Vial S.A. Corredores de Bolsa 80.537.000-9 1,951,504,246 0.9% 2,263,528,244 1.0%
Citibank NA por cuenta terceros Cap XIV 97.008.000-7 3,642,368,787 1.6% 3,897,905,927 1.7%
AFP Habitat S.A. para fondo Tipo B 98.000.100-8 1,453,916,788 1.1% 1,543,698,764 1.3%
Corp Corredores de Bolsa S.A. 96.665.450-3 1,909,541,292 0.8% 2,008,472,173 0.9%
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BOARD OF DIRECTORS
ChairmanCarlos Abumohor Touma Tax ID: 1.535.896-3 Entrepreneur
First Vice-Chairman Álvaro Saieh Bendeck Tax ID: 5.911.895-1 Business Administrator Universidad de Chile
Second Vice-Chairman Jorge Andrés Saieh Guzmán Tax ID: 8.311.093-7 Business Administrator Universidad Gabriela Mistral
DirectorJulio Barriga Silva Tax ID: 3.406.164-5 AgronomistUniversidad de Chile
DirectorJorge Selume Zaror Tax ID: 6.064.619-8 Business Administrator Universidad de Chile
DirectorCarlos Massad Abud Tax ID: 2.639.064-8 Business Administrator Universidad de Chile
DirectorFernando Aguad Dagach Tax ID: 6.867.306-2 Entrepreneur
DirectorRené Cortázar Sanz Tax ID: 5.894.548-K Business Administrator Pontificia Universidad Católica de Chile
DirectorHernán Somerville Senn Tax ID: 4.132.185-7 AttorneyUniversidad de Chile
DirectorFrancisco Rosende Ramírez Tax ID: 7.024.063-7 Business Administrator Universidad de Chile
DirectorOdde Rishmague Rishmague Tax ID: 4.366.863-3 Entrepreneur
Alternate DirectorJuan Rafael Gutiérrez Avila Tax ID: 4.176.092-3 Accountant Auditor
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BOARD OF DIRECTORS COMMITTEE
ChairmanCarlos Massad Abud Tax ID: 2.639.064-8 Business Administrator Universidad de Chile
DirectorRené Cortázar Sanz Tax ID: 5.894.548-K Business Administrator Pontificia Universidad Católica de Chile
DirectorFrancisco Rosende Ramírez Tax ID: 7.024.063-7 Business Administrator Universidad de Chile
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CORPBANCA’s SENIOR MANAGEMENT
General Manager Christian Samsing Stambuk Tax ID: 6.731.190-6 Business Administrator Pontificia Universidad Católica de Chile
Corporate Banking Div. Manager Marcelo Achondo Larenas Tax ID: 6.447.511-8 Business Administrator Universidad de Chile
Planning & Development Div. Manager Camilo Morales Riquelme Tax ID: 8.128.840-2 Business Administrator Universidad de Chile
Retail Banking Div. Manager Osvaldo Barrientos Valenzuela Tax ID: 9.006.525-4 Civil Engineer Universidad de Chile
Human Resources Div. Manager María Olivia Brito BahamondeTax ID: 10.006.501-0 Business Administrator Universidad Gabriela Mistral
Treasury / International Div. ManagerChristian Schiessler García Tax ID: 7.277.278-4 Business Administrator Universidad Federico Santa María
Logistics Div. Manager Hernán Santamaría TorresTax ID: 14.729.406-9 Business Administrator Universidad Autónoma del Caribe, Colombia
Sales Channels Div. Manager Carlos Aracena Mellado Tax ID: 8.746.808-9 Business Adminstrator Universidad de Santiago
Information Technology Div. Manager Armando Ariño Joiro Tax ID: 14.726.855-6 Civil Engineer Universidad INCCA, Colombia
Legal Services Div. Manager Cristián Canales Palacios Tax ID: 9.866.273-1 AttorneyUniversidad de Chile
Comptroller Div. Manager Julio Henríquez Banto Tax ID: 8.943.341-K Business Administrator Universidad de Santiago de Chile
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MANAGEMENT AND PERSONNEL
At the head of the Bank is a Board of Directors that provides overall guidelines and
frameworks to the General Manager. As of December 31st, 2004, CORPBANCA was
structured as follows:
General ManagerChristianSamsing
Support Areas SubsidiariesCommercial Areas
Corporate Banking Div. Manager
Marcelo Achondo
Retail Banking Div.Manager
Osvaldo Barrientos
Logistics Div.Manager
Hernán Santamaría
InformationTechnology Div.
ManagerArmando Ariño
Treasury andInternational Div.
ManagerChristian Schiessler
Planning & Development Div.
ManagerCamilo Morales
Human ResourcesDiv. ManagerOlivia Brito
Legal Services Div.Manager
Cristian Canales
General ManagerCorp
Administradora deFondos Mutuos
Pedro Silva
General ManagerCorp Corredora de
SegurosRoberto Vergara
General ManagerCorp Corredora de
BolsaCarlos Ubeda
General ManagerCorp Asesorías
FinancierasRoberto Baraona
Comptroller Div.Manager
Julio Henriquez
Sales Channel Div.Manager
Carlos Aracena
NormalizationManager
Sergio Tupper
Credit ManagerPatricio Rojas
Marketing andProduct ManagerEnrique Martinez
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As of December 31st, 2004, CORPBANCA and its subsidiaries have a total staff of
1,963 employees, distributed as follows:
Company SeniorExecutives
Professionalsand
Administratives
Workers and
Others
Total
CORPBANCA Corp Administradora General de Fondos S.A. Corp Corredores de Bolsa S.A. Corp Corredores de Seguros S.A. Copr Asesorías Financieras S.A.
733432
6962527131
10612010250
18304841413
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BUSINESS AND ACTIVITIES
Historical Background
In mid 1871, a group of neighbors from Concepción led by Aníbal Pinto, who would
later become President of Chile, drew up the by-laws of Banco de Concepción. The
Bank began business that year, on October 6th, and has continued operating
uninterrupted until today, which makes it the oldest bank in Chile. Following
nationalization of private sector banking in 1971, the ownership of the Bank changed
and came under the control of CORFO. That same year, Banco de Concepción
acquired the local interests of Banco Francés and Italiano, which provided the
institution presence in Santiago. Later, in 1972, the bank purchased Banco de Chillán
and, in 1975, Banco de Valdivia. In November 1975, CORFO sold shares to private
sector businessmen who took control of the bank the following year. After a period of
growth, in 1980 Banco de Concepción was redefined as a nationwide bank; it
changed its name to Banco Concepción and moved its headquarters from
Concepción to Santiago. In 1986 the National Mining Corporation (SONAMI) acquired
the Bank and took special interest in financing small and medium mining projects,
increased its capital and sold its riskier portfolio to the Central Bank. In late 1995,
SONAMI sold the majority of its shareholding in the Bank to a group of investors led
by Mr. Alvaro Saieh B., through the holding company INFISA (now Corp Group).
Since the acquisition, the new shareholders defined a new strategy; restructuring and
repositioning its business in order to compete with Chile’s leading institutions. To
promote growth, the controlling group redefined the Bank’s objectives making its
target market personal financing and developing products for the middle-income
population and small and medium sized companies. In the first quarter of 1997 the
shareholders of Banco Concepción reached an agreement with the Chilean Central
Bank over extinguishing the subordinated debt that had existed since the early 80’s.
As part of the repositioning strategy the bank’s name was changed to CORPBANCA.
In 1998, through the acquisition of Corfinsa (consumer loan division of Banco
Sudamericano) and Financiera Condell, the bank formed Bancondell initiating its
presence in the medium – lower income consumer business (massive banking). The
defined strategy has helped CORPBANCA achieve the financial sector’s second
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strongest loan growth over the past seven years and, in addition, reversing the 1999
losses and achieve an adequate ROE since 2001.
Financial and Economic Environment
The Chilean economy consolidated its recovery during 2004, with its principal
macroeconomic indicators recording a favorable performance compared to the
previous year, which already began to show signs of recovery. Likewise, the solid
trends of these factors have enabled different players, including Central Bank of Chile
(BCCH), to make optimistic forecasts on the expected evolution for 2005.
Indeed, according to the Central Bank own estimations, economic growth reached
5.8% in 2004, comparable to the 3.3% recorded in 2003. This growth was led by an
expansion in domestic demand for the second consecutive year, from a growth of
3.5% in 2003, to 6.8% recorded in 2004, both figures consistent with the National
Income evolution.
One particularly important factor of added expenditure is the quality of its composition,
which reveals an important increase in investment and in the trade balance position.
Investment reached 24.6% of GDP, outpacing 2003, when it reached 21.2%. This
situation anticipates interesting expectations in job creation and in turn, a reduction in
the unemployment rate, which has already been showing encouraging signs. By year
end, this rate fell to 8.8% and the downward trend is expected to continue in the
upcoming months. Additionally, real salaries also reflect the effects of the recovery,
showing a 0.2% growth in twelve months to November 2004, which anticipates
improvements in wages and therefore a favorable outlook for the future performance
of internal demand.
Total exports reached US$32 billion, an unprecedented figure in Chilean economic
history, increasing, when compared to 2003, 52.1%. This was mainly achieved
because of the significant recovery in the prices of the country’s natural resources
exports, in particular copper. In fact, average price of the metal reached US$1.30 in
2004, a growth of 49 cents over the previous year, this is a 61%. Imports also rose to
a record of US$23 billion, which translated into a US$9 billion trade balance surplus,
tripling 2003. One interesting fact is that international economic outlook continues to
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be as favorable for 2005 as the performance recorded in 2004 when expansion rose
to 4.9%.
Prices evolution were also consistent with domestic demand growth over product
expansion, whereby the Consumer Price Index rose from 1.4% in 2003 to 2.4% in
2004. This is basically explained by the domestic behavior of the economy, since the
tradable component, close to 50% of this index, was affected by the drastic recovery
of the Chilean peso, appreciating significantly from Ch$599.4 per dollar at December
2003, to Ch$559.8 by year end 2004, a contraction of around 7.0%.
Even though the Central Bank began to increase interest rates as part of its monetary
policy, from 1.75% in January, 2004 to 2.25% at November, 2004, its prevailing
economic value cannot yet be considered as one that influences any change in
consumption, so that it still equates real values of around 0%. This way, the amount
of money circulating in domestic economy increased in 21.1%, while the previous
year it only did it by 16.4%, indicating that the movements were consistent with the
expansion of added expenditure of the economy.
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Banking Industry
The banking industry showed significant progress in terms of efficiency and
profitability, closing the year with a solid financial framework. Among its most
noteworthy areas is the recovery of the activity levels, with a strong expansion in total
loans, influenced by historically low interest rates and by the incorporation of new
clients. Competition has turned harder, due to the starting up of new financial
institutions as well as to the opening up of new and more ATM’s, credit cards and the
emergence of alternative loans suppliers.
The following table presents the development of financial institutions during the past
five years:
Number of Financial Institutions
31 30
26 25 24
11
3 4 7
10
15
20
25
30
35
2000 2001 2002 2003 2004
Includes banks, financial companies, cooperatives and non-banking issuersof credit cards. Excludes subsidiaries and companies that support the line of business.
Source: SBIF
N°New
Old
Another major highlight is the solid image achieved by the banking sector, both local
and overseas, in terms of solvency, strength and transparency. This was
accomplished fundamentally through the modernization of regulations and
supervision, improvements in risk portfolio, progress in efficiency levels, historical
profitability and good equity indexes. This was also complemented with advanced
customer service and modernized payment systems.
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Among the most important structural changes observed in the industry, is the above
average growth of mid-sized banks to the detriment of the so-called “Megabanks”,
which have lost market share when compared to positions before mergers. And, as
already mentioned, the incorporation of new institutions focused on consumer banking
and the rising of non – banking consumer loans suppliers are relevant facts.
During 2004 total loans, net of interbank, increased in 11% in real terms, much more
than the 2003 growth of 4%.
This growth was reported mainly in mortgage and consumer loans which jointly
recorded an 18.2% real increase. However, business loans also expanded in
commercial, foreign trade, contingent, leasing and general-purpose mortgage areas,
posting an 8.1% increase, far outpacing the 1% growth of 2003, reflecting this group’s
greater interest in obtaining financing at lower rates from the local market.
Retail v/s Corporate Loan Growth
7,9%
13,9%
18,2%
-1,0%
1,1%
8,1%
-3,0%
0,0%
3,0%
6,0%
9,0%
12,0%
15,0%
18,0%
21,0%
2002 2003 2004
Retail Corporate
The financial system’s loan quality also showed signs of recovery by virtue of the
global economic improvement. Thus, past due loans fell 18.9% when compared to
2003, reaching 1.2% of total loans (1.7% previous year). Moreover, the coverage ratio
for provisions over past due portfolio improved and rose from 130.9% in 2003 to
165.3% in 2004.
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Efficiency ratio deteriorated when compared to 2003. The reason for this is the
increase in administrative expenses. Efficiency ratio went from 53.2% in 2003 up to
55.8% at the end of 2004.
On the other hand, total industry reached a net income of Ch$665,176 million,
representing an increase of 4.2% over the previous year, a positive figure even
though it is lower than the expansion recorded for loan placement. As a result of the
improved results obtained and higher equity solvency shown by the sector during
2004, ROE increased from 16.7% in December 2003 to 16.8% in December 2004.
ROA, likewise, varied from 1.5% to 1.4%, respectively.
Description of Business and Regulatory Framework
Over the last few years, the Banks and Financial Institutions Superintendency has
received numerous requests for banking licenses which is further testimony of the
sector’s dynamism. A new national bank, Monex, started up in 2003, while Conosur,
the only loans and savings company still acting as such, initiated operations as a
Bank (subsequently acquired by Banco de Crédito e Inversiones). Meanwhile, in
2004, Penta Bank started up, targeting high income segments, and Banco Paris,
mainly oriented towards consumer loans (it must be remembered that Banco Paris
acquired Santiago Express’ financial and fixed assets). The trend for niche banks is
likely to be further accentuated in view of these events with institutions targeting
specific segments or economic activities.
At December 2004, the banking industry was composed of 26 banks – one state-
owned, thirteen locally owned and twelve under foreign ownership.
In Chile, banks operate within the regulatory framework of The General Banking Law
and The Company Law Nº 18.046, and are regulated by the Central Bank and the
Banks and Financial Institutions Superintendency. The following are among the most
significant regulatory modifications implemented in 2004:
On January 1st, 2004, the criteria for provisions over loan portfolio was modified,
stipulating it must be set up according to the models and methods developed by the
same institutions, which must be approved by the company’s Board of Directors.
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Since 2004 fiscal year, provisions for risk assets must be presented net of income for
recovery of charged-off loans.
On the other hand, it is important to emphasize the effort made by the Central Bank to
modernize the Chilean financial system’s means of payment which increased the
security and efficiency of payment systems by reducing risk in the banking industry,
placing our country at the level of the developed economies.
Along these lines, one of the Central Bank’s principal reforms was the implementation
of an electronic payment transfer system known as Full Payment in Real Time (LBTR)
whereby financial institutions proceed to liquidate their operations in local currency in
their current accounts with the Central Bank, allowing to carry out inter-bank and third-
party transactions. This system aims to carry out financial institutions’ payments
electronically and in real time, thereby eliminating any physical interchange of
documents.
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CORPBANCA’s MANAGEMENT REPORT
In its constant effort to maximize growth, and strongly committed to follow the highest
standards on loan quality and efficiency, CORPBANCA management has continued
throughout 2004 with the implementation of its strategic program, once again
expanding beyond industry levels, with risk index below peer average and a market
leading efficiency level.
Levels of Activity
CORPBANCA’s total loans – net of interbank – reached Ch$ 2,423,646 million as of
December 2004, equivalent to a twelve month 13.2% increase in real terms,
outpacing the industry’s performance of 11.0% during the same period, and
increasing its market share from 6.4% at year-end 2003 to 6.5% at the close of 2004.
The following table shows the evolution of CORPBANCA’s loan growth during the
past six years:
Total loans, net of interbank loans(Ch$ Millions, December 2004)
1.340.1741.513.839
1.747.080
2.140.826
2.423.646
1.178.056
-
500.000
1.000.000
1.500.000
2.000.000
2.500.000
3.000.000
1999 2000 2001 2002 2003 2004
Ch$ MM
Most dynamic loans, in terms of growth for year 2004 were residential mortgages
(58.8%), foreign trade (25.0%), and consumer loans (22.1%). Past due loans, on the
other hand, reported a 25.9% decrease as a result of ongoing improvement of credit
quality and the strict risk policies CORPBANCA has been applying.
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Commercial loans reported the portfolio’s largest nominal growth with Ch$ 111,297
million, followed by residential mortgages with Ch$ 65,044 million and by consumer
loans with Ch$ 49,410 million. This expansion is mainly explained by the generalized
lower interest rates observed in the sector, which generated favorable conditions for
borrowing, and CORPBANCA’s actively implemented marketing campaign aimed at
positioning the most profitable portfolio products. The following table shows the
market share evolution for commercial, consumer and residential mortgages loans
during the past five years:
Market Share Evolution(Comercial, Consumer and Housing Loans)
7,3%
4,8%
7,2%
7,0%
2,3%
1,1%
0,0%
1,0%
2,0%
3,0%
4,0%
5,0%
6,0%
7,0%
8,0%
2000 2001 2002 2003 2004
Commercial Consumer Residential
As was mentioned earlier, housing mortgages recorded a 58.8% increase over twelve
months, reaching sales of Ch$ 100,952 million by December 2004, far outpacing the
18.7% expansion registered by the overall industry for the same year. CORPBANCA
was able to increase its market share in this area, from 1.7% in December 2003 to
2.3% at year-end 2004, which is in accordance with the emphasis the Bank’s strategic
framework has placed on this kind of loans.
The strong loan portfolio growth of 13.2% year on year, contrasts with the 8.2%
decrease reported for provisions for loan losses, which reflects the improved credit
quality measured as provisions for loan losses over total loans, diminishing from 2.1%
at year-end 2003 to 1.7% in 2004. This is also associated with an improvement in the
loan portfolio composition since past due loans decreased by 25.9%, representing an
0.8% over total loans, figure that must be compared to 1.2% in December 2003. The
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concentration of mortgage products and corporate agreements translated into a lower
risk for retail banking.
The following table shows the evolution of the risk index, measured as provisions for
loan losses over total loans, during the past seven years:
Risk Index(Provisions/Total Loans)
1,7%
1,6%
2,0%1,9%
0,0%
0,5%
1,0%
1,5%
2,0%
2,5%
3,0%
1998 1999 2000 2001 2002 2003 2004
Corpbanca System
The capital increase carried out in late 2002 and the maintenance of the dividend
policy has allowed, notwithstanding loan growth, an expansion of financial
investments, generating a profitable way of capital assignment. Therefore,
investments rose to Ch$ 51,683 million, equating an 11.4% increase over 2003,
principally based on lower credit risk securities and adequate measures to control
interest rate and currency exchange risks.
Funding
In addition to the capitalization on earnings and the Bank’s excellent equity base, the
significant growth in productive assets was funded mainly by deposits and borrowings
obtained on the domestic and foreign market.
Deposits and other domestic borrowings increased by Ch$ 260,994 million or 11.8%,
mainly explained by time and demand deposits that expanded by Ch$ 175,639
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million, (12.2%), by mortgage bonds which increase by Ch$ 35,417 million (12.4%),
and by a reduction of Ch$ 24,610 million (30.1%), in other local borrowings. Foreign
borrowings grew by Ch$ 58,894 million (36.2%) given the dynamism of foreign trade
and commercial loans in foreign currency.
Added to the above, a noteworthy increase of Ch$ 22,147 million (14.98%) was
recorded by holders of checking accounts and other sight accounts, net of settlement.
This increase is of great relevance as these liabilities make up an important source of
financing that do not generate financial costs.
The combination of the abovementioned growths allowed CORPBANCA to continue
expanding at a low financial costs, standing at 3.5% for time and demand deposits in
local currency, contrasting with 3.9% in the banking industry.
Figures in MCh$ to December 2004 Dec-04 Dec-03 04 – 03 (MCh$) 04 - 03 (%)
Time and demand deposits 1,612,278 1,436,639 175,639 12.23%
Checking Account 130,760 123,467 7,293 5.91%
Other sight or demand deposits 129,388 98,527 30,861 31.32%
Mortgage Bonds 320,139 284,722 35,417 12.44%
Domestic Borrowings 57,286 81,895 (24,610) -30.05%
Foreign Borrowings 221,822 162,928 58,894 36.15%
Settlement 89,340 73,333 16,007 21.83%
Checking & Sight Accounts, net 170,809 148,661 22,147 14.9%
Performance
CORPBANCA’s total net income reached Ch$ 50,767 million as of December 2004, a
decrease of Ch$ 609 million when compared to 2003. The main issue that explains
this reduction is the higher tax provision that had to be constituted (Ch$ 4,385 million)
in order to extinguish the subordinated debt mantained with Central Bank. On the
other hand income before taxes grew by Ch$ 3,776 million over 2003, equating 7.1%.
The following table shows the Bank’s performance in 2003-2004.
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Figures in MCh$ to December 2004 Dec-04 Dec-03 04 - 03 (MCh$) 04 - 03 (%)
Net Interest margin 111,927 97,991 13,936 14.2%Fees from Services, net 18,854 22,535 (3,681) (16.3%)Gains on Financial Instruments 10,170 11,513 (1,343) (11.7%)Exchange Rate Earnings 1,263 9,205 (7,943) (86.3%)Other Operating Income, net (4,760) (6,738) 1,978 (29.4%)Gross Margin 137,453 134,507 2,947 2.2%Operating Expenses (53,838) (50,855) (2,983) 5.9%Net Margin 83,615 83,652 (37) (0.0%)Provisions (18,119) (26,179) 8,060 (30.8%)Income Attributed to Invest. in other Companies 225 216 9 4.3%Other Non Operating Expenses (1,998) (1,891) (98) 5.2%Price Level Restatement (6,453) (2,294) (4,159) 181.3%Income before Income Taxes 57,279 53,504 3,776 7.1%Income Tax Provisions (6,512) (2,127) (4,385) 206.2%Net Income 50,767 51,377 (609) (1.2%)
Gross margin showed a favorable evolution with an increase of Ch$ 2,947 million.
This growth was generated mainly by the expansion of Ch$ 13,936 million in net
interest earnings, stemming from important commercial growth, in spite of lower
interest rates seen by both the Bank and the financial system.
On the other hand, fee income exhibited a decrease of Ch$ 3,681 million , as a result
of both the contract termination with the Instituto de Normalización (INP) which
concluded in December 2003, as well as lower fee revenue for the concepts of
granting and renegotiating loans.
Net earnings on foreign exchange operations, decreased by Ch$ 7,943 million, due
to new hedge requirements in the Bank entailing a lower use of forward contracts as
the peso appreciated during 2004.
Although operating expenses increased by 5.9% over the previous year, which is in
line with the activity’s growth, CORPBANCA reached an efficiency index of 39.2% at
the end of 2004, consolidating its position as one of the most efficient banks within the
Chilean banking industry and as the most efficient institution among its peers. As
mentioned earlier, in an effort to maximize its efficiency, CORPBANCA has generated
economies of scale through client growth, bolstering initiatives such as productivity
incentives and variable pay based on performance. The following table shows the
evolution of CORPBANCA’s efficiency ratio:
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Efficiency Evolution of Corpbanca v/s Industry
39,17%
100,58%
53,47%
63,17%
0,00%
20,00%
40,00%
60,00%
80,00%
100,00
120,00%
1997 1998 1999 2000 2001 2002 2003 2004
YearsCorpbanca System
Allowances for loan losses, net of recoveries, diminished in Ch$ 8,060 million
(30.8%), in keeping with the Bank’s continued goal to bring portfolio risk under control.
Expenses for gross provisions for loan losses over total loan portfolio declined from
1.5% at year-end 2003, to 1.1% for 2004.
CORPBANCA, as well as the industry, enjoyed a favorable trend throughout the year
regarding portfolio risk. Nevertheless, for the Bank, a higher concentration in
mortgage loans and pacts (for consumer product and others carried out with large
companies) entailed a relevant risk reduction in retail banking.
On the other hand, past due loans decreased by 25.9% compared to December 2003,
whereby the coverage ratio, measured as provision over past due loans, increased
from 170.8% in December 2003 to 211.8% in December 2004.
Finally, provisions for income tax reached Ch$ 6,512 million, stemming from the
Bank’s continuous loan expansion, increased productivity, improved efficiency and the
sustained growth in the income generating capacity of the Bank, which extinguished,
during 2004, the tax benefit created as a result of the subordinated debt maintained
with the Central Bank. As a result of this, the bank had to constitute allowances to pay
taxes on income, and finally attained a net income of Ch$ 50,767 million for 2004,
very similar to the one recorded last year. Nevertheless, comparing income before
taxes leads to the conclusion that the Ch$ 57,279 million revenue represents a growth
of 7.1% of income generation capacity.
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Consequently, returns on equity (ROE) varied from 17.4% in December 2003 to
15.6% in December 2004, which is largely explained by the increase in the Bank’s
equity base after the capitalization of 50% of net income generated during 2003 (Ch$
25,062 million) and the effect of the tax provision, therefore, as this effect is corrected,
ROE reaches 17.6%.
Credit Risk
In 2004 classification of CORPBANCA’s domestic credit risk held firm in debt
instruments and shares rating, reflecting its favorable financial and business situation,
in terms of solvency, as well as the good performance obtained and the increase in
market share, while maintaining the portfolio risk under control.
On the other hand, Standard & Poors assigned a classification of BBB+ to
international financing for more than 1 year and an A2 for financing for less than 1
year, while Fitch Ratings granted a classification of BBB+ and F2, respectively. Both
classifications are based on the Bank’s market share growth in the competitive
Chilean environment, on consistently good quality assets indexes and on solid
fundaments of profitability.
INSTRUMENT 1995 Previous Classification
(Domestic)
Current Classification
(Domestic)
International Classification
Dep. less than 1 year Grade 2 Grade 1+ Grade 1+ A2 F2
Dep. more than 1 year A- AA- AA- BBB+ BBB+
Mortgage Bonds A- AA- AA-
Subordinated Bonds BBB A+ A+
Common Shares Grade 2 Grade 2 Grade 2
ADR Issue
In November 2004, CORPBANCA took a new and significant step forward in its
internationalization process on completing its listing process, allowing it to currently
transact American Depositary Receipts (ADR’s) on the New York Stock Exchange. By
doing so, the bank culminated a process started in November 2003, when the bank’s
shares started trading in the U.S. under Rule 144-A in the OTC market. On that
occasion, in order to facilitate the sale of the controlling group’s foreign partners’
23.3% shareholding, it was decided to place ADRs on the New York Stock Exchange,
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which took place in November 2003 with the auction of 52,877,267,013 CORPBANCA
shares on the Santiago Stock Exchange at a unit price of Ch$2.75 per share of which
some 26,438,630,000 shares, equivalent to 5,287,726 American Depositary Shares at
a ratio of 5,000 shares per ADS, were placed abroad as ADRs.
In November 2004, the NYSE auctioned 2,701,040 ADRs, each one equivalent to
5,000 CORPBANCA shares on the North American market, representing 5.95% of
total ownership. This will improve share liquidity while a series of information
requirements will be fulfilled, translating into higher transparency, as well as
complying with international accounting principles and corporate governance.
2004 Awards
CORPBANCA received numerous prizes and distinctions for its management, during
2004, among them:
Ranked sixth best Latin American bank by América Economía magazine.
Award for Creativity granted by Diario Financiero journal in September, 2004
Silver Prize for the category Promotions and Sales in the V ACHAP Publicity
Festival
Organizational Structure
CORPBANCA modified its organizational framework during 2004, creating new
business and support areas, setting up the Sales Channel Division and Medium-Sized
Company Business departments, Commercial Mortgage and Financial Risk.
The Medium-Sized Company Business department was created in January 2004
under authority of the Commercial Banking Division with the purpose of stepping up
the generation of business in the commercial banking platform and achieving the
defined service quality standards. This new area is responsible for Leasing and
Factoring departments as well as for the development of new liability products (Cash
Management) and Foreign Trade, among others.
Along this line, and considering that the placement of mortgage products on the retail
market constitutes one of CORPBANCA’s main strategic challenges, the Commercial
Mortgage department was set up under the supervision of the Retail Banking Division.
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Upon achieving the unification of all risk control units within the Comptroller Division,
CORPBANCA created, in February 2004, the Financial Risk Management office
allowing the Bank to be aligned with the principal international standards applied in
the identification of risks inherent to the management of positions at the Bank.
Lastly, the Sales Channel Division was created concentrating, under its supervision,
Remote Sales Channel, Contracts and Commercial Mortgage areas.
Management and New Products
In July 2004 and once the implementation of the new technological platform IBS was
concluded, the development of a new project, MIS, was started up. It is meant to
improve management control standards. This system, aims to measure the Bank’s
Profitability from the most detailed aspects of the organization (transaction) to the
consolidated level (scorecard), and is once again pioneering the Chilean banking
industry by integrating the latest technology available for measuring institutional
management.
On the other hand, in February 2004, CORPBANCA launched its American Express
card, providing clients with access to a wide range of benefits in more than 65,000
commercial establishments in Chile and worldwide.
Risk Factors
The risk factors associated with CORPBANCA’s business and the banking industry in
general, are mainly four. The first one is inflation, since the economy’s inflation rates
are internalized in the commercialization and price determination of the bank
products. The second critical risk element, is the exchange rate volatility, a key
variable, as it directly impacts revenues derived from the exposure the Bank presents
in foreign currency. On the other hand, the economy’s interest rate also constitutes a
risk factor, since due to its variations, prices of different products adjust towards the
appropriate direction. In this sense, it is interesting to highlight that a relevant
proportion of assets and liabilities are subject to market price adjustments. In the case
of the majority of the operations, it is due to the repricing period while in others, such
as long-term investments, a “mark to market” procedure is used. The fourth factor is
the overall economic performance. CORPBANCA and the banking industry as a
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whole tend to move in the same direction as the country economy does. In other
words, in times of deceleration, the projected growth of the banking industry also
tends to decrease owing to the elasticity of banking operations. A natural
consequence of this evolution is credit risk, which constitutes one of the main
evaluation criteria when determining a bank’s financial position.
Currently CORPBANCA enjoys a below average portfolio credit risk in comparison
with the financial system. For the purpose of satisfactorily covering the risks
mentioned, the present regulation establishes limits or maximum asset liability gap
risk, which are an integral part of the policy on exposure maintained by
CORPBANCA.
INVESTMENT AND FUNDING POLICIES
As a bank, CORPBANCA is governed by the legal and regulatory restrictions defined
by the General Banking Law. Within this framework, CORPBANCA maintains a loan
portfolio aimed at financing all types of clients, across all business sectors, adequately
combining profitability and risk standards. As an intermediary, CORPBANCA finances
itself by seeking an economically profitable mix, privileging the use of funds at the
lowest possible cost. Given the importance of financial leverage in financial
institutions, one of the Bank’s key concerns is to maintain a satisfactory equity level.
Among the investments geared at maintaining a suitable infrastructure for its business
plan, CORPBANCA has a dynamic program sustained by a combination of its own
resources and rental expenses that have helped the Bank end 2004 as the most
efficient banking institution among its peers in Chile.
PATENTS AND OTHER RIGHTS
Each and every trademark the Company uses is duly registered and, therefore, legally
protected.
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PRINCIPAL ASSETS
At December 31, 2004 the principal fixed assets of CORPBANCA were its
headquarters building located at Huérfanos 1072, Santiago and 32 branch offices
throughout Chile.
SUBSIDIARIES AND SUPPORT COMPANIES
CORPBANCA holds a stake in a number of companies that are divided in
Subsidiaries Companies and Trade Support Companies. At year-end 2004, these
companies reported to CORPBANCA a net total income of Ch$ 5,607 million, a figure
that represents an increase of 49% over the revenues obtained the previous year for
the same concept.
Subsidiaries Companies
1. Corp Administradora General de Fondos: The purpose of this company is
to administrate mutual funds capital on behalf of its depositors. Investments
are undertaken in fixed as well as variable market securities in Chile and
overseas. During 2004, the company generated a net income of Ch$ 701
million, a profit of 46.2% over invested capital. At year-end 2004, the
company’s fully subscribed and paid-in share capital was Ch$ 1,519 million.
CORPBANCA’s holding in the company is 99.996%, an investment equivalent
to 0.07% of the Bank’s total assets.
Board of Directors:
Chairman : Cristián Canales P. (2)
Director : Camilo Morales R. (2)
Director : Patricio Rojas O. (2)
Director : Hernán Santamaría T. (2)
General Manager : Pedro Silva Y.
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2. Corp Corredores de Bolsa: The stock brokerage firm deals in securities for
third parties besides administrating its fixed income security portfolio and
trading in foreign currency. These activities generated revenues of Ch$ 2,819
million in 2004, translating into 29.9% profitability over invested capital. At
year-end 2004, the fully subscribed and paid-in capital of Corp Corredores de
Bolsa ascended to Ch$ 9,442 million, while CORPBANCA’s participation in the
company reached 99.992%, an investment equivalent to 0.38% of the Bank’ s
total assets.
Board of Directors
Chairman : Pablo de la Cerda M. (3)
Director : Nazir Alberto Selman H. (2)
Director (Gen. Manager) : Carlos Ubeda P.
3. Corp Corredores de Seguros: The insurance broker administrates
insurance, both of its own clients as well as clients from the Bank. At year-end
2004, this affiliate recorded a net income of 1,784 million, with a fully
subscribed and paid-in capital of Ch$ 55 million. CORPBANCA’s holding in the
company reached 99.99%, an investment equivalent to a 0.6% of the Bank’s
total assets.
Board of Directors
Chairman : Maritza Saieh B.
Director : Olivia Brito B. (2)
Director (Gen. Manager) : Roberto Vergara K.
4. Corp Asesorías Financieras: This Company conducts studies and provides
its clients with consultancy on financial and debt re-scheduling. At year-end
2004, Corp Asesorías Financieras exhibited a total net income of Ch$ 125
million, which entailed an 84.2% profitability over invested capital. The fully
subscribed and paid-in capital amounted to Ch$ 149 million, while
CORPBANCA’s stake reached 99.99%, equivalent to 0.01% of the Bank’s
total assets.
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Board of Directors
Chairman : Christian Schiessler G. (2)
Vice-Chairman : Christian Samsing S. (1)
Director : José Francisco Sánchez F. (2)
Director : Cristián Canales P. (2)
Director : Héctor Valdés R.
General Manager : Roberto Baraona U.
Support Companies1
1. Nexus: This Company processes credit and debit cards at the lowest possible
cost. At year-end 2004, the company’s fully subscribed and paid-in capital was
Ch$ 3,465 million. CORPBANCA’s holding in Nexus is 12.93% and the
investment accounts for 0.02% of the Bank’s total assets.
Board of Directors
Chairman : Mario Gaete H.
Vice- Chairman : Miguel Vargas M.
Director : Jeremy Pallant
Director : Fernando León S.
Director : Hernán Santamaría T. (2)
General Manager : Carlos Johnson L.
2. Combanc: The purpose of this company is to lend services for payment
compensation and activities complementary to the banking business. At year-
end 2004, the fully subscribed and paid-in capital of the company was Ch$
1.611 million; CORPBANCA’s holding in Combanc was 13.67%, an
investment that represents 0.01% of the bank’s total assets.
Board of Directors
Chairman : Mario Duque A.
Director : Alejandro Alarcón P.
Director : Segismundo Schulin-Zenthen S.
Director : Joaquín Cortez H.
1Companies in which CORPBANCA held more than 10.0% at December, 31 2004.
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Director : Héctor Valdez R.
Director : Roberto Busto K.
Director : Carlos Budnevich L.
Director : Patricio Claro G.
Director : Andrés Sanfuentes V.
General Manager : Felipe Ledermann B.
3. Transbank: This is a banking support company whose partners are the most
important banking and financial entities. Its business consists of administrating
credit cards (Visa, Mastercard, Magna, American Express and Diners Club)
and Redcompra debit cards (Electron and Maestro). Additionally, it
administrates Webpay, the Internet shopping services, enabling the safe and
secure interchange of information. At year-end 2004, the fully subscribed and
paid-in capital of the company was Ch$ 4,202 million; CORPBANCA’s stake in
Transbank reached 8.72%, an investment representing 0.01% of the Bank’s
total assets.
(1) CORPBANCA General Manager
(2) CORPBANCA Manager
(3) CORPBANCA’s Chief Legal Counsel
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STOCK EXCHANGE TRANSACTIONS
CORPBANCA’s shares were transacted on the Santiago Stock Exchange during
2003-2004 as follows:
Year 2003
N°
Bus Average Volume Closing High Low
Average
Quantity P/U
Stock-exchange
capital
First quarter 2003 232 1,445,575,707 2,15 2,18 2,1 3,088,136,891 11,24 367,034,139,042
Second quarter 2003 484 2,292,091,176 2,63 2,74 2,4 5,840,844,919 12,61 498,534,598,519
Third quarter 2003 505 1,898,942,348 2,79 2,88 2,6 5,208,733,919 15,00 632,320,556,408
Fourth quarter 2003 1807 26,173,992,996 3,11 3,30 2,8 74,689,429,674 15,48 706,444,257,996
Year 2004
N°
Bus Average Volume Closing High Low
Average
Quantity P/U
Stock-exchange
capital
First quarter 2004 1570 10,947,679,957 3,14 3,21 3,0 34,454,375,694 14,55 712,495,172,412
Second quarter 2004 1018 5,215,106,389 2,97 3,10 2,9 15,406,969,204 13,21 673,920,593,014
Third quarter 2004 1401 4,703,949,655 3,18 3,21 3,0 14,875,841,293 13,92 722,327,908,337
Fourth quarter 2004 1379 4,825,028,916 3,20 3,32 3,1 15,441,130,072 14,05 726,109,729,846
During 2004, the following Bank directors and senior executives transacted the
following CORPBANCA shares:
Marcelo Achondo L.
Date of Purchase Date of Sale Quantity Price Investment10.13.2004 4,239,668 3,27 13,863,71410.13.2004 673,264 3,24 2,181,37510.14.2004 793,814 3,17 2,516,39010.15.2004 2,521,207 3,18 8,017,43810.15.2004 2,123,779 3,22 6,838,569
Christian Schiesser G.
Date of Purchase Date of Sale Quantity Price Investment10.01.2004 15,500,500 3,30 51,150,000
Julio Henríquez B.
Date of Purchase Date of Sale Quantity Price Investment02.10.2004 12,239,721 3,20 39,167,107
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DIVIDEND POLICY
Dividend policy established by CORPBANCA and accepted at the ordinary
shareholders’ meeting, entails disbursing 50% of net income charged to the previous
fiscal year. This policy was first enacted in 2002, when disbursements were charged
to earnings from fiscal year 2001. For this concept, at the annual shareholders’
meeting held in February 2004, the bank distributed dividends amounting to Ch$
25,062 million, representing 50% of net income of fiscal year 2003.
The following table shows dividends per share, distributed during the past three years:
YearDistributed Income
(MCh$)Pesos per Share
(Ch$ of each year) Charged to Fiscal Year
2002 14,221.7 0.083437 20012003 17,776.5 0.078342 20022004 25,061.8 0.110448 2003
REMUNERATION
At the ordinary shareholders’ meeting held on February 20th, 2004 it was established
that members of the Board of Directors would not receive salaries for fiscal year 2004,
except for members of the Board of Directors Committee and the Auditing Committee,
who received total fees of Ch$ 148 million (Ch$ 13.8 million in 2003).
Total remunerations received by managers and senior executives at CORPBANCA
during fiscal year 2004 amounted to Ch$ 1,447 million. Additionally, Bank executives
receive bonuses for target accomplishment. The Human Resources Division Manager
and the General Manager jointly establish policies determining such bonuses.
BOARD OF DIRECTOR’S COMMITTEE
The Board of Directors Committee at CORPBANCA is composed by Carlos Massad
A. who presides over the events, René Cortazar S. and Francisco Rosende R. During
2004, the Board of Directors Committee performed each and every task stipulated in
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clauses one through five of Article 50 bis of Law 18.046. These essentially includes,
checking financial statements of the Bank and of the External Auditors, providing an
opinion of them, reviewing material concerning transactions pertaining to Articles 44
and 89 of law and expressing pertinent opinions and issuing reports on such matters,
as well as examining Bank executive and senior management pay scales and
compensation plans.
MATERIAL EVENTS
During 2004, CORPBANCA informed to the Banks and Financial Institutions
Superintendency the following material events:
1. At the ordinary shareholders meeting on February 20th, 2004 the Board of
Directors of CORPBANCA was renewed, and the following directors were
elected for a period of 3 years:
Full Members: Alvaro Saieh B., Jorge Andrés Saieh G., Carlos Abumohor T.,
Jorge Selume Z., Fernando Aguad D., Odde Rishmague R., Julio Barriga S.,
Hernán Somerville S., René Cortazar S., Francisco Rosende R., and Carlos
Massad A.
Alternate Member: Juan Rafael Gutiérrez A.
2. On September 28th, 2004 CORPBANCA informed the Security and Exchange
Commission (SEC) of the registration of the American Depositary Receipts
(ADRs). This is part of the North American listing process so that
CORPBANCA can constitute itself into an issuing company of internationally
auctioned shares through ADRs. By doing so, the ADR program was modified
in accordance with Regulation S, subject to the Securities Act of 1933, in order
to include the ADRs in the SEC registry. Moreover, it was informed that every
holder of ADRs of Rule 144-A, would be offered to exchange them for those
registered with the Security and Exchange Commission.
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3. On November 2nd, 2004 CORPBANCA informed the end of the established
period for holders of American Depositary Shares (ADSs) of Rule 144-A to
carry out their corresponding exchange for those ADSs registered with the
Securities and Exchange Commission (SEC), thereby ending the process and
having exchanged the total amount of ADSs of Rule 144-A.
As a consequence of the exchange, the total ADSs registered ascended to
2,701,040 on November 1st, 2004; each one representing 5,000 CORPBANCA
shares. This total includes the number of ADSs previously issued under
Regulation S, which were also registered with the SEC.
Lastly, the abovementioned ADSs proceeded to be registered on the New
York Stock Exchange (NYSE), which became effective on November 1st, 2004.
By doing so, CORPBANCA shares can now be transacted on the international
stock exchange as ADSs.
FINANCIAL STATEMENTS
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INDEPENDENT AUDITORS' REPORT
To the Shareholders of CORPBANCA
We have audited the accompanying consolidated balance sheets of CORPBANCA and its Subsidiaries as of December 31, 2004 and 2003, and the related consolidated statements of income and of cash flows for the years then ended. These financial statements (including the related Notes) are the responsibility of the management of CORPBANCA. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in Chile. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management of the Bank, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of CORPBANCA and its Subsidiaries at December 31, 2004 and 2003 and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in Chile and the rules of the Superintendencia de Bancos e Instituciones Financieras.
As explained in Note 2, starting January 1, 2004, the Bank modified the basis for calculation of the allowance for loan losses. Additionally, the Bank modified the income statement presentation of provisions made and the effects of reserves established and released allowances for loan losses.
The translation of the financial statements into English has been made solely for the convenience of readers outside Chile.
January 14, 2005
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CORPBANCA AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
(in millions of Chilean pesos – MCh$)
At December 31,ASSETS 2004 2003
MCh$ MCh$
CASH AND BANKS 158,602.1 118,157.6
LOANS:Commercial loans 1,123,389.3 994,495.7Foreign trade loans 178,661.7 142,975.5Consumer loans 286,816.7 223,580.0Mortgage loans 293,350.4 313,219.7Lease contracts 179,008.9 157,801.3Factored receivables 60,117.7 38,172.1Contingent loans 196,767.4 202,533.9Other outstanding loans 85,890.9 41,528.5Past due loans 19,642.9 26,519.3
Total loans 2,423,645.9 2,140,826.0
Less: Allowance for loan losses (41,610.5) (45,308.1)Total loans (net) 2,382,035.4 2,095,517.9
OTHER LOAN OPERATIONS: Interbank loans 20,003.3 4,100.0Investments under agreements to resell 24,264.5 18,363.9
Total other loan operations 44,267.8 22,463.9
INVESTMENTS:Government securities 88,735.7 78,193.8Other financial investments 340,135.9 313,183.2Investments under agreements to repurchase 76,257.2 62,068.7Assets to be leased 3,311.5 23,729.8Assets received in lieu of payment or on foreclosure 4,308.2 6,237.5Other non - financial investments 14.6 2.1
Total investments 512,763.1 483,415.1
OTHER ASSETS 70,536.9 102,922.5
FIXED ASSETS: Bank premises and equipment (net) 31,714.4 32,417.0Investments in other companies 1,664.4 1,432.9
Total fixed assets 33,378.8 33,849.9
Total assets 3,201,584.1 2,856,326.9
Notes 1 to 18 are an integral part of these consolidated financial statements
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CORPBANCA AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS
(in millions of Chilean pesos – MCh$)
At December 31, LIABILITIES AND SHAREHOLDERS’ EQUITY 2004 2003
MCh$ MCh$LIABILITIES
DEPOSITS AND OTHER LIABILITIES: Current accounts 130,760.3 123,467.1Saving accounts and time deposits 1,612,278.0 1,436,639.1Other sight and term liabilities 129,388.3 98,527.2Investments under agreements to repurchase 80,778.8 63,259.0Mortgage finance on bonds 320,139.3 284,722.2Contingent liabilities 196,918.1 202,653.9
Total deposits and other liabilities 2,470,262.8 2,209,268.5
BONDS:Bonds - - Subordinated bonds 46,289.8 48,502.2
Total bonds 46,289.8 48,502.2
BORROWINGS FROM CENTRAL BANK AND OTHER FINANCIAL INSTITUTIONS: Chilean Central Bank lines of credit for renegotiations of loans 4.3 36.0 Other Central Bank borrowings 26,103.5 - Borrowings from domestic financial institutions 18,131.5 71,186.4Foreign borrowings 221,822.3 162,928.2Other obligations 13,046.2 10,673.0
Total borrowings from financial institutions 279,107.8 244,823.6
OTHER LIABILITIES 29,527.9 6,237.5Total liabilities 2,825,188.3 2,508,831.8
MINORITY INTEREST - -
SHAREHOLDERS’ EQUITY: Capital and reserves 322,396.5 296,833.5Other reserves 3,232.0 (715.0)Net income for the year 50,767.3 51,376.6
Total shareholders' equity 376,395.8 347,495.1
Total liabilities and shareholders’ equity 3,201,584.1 2,856,326.9
Notes 1 to 18 are an integral part of these consolidated financial statements
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CORPBANCA AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003 (in millions of Chilean pesos – MCh$)
2004 2003MCh$ MCh$
OPERATING REVENUEInterest revenue 190,820.2 159,302.3
Gains from trading activities 21,261.5 21,974.1
Fees and other services income 22,046.9 25,804.0
Foreign exchange transactions gain (net) 1,262.5 9,205.4
Other operating income 3,451.8 2,961.5
Total operating revenue 238,842.9 219,247.3
Less:Interest expense (78,893.6) (61,311.6)
Losses from trading (11,091.6) (10,461.1)
Fees and other services expenses (3,192.6) (3,268.7)
Other operating expenses (8,212.0) (9,699.3)
Gross operating margin 137,453.1 134,506.6
Personnel salaries and expenses (33,172.9) (31,399.5)
Administrative and other expenses (15,883.0) (14,100.2)
Depreciation and amortization (4,782.0) (5,354.8)
Net operating margin 83,615.2 83,652.1
Provisions for assets at risk (18,119.4) (26,179.2)
Operating income 65,495.8 57,472.9
OTHER INCOME AND EXPENSESNon-operating income 2,753.5 2,373.9
Non-operating expenses (4,741.9) (4,264.7)
Income from investments in other companies 225.0 215.7
Net loss from price-level restatement (6,453.1) (2,294.3)
Income before income tax 57,279.3 53,503.5
Income taxes (6,512.0) (2,126.9)
Income after income tax 50,767.3 51,376.6
Minority interest - -
Net income 50,767.3 51,376.6
Notes 1 to 18 are an integral part of these consolidated financial statements
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CORPBANCA AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003(in millions of Chilean pesos – MCh$)
2004 2003CASH FLOW FROM OPERATING ACTIVITIES: MCh$ MCh$
Net income 50,767.3 51,376.6
Charge (credit) to income not representing cash flow: Depreciation and amortization 4,782.0 5,354.8Provisions and write-offs of assets at risk 25,655.6 32,611.3Adjustment to market value of financial investments trading portfolio 449.1 713.2Tax provision 6,512.0 2,126.9Amortization of negative goodwill on investments in companies 1,160.2 1,205.5Write-off of other assets 1,919.2 1,844.0Income from investments in companies (225.0) (215.7)Net gain on sale of assets received in payment (440.4) (2,074.0)Loss on sale of fixed assets 19.7 73.0Net loss from price-level restatement 6,453.1 2,294.3Other charges that do not require cash (2,593.6) (12,406.6)
Net change-interest adjustments and fees and other services accrued on assets and liabilities 1,176.5 (4,255.6)Net cash provided by operating activities 95,635.7 78,647.7
CASH FLOW FROM INVESTING ACTIVITIES: Increase in loans (net) (361,463.4) (393,250.4)(Increase) decrease in other credit operations (net) (22,628.6) 16,463.0Increase in investments (net) (36,827.1) (191,546.4)Purchase of fixed assets (2,337.8) (4,726.1)Sale of fixed assets 172.7 351.6Investments in other companies (219.4) -Dividends received from investment in companies 168.2 179.0Sale of fixed assets received in lieu of payment or in foreclosure 4,511.1 6,886.3(Increase) decrease in other assets and liabilities (net) 36,668.3 (49,934.2)Net cash used in investing activities (381,956.0) (615,577.2)
CASH FLOW FROM FINANCING ACTIVITIES: Increase in current accounts (net) 10,433.4 1,835.6Increase in deposits and borrowings (net) 207,396.3 314,596.7Increase (decrease) in other sight or term obligations (net) 33,637.3 (5,607.1)Increase of other liabilities from brokerage of instruments 19,303.0 12,450.3Increase in borrowings from Chilean Central Bank (short term) 26,429.8 -Increase (decrease) of short-term foreign loans (net) (8,979.4) 37,566.0Issue of mortgage notes 173,981.2 419,053.8Redemption of mortgage notes (135,277.1) (326,666.5)Increase (decrease) in other short-term liabilities (53,405.4) 55,458.7Repayment of Chilean Central Bank borrowings (long-term) (32.0) (504.4)Redemption of bonds (2,272.6) (15,494.5)Loans obtained abroad (long-term) 181,668.3 84,285.7Repayment of foreign borrowings (long-term) (103,446.1) (48,737.6)Other borrowing (long-term) 8,750.8 5,724.1Repayment of other borrowings (long-term) (4,367.8) (5,930.4)Dividends paid (25,813.6) (18,457.8)Net cash provided by financing activities 328,006.1 509,572.6NET POSITIVE (NEGATIVE) CASH FLOW OF THE YEAR 41,685.8 (27,356.9)INFLATION EFFECT ON CASH AND CASH EQUIVALENTS (1,241.3) (134.6)NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 40,444.5 (27,491.5)CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 118,157.6 145,649.1CASH AND CASH EQUIVALENTS AT END OF YEAR 158,602.1 118,157.6
Notes 1 to 18 are an integral part of these consolidated financial statements
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CORPBANCA AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AT DECEMBER 31, 2004 AND 2003 (In millions of Chilean pesos - MCh$)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Information provided
The financial statements have been prepared in accordance with accounting regulations issued by the Superintendence of Banks and Financial Institutions (hereinafter, the Superintendence). Such regulations agree with accounting principles generally accepted in Chile.
The 2003 figures are restated for the change of 2.5% in the Consumer Price Index (CPI). Certain reclassifications have also been made for purposes of comparison.
b. Basis of consolidation
The consolidated group (“the Group”) comprises Corpbanca (“the Bank”) and its subsidiaries listed below:
Ownership2004 2003
% %
Corp Corredores de Bolsa S.A. 100.00 100.00Corp Administradora de Fondos Mutuos S.A. 100.00 100.00Corp Asesorías Financieras S.A. 100.00 100.00Corp Corredores de Seguros S.A. 100.00 100.00
The subsidiaries’ assets and operating income represent 2.8% and 9.4%, respectively, of the total consolidated assets and operating income (2.1% and 5.9% in 2003).
All significant balances and transactions among the group’s companies have been eliminated in consolidation.
c. Interest and indexation
The amounts recorded in the balance sheet for loans, investments and liabilities include interest and indexation accrued at year end. However, the Group has taken the conservative position of discontinuing the recognition of interest and indexation on high-risk or past-due loans.
d. Price-level restatement
Shareholders' equity, fixed assets, and other non-monetary balances have been price-level restated, considering the changes in the Chilean Consumer Price Index (CPI). The application of price-level restatement results in a net charge to income of MCh$6,453.1 (MCh$2,294.3 in 2003).
The income statement is not price-level restated.
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e. Foreign currency
Assets and liabilities denominated in foreign currency are stated in Chilean pesos at the exchange rate prevailing at year-end. The December 31, 2004 rate for the US dollar was Ch$559.83 = US$1 (Ch$599.42 = US$1 at December 31, 2003).
The net exchange gain of MCh$1,262.5 in 2004 presented in the income statement (MCh$9,205.4 in 2003) includes recognition of effects of changes in the exchange rate of assets and liabilities in foreign currency and income from exchange operations.
f. Leasing contracts
Finance leasing operations are leasing contracts including a clause granting the lessee a purchase option on the leased asset at the end of the contract.
g. Factoring receivables
Factoring receivables are valued at the amount disbursed to the borrower. The price difference between the amounts disbursed and the actual value of the received is earned and recorded as interest income over the financing period. The grantor is responsible for the payment of loans.
h. Financial investments
Investments in financial instruments with a secondary market held by the Bank are presented at market value in accordance with specific instructions of the Superintendence. Such instructions call for the recognition of the adjustments to market value against income for the year, unless permanent investments are involved, in which case, under certain limitations, the aforementioned adjustments can be made directly against equity in “Fluctuations in value of financial investments”.
The adjustment resulted in a net charge to income for the year 2004 of MCh$449.1 (MCh$713.2 in 2003) which is included in operating income in "Gains or losses from trading securities". For permanent investments, the adjustment resulted in a net credit of MCh$3,929.6 against equity (net credit in 2003 of MCh$38.5 - historical amount).
Other investments in financial instruments are stated at cost plus accrued interest and indexation.
i. Bank premises and equipment
Bank premises and equipment are stated at price-level restated cost and are shown net of accumulated depreciation. Depreciation is calculated using the straight-line method over the useful lives of the assets.
j. Goodwill on investments in related companies
Goodwill on investments in related companies and the premium paid for the acquisition of shares, rights, assets and contracts of the Consumer Credit Division of Corfinsa are amortized over a period of ten years.
The excess price paid as a result of the recognition of the quality of the portfolio purchased from Financiera Condell S.A. is amortized over six years starting August 1, 1999, following instructions from the Superintendence.
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k. Provisions for assets at risk
The Bank established all provisions required to cover the risk of loss on assets (Note 6), in accordance with the regulations issued by the Superintendence. Assets are stated net of such provisions or are shown as a deduction in the case of loans.
l. Deferred taxes
The effects of deferred taxes arising from temporary differences between tax and book balances are recorded on the accrual basis in accordance with Technical Bulletin Nº 60 of the Chilean Institute of Accountants and its supplements, and with instructions from the Superintendence. According to Technical Bulletin Nº 71 of the Chilean Institute of Accountants, deferred taxes are booked by applying the income tax rate for the year in which the corresponding temporary difference that produced the aforementioned taxes will be reversed.
m. Vacation expense
The annual cost of employee vacations and benefits is recorded on the accrual basis.
n. Cash and cash equivalents
For purposes of the statement of cash flows, the balance of “cash and banks” has been considered cash and cash equivalents, as per the definition in Chapter 18-1 of the updated Compilation of Regulations for Banks and Finance Companies.
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2. ACCOUNTING CHANGE
As established in Circular N° 3,189 and 3,246 of the Chilean Superintendency of Banks, starting January 1°, 2004, the Bank modified the basis for calculation of the allowance for loan losses.
These Circulars provide for a substantial change due to the fact that the provisions must be established by applying evaluation models and methods developed by the banks themselves, models and methods which have to be approved by the Board of Directors of the Bank.
At December 31, 2004 the application of the new models and methods did not have any significant effects on the Bank's income.
As established in Circular N° 3,246 of the Chilean Superintendency of Banks, starting January 1, 2004, the provisions for asset at risk are presented in the Income Statements net of recoveries of written-off loans. For comparison purposes the Income Statement of 2003 was reclassified.
3 SIGNIFICANT EVENTS
In an Ordinary Meeting of Shareholders on February 20, 2004, the Board of Directors of CORPBANCA was renewed and the following Directors were elected for a period of 3 years:
Directors Alternate Director
Messrs.: Mr.:Carlos Abumohor Touma Juan Rafael Gutiérrez Avila Fernando Aguad Dagach Julio Barriga Silva René Cortázar Sanz Carlos Massad Abud Odde Rishmague Rishmague Francisco Rosende Ramírez Alvaro Saieh Bendeck Jorge Andrés Saieh Guzmán Jorge Selume Zaror Hernán Somerville Senn
In a meeting of the Board of Directors on March 2, 2004, the following appointments were made in the Board of Directors of CORPBANCA:
President Carlos Abumohor Touma First Vice-president Alvaro Saieh Bendeck Second Vice-president Jorge Andrés Saieh Guzmán
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On June 4, 2004, exempt resolution 271 of the Superintendence of Securities and Insurance approved the amended by-laws of the company “Corp Administradora de Fondos Mutuos S.A.”, agreed to in the Extraordinary Meeting of Shareholders held on March 22, 2004, drawn up as a public deed on March 25, 2004 and supplemented by public deed dated April 21, 2004, consisting of a change in the type of administrative company to make it a General Fund Administrator, as provided for in Section XXVII of Law 18.045; and to that end amending the purpose and name of the company, which is now called “Corp Administradora General de Fondos S.A”.
On September 28, 2004, CORPBANCA communicated the following significant event:
Continuing with the listing process in the United States of America for CORPBANCA to be incorporated as a company issuing shares traded in international stock exchanges through American Depositary Receipts (ADRs), such ADRs have been registered with the Securities and Exchange Commission (SEC). To that end, the ADR plan issued according to Regulation S has been amended in accordance with the Securities Act of 1933 of the United States of America, so as to include such ADRs in the aforementioned registration with SEC.
Likewise, each holder of ADRs under Rule 144 A will be offered the possibility of exchanging them for those registered with the Securities and Exchange Commission.
On November 2, 2004, CORPBANCA communicated the following significant event:
The deadline stipulated for holders of American Depositary Shares, ADSs, under Rule 144A to change them for those ADSs registered with the Securities and Exchange Commission (SEC) has expired. Thus, the above process has been completed, with all ADSs under Rule 144A having been exchanged.
As a result of the exchange, the total number of registered ADSs at November 1, 2004 is 2,701,040, each representing 5,000 CORPBANCA shares. This total includes the number of ADSs issued previously under Regulation S, which were also registered with SEC.
Finally, these ADSs have been registered with the New York Stock Exchange (NYSE), coming into effect as of November 1, 2004. Thus, CORPBANCA shares may be traded in international stock exchanges as ADSs.
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3. RELATED PARTY TRANSACTIONS
According to the provisions of the General Banking Law and instructions from the Superintendence, individuals and companies that are related, directly or indirectly, to the Bank's owners or management are considered related parties.
a. Loans to related parties
At December 31, 2004 and 2003, loans to related parties are as follows:
Current portfolio Past due portfolio Total
Collateralpledged (*)
2004 2003 2004 2003 2004 2003 2004 2003MCh$ MCh$ MCh$ MCh$ MCh$ MCh$ MCh$ MCh$
Operating companies 47,743.0 50,731.3 - - 47,743.0 50,731.3 10,820.9 18,615.3Investment companies 5,416.1 5,425.4 - - 5,416.1 5,425.4 - -Individuals (**) 235.5 227.6 - - 235.5 227.6 235.5 227.6Total 53,394.6 56,384.3 - - 53,394.6 56,384.3 11,056.4 18,842.9
(*) Includes only those guarantees that are admitted by Article 84 of the General Banking Law for purposes of establishing the individual credit limits defined by the Law. The guarantees are valued in accordance with instructions from the Superintendence.
(**) Includes only those loans to individuals whose outstanding balances are not less than the equivalent of 3,000 inflation index-linked units of account.
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b. Other transactions with related parties
During 2004 and 2003, the Bank’s transactions with related parties for amounts in excess of 1,000 UF inflation index-linked units of account are as follows:
Balancereceivable Effect on income
Related party Item (payable) Income ExpenseMCh$ MCh$ MCh$
2004:Evaluadora de Antecedentes S.A. Customer evaluation - 6.8 3,125.0 (*)
Recaudaciones y Cobranzas S.A. Rental of offices and collection (8.6) 64.5 1,421.7
Corp Group Interhold S.A. Management advisory services - 29.3 1,277.8
Nexus S.A. Credit card management - - 930.6
Fundación Corpgroup Centro Cultural
Donations - - 780.0
Proveedora de Servicios S.A. Customer evaluation and office rental - 0.8 760.6 (*)
Transbank S.A. Credit card management - - 711.8
Compañía de Seguros Vida Corp S.A.
Rental of offices Insurance brokerage
1.930.5
158.4236.3
- -
Redbanc S.A. Automatic teller machine administration
- - 350.8
Inmobiliaria e Inversiones San Francisco Ltda.
Financial advisory services - - 142.7
Asesorías Santa Josefina Ltda. Advisory and management services - - 135.9
Promoservice S.A. Advertising advisory services - -
125.0
Sociedad Nacional de Minería Advertising in mining newsletter - - 47.8
Inmobiliaria e Inversiones Boquiñeni Ltda.
Economic and financial advisory services
- - 36.0
Corp Legal S.A. Rental of offices and advisory services 1.8 23.8 27.0
Servicios y Consultorías S.A. Services received - - 3.0
(*) Companies related until August, 2004.
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Balancereceivable Effect on income
Related party Item (payable) Income ExpenseMM$ MM$ MM$
2003:Evaluadora de Antecedentes S.A. Customer evaluation 196.8 9.9 4,384.5
Recaudaciones y Cobranzas S.A. Rental of offices and collection - 53.6 1,450.8
Corp Group Interhold S.A. Management advisory services - 47.3 1,297.9
Nexus S.A. Credit card management - - 844.6
Proveedora de Servicios S.A. Customer evaluation and office rental 30.8 - 784.6
Transbank S.A. Credit card management - - 706.9
Redbanc S.A. Automatic teller machine administration
- - 396.1
Promoservice S.A. Advertising advisory services (38.7) - 304.9
Asesorías Santa Josefina Ltda. Advisory and management services - - 137.0
Inmobiliaria e Inversiones Boquiñeni Ltda
Economic and financial advisory services
- - 72.1
Consorcio Periodístico de Chile S.A. Advertising services - - 70.8
Corp Legal S.A. Rental of offices and advisories 1.6 18.0 64.2
Sociedad Nacional de Minería Advertising in mining newsletter - - 48.1
Compañía de Seguros Vida Insurance premiums and office rental - 213.2 38.4 Corp S.A. Rewards and allocations 32.0 32.0 -
Insurance brokerage 105.3 810.6 - Advisory services rendered - 21.4 -
These transactions were performed under terms normally prevailing in the market at the date of the transaction.
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5. INVESTMENTS IN OTHER COMPANIES
The balance sheet includes investments in other companies for MCh$1,664.4 (MCh$1,432.9 in 2003), as follows:
Investment
Company Ownership EquityInvestment
amountEquity in
income (loss) 2004 2003 2004 2003 2004 2003 2004 2003% % MCh$ MCh$ MCh$ MCh$ MCh$ MCh$
Transbank S.A. 8.72% 8.72% 4,958.3 4,973.1 432.3 433.6 66.0 66.2Nexus S.A. 12.90% 12.90% 4,131.2 3,916.6 533.1 505.4 86.0 72.8Combanc S.A. 13.67% - 1,609.9 - 220.1 - (0.2) -Subtotal 1,185.5 939.0 151.8 139.0
Shares and rights in other companies: Redbanc S.A. 87.0 96.5 19.2 25.1Sociedad Interbancaria de Depósitos de Valores S.A.
48.2 54.6 6.2 6.2
Share in Bolsa de Comercio de Santiago 278.9 279.4 46.4 45.0Share in Bolsa Electrónica de Chile 64.8 63.4 1.4 0.4 Subtotal 478.9 493.9 73.2 76.7Total 1,664.4 1,432.9 225.0 215.7
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6. ALLOWANCES
Allowances for assets at risk
At December 31, 2004, the Bank and its subsidiaries have accrued allowances to cover estimated losses of MCh$42,504.9 (MCh$46,901.6 in 2003), which correspond to the minimum amount of allowances required by the Superintendence.
During 2003 and 2004, the changes in such allowances were as follows:
Reserves forAssets
received
Loanlosses
in lieu of payment or on
foreclosureOtherassets Total
MCh$ MCh$ MCh$ MCh$
Balances, January 1, 2003 37,921.9 52.9 693.3 38,668.1Application of allowances (19,559.0) (4,488.7) (725.3) (24,773.0)Allowances established 30,696.7 5,270.8 1,103.4 37,070.9Allowances released (4,856.6) (200.0) (151.7) (5,208.3)Balances, December 31, 2003 44,203.0 635.0 919.7 45,757.7Price-level restated balances, for comparative purposes 45,308.1 650.9 942.6 46,901.6
Balances, January 1, 2004 44,203.0 635.0 919.7 45,757.7Application of allowances (21,922.7) (3,935.6) (3,070.8) (28,929.1)Allowances established 27,316.5 3,563.4 2,966.4 33,846.3Allowances released (7,986.3) - (183.7) (8,170.0)Balances, December 31, 2004 41,610.5 262.8 631.6 42,504.9
Allowances for assets at risk is presented net of recovery of written-off loans for MCh$7,536.2 in 2004 (MCh$6,432.1 in 2003).
In the opinion of the Bank's management, based on the information examined, the allowances established reasonably cover all possible losses that might result from non-recovery of assets.
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7. SHAREHOLDERS’ EQUITY
a. Equity
The movements in the shareholders’ equity accounts during 2004 and 2003 are summarized as follows:
Paid-in Other Net incomecapital Reserves reserves for the year Total MCh$ MCh$ MCh$ MCh$ MCh$
Balances, January 1, 2003 267,328.2 1,674.6 (736.1) 35,553.0 303,819.7Net income from prior year - 35,553.0 - (35,553.0) - Dividends paid - (17,776.5) - - (17,776.5)Price – level restatement of capital 2,673.3 141.1 - - 2,814.4Fluctuation in value of financial investments - - 38.5 - 38.5Net income – 2003 - - - 50,123.5 50,123.5Balances, December 31, 2003 270,001.5 19,592.2 (697.6) 50,123.5 339,019.6Price-level restated balances for comparative purposes 276,751.5 20,082.0 (715.0) 51,376.6 347,495.1
Balances, January 1, 2004 270,001.5 19,592.2 (697.6) 50,123.5 339,019.6Net income from prior year - 50,123.5 - (50,123.5) - Dividends paid - (25,061.7) - - (25,061.7)Price – level restatement of capital 6,750.0 991.0 - - 7,741.0Fluctuation in value of financial investments - - 3,929.6 - 3,929.6Net income – 2004 - - - 50,767.3 50,767.3Balances, December 31, 2004 276,751.5 45,645.0 3,232.0 50,767.3 376,395.8
Subscribed and paid shares
At December 31, 2004, the paid in capital of the Bank is represented by 226,909,290,577 subscribed and paid ordinary no-par-value shares.
As explained in Note 3, as a result of the exchange, the total number of registered ADS’s at November 1, 2004 is 2,701,040, each representing 5,000 CORPBANCA shares. This total includes the number of ADS’s issued previously under Regulation S.
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Dividend distribution
The Ordinary General Meeting of Shareholders of CORPBANCA, held on February 25, 2002, stipulated a dividends policy consisting of distributing 50% of distributable profits as of 2002, retaining the remaining 50% in the account “Retained earnings for distribution”, classified in “Other reserves”. As a result of applying this criterion, the Ordinary General Meeting of Shareholders held on February 20, 2004, approved payment of a dividend of MCh$25,061.7 corresponding to 50% of the net income in the 2003 financial year.
b. Minimum basic capital and effective equity
According to the General Banking Law, a financial institution’s minimum basic capital may not be less than 3% of its total assets, while the effective equity may not be less than 8% of its risk weighted assets. At each year-end, the situation of the Bank is as follows:
December 312004 2003
MCh$ MCh$
Minimum basic capital * 325,628.5 296,118.5Total assets 3,206,009.6 2,855,052.3Percentage 10.16% 10.37%
Effective equity ** 372,015.3 335,150.2Risk weighted assets 2,561,906.2 2,267,536.0Percentage 14.52% 14.78%
* Represents the paid-in capital and reserves.
** In order to calculate the effective equity, contributions equivalent to goodwill and contributions equivalent to non-consolidated investments in foreign companies must be deducted, and subordinated bonds and allowances for loans at risk must be considered equity, up to certain limits. Total assets and risk weighted assets are calculated based on the consolidated balance sheet of the Bank and its Subsidiaries.
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8. INVESTMENTS
At December 31, 2004 and 2003, the Consolidated Group’s investments are as follows:
a. Financial investments
2004
Type of portfolio Adjustment to market value
Securities *Permanent
**Non
permanent SubtotalAgainst income
Against equity Total
MCh$ MCh$ MCh$ MCh$ MCh$ MCh$
Chilean Central Bank 4,799.8 63,867.6 68,667.4 (137.8) (46.9) 68,482.7Chilean Treasury or other government entities - 34,781.0 34,781.0 (72.1) - 34,708.9Local financial institutions 117,298.2 130,502.9 247,801.1 (116.1) 1,608.5 249,293.5Other local investments 98,600.4 11,528.6 110,129.0 - 1,650.3 111,779.3Investments abroad 40,844.3 - 40,844.3 - 20.1 40,864.4Total 261,542.7 240,680.1 502,222.8 (326.0) 3,232.0 505,128.8
2003
Type of portfolio Adjustment to market value
Securities *Permanent
**Non
permanent SubtotalAgainst income
Against equity Total
MCh$ MCh$ MCh$ MCh$ MCh$ MCh$
Chilean Central Bank - 97,560.0 97,560.0 126.3 - 97,686.3Chilean Treasury or other government entities - 9,891.5 9,891.5 25.9 - 9,917.4Local financial institutions 134,427.1 108,245.3 242,672.4 (103.8) (417.4) 242,151.2Other local investments 36,686.4 7,464.5 44,150.9 129.2 265.8 44,545.9Investments abroad 36,351.7 23,475.0 59,826.7 (118.4) (563.4) 59,144.9Total 207,465.2 246,636.3 454,101.5 59.2 (715.0) 453,445.7
* Classification according to issuers. Totals of this table include MCh$76,257.2 (MCh$62,068.7 in 2003) for securities sold under repurchase agreements.
** Permanent investments include securities whose adjustment to market value is charged to the “Fluctuation in value of financial investments” account, as described in Note 1h).
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b. Other investments
2004 2003MCh$ MCh$
Assets received in lieu of payment or in foreclosure (*) 4,308.2 6,237.5Other investments and assets for leasing 3,326.1 23,731.9 Total 7,634.3 29,969.4
(*) Assets received in settlement are included net of allowances for MCh$262.8 at December 31, 2004 (MCh$650.9 in 2003). The amount shown on the balance sheet corresponds to the estimated realizable value of these assets taken as a whole.
In addition to assets received in lieu of payment or in foreclosure, there are other assets that were written-off and have not been disposed of. These written-off assets are estimated to realize about MCh$490.0.
9. MATURITIES OF ASSETS AND LIABILITIES
a. Maturities of loans and financial investments
The information below shows loans and investments classified in accordance with the remaining terms until maturity. The balances, which include interest accrued at December 31, 2004 and 2003, are as follows:
At December 31, 2004:
Due after Due after Due 1 year 3 years Due
within but within but within after1 year 3 years 6 years 6 years Total MCh$ MCh$ MCh$ MCh$ MCh$
LOANS (1): Commercial loans and others 886,795.9 299,818.4 284,228.6 261,909.9 1,732,752.8Mortgage loans 9,366.2 19,452.4 30,821.0 115,775.5 175,415.1Consumer loans 105,055.8 116,961.5 56,863.1 5,984.3 284,864.7
OTHER LOAN OPERATIONS: Loans to other financial institutions 20,003.3 - - - 20,003.3Credit arising from trading securities 24,264.4 - - - 24,264.4
FINANCIAL INVESTMENTS: Permanent investment portfolio (2) 23,686.2 44,260.8 88,656.8 104,938.9 261,542.7Non-permanent investment portfolio (3) 240,354.1 - - - 240,354.1
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At December 31, 2003:
Due after Due after Due 1 year 3 years Due
within but within but within after1 year 3 years 6 years 6 years Total MCh$ MCh$ MCh$ MCh$ MCh$
LOANS (1): Commercial loans and others 860,080.2 267,774.2 236,428.8 199,722.3 1,564,005.5Mortgage loans 5,849.3 12,426.1 19,843.2 72,325.6 110,444.2Consumer loans 85,191.3 98,418.8 31,942.3 5,457.9 221,010.3
OTHER LOAN OPERATIONS: Loans to other financial institutions 4,100.0 - - - 4,100.0Liabilities arising from trading securities 18,363.9 - - - 18,363.9
FINANCIAL INVESTMENTS: Permanent investment portfolio (2) 16,899.8 39,303.9 51,729.3 99,532.2 207,465.2Non-permanent investment portfolio (3) 246,695.5 - - - 246,695.5
(1) Includes only those loans outstanding at year-end that mature within the indicated periods. Consequently, contingent loans and loans transferred to the past-due portfolio, as well as delinquent loans that have not been transferred to the past-due portfolio amounting to MCh$14,203.0 (MCh$16,312.8 in 2003) of which MCh$5,723.0 (MCh$11,113.1 in 2003) were delinquent less than 30 days, have been excluded.
(2) Includes notes which make up the permanent investment portfolio as described in note 1h, but does not include adjustments to market value or non-transferable securities.
(3) Includes all other financial investments, with their respective adjustments to market value.
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b. Maturities of deposits, borrowings and other liabilities
The information detailed below shows deposits, borrowings and other liabilities in accordance with the remaining terms until maturity. Balances include interest accrued at December 31, 2004 and 2003.
At December 31, 2004:Due Due
Due after 1 year after 3 years Duewithin but within but within after1 year 3 years 6 years 6 years TotalMCh$ MCh$ MCh$ MCh$ MCh$
DEPOSITS AND OTHER LIABILITIES (*) - Time and demand deposits 1,590,889.0 5,053.9 53.0 1,132.2 1,597,128.1- Other term liabilities 162.7 156.9 184.8 678.8 1,183.2- Liabilities arising from trading securities 85,882.3 - - - 85,882.3- Mortgage notes 26,233.4 45,321.6 72,189.3 176,395.0 320,139.3
BONDS 5,607.9 9,988.5 12,348.9 18,344.5 46,289.8BORROWINGS FROM CHILEAN CENTRALBANK AND OTHER FINANCIALINSTITUTIONS:- Lines of credit for renegotiations 1.0 1.6 1.7 - 4.3- Other Chilean Central Bank borrowings 26,103.5 - - - 26,103.5- Domestic borrowings 18,131.5 - - - 18,131.5- Foreign borrowings 217,623.6 4,198.7 - - 221,822.3- Other borrowings 4,369.8 3,187.5 3,854.1 1,634.8 13,046.2
At December 31, 2003:
Due DueDue after 1 year after 3 years Due
within but within but within after1 year 3 years 6 years 6 years TotalMCh$ MCh$ MCh$ MCh$ MCh$
DEPOSITS AND OTHER LIABILITIES (*) - Time and demand deposits 1,374,457.4 44,711.1 730.6 1,093.7 1,420,992.8- Other term liabilities 529.1 239.4 101.5 6.4 876.4- Liabilities arising from trading securities 63,259.0 - - - 63,259.0- Mortgage notes 21,025.6 36,353.7 57,765.2 169,577.7 284,722.2
BONDS 2,938.6 5,877.2 8,815.8 30,870.6 48,502.2BORROWINGS FROM CHILEAN CENTRALBANK AND OTHER FINANCIALINSTITUTIONS:- Lines of credit for renegotiations 2.9 6.6 8.7 17.8 36.0- Other Chilean Central Bank borrowings - - - - - - Domestic borrowings 71,186.4 - - - 71,186.4- Foreign borrowings 162,928.2 - - - 162,928.2- Other borrowings 5,225.5 1,552.6 2,040.4 1,854.5 10,673.0
(*) Excludes all demand obligations, savings accounts and contingent liabilities.
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10. FOREIGN CURRENCY POSITION
The balance sheet includes assets and liabilities that are denominated in foreign currency or are indexed to changes in exchange rates. These amounts are summarized below:
Receivable / Payable in: Foreign currency Chilean Pesos * Total
2004 2003 2004 2003 2004 2003ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$
ASSETS:Liquid assets 46,359.2 50,474.8 - - 46,359.2 50,474.8Loans 594,338.3 463,411.0 23,979.5 21,448.8 618,317.8 484,859.8Contingent loans 144,085.4 146,030.1 - - 144,085.4 146,030.1Financial investments: - Domestic 127,099.2 58,104.1 11,153.3 17,150.9 138,252.5 75,255.0- Foreign 72,958.4 38,159.5 - - 72,958.4 38,159.5Other assets 274,122.7 318,163.6 - - 274,122.7 318,163.6
Total assets 1,258,963.2 1,074,343.1 35,132.8 38,599.7 1,294,096.0 1,112,942.8
LIABILITIES:Time and demand deposits 338,394.0 446,010.3 1.4 - 338,395.4 446,010.3Contingent liabilities 144,389.5 146,260.8 - - 144,389.5 146,260.8Liabilities with domestic banks 2,012.5 2,100.0 - - 2,012.5 2,100.0Obligations with foreign banks 396,153.1 258,019.7 - 32.1 396,153.1 258,051.8Other liabilities 384,419.2 260,283.7 4,077.2 - 388,496.4 260,283.7
Total liabilities 1,265,368.3 1,112,674.5 4,078.6 32.1 1,269,446.9 1,112,706.6
* Corresponds to operations denominated in foreign currencies and payable in Chilean pesos or operations that are indexed to changes in the exchange rate.
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11. TRANSACTIONS INVOLVING DERIVATIVE INSTRUMENTS
Transactions related to derivative products outstanding at December 31, 2004 and 2003 are summarized below:
a. Currency contracts
Notional amounts Number of Up to Over
Transactions 3 months 3 months Type of future operations 2004 2003 2004 2003 2004 2003
ThUS$ ThUS$ ThUS$ ThUS$Domestic market:
- Foreign currency forwards 293 117 278,815 181,311 319,219 283,782
Foreign market
- Foreign currency forwards 28 25 12,335 15,617 21,192 18,023- Forwards or other interest rate contracts 23 - - - 250,300 -
The amount refers to either the US dollar futures bought or sold, or the equivalent in US dollars of foreign currency futures bought or sold, as applicable. The terms correspond to the duration of the contracts from the transaction date.
b. Contracts on the value of some authorized readjustment index (ARS) and interest rates in Chilean pesos.
Notional amounts Number of Up to Over
Transactions 3 months 3 months Type of future operations 2004 2003 2004 2003 2004 2003
MCh$ MCh$ MCh$ MCh$
- Forward in ARS/pesos purchased 1 - - - 3,536.0 -
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12. CONTINGENCIES, COMMITMENTS AND RESPONSIBILITIES
a. Commitments and responsibilities recorded in memorandum accounts:
At December 31, 2004 and 2003, the Bank had recorded the following commitments and responsibilities in memorandum accounts:
2004 2003MCh$ MCh$
Securities held in custody 549,269.9 504,812.8Guarantees given by the Bank 277,781.3 222,776.5Loans approved but not disbursed 133,268.1 85,408.6Collections from abroad 22,395.4 22,044.8Local collections 12,414.6 14,217.3
The above summary lists only the more important balances. Contingent loans and liabilities are rendered in the balance sheet.
b. Pending lawsuits:
At December 31, 2004 and 2003, there were lawsuits pending against the Bank relating to loans and other matters. In the opinion of the Bank’s legal counsel, these lawsuits should not result in significant losses for the Bank.
The Fifth Criminal Court of Santiago, in the Fraud case N°149913-7, pursuant to criminal complaint in initial stages filed by Banco del Estado de Chile, and to which Corp Corredores de Bolsa S.A. is not a party, a time deposit of MCh$42.8, which Concepción S.A. Corredores de Bolsa S.A. (now Corp Corredores de Bolsa S.A.) had acquired from its original beneficiary, was seized, improperly in the Company’s opinion, as it was considered physical evidence. The aforementioned time deposit is fully provided for in the financial statements of the Company.
c. Other liabilities:
CORPBANCA is entitled to transfer obligations arising from deferred customs duties related to the import of assets for lease to its clients. These transfers require authorization from customs authorities. At December 31, 2004, CORPBANCA had transferred to its clients deferred customs duty obligations amounting to MCh$3,091.7 (MCh$3,316.1 in 2003).
At December 31, 2004, leasing contracts signed, but for which assets have not yet been delivered, amounted to MCh$7,863.9 (MCh$39,273.9 in 2003).
Complying with articles 30 and 31 of Law Nº 18,045 (Securities Market Law), Corp Corredores de Bolsa S.A. has furnished a guarantee through Compañía de Seguros de Crédito Continental S.A. for 4,000 inflation index-linked units of account, expiring on April 22, 2005, with the Santiago Stock Exchange being designated custodian of the aforementioned policy.
On June 19, 2004, an Insurance Policy of US$2,500,000 was taken out with Compañía de Seguros Generales Cruz del Sur S.A, in order to cover any possible situations involving employee wrongdoings. This policy, whose direct beneficiary is Corp Corredores de Bolsa S.A. expires on June 19, 2005.
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In order to comply with the provisions of article 58 d) of Decree Law N°251, of 1931, specifying that “in order to exercise their activity, Insurance Brokers should comply with the requirement of taking out insurance policies as determined by the Superintendence of Securities and Insurances in order to answer for proper, complete fulfilment of all obligations issuing from their activity, and especially for any damages that they may cause to their insured parties”, the Company has taken out the following policies with Chilena Consolidada Seguros Generales S.A. They come into effect on April 15, 2004 and expire on April 14, 2005.
Policy Insurance Insured amount UF
1825141 Liability 60,0001825142 Guarantee 500
On June 19, 2004, the Company took out an insurance policy with Chubb de Chile Compañía de Seguros Generales S.A., in order to cover possible employee wrongdoings for US$2,500,000 and it expires on June 19, 2005. Its direct beneficiary is Corp Administradora de Fondos Mutuos S.A. and a net premium of US$15,960 was paid.
On January 10, 2004, Corp Administradora General de Fondos S.A. renewed the following Guarantee Insurance Policies for General Fund Administrators in order to guarantee performance of the Administrator’s obligations with regard to the administration of third party funds and indemnity for damages resulting from non-performance thereof, in accordance with article 226 of Law N°18,045. They expire on January 10, 2005.
The details are as follows:
Policy N° Corp Mutual Fund Coverage
in UF 017427 Financial Banking 10,000 (*)017428 Europa 10,000 (*)017551 Eficiencia 10,000017552 Más Ingreso 10,000017553 Acciones 10,000017554 Selecto 10,000017555 Más Futuro 10,485017556 Latinoamérica 10,000017545 Emerging Markets 10,000017544 Global Markets 10,000017546 Más Valor 10,000017547 Oportunidad 41,433017548 Asia 10,000017549 Technocom 10,000017550 Commodities 10,000017557 USA 10,000017558 Biotech 10,000017559 Dólar 10,000
(*) These policies were taken out on December 11, 2003, as a result of start-up of the mutual fund operations particularizad above.
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The aforementioned policies were taken out with Compañía de Seguros Mapfre Garantías y Crédito S.A.
CORPBANCA is the representative of the beneficiaries of the guarantee on the above Funds.
13. FEES AND INCOME FROM SERVICES
Income and expenses for this item shown on the statements of income correspond to the following:
Commissions earned or paid:
Income Expenses2004 2003 2004 2003
MCh$ MCh$ MCh$ MCh$
Checking accounts 5,300.8 6,010.4 16.2 26.0Commissions – agreements - 3,249.2 - - Insurance brokerage 2,785.1 2,468.3 - - Commissions from collection 2,478.3 2,353.9 - - Credit cards 2,034.2 1,575.0 2,174.7 1,778.5Commissions on credit operations 2,000.7 2,164.0 - - Remuneration and commissions from Mutual funds 2,382.4 1,777.9 - - Letters of credit, guarantees, pledges and other contingent loans 1,606.2 1,761.2 90.8 95.8Lines of credit 922.7 1,466.3 - - Automatic teller cards 869.2 1,159.8 578.3 706.9Customer services 468.9 407.4 137.4 173.4Commissions on sales of mortgages notes 326.2 408.8 12.7 351.0Collection of documents 290.2 313.7 46.7 22.6Commissions from stock-exchange operations 213.9 381.4 41.9 33.2Stock exchange rights 159.9 94.8 45.7 43.0Factoring operations 110.1 23.3 - - Trust and custody commissions 22.7 24.4 - - Others 75.4 164.2 48.2 38.3
Total 22,046.9 25,804.0 3,192.6 3,268.7
The commissions earned on mortgage instrument operations are included in “Interest and indexation income” in the income statement.
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14. OTHER OPERATING EXPENSES
Details of other operating expenses are as follows:
2004 2003MCh$ MCh$
Sales force expenses 6,685.9 5,169.1Expenses from assets received in payment 678.2 684.3Credit card operation expenses 332.4 248.6Expenses from commercial reports 209.2 182.6Expenses – Agreement 64.3 2,843.8Leasing contract expenses 23.4 245.7Others 218.6 325.2 Total 8,212.0 9,699.3
15. NON OPERATING EXPENSES
The details of non-operating expenses are as follows: 2004 2003
MCh$ MCh$
Amortization of goodwill from acquisition of Financiera Condell S.A. 1,054.1 1,076.7Amortization of goodwill from acquisition of loan portfolio of Corfinsa 1,067.4 1,076.3Amortization of goodwill on investments in companies 128.8 128.8Write-off of other-assets 1,919.2 1,844.0Provision for pending legal proceedings 121.3 (56.3)Others 451.1 195.2
Total 4,741.9 4,264.7
16. INCOME TAXES AND DEFERRED TAXES
a. Income taxes
The provision for first category income tax (current expense) is MCh$5,551.9 (MCh$703.7 in 2003).
b. Deferred taxes
As described in Note 1 l), the Bank applied the accounting criteria of Technical Bulletin Nº 60 of the Chilean Institute of Accountants and its supplements. In accordance with Technical Bulletin N° 71 of the Chilean Institute of Accountants, as of 2001 deferred taxes are accounted for by applying the income tax rate for the year in which the corresponding temporary difference that gave rise to the tax will be reversed.
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Deferred taxes arising from temporary differences are as follows:
Balances at Balances at January1, 2004
December31, 2004
January 1, 2003
December31, 2003
MCh$ MCh$ MCh$ MCh$(historical)
Debit differences: Tax loss 3,681.3 - 7,705.1 3,773.3 Loan portfolio-overall provision 6,425.5 5,972.8 5,205.5 6,586.1Unearned price difference 1,772.1 1,735.6 2,075.7 1,816.4Suspended accrual of interest 455.7 619.4 480.1 467.1Other provisions 306.4 450.7 359.9 314.1 Others 402.2 951.9 139.1 412.3
Subtotal 13,043.2 9,730.4 15,965.4 13,369.3
Balance complementary accounts (3,687.9) (6.6) (7,711.9) (3,780.1)
Net difference 9,355.3 9,723.8 8,253.5 9,589.2
Credit differences: Fixed asset depreciation (144.3) (174.7) (241.3) (147.9)Deferred and other expenses (2,268.9) (3,762.2) (300.0) (2,325.6)
Subtotal (2,413.2) (3,936.9) (541.3) (2,473.5)
Balance complementary accounts 14.0 - 78.5 14.3
Net difference (2,399.2) (3,936.9) (462.8) (2,459.2)
The effect of tax expense during each year is as follows:
Item 2004 2003MCh$ MCh$
Current tax expense (5,551.9) (703.7)
Effect in year due to assets or liabilities from deferred taxes (4,836.5) (4,528.3)
Effect in year due to amortization of complementary accounts of assets and liabilities from deferred taxes 3,667.3 3,867.6
Valuation allowance 217.8 (762.1)
Other (8.7) (0.4)
Total (6,512.0) (2,126.9)
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17. EXPENSES AND REMUNERATIONS OF DIRECTORS
The Ordinary Meetings of Shareholders held on February 20, 2004 and February 25, 2003 agreed not to pay any remuneration to the Board of Directors, except to members of the Directors Committee and Audit Committee, who earned fees of MCh$148.0 (MCh$13.8 in 2003).
18. SUBSEQUENT EVENTS
From January 1 to January 14, 2005, there have been no subsequent events that would materially affect the financial statements.
Carlos Opazo Lara Christian Samsing Stambuk Accounting Manager General Manager
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STATEMENT OF LIABILITY
This CORPBANCA Annual Report has been approved by the Directors and General Manager who signed a sworn declaration of responsability as to the veracity of the information contained therein.
Signed copies of theAnnual Report are available to shareholders and may obtained from the institution's head office at Huérfanos 1072, Santiago.
POSITION NAME
Chairman Carlos Abumohor Touma
First Vice President Álvaro Saieh Bendeck
Second Vice President José Andrés Saieh Guzmán
Director Julio Barriga Silva
Director Jorge Selume Zaror
Director Carlos Massad Abud
Director Fernando Aguad Dagach
Director René Cortázar Sanz
Director Hernán Somerville Senn
Director Francisco Rosende Ramírez
Director Odde Rishmague Rishmague
Alternate Director Juan Rafael Gutiérrez Avila
General Manager Christian Samsing Stambuck
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