banco de costa rica separate financial statements with ... · in our opinion, the separate...

Banco de Costa Rica

Separate Financial Statements with Independent Auditor’s Report

December 31, 2012 and 2013

(Translation into English of the original Independent Auditor’s Report issued in Spanish)

(Continued)

Table of contents Separate Financial Statements Separate Balance Sheet Separate Statement of Income Separate Statement of changes in equity Separate Statement of cash flows

Notes to the Separate financial statements

(1) Summary of operations and significant accounting policies ......................................... - 8 -

(a) Operations .................................................................................................................. - 8 -

(b) Accounting policies for financial statement preparation .............................................. - 9 -

(c) Investments in other companies ................................................................................ - 10 -

(d) Foreign currency ....................................................................................................... - 10 -

(e) Basis of financial statement preparation .................................................................... - 11 -

(f) Financial instruments ................................................................................................ - 12 -

(g) Cash and cash equivalent .......................................................................................... - 14 -

(h) Investment in financial instruments ........................................................................... - 14 -

(i) Loan portfolio ........................................................................................................... - 15 -

(j) Allowance for loan losses ......................................................................................... - 15 -

(k) Securities sold under repurchase agreements ............................................................. - 18 -

(l) Accounting for interest receivable ............................................................................. - 19 -

(m) Other receivables ...................................................................................................... - 19 -

(n) Foreclosed assets ...................................................................................................... - 19 -

(o) Offsetting .................................................................................................................. - 20 -

(p) Property and equipment ............................................................................................ - 20 -

(q) Deferred charges ....................................................................................................... - 22 -

(r) Intangible assets ........................................................................................................ - 22 -

(s) Impairment of assets ................................................................................................. - 23 -

(t) Accounts payable and other payables ........................................................................ - 23 -

(u) Severance benefits .................................................................................................... - 24 -

(v) Legal reserve ............................................................................................................ - 24 -

(w) Revaluation surplus ................................................................................................... - 25 -

(x) Use of estimates ........................................................................................................ - 25 -

(y) Recognition of main types of revenue and expenses .................................................. - 25 -

(z) lncome tax ................................................................................................................ - 26 -

(aa) Pension plans, retirement, and outgoing personnel .................................................... - 27 -

(bb) Statutory allocations.................................................................................................. - 27 -

(cc) Development Financing Funds .................................................................................. - 28 -

(dd) Development Credit Funds........................................................................................ - 28 -

(Continued)

(ee) Economic period ....................................................................................................... - 29 -

(2) Collateralized or restricted assets .............................................................................. - 29 -

(3) Balances and transactions with related parties ........................................................... - 29 -

(4) Cash and cash equivalents ......................................................................................... - 31 -

(5) Investment in financial instruments ........................................................................... - 31 -

(6) Loan portfolio ........................................................................................................... - 33 -

(7) Foreclosed assets, net ................................................................................................ - 36 -

(8) Investment in other companies .................................................................................. - 37 -

(9) Property and equipment ............................................................................................ - 39 -

(10) Intangible assets ........................................................................................................ - 41 -

(11) Demand obligation with the public ............................................................................ - 42 -

(12) Demand and term deposits from customer ................................................................. - 42 -

(13) Repurchase and reverse repurchase agreements ......................................................... - 43 -

(14) Obligations with entities and obligations with BCCR ................................................ - 44 -

(a) Maturities of loans payable ....................................................................................... - 45 -

(15) Income tax ................................................................................................................ - 45 -

(16) Provisions ................................................................................................................. - 48 -

(17) Other sundry accounts payable .................................................................................. - 50 -

(18) Equity ....................................................................................................................... - 51 -

(a) Share capital ............................................................................................................. - 51 -

(b) Revaluation surplus ................................................................................................... - 52 -

(c) Adjustment for valuation of available-for-sale investments ....................................... - 52 -

(d) Adjustment for valuation of investment in other companies ...................................... - 52 -

(19) Commitments and contingencies ............................................................................... - 53 -

(20) Trusts ........................................................................................................................ - 56 -

(21) Other memoranda accounts ....................................................................................... - 57 -

(22) Finance income on investment in financial instruments ............................................. - 57 -

(23) Finance income on loan portfolio .............................................................................. - 58 -

(24) Finance expense for obligations with the public ........................................................ - 58 -

(25) Expenses for allowance for impairment of investments in financial instruments

and allowance for loan losses ............................................................................................. - 58 -

(26) Income from recovery of financial assets and decreases in allowances ...................... - 59 -

(27) Income from service fees and commissions ............................................................... - 59 -

(28) Administrative expenses ........................................................................................... - 60 -

(29) Operating leases ........................................................................................................ - 61 -

(30) Fair value .................................................................................................................. - 61 -

(a) Cash and cash equivalents, accrued interest receivable, other receivables, demand

deposits and customer savings deposits, accrued interest payable, and other liabilities......... - 62 -

(b) Investments in financial instruments ......................................................................... - 62 -

(c) Securities sold under repurchase agreements ............................................................. - 62 -

(d) Loan portfolio ........................................................................................................... - 62 -

(Continued)

(e) Deposits and loans payable ....................................................................................... - 62 -

(31) Risk management...................................................................................................... - 63 -

(32) Financial information of the Development Financing Fund ..................................... - 101 -

(33) Financial information of the Development Credit Fund ........................................... - 110 -

(34) Transition to International Financial Reporting Standards (IFRSs) .......................... - 112 -

(35) 2012 figures ............................................................................................................ - 130 -

(36) Relevant and subsequent matters ............................................................................. - 131 -

(37) Re-issuance of Separate financial statements as of December 31, 2012 ................... - 136 -

(38) Date of authorization for issuance of financial statements ....................................... - 137 -

A Crowe l-lorwath, Despacho Lara Eduarte, S. C.Member Crowe Horwath International

Independent Auditar's Report2442 Avenida 2Apdo 7108 -1000 San José, Costa RicaTel (506) 2221-4657Fax (506) [email protected]

To the Superintendence General ofFinancial Entitiesand the Board of Directors of Banco de Costa Rica

We have audited the accompanying Separate financial statements of Banco de Costa Rica,which comprise the balance sheet as of December 31, 2013 and 2012, the incomestatement, the statement of changes in equity and the statement of cash flows for the oneyear's period then ended, and a surnmary of significant accounting policies and otherexplanatory notes. The accompanying Separate financial statements have been prepared bythe management of Banco de Costa Rica in conformity with the directives issued by theNatiohal Financial System Oversight Board and the General Superintendence of FinancialEntities.

Management 's Responsibility for the Financial Statements

The Bank's management is responsible for the preparation and fair presentation of thesefinancial statements in accordance with directives issued by the National Financial SystemOversight Board and the General Superintendence of Financial Entities. This responsibilityinc1udes designing, implementing and maintaining internal control relevant to thepreparation and fair presentation of financial statements free from material misstatement,whether due to fraud or error, selecting and applying appropriate accounting policies andmaking accounting estimates that are reasonable in the circumstances.

Auditors ' responsibility

Our responsibility is to express an opinion on these Separate financial statements based onour audits. We conducted our audits in accordance with International Standards onAuditing. Those standards require compliance with ethical requirements and to plan andperform the audits to obtain reasonable assurance on whether the financial statements arefree from material misstatement. An audit involves performing procedures to obtain auditevidence about the amounts and disclosures in the financial statements. The proceduresselected depend on the auditor' s judgment, including the assessment of the risks of materialmisstatement ofthe financial statements, whether due to fraud or error. In making those riskassessments the auditor considers the internal control relevant to the entity's preparationand fair presentation of the financial statements in arder to design audit procedures that areappropriate in the circumstances. An audit also inc1udes evaluating the appropriateness ofaccounting policies used and the reasonableness of accounting estimates made by theBank's management, as well as evaluating the overall presentation of the financialstatements.

(Continued)

Despacho Lara Eduarte, s. c. - 2 -

We believe that the audit evidence we have obtained is sufficient and appropriate to providea basis for our opinion.

Opinion

In our opinion, the Separate financial statements referred to above present fair1y, in allmaterial respects, the financial position of Banco de Costa Rica as of December 31, 2012and 2013, and of its financial position and its cash flows for the one year's period thenended, in accordance with directives issued by the National Financial System OversightBoard and the General Superintendence ofFinancial Entities, as discussed in note 1.

Basis o/ accounting

Without modifying our opinion, we draw attention to note 1 of the Separate financialstatements which describes the basis of accounting. The accompanying Separate financial

. statements have been prepared by the management of Banco de Costa Rica in conformitywith the directives issued by the National Financial System Oversight Board and theGeneral Superintendence of Financial Entities. The Bank issues consolidated financialstatements which are main its financial statements; separate financial statements,considering investment in subsidiaries by the equity method are prepared for managementand the General Superintendence of Financial Entities. Separate ancial statements shouldbe read altogether with the consolidated fi cial stat ent. As a result, these financialstatements could be not suitable for other rposes.

San José, Costa RicaFebruary 19, 2014JClséAntonloLaraE.N!l21Pol.0116FIG7 Mature!il_3G-14Exemptfromleca1rt.ampasp••rArt.8,Law No. 6663.

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(Continued)

Banco de Costa Rica

Notes to Separate Financial Statements

(1) Summary of operations and significant accounting policies

(a) Operations

Banco de Costa Rica (the Bank) is an autonomous, independently managed, public law institution organized in 1877. As a State-owned public bank, it is regulated by the Internal Regulations of the National Banking System (IRNBS), the Internal Regulations of the Central Bank of Costa Rica, and by the Political Constitution of the Republic of Costa Rica. It is also subject to oversight by the General Superintendence of Financial Entities (SUGEF) and the Comptroller General of the Republic (CGR). The Bank’s registered office is located at Avenida Central and Avenida Segunda, Calle 4 and Calle 6, in San José, Costa Rica.

The Banks website is www.bancobcr.com.

The Bank is mainly dedicated to extending loans; granting bid and performance bonds; issuing certificates of deposit; opening checking accounts in colones, U.S. dollars, and euros; issuing letters of credit; providing collection services; buying and selling foreign currency; managing trusts; providing custodial services for assets; and other banking operations. As of December 31, 2013 the Bank has 247 branches (2012: 245) distributed among the national territory and has in operation 531 automated teller machines (2012: 513), and has 3.756 employees (2012: 3.738). The financial statements and notes thereto are expressed in colones (¢), the monetary unit of the Republic of Costa Rica. The Bank is shareholder owner of a 100% of the following subsidiaries:

BCR Valores, S.A. (brokerage firm) was organized as a corporation in February 1999 under the laws of the Republic of Costa Rica. Its main activity is securities trading. BCR Sociedad Administradora de Fondos de Inversion, S.A. (investment fund manager company) was organized as a corporation in July 1999 under the laws of the Republic of Costa Rica. Its main activity is investment fund management.

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BANCO DE COSTA RICA


(Continued)

BCR Pensión Operadora de Planes de Pensiones Complementarias, S.A. (pension fund operator) was organized as a corporation in September 1999 under the laws of the Republic of Costa Rica. Its main activity is managing supplemental pension plans and offering additional services related to disability and death plans to members. BCR Corredora de Seguros, S.A. (insurance broker) was organized as a corporation in February 2009 under the laws of the Republic of Costa Rica. Its main activity is insurance underwriting. BAN Procesa - TI. S.A. was organized as a corporation in August 2009 under the laws of the Republic of Costa Rica. Its main activity will be to provide IT processing services and technical support, purchase, lease, and maintain hardware and software, including software development, and address the Bank’s IT needs. This entity is not engaged in operations. As of December 31, 2012, the share capital of Ban Procesa - IT, S.A. was represented by 100 ordinary/common registered shares of ¢100,000 par value each, subscribed and paid (up) in full as follows: 50 ordinary registered shares by Banco de Costa Rica and 50 ordinary registered shares by Banco Nacional de Costa Rica. The Bank holds a 51% ownership interest in the following subsidiary: Banco Internacional de Costa Rica, S.A. and subsidiary (BICSA) was organized as a bank under the laws of the Republic of Panama in 1976. It operates under a general license granted by the Superintendence of Banks of Panama to engage in banking transactions in Panama or abroad. is located in Panama City, Republic of Panama, Calle Manuel María Icaza No. 25, and has a branch in Miami, Florida, U.S.A. Banco Nacional de Costa Rica owns the remaining 49% of shares.

(b) Accounting policies for financial statement preparation

The financial statements have been prepared in accordance with the legal provisions, rules, and accounting regulations issued by the Central Bank of Costa Rica (BCCR), the General Superintendence of Financial Entities (SUGEF), and the National Financial System Oversight Board (CONASSIF).

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BANCO DE COSTA RICA


(Continued)

(c) Investments in other companies

Valuation of investments by the equity method i. Subsidiaries

Subsidiaries are entities controlled by the Bank. Control exists when the Bank has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its actives. As prescribed by regulations, the financial statements must present investments in subsidiaries by the equity method rather than on a consolidated basis. Transactions that affect the equity of those companies, such as conversion adjustments and unrealized gain or loss on valuation of investments, are recognized in the same manner in the Bank's equity, the effects are recorded in the “Adjustment for valuation of investments in other companies" account.

(d) Foreign currency

i. Foreign currency transactions

Assets and liabilities held in foreign currency are conversion to colones at the exchange rate ruling at the balance sheet date. Transactions in foreign currency during the year are translated at the exchange rate ruling at the date of the transaction. Conversion gains or losses are presented in the income statement.

ii.Monetary unit and foreign exchange regulations

As of October 17, 2006, a reform to the exchange rate regime entered into force by the Central Bank of Costa Rica, through which the exchange scheme of mini-devaluations is replaced by the exchange rate band system. As a result, the Board of Directors of that body agreed to establish a floor and ceiling, which are to be modified depending on the financial and macroeconomic conditions of the country. As established in the accounts manual, assets and liabilities in foreign currency should be expressed in colones, using the reference exchange purchase rate disclosed by the Central Bank of Costa Rica. Thereby, as at December 31st. 2013, assets and liabilities US$ denominated, were valued at the exchange rate of ¢495,01 for US$1,00 (¢502,07 for US$1,00 in 2012).

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BANCO DE COSTA RICA


(Continued)

Valuation in colones of monetary assets and liabilities in foreign currency during the year ended December 31, 2013 gave rise to foreign exchange losses of ¢332.501.866.779 (2012: ¢147.286.701.242) and gains of ¢333.519.705.893 (2012: ¢148.880.351.520), respectively, which are presented net in the income statement.

Additionally, valuation of other liabilities and other assets gave rise to losses and gains, respectively, which are booked in “Other operating expenses” and “Other operating income”, respectively. For the year ended December 31, 2013, valuation of other assets gave rise to gains of ¢496.344.224 (2012: ¢253.733.014) and valuation of other liabilities gave rise to losses of ¢304.318.469 (2012: losses of ¢339.071.544).

iii.Financial statements of foreign subsidiaries (BICSA)

BICSA’s financial statements are present in U.S. dollars.

Those financial statements were converted to Costa Rican colones as follows:

Assets and liabilities at the closing exchange rate.

Income and expenses at the average exchange rates in effect during each

year.

Equity at historical exchange rates, using the exchange rate in effect on the dates of the transactions.

For the year ended December 31, 2013, valuation of the Bank’s investment in this foreign operation gave rise to a net gain of ¢4.473.258.182 (2012: ¢4.080.502.682), which is included in the consolidated income statement.

(e) Basis of financial statement preparation

The financial statements have been prepared on the fair value basis for available-for-sale assets and trading financial instruments. Other financial and non-financial assets and liabilities are recorded at amortized or historical cost. The accounting policies have been consistently applied.

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BANCO DE COSTA RICA


(Continued)

(f) Financial instruments

A financial instrument is any contract that gives rise to both a financial asset of one entity and a financial liability or equity instrument of another entity. The Bank’s financial instruments include primary instruments: cash and due from banks, investments in financial instruments, loan portfolio, other receivable, obligations with the public, obligations with entities, and payables.

i. Classification

Trading financial instruments are instruments held by the Bank for short-term profit taking. The loan portfolio and the other account receivables are classified as instruments derived by the Bank, as they were established to provide funds to a debtor and not to generate short-term profits. Available-for-sale assets are financial assets that are not held for trading purposes, not been generated by the Bank or to kept until maturity. Available-for-sale assets include certain debt securities. In accordance with accounting standards issued by CONASSIF, as of January 1, 2008, investments in financial instruments made by regulated entities are to be classified as available-for-sale. Own investments in open investment funds are to be classified as trading financial assets. Own investments in closed investment funds are to be classified as available for sale. Until December 31, 2007, SUGEF allowed investments in financial instruments to be classified as held-to-maturity. Entities regulated by SUGEVAL, SUPEN , SUGESE, and SUGEF may classify other investments as trading financial instruments, provided there is an express statement of intent to trade them within 90 days from the acquisition date.

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BANCO DE COSTA RICA


(Continued)

ii. Recognition

The Bank recognizes available-for-sale assets on the date at which the Bank becomes a party to the contractual provisions of the instrument. From this date, any gains or losses arising from changes in the fair value of the assets are recognized in equity. Held-to-maturity assets and originated loans and other receivables are recognized using settlement date accounting, i.e. on the date they are transferred to the Bank. In 2012 and 2011, the Bank did not classify financial instruments as held-to-maturity, except for the securities received to capitalize the Bank.

iii. Measurement

Financial instruments are measured initially at fair value, including transaction costs. Subsequent to initial recognition, available-for-sale assets are measured at fair value, except that any instrument that does not have a quoted market price in an active market and whose fair value cannot be reliably measured is stated at cost, including transaction costs less impairment losses. All non-trading financial assets and liabilities, originated loans and other receivables, and held-to-maturity investments are measured at amortized cost less impairment losses. Any premium or discount is included in the carrying amount of the underlying instrument and amortized to finance income or expense using the effective interest method. Article 17 of the Accounting Regulations Applicable to Entities Regulated by SUGEF, SUGEVAL, SUPEN and SUGESE and to Non-financial Issuers prescribes available-for-sale classification for investments in financial instruments by regulated entities

iv. Fair value measurement principles

The fair value of financial instruments is based on their quoted market prices at the balance sheet date without any deduction for transaction costs.

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BANCO DE COSTA RICA


(Continued)

v. Gains and losses on subsequent measurement

Gains and losses arising from a change in the fair value of available-for-sale assets are recognized directly in equity until the investment is considered to be impaired, at which time the loss is recognized in the income statement. When the financial assets are sold, collected, or otherwise disposed of, the cumulative gain or loss recognized in equity is transferred to the income statement.

vi. Derecognition

A financial asset is derecognized when the Bank loses control over the contractual rights that comprise the asset. This occurs when the rights are realized, expire, or are surrendered. A financial liability is derecognized when it is extinguished.

(g) Cash and cash equivalent

The Bank considers cash and due from banks, demand and term deposits, and investment securities that the Bank has the intent to convert into cash within two months or less to be cash and cash equivalents.

(h) Investment in financial instruments

Investments in financial instruments are classified as available-for-sale investments which are valued at market prices using the price vector furnished by Proveedor Integral de Precios de Centroamérica, S. A. (PIPCA). In accordance with accounting standards issued by CONASSIF, starting January 1, 2008, the Bank no longer classifies investments in financial instruments as held to maturity. However, pursuant to Law No. 8703 “Amendment to Law No. 8627 on the Ordinary and Extraordinary Budget of the Republic for Tax Year 2008”, securities received to capitalize State-owned banks are to be classified as held-to-maturity and are not subject to market price valuation

The effect of market price valuation of available-for-sale investments in included in the equity account with the caption “Adjustment for valuation of available-for-sale investments” until those investments are realized or sold. Regular purchases or sales of financial assets are recognized by the settlement date method, date of delivery in exchange for an asset.

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BANCO DE COSTA RICA


(Continued)

Investments in repurchase agreements (term seller positions) and investment securities with original maturities of less than 180 days are not valued at market prices.

Held-to-maturity investments are measured at amortized cost by the effective interest method. In accordance with Law No. 8703, the Bank no longer classifies investments as held-to-maturity, except investments in financial instruments received to capitalize the Bank.

Trading investments are measured at fair value through profit or loss and are acquired with the intention of selling the financial instrument in the immediate future. When a financial asset is acquired with accrued interest, the interest is booked in a separate account as accrued interest receivable.

(i) Loan portfolio

SUGEF defines credits as any operation formalized by a financial intermediary irrespective of the type of underlying instrument or document, whereby the intermediary assumes the risks of either directly providing funds or credit facilities or guaranteeing that their customer will honor its obligations with third parties. Credits include loans, factoring, purchases of securities, guarantees in general, advances, checking account overdrafts, bank acceptances, interest, open letters of credit, and preapproved lines of credit.

The loan portfolio is presented at the value of outstanding principal. Interest on loans is calculated based on the outstanding principal and contractual interest rates, and is accounted for as income on the accrual basis of accounting. The Bank follows the policy of suspending interest accruals on loans with principal or interest that is more than 180 days past due.

(j) Allowance for loan losses

The loan portfolio is valued in accordance with provisions established in SUGEF Directive 1-05 “Regulations for Borrower Classification”, which was approved by CONASSIF on November 24, 2005, published in Official Gazette No. 238 on Friday, December 9, 2005, and became effective on October 9, 2006.

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BANCO DE COSTA RICA


(Continued)

Loan operations approved for individuals or legal entities with a total outstanding balance exceeding ¢65,000,000 (Group 1 under SUGEF Directive 1-05) are classified by credit risk. This classification takes into account the following considerations: Creditworthiness, which includes an analysis of projected cash flows, an

analysis of financial position, consideration for experience in the line of business, quality of management, stress testing for critical variables, and an analysis of the creditworthiness of individuals, regulated financial intermediaries, and public institutions.

Historical payment behavior, which is determined by the borrower’s

payment history over the previous 48 months, considering servicing of direct loans, both current and settled, in the National Financial System as a whole. SUGEF calculates the level of historical payment behavior for borrowers reported by entities during the previous month.

Arrears

Pursuant to the aforementioned Directive, collateral may be used to mitigate

risk for purposes of calculating the allowance for loan losses. The fair value of collateral should be considered and adjusted at least once annually. The percentage of acceptance of collateral is also a mitigating factor. Collateral must be depreciated six months after the most recent appraisal.

Risk categories are summarized below:

Risk

category Arrears Historical payment

behavior Creditworthiness

A1 30 days or less Level 1 Level 1 A2 30 days or less Level 2 Level 1 B1 60 days or less Level 1 Level 1 or Level 2 B2 60 days or less Level 2 Level 1 or Level 2

C1 90 days or less Level 1 Level 1, Level 2 or

Level 3

C2 90 days or less Level 1 or Level 2 Level 1, Level 2 or

Level 3

D 120 days or less Level 1 or Level 2 Level 1, Level 2, Level 3

or Level 4

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BANCO DE COSTA RICA


(Continued)

Remaining loan operations, for which the borrower’s total outstanding balance is less than ¢65,000,000 (Group 2 under SUGEF Directive 1-05), are classified in the following categories based on historical payment behavior and arrears:

Risk

category Arrears Historical payment

behavior A1 30 days or less Level 1 A2 30 days or less Level 2 B1 60 days or less Level 1 B2 60 days or less Level 2 C1 90 days or less Level 1 C2 90 days or less Level 1 or Level 2 D 120 days or less Level 1 or Level 2

Borrowers are to be classified in risk category E if they fail to meet the conditions for classification in risk categories A through D mentioned above, are in bankruptcy, a meeting of creditors, court protected reorganization procedure, or takeover, or if the Bank considers classification in such category to be appropriate.

The risk and allowance percentages required for each are indicated below:

Risk category

Allowance percentage

A1 0,5% A2 2% B1 5% B2 10% C1 25% C2 50% D 75% E 100%

As an exception in the case of risk category E, the minimum allowance for loans to a borrower whose historical payment behavior is rated as level 3 is to be calculated as follows:

Arrears Allowance percentage

0 to 30 days 20% 31 to 60 days 50%

More than 61 days 100%

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BANCO DE COSTA RICA


(Continued)

Pursuant to SUGEF Directive 1-05, as of December 31, 2013, the structural allowance is ¢31.135.553.174, of which ¢30.934.747.789 and ¢200.805.385 correspond to direct loans and stand-by credits, respectively. As of December 31, 2012, the structural allowance amount to ¢31.118.492.559 of witch ¢30.523.817.524 and ¢594.675.035 correspond to direct loans and stand-by credits, respectively. As of December 31, 2013, an allowance was booked for ¢31.663.496.555 (2012: ¢35.480.278.315). As of December 31, 2013 and 2012, increases in the allowance for loan losses resulting from the above are included in the accounting records in conformity with article 17 of SUGEF Directive 1-05, under prior authorization from SUGEF in conformity with article 10 of IRNBS.

As of December 31, 2013 and 2012, management considers the allowance to be sufficient to absorb any potential losses that could be incurred on recovery of the portfolio. Accounts and accrued interest receivable

In order to assess the risk of accounts and accrued interest receivable unrelated to loan operations, the Bank considers the arrears of the accounts based on ranges established for other assets in SUGEF Directive 1-05 adopted by CONASSIF.


30 days or less 2% 60 days or less 10% 90 days or less 50%

120 days or less 75% More the 120 days 100%

(k) Securities sold under repurchase agreements

The Bank sells securities under agreements to repurchase them on a certain date in the future at a fixed price. The obligation to repurchase securities sold is reflected as a liability in the balance sheet and is stated at the value of the original agreement. The underlying securities are held in asset accounts. Finance expense recognized is calculated by the effective interest method. Interest is presented as finance expense in the income statement, and as accrued interest payable in the balance sheet.

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BANCO DE COSTA RICA


(Continued)

(l) Accounting for interest receivable

Interest receivable is accounted for on the accrual basis. Under current regulations, interest accrual is suspended on loan operations that are more than 180 days past due; accrued interest receivable on those loans is recorded when collected.

(m) Other receivables

The recoverability of these accounts is assessed by applying criteria similar to those established by SUGEF for the loan portfolio. If an account is not recovered within 120 days from the due date or the date booked, an allowance is created for 100% of the outstanding balance. Accounts with no specified due date are considered payable immediately.

(n) Foreclosed assets

Foreclosed assets are assets owned by the Bank for realization or sale. Included in this account are assets acquired in lieu of payment, assets adjudicated in judicial auctions, assets purchased to be leased under finance and operating leases, goods produced for sale, idle property and equipment, and other foreclosed assets. Foreclosed assets are valued at the lower of cost and fair value. If fair value is less than the cost booked in the accounting records, an impairment allowance must be booked for the amount of the difference between both values. Cost is the historical acquisition or production value in local currency, these assets should not be revalued or depreciated for accounting purposes, and they are to be booked in local currency. The cost booked for a foreclosed asset may only be increased by the amount by which any improvements or additions increase the fair value. Other expenditures related to foreclosed assets are expensed in the period incurred.

The net fair value of an asset should be used as its fair value. Net fair value is determined by applying strictly conservative criteria and is calculated by subtracting expenses to be incurred on the sale of the asset from its estimated selling price. The estimated selling price of the asset is determined by an appraiser based on current market conditions. Future expectations for market improvements are not considered and it is assumed that the assets must be sold in the shortest period of time possible to enable the Bank to recover the money invested and use it for its business activities.

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BANCO DE COSTA RICA


(Continued)

For all foreclosed assets, the Bank should have reports from the appraisers who made the appraisals and those reports are to be updated at least annually. If an asset booked in this group is used by the Bank, it should be reclassified to the appropriate account in the corresponding group. Pursuant to article 20-b of SUGEF Directive 1-05, regulated entities are required to book an allowance for retired assets and for foreclosed assets that were not sold or leased under operating or finance leases within two years from the acquisition or production date for an amount equivalent to the carrying amount of the assets. The allowance must be established gradually by booking one-twenty-fourth of the value of such assets each month until the allowance is equivalent to 100% of the carrying amount of the assets, without exception. The booking of the allowance shall begin at month-end of the month in which the asset was i) acquired, ii) produced for sale or lease, or iii) retired from use.

(o) Offsetting

Financial assets and liabilities are offset and the net amount presented in the financial statements when the Bank has a legal right to set off the recognized amounts and intends to settle on a net basis.

(p) Property and equipment

i. Own assets Property and equipment (buildings, furniture, and equipment) is depreciated on the straight-line method over the estimated useful lives of the assets for both tax and financial purposes. Leasehold improvements are amortized straight line over a period of sixty months, starting the month after the deferred charge is booked. Leasehold improvements are amortized solely at the end of the term of the lease agreement. When the lesser or the Bank notifies the other party that it does not intend to renew the lease at the end of the original lease term or extension, the remaining balance is amortized over the remainder of the lease term. Pursuant to requirements established by regulatory authorities, the Bank must have its real property appraised by an independent appraiser at least once every five years, in order to determine its net fair value. If the fair value is less than the carrying amount, the carrying amount must be adjusted to the appraisal value.

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BANCO DE COSTA RICA


(Continued)

ii. Leased assets

Leases in terms of which the Bank assumes substantially all the risks and rewards of ownership are classified as finance leases. At the beginning of the lease term, this is recognized in the statement of financial position, as an asset and a liability by the same amount, the fair value of the leased assets, or the present value of minimum lease payments, if this were the lowest between the present value of the stipulated payments in the contract discounted at the interest rate implicit in the operation, determined at the beginning of the lease. To calculate the present value of the minimum payments by the lease, is taken as a discount factor the interest rate implicit in the lease, wherever practicable to determine; otherwise the incremental interest rate of the tenant loans is used. Any initial direct cost of the tenant will be added to the amount recognized as an asset.

iii. Subsequent costs

Costs incurred to replace a component of an item of property and equipment are capitalized and accounted for separately. Subsequent costs are only capitalized when they increase the future economic benefits. All other costs are recognized in the income statement when incurred.

iv. Depreciation

Depreciation and amortization are charged to the income statement on the straight-line method using the annual depreciation rates established for tax purposes. When appraisals made by independent appraisers determine that the technical useful life is less than the remaining useful life calculated using applicable rates for tax purposes, the technical useful life is to be used. Estimated useful lives are as follows: Useful life Buildings 50 years Vehicles 10 years Furniture and equipment 10 years Computer hardware 5 years Improvements 5 years

- 22 -

BANCO DE COSTA RICA


(Continued)

v. Revaluation

At least every five years financial entities should evaluate the real estate by appraisals, stating the net realizable value of the property. If the realizable value of the assets is different than the one included in the accounting registers, Bank must adjust the book value to the resulting value of the appraisal. These assets are depreciated by the straight line method for financial and tax purposes, based on the expected life of the respective assets. The last appraisal was done on January 2011 and the accounting register on April 29, 2011.

(q) Deferred charges

Deferred charges are valued at cost and stated in local currency. These charges are not subject to revaluations or adjustments.

(r) Intangible assets

Intangible assets acquired by the Bank are stated at cost less accumulated amortization and impairment losses. As of December 31, 2013 and 2012, the Bank recognizes amortization expense on goodwill acquired on shares, which will be amortized over 5 years in accordance with the Accounting Regulations Applicable to Entities Regulated by SUGEF, SUGEVAL, SUPEN, and SUGESE and to Nonfinancial Issuers. Amortization of IT systems is charged to the income statement on a straight-line basis over the estimated useful lives of the related assets. The estimated useful life is five years. Subsequent expenditures or disbursements are capitalized only when they increases the future economic benefits; otherwise are recognized on results as incurred.

- 23 -

BANCO DE COSTA RICA


(Continued)

(s) Impairment of assets The carrying amount of an asset is reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated. An impairment loss is recognized whenever the carrying amount of an asset exceeds its recoverable amount. Impairment losses are recognized in the income statement for assets carried at cost, and treated as a decrease in revaluation surplus for assets recorded at revalued amounts, until the amount of the surplus of the specific asset is sufficient to absorb the impairment loss. The recoverable amount of an asset is the greater of its net selling price and value in use. The net selling price is equivalent to the value obtained in an arm’s length transaction. Value in use is the present value of future cash flows and disbursements derived from continuing use of an asset and from its disposal at the end of its useful life. If in a subsequent period the amount of the impairment loss decreases and the decrease can be linked objectively to an event occurring after the write-down, the write-down is reversed through the income statement or the statement of changes in equity, as appropriate. Pursuant to SUGEF regulations, financial entities are to obtain a report from an independent appraiser at least every five years indicating the net fair value of real property (land and buildings) for use that has a net carrying amount in excess of 5% of the entity’s equity. If the net fair value of the assets appraised, taken as a whole, is less than the corresponding net carrying amount, the carrying amount is to be reduced to the appraisal value by adjusting assets that are significantly overstated. The decrease in the value of real property for use is taken against account “331 – Adjustments for revaluation of assets”.

In cases where an entity is aware of a significant overstatement in the carrying amount of one or more assets, regardless of the cause of the reduction in their value and/or the useful life originally assigned, the entity must hire an appraiser to perform a technical appraisal, immediately notify SUGEF of the results, and book the applicable adjustments in the accounting records.

(t) Accounts payable and other payables

Accounts payable and other payables are recognized at cost.

- 24 -

BANCO DE COSTA RICA


(Continued)

(u) Severance benefits

Costa Rican legislation requires payment of severance benefits to employees dismissed without just cause, equivalent to seven days salary for employees with three to six months of service, 14 days salary for employees with between six months to one year of service, and compensation in accordance with the Employee Protection Law for those with more than one year of service. In the specific case of the Bank, this limit is increased to twenty months for personnel who have worked for more than twenty years and for those who have fewer years, it corresponds to seniority in the Solidarity Association up to twenty months.

In February 2000, the Employee Protection Law was enacted and published. Such law modifies the existing severance benefit system and establishes a mandatory supplemental pension plan, thereby amending several provisions of the Labor Code. Pursuant to the Employee Protection Law, all public and private employers must contribute 3% of monthly employee salaries during the entire term of employment. Contributions are collected through the Costa Rican Social Security Administration (CCSS) and are then transferred to pension fund operators selected by employees. The Bank follows the practice of transferring to the Employees Association the severance benefits corresponding to each employee based on the employee’s current salary. From severance obligation, amounts not transferred to the Solidarity Association are provisioned as stated in the Collective Agreement, according to the article 29 subsection 3 and the laws of the country, where only 50% is provisioned for the employee belonging to the Association. By agreement of the Board of Directors, session 30-12 of July 30, 2012, it was agreed that 100% provision should be accrued from November 2012 thereafter.

(v) Legal reserve

According to Article 12 of the Organic Law of the National Banking System the Bank sets aside 50% of net earnings after income tax to increase its Legal Reserve.

- 25 -

BANCO DE COSTA RICA


(Continued)

(w) Revaluation surplus

Revaluation surplus included in equity may be transferred directly to prior period retained earnings when the surplus is realized. The surplus may be realized on the retirement, disposal, or use of the asset. The transfer of surplus to retained earnings is not made through the income statement. The Bank was authorized by SUGEF to capitalize revaluation surplus by increasing share capital.

(x) Use of estimates

Management has made a number of estimates and assumptions relating to the reporting of assets, liabilities, profit or loss, and the disclosure of contingent liabilities in preparing these financial statements. Actual results may differ from those estimates. Material estimates that are particularly susceptible to significant changes are related to the determination of the allowance for loan losses.

(y) Recognition of main types of revenue and expenses

i. Finance

Finance income and expense is recognized in the income statement as it accrues considering the effective yield or interest rate. Finance income and expense includes amortization of any premium or discount during the term of the instrument and until its maturity, and is calculated on an effective interest basis.

ii. Fee and commission income

When loan origination fees are generated, they are taken against effective yield, provided income exceeds costs incurred to generate those fees, and they are deferred over the loan term. Service fees and commissions are recognized when the services are rendered. In the case of other commissions related to the provision of services, these are recognized when the service is provided.

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BANCO DE COSTA RICA


(Continued)

iii. Net income on trading securities

Net income on trading securities includes gains and losses arising from sales and from changes in the fair value of trading assets and liabilities.

iv. Operating lease expenses

Payments for operating lease agreements are recognized in the income statement over the life of the lease.

(z) lncome tax

Pursuant to the Income Tax Law, the Bank is required to file its income tax returns for the twelve months ending December 31 of each year.

i. Current

Current tax is the expected tax payable on taxable income for the year, using tax rates enacted at the reporting date, and any adjustment to tax payable in respect of previous years.

ii. Deferred

Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial purposes and the amounts used for taxation purposes. In accordance with this method, temporary differences are identified as either taxable temporary differences (which result in future taxable amounts) or deductible temporary differences (which result in future deductible amounts). A deferred tax liability represents a taxable temporary difference, while a deferred tax asset represents a deductible temporary difference. A deferred tax asset is recognized only to the extent that there is a reasonable probability that it will be realized.

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BANCO DE COSTA RICA


(Continued)

(aa) Pension plans, retirement, and outgoing personnel

A fund was created by Law No. 16 of November 5, 1936, which has been amended on a number of occasions. The most recent amendment was included in Law No. 7107 of October 26, 1988. Pursuant to Law No. 16, the fund was established as a special wage protection and retirement system for the Bank’s employees. The fund is comprised of allotments established by the laws and regulations related to the fund, and monthly contributions made by the Bank and employees equivalent to 10% and 0,5% of total wages and salaries, respectively. As of October 1, 2007, this fund is managed by BCR Pensión Operadora de- Planes de Pensiones Complementarias. S.A. (subsidiary) under a comprehensive management agreement.

The Bank's contributions to the fund are considered to be defined contribution plans. Consequently, the Bank has no additional obligations.

(bb) Statutory allocations

Under article 12 of IRNBS, the net earnings of commercial State-owned banks are allocated as follows: 50% to a legal reserve; 10% to increase the capital of the National Institute for Cooperative Development (INFOCOOP); and the remainder to increase the Bank’s capital, pursuant to article 20 of Law No. 6074. Transition provision III of Law No. 8634 “Development Banking System” establishes that for a five-year period starting in 2007, the contributions made by State-owned banks equivalent to 5% of their annual net earnings (prescribed by article 20 of the Law for the Creation of the National Commission for Educational Loans (CONAPE) will be allocated as follows: 2% to CONAPE and 3% to the capital of the Development Financing Fund (FINADE). On January 2013 transitory III is removed and will continue calculating a 5% for CONAPE in accordance with Law 9092, National Commission for Educational Loans. In accordance with article 46 of the “National Emergency and Risk Prevention Act”, all institutions of the central administration and decentralized public administration, as well as State-owned companies, must contribute three percent (3%) of their reported earnings before taxes and statutory allocations and of their accumulated budget surplus to CNE. Such funds are deposited in the National Emergency Fund to finance the National Risk Management System. The expenditure for CNE is calculated as a 3% of income before taxes and profit appropriations.

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BANCO DE COSTA RICA


(Continued)

Pursuant to article 78 of the Employee Protection Law, State-owned public entities must contribute up to fifteen percent (15%) of their earnings with the purpose of strengthening the funding base for the Disability, Old Age, and Death Benefit System of CCSS and to provide universal CCSS coverage for impoverished non-salaried workers. According to Executive Decree number 37127-MTSS, beginning in 2013 a progressive yearly contribution from net earnings must be set aside beginning with 5% in 2013, up to 7% beginning in 2015 and 15% from 2017.

(cc) Development Financing Funds

In accordance with article 32 of Law No. 8634 “Development Banking System”, all State-owned banks, except Banco Hipotecario para la Vivienda (BANHVI), shall appropriate each year at least five percent (5%) of their net earnings after income taxes to the creation and strengthening of its own development funds. The objective of that appropriation is to provide financing to individuals and legal entities that present viable and feasible projects in conformity with the provisions of the aforementioned law. (See note 32)

(dd) Development Credit Funds

The Development Credit Fund (DCF), comprised of the resources provided in Article 59 of the Organic Law of the National Banking System, No.1644, commonly called "Banking Toll ". Will be administered by the State Banks, in compliance with Law No. 9094 "Derogatory of Transitory VII-Law No. 8634"; and in accordance with Article 35 of Law No. 8634 "Development Banking System", in meeting 119 of January 16, 2013, by agreement number AG 1015-119-2013, agreed to appoint Banco de Costa Rica and Banco Nacional de Costa Rica as administrators for a five years period from the signature of the respective management agreements. Each bank is responsible for managing fifty percent (50%) of the fund. The Technical Secretariat of the Governing Board through written communication CR/SBD-014-2013 informed all private banks to open up checking accounts with each of the administrators’ banks (Banco Nacional and Banco de Costa Rica), both in colones and foreign currency with the obligation to distribute fifty percent of the resources to each bank.

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BANCO DE COSTA RICA


(Continued)

The powers granted by the Governing Board to the administrators are: a) Administrators’ Banks can perform services with the beneficiaries of the

Development Banking System as recognized by Article 6 of Law 8634.

b) In accordance with Article 35 of the Law 8634 with funds from the

Development Credit Fund the Banks can perform services for other financial

entities except for private banks provided they meet the objectives and

obligations under Law 8634 and that are duly accredited by the Board.

c) The Banks may proceed or carry on in accordance with Article 35 Law 8634

the resources of the Development Credit Fund through: associations,

cooperatives, foundations, NGO, producers organizations or other entities if

they have credit operations in programs that meet the objectives established

in the Law 8634 and are duly accredited by the Board.

The contract signed for a five years term will be renewable for equal and successive periods unless otherwise decided by the Governing Board, notified in writing at least three months in advance. It may be terminated as provided for in Article 12 paragraph j) of the Law 8634 and its executive regulations, if the Banks administrators demonstrate proven lack of capacity and expertise (See note 33).

(ee) Economic period

The economic and fiscal period corresponds to the period ended on December 31 of every year.

(2) Collateralized or restricted assets

Collateralized or restricted assets are as follows:

(3) Balances and transactions with related parties

The financial statements include balances and transactions with related parties, as follows:

2013 2012

Cash due from banks (note 4) ¢ 378,300,133,368 354,014,156,436

Investments in financial instruments (note 5) 22,451,387,218 30,984,478,175

¢ 400,751,520,586 384,998,634,611

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BANCO DE COSTA RICA


(Continued)

At December 31, 2013 investment in funds administered by BCR Sociedad Administradora de Fondos de Inversión, S.A. (a subsidiary), amount to ¢7.830.906.252 (¢4.252.551.796 for 2012). During 2013 and 2012. The bank performed the purchase and sale of portfolios financial instruments at cost with BICSA.

2013 2012

Assets:

Cash and due from banks ¢ 2,477,969,247 2,241,431,573

Investments in financial instruments 29,921,619,896 -

Loan portfolio 329,221,124 329,614,925

Accounts receivable 246,252,465 261,465,299

Investments in other companies 72,576,370,018 63,483,952,197

Total assets ¢ 105,551,432,750 66,316,463,994

Liabilities:

Obligations with the public ¢ 2,423,999,106 2,339,079,867

Accounts payable and provisions 10,413,736 -

Total liabilities ¢ 2,434,412,842 2,339,079,867

Income:

Financial income ¢ 248,305,610 145,378,333

Income from investments in other companies 11,538,522,657 8,819,151,131

Sundry operating income 1,840,630,824 1,945,132,534

Total income ¢ 13,627,459,091 10,909,661,998

Expenses:

Finance expense ¢ 136,320,622 164,106,741

Expense from investments in other companies - 689,046,893

Sundry operating expenses 415,035,059 275,823,539

Total expenses ¢ 551,355,681 1,128,977,173

Equity.

Adjustment for valuation of

investments in other companies ¢ (976,952,345) (599,369,717)

December 31

- 31 -

BANCO DE COSTA RICA


(Continued)

(4) Cash and cash equivalents

Cash and cash equivalents are as follows for purposes of reconciliation with the cash flow statement:

As of December 31, 2013 and 2012, demand deposits in BCCR are restricted as a minimum legal reserve in the amount of ¢378.300.133.368 (2012: ¢354.014.156.436). As of December 31, 2013 and 2012, the Bank has a liability for outstanding checks in the amount of ¢2.553.308.639 and ¢2.254.031.183, respectively, which is offset by notes payable on demand cashed the next day once cleared by the clearing house.

(5) Investment in financial instruments

Investments in financial instruments are as follows:

2013 2012

Cash ¢ 68,455,391,787 65,588,639,679

Demand deposits in BCCR 379,195,265,239 354,135,346,935

Checking accounts and demand

deposits in local financial entities 2,682,763,594 1,243,343,606

Checking accounts and demand

deposits in foreign financial entities 41,463,357,638 17,024,336,189

Notes payable on demand 3,475,717,670 4,921,601,443

Total cash and due from banks 495,272,495,928 442,913,267,852

Investments in trading financial

Instruments 96,145,207,610 192,761,617,193

Total cash and cash equivalents ¢ 591,417,703,538 635,674,885,045

December 31

2013 2012

Trading ¢ 8,407,955,959 4,258,471,139

Available for sale 572,797,947,200 411,272,188,857

Held to maturity (note 18-a) 25,824,180,960 33,217,971,872

Accrued interest receivable on

available for sale investments 4,550,667,239 3,065,991,997

¢ 611,580,751,358 451,814,623,865

December 31

- 32 -

BANCO DE COSTA RICA


(Continued)

As of December 31, 2013, the loan portfolio amounts to ¢126.952.810.974 corresponding to the Development Credit Fund (See note 33). Investments have been pledged as follows:

2013 2012

Trading: Fair value Fair value

Local issuers:

Open investment funds ¢ 8,407,955,959 4,258,471,139

¢ 8,407,955,959 4,258,471,139

December 31

2013 2012

Available for sale: Fair value Fair value

Local issuers:

Government ¢ 440,439,734,545 347,193,763,057

State-owned banks 72,127,105,122 34,531,579,053

Private banks 8,353,802,527 11,240,331,760

Private issuers 4,486,878,552 3,014,908,430

Other 4,330,144,477 4,868,822,377

529,737,665,223 400,849,404,677

Foreign issuers:

Government 5,453,193,761 -

Private banks 37,607,088,216 10,371,798,469

Private issuers - 50,985,711

¢ 572,797,947,200 411,272,188,857

December 31

2013 2012

Held-to-maturity Fair value Fair value

Local issuers:

Government (note 18) ¢ 25,824,180,960 33,217,971,872

¢ 25,824,180,960 33,217,971,872

December 31

2013 2012

Interbank Electronic

Payment System

(SINPE)guarantee ¢ 22,451,387,218 30,984,478,175

¢ 22,451,387,218 30,984,478,175

December 31

- 33 -

BANCO DE COSTA RICA


(Continued)

(6) Loan portfolio

(a) Loan portfolio by sector

Total loans receivable originated by the Bank by sector are as follows:

(b) Loan portfolio by arrears

The loan portfolio by arrears is as follows:

Sector 2013 2012

Agriculture, livestock, hunting and

related services ¢ 124,591,566,452 107,071,368,906

Fishing and aquaculture 47,124,722 19,964,367

Manufacturing 195,965,121,764 177,324,353,675

Telecommunication and public utilities 45,029,550,111 46,168,985,397

Mining and quarrying 1,528,774,887 1,522,083,961

Trade 1,479,410,218 950,755,445

Services 731,995,364,663 665,188,740,892

Transportation 52,309,442,509 44,774,973,028

Real estate, business and leasing

activities 1,246,449,570 1,315,302,709

Construction, purchase and repair

of real estate 619,375,411,332 590,867,036,655

Consumer 339,773,479,520 333,292,387,084

Hospitality 74,149,365,137 52,690,953,846

Education 979,147,770 -

2,188,470,208,655 2,021,186,905,965

Plus accrued interest receivable 18,567,713,926 19,992,916,748

Less allowance for loan losses (31,434,008,813) (34,720,237,576)

¢ 2,175,603,913,768 2,006,459,585,137

December 31

2013 2012

Current ¢ 1,985,118,276,959 1,854,618,921,659

1 to 30 days 95,648,136,787 72,992,126,318

31 to 60 days 38,130,760,284 24,340,098,682

61 to 90 days 24,954,773,555 18,432,422,934

91 to 120 days 5,884,351,741 15,764,969,366

121 to 180 days 3,303,370,154 3,301,044,282

More than 180 days 3,904,923,272 4,236,427,702

Legal collections 31,525,615,903 27,500,895,022

¢ 2,188,470,208,655 2,021,186,905,965

December 31

- 34 -

BANCO DE COSTA RICA


(Continued)

As of December 31, 2013, the Bank has granted loans to financial entities in the amount of ¢2.773.585.071 (2012: ¢9.284.328.703)

The Bank classifies loans as past due when no principal or interest payments have been made by one day after the due date.

(c) Past due loans

Past due loans, including loans in accrual status (for which interest is recognized on a cash basis) and unearned interest on past due loans, are as follows:

Loans in legal collections as of December 31, 2013:

Loans in legal collections as of December 31, 2012:

As of December 31, 2013 total restructured loans amount to ¢614.605.062 (2012: ¢792.788.551). As of December 31 2013, the average annual interest rate earned in loans is 11,18% in colones and 6,30% in U.S. dollars (2012: 13,19% in colones and 6,17% in U.S. dollars).

2013 2012

Past due loans in nonaccrual status

(2013: 1.232) (2012: 1.620) ¢ 3,904,923,272 4,236,427,702

Past due loans in

accrual status ¢ 167,921,392,521 134,830,661,582

Total unearned interest ¢ 5,667,992,155 5,846,141,272

December 31

Percentage Balance

2,324 1.44% ¢ 31,525,615,903

No. of loans

Percentage Balance

2,564 1.36% ¢ 27,500,895,022

No. of loans

- 35 -

BANCO DE COSTA RICA


(Continued)

(d) Accrued interest receivable

Accrued interest receivable is as follows:

(e) Allowance for loan losses

Movement in the allowance for loan losses is as follows:

(f) Syndicated loans

As of December 31, 2013, the Bank’s syndicated loan portfolio with other banks is as follows:

2013 2012

Current loans ¢ 9,429,684,553 10,934,798,329

Past due loans 6,236,963,461 6,172,914,890

Loans in legal collections 2,901,065,912 2,885,203,529

¢ 18,567,713,926 19,992,916,748

December 31

2012 opening balance

Plus: 28,405,563,054

Allowance charged to profit or loss (note 25)

Less 12,558,206,015

Adjustment for foreign exchange differences

Transfer to unpaid balances (29,280,922)

Reversal of allowance against income (note 26) (1,322,161,083)

2012 closing balance (4,892,089,488)

¢ 34,720,237,576

2013 opening balance

Plus: 34,720,237,576

Estimación cargada a resultados (Véase nota 25) 8,563,745,692

Less

Adjustment for foreign exchange differences (66,776,918)

Transfer to unpaid balances (6,564,734,095)

Otros traspasos (5,218,463,442)

2013 closing balance ¢ 31,434,008,813

- 36 -

BANCO DE COSTA RICA


(Continued)

Syndicated loans with Banco Internacional de Costa Rica S.A. (BICSA):

Besides, these operations did not generate the Bank revenue for the administration of syndicated loans.

As of December 31, 2012, the Banks syndicated loan portfolio with other banks is as follows: Syndicated loans with Banco Internacional de Costa Rica S.A. (BICSA):

(7) Foreclosed assets, net

Foreclosed assets are presented net of the allowance for impairment and per legal requirement, as follows:

No. of loans BCR BICSAU.S. dollars 7 ¢ 33,482,258,556 13,262,868,940Total 7 ¢ 33,482,258,556 13,262,868,940

U.S. dollars No. of loans BCR BICSATotal 15 ¢ 44,857,151,418 30,505,071,130

15 ¢ 44,857,151,418 30,505,071,130

2013 2012

Real property ¢ 36,863,452,803 29,572,127,005

Other acquired assets 232,288,833 638,898,624

Idle property and equipment 8,305,400 -

37,104,047,036 30,211,025,629

Allowance for impairment and per

legal requirement (25,147,896,462) (16,623,861,477)

¢ 11,956,150,574 13,587,164,152

December 31

- 37 -

BANCO DE COSTA RICA


(Continued)

Movement in the allowance for impairment and per legal requirement is as follows:

(8) Investment in other companies

Investments in other companies are as follows:

In accordance with the General Board’s Agreement inArticle VII, of meeting 12-13, of April 1, 2013, and in addition to the 50 ordinary registered shares already held, Banco Nacional de Costa Rica transfers to Banco de Costa Rica 50 ordinary registered shares of ¢100,000 par value each, from the Ban Procesa - IT, S.A. share capital.

As of December 31, 2013, Banco de Costa Rica holds a 100% interest in the company, represented by 100 ordinary registered shares of ¢100,000 par value each, subscribed and paid in full.

Opening balance 16,623,861,477 9,896,617,542

Increases 12,686,096,785 8,354,576,071

Reversals (3,931,205,450) (1,627,332,136)

Elimination of allowance due to sale of property (230,856,350) -

Closing balance ¢ 25,147,896,462 16,623,861,477

December 31

2013 2012

BCR Valores S.A.(brokerage firm) ¢ 11,620,442,757 8,669,347,372

BCR Sociedad Administradora

de Fondos de Inversión S.A.

(investment fund manager company) 8,391,789,900 7,051,203,508

BCR Pensión, Operadora de

Planes de Pensiones

Complementarias S.A.

(pension fund operator) 6,912,864,221 5,985,294,984

BCR Corredora de

Seguros S.A. (insurance broker) 2,649,049,738 1,872,234,789

BAN Procesa – TI, S.A. 10,000,000 5,000,000

29,584,148,629 23,583,082,665

Foreign entities

Banco Internacional de Costa Rica, S.A.

and subsidiary ¢ 42,992,223,402 39,900,871,544

72,576,372,031 63,483,954,209

December 31

- 38 -

BANCO DE COSTA RICA


(Continued)

As of December 31, 2012, the share capital of BAN Procesa - TI, S.A. is represented by 100 ordinary registered shares of ¢100.000 par value each, subscribed and paid up as follows: 50 ordinary registered shares by Banco de Costa Rica and 50 ordinary registered shares by Banco Nacional de Costa Rica. Banco Internacional de Costa Rica, S.A. and subsidiary (BICSA) was organized as a bank under the laws of the Republic of Panamá in 1976. It operates under a general license granted by the Superintendence of Banks of Panama to engage in banking transactions in Panamá or abroad. BICSA is located in Panama City, Republic of' Panama, Calle Manuel María lcaza No. 25. The Bank owns a 51 % ownership interest in BICSA (domiciled in Panamá). As of December 31, 2013, that ownership interest is represented by 6.410.649 ordinary shares of US$10 par value each (2012: 5.750.658 ordinary shares of US$10 par value each). On March, 2012, BICSA amended article third of its By-Laws to authorize the capitalization of US$12,25 million to increase its Capital Stock to US$112.75 million, corresponding to 11.275.800, US$10 nominative par value shares duly included in the December 31, 2012 financial statements.

On July 2013, BICSA increased its capital stock in the amount of US$12.94 million from Retained Earnings US$125.70 million, distributed over a total of 12,569,900 shares with a nominal value of US$10 par value each duly recognized in the Financial Statements in 2013. The Bank follows the policy of adjusting the value of its investment in BICSA by the equity method. In applying this policy, the Bank considers the entity's results of operations, as well as the variation in equity (in colones) arising from adjustments to equity by applying the year-end exchange rate with respect to the U.S. dollar, in addition to changes resulting from revaluations. Such variation results from the fact that BICSA’s accounting records are kept in U.S. dollars. The Bank’s income statement as of December 31, 2013 and 2012 includes ¢4.473.258.182 and ¢4.080.502.682, respectively, for BICSA’s result of operations. (See note 37) The Bank’s statement of changes in equity for the years ended December 31, 2013 and 2012 includes a decrease in equity for ¢474.156.114 and ¢166.852.442, respectively, corresponding to changes arising from translation of BICSA’s financial statements.

- 39 -

BANCO DE COSTA RICA


(Continued)

(9) Property and equipment

As of December 31, property and equipment is as follows:

Cost: Land Building

Furniture and

equipment Computer hardware Vehicles Finance leases Total

Balance at December 31,2012 ¢ 18,971,804,072 48,456,510,228 24,203,051,137 22,024,299,013 4,761,649,460 3,816,761,061 122,234,074,971

Additions - 736,483,052 1,889,300,237 3,684,608,206 916,157,200 - 7,226,548,695

Retirements - - (453,636,769) (435,256,501) (22,283,960) (3,816,761,061) (4,727,938,291)

Transfers - - (661,406,835) (1,207,615,837) - - (1,869,022,672)

Revaluation - (14,316) - - - - (14,316)Balance at December 31,2013 18,971,804,072 49,192,978,964 24,977,307,770 24,066,034,881 5,655,522,700 - 122,863,648,387

Accumulated depreciation

and impairment:

Balance at December 31,2012 - 12,349,189,137 11,972,620,755 15,592,351,089 2,397,915,461 3,816,761,061 46,128,837,503

Depreciation expense - 866,255,139 1,956,780,947 2,817,196,769 487,590,394 - 6,127,823,249

Retirement - - (382,423,796) (422,906,535) (16,203,960) (3,816,761,061) (4,638,295,352)

Transfers - (33,186) (435,421,219) (1,202,688,462) - - (1,638,142,867)

Revaluation - (16,528) - - - - (16,528)

Balance at December 31,2013 ¢ - 13,215,394,562 13,111,556,687 16,783,952,861 2,869,301,895 - 45,980,206,005

Balances net:

December 31, 2013 ¢ 18,971,804,072 35,977,584,402 11,865,751,083 7,282,082,020 2,786,220,805 - 76,883,442,382

- 40 -

BANCO DE COSTA RICA


(Continued)

Cost: Land Building

Furniture and

equipment Computer hardware Vehicles Finance leases Total

Balance at December 31,2011 ¢ 19,074,656,572 48,051,283,797 21,015,525,906 23,307,418,149 4,759,474,625 3,816,761,061 120,025,120,110

Additions - 1,770,096,394 2,586,903,779 2,840,396,421 4,143,540 - 7,201,540,134

Retirements - (97,855,626) (225,282,092) (3,920,913,590) - - (4,244,051,308)

Transfers (15,000,000) (1,279,761,559) 825,903,544 (202,601,967) (1,968,705) - (673,428,687)

Revaluation - 13,176,473 - - - - 13,176,473

Impairment (87,852,500) (429,251) - - - - (88,281,751)Balance at December 31,2012 18,971,804,072 48,456,510,228 24,203,051,137 22,024,299,013 4,761,649,460 3,816,761,061 122,234,074,971

Accumulated depreciation

and impairment:

Balance at December 31,2011 - 11,732,213,383 10,472,357,585 16,981,445,845 1,918,862,051 3,169,906,697 44,274,785,561

Depreciation expense - 833,333,535 1,774,627,861 2,718,582,807 480,985,373 646,854,364 6,454,383,940

Retirement - (35,307,534) (189,734,778) (3,918,225,965) - - (4,143,268,277)

Transfers - (181,446,439) (84,629,913) (189,451,598) (1,931,963) - (457,459,913)

Revaluation - 396,192 - - - - 396,192

Balance at December 31,2012 ¢ - 12,349,189,137 11,972,620,755 15,592,351,089 2,397,915,461 3,816,761,061 46,128,837,503

Balances net:

December 31, 2012 ¢ 18,971,804,072 36,107,321,091 12,230,430,382 6,431,947,924 2,363,733,999 - 76,105,237,468

- 41 -

BANCO DE COSTA RICA


(Continued)

(10) Intangible assets

As of December 31, 2013, intangible assets, net correspond to software and goodwill acquired from the purchase of BICSA shares. Those assets are as follows:

As of December 31, 2012, intangible assets, net correspond to software and goodwill acquired from the purchase of BICSA shares. Those assets are as follows:

Cost:

Balance at December 31, 2012 18,228,962,225

Additions to software 4,449,362,913

Retirements (294,297,009)


Accumulated amortization and impairment:


Amortization expense for software 3,410,119,472

Amortization expense for goodwill acquired 154,682,360

Retirements (292,969,979)


Net Balance:

Balance at December 31, 2013 ¢ 7,701,863,848

Cost:


Additions to software 2,814,979,814

Retirements (4,512,257,590)


Accumulated amortization and impairment:


Amortization expense for software 2,678,413,246

Amortization expense for goodwill acquired 154,682,360

Retirements (4,381,475,928)


Net Balance:

Balance at December 31, 2012 ¢ 6,818,629,797

- 42 -

BANCO DE COSTA RICA


(Continued)

(11) Demand obligation with the public

Demand obligations with the public are as follows:

(12) Demand and term deposits from customer

Demand and term deposit from customer by number of customers and cumulative amount are as follows:

As of December 31, 2013 and 2012, demand deposits from customers include court-ordered deposits for ¢157.702.441.024 and ¢135.267.300.737, respectively, which are restricted because of their nature. As of December 31, 2013, the Bank has a total of 1.105.491 and 31.294 customers with demand and term deposits, respectively (2012: 1.079.719 and 31.597 customers with demand and term deposits, respectively).

2013 2012

Checking accounts ¢ 840,310,379,687 766,437,740,401

Certified checks 176,463,154 130,362,591

Demand saving deposits 443,885,452,448 410,399,345,853

Matured term deposits 4,782,368,992 6,059,936,906

Other demand obligations with the public 7,376,664,444 7,888,843,598

¢ 1,296,531,328,725 1,190,916,229,349

December 31

Demand Term Demand Term

Public

¢

1,289,154,664,281 1,128,910,890,914 1,183,027,385,749 1,129,437,832,728

Other obligation with the public 7,376,664,444 - 7,888,843,600 -

1,296,531,328,725 1,128,910,890,914 1,190,916,229,349 1,129,437,832,728

State-owned entities 6,774,751,009 45,288,827,970 9,009,604,350 31,767,563,107

Other Banks 131,373,636,248 4,587,860,050 2,359,560,950 997,778,070

Other Financial entities 9,701,506,066 362,956,981,885 11,776,574,756 232,834,994,314

147,849,893,323 412,833,669,905 23,145,740,056 265,600,335,491

¢ 1,444,381,222,048 1,541,744,560,819 1,214,061,969,405 1,395,038,168,219

December 31

20122013

- 43 -

BANCO DE COSTA RICA


(Continued)

(13) Repurchase and reverse repurchase agreements

The Bank purchases financial instruments under agreements whereby the Bank commits to sell the financial instruments at future dates at a predetermined price and return. As of December 31, 2013 and 2012, the Bank has no repurchase agreements. As of December 31, 2013, the Bank has the following reverse repurchase agreements:

As of December 31, 2012, the Bank has the following reverse repurchase agreements:

IssuerCarrying amount

of asset

Fair Value of

guaranteeRepurchase date Repurchase price

BCCR ¢ 789,253,308 783,300,000 01-01-14 al 21-01-14 100%

Local government 1,037,136,993 1,029,300,000 01-01-14 al 23-01-14 100%

¢ 1,826,390,301 1,812,600,000

IssuerCarrying amount

of asset

Fair Value of

guaranteeRepurchase date Repurchase price

BCCR ¢ 1,291,258,388 1,274,077,406 01-01-13 al 08-01-13 100%

Local government 2,972,668,768 2,932,322,476 01-01-13 al 09-01-13 100%

Others 801,373,770 791,000,000 01-01-13 al 04-01-13 100%

¢ 5,065,300,926 4,997,399,882

- 44 -

BANCO DE COSTA RICA


(Continued)

(14) Obligations with entities and obligations with BCCR Obligations with entities are as follows:

As of December 31, 2013, time deposits of foreign financial entities include the international issuance of US$500 million equivalent to ¢247.505.000.000, at a rate 5.25% yearly rate and five years term.

2013 2012

Obligations with the Central Bank

of Costa Rica ¢ - -

- -

Checking accounts of local

financial entities ¢ 10,674,827,222 12,826,904,555

Overdrafts on demand checking accounts

in foreign financial entities 5,254,542,669 8,064,804,317

At sight liabilities statutory legal mandate 129,367,214,793 -

Outstanding checks 2,553,308,639 2,254,031,183

Term deposits from local

financial entities 49,984,702,811 32,873,359,778

Term deposits from local

foreign financial entities 247,505,000,000 -

Loans from foreign financial

entities 115,343,967,094 211,539,621,713

Liquidity market obligations - 21,187,354,000

Charges payable for obligations with

financial and non-financial entities 6,241,048,472 3,074,182,915

566,924,611,700 291,820,258,461

Subordinated obligations or debentures 14,850,300,000 15,062,100,000

Charges payable for subordinated

obligations 33,413,175 31,771,617

14,883,713,175 15,093,871,617

¢ 581,808,324,875 306,914,130,078

December 31

- 45 -

BANCO DE COSTA RICA


(Continued)

(a) Maturities of loans payable

As of December 31, 2013, loans payable mature as follows:

As of December 31, 2012, loans payable mature as follows:

The Bank has no obligations from financial leases at December 31, 2013 and 2012.

(15) Income tax

Pursuant to Costa Rican Income Tax Law, the Bank is required to file income tax returns for the twelve months ending December 31 of each year. As December 31, 2013, the Bank’s income tax payable and income tax receivable amount to ¢6.156.016.518 (2012: ¢10.713.145.571) (see note 17) and ¢6.174.744.816 (2012: ¢6.435.357.976), respectively, and are booked under “Other assets”.

As of December 31, the different between income tax expense and the amounts computed by applying the corresponding income tax rate to pretax income (30%) is reconciled as follows:

BCCR

Local financial

entities

Foreign financial

entities

International

organizations Total

Less than one year ¢ - - 74,994,015,000 12,375,250,000 87,369,265,000

Between one and two years - - - 27,974,702,094 27,974,702,094

More of five year - - - 14,850,300,000 14,850,300,000

Total ¢ - - 74,994,015,000 55,200,252,094 130,194,267,094

BCCR

Local financial

entities

Foreign financial

entities

International

organizations Total

Less than one year ¢ - 21,187,354,000 125,421,494,611 53,483,577,102 200,092,425,713

Between one and two years - - 15,062,100,000 - 15,062,100,000

Between three and five years - - 17,572,450,000 - 17,572,450,000

More of five year - - - 15,062,100,000 15,062,100,000

Total ¢ - 21,187,354,000 158,056,044,611 68,545,677,102 247,789,075,713

2013 2012

Current tax ¢ 6,585,928,483 11,219,902,758

Prior year income tax (429,911,965) (506,757,187)

6,156,016,518 10,713,145,571

Decrease in deferred income tax (125,258,140) (121,074,630)

Income tax ¢ 6,030,758,378 10,592,070,941

December 31

- 46 -

BANCO DE COSTA RICA


(Continued)

A deferred tax liability represents a taxable temporary difference and a deferred tax asset represents a deductible temporary difference. As of December 31, 2013 deferred tax assets and liabilities are attributed to the following:

As of December 31, 2012, deferred tax assets and liabilities are attributed to the following:

2013 2012

Expected income tax ¢ 10,700,620,446 13,623,131,497

Plus:

Non deductible expenses 8,123,840,090 7,255,370,608

Less:

Non taxable income (12,668,444,018) (10,165,356,534)¢ 6,156,016,518 10,713,145,571

Prior year income tax 429,911,965 506,757,187

Income tax 6,585,928,483 11,219,902,758

December 31

2013 2012

Realization of

deferred tax ¢ 125,258,140 121,074,630

December 31

Assets Liabilities Net

Valuation of investments ¢ 1,074,065,202 (554,550,464) 519,514,738

Revaluation of Assets - (4,922,278,262) (4,922,278,262)

Total ¢ 1,074,065,202 (5,476,828,726) (4,402,763,524)

Assets Liabilities Net

Valuation of investments ¢ 1,933,774,998 (286,752,953) 1,647,022,045

Revaluation of Assets - (5,047,665,178) (5,047,665,178)

Total ¢ 1,933,774,998 (5,334,418,131) (3,400,643,133)

- 47 -

BANCO DE COSTA RICA


(Continued)

Movement in temporary differences is as follows: As of December 31, 2013:

As of December 31, 2012:

December 31,

2012 Income statement Equity

December 31,

2013

Valuation of investments ¢ (286,752,954) - (267,797,510) (554,550,464)

Revaluation of assets (5,047,665,177) 125,258,140 128,775 (4,922,278,262)

Asset account

Valuation of investments 1,933,774,998 - (859,709,796) 1,074,065,202

Total ¢ (3,400,643,133) 125,258,140 (1,127,378,531) (4,402,763,524)

Liability account

December 31,

2011 Income statement Equity

December 31,

2012

Valuation of investments ¢ (174,432,006) - (112,320,948) (286,752,954)

Revaluation of assets (5,204,814,140) 121,074,630 36,074,333 (5,047,665,177)

Asset account

Valuation of investments 1,907,930,874 - 25,844,124 1,933,774,998

Total ¢ (3,471,315,272) 121,074,630 (50,402,491) (3,400,643,133)

Liability account

- 48 -

BANCO DE COSTA RICA


(Continued)

(16) Provisions

Movement in provisions is as follows:

Severance

benefits Litigations Other (1) Total

Balance at December 31, 2011 ¢ 20,702,635,041 794,698,974 5,585,704,796 27,083,038,811

Provisioned (1) 6,666,815,535 616,985,000 2,466,487,490 9,750,288,025

Used (369,518,623) (140,411,932) (3,127,051,764) (3,636,982,319)

Adjustment for foreign exchange - (2,588,431) - (2,588,431)

Differences

Reversal - (158,210,797) - (158,210,797)

Balance at December 31, 2012 26,999,931,953 1,110,472,814 4,925,140,522 33,035,545,289

Balance at December 31, 2012 26,999,931,953 1,110,472,814 4,925,140,522 33,035,545,289

Provisioned (1) - 584,510,214 2,393,990,554 2,978,500,768

Used (3,033,835,764) (595,714,843) (2,666,384,235) (6,295,934,842)

Adjustment for foreign exchange

Differences - (3,267,175) - (3,267,175)

Reversal - - (181,920,077) (181,920,077)

Balance at December 31, 2013 ¢ 23,966,096,189 1,096,001,010 4,470,826,764 29,532,923,963

- 49 -

BANCO DE COSTA RICA


(Continued)

As of December 31, 2013, the Bank is a defendant in litigation, for which the following provisions have been established. Ordinary suits filed against the Bank estimated at ¢4.382.756.488 and

US$37.394.296, for which the Bank has provisioned ¢446.988.892 and US$450.520, respectively.

Criminal proceedings in which the Bank is the defendant estimated at

¢455.819.163 and US$207.018, for which the Bank has provisioned ¢120.000.000.

Labor suits by nature are difficult to estimate. However, they have been estimated at ¢1.720.931.705 and US$186,200, for which the Bank has provisioned ¢306.000.000, corresponding to cases where a provisional judgment has been handed down.

As of December 31, 2013, other provisions correspond to employee incentives, self-insurance booked for a fidelity policy, a policy covering detached auxiliary teller offices, and a policy covering the transportation of securities. As of December 31, 2012, the Bank is a defendant in litigation, for which the following provisions have been established. Ordinary suits filed against the Bank estimated at ¢6.609.774.807 and

US$21.713.199, for which the Bank has provisioned ¢428.347.828 and US$380.295, respectively.

Criminal proceedings in which the Bank is the defendant estimated at

¢283.749.305 and US$200.000, for which the Bank has provisioned ¢131.190.000.

Labor suits by nature are difficult to estimate. However, they have been estimated at ¢1.095.000.000, for which the Bank has provisioned ¢360.000.000, corresponding to cases where a provisional judgment has been handed down.

As of December 31, 2012, the provisions include an amount of ¢6.182.462.494 due to the increase on the provision for employee legal benefits, according to Board of Directors Agreement in meeting 30-12 of July 30, 2012, where is decided to retain a 100% provision from the month of November 2012 hereinafter.

- 50 -

BANCO DE COSTA RICA


(Continued)

(1) Until October 2012, the bank held a provision for possible employers’ vacation compensation in the amount of ¢7.174.000.000. As of December 31, 2012, according to Board of Directors Agreement, meeting 30-12 of July 30, 2012, the possibility of holiday compensation was rejected.

As of December 31, 2012, other provisions correspond to employee incentives, self-insurance booked for a fidelity policy, a policy covering detached auxiliary teller offices, and a policy covering the transportation of securities.

(17) Other sundry accounts payable

Other sundry accounts payable are as follows:

2013 2012

Current tax (note 15) ¢ 6,156,016,518 10,713,145,571

Tax on again on DU 538,202,586 474,252,242

Employer payroll taxes 1,216,807,579 1,136,508,837

Court-ordered withholdings 906,895,703 748,424,190

Tax withholdings 984,464,125 819,021,883

Employee withholdings 722,887,104 719,039,730

Other third-party withholdings 6,084,548,745 5,241,824,669

Compensation and salaries 6,918,011,254 6,725,566,582

Statutory allocations 8,595,903,044 9,440,339,835

Accrued vacation 6,008,926,943 5,608,446,918

Accrued statutory Christmas bonus 443,530,177 427,362,599

Fees and commissions payable related parties 10,413,736 -

Various creditors 22,086,519,439 7,745,321,685

¢ 60,673,126,953 49,799,254,741

December 31

- 51 -

BANCO DE COSTA RICA


(Continued)

(18) Equity

(a) Share capital

The Bank’s share capital is as follows:

On December 23, 2008, the Executive Branch of the Costa Rican Government authorized a capital contribution funded under Law No. 8703 “Amendment to the Law on the Ordinary and Extraordinary Budget of the Republic for Tax Year 2008 (Law No. 8627)”. Such law grants funds to capitalize three State-owned banks, including Banco de Costa Rica, in order to stimulate productive sectors, particularly small and medium-sized enterprises. For such purposes, the Bank received four securities for a total of US$50.000.000 (¢27.619.000.002) and denominated in DU maturing in 2013, 2017, 2018, and 2019 (No. 4191, No. 4180, No. 4181, and No. 4182 for DU10.541.265,09 each, at a reference exchange rate of ¢655.021 to DU1.00). As of December 31, 2013 and based on the closing exchange rate, the balance of these investments is ¢25.824.180.960 (2012: ¢33.217.971.872)

On August 3, 2012 the National Financial System Oversight Board authorized the increase of the capital stock of the Bank for ¢14.855.949.009 from accumulated earnings and from assets revaluation surplus’s from 2009 and 2010 for ¢625.341.806 a total ¢15.481.290.815.

As of December 31, 2013, the Bank has appropriated ¢9.255.323.171 (2012: ¢6.675.813.355) to form the equity of its Development Financial Fund.

2013 2012

Capital under Law No. 1644 ¢ 30,000,000 30,000,000

Bank capitalization bonds 1,288,059,486 1,288,059,486

Capital increase under Law No. 7107 69,451,288,741 69,451,288,741

Capital increase under Law No. 8703 27,619,000,002 27,619,000,002

Increase from revaluation of assets 12,966,901,983 12,966,901,983

Other 697,630,970 697,630,970

¢ 112,052,881,182 112,052,881,182

December 31

- 52 -

BANCO DE COSTA RICA


(Continued)

(b) Revaluation surplus

Revaluation surplus corresponds to the increase in fair value of real property owned by the Bank.

As of December 31, 2013, and 2012, revaluation surplus amounts to ¢27.236.745.716 and ¢27.237.046.192, respectively.

(c) Adjustment for valuation of available-for-sale investments

The adjustment corresponds to variations in the fair value of available-for-sale investments.

As of December 31, 2013 and 2012, the balance of the adjustment for valuation of available-for-sale investments corresponds to unrealized net losses in the amount of ¢1.213.878.152 and ¢4.108.556.224, respectively.

(d) Adjustment for valuation of investment in other companies This item mainly corresponds to foreign exchange differences arising from translation of BICSA’s financial statements and the unrealized gain or loss on valuation of investments in subsidiaries.

As of December 31, 2013 and 2012, changes in equity include foreign exchange differences corresponding to investments in other companies in the amount of ¢3.383.069.597 and ¢4.834.178.056, respectively.

- 53 -

BANCO DE COSTA RICA


(Continued)

(19) Commitments and contingencies

The Bank has off-balance sheet commitments and contingencies that arise in the normal course of business and involve elements of credit and liquidity risk. Off-balance sheet financial instruments with risk are as follows:

Off-balance sheet financial instruments with risk by type of deposit are as follows:

These contingent commitments and liabilities involve credit risk because the fees and commissions and losses are recognized in the financial statements until the obligations are fulfilled or expire. As of December 31, 2013 and 2012, letters of credit are backed by 100% of the stand-by balance or by lines of credit. As of December 31, 2013 and 2012, floating guarantees in custody are for ¢122.317.830.997 and ¢102.984.212.162, respectively.

2013 2012

Guarantees:

De cumplimientoPerformance bonds ¢ 90,945,547,421 87,876,139,121

De participación Bid bonds 4,380,885,917 3,937,726,366

Issued but unused letters of credit 20,215,968,201 9,873,675,483

Confirmed but unused letters of credit 438,380,856 -

Preapproved lines of credit 104,433,896,248 103,127,682,703

Other contingencies 24,168,703,601 17,880,011,060

Credits pending disbursement 9,427,806,107 15,936,627,848

¢ 254,011,188,351 238,631,862,581

December 31

2013 2012

With prior deposit ¢ 9,580,145,503 3,921,354,821

Without prior deposit 220,262,339,247 216,830,496,700

Pending litigation

and claims 24,168,703,601 17,880,011,060

Total deposits ¢ 254,011,188,351 238,631,862,581

December 31

- 54 -

BANCO DE COSTA RICA


(Continued)

Other contingencies: As of December 31, 2013, the Bank’s Legal Division reported the following contingencies and commitments: Administrative suits against the Bank estimated at ¢3.935.767.596 and

US$36.943.775. In addition other contentious processes are filed for preliminary injunction with no estimate.

Ordinary labor suits estimated at ¢1.414.931.705 and US$186.200.

Criminal proceedings in which the Bank is a third-party defendant estimated at ¢335.819.163 and US$207.018.

As of December 31, 2012, the Bank’s Legal Division reported the following contingencies and commitments: Administrative suits against the Bank estimated at ¢6.181.426.980 and

US$21.332.903. In addition other contentious processes are filed for preliminary injunction with no estimate.

Ordinary labor suits estimated at ¢735.000.000.

Criminal proceedings in which the Bank is a third-party defendant estimated at

¢152.559.305 and US$200.000

- 55 -

BANCO DE COSTA RICA


(Continued)

Other matters: There has not been any demand from external lawyers, whereby compensation is requested. In the case of the Bank, two separate procedures for terminating contracts have started, considering signing an agreement with these professionals and with those where the arrangement is not reached, a possible compensation would have to be fixed previous approval by the General Comptroller. At this time there is no information regarding any compensation because it depends on each particular case and from those who do not wish to sign the agreement, which however, according to negotiations possibly more than 90% of cases are resolved with a settlement or an arrangement that does not include the payment of compensation. However, take note that in the case of banks with no conviction has become final, because an appeal has been filed (Sala I). Because we are not discussing this in court and rather it is in the process of negotiations at the administrative level, establishing provisions does not correspond in this case. To guarantee recovery arrangement by US$2,008,000 to China Construction Bank, the Bank does not execute the guarantee because the lawsuit was filed in China, Hefei city by AFECC against Palacio Oriental, S.A. It was a precautionary measure pronouncement against the financial entity, ordering no guarantee payment until lawsuit resolution on that jurisdiction. China Construction Bank maintain recognized the guarantee in favor to Banco de Costa Rica until process conclusion. However, Banco de Costa Rica filed a precautionary protest because Costa Rica held an arbitration process to resolve the conflict between China AFECC and Palacio Oriental, S.A. based on the principle that same case cannot be tried twice according to New York Convection, ratified by China. This arrangement is pending resolution until China judicial pronouncement, therefore Banco de Costa Rica does not discard a judicial process in Costa Rica.

- 56 -

BANCO DE COSTA RICA


(Continued)

(20) Trusts

The Bank provides trust services, whereby it manages assets at the direction of the customer. The Bank receives a fee for providing those services. The underlying assets and liabilities are not recognized in the Bank’s consolidated financial statements. The Bank is not exposed to any credit risk and it does not guarantee these assets or liabilities. The types of trusts managed by the Bank are as follows: Management and investment trust Management trusts with a testamentary clause Guaranty trusts Housing trusts Management and investment public trusts

Trust capital is invested in the following assets:

2013 2012

Cash and due from banks ¢ 17,010,312,418 8,603,125,212

Investment 135,906,553,085 54,919,802,873

Loan portfolio 50,872,667,119 20,433,831,260

Allowance for loan losses (19,759,136,434) (14,311,314,575)

Foreclosed assets 5,352,055,809 5,613,380,932

Investment in other companies 38,305,034,004 35,585,038,345

Other receivables 44,899,751,853 50,772,686,425

Property and equipment 446,204,876,028 367,807,268,927

Other assets 17,740,747,053 91,021,939,000

¢ 736,532,860,935 620,445,758,399

December 31

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BANCO DE COSTA RICA


(Continued)

(21) Other memoranda accounts Other memoranda accounts are as follows:

(22) Finance income on investment in financial instruments

Finance income on investment in financial instruments is as follows:

2013 2012

Guarantees received and held in custody ¢ 36,157,867,293 37,185,147,795

Guarantees received and held by third Parties 764,363,409 777,542,865

Unused authorized lines of credit 280,509,310,575 214,881,501,672

Write-offs 26,690,756,181 20,588,462,953

Interest income on nonaccrual loans 11,677,944,320 10,936,309,992

Other memoranda accounts 570,627,162,229 517,425,633,593

Assets and securities held in custody for

81,638,480,938 93,518,045,899

Trading securities held in custody 1,286,058,285

Trading securities received as -

guarantee (Guarantee Trust) 1,888,400,000 -

Cash and accounts receivable

custodial activities 19,491,926,635 18,228,061,641

Trading securities held in custody 3,585,696,371,103 3,230,908,172,896

Third-party trading securities

received as guarantee (Guaranty Trust) 32,431,112,708 50,146,421,638

Third-party trading securities

pledged as guarantee (Guaranty Trust) 46,252,306,163 68,082,077,692

¢ 4,695,112,059,839 4,262,677,378,636

third parties

December 31

2013 2012

Trading financial instruments

Available-for-sale financial Instruments ¢ 28,420,602,018 18,672,281,790

¢ 28,420,602,018 18,672,281,790

December 31

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BANCO DE COSTA RICA


(Continued)

(23) Finance income on loan portfolio

Finance income on loan portfolio is as follows:

(24) Finance expense for obligations with the public

Finance expense for obligations with the public is as follows:

(25) Expenses for allowance for impairment of investments in financial instruments and

allowance for loan losses Expenses for allowance for impairment of investments in financial instruments and allowance for loan losses are as follows:

2013 2012

Checking account overdrafts ¢ 1,308,440,412 1,018,584,193

Loans with other funds 189,622,922,959 198,139,952,260

Credit cards 12,499,579,508 12,731,336,812

Factoring 139,642,144 106,085,193

Issued and used letters of credit 10,131,281 19,149,136

Past due loans and loans in legal collections 1,381,948 3,763,123

¢ 203,582,098,252 212,018,870,717

December 31

2013 2012

Demand deposits ¢ 18,262,800,118 15,898,123,220

Term deposits 76,702,339,223 74,850,412,179

¢ 94,965,139,341 90,748,535,399

December 31

2013 2012

Allowance for loan losses (note 6-e) ¢ 8,563,745,692 12,558,206,015

Allowance for other doubtful receivables 1,572,222,116 2,230,445,807

Allowance for stand-by credit losses 483,492,486 660,047,494

¢ 10,619,460,294 15,448,699,316

December 31

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BANCO DE COSTA RICA


(Continued)

(26) Income from recovery of financial assets and decreases in allowances Income from recovery of financial assets and decreases in allowances is as follows:

(27) Income from service fees and commissions

Income from service fees and commissions is as follows:

2013 2012

Recovery of loan write-offs ¢ 521,264,690 241,339,448

Recovery of receivables - 3,116,071

Decrease in allowance for

loan losses (note 6-c) 5,218,463,442 4,892,089,488

Decrease in allowance for

other doubtful receivables 430,945,932 855,213,675

Decrease in allowance for stand-by

credit losses 1,010,097,453 148,479,949

¢ 7,180,771,517 6,140,238,631

December 31

2013 2012

Drafts and transfers ¢ 1,796,896,115 1,841,223,772

Foreign trade 71,375,577 39,648,951

Certified checks 8,882,591 8,718,623

Trust management 1,836,641,123 910,409,365

Custodial services 294,086,007 226,983,242

Banking mandates 4,892,389 6,133,841

Collections 327,336,761 336,048,095

Credit cards 29,981,861,912 27,495,062,842

Insurance underwriting - 563,300

Authorized custodial services for securities 209,961,053 209,270,181

Other 17,906,787,833 17,053,052,171

¢ 52,438,721,361 48,127,114,383

December 31

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BANCO DE COSTA RICA


(Continued)

(28) Administrative expenses

Administrative expenses are as follows:

As of December 31, 2012, the other personnel expenditures include an amount for ¢7.174.000.000, related to the provision of holiday compensation as indicated in Note 16.

2013 2012

Salaries and bonuses, permanent staff ¢ 47,499,512,571 44,794,172,311

Salaries and bonuses, contractors 1,655,762,153 1,429,249,755

Compensation for directors and statutory examiners 112,554,367 109,263,840

Overtime 1,272,535,701 879,248,766

Per diem 671,950,338 649,713,100

Statutory Christmas bonus 4,319,450,225 4,048,139,973

Vacation 5,620,684,750 5,448,576,237

Incentives 2,356,242,624 2,421,487,490

Other compensation 1,177,191,297 1,081,185,436

Employer social security taxes 19,066,813,566 17,887,890,772

Refreshments 256,670,593 304,697,788

Uniforms 72,674,623 414,754,919

Training 741,601,097 625,179,952

Employee insurance 164,489,489 165,226,074

Assets for personal use 4,338,974 3,105,136

“Back-to-school” bonus 6,809,405,904 6,412,323,595

Compulsory retirement savings account 1,546,164,253 1,438,239,642

Other personnel expenses 393,151,274 7,428,954,355

Outsourcing 9,409,086,754 7,945,401,018

Transportation and communications 4,767,361,812 4,819,395,374

Property insurance 63,232,316 209,902,254

Property maintenance and repairs 3,844,234,708 3,738,502,369

Public utilities 3,241,330,081 2,570,901,285

Leasing of property 4,349,155,531 3,884,038,346

Leasing of furniture and equipment 969,402,529 819,483,521

Depreciation of property and equipment 5,640,232,853 5,973,398,566

Amortization of leasehold property 846,561,028 941,578,702

Impairment loss - 88,891,274

Other infrastructure expenses 565,997,114 567,563,606

Overhead 12,858,874,539 12,326,015,821

¢ 140,296,663,064 139,426,481,277

December 31

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BANCO DE COSTA RICA


(Continued)

(29) Operating leases

Bank as lessee Non-cancellable operating lease rentals are payable as follows:

(30) Fair value

Fair values of financial instruments are as follows:

As of December 31, 2013 the financial obligations include ¢14.883.713.175 (2012: ¢15.093.871.617) for subordinated obligations. Where practicable, the following assumptions were used by management to estimate the fair value of each class of financial instrument both on and off the balance sheet:

2013 2012

Less than one year ¢ 406,378,354 78,794,182

Between one and five years 1,215,264,072 -

¢ 1,621,642,426 78,794,182

December 31

Carrying amount Fair value Carrying amount Fair value

Cash and due from banks ¢ 495,272,495,928 495,272,495,928 442,913,267,852 442,913,267,852

Investment 611,580,751,358 607,030,084,119 451,814,623,865 448,748,631,868

Loan portfolio 2,207,037,922,581 2,005,094,829,847 2,041,179,822,713 1,883,898,407,773

3,313,891,169,867 3,107,397,409,894 2,935,907,714,430 2,775,560,307,493

Demand deposits 1,306,481,175,866 1,306,481,175,866 1,203,896,513,433 1,203,896,513,433

Term deposit 1,128,910,890,914 1,127,118,406,452 1,129,437,832,728 1,118,585,419,941

Financial obligations 581,808,324,875 587,364,541,834 306,914,130,077 311,584,129,029

¢ 3,017,200,391,655 3,020,964,124,152 2,640,248,476,238 2,634,066,062,403

2013

December 31 December 31

2012

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BANCO DE COSTA RICA


(Continued)

(a) Cash and cash equivalents, accrued interest receivable, other receivables, demand deposits and customer savings deposits, accrued interest payable, and other liabilities.

The carrying amounts approximate fair value because of the short maturity of these instruments.

(b) Investments in financial instruments The fair value of available-for-sale financial instruments is based on quoted market prices or prices quoted by brokers.

(c) Securities sold under repurchase agreements The carrying amount of funds owed under repurchase agreements maturing in one year or less approximates their fair value because of the short maturity of these instruments.

(d) Loan portfolio Management determined the fair value of the loan portfolio by the discounted cash flow method.

(e) Deposits and loans payable Management determined the fair value of deposits and loans payable by the discounted cash flow method. Fair value estimates are made at a specific date, based on relevant market information and information concerning the financial instruments. These estimates do not reflect any premium or discount that could result from offering for sale a particular financial instrument at a given date. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Estimates could vary significantly if changes are made to those assumptions.

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BANCO DE COSTA RICA


(Continued)

(31) Risk management

The Bank has exposure lo the following risks from financial instruments:

credit risk liquidity risk market risk

- interest rate risk - currency risk - inflation risk - price risk of financial assets of the investment portfolio

operational risk. The Financial Risk Division, through the Market Risk Office and Balance Sheet Risk Office, is responsible for identifying and measuring the risk of investment portfolios as well as interest rate, currency, and liquidity risks, respectively. For such purposes, all types of risks to which the Bank is exposed are monitored by those Offices on an ongoing basis by using a mapping procedure, and risks are classified based on their severity or impact and their frequency or probability of occurrence. Policies and procedures for managing market and liquidity risks are also update formalized through the design of specific manuals that describe the applicable methodologies used. This activity has been extended to the Bank’s subsidiaries: Puesto de Bolsa, Sociedad Administradora de Fondos de Inversión, Operadora de Pensiones y Corredora de Seguros, S. A., same as the BCR Financial Congromerate.

Following is a description of how the Bank manages the above risks. Credit risk

This is the risk that the borrower or issuer of a financial asset will not comply, fully and on time, with repayment of any obligation due to the Bank according to the terms and conditions established at the time the Bank acquired or originated the financial asset. Credit risk is mainly related to the loan portfolio and investments in financial instruments (see notes 5 and 6). The maximum exposure to credit risk on investments is represented by the carrying amount of the assets in the balance sheet. The Bank also has exposure to credit risk for off-balance sheet credits, such as commitments, letters of credit, sureties, and guarantees.

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BANCO DE COSTA RICA


(Continued)

The Bank monitors credit risk on an ongoing basis through reports on the status of the current loan portfolio and its classification. Credit analyses include periodic assessments of the financial position of customers, an analysis of the country’s economic, political, and financial environment, and the potential impact on each sector. For such purposes, a thorough understanding is obtained of customers on an individual basis and their ability to generate cash flows that enable them to honor their debt commitments. Risk management policies establish the following limits to mitigate credit risk: Arrears limit The balance of the portfolio more than 90 days past due may not exceed the percentage of the total current portfolio set by the General Board of Directors based on its level of risk aversion. Foreign currency limit The Bank establishes a limit on the portfolio of customers who do not generate cash flows in U.S. dollars with consideration for allowances and equity. Amount limit The Prudential Standard issued by SUGEF establishes a maximum limit for the Bank’s total lending operations with an individual or legal entity or individuals comprising a Bank-related group. Specifically, SUGEF Directive 5-04 sets the maximum limit for economic interest groups.

This notwithstanding, a maximum limit has been set at the internal level for the Bank’s total lending operations with individuals comprising a Bank-related group. That limit is more restrictive than the limit defined by SUGEF.

Sector limits

The Bank defines an ideal portfolio structure by sector to achieve a level of diversification that is consistent with the growth strategy or with the risk appetite defined in that strategy. Such “ideal” loan portfolio structure will be reviewed at least once annually, which shall not preclude other reviews at the request of the Board of Directors, Credit Committee, or Risk Committee.

The appropriate committees appointed by the Board of Directors periodically monitor the financial position of borrowers and issuers involving credit risk for the Bank.

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BANCO DE COSTA RICA


(Continued)

The Bank has established certain credit risk management procedures, which are summarized below: Methodologies used to control credit risk include those imposed by the current Prudential Standard and methodologies developed by the Credit Risk Office, with consideration for best practices, as follows: Application of the models is limited to:

Credit approval: Development of parametric analysis models for extending credit to companies and the respective determination of the risk classification, as well as assignment of interest rates based on that classification, with consideration for both quantitative and qualitative management aspects.

Early warning: Simulation models are used to estimate portfolio performance under a specific expected scenario and to facilitate implementation of corrective action. This permits an analysis of the performance of loan arrears in the event of changes in macroeconomic variables such as income and interest rate. In the case of the loan portfolio in U.S. dollars extended to customers who do not generate cash flows in that currency, the reaction of loan arrears to increases in the exchange rate is also analyzed.

Credit risk model: For a quantitative analysis of the consolidated loan portfolio by activity, by the Commercial Division, and by currency, the Bank uses a Credit Risk Model to determine average payment losses, probability of arrears, expected losses, and Value at Risk (VaR). From these results, the Bank can anticipate loss margins associated with credit risk. All of these indicators are part of a dynamic process aimed at achieving an increasing level of maturity in credit risk management.

Foreign exchange impact measurement model: This model measures the impact of exchange rate volatility on the loan portfolio in foreign currency placed with customers defined as non-generators of cash flows in U.S. dollars. This report is segregated by individuals and legal entities

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BANCO DE COSTA RICA


(Continued)

Credit management information: As of December 31, 2013, the allowance for loan losses amounted to ¢31.434 million (2012: ¢34.720 million). As of the same date, the capital adequacy requirement (CAR) is above 10% (the SUGEF minimum limit), considering credit risk, price risk, interest rate risk, operational risk, and currency risk. As of December 31, 2013, the rate of arrears greater than 90 days is 2,20% (2012: 2,17%). This indicator is 0,80 percentage points (2012: 0,83 percentage points) below the maximum limit permitted by SUGEF to be considered normal levels. The value of this indicator reflects the importance of risk-based management exercised by the Bank for the loan portfolio combined with ambitious underwriting targets.

As of December 31, 2013, the portfolio in U.S. dollars represented 41,14% (2012: 37,63%) of the total portfolio. Growth in the loan portfolio has been strategically controlled so as to only attract customers with an acceptable risk profile. The established limit for extending credit in U.S. dollars to customers who do not generate cash flows in that currency is periodically monitored. Concentration by customer or economic interest group has been controlled by establishing limits. The Bank’s regulations set a maximum limit on loans to an individual or legal entity or economic interest group at 10% of the Bank’s equity. This limit may be lower, depending on the number of activities carried out by the economic interest group. Percentages above that limit may be approved by a unanimous vote in favor by the Credit Committee. In the case of private financial groups, this amount should represent at least 10% of the income of the group. Finally, SUGEF sets a maximum limit of 20% of equity for economic interest groups. Although there is a relative concentration in 2013 in sectors like trade (16,01%), housing (24,70%), services (17,50%), and consumer loans (13,20%) (2012: services (16,61%), trade (17,27%), housing (25,41%), consumer loans (13,85%)), limits on annual growth by sector have been enforced in order to achieve a loan portfolio structure in the medium and long term that suits the risk appetite defined by senior management. This forces the Bank to effectively manage collections and to monitor its portfolio more closely. In order to monitor each segment of the loan portfolio using the beta model, starting 2011, the Bank tracks credit risk indicators such as expected losses, average probability of payment, and VaR based on limits approved by the General Board of Directors for current loans and loans more than 90 days past due by sector, division, regional management office, and branch.

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BANCO DE COSTA RICA


(Continued)

At the balance sheet date, there were no significant concentrations of credit risk. The maximum exposure to credit risk is represented by the carrying amount of each financial asset.

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(Continued)

The Bank’s financial instruments with credit risk exposure are as follows:

December 31,

Note 2013 2012 Nota 2013 2012

Principal 6a 2,188,470,208,655 2,021,186,905,965 220,262,339,247 216,830,496,700

Interest 18,567,713,926 19,992,916,748 - -

2,207,037,922,581 2,041,179,822,713 220,262,339,247 216,830,496,700

Allowance for loan losses (31,434,008,813) (34,720,237,576) (229,487,742) (760,040,739)

Carrying amount ¢ 2,175,603,913,768 2,006,459,585,137 19 220,032,851,505 216,070,455,961

Loan portfolio

Total balances:

A1 ¢ 1,768,889,143,200 1,565,713,049,042 204,569,770,702 192,050,203,645

A2 14,116,979,653 11,750,606,741 576,521,019 740,261,405

B1 214,386,533,248 274,947,896,048 3,929,461,139 11,804,791,209

B2 8,170,277,165 6,229,771,347 223,729,600 73,430,000

C1 44,585,804,392 58,290,638,362 2,424,803,060 3,216,582,162

C2 14,331,097,199 14,158,279,568 100,313,129 64,197,948

D 51,199,199,403 31,927,691,005 675,784,445 667,693,481

E 91,358,888,321 78,161,890,600 7,761,956,153 8,213,336,850

2,207,037,922,581 2,041,179,822,713 220,262,339,247 216,830,496,700

Structural allowance (30,934,747,789) (30,523,817,524) (200,805,385) (594,675,035)

Carrying amount, net 2,176,103,174,792 2,010,656,005,189 220,061,533,862 216,235,821,665

Individually assessed loans

with allowance:

A1 ¢ 655,449,089,628 610,765,541,372 107,424,810,966 101,355,634,977

A2 4,150,670,338 3,456,483,798 57,767,028 21,043,756

B1 31,135,363,023 56,782,258,436 220,055,551 7,185,374,617

B2 1,815,442,601 1,468,559,907 93,684,518 917,110

C1 3,651,502,381 4,325,829,467 85,623,456 30,476,112

C2 1,588,137,708 1,920,605,807 - -

D 14,306,424,600 15,100,739,644 108,000,000 12,746,918

E 54,590,815,264 49,498,581,723 196,639,541 696,507,240

766,687,445,543 743,318,600,154 108,186,581,060 109,302,700,730


Carrying amount, net 735,752,697,754 712,794,782,630 107,985,775,675 108,708,025,695

Direct loans

December 31,

Stand-by credits

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(Continued)

December 31, December 31,

Note 2013 2012 2013 2012

Past due loans

without allowance:

A1 35,970,299,547 25,908,997,399 1,691,908,083 2,018,671,240

A2 3,513,586,938 3,246,751,081 68,762,788 93,335,924

B1 34,207,273,792 14,925,223,755 701,927,801 543,789,175

B2 5,256,557,437 3,507,387,861 94,314,295 57,812,790

C1 4,967,923,261 19,308,303,453 478,310,132 318,008,429

C2 11,844,489,485 3,406,103,805 63,436,919 46,073,927

D 14,639,319,722 5,326,513,760 309,056,599 231,177,646

E 25,713,527,732 18,506,898,925 6,632,521,678 6,561,087,400

Carrying amount 136,112,977,914 94,136,180,039 10,040,238,295 9,869,956,531

Balance aging of past due loans

without allowance:

1 to 30 days 72,493,059,769 43,509,351,410 2,018,269,960 2,439,476,542

31 to 60 days 28,538,836,088 14,758,056,402 887,232,608 626,597,915

61 to 90 days 20,009,200,754 23,870,937,234 499,450,966 287,053,416

91 to 180 days 6,121,899,120 4,858,106,146 696,908,406 625,225,956

More than 180 days 8,949,982,183 7,139,728,847 5,938,376,355 5,891,602,702

Carrying amount 136,112,977,914 94,136,180,039 10,040,238,295 9,869,956,531

Current loans without allowance

A1 1,077,469,754,025 929,038,510,271 95,453,051,653 88,675,897,428

A2 6,452,722,376 5,047,371,862 449,991,203 625,881,725

B1 149,043,896,433 203,240,413,857 3,007,477,788 4,075,627,416

B2 1,098,277,128 1,253,823,579 35,730,787 14,700,100

C1 35,966,378,751 34,656,505,442 1,860,869,472 2,868,097,621

C2 898,470,006 8,831,569,956 36,876,210 18,124,021

D 22,253,455,081 11,500,437,602 258,727,846 423,768,917

E 11,054,545,324 10,156,409,951 932,794,933 955,742,211

Carrying amount 1,304,237,499,124 1,203,725,042,520 102,035,519,892 97,657,839,439

Carrying amount 2,207,037,922,581 2,041,179,822,713 220,262,339,247 216,830,496,700


(Excess) insufficiency of allowance

Over structural allowance (499,261,024) (4,196,420,052) (28,682,357) (165,365,704)

Carrying insufficiency allowance 6a ¢ 2,175,603,913,768 2,006,459,585,137 220,032,851,505 216,070,455,961

Restructured loans 6c ¢ 614,605,062 792,788,551 - -

Direct loans Stand-by credits

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BANCO DE COSTA RICA


(Continued)

Set out below is an analysis of the gross and net (of allowance for loans losses) amounts of individually assessed loans with allowance by risk category according to applicable regulations:

Individually assessed loans with allowance: According to regulations established in SUGEF Directive 1-05, all loan operations are assigned a risk classification and the applicable allowance percentages are determined based on that classification. Individually assessed loans with allowance are loan operations for which, after considering the guarantee for the loan, a balance remains to which the allowance percentage determined by the risk category assigned by the Bank will be applied.

At December 31, 2013 Gross Net

Risk category:

A1 ¢ 1,768,889,143,200 1,766,811,205,815

A2 14,116,979,653 14,085,404,697

B1 214,386,533,248 213,977,666,274

B2 8,170,277,165 8,108,581,257

C1 44,585,804,392 44,104,466,281

C2 14,331,097,199 14,129,563,187

D 51,199,199,403 48,243,477,442

E 91,358,888,321 66,642,809,839

¢ 2,207,037,922,581 2,176,103,174,792

Loans to customer

At December 31, 2012 Gross Net

Risk category:

A1 ¢ 1,565,713,049,042 1,563,739,406,777

A2 11,750,606,741 11,721,793,266

B1 274,947,896,048 274,216,909,093

B2 6,229,771,347 6,187,536,060

C1 58,290,638,362 57,742,405,462

C2 14,158,279,568 13,772,264,428

D 31,927,691,005 28,769,225,592

E 78,161,890,600 54,506,464,511

¢ 2,041,179,822,713 2,010,656,005,189

Loans to customer

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BANCO DE COSTA RICA


(Continued)

Past due loans without allowance: Past due loans without allowance correspond to loan operations with a guarantee for at least the outstanding balance due to the Bank. Accordingly, no allowance is established.

Restructured loans: Restructured loans are those for which the Bank has changed the original contractual terms due to deterioration in the borrower’s financial position and where the Bank has made concessions that it would not otherwise consider. Once the loans are restructured, it remains in this category irrespective of improvement in the borrower’s position after restructuring. Following are the different types of restructured loans. a. Extended loan: Loan operation in which at least one full or partial payment of

principal or interest due under the current contractual terms has been postponed.

b. Modified loan: Loan operation in which at least one of the current contractual

repayment terms has been modified, excluding extensions, additional payments not included in the loan repayment schedule, additional payments to reduce the amount of installments, and a change in the currency used, while respecting the original loan maturity date.

c. Refinanced loan: Loan operation in which at least one payment of principal or interest is made fully or partially with the proceeds of another loan extended to the borrower or to an individual from its economic interest group by the same financial intermediary or any other entity of the same financial group or conglomerate. In the event of full settlement of the loan operation, the new loan operation is considered to be refinanced. In the event of partial settlement, both the new and existing loan operations are considered to be refinanced

Loan write-off policy:

The Bank charges off a loan (and any allowance for loan losses) when it determines the loan to be uncollectible based on an analysis of significant changes in the financial conditions of the borrower preventing compliance with the payment obligation, or when it determines that the guarantee is insufficient to cover the entire amount of the loan facility. For standard loans with smaller balances, write-offs are generally based on the level of arrears of the loan granted.

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BANCO DE COSTA RICA


(Continued)

Allowance for loan losses:

Borrower classification

The Bank must classify its borrowers into the following two groups: a. Group 1: Borrowers with total outstanding balances due to the Bank that exceed

the SUGEF limit.

b. Group 2: Borrowers with total outstanding balances due to the Bank that are

less than or equal to the SUGEF limit.

For purposes of borrower classification, the following should be considered when calculating total outstanding balances:

a. Balances of back-to-back operations and the portion of bonds, sureties, and

letters of credit covered by a previous deposit are excluded; and

b. The stand-by principal balance should be treated as a credit equivalent.

Risk categories

The Bank must individually classify its borrowers in one of eight risk categories, identified as A1, A2, B1, B2, C1, C2, D, and E, with category A1 as the lowest credit risk and category E as the highest credit risk.


Analysis of borrower’s creditworthiness

The Bank must define effective mechanisms to determine the creditworthiness of borrowers in Group 1. Based on whether the borrowers are individuals or legal entities, those mechanisms should enable the Bank to evaluate the following:

a. Financial position and expected cash flows: Analysis of the stability and

continuity of main sources of income. The effectiveness of the analysis depends on the quality and timeliness of information.

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BANCO DE COSTA RICA


(Continued)

b. Experience in the line of business and quality of management: Analysis of management’s ability to lead the business with appropriate controls and adequate support from the owners.

c. Business environment: Analysis of the main sector variables that affect the

borrower’s creditworthiness.

d. Vulnerability to changes in interest rates and foreign exchange rates: Analysis of the borrower’s ability to confront unexpected adverse changes in interest rates and foreign exchange rates.

e. Other factors: Analysis of other factors that affect the borrower’s

creditworthiness. In the case of legal entities, considerations include, but are not limited to, environmental issues, technological aspects, development and operating licenses and permits, representation of products or foreign offices, relationships with significant customers and suppliers, sales agreements, legal risks, and country risk (the latter in the case of foreign-domiciled borrowers). In the case of individuals, the following borrower characteristics may be taken into consideration, among other: marital status, age, level of education, profession, and gender.

When a borrower has been assigned a risk rating by a rating agency, that rating should be an additional consideration when evaluating the borrower’s creditworthiness. The Bank must classify the borrower’s creditworthiness into 4 levels: level 1-has the ability to pay, level 2 - has minor weaknesses in ability to pay, level 3 - has serious weaknesses in ability to pay, and level 4 - has no ability to pay. For purposes of this classification, the borrower and co-borrower(s) must be assessed jointly. Joint classification of creditworthiness may only be used to determine the allowance percentage for operations in which the parties are borrower and co-borrower.

Analysis of historical payment behavior

The Bank must determine a borrower’s historical payment behavior based on the level assigned by SUGEF’s Credit Information Center (CIC).

The Bank must classify historical payment behavior into 3 levels: level 1 - good historical payment behavior, level 2 - acceptable historical payment behavior, and level 3 - poor historical payment behavior.

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BANCO DE COSTA RICA


(Continued)


Borrowers in Group 1 are to be rated by the Bank based on arrears, historical payment behavior, and creditworthiness. Borrowers in Group 2 are to be rated based on arrears and historical payment behavior, as follows:

Risk category

Allowance percentage Arrears

Historical payment behavior Creditworthiness

A1 0,5% 30 days or less Level 1 Level 1 A2 2% 30 days or less Level 2 Level 1 B1 5% 60 days or less Level 1 Level 1 or Level 2 B2 10% 60 days or less Level 2 Level 1 or Level 2 C1 25% 90 days or less Level 1 Level 1 or Level 2 or

Level 3 C2 50% 90 days or less Level 1 or Level 2 Level 1 or Level 2 or

Level 3 D 75% 120 days or less Level 1 or Level 2 Level 1 or Level 2 or Level 3 or Level 4

In all cases, borrowers without valid authorization for a credit check through SUGEF’s Credit Information Center (CIC) cannot be rated in risk categories A1 to B2.

Likewise, borrowers with at least one loan operation purchased from a financial intermediary domiciled in Costa Rica and regulated by SUGEF must be rated for at least one month in the category of greatest risk between the rating assigned by the selling bank and the rating assigned by the buying bank at the time of the purchase.

Direct classification in risk category E

The Bank must classify borrowers in risk category E who do not meet the conditions to be classified in any of the risk categories defined above, are in bankruptcy, a meeting of creditors, a court protected reorganization procedure, or takeover, or if the Bank considers classification in this risk category to be appropriate.

Structural allowance

The structural allowance is equivalent to the total outstanding balance of each loan operation less the weighted adjusted value of the corresponding guarantee, multiplying the resulting amount (or resulting balance) by the allowance percentage corresponding to the risk category of the borrower or co-borrower with the category of lowest risk. If the result of this calculation is negative or zero, the allowance is zero. If the total outstanding balance includes a stand-by principal balance, the credit equivalent indicated below should be considered.

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BANCO DE COSTA RICA


(Continued)

The adjusted value of the corresponding guarantees must be weighted with 100% when the borrower or co-borrower with the lowest risk category is classified in category C2 or another lower-risk category, with 80% when classified in risk category D, and with 60% when classified in risk category E.

Allowance percentages based on borrower risk category are as follows:

Risk category

Allowance percentage

A1 0,5% A2 2% B1 5% B2 10% C1 25% C2 50% D 75% E 100%

As an exception in the case of risk category E, the minimum allowance for borrower whose historical payment behavior is classified in level 3 should be calculated as follows:


0 to 30 days 20% 31 to 60 days 50%

More than 60 days 100%

The sum of individual allowances for each loan operation constitutes the structural allowance.

In compliance with SUGEF Directive 1-05, as of December 31, 2013, the Bank must maintain a structural allowance in the amount of ¢31.135.553.174 (corresponding to direct loans for ¢30.934.747.789 and stand-by credits for ¢200.805.385). As of December 31, 2012, the minimum structural allowance amounted to ¢31.118.492.559 (corresponding direct loans for ¢30.523.817.524 and stand-by loans for ¢594.675.035). SUGEF External Circular Letter 02 1-2008 dated May 30, 2008 indicates that the expense for the allowance for loan losses corresponds to the amount necessary to achieve the minimum structural allowance. Furthermore, there must be a duly documented technical justification for any excess above the minimum structural allowance, which is to be sent to SUGEF with the authorization request. The excess may not surpass 15% of the minimum required allowance for the loan portfolio. This notwithstanding, if any additional allowances are required above the 15%, they must be taken from net earnings for the period pursuant to article 10 of IRNBS.

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BANCO DE COSTA RICA


(Continued)

Credit equivalent

The following stand-by credit must be converted to credit equivalents based on the credit risk they represent. The credit equivalent is obtained by multiplying the balance of the stand-by principal by the corresponding credit equivalent conversion factor as follows:

a) Bid bonds and export letters of credit without prior deposit: 0,05;

b) Other sureties and guarantees without prior deposit: 0,25: and

c) Preapproved lines of credit: 0,50.

Allowances for other assets

Allowances must he established for the following assets:

a. Accounts and accrued interest receivable unrelated to loan operations based on arrears calculated from the first day overdue or the date booked in the accounting records, as follows:


30 days or less 2% 60 days or less 10% 90 days or less 50%

120 days or less 75% Over 120 days 100%

b. The allowance for foreclosed assets must be established gradually by booking

one-twenty-fourth of the value of such assets each month until the allowance is equivalent to 100% of the carrying amount of the assets, without exception. The booking of the allowance shall begin at month-end of the month in which the asset was i) acquired, ii) produced for sale or lease, or iii) retired from use

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BANCO DE COSTA RICA


(Continued)

As of December 31, concentration of the portfolio of direct loans and stand-by credits by sector (economic activity) is as follows:

As of December 31, concentrations based on the VaR of beta model for direct loans and stand-by credits are as follows:

2013 2012 Location Percentage Percentage Business Division 48,30% 52,08% Retail Commercial Division 51,62% 47,92%

As December 31, 2013 and 2012, credit risk is concentrated in Costa Rica. As of December 31, 2013, the Bank has banking mandates for ¢3.385.475 (2012: ¢11.099.987).

As of December 31, total assets adjudicated to the Bank are as follows (see note 7):

Direct loans Stand-by credits Direct loans Stand-by credits

Trade ¢ 1,479,410,218 24,530,647,093 950,755,445 20,060,647,014

Manufacturing 195,965,121,764 579,735,913 177,324,353,675 617,185,853

Construction, purchase and

repair of real estate 619,375,411,332 530,535,034 590,867,036,655 712,783,993

Agriculture, livestock,

hunting and related services 124,591,566,452 - 107,071,368,906 -

Fishing and aquaculture 47,124,722 - 19,964,367 -

Consumer 339,773,479,520 106,768,474,715 333,292,387,084 111,351,467,789

Education 979,147,770 100,000,000 - -

Transportation 52,309,442,509 417,116,783 44,774,973,028 100,740,000

Telecommunications and public Utilities 45,029,550,111 - 46,168,985,397 -

Services 731,995,364,663 111,967,482,588 665,188,740,892 102,175,423,378

Hospitality 74,149,365,137 - 52,690,953,846 -

Mining and quarrying 1,528,774,887 - 1,522,083,961 -

Real estate, business and

leasing activities 1,246,449,570 - 1,315,302,709 -

Government - 9,117,196,225 - 3,613,614,554

¢ 2,188,470,208,655 254,011,188,351 2,021,186,905,965 238,631,862,581

2013 2012

2013 2012

Real property ¢ 36,863,452,803 29,572,127,005

Others 232,288,833 638,898,624

¢ 37,095,741,636 30,211,025,629

December 31

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BANCO DE COSTA RICA


(Continued)

The loan portfolio by type of guarantee is as follows:

See notes 6 y 19.

Guarantees: Collateral: The Bank accepts collateral guarantees – usually mortgages or chattel mortgages – to secure its loans. The value of collateral is determined by an appraisal made by an appraiser who determines the estimated fair value of land and buildings based on comparable market offerings and prior appraisals made by the appraiser. Personal: The Bank also accepts sureties from individuals or legal entities. The Bank evaluates the guarantor’s ability to honor the debt obligations on the borrower’s behalf, as well as the integrity of the guarantor’s credit history.

The Bank conducts strict credit analyses and requires collateral from its borrowers. As of December 31, 2013, 59% of the loan portfolio is secured by mortgage or chattel mortgage (2012: 58%). In compliance with SUGEF 5-04 "Regulations on Credit Limits to Individual Persons and Economic Interest Groups", the Bank review information of the reported data of economic interest groups as part of their responsibility to identify significant administrative and property relationships among debtors with total active operations. As of December 31, 2013, groups of borrowers (members) are reported having operations that add 2% or more of adjusted capital and in groups report 5% or more of adjusted capital.

Direct loans Stand-by credits Direct loans Stand-by credits

Guarantee:

Fiduciary ¢ 2,081,193,492 106,400,636,896 1,785,443,140 97,766,186,148

Mortgage 894,929,393,440 472,068,235 802,001,217,346 480,534,366

Chattel mortgage 391,083,189,076 2,646,432,362 370,706,282,361 2,684,176,675

Other 900,376,432,647 144,492,050,858 846,693,963,118 137,700,965,392

¢ 2,188,470,208,655 254,011,188,351 2,021,186,905,965 238,631,862,581

20122013

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BANCO DE COSTA RICA


(Continued)

The concentration of the loan portfolio by economic interest group is as follows:



Liquidity risk Liquidity risk arises when a financial entity is unable to honor its commitments or obligations with third parties due to insufficient cash flows resulting from a mismatch between the term that assets are recovered (lending operations) and the term that obligations are due (borrowing operations). Pursuant to risk definitions included in SUGEF Directive 2-10 “Regulations for Comprehensive Risk Management”, liquidity risk is the risk of monetary losses due to a shortage of funds causing a financial entity to be unable to honor its obligations in accordance with the respective contractual terms. Liquidity risk may also be associated with a specific financial instrument, in which case the risk relates to the financial depth of the market in which the instrument is traded with the intention of putting or calling the instrument without significant changes in the instrument’s value.

Liquidity risk can result in potential losses due to premature or forced sales of assets, such as investment portfolios, in order to fulfill commitments, or when a position cannot be liquidated, acquired, or hedged in a timely manner by offsetting with an equivalent position.

No. Percentage Band Total No. of customers

1 0-4,99% 13,745,304,580 425,138,953,457 211

2 5-9,99% 27,490,609,159 157,151,562,344 8

3 10-14,99% 41,235,913,739 128,787,422,671 4

4 15-20% 54,981,218,319 101,752,456,180 2

Total 812,830,394,652 225

No. Percentage Band Total No. of customers

1 0-4,99% 12,873,580,334 386,983,689,381 204

2 5-9,99% 25,747,160,667 93,265,234,633 6

3 10-14,99% 38,620,741,001 188,832,991,275 6

4 15-20% 51,494,321,335 38,639,262,979 1

Total 707,721,178,268 217

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BANCO DE COSTA RICA


(Continued)

The main objective of the Bank’s liquidity policy is to ensure that the Bank is able to honor its payment and disbursement commitments under any circumstances with its own resources, without incurring high costs or experiencing a loss of profitability. The following variables are considered to minimize liquidity risk: volatility of deposits, debt levels, liability structure, asset liquidity, availability of financing, and general effectiveness of term gaps. With the implementation of this policy, the Bank has had during the years 2013 to 2007 strict control over the liquidity index, according to the methodology established by the General Superintendence of Financial Entities (SUGEF); as well as in the use of internal models that facilitate the control of liquidity to calibrate the amount necessary to bring the business operations in order to minimize the opportunity costs associated, to the point of these reports to be automated and delivered on a weekly basis with sophisticated programs offered by a tool known as MatLab from Mathworks® The Bank has access to different sources of funding, including term deposits, the liquidity market, the foreign exchange market, standardized bond issues, and repurchase operations. The Bank periodically reviews its liquidity limits based on its expected growth in order to manage liquidity risk. Once that risk is determined, stress testing is done to help manage the risk. Information obtained during stress testing is reviewed and approved by the Risk Committee. Liquidity and financing risk is monitored daily by the Treasury Area and actual results versus approved limits are presented to and discussed monthly with the Asset and Liability Committee. The gap report (rate-sensitive assets and liabilities) in local currency presents the difference in recovered assets less matured liabilities as of December 31, 2013 of ¢829.241.807.172 (2012: ¢753.839.108.746). In foreign currency, that difference amounts to ¢337.756.311.183 (2012: ¢378.575.131.355), which shows improvements in the balances due to positive changes in interest rates, since the Bank’s assets exceed its liabilities in both currencies. With respect to term matching (sum of liquidity of assets and liabilities), as of December 2013, the total in local and foreign currency is ¢284.668.286.399 (2012: ¢299.447.134.417) and ¢26.906.204.983 (2012: ¢11.305.975.390), respectively. This demonstrates that the Bank has the necessary liquidity to meet its current liability commitments.

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BANCO DE COSTA RICA


(Continued)

Liquidity management is evaluated periodically by updating six-month projected cash flows on a daily basis (which is being computerized using an in-house application, providing lower operational risk in data management) and preparing the one-month and three-month term matching report. The Bank also uses the Miller-Orr cash balance optimization model prepared jointly by Financial Risk Management and the Bank’s Treasury on a semimonthly basis.

In essence the model raises the determination of the upmost point of return that shows how to provide local and foreign currency cash through the minimization of costs, not been possible to estimate cash flows due to the contingency of both currencies quotations. Treasury funds fluctuate up to the upper limit at which point the purchase of securities brink the balance back to regular level. When fluctuations bring cash balances down for the entity to cash investments to recover the balance. Results of those operations are fortnight monitored by the Treasury and the results are present to the Assets and Liabilities Committee to monitor liquidity and to review the limits when necessary These elements are considered in the liquidity management policies, which are extensively followed by the Treasury and Marketing Risk Management. The models are adjusted for the volatility of the inputs that feed cash flows, such as checking and savings accounts. As of December 31, 2013, the Bank has a one-month term matching adjusted for volatility of 1,47 times (2012: 1,63 times). Normal levels have thus been maintained given that applicable regulations require a level of 1 time or higher.

This indicator has decreased inter annually by -10,08% (2012: increased a 18,98%), which evidences the efforts from the Treasury to increase the liquidity to less than a month, without inconvenience of keeping normal levels required by the regulator. It is noteworthy that the use of Eurobonds in the amount of US$500 million allowed the restructuring of short-term liabilities to long-term, providing more freedom to manage three month matching of terms. This change results from inter annual increase in the maturities of 30-day liabilities in foreign currency, increases in the maturities of demand liabilities in local currency, and increases in obligations with the public in local currency for ¢26.368 million, (2012: increased of ¢136.950 million), ¢168.778 million (2012: increased of ¢62.682 million), and ¢120.251 million (2012: increased of ¢57.748 million), respectively. The latter two items in foreign currency increased by ¢61.541 million (2012: increased of ¢38.422 million) and ¢14.636 million (2012: increased of ¢43.230 million), respectively. Additionally, recovery of 30-day assets in local

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BANCO DE COSTA RICA


(Continued)

currency increased inter annually by ¢91.855 million (2012: increased of ¢185.158 million), and the recovery of demand assets in foreign currency increased by ¢19.545 million (2012: increase of ¢35.509 million), which explains the results obtained by the December 2011 close. These variations in the items used to calculate the indicator of the CAMELS table evidence liquidity close to regulatory limits, as the numerator components have increased by 22,47% (2012: increased 64,21%) versus an inter annual increase of 36,20% (2012: increased 38,16%) in the denominator components. This suggests stricter monitoring of liquidity management by the Bank. As of December 31, 2013, the three-month matching of terms adjusted for volatility is 0,97 times (2012: 0,95 times) which is equivalent to a decrease of 2,46%.(2012: increase of 3,23). Accordingly, the level is normal, pursuant to regulations that define “normal” as 0,85 times or greater. This increased in the indicator is the result of an inter annual increase in the numerator of 23,69% (2012: increased of 68,62%) and an increase in the denominator 20,72% (2012: increase of 74,24%) behaviors that draw attention to the study period justifying the figures obtained, since the growth of liabilities is 2.97% greater than the assets. Those indicators have been sensitized with computer techniques and stress testing that weekly monitor the behavior of liquidity according to terms (in two installments) to avoid deviations according to CAMELS.

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BANCO DE COSTA RICA


The Bank´s assets and liabilities mature as follows: As of December 31, 2013

Demand 1 to 30 days 31 to 60 days 61 to 90 days 91 to 180 days 181 to 365 days More than 365 days

More than 30 days

past due Total

Cash and due from banks ¢ 116,077,230,690 - - - - - - - 116,077,230,690

Cash reserve-BCCR 202,741,181,028 48,620,992,502 31,152,296,961 25,109,280,686 41,287,243,878 26,032,333,154 4,251,937,029 - 379,195,265,238

Investments - 98,289,431,564 15,280,178,227 54,055,026,573 96,185,091,163 175,784,763,758 167,435,592,833 - 607,030,084,118

Interest on investments - 872,729,063 353,670,241 1,570,149,677 1,497,810,645 252,955,467 3,352,146 - 4,550,667,239

Loan portfolio - 39,065,126,002 27,880,854,913 41,454,538,855 80,584,807,888 1,902,500,096,528 62,948,081,844 34,036,702,625 2,188,470,208,655

Interest on loans - 9,680,713,025 - - - 4,741,783,862 2,331,154,751 1,814,062,288 18,567,713,926

¢ 318,818,411,718 196,528,992,156 74,667,000,342 122,188,995,791 219,554,953,574 2,109,311,932,769 236,970,118,603 35,850,764,913 3,313,891,169,866

Obligations with public ¢ 1,296,531,328,725 311,038,937,908 199,836,043,890 160,899,068,543 264,662,319,152 166,133,904,173 27,008,681,853 - 2,426,110,284,244

Obligations with financial

entities 147,849,893,322 12,066,798,747 25,091,163,957 30,070,815,918 33,051,937,326 42,879,581,602 269,673,372,356 - 560,683,563,228

Charges payable - 2,875,789,926 6,916,741,615 1,790,082,311 2,186,830,042 1,492,794,991 260,592,124 - 15,522,831,009

1,444,381,222,047 325,981,526,581 231,843,949,462 192,759,966,772 299,901,086,520 210,506,280,766 296,942,646,333 - 3,002,316,678,481

¢ (1,125,562,810,329) (129,452,534,425) (157,176,949,120) (70,570,970,981) (80,346,132,946) 1,898,805,652,003 (59,972,527,730) 35,850,764,913 311,574,491,385

Assets

Liabilities

Brechas de activos y pasivos

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BANCO DE COSTA RICA


As of December 31, 2012


More than 30 days

past due Total

Cash and due from banks ¢ 88,777,920,917 - - - - - - - 88,777,920,917

Cash reserve-BCCR 181,805,709,174 38,587,062,328 25,336,212,549 27,808,021,083 44,278,370,977 32,564,582,215 3,755,388,609 - 354,135,346,935

Investments - 184,176,741,969 17,712,168,738 12,387,249,707 39,457,623,224 52,545,856,785 142,468,991,445 - 448,748,631,868

Interest on investments - 838,642,651 358,497,760 1,067,154,475 783,613,361 17,983,541 100,209 - 3,065,991,997

Loan portfolio - 39,141,647,797 25,782,727,246 23,360,330,726 78,613,992,043 1,700,368,855,445 125,770,372,309 28,148,980,399 2,021,186,905,965

Interest on loans - 11,027,095,996 - - - 6,046,680,815 - 2,919,139,937 19,992,916,748

¢ 270,583,630,091 273,771,190,741 69,189,606,293 64,622,755,991 163,133,599,605 1,791,543,958,801 271,994,852,572 31,068,120,336 2,935,907,714,430

Obligations with public ¢ 1,190,916,229,349 252,188,584,324 165,619,816,075 182,216,096,523 290,201,362,434 214,729,635,469 24,809,186,372 - 2,320,680,910,546


entities 23,145,740,055 27,935,715,455 20,978,486,313 41,831,663,171 85,744,121,570 66,475,412,430 22,634,936,553 - 288,746,075,547

Charges payable - 3,512,452,572 1,947,611,041 2,797,886,176 4,034,072,192 3,106,962,211 328,634,337 - 15,727,618,529

1,214,061,969,404 283,636,752,351 188,545,913,429 226,845,645,870 379,979,556,196 284,312,010,110 47,772,757,262 - 2,625,154,604,622

¢ (943,478,339,313) (9,865,561,610) (119,356,307,136) (162,222,889,879) (216,845,956,591) 1,507,231,948,691 224,222,095,310 31,068,120,336 310,753,109,808

Assets

Liabilities

Assets and liabilities spread

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BANCO DE COSTA RICA


(Continued)

Market risk

Market risk analyzes interest rate, currency, and price risks, arising on the financial assets that comprise the portfolio, as well as country risk. As a result of considerations related to the banking system as a whole, the Bank is required to apply the following definitions of country risk and price risk included in article 3 of SUGEF Directive 2-10: Country risk: Risk assumed by holding or committing resources in a foreign

country and resulting from potential difficulties on the recovery of such resources due to factors affecting the foreign country as a whole. Country risk comprises “sovereign risk” and “transfer risk”. Transfer risk is defined as the possibility that official restrictions will prevent a debtor from honoring the debt commitments, even though sufficient funds are available. Sovereign risk is assumed on loans extended to a State or Government and is the risk of difficulties arising from enforcing the repayment of debt by the borrower or other party responsible for payment due to sovereignty.

Price risk: Possibility of monetary loss due to adverse changes in market prices

of financial instruments. The objective of market risk management is to manage and control market risk exposure within acceptable parameters, while optimizing the return. Market risk is the risk of potential losses due to an adverse change in the aforementioned market variables that determine the Bank’s value. VaR is also tracked by applying the RiskMetrics methodology to the Bank’s investment portfolio using the new SAP-TRM IT platform, which permits consolidating the correlations of the different risk factors, such as yield curves and foreign exchange rates, in order to determine a more robust VaR.

Market risk management

For purposes of market risk management, the Bank uses the SAP-TRM system, which offers several methodologies for VaR analysis (delta normal, with the use of other methods such as historical simulation and monte carlo). VaR is defined as the maximum expected loss over an objective time horizon, within a given confidence interval. Specifically, follow-up is provided by calculating exposure to market risk. Of the methodologies offered by the IT system, the delta-normal methodology is the most frequently used, which applies a one-month holding period (21 business days) and a confidence level of 99%.

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BANCO DE COSTA RICA


(Continued)

This permits more precise calculations since it shows the distribution of expected losses and determines the value of those losses. It also shows the greatest loss scenarios and thus makes it possible to hedge part of the unexpected risk. The analysis is more robust if a region of confidence is obtained, which provides certainty as to the worst loss in the market value of the portfolios. However the results presented are still preliminary because the Bank is currently gathering a representative sample for back-testing purposes. In applying the stress testing with SPA-TRM to the whole portfolio of the Banks funds beneath four different scenarios, the following chart show results as of December 31, 2013: The following chart shows the information at December 31, 2013:

The first scenario applies 100 base points to the proceeds. The second scenario moves on short term nodes between 150 and 175 base point. In the third scenario on stress 2,5% variations on the rate of exchange applies. Finally in the fourth scenario second and third scenario are simultaneously applied. By stress testing the investment portfolio for the different scenarios, the portfolio could present losses between 0.79% and 2.00%.

Scenarios Market value Stress market value Difference Variation

Scenario 1: Mov. curve 100 points base ¢ 578,950,460,908 ¢ 571,969,597,304 ¢ (6,980,863,604) -1.206%

Scenario 2: Mov. Curve short term 578,950,460,908 574,382,955,771 (4,567,505,137) -0.789%

Scenario 3: Variation TC 2.5% 578,950,460,908 591,482,901,215 12,532,440,307 2.165%

Scenario 4: Scenario 2 + Scenario 3 ¢ 578,950,460,908 ¢ 589,073,700,630 ¢ 10,123,239,722 1.749%

Investment portfolio of stress scenario

Investment Portfolio

VaR ¢ 870,283,175

Capital requirement ¢ 5,221,699,052

Risk price 52,217

Observation 25 (0.0021395000)

Exchange rate UDES ¢ 816.61000

Exchange rates USD ¢ 495.01000

Nominal value investment portfolio ¢ 399,424,645,310

Market value investment portfolio ¢ 406,769,377,553

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BANCO DE COSTA RICA


(Continued)


The Bank’s Board of Directors has determined that market risk should be managed and monitored directly by the Risk Committee, which is comprised of representatives of the entities of the financial conglomerate.

Market risk exposure

The Bank and subsidiaries use VaR limits to monitor the price risk of their investment portfolios. The structure of the VaR limits is subject to review and approval by the Board of Directors. Those limits are based on the corresponding limits of the trading portfolio. VaR is measured at each month-end. Reports on the VaR limits are sent to the Risk Committee and the Asset and Liability Committee.

Interest rate risk

Interest rate risk, as defined in SUGEF Directive 2-10, is the risk of monetary losses due to adverse variations in interest rates.

The Bank is sensitive to this type of risk due to the mix of rates and terms for both assets and liabilities. This sensitivity is mitigated by managing variable rates and ensuring matched asset and liability positions. The effect may vary due to a number of factors, including prepayments, late payments, fluctuations in interest rates, and foreign exchange rate variations.

Scenarios Market value Stress market value Difference Variation

Scenario 1: Mov. curve 100 points base ¢ 431,368,003,511 ¢ 425,806,086,283 ¢ (5,561,917,228) -1.289%

Scenario 2: Mov. Curve short term 431,368,003,511 428,781,735,954 (2,586,267,557) -0.600%

Scenario 3: Variation TC 2.5% 431,368,003,511 422,567,831,492 (8,800,172,019) -2.040%

Scenario 4: Scenario 2 + Scenario 3 ¢ 431,368,003,511 ¢ 425,494,240,403 ¢ (5,873,763,108) -1.362%

Investment portfolio of stress scenario

VaR ¢ 669,820,706

Capital requirement ¢ 4,018,924,237

Risk price 40,189

Observation 25 (0.0031510666)

Exchange rate UDES ¢ 785.76000

Exchange rates USD ¢ 492.83000

Nominal value investment portfolio ¢ 209,159,121,795

Market value investment portfolio ¢ 212,569,517,283

Investment Portfolio

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BANCO DE COSTA RICA


(Continued)

The Bank’s Risk Committee periodically monitors this risk in the Strategic/Tactic Risk Committee. SUGEF Directive 24-00 “Regulations for Determining the Economic and Financial Status of Regulated Entities” defines interest rate risk as exposure to losses due to fluctuations in interest rates when asset and liability terms are mismatched and the entity does not have the required flexibility to make a timely adjustment. According to SUGEF Directive 24-00, the interest-rate sensitivity of assets and liabilities is evaluated by determining term gaps and the interest rate risk indicator. As of December 31, 2013, the interest rate risk indicator in local currency was 1,07% (2012: 0,86%), which means that the Bank is still at a normal level (applicable regulations require a value of 5% or less). In foreign currency, this indicator is on the order of -0,02% (2012: 0,11%). The Bank is getting further from the 5% maximum due to growing local interest rates and the current historical lows of the U.S. dollar, which value may decrease in the second half of 2014.

The effect in the financial margin as of December 31, 2012 is shown in the following chart, under changes in interest rates:

The impact of variations in interest rates in the Bank’s financial margin as of December 2012 is as follows:

Colones U.S. dollars Consolidated

Impact on balances 966 3.23 2,994

Impact on rates 1,549 (25.00) 1,048

Combined impact 94 (2.00) 8

Change in net income 2,421 3.00 4,034

Change in net financial margin

-in millions of colones-

Colones U.S. dollars Consolidated

Impact on balances (806) (0) (911)

Impact on rates 2,413 (6.60) (648)

Combined impact 154 (0.06) 154

Change in net income 1,453 -6.71 (1,713)

Change in net financial margin

-in millions of colones-

- 89 -

As of December 31, 2013, interest rate for assets and liabilities are matched as follows:

Effective

rate 1 to 30 days 31 to 90 days 91 to 180 days 181 to 360 days 361 to 720 days

More than 720

days Total

Colones

Assets

Investments 5.79% ¢ 89,797,599,851 17,682,116,917 78,165,675,817 100,890,230,537 61,453,639,945 101,269,838,501 449,259,101,568

Loan portfolio 11.18% 890,498,303,468 43,212,606,234 6,480,236,607 27,784,774,360 36,893,756,968 144,886,074,319 1,149,755,751,956

Total recovered assets (*) 980,295,903,319 60,894,723,151 84,645,912,424 128,675,004,897 98,347,396,913 246,155,912,820 1,599,014,853,524

Liabilities

Obligations with the public 6,383,941,858 2,996,027,178 2,794,755,783 339,162,612 28,622,707 33,855,737 12,576,365,875

Demand 2.11%

Term 6.46%


entities 3.79% 225,344,419,581 239,638,199,599 161,937,828,345 118,678,553,638 5,372,383,442 6,225,295,872 757,196,680,477

Total matured liabilities (*) 231,728,361,439 242,634,226,777 164,732,584,128 119,017,716,250 5,401,006,149 6,259,151,609 769,773,046,352

¢ 748,567,541,880 (181,739,503,626) (80,086,671,704) 9,657,288,647 92,946,390,764 239,896,761,211 829,241,807,172

U.S. dollars

Assets

Investments 2.38% ¢ 7,805,720,014 33,486,391,474 9,197,045,606 1,872,596,481 14,743,822,800 27,914,707,179 95,020,283,554

Loan portfolio 6.30% 557,598,245,097 27,960,188,268 21,688,060,862 20,367,671,692 64,548,028,729 99,423,474,203 791,585,668,851

Total recovered assets (*) 565,403,965,111 61,446,579,742 30,885,106,468 22,240,268,173 79,291,851,529 127,338,181,382 886,605,952,405

Liabilities

Obligations with the public 513,531,294 47,115,893,525 847,836,967 231,683,588 7,024,364 2,093,926 48,718,063,664

Demand 0.23%

Term 2.84%


entities 0.09% 9,067,365,236 42,432,057,549 103,768,356,226 73,030,622,609 3,052,390,438 268,780,785,500 500,131,577,558


¢ 555,823,068,581 (28,101,371,332) (73,731,086,725) (51,022,038,024) 76,232,436,727 (141,444,698,044) 337,756,311,183

(*) Rate-sensitive



- 90 -

As of December 31, 2013, interest rate for assets and liabilities are matched as follows:

Effectiv

e rate 1 to 30 days 31 to 90 days 91 to 180 days 181 to 360 days 361 to 720 days

More than 720

days Total

Colones

Assets

Investments 7.51% ¢ 165,419,641,091 25,286,591,698 23,173,969,945 29,344,579,807 33,102,675,777 120,915,192,458 397,242,650,776

Loan portfolio 13.09% 849,739,721,563 104,080,612,389 5,179,394,374 9,646,021,733 30,942,274,020 131,860,965,900 1,131,448,989,979

Total recovered assets (*) 1,015,159,362,654 129,367,204,087 28,353,364,319 38,990,601,540 64,044,949,797 252,776,158,358 1,528,691,640,755

Liabilities

Obligations with the public 7,155,784,155 2,348,657,973 2,953,968,817 831,031,514 64,185,235 18,680,770 13,372,308,464

Demand 2.02%

Term 9.88%


entities 0.00% 170,334,693,648 226,820,494,636 190,013,851,908 167,066,284,533 3,732,781,745 3,512,117,075 761,480,223,545


¢ 837,668,884,851 (99,801,948,522) (164,614,456,406) (128,906,714,507) 60,247,982,817 249,245,360,513 753,839,108,746

U.S. dollars

Assets

Investments 2.95% ¢ 15,430,521,843 4,517,255,413 19,567,517,275 18,082,141,327 7,399,019,618 33,186,455,614 98,182,911,090

Loan portfolio 6.13% 453,826,586,744 81,193,807,927 10,912,232,677 10,855,455,539 39,111,951,582 86,667,199,181 682,567,233,650

Total recovered assets (*) 469,257,108,587 85,711,063,340 30,479,749,952 28,937,596,866 46,510,971,200 119,853,654,795 780,750,144,740

Liabilities

Obligations with the public 542,122,319 48,697,249,320 859,429,068 277,140,917 17,708,014 1,022,731 50,394,672,369

Demand 0.29%

Term 2.98%


entities 3.79% 22,109,720,053 60,145,454,894 144,285,916,190 87,555,719,200 577,464,712 37,106,065,967 351,780,341,016

Total matured liabilities (*) 22,651,842,372 108,842,704,214 145,145,345,258 87,832,860,117 595,172,726 37,107,088,698 402,175,013,385

¢ 446,605,266,215 (23,131,640,874) (114,665,595,306) (58,895,263,251) 45,915,798,474 82,746,566,097 378,575,131,355

(*) Rate-sensitive



- 91 -

BANCO DE COSTA RICA


(Continued)

Currency risk Pursuant to SUGEF Directive 2-10, currency risk is the risk of monetary losses due to adverse changes in foreign exchange rates. This risk also arises when net foreign exchange differences do not proportionally offset the changes in the value of assets denominated in foreign currency, causing a decrease in an entity’s capital adequacy indicator. Currency risk may also result in increased credit risk in the event of default by borrowers that hold loans in a foreign currency in which they do not generate cash flows, as a result of variations in foreign exchange rates. In October 2006, BCCR introduced a foreign exchange adjustable band system. Since then, the exchange rate had remained consistently at the floor of that band. However, with the significant band adjustment that occurred starting May 2008, the Bank’s management has decided to define the foreign currency position through cap and floor with the purpose of protecting the Bank from any variation in the exchange rate of the defined hall/”corridor” and, meanwhile, is watching developments in the foreign exchange market. Currently this position has been eliminated given the high uncertainty from the political point of view as to the decision of moving the system floor. Through written communication CCAP 02-13 of January 16, 2013´s meeting, the Assets and Liabilities Corporate Committee, in its Article 9 decided by determined period to skip this limit so the Treasury can count on an own minimum level position in order to prevent exchange losses in the case of a variation of the band floor. The Bank’s foreign currency position is monitored daily by the Market Risk Area. As of December 31 2013, the Bank is in a normal level of currency risk, in accordance with the provisions of regulations, since the indicator is a 0,30% (0,51% as of December 31 2012), and consideration of “normal” establishes the indicator must be less or equal to a 5%. Consideration that appeals, as the Bank has shown a better performance in the management of this risk, since learning which has resulted or materialized in the last years under the new exchange rate regime. The above is reflected in the Monte Carlo simulations prepared by Financial Risk Management as of December 31, 2013, where in the event of a variation in the exchange rate of 0,295% (2012: 0,29%) and applying the Garch methodology to this variable, equity sensitive to this type of risk would be reduced by ¢1.920.065.713 (2012: ¢1.648.684.153), with a confidence level of 99% over a period of one year.

- 92 -

BANCO DE COSTA RICA


(Continued)

Monetary assets and liabilities denominated in U.S. dollars are as follows:

Monetary assets and liabilities in foreign currency are valued by using the reference buy rate established by BCCR on the last business day of each month. As of December 31, 2013, that rate was ¢495,01 per US$1.00 (2012: ¢502,07 per US$1.00). Net exposure is not hedged. However, the Bank considers its position to be acceptable since it can buy or sell U.S. dollars in the market when necessary.

2013 2012

Assets:

Cash and due from banks US$ 325,600,842 279,067,325

Investments in financial instruments 338,847,936 170,514,777

Loan portfolio 1,818,388,789 1,508,220,810

Accounts and accrued interest receivable 181,936 204,347

Investments in other companies 86,851,222 79,472,726

Other 5,588,153 5,926,811

Total activos 2,575,458,878 2,043,406,796

Liabilities:

Obligations with the public 1,482,277,373 1,454,571,204

Other financial obligations 953,763,890 489,430,831

Other accounts payable and provisions 34,181,858 8,819,044

Other 2,740,442 7,443,744

Subordinated obligations 30,067,500 30,063,281

Total liabilities 2,503,031,063 1,990,328,104

Net position (excess of monetary assets

over monetary liabilities) US$ 72,427,815 53,078,692

December 31

- 93 -

In accordance with SUGEF regulation, the terms of the Bank´s most important accounts in U.S. dollars as of December 31, 2013 are matched as follows:


More than 30 days

past due Total

Cash and due from banks US$ 100,079,106 - - - - - - - 100,079,106

Cash reserve-BCCR 115,194,504 28,562,396 23,083,458 17,103,144 28,957,312 11,797,503 823,418 - 225,521,735

Investments - 46,366,004 20,326,490 71,712,798 27,992,976 103,869,197 66,749,040 - 337,016,505

Interest on investments - 241,663 295,421 764,587 382,809 140,180 6,772 - 1,831,432

Loan portfolio - 42,930,958 29,492,029 42,863,877 73,050,736 1,524,257,704 98,742,312 7,506,238 1,818,843,854

Interest on loans - 5,540,039 - - - - 1,342,924 220,540 7,103,503

US$ 215,273,610 123,641,060 73,197,398 132,444,406 130,383,833 1,640,064,584 167,664,466 7,726,778 2,490,396,135

Obligations with public US$ 755,836,549 187,409,138 151,459,668 112,220,467 190,000,340 77,408,068 5,402,773 - 1,479,737,003


entities 174,589,316 5,430,109 39,849,618 51,603,149 51,960,511 75,528,657 542,671,364 - 941,632,724

Charges payable - 780,640 11,368,850 1,394,576 758,547 349,993 18,930 - 14,671,536

930,425,865 193,619,887 202,678,136 165,218,192 242,719,398 153,286,718 548,093,067 - 2,436,041,263

US$ (715,152,255) (69,978,827) (129,480,738) (32,773,786) (112,335,565) 1,486,777,866 (380,428,601) 7,726,778 54,354,872

Assets

Liabilities


- 94 -

In accordance with SUGEF regulation, the terms of the Bank´s most important accounts in U.S. dollars as of December 31, 2012 are matched as follows:


More than 30 days

past due Total

Cash and due from banks US $ 52,525,608 - - - - - - - 52,525,608

Cash reserve-BCCR 120,792,295 31,101,213 20,106,441 17,906,398 27,933,917 8,195,804 505,648 - 226,541,716

Investments - 30,318,987 11,401,963 2,508,460 36,940,648 33,978,386 54,320,441 - 169,468,885

Interest on investments - 103,440 440,803 155,969 345,681 - - - 1,045,893

Loan portfolio - 26,403,798 25,731,873 20,714,157 77,066,875 1,186,768,293 165,859,612 8,086,927 1,510,631,535

Interest on loans - 4,870,414 - - - - - 1,436,709 6,307,123

US $ 173,317,903 92,797,852 57,681,080 41,284,984 142,287,121 1,228,942,483 220,685,701 9,523,636 1,966,520,760

Obligations with public US $ 774,359,967 199,379,725 128,895,831 114,792,073 179,075,222 52,540,623 3,241,544 - 1,452,284,985


entities 20,407,964 43,155,299 33,500,000 73,090,566 154,337,785 116,939,695 43,180,084 - 484,611,393

Charges payable - 879,996 902,123 2,084,002 2,270,292 958,372 10,872 - 7,105,657

794,767,931 243,415,020 163,297,954 189,966,641 335,683,299 170,438,690 46,432,500 - 1,944,002,035

US $ (621,450,028) (150,617,168) (105,616,874) (148,681,657) (193,396,178) 1,058,503,793 174,253,201 9,523,636 22,518,725Assets and liabilities spread

Assets

Liabilities

- 95 -

BANCO DE COSTA RICA


(Continued)

The Bank incurs currency risk when the value of its dollar-denominated assets and liabilities is affected by exchange rate variations, which is recognized in the income statement. As of December 31, 2013 and 2012, the financial statements show a net foreign exchange gain of ¢1.017.839.114 and ¢1.593.650.278, respectively. The sensitivity analysis for currency risk is mainly considered for measuring the position in a specific currency. The analysis consists of verifying each month how much the position in the functional currency would represent with respect to the currency it would be converted into and, therefore, the mix of the currency risk. The analysis performed by the Bank is described below: As of December 31, 2013, the fair value of the Bank’s own investments is shown below:

0.30%

Gap 82,870,584

VaR Daily ¢ 120,952,771

VaR Annual ¢ 1,920,065,713

Exchange risk index 4.68%

Exchange rate USD 495.01000

0.29%

Gap 71,130,119

VaR Daily ¢ 103,857,340

VaR Annual ¢ 1,648,684,153

Exchange risk index 4.62%

Exchange rate USD 502.07000

Garch Methodology


Exchange Currency risk

Garch Methodology


Exchange Currency risk

- 96 -

BANCO DE COSTA RICA


(Continued)

As of December 31, the fair value of the Bank’s own investments is shown below:

As of December 31, 2013, the fair value of the Bank’s investments is shown below:

As of December 31, 2013, the share of investment funds in the Bank’s portfolio is as follows:

Colones U.S. dollars EUR DU

2013 ¢ 393,040,406,399 US$ 332,548,549 € 3,251,078 47,163,137,648

2012 ¢ 311,006,748,156 US$ 169,468,885 - 52,656,640,726

Percentage variation 26.38% 96.23%

Portfolio of Own Funds

December 31

Colones U.S. dollars

U.S. dollars

expressed in colones

Percentage of

investments in U.S.

dollars

BIPANCD$ - US$ 60,000,000 ¢ 29,700,600,000 18.04%

CAMEB bca14 - 1,143,354 565,971,604 0.34%

Total ¢ - US$ 61,143,354 ¢ 30,266,571,604 18.38%

XRT 495.01

Fair Value of Foreign Investments


Colones Share Price Fair value

Amount expressed

in colones

BCRSF - inm3 569 3,010,000 ¢ 1,712,690,000 ¢ 1,712,690,000

PSFI - FI006 1,019,020,786 2,247 ¢ 2,289,739,707 ¢ 2,289,739,707

4,002,429,707

U.S. dollars

BCRSF - F1022 10,274,134 1 US$ 12,359,783 ¢ 6,118,216,252

INTSF - inm1$ 892 2,900 2,586,800 1,280,491,868

INTSF - inm2$ 637 4,240 2,700,880 1,336,962,609

US$ 17,647,463 ¢ 8,735,670,729

Total 12,738,100,436

XRT 495.01

Share of Investment Funds

- 97 -

BANCO DE COSTA RICA


(Continued)

As of December 31, 2012, the fair value of the Bank’s investments is shown below:

As of December 31, 2012 the share of investment funds in the Bank’s portfolio is as follows:

Colones

U.S. dollars

expressed in colones DU Total

Instruments ¢ 306,636,728,845 ¢ 80,327,968,783 ¢ 52,656,640,726 ¢ 439,621,338,354

Funds 4,370,019,342 4,757,274,172 - 9,127,293,514

Total ¢ 311,006,748,187 ¢ 85,085,242,955 ¢ 52,656,640,726 ¢ 448,748,631,868

XRT 502.07

XRT DU 787.8080

Fair Value of Local Investments


Colones U.S. dollars

U.S. dollars

expressed in colones

Percentage of

investments in U.S.

dollars

CAFOM caf13 - US$ 101,551 ¢ 50,985,711 0.06%

CAMEB bca14 - 1,174,217 589,539,149 0.69%

CAMEB cam13 - 1,674,864 840,898,808 0.99%

EIB bek13 - 1,002,720 503,435,630 0.59%

KFW bkf13 - 1,005,740 504,951,882 0.59%

Total ¢ - US$ 4,959,092 ¢ 2,489,811,180 2.92%

XRT 502.07

Fair Value of Foreign Investments


Colones Share Price Fair value

Amount expressed

in colones

BCRSF - inm3 746 2,925,000 ¢ 2,182,050,000 ¢ 2,182,050,000

PSFI - FI006 1,001,076,406 2 ¢ 2,187,969,342 2,187,969,342

4,370,019,342

U.S. dollars

INTSF - inm1$ 892 2,950 US$ 2,631,400 1,321,146,998

INTSF - inm2$ 637 4,270 2,719,990 1,365,625,379

BCRSF - F1022 3,494,856 1 4,123,931 2,070,501,795

US$ 9,475,321 ¢ 4,757,274,172

Total 9,127,293,514

XRT 502.07

Share of Investment Funds

- 98 -

BANCO DE COSTA RICA


(Continued)

Operational risk

Operational risk is the risk of direct or indirect loss associated with the Bank’s processes, personnel, technology, and infrastructure, and from external factors other than credit, market, and liquidity risks, such as those arising from legal and regulatory requirements and generally accepted standards of corporate behavior. This is an inherent risk for the sector in which the Bank operates and for all of its main activities. This risk may take various forms, particularly failures, errors, business interruptions, or inappropriate employee conduct, and may result in financial losses, sanctions imposed by regulatory authorities, or damage to the Bank’s reputation.

The Bank’s objective is to manage operational risk in order to minimize financial losses and damage to the Bank’s reputation, as well as to achieve efficient and effective processes and optimize its internal control system.

The primary responsibility for the development and implementation of controls to address operational risk is assigned to senior management in each business and support unit. Periodic reports are submitted to the Risk Committee and, where appropriate, to the Executive Committee and General Board of Directors. This responsibility is supported by the development of standards or specific regulations for the management of operational risk included in the following areas: - Corporate Policies for Integrated Risk Management. - Corporate Regulation for Integrated Risk Management. To manage operational risk both qualitative and quantitative methods are used. The first are performed by: - Assessment of risks by strategic objectives - Assessment of substantial process risks These assessments are made based on the framework, which involves development of management plans for the risks identified, as well as informing the appropriate committees of the results of the assessments and follow-up.

The Bank has also defined:

appropriate segregation of duties, including the independent authorization of transactions.

requirements for effective reconciliation and monitoring of transactions.

- 99 -

BANCO DE COSTA RICA


(Continued)

compliance with regulatory and legal requirements. documentation of controls and procedures; periodic assessments of operational risk management and effective controls and

procedures for the risks identified. monthly reporting of operational losses and proposed remedial action. development of the contingency plan. development of training activities for Bank personnel. application of standards of business ethics. development of risk mitigation activities, including security policies. communication and application of corporate conduct guidelines. risk mitigation, including insurance where this is effective; comprehensive planning for resuming activities, including plans to restore key

operations and internal and external support to ensure that services are not interrupted; and

These policies established by the Bank are supported by a program of periodic reviews undertaken by Internal Audit. The results of Internal Audit reviews are discussed with management of each business unit, with summaries submitted to the Bank’s Audit Committee and Risk Department. In turn, the quantitative assessment of operational risk is made through the Exponential Smoothing Methodology, which projects losses. A maximum limit has been issued for operational risk losses with respect to equity. Capital management: Regulatory capital Based on the CAR defined in recent SUGEF regulations, as of December 31, 2013, the Bank’s risk-weighted assets amount to ¢2.269.715 million (2012: ¢2.012.782 million). The Bank’s capital must always comply with the CAR established by SUGEF, which require that banks maintain a ratio of at least 10% at all times. That ratio is calculated by dividing the Bank’s base capital by total risk-weighted exposures. Management periodically monitors these requirements and reports to the Board of Directors on compliance. As of December 31, 2013 and 2012, the Bank’s CAR is above the minimum ratio 10% required by applicable regulations. A directive has been issued by the Board of Directors requiring that the CAR not fall below 11%.

- 100 -

BANCO DE COSTA RICA


(Continued)

The Bank’s tier II capital is as follows:

2013 2012

Tier I capital ¢

Ordinary paid-up capital 112,052,881,182 112,052,881,182 Legal reserve 162,853,210,411 145,418,725,491

Acquired goodwill (219,133,343) (373,815,703)

274,686,958,250 257,097,790,970

Tier II capital

Adjustment for revaluation of real Property 20,427,559,287 20,427,784,644


available for-sale investments (725,370,788) (4,024,733,840)


restricted financial instruments (488,507,364) (83,822,385)

Adjustment for revaluation of

investments in other companies 3,383,069,597 4,834,178,056

Prior period retained earnings 21,552,740,443 9,656,096,274

Results for the year 13,894,615,701 17,701,552,364

Profit (loss) for the year 15,320,327,216 14,209,086,541

Subordinated debt instruments 14,850,300,000 15,062,100,000

Development Financing Fund 9,255,323,171 6,675,813,355

97,470,057,263 84,458,055,009

Deductions

Investments in other companies (72,576,370,018) (63,483,952,197)

¢

Total regulatory capital 299,580,645,495 278,071,893,782

December 31

- 101 -

BANCO DE COSTA RICA


(Continued)

(32) Financial information of the Development Financing Fund

As of December 31, the Bank presents the following financial information as manager of its Development Financing Fund (DFF:

2013 2012

ASSETS

Loan portfolio 10,866,818,474 8,245,980,046

Current 9,291,480,967 7,844,154,331

Past due 1,497,297,276 401,541,593

Legal collections 97,842,775 50,215,377

Accrued interest receivable 94,180,141 64,546,169

(Allowance for loan impairment) (113,982,685) (114,477,424)

TOTAL ASSETS 10,866,818,474 8,245,980,046

LIABILITIES

Accounts payable and provisions 577,325,630 955,809,895

Other sundry accounts payable 577,325,630 955,809,895

Other liabilities 2,079,885 430,654

Deferred income 2,079,885 430,654

TOTAL LIABILITIES 579,405,515 956,240,549

EQUITY

Contributions from Banco de Costa Rica 8,158,223,302 6,192,639,628

Profit from prior year 1,097,099,869 483,173,727

Profit for current year 1,032,089,788 613,926,142

TOTAL EQUITY 10,287,412,959 7,289,739,497

TOTAL LIABILITIES AND EQUITY 10,866,818,474 8,245,980,046

OTHER DEBIT MEMORANDA ACCOUNTS

Own debit memoranda accounts 917,376,712 470,459,844

DEVELOPMENT FINANCING FUND

BALANCE SHEET

As of December 31

(In colones)

Financial information

- 102 -

BANCO DE COSTA RICA


(Continued)

2013 2012

FINANCE INCOME

Investments in financial instruments - 261,354,291

Loan portfolio 1,061,048,100 431,236,898

Gain on foreign exchange differences - 3,221,839

TOTAL FINANCE INCOME 1,061,048,100 695,813,028

Financial expenses

Foreign exchange loss 2,441,322 -

Total financial expenses 2,441,322 -

Allowance for loan losses 23,193,917 192,044,499

Recovery of assets and decrease in allowances 23,681,735 107,173,449

FINANCE INCOME 1,059,094,596 610,941,978

OTHER OPERATING INCOME

Other operating income 8,578,704 2,984,164

TOTAL OTHER OPERATING INCOME 8,578,704 2,984,164

Other operating expenses

Other operating expenses 35,583,512 -

Total other operating expenses 35,583,512 -

GROSS OPERATING INCOME 1,032,089,788 613,926,142

PROFIT FOR THE YEAR 1,032,089,788 613,926,142


INCOME STATEMENT

For the year ended December 31

(In colones)


- 103 -

BANCO DE COSTA RICA


(Continued)

Loan portfolio corresponding to the Development Financing Fund

The information contained in notes a) through g) below corresponds to financial information.

a) Loan portfolio by sector

The loan portfolio by sector is as follows:

2013 2012

Sector

Agriculture, livestock, hunting and

related services ¢ 2,822,271,858 1,727,501,181

Fisheries and aquaculture 19,404,161 19,964,367

Manufacturing 2,493,853,136 1,799,587,935

Exploitation of mines and quarries 32,465,312 39,476,070

Trade 7,010,785 -

Services 4,552,347,453 4,015,404,405

Transport 655,606,852 626,064,553

Actividades inmobiliaria, empresariales 23,724,929 -

Construction, purchase and repair

of properties 115,282,588 -

Consumption 10,372,173 11,616,334

Hotels and Restaurants 72,922,375 56,296,456

Education 81,359,396 -

10,886,621,018 8,295,911,301

Plus accrued interest receivable 94,180,141 64,546,169

Less allowance for loan losse (113,982,685) (114,477,424)

¢ 10,866,818,474 8,245,980,046

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(Continued)

b) Loan portfolio by arrears

The loan portfolio by arrears is as follows:

c) Past due loans

Past due loans, including loans in accrual status (for which interest is recognized on a cash basis) and unearned interest on past due loans, are as follows:

December 31

2013 2012

Current ¢ 9,291,480,967 7,844,154,331

1 to 30 days 560,408,755 255,179,395

31 to 60 days 545,242,647 83,372,622

61 to 90 days 160,114,354 -

91 to 120 days 200,000,000 50,118,831

121 to 180 días 24,609,497 -

More than 181 days 6,922,023 12,870,745

Legal collections 97,842,775 50,215,377

¢ 10,886,621,018 8,295,911,301

December 31

2013 2012

Past due loans in

nonaccrual status

(5 loans on 2013 and 6 loans on 2012) ¢ 6,922,023 12,870,745

Past due loans in

accrual status ¢ 1,490,375,253 388,670,848

Total interest not collected ¢ 16,211,098 6,700,990

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(Continued)

d) Accrued interest receivable on loan portfolio

Accrued interest receivable is as follows:

e) Allowance for loan impairment

Movement in the allowance for loan losses as of December 31 is as follows:

December 31

2013 2012

Current loans ¢ 51,524,335 51,179,643

Past due loans 36,650,357 10,233,623

Loans in legal collections 6,005,449 3,132,903

¢ 94,180,141 64,546,169

Opening balance, 2013 ¢ 114,477,424

Plus:

Allowance charged to profit or loss 23,193,917

Less:

Exchange rate differential adjustment (6,921)

Reversal of allowance against income (23,681,735)

Closing balance, 2013 ¢ 113,982,685

Opening balance, 2012 ¢ 29,592,827

Plus:

Allowance charged to profit or loss 192,044,499

Exchange rate differential adjustment 13,547

Less:

Reversal of allowance against income (107,173,449)

Closing balance, 2012 ¢ 114,477,424

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(Continued)

f) Loan portfolio by type of guarantee

The loan portfolio by type of guarantee is as follows:

g) Financial instruments with credit risk exposure

December 31

2013 2012

Guarantee

Mortgage ¢ 1,465,001,576 896,138,612

Chattel mortgage 4,035,311,723 3,763,860,626

Others 5,386,307,719 3,635,912,063¢ 10,886,621,018 8,295,911,301

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(Continued)

2013 2012

Principal 10,886,621,018 8,295,911,301

Accrued interest receivable 94,180,141 64,546,169

10,980,801,159 8,360,457,470

Allowance for loans losses (113,982,685) (114,477,424)

Carrying amount ¢ 10,866,818,474 8,245,980,046

Loan portfolio

Total balance:

A1 ¢ 9,190,606,147 7,547,210,956

A2 178,728,716 293,093,325

B1 625,493,389 317,419,801

B2 220,307,859 -

C1 129,320,657 68,129,351

C2 88,665,936 4,159,749

D 344,223,452 52,954,721

E 203,455,003 77,489,567

10,980,801,159 8,360,457,470

Structural allowance (113,982,606) (114,238,317)

Carrying amount, net 10,866,818,553 8,246,219,153

Individually assessed loans

with allowance:

A1 ¢ 1,914,654,447 1,507,399,278

A2 79,636,797 191,789,749

B1 161,426,863 213,783,980

B2 166,765,153 -

C1 9,212,267 66,600,470

C2 33,570,383 -

D 118,096,646 52,954,721

E 136,400,408 73,410,569

2,619,762,964 2,105,938,767

Allowance for loan losses (113,982,606) (114,238,317)

Carrying amount, net 2,505,780,358 1,991,700,450

December 31

Direct loans

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(Continued)

December 31

2013 2012

Past due loans

without allowance:

A1 278,136,152 172,470,863

A2 20,951,909 -

B1 275,222,684 -

B2 53,542,706 -

C1 76,787,946 -

C2 51,514,773 -

D 160,635,556 -

E 44,105,666 4,078,997

Carrying amount 960,897,392 176,549,860

Balance aging of past due loans

without allowance:

1 to 30 days 310,562,224 172,470,863

31 to 60 days 317,291,228 -

61 to 90 days 128,302,719 -

91 to 180 days 200,662,222 -

More than 181 days 4,078,999 4,078,997

Carrying amount 960,897,392 176,549,860

Current loans without allowance:

A1 6,997,815,547 5,867,340,815

A2 78,140,010 101,303,577

B1 188,843,842 103,635,821

C1 43,320,444 1,528,881

C2 3,580,780 4,159,749

D 65,491,250 -

E 22,948,930 -

Carrying amount 7,400,140,803 6,077,968,843

Carrying amount 10,980,801,159 8,360,457,470

Allowance for loan impairment (113,982,606) (114,238,317)

(Surplus/excess) of

structural allowance (79) (239,107)

Carrying amount, net ¢ 10,866,818,474 8,245,980,046

Direct loans

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(Continued)

As of December 31, 2013 Gross Net

Risk category:

A1 ¢ 9,190,606,147 9,184,951,411

A2 178,728,716 177,485,831

B1 625,493,389 617,422,046

B2 220,307,859 210,738,651

C1 129,320,657 127,017,590

C2 88,665,936 81,037,823

D 344,223,452 339,584,055

E 203,455,003 128,581,146

¢ 10,980,801,159 10,866,818,553

Loans to customers

As of December 31, 2012 Gross Net

Risk category:

A1 ¢ 7,547,210,956 7,542,387,919

A2 293,093,325 290,836,932

B1 317,419,801 309,594,423

C1 68,129,351 51,479,233

C2 4,159,749 4,159,749

D 52,954,721 32,180,800

E 77,489,567 15,580,097

¢ 8,360,457,470 8,246,219,153

Loans to customers

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(Continued)

(33) Financial information of the Development Credit Fund

As of December 31, the Bank presents the following financial information as manager of its Development Credit Fund (DCF):

Local currency Foreign currency Total

ASSETS

Availabilities ¢ 1,069,060,035 ¢ 877,091,161 ¢ 1,946,151,196

Central Bank of Costa Rica 1,069,060,035 877,091,161 1,946,151,196

Investments in financial instruments 50,513,607,578 77,499,715,014 128,013,322,592

Available-for-sale 49,872,345,648 77,080,465,324 126,952,810,972

Accrued interest receivable 641,261,930 419,249,690 1,060,511,620

Accounts and fees and commissions receivable 5,367,733 - 5,367,733

Deferred tax and income tax receivable 5,367,733 - 5,367,733

TOTAL ASSETS 51,588,035,346 78,376,806,175 129,964,841,521

LIABILITIES

Obligations with the public 50,412,446,683 78,954,768,110 129,367,214,793

Demand obligation 50,412,446,683 78,954,768,110 129,367,214,793

Accounts payable and provisions 218,302,809 - 218,302,809

Defferred income 24,002,497 - 24,002,497

Other sundry accounts payable 194,300,312 - 194,300,312

TOTAL LIABILITIES 50,630,749,492 78,954,768,110 129,585,517,602

EQUITY

Equity adjustments 43,519,190 - 43,519,190


available-for-sale investments 43,519,190 - 43,519,190

Profit for current year 335,804,729 - 335,804,729

TOTAL EQUITY 379,323,919 - 379,323,919

TOTAL LIABILITIES AND EQUITY ¢ 51,010,073,411 ¢ 78,954,768,110 ¢ 129,964,841,521


BALANCE SHEET

As of December 31,


(In colones)

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(Continued)

2013

Financial income

Investments in financial instruments ¢ 3,432,867,102

Gain on available for-sale financial instruments 65,248,242

Total financial income 3,498,115,344

Financial expenses

Obligations with the public 1,262,367,017

Loss on marketable securities 55,269,209

Loss on securities avaible-for-sale 5,446,053

Total financial expenses 1,323,082,279

FINANCIAL INCOME 2,175,033,065

Other operating income

Exchange and arbitrage, foreign currency 97,282,413

Other operating income 13,353,086

Service fees and commissions 7,232

Total other operating income 110,642,731


Exchange and arbitrage, foreign currency 36,309,059

Other operating expenses 10,668,544

Total other operating expenses 46,977,603

GROSS OPERATING INCOME 2,238,698,193

Statutory allocations of earnings (DFF) 1,902,893,464

RESULT FOR THE PERIOD ¢ 335,804,729

STATUTORY ALLOCATIONS

Statutory allocations of earnings (DFF) ¢ 1,902,893,464

Service fees and commissions (DCF) 335,804,729

¢ 2,238,698,193


INCOME STATEMENT

As of December 31,


(In colones)

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(Continued)

The investments in financial instruments corresponding to Development Credit Fund (DCF) are a follow:

(34) Transition to International Financial Reporting Standards (IFRSs)

Through various resolutions, CONASSIF (the Board) agreed to partial adoption starting January 1, 2004 of IFRSs promulgated by the International Accounting Standards Board (IASB). In order to regulate application of those Standards, the Board issued the Terms of the Accounting Regulations Applicable to Entities Regulated by SUGEF, SUGEVAL, SUPEN, and SUGESE and to Nonfinancial Issuers and approved a comprehensive revision of those regulations on March 17, 2007 the Council adopted a comprehensive reform of the “Accounting regulations/standards applicable to supervised entities by SUGEF, SUGEVAL, SUPEN and SUGESE and non financial issuers”.

2013 2012

Trading ¢ 126,952,810,972 -

Accrued interes recivable on

avaible for sale investmets 1,060,511,620 -

¢ 128,013,322,592 -

2013 2012

Trading: Fair value Fair value

Local issuers:

Govermment ¢ 76,067,867,076 -

State-owned banks 38,091,233,512 -

114,159,100,588 -

Foreing issuers

Govermment 5,453,193,761 -

Private issuers 7,340,516,623 -

¢ 126,952,810,972 -

December 31

December 31

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(Continued)

On May 11, 2010, the Board issued private letter ruling CNS 413-10 to revise the Accounting Regulations Applicable to Entities Regulated by SUGEF, SUGEVAL, SUPEN, and SUGESE and to Non-financial Issuers (the Regulations), which mandate application by regulated entities of IFRSs and the corresponding interpretations issued by the IASB in effect as of January 1, 2008, except for the special treatment indicated in Chapter II of the aforementioned Regulations.

Pursuant to the Regulations and in applying IFRSs in effect as of January 1, 2008, any new IFRSs or interpretations issued by the IASB, as well as any other revisions of IFRSs adopted that will be applied by regulated entities, will require the prior authorization of the Board. As part of the regulations, and applying NIIF (IFRS) effective to January 2008, the issue of new NIIF (IFRS) or interpretations issued by the IASB, and any changes to the NIIF (IFRS) adopted supervised entities applying, will require previous authorization from the National Council of Supervision of the Financial System (CONASSIF). On April 4, 2013, C.N.S. 1034/08 is issued and states that for the period beginning on January 1, 2014, IFRS 2011 shall apply with the exception of special treatments listed in Chapter II accounting regulations applicable to entities. Following is a summary re some of the main differences between the accounting standards issued by the CONASSIF and IFRSs, as well as the IFRSs and interpretations of the International Financial Reporting Interpretations Committee (IFRICs) yet to be adopted:

a) IAS 1: Presentation of Financial Statements

The presentation of financial statements required by the Board differs in some respects from presentation under IAS 1. Following are some of the most significant differences: SUGEF Standards do not allow certain transactions, such as clearing house balances, gains or losses on the sale of financial instruments, income taxes, etc. to be presented on a net basis. Given their nature, IFRSs require those balances to be presented net to prevent assets and liabilities or profit or loss from being overstated.

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(Continued)

b) Revised IAS 1: Presentation of Financial Statements (revised) The revised Standard introduces the term total comprehensive income, which represents changes in equity during a period other than those changes resulting from transactions with owners in their capacity as owners. Total comprehensive income may be presented in either a single statement of comprehensive income or in a statement of operations and a separate statement of comprehensive income. IAS 1 requires an entity to disclose reclassification adjustments and income tax relating to each component of other comprehensive income. Reclassification adjustments are amounts reclassified to profits or loss in the current period that were previously recognized in the previous period or in other comprehensive income (integral result). IAS 1 requires the presentation of dividends recognized as distributions to owners and related amounts per share in the statement of changes in equity. The presentation of such disclosures in the statements of income is not permitted. Revised IAS 1 changes the name of some financial statements, using “Statement of Financial Position” instead of Balance Sheet. IAS 1 requires an entity to present a statement of financial position as at the beginning of the earliest comparative period in a complete set of financial statements when the entity applies an accounting policy retrospectively or makes a retrospective restatement. These changes will apply for the period beginning on January 1, 2014.

c) IAS 7: Statement of Cash Flows The Board has only authorized preparation of the cash flow statement using the indirect method. The direct method is also acceptable under IAS 7.

d) IAS 8: Accounting Policies, Changes in Accounting Estimates, and Errors SUGEF has authorized the booking of notices of deficiencies received from Tax Authorities against prior period retained earnings.

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(Continued)

e) IAS 16: Property, Plant and Equipment The Standard issued by the Board requires the revaluation of property through appraisals made by independent appraisers at least once every five years, eliminating the option to carry these assets at cost or to revalue other types of assets. Furthermore, SUGEF permits the conversion (capitalize) of the surplus revaluation directly in equity shares (only for state banks), without having to relocate previously to retained earnings, as required by IAS 16. Moreover, under IAS 16, depreciation continues on property, plant and equipment, even if the asset is idle. The Standard issued by the Board allows entities to suspend the depreciation of idle assets and reclassify them as foreclosed assets.

f) IAS 18: Revenue The Board has allowed regulated financial entities to recognize loan fees and commissions collected prior to January 1, 2003 as revenue. Additionally, the Board has permitted the deferral of 25%, 50%, and 100% of loan fees and commissions for transactions completed in 2003, 2004, and 2005, respectively. IAS 18 prescribes deferral of 100% of those fees and commissions over the loan term.

The Board has also allowed deferral of the net excess of loan fee income minus expenses incurred for activities such as assessment of the borrower’s financial position, evaluation and recognition of guarantees, sureties, or other collateral instruments, negotiation of the terms of the instrument, preparation and processing of documents, and settlement of the operation. IAS 18 does not allow deferral on a net basis of such income. Instead, it prescribes deferral of 100% of loan fee income, and permits the deferral of only certain incremental transaction costs, rather than all direct costs. Accordingly, when costs exceed income, loan fee income is not deferred, since the Board only allows the net excess of income over expenses to be deferred. This treatment does not conform to IAS 18 and IAS 39, which prescribe separate treatment for income and expenses (see comments on IAS 39).

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(Continued)

g) Revised IAS 19: Benefits for employees

This standard is for the application in the periods that begin in or after January 1, 2013. It includes changes referring to the benefit plans defined for which it previously required that the remeasurements of the actuarial appraisals were recognized in the statement of results or in other integral results. The new IAS 19 will require the changes in the measurements to be included in other integral results and the costs of services and net interest to be included in the statement of results.

h) IAS 21: The Effects of Changes in Foreign Exchange Rates

The Board requires that the financial statements of regulated entities be presented in colones as the functional currency.

i) IAS 24: Related parties disclosures

The Council of International Accounting Standards Board revised IAS 24 in 2009 in order to: a) Simplify the definition of “related parties”, clarify the meaning pretend to be given to this term and eliminate the incoherencies of the definition. b) Provide a partial exemption from the requirement of information disclosed by entities related with the government. An entity will apply this standard retroactively for the annual periods starting as from January 1, 2011.

j) IAS 27: Consolidated and Separate Financial Statements The Board requires that the financial statements of a parent be presented separately, measuring its investments by the equity method. Under IAS 27, a parent is required to present consolidated financial statements. A parent need not present consolidated financial statements when the ultimate or any intermediate parent of the parent produces consolidated financial statements available for public use, provided certain other requirements are also met. However, in this case, IAS 27 requires that investments be accounted for at cost.

In the case of financial groups, the holding company must consolidate the financial statements of all of the companies of the group in which it holds an ownership interest of twenty-five percent (25%) or more, irrespective of control. For such purposes, proportionate consolidation should not be used, except in the consolidation of investments in joint arrangements.

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(Continued)

Amended IAS 27 (2008) requires accounting for changes in ownership interests in a subsidiary, while maintaining control, to be recognized as an equity transaction. When the entity loses control of a subsidiary, any interest retained in the former subsidiary will be measured at fair value with the gain or loss recognized in profit or loss. The amendments to IAS 27 became mandatory for 2010 financial statements. These amendments have not been adopted by the Board. The objective of IAS 27 is to describe the accounting treatment and disclosures required by subsidiaries, joint ventures and associates when the entity presents separate financial statements.

k) IAS 28: Investments in Associates

The Board requires consolidation of investments in companies in which an entity holds twenty-five percent (25%) or more equity interest, irrespective of any considerations of control. Such treatment does not conform to IAS 27 and IAS 28. The objective of this IFRS is to describe the accounting treatment for investments in associates and it determines the requirements for the application of the method of equity participation when recording investments in partners and joint ventures.

l) Revised IAS 32: Financial Instruments: Presentation Revised IAS 32 provides new guidelines clarifying the classification of financial instruments as liabilities or equity (e.g. preferred shares). SUGEVAL determines whether those shares fulfill the requirements of share capital.

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(Continued)

m) Amendments to IAS 32: Financial Instruments – Presentation and IAS 1: Presentation of Financial Statements – Financial Instruments with sale option and Obligations Arising on Liquidation

The amendments to the Standards require puttable instruments (with sale option) and instruments that impose on the entity an obligation to deliver to another party a pro rata share of the net assets of the entity only on liquidation to be classified as equity if certain conditions are met. These changes have not been adopted by the Board.

n) IAS 37: Provisions, Contingent Liabilities and Contingent Assets SUGEF prescribes recognition of a provision for possible losses on contingent assets. This type of provision is prohibited under IAS 37.

o) IAS 38: Intangible Assets The commercial banks listed in article 1 of Internal Regulations National Banking System (Law No. 1644) may present organization and installation expenses as an asset in the balance sheet, however, those expenses must be fully amortized on the straight-line method over a maximum of five years. This is not in accordance with IAS 38. Automated applications must be amortized systematically by the straight line method during the period expected to produce economic benefits for the entity, which cannot exceed five years. Similar procedure and term must be used for the amortization of goodwill acquired. IAS 38 allows different methods to distribute the depreciable amount of an asset in a systematic way, over the lifetime. The lifespan of the automated applications could be higher to five years as established by the norms and regulations of CONASSIF. On the other hand, IFRS do not require that goodwill is amortized; it requires to be assessed for impairment annually.

p) IAS 39: Financial Instruments: Recognition and Measurement

The Board requires that the loan portfolio be classified pursuant to SUGEF Directive 1-05 and that the allowance for loan losses be determined based on that classification. It also allows excess allowances to be booked. IAS 39 requires that the allowance for loan losses be determined based on a financial

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(Continued)

analysis of actual losses. IAS 39 also prohibits the booking of provisions for contingent accounts. Any excess allowances must be reversed through profit or loss. Revised IAS 39 introduced changes with respect to classification of financial instruments, which have not been adopted by the Board. Those changes include the following: The option of classifying loans and receivables as available for sale was

established.

Securities quoted in an active market may be classified as available for sale, held-for-trading, or held to maturity.

The “fair value option” was established to designate any financial instrument to be measured at fair value through profit or loss; provided a series of requirements are met (e.g. the instrument has been measured at fair value since the original acquisition date).

The category of loans and receivables was expanded to include purchased loans and receivables that are not quoted in an active market.

The Board has also allowed capitalization of direct costs incurred for assessment of the borrower’s financial position, evaluation and recognition of guarantees, sureties, or other collateral instruments, negotiation of the terms of the instrument, and preparation and processing of documents, net of income from loan fees. However, IAS 39 only permits capitalization of incremental transaction costs, which are to be presented as part of the financial instrument and may not be netted against loan fee income (see comments on IAS 18). Regular purchases and sales of securities are to be recognized using the settlement date accounting only.

Depending on the type of entity, financial assets are to be classified as follows: a) Pooled portfolios

Investments in pooled investment funds, pension and capitalization funds, and similar trusts are to be classified as available for sale.

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(Continued)

b) Own investments of regulated entities Investments in financial instruments of regulated entities are to be classified as available for sale.

Own investments in open investment funds are to be classified as trading financial assets. Own investments in closed investment funds are to be classified as available for sale. Entities regulated by SUGEVAL and SUGEF may classify other investments in financial instruments as held-for-trading instruments, provided there is an express statement of intent to trade them within 90 days from the acquisition date. Banks regulated by SUGEF may not classify investments in financial instruments as held to maturity.

The above classifications do not necessarily adhere to the provisions of IAS 39.

The amendment to IAS 39 clarifies the existing principles that determine whether specific risks or portions of cash flows are eligible for designation in a hedging relationship. The amendments, which became mandatory for 2010 financial statements, will be applied prospectively. The amendment Standard has not been adopted by the Board.

q) IAS 40: Investment Property IAS 40 allows entities to choose between the fair value model and the cost model to measure their investment property. The standard issued by the Board only allows entities to use the fair value model to measure this type of assets, except in the case for which no clear evidence is provided to determine their value.

r) Revised IFRS 3: Business Combinations Revised IFRS 3 (2008) incorporates the following changes:

The definition of a business has been broadened, which is likely to result in

more acquisitions being treated as business combinations.

Contingent consideration will be measured at fair value, with subsequent changes therein recognized in profit or loss.

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(Continued)

Transaction costs, other than share and debt issue costs, will be expensed as

incurred.

Any pre-existing interest in the acquisition will be measured at fair value, with the gain or loss recognized in profit or loss.

Any non-controlling (minority) interest will be measured at either fair value, or at its proportionate interest in the identifiable assets and liabilities of the acquisition, on a transaction-by-transaction basis.

Revised IFRS 3, which became mandatory for 2010 financial statements, will be applied prospectively. This Standard has not been adopted by the Board.

s) IFRS 5: Non-current Assets Held for Sale and Discontinued Operations The Board requires that an allowance be booked for 100% of the carrying amount of assets that have not been sold within two years. IFRS 5 requires that such assets be recorded and measured at the lower of cost or fair value, discounting the future cash flows of assets to be sold in more than one year. Accordingly, assets could be understated, with excess allowances.

t) Amendments to IFRS 7: Financial Instruments – Disclosures In March 2009, the IASB issued certain amendments to IFRS 7, Financial Instruments: Disclosure, which requires enhanced disclosures about fair value measurements and liquidity risk in respect of financial instruments.

The amendments require that fair value measurement disclosures use a three-level fair value hierarchy that reflects the significance of the inputs used in measuring fair values of financial instruments. Specific disclosures are required when fair value measurements are categorized as Level 3 (significant unobservable inputs) in the fair value hierarchy. The amendments require that any significant transfers between Level 1 and Level 2 of the fair value hierarchy be disclosed separately, distinguishing between transfers into and out of each level. Furthermore, changes in valuation techniques from one period to another, including the reasons there for, are required to be disclosed for each class of financial instruments.

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(Continued)

Further, the definition of liquidity risk has been amended and it is now defined as the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or another financial asset. The amendments require disclosure of a maturity analysis for non-derivative and derivative financial liabilities, but contractual maturities are required to be disclosed for derivative financial liabilities only when contractual maturities are essential for an understanding of the timing of cash flows. For issued financial guarantee contracts, the amendments require the maximum amount of the guarantee to be disclosed in the earliest period in which the guarantee could be called. These amendments have not been adopted by the Board.

u) IFRS 9: Financial Instruments IFRS 9 Financial Instruments deals with classification and measurement of financial assets. The requirements of this Standard represent a significant change from the existing requirements in IAS 39 in respect of financial assets. The Standard contains two primary measurement categories for financial assets: amortized cost and fair value. The Standard eliminates the existing IAS 39 categories of held to maturity, available for sale, and loans and receivables. For an investment in an equity instrument which is not held for trading, the Standard permits an irrevocable election, at initial recognition, on an individual share-by-share basis, to present all fair value changes in other comprehensive income. No amount recognized in other comprehensive income would ever be reclassified to profit or loss at a later date. The Standard requires that derivatives embedded in contracts with a host contract that is a financial asset within the scope of the standard not be separated; instead the hybrid financial instrument is assessed in its entirety as to whether it should be measured at amortized cost or fair value. This Standard requires entities to determine whether presenting the effects of changes in the credit risk of a liability designated at fair value through profit or loss would create an accounting mismatch based on facts and circumstances at the date on which the financial liability is initially recognized. The objective of this IFRS is to establish the principles for the financial information about financial assets so that it will present useful and relevant information for the users of the financial statements facing the evaluation of the amounts, calendar and uncertainty of the future cash flows of the entity.

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(Continued)

On November 2013, the IASB withdrew date January 1, 2015 as the date of entry into force for the IFRS 9, in order to allow enough time for preparers of financial statements to make transition to the new requirements regarding securities and deposits, especially since the standard phase corresponding to the impairment loss has not yet finalized. It remains undefined what the new effective date will be; however, early application is permitted.

v) IFRS 10: Consolidated Financial Statements This Standard provides a revised control definition and application guidance there for. This IFRS supersedes IAS 27 (2008) and SIC 12, Consolidation - Special Purpose Entities, and is applicable to all investees. Early application is permitted. Entities that apply this IFRS earlier must disclose that fact and apply IFRS 11, IFRS 12, IAS 27 (as amended in 2011), and IAS 28 (as amended in 2011) simultaneously. An entity is not required to make adjustments to the accounting for its involvement with an investee when entities that was previously consolidated or Separate in accordance with IAS 27 (2008), SIC 12, and this IFRS, continue to be consolidated or continue not to be consolidated. When application of this IFRS results in an investor consolidating an investee that is a business that was not previously consolidated, the investor must: 1) determine the date when the investor obtained control of that investee on

the basis of the requirements of this IFRS; and

2) Measure the assets, liabilities, and no controlling interests as if acquisition accounting had been applied from that date.

If (2) is impracticable, then the deemed acquisition date must be the beginning of the earliest period for which retroactive application is practicable, which may be the current period. The Standard is effective for annual periods beginning on or after January 1, 2013. Earlier application is permitted. This Standard has not been adopted by the Board.

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BANCO DE COSTA RICA


(Continued)

w) IFR 11: Joint Arrangements This Standard was issued in May 2011 with an effective date of January 1, 2013. The Standard addresses the inconsistencies in the accounting for joint arrangements and requires a single accounting treatment for interest in jointly controlled entities. This Standard has not been adopted by the Board. The objective of IFRS 11 is to establish principles for joint arrangements disclosures. It supersedes IAS 31, Interests in Joint Ventures and SIC 13 Jointly Controlled Entities-Non monetary Contributions by Ventures.

x) IFRS 12: Disclosure of Interests in Other Entities This Standard was issued in May 2011 with an effective date of January 1, 2013. This Standard requires an entity to disclose information that enables users of financial statements to evaluate the nature and financial effects of its interests in other entities, including joint arrangements, associates, structured entities, and “off balance sheet” activities. This Standard has not been adopted by the Board.

y) IFRS 13: Fair Value Measurement This Standard was issued in May 2011 and clarifies the definition of fair value, establishes a single procedure for measuring fair value, and defines the measurements and applications required or permitted by IFRSs. This Standard is to be applied for annual periods beginning on or after January 1, 2013. Earlier application is permitted. This Standard has not been adopted by the Board.

z) IFRIC 10: Interim Financial Reporting and Impairment This Interpretation prohibits the reversal of an impairment loss recognized in a previous interim period in respect of goodwill, an investment in an equity instrument, or a financial asset carried at cost. IFRIC 10 applies to goodwill, investments in equity instruments, and financial assets carried at cost from the date that the Bank first applied the measurement criteria of IAS 36 and IAS 39 (i.e. January 1, 2004). The Board permits reversal of the allowances.

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(Continued)

aa) IFRIC 12: Service Concession Arrangements This Interpretation gives guidance on the accounting by operators for public-to-private service concession arrangements. This Interpretation applies to both: infrastructure that the operator constructs or acquires from a third party for

the purpose of the service arrangement; and

Existing infrastructure to which the grantor gives the operator access for the purpose of the service arrangement.

This Interpretation became mandatory for annual periods beginning on or after July 1, 2009 and has not been adopted by the Board.

bb) IFRIC 13: Customer Loyalty Programmes This Interpretation gives guidance on the accounting by entities that grant loyalty award credits to customers as part of a sales transaction which, subject to meeting any further qualifying conditions, the customers can redeem in the future for free or discounted goods or services. This Interpretation became mandatory for annual periods beginning on or after January 1, 2011 and has not been adopted by the Board.

cc) IFRIC 14, IAS 19: The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction This Interpretation applies to all post-employment defined benefits and other long-term employee defined benefits. Also, it considers the minimum funding requirements to fund a post-employment or other long-term defined benefit plan. It also addresses when a minimum funding requirement might give rise to a liability. IFRIC 14 became mandatory for 2011 financial statements with retrospective application required. This Interpretation has not been adopted by the Board.

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BANCO DE COSTA RICA


(Continued)

dd) IFRIC 16: Hedges of a Net Investment in a Foreign Operation This Interpretation allows entities that use the step-by-step consolidation method to choose an accounting policy that hedges currency risk to determine the amount of the cumulative foreign currency translation reserve that is reclassified to profit or loss on the disposal of a net investment in a foreign operation, which is equivalent to the amount that would have been reclassified had the entity used the direct method of consolidation. This Interpretation became mandatory for annual periods beginning on or after July 1, 2009 and has not been adopted by the Board.

ee) IFRIC 17: Distributions of Non-cash Assets to Owners This Interpretation gives guidance on the accounting of distributions of non-cash assets to owners at the beginning and end of the reporting period. If, after the end of a reporting period but before the financial statements are authorized for issue, an entity declares a dividend to distribute a non-cash asset, it must disclose: a) the nature of the asset to be distributed;

b) the carrying amount of the asset to be distributed as of the end of the

reporting period; and

c) Whether fair values are determined, in whole or in part, directly by reference to published price quotations in an active market or are estimated using a valuation technique, and the method used to determine fair value and, when a valuation technique is used, the assumptions applied.

This Interpretation became mandatory for annual periods beginning on or after July 1, 2009 and has not been adopted by the Board.

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BANCO DE COSTA RICA


(Continued)

ff) IFRIC 18: Transfers of Assets from Customers This Interpretation gives guidance on the accounting of transfers of items of property, plant and equipment by entities that receive such transfers from their customers. This Interpretation also applies to agreements in which an entity receives cash when that amount of cash must be used only to construct or acquire an item of property, plant and equipment, and the entity must then use the item either to connect the customer to a network or to provide the customer with ongoing access to a supply of goods or services, or to both. This Interpretation became mandatory for annual periods beginning on or after July 1, 2009 and has not been adopted by the Board.

gg) IFRIC 19: Extinguishing Financial Liabilities with Equity Instruments This Interpretation gives guidance on the accounting by an entity when the terms of a financial liability are renegotiated and result in the entity issuing equity instruments to a creditor of the entity to extinguish all or part of the financial liability. This Interpretation became mandatory for annual periods beginning on or after July 1, 2010 and has not been adopted by the Board.

hh) IFRIC 17: Non cash assets distribution to owners

Effective as from the periods beginning on or after July 1, 2009. Its application is prospective and its retroactive application is not permitted.

ii) IFRIC 18: Transfer of assets from customers

Effective as soon as the assets are transferred by the clients to the providers as from July 1, 2009. This interpretation applies to entities that transfer assets to the entity for a good or service of different nature, requiring the recognition of an income because of the difference of value.

jj) IFRIC 19: Amortizing financial liabilities with equity instruments.

Effective as from the periods beginning on or after July 1, 2010.

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(Continued)

kk) IFRIC 21: Levies

This interpretation addresses the accounting of a liability to pay a levy if that liability is within IAS 37. It also addresses the accounting of a liability to pay a levy where the amount and maturity are true. This interpretation does not address the accounting of costs arising from the recognition of a liability to pay a levy. Entities should apply other standards to decide whether the recognition of a liability to pay a tax results in an asset or an expense. The event that triggers the obligation and results in a liability to pay a levy is the activity that produces the levy payment, as established by law. For example, if the activity that results in the levy payment is to generate an income from ordinary activities in this period, and the calculation of this tax is based on income from ordinary activities that took place in an earlier period, the event that results in the obligation of that levy is the income generation in the current period. Generating revenue in the previous period is necessary, but not sufficient to create a present obligation. An entity does not have an implied obligation to pay a levy to be generated by future period operations; as a result, the entity is economically compelled to continue operating in that future period. The preparation of financial statements under the going concern assumption does not imply that an entity has a present obligation to pay a levy to be generated by operations in a future period. The liability to pay a levy is recognized progressively if the event results in the obligation over a period (for example, if the activity that generates the payment of the tax occurs as established by law, over a period). For example, if the event that results in the obligation is the generation of a regular income for activities over a period, the corresponding liability is recognized as the entity produces that income.

An entity shall apply this interpretation for annual periods beginning on or after January 1, 2014.

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(Continued)

ll) Amendments to existing standards:

Novation or renewal of derivatives and continued hedge accounting (Amendments to IAS 39) This document establishes amendments to IAS 39, Financial Instruments: Recognition and Measurement. These amendments result from proposals of the standard project 2013/2: Novation Derivatives and Continued Hedge Accounting, and the corresponding responses received (Proposed Amendments to IAS 39 and IFRS 9) was published in February 2013. IASB has amended IAS 39 to discontinue exempt the hedge accounting when the novation of a derivative designated as a hedging instrument meets certain conditions. A similar exemption will be included in IFRS 9 Financial Instruments. It is effective from annual periods beginning on or after January 1, 2014. Disclosure of the recoverable amount of non-financial assets This document establishes the amendments to IAS 36 Impairment of Assets. These amendments result from proposals of the standard project 2013/1 Disclosure of the recoverable amount of non-financial assets and corresponding responses received (Proposed Amendments to IAS 36) that was published in January 2013.

In May 2013, paragraphs 130 and 134 were amended, and the heading above paragraph 138. An entity shall apply these amendments retrospectively for annual periods beginning on or after January 1, 2014. Earlier application is permitted. An entity shall not apply those amendments periods (including comparative periods) in which IFRS 13 is applied. The changes made in this document align the disclosure requirements of IAS 36 with the original intention of the IASB. For the same reason, the IASB also amended IAS 36 to require additional information on the fair value measurement when the recoverable amount of assets that present impairment is based on fair value less costs of disposal, consistent with the disclosure requirements for impairment assets presented in U.S. GAAP.

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BANCO DE COSTA RICA


(Continued)

mm) Amendments to standards established by CONASSIF The following amendments to the accounting standards applicable to entities supervised by SUGEF, SUGEVAL, SUGESE, SUPEN and non-financial issuers established by CONASSIF shall apply from January 1, 2014: 1. Delete the last paragraph of Article 8 therefore not allowed to commercial

state banks to capitalize total revaluation surplus but may continue

capitalizing revaluation surplus as permitted by IAS 16, i.e. the part already

used of that surplus (or made when asset is sell), because on this issue any

exception is not included by SUGEF.

2. Delete paragraph two of article 19, IAS 40, Investment Property for rent or

goodwill. Therefore, the adjustments to fair value of investment properties

are recognized in the income statement.

3. Modify paragraph fourth of the concept of Group 130 Loan portfolio, so the

commissions representing an adjustment to the effective yield should be

recorded as a deferred credit.

4. Add the account of deferred direct costs associated with credit, recognizing

the direct costs incurred by the entity in the formalization of credit, and

must be repaid by means of effective interest method.

5. Another important change is that the format and scope of disclosures in the

financial statements will be made mostly based on IAS 1, between them,

including the concept of other comprehensive income, adjusting the

statement of changes in equity and requiring the submission criteria for

intermediate financial information in accordance with IAS 34.

(35) 2012 figures

The December 31, 2012 financial statement figures have not been reclassified for comparison with those at December 31, 2013.

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(Continued)

(36) Relevant and subsequent matters

As of December 2013, there are significant subsequent events (facts) to disclose as follows: On January 11 2013, Law N° 9092 was published; Refund of Income to the National Commission Education Loan (CONAPE), derogatory of article 41 and the Transitory III of the Law N°8634, from October 23 2008: Article I: is repealed article N°41 and the transitory III of the Law N° 8634, Banking System Development from October 23 2008. The Executive Secretary of CONAPE will coordinate with the Regents of Development Banking, the implementation of this Law, since there is uncertainty whether it applies to the results of the year 2012 or 2013. On January 30 2013, the Board of Directors of the Central Bank of Costa Rica in its article 7 minute of the session 5582-2013, took the following agreements in relation to the portfolio:

1- Establish an overall limit of 9% to the accrued growth between February 1

and October 31 2013 for the balance of the portfolio loan and investments to

the non financial private sector granted by financial intermediaries supervised

by the General Superintendence (Superintendent) of Financial Entities; rate

expressed in annualized terms corresponds to a 12,2%.

2- Establish an overall limit to the accrued growth between February 1 and

October 31 2013 for the balance of the portfolio loan and investments to the

non financial private sector in foreign currency and granted by financial

intermediaries supervised by the General Superintendence of Financial

Entities as follows:

a) If the financial intermediary showed as of December 31 2012 an annual

growth equal or less to 20%, the increase accumulated on the balance of

the portfolio between February 1 and October 31 2013 may not exceed

6,0%. This rate expressed in annualized terms corresponds to an 8%.

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BANCO DE COSTA RICA


(Continued)

3- The follow-up on the present agreement will be conducted on a quarterly

basis, based on the Information provided by the financial intermediaries as at

April 30, July 31 and October 31, 2013, as follows:

a) The follow-up will be conducted based on the projection of balances that

each institution provides the Central Bank of Costa Rica and the General

Superintendence of Financial Entities, 15 calendar days to the entry into

force of this measure.

b) In it´s absence, for the follow-up of the limits established in paragraphs 1

and 2, the resulting flow is distributed evenly in the three quarters

comprising the measure.

c) As follow-up, the balance of the portfolio in foreign currency for each

and every reference date, must be expressed in collones using the

Exchange reference rate of the Central Bank of Costa Rica as of

December 31, 2012 (¢502,07 per US$ dollar).

Therefore, among the measures to consider will be in first instance:

1. Tracking the required limit according to the parameters established by the Central Bank of Costa Rica.

2. The Bank will need to act diligently with the granting credit and more stringent

with the credit analysis for companies and people in light of the stress scenarios suggested by the regulator.

3. Review the budget targets for 2013.

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BANCO DE COSTA RICA


(Continued)

As of July 31, 2013, the Board of the Central Bank decides to eliminate the global

constraint to the growth of the financial system credit to the private sector.

On July 8, 2013, the return of capital to the Banco de Costa Rica.is approved in the

Extraordinary General Meeting of Shareholders of BCR Pension Operadora de

Planes de Pensiones Complementarias through minute No. 02-13.

In accordance with Chapter VII of the "Regulation on the opening and operation of authorized entities and operation of pension funds, labor capitalization and voluntary savings under the Worker Protection Law" establishes capital adequacy guidelines for authorized entities, where the different levels of requirements are set for market risk, operational and credit, as well as calculations of capital base. In that sense, BCR Pensions held since early 2012 an average level of capital adequacy ratio of 2.19 times, which is well above the regulatory requirement (1 time) and internal risk limit set at 1.5 times. This reflects a comfortable capital position against risk requirements faced by the entity. Given the above circumstances, it is considered appropriate to make a return of surplus capital Pensiones in the amount of ¢1,000 million colones to the Banco de Costa Rica as sole shareholder of BCR, in order to optimize the financial resources of the institution. The detail of the return is as follows:

Cash ¢ 877.642.491

Computer equipment, furniture and computer licenses 122.357.509

Total return Capital ¢ 1.000.000.000

The capital of Operadora de Pensiones decreases in the amount indicated, from 2,444,450,000 shares with a nominal value of ¢1 per share each to 1,444,450,000 shares with the same par value.

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BANCO DE COSTA RICA


(Continued)

On August 5, 2013, the Bank performs the first international bond issuance for US$ 500 million, which had a close demand of 8.75 times. Bond orders from more than 290 investors accounts were received for a total amount of US$ 4.363 million. The bonds were issued under regulations 144a to institutional investors in the United States of America and Regulation "S", to market outside the United States, including non-institutional investors. The issue only traded in international markets, for a term of 5 years, with a facial rate of 5.25%. The Bank hired Barclays Capital Inc. and Deutsche Bank Securities Inc. to perform the structuring and issuance of bonds. Recently, as part of this process, the international firm Moody's Investment Service, gave the bank a rating of Baa3, the same granted to the Republic of Costa Rica, and is classified as investment grade. This indicator represents a high degree of confidence to investors. Moreover, Fitch Ratings Inc., with same rating established by the Government of Costa Rica, rated the bond issue BB+. On September 6, 2013, the documents are signed in order to settle negotiations with Consejo Nacional de Produccion (CNP), for the acquisition of land and building of its headquarters, close to La Sabana, which will develop the real estate project to install the bank headquarters. However, a period of one year for the delivery of the property is given to CNP, while Sociedad Administradora de Fondos de Inversión S. A. (SAFI), introduces a real estate solution to the entity. The amount paid for the purchase of the property is ¢6,430,087,005.

As of December 2012, there are significant subsequent events (facts) and to disclose as follows:

On February 2 2012, 129.173 VISA Inc. Class A shares were sold, owned by Bank of Costa Rica, according to Board of Directors agreement session 52-11 of December 5, 2011.

The following is the summary of the sale:

Sale Summary VISA Shares sold 129.173 Sale Price US$105.296 Principal sold US$13.601.4520 Broker´s commission (US$0.05 per share) US$6.458.650 Other commissions (Stock-market) US$261.150 Date of Sale 02/02/2012 Settlement date 07/02/2012

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BANCO DE COSTA RICA


(Continued)

Shares were sold through Wells Fargo Securities LLC, entity with which the account was opened. On May 22 2012, Bank of Costa Rica was authorized a public offering of securities issuance according to the Program to Issue Commercial Paper and the Program to Issue Standardized Bonds of Bank of Costa Rica through resolution SGV-R2645 of SUGEVAL. The prospectus of the Program to Issue Commercial Paper and the Program to Issue Standardized Bonds of Bank of Costa Rica-2012 establishes the issuance to be carried out during the year 2013 of the following amounts:

Program to Issue Commercial Paper US$250.000.000 Program to Issue Standardized Bonds US$150.000.000

As of 16 October 2012, the National Council of Supervision of the Financial System in circular C.N.S 1006/13/02 authorized the Bank of Costa Rica, in its capacity as controlling entity of the Financial Conglomerate of the Bank of Costa Rica and Subsidiaries to acquire 100% shares of the INS Complementary Pension Operator S.A., conditional on immediate and simultaneous merger with BCR Operates Complementary Pension Plans S.A, prevailing the latter. As of October 24 2012, Bank of Costa Rica once all legal and regulation requirements were accomplished governing this transactions, made effective the acquisition, on the amount of ¢1.310.505.681. The reasonable/fair values of the assets and liabilities acquired are as follows:

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BANCO DE COSTA RICA


(Continued)

Assets Availabilities ¢ 462.392.007

Securities 727.570.898

Accounts receivable, net 104.412.947 Property, plant and equipment, net 147.571.300 Other assets 18.674.329

¢ 1.460.621.481Liabilities Accounts payable ¢ 22.797.828 Provisions 127.320.972 ¢ 150.118.800 Net assets ¢ 1.310.502.681 Minus: Cash from aquired company 462.392.007 Cash paid for Company ¢ 848.110.674

As of December 20 2012, the contract was endorsed by the Comptroller General of the Republic so that during the first half of the year 2013, the resources from the National Development Trust (FINADE) are transferred from Banco Crédito Agrícola de Cartago to the Bank of Costa Rica. The Administrative Court judged that the period of the Banco Crédito Agrícola de Cartago to translate the resources is of 6 months and the Bank will be responsible for those resources for a period of four years.

(37) Re-issuance of Separate financial statements as of December 31, 2012

The Banks’ management has re-issued Separate financial statements as of December 31, 2012 due audit adjustments on BICSA equity participation calculation. Following is a detailed of such adjustments:

Investment in subsidiaries

(net)

Sundry accounts payable

Gain on investment in subsidiaries

Loss on investment in subsidiaries

Profits appropriation Period’s result

Previous balances as of December 31, 2012

¢

64.277.124.893

49.972.166.389

4.873.675.378

-

9.613.251.483

32.530.899.953

Adjustments (793.172.696) (172.911.648) (104.125.803) 689.046.893 (172.911.648) (620.261.048) Adjusted balances as of December 31, 2012 ¢ 63.483.952.197 49.799.254.741 4.769.549.575 689.046.893 9.440.339.835 31.910.638.905

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BANCO DE COSTA RICA


(Continued)

(38) Date of authorization for issuance of financial statements

The General Management of the Bank authorized the issuance of the Separate Financial Statements on January 31, 2014. SUGEF has the possibility to require modifications to the Financial Statements after the date of authorization for issuance.

-138-

Book Audit

ASSETS balance Debit Credit Debit Credit balance

Cash and due from banks 442,913,267,852 - - - - 442,913,267,852

Cash 65,588,639,679 - - - - 65,588,639,679

Central Bank of Costa Rica 354,135,346,935 - - - - 354,135,346,935

Local financial entities 1,243,343,606 - - - - 1,243,343,606

Foreing financial entities 17,024,336,189 - - - - 17,024,336,189

Other cash and due from banks 4,921,601,443 - - - - 4,921,601,443

Investments in financial instruments 451,814,623,865 - - - - 451,814,623,865

Trading 4,258,471,139 - - - - 4,258,471,139

Available-for-sale 411,272,188,857 - - - - 411,272,188,857

Held-to-maturity 33,217,971,872 - - - - 33,217,971,872

Accrued interest receivable 3,065,991,997 - - - - 3,065,991,997

Loan portfolio 2,006,459,585,137 - - - - 2,006,459,585,137

Current 1,854,618,921,659 - - - - 1,854,618,921,659

Past due 139,067,089,284 - - - - 139,067,089,284

Legal collections 27,500,895,022 - - - - 27,500,895,022

Accrued interest receivable 19,992,916,748 - - - - 19,992,916,748

(Allowance for loan impaiment) (34,720,237,576) - - - - (34,720,237,576)

Accounts and fees and commissions receivable 4,074,153,743 - - - - 4,074,153,743

Fees and commissions receivable 191,423,685 - - - - 191,423,685

Accounts receivable for related party transactions 88,762,928 - - - - 88,762,928

Deferred tax and income tax receivable 1,933,774,998 - - - - 1,933,774,998

Other accounts receivable 4,330,299,698 - - - - 4,330,299,698

(Allowance for doubtful accounts receivable) (2,470,107,566) - - - - (2,470,107,566)

Foreclosed assets 13,587,164,152 - - - - 13,587,164,152

Assets and securities acquired in lieu of payment 30,211,025,629 - - - - 30,211,025,629

Other foreclosed assets - - - - - -

(Allowance for impairment and per legal requirements) (16,623,861,477) - - - - (16,623,861,477)

Investments in other companies, net 66,568,190,942 - - 10,687,422 3 3,094,926,167 2, 4 and 5 63,483,952,197

Property and equipment, net 76,105,237,468 - - - - 76,105,237,468

Other assets 29,330,601,840 - - - - 29,330,601,840

Deferred charges 1,879,849,407 - - - - 1,879,849,407

Intagible assets, net 6,818,629,797 - - - - 6,818,629,797

Other assets 20,632,122,636 - - - - 20,632,122,636

TOTAL ASSETS 3,090,852,824,999 - - 10,687,422 3,094,926,167 3,087,768,586,254

LIABILITIES AND EQUITY

LIABILITIES

Obligations with the public 2,333,334,346,161 - - - - 2,333,334,346,161

Demand obligation 1,190,916,229,349 - - - - 1,190,916,229,349

Term obligation 1,129,437,832,728 - - - - 1,129,437,832,728

Other obligations with the public 326,848,469 - - - - 326,848,469

Finance charges payable 12,653,435,615 - - - - 12,653,435,615

Obligations with Central Bank of Costa Rica - - - - - -

Term obligations - - - - - -

Obligations with entites 291,820,258,461 - - - - 291,820,258,461

Demand obligations 23,145,740,056 - - - - 23,145,740,056

Term obligations 265,600,335,491 - - - - 265,600,335,491

Finance charges payable 3,074,182,914 - - - - 3,074,182,914

Accounts payable and provisions 88,841,582,208 - - 674,693,905 2,329,858 88,169,218,161

Deferred tax 5,334,418,131 - - - - 5,334,418,131

Provisions 33,035,545,289 - - - - 33,035,545,289

Other sundry accounts payable 50,471,618,788 - - 674,693,905 2, 4 and 5 2,329,858 3 49,799,254,741

Other liabilites 25,674,068,623 - 1 - - 25,674,068,624

Deferred income 706,432,697 - 1 - - 706,432,698

Allowance for stand by credit losses 760,040,739 - - - - 760,040,739

Other liabilites 24,207,595,187 - - - - 24,207,595,187

Subordinate obligations 15,093,871,617 - - - - 15,093,871,617

Subordinate obligations 15,062,100,000 - - - - 15,062,100,000

Financial charges 31,771,617 - - - - 31,771,617

TOTAL LIABILITES 2,754,764,127,070 - 1 674,693,905 2,329,858 2,754,091,763,024

EQUITY

Share capital 112,052,881,182 - - - - 112,052,881,182

Paid up capital 112,052,881,182 - - - - 112,052,881,182

Equity adjustments 27,962,668,023 - - - - 27,962,668,023

Adjustments for surplus from revaluation of propety and equipment 27,237,046,192 - - - - 27,237,046,192

Adjustment for valuation of avaible for sale investments (4,024,733,840) - - - - (4,024,733,840)

Adjustment for valuation of restricted financial instruments (83,822,385) - - - - (83,822,385)

Adjustment for transtation of financial statements 4,834,178,056 - - 4,834,178,056

Capital reserves 145,418,725,491 - - - - 145,418,725,491

Prior period retained earnings 9,656,096,274 - - - - 9,656,096,274

Profit for the year 34,322,513,604 11,663,932 1 11,663,931 1 3,097,256,025 2 to 5 685,381,327 2 to 5 31,910,638,905

Development Financing Fund equity 6,675,813,355 - - - - 6,675,813,355

TOTAL EQUITY 336,088,697,929 11,663,932 11,663,931 3,097,256,025 685,381,327 333,676,823,230

TOTAL LIABILITIES AND EQUITY 3,090,852,824,999 11,663,932 11,663,932 3,771,949,930 687,711,185 3,087,768,586,254

DEBIT CONTINGENT ACCOUNTS 238,631,862,581 - - - - 238,631,862,581

TRUST ASSETS 620,445,758,399 - - - - 620,445,758,399

TRUST LIABILITIES 338,946,949,326 - - - - 338,946,949,326

TRUST EQUITY 281,498,809,073 - - - - 281,498,809,073

OTHER DEBIT MEMORANDA ACCOUNTS 4,262,677,378,636 - - - - 4,262,677,378,636

Own debit memoranda accounts 801,794,598,871 - - - - 801,794,598,871

Third party debit memoranda accounts 93,518,045,899 - - - - 93,518,045,899

Third party debit memoranda accounts for custodial activities 3,367,364,733,866 - - - - 3,367,364,733,866

Reclassification entries Adjustment entries

BANCO DE COSTA RICA

UNCONSOLIDATED BALANCE SHEET

As of December 31,2012

(In colones)

(Continued)

-139-

Book Audit

balance Debit Credit Debit Credit balance

Finance income

Cash and due from banks 19,091,196 - - - - 19,091,196

Investments in financial instruments 18,672,281,790 - - - - 18,672,281,790

Loan portfolio 212,018,870,717 - - - - 212,018,870,717

Gain on foreign exchange and developmnent units 1,593,650,278 - - - - 1,593,650,278

Gain on trading financial instruments 312,078,724 - - - - 312,078,724

Gain on available for sale financial instruments 448,313,073 - - - - 448,313,073

Other finance income 985,499,365 - - - - 985,499,365

Total finance income 234,049,785,143 - - - - 234,049,785,143

Finance expenses

Obligations with the public 90,748,535,399 - - - - 90,748,535,399

Obligations with Central Bank of Costa Rica 326,546,278 - - - - 326,546,278

Obligations with financial entities 5,220,953,908 - - - - 5,220,953,908

Subordinate, exchangeable and preference obligations 627,382,629 - - - - 627,382,629

Loss on trading financial instruments 57,962,119 - - - - 57,962,119

Loss on available for sale financial instruments 38,376,282 - - - - 38,376,282

Other finance expenses 38,857,950 - - - - 38,857,950

Total finance expenses 97,058,614,565 - - - - 97,058,614,565

Allowance for impairment of assets 15,448,699,316 - - - - 15,448,699,316

Recovery of assets and decrease in allowances 6,140,238,631 - - - - 6,140,238,631

FINANCE INCOME 127,682,709,893 - - - - 127,682,709,893

Other operating income

Service fees and commissions 48,127,114,383 - - - - 48,127,114,383

Foreclosed assets 1,702,477,975 - 11,663,931 1 - - 1,714,141,906

Gain on investments in other companies 7,175,428,849 - - 2,405,879,274 2, 4 and 5 4,769,549,575

Gain on investments in SUGEVAL regulated entities 2,246,578,667 - - - - 2,246,578,667

Gain on investments in SUPEN regulated entities 1,257,134,899 - - - - 1,257,134,899

Gain on investments in SUGESE regulated entities 535,200,570 - - - 10,687,421 3 545,887,991

Foreign currency exchange and arbitrage 18,431,285,562 - - - - 18,431,285,562

Other income related parties 1,822,080,598 - - - - 1,822,080,598

Other operating income 21,758,704,984 11,663,931 1 - - - 21,747,041,053

Total other operating income 103,056,006,487 11,663,931 11,663,931 2,405,879,274 10,687,421 100,660,814,634


Service fees and comissions 7,871,198,955 - - - - 7,871,198,955

Foreclosed assets 10,016,771,041 - - - - 10,016,771,041

Loss on investements in other entities - - - 689,046,893 5 - 689,046,893

Loss on investments in SUGESE regulated entities - - - - - -

Sundry assets 248,706,992 - - - - 248,706,992

Provisions 7,328,800,535 - - - - 7,328,800,535

Foreign currency exchange and arbitrage 629,408,907 - - - - 629,408,907

Other expenses related parties 9,383,939 - - - - 9,383,939

Other operating expenses 11,099,298,240 - - - - 11,099,298,240

Total other operating expenses 37,203,568,609 - - 689,046,893 - 37,892,615,502

GROSS OPERATING INCOME 193,535,147,771 11,663,931 11,663,931 1,716,832,381 10,687,421 190,450,909,025

Administrative expenses

Personnel expenses 95,541,409,141 - - - - 95,541,409,141

Other administrative expeses 43,885,072,136 - - - - 43,885,072,136

Total administrative expenses 139,426,481,277 - - - - 139,426,481,277

NET OPERATING INCOME BEFORE TAXES AND

STATUTORY ALLOCATIONS 54,108,666,494 11,663,931 1 11,663,931 1 1,716,832,381 10,687,421 51,024,427,748

Income tax 11,219,902,758 - - - - 11,219,902,758

Decrease in income tax 121,074,630 - - - - 121,074,630

Statutory allocations 10,112,703,882 - - 2,329,858 3 674,693,905 2, 4 and 5 9,440,339,835

Decrease in statutory allocations 1,425,379,120 - - - - 1,425,379,120

NEX PROFIT FOR THE YEAR 34,322,513,604 11,663,931 11,663,931 1,714,502,523 (664,006,484) 31,910,638,905

Reclassification entries Adjustment entries

BANCO DE COSTA RICA

UNCONSOLIDATED INCOME STAMENT For the year ended December 31, 2012

(In colones)

(Continued)

- 140 -

Entry 1

539991 11,663,931

532021 11,663,931

11,663,931 11,663,931

Description: reclassification.

Entry 2

162012 130,588,407

533032 130,588,407

452021 2,611,768

24213102 2,611,768

452031 12,014,133

24213103 12,014,133

452041 3,917,652

24213104 3,917,652

452091 3,917,652

24213109 3,917,652

452991 6,007,067

24213199 6,007,067

159,056,679 159,056,679

Description: BICSA equity adjustment.

Entry 3

1610210001 10,687,422

533021 10,687,422

452021 213,748

24213102 213,748

452031 983,243

24213103 983,243

452041 320,623

24213104 320,623

452091 320,623

24213109 320,623

452991 491,621

24213199 491,621

13,017,280 13,017,280

Description: BCR Seguros equity adjustment.

(Continued)

(in colones)

BANCO DE COSTA RICA

AUDIT ENTRIES


- 141 -

Entry 4

162012 2,171,165,064

533032 2,171,165,064

452021 43,423,301

24213102 43,423,301

452031 199,747,186

24213103 199,747,186

452041 65,134,952

24213104 65,134,952

452091 65,134,952

24213109 65,134,952

452991 99,873,593

24213199 99,873,593

2,644,479,048 2,644,479,048


Entry 5

162012 793,172,696

433032 689,046,893

533032 104,125,803

452021 15,863,454

24213102 15,863,454

452031 72,971,888

24213103 72,971,888

452041 23,795,181

24213104 23,795,181

452091 23,795,181

24213109 23,795,181

452991 36,485,944

24213199 36,485,944

966,084,344 966,084,344


(in colones)

BANCO DE COSTA RICA

AUDIT ENTRIES


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