Agreement 12-2022 of December 7, 2022 Modifying Articles 32 and 39 of Agreement No. 11-2005

REPUBLIC OF PANAMA BOARD OF DIRECTORS SUPERINTENDENCY OF THE SECURITIES MARKET Agreement No. 12-2022 (December 7, 2022) "Modifying Articles 32 and 39 of Agreement No. 11-2005 of August 5, 2005"

THE BOARD OF DIRECTORS

In exercise of its legal powers, and

CONSIDERING:

That through Law No. 10 of April 16, 1993, incentives were established for the formation of funds or plans to pay pensions, retirement benefits, and other similar benefits in the Republic of Panama, which are voluntary and complementary, if applicable, to the benefits granted by the Social Security system.

That Article 4 of Law No. 10 of April 16, 1993, establishes the authority of the Superintendency of the Securities Market to regulate and supervise funds or plans for pensions and retirement.

That in Articles 8 and 8-D of Law No. 10 of April 16, 1993, as amended by Law No. 67 of September 1, 2011, investment parameters and limits regarding investments that Administrators of pension and retirement funds may make are established.

That in Article 8-F of Law No. 10 of April 16, 1993, as amended by Law No. 67 of September 1, 2011, it initially determines on the matter as follows: "The valuation of assets must be daily and at market prices." However, subsequently in the same article, in a contradictory manner, it establishes the following: "For accounting purposes, administrators of pension and retirement funds shall be governed by the International Financial Reporting Standards (IFRS) applicable to the case, as determined by the Superintendency of the Securities Market, or in accordance with the prudential and technical standards issued by this Superintendency."

The contradiction arises by indicating a single methodology for measuring financial assets under administration, when International Financial Reporting Standards (IFRS) establish other forms of measurement, such as amortized cost or fair value, depending on the accounting classification and the business model adopted for the management of the investment portfolio.

That this Article 8-F of Law No. 10 of April 16, 1993, concludes by determining that "The Superintendency may regulate this matter through Agreement," so the Superintendency of the Securities Market, based on this regulatory power, has seen the importance of clarifying, for the protection of the rights of affiliates to pension and retirement plans or funds, that the regime that Administrators must observe for accounting purposes, including the valuation of managed financial assets, are the International Financial Reporting Standards (IFRS), applicable according to the accounting classification made by the Administrator.

That this clarification is necessary, not only because these are the accounting standards that the legislator foresaw within the content of the aforementioned Article 8-F, but because it is consistent with what is contemplated in the IFRS themselves and with the activity or service provided to their affiliates by the Administrators of these plans or funds.

That, in this sense, the Superintendency of the Securities Market will proceed to modify Articles 32 and 39 of Agreement No. 11-2005 of August 5, 2005, adopted at the time to develop the provisions of Law No. 10 of April 16, 1993, so that they are adapted and updated with respect to the topics described above.

That, in this order of ideas, Article 323 of the Single Text establishes that when the Superintendency contemplates reforming an agreement, it must consider to determine if the action is necessary and appropriate: (a) the public interest, (b) the protection of investors, and (c) whether the action promotes efficiency, market competition, and capital formation.

That the present agreement has been submitted to the Public Consultation Procedure established in Title XV of the Single Text of the Securities Market Law, specifically in Articles 323 et seq., whose term was from August 24 to September 15, 2022, as recorded in the public access file held by the Superintendency.

That, in virtue of the foregoing, the Board of Directors of the Superintendency of the Securities Market, in exercise of its legal powers,

AGREES:

ARTICLE ONE: MODIFY Article 32 of Agreement 11-2005 of August 5, 2005, which will read as follows:

Article 32. Excesses. An excess shall be understood as any amount that exceeds the investment parameters, limits, or fails to comply with the terms and conditions of the instrument (e.g., risk rating), imposed in Articles 8 and 8-D of Law No. 10 of April 16, 1993, for the Basic Fund, and as provided in Article 8-D of Law No. 10 of April 16, 1993, for other Funds.

The Administrator shall have a term of fifteen (15) business days from its occurrence to remedy any excess. Upon expiration of the aforementioned term, any excess that has not been remedied must be communicated to the Superintendency of the Securities Market on the next business day. In this communication, the reasons that caused the excess, those that have prevented its remediation, must be indicated, and an Action Plan must be presented, which shall be subject to review, approval, and follow-up by the Superintendency of the Securities Market, without prejudice to the administrative sanctions that may apply if any infringement of the provisions of this article is established.

Excesses that exceed the term described in the previous paragraph must be remedied as follows:

1. Excesses caused by factors unrelated to the Administrator: The Administrator must remedy them within a period of six (6) months from when the excess occurred. Factors unrelated to the Administrator shall be understood as any excess caused by situations outside the control of the Administrator, including, but not limited to: market fluctuations, changes in macroeconomic conditions, fortuitous events, and force majeure situations, among others.

2. Excesses caused by factors attributable to the Administrator: The Administrator must remedy them within a period of six (6) months from when the excess occurred, without prejudice to the sanctions and responsibilities that correspond. Factors attributable to the Administrator shall be understood as any excess caused by acts of negligence or intent on the part of the Administrators.

The Superintendency of the Securities Market, at the request of the Administrator (delivered before the expiration of the aforementioned deadlines), may extend the aforementioned deadlines after the analysis of each case.

The Administrator must document, through a log, all excesses that are recorded during investment management, including those that have been remedied within the first fifteen (15) business days from their occurrence, and must have the support of the elements that caused them and the time the Administrator took to remedy them. This information and documentation shall be available to the Superintendency of the Securities Market whenever it is required.

Paragraph I (Disclosure in Financial Statements). Any excess that has not been remedied within the term of fifteen (15) business days from its occurrence must be disclosed through a Note within the Financial Statements, titled "Investment Excesses of the Period," and must include at minimum: (i) name of the issuer or counterparty, (ii) total invested amount, (iii) amount of the excess and percentage of the total net equity of the fund.

Excesses must be disclosed in the Financial Statements as follows:

1. Note of any excess remedied within the reporting period of the Financial Statement, provided that it was caused by factors attributable to the Administrator. Excesses remedied within the reporting period of the Financial Statement that were caused by factors unrelated to the Administrator do not require disclosure in the Financial Statements.

2. Note of any excess not remedied at the close (cutoff) of the reporting period of the Financial Statements, regardless of the cause that originated it.

Additionally, it must be disclosed, via Note, whether this excess has been remedied between the date subsequent to the close (cutoff) of the reporting period and the date of issuance of the Financial Statements (Note of Subsequent Event).

3. Note of any excess occurring between the date subsequent to the close (cutoff) of the reporting period of the Financial Statements and the date of issuance of the Financial Statements (Note of Subsequent Event) in the following cases: a. Excess caused by factors attributable to the Administrator, or b. Excess caused by factors unrelated to the Administrator, provided that it has not been remedied before the date of issuance of the Financial Statements.

Adaptation Period. The provisions of this paragraph regarding the disclosure of excesses in the financial statements shall enter into force on July 1, 2023, the date by which all Administrators must be in compliance with the disclosure method established herein.

Paragraph II (Sanctioning). Excesses generated by factors attributable to the Administrator shall be sanctioned by the Superintendency of the Securities Market, by their mere occurrence, in accordance with the provisions of the Securities Market Law.

Excesses generated by factors unrelated to the Administrator and those generated by factors attributable to the Administrator that have not been remedied within the deadlines provided for in this article, shall be sanctioned in accordance with what is established in the Securities Market Law.

ARTICLE TWO: MODIFY Article 39 of Agreement 11-2005 of August 5, 2005, which will read as follows:

Article 39. Valuation and accounting of assets. For the purposes of what is provided in Article 8-F of Law No. 10 of April 16, 1993, the valuation of assets must be daily and at fair value or amortized cost (as applicable), in accordance with the current International Financial Reporting Standards (IFRS), according to the business model of the Administrators.

Adaptation Period. The provisions of this article, regarding the valuation and accounting of assets, shall enter into force on July 1, 2023, the date by which all Administrators must be in compliance with the methodology established in the current International Financial Reporting Standards (IFRS).

ARTICLE THREE: VALIDITY. This Agreement shall enter into force from its promulgation in the Official Gazette of the Republic of Panama.

PUBLISH AND COMPLY,

President of the Board of Directors