Norm on Financing Granted by General Warehouses and Assets Acquired in Recovery

Resolution No. CD-SIBOIF-676-2-MAY11-2011 Date: May 11, 2011

NORM ON FINANCING GRANTED BY GENERAL WAREHOUSES AND ASSETS ACQUIRED IN RECOVERY

The Board of Directors of the Superintendence of Banks and Other Financial Institutions,

CONSIDERING

I

That pursuant to Article 51 of Law 734, the General Warehouse Law, published in La Gaceta, Official Diary, Numbers 201 and 202, on October 21 and 22, 2010, respectively (Warehouse Law); General Warehouses that opt to grant financing must guarantee them with goods or merchandise stored in warehouses owned by them or received under lease that they administer directly, backed by the issuance of deposit certificates and pledge bonds, or credits without pledge bonds.

II

That the aforementioned article empowers the Board of Directors of the Superintendence to establish, through a general norm, the conditions and limits of financing operations.

III

That based on the powers conferred by Articles 2 and 139 of Law 734, the General Warehouse Law, and Article 2, fourth paragraph, and Article 3, item 13, of Law 316, the Law of the Superintendence of Banks and Other Financial Institutions, and its reforms.

In exercise of its powers,

HAS ISSUED,

The following:

Resolution No. CD-SIBOIF-676-2-MAY11-2011 NORM ON FINANCING GRANTED BY GENERAL WAREHOUSES AND ASSETS ACQUIRED IN RECOVERY

CHAPTER I

OBJECT AND SCOPE

Art. 1 Object and scope.- This norm aims to regulate the financing granted by General Warehouses to their depositors of goods or merchandise; as well as the assets acquired in recovery by said warehouses.

CHAPTER II

RESPONSIBILITIES OF THE BOARD OF DIRECTORS

Art. 2 Responsibility of the board of directors.- The Board of Directors of the warehouse is responsible for establishing mechanisms, guidelines, procedures, and policies oriented towards carrying out adequate management of the administration of financing granted. These measures must include, among other aspects, the following:

a) The criteria for granting the types of financing, as well as the global limits of the risks to be assumed for each of them, and the requirements that clients must meet.

b) The minimum analysis and documentation requirements that must be gathered prior to granting or renewing financing, and during its validity.

c) The general pricing policy to be applied.

d) The responsibilities and delegated powers of the different bodies and persons in charge of granting, formalizing, monitoring, valuing, and controlling operations.

e) Ensuring that the administration and control bodies implement and execute the provisions emanating from the Board of Directors, as well as the provisions established in this norm.

f) Reviewing credit policies at least once a year.

CHAPTER III

DOCUMENTED CREDITS AND CREDITS WITH PLEDGE BONDS

Art. 3 Documented Credits.- These are commercial credits without Pledge Bonds granted by warehouses to natural or legal persons, to finance operations linked to goods or merchandise that are deposited in the warehouse's warehouses or whose import destination and/or export origin is the same warehouse.

These credits must be duly documented and shall be granted for a term not exceeding sixty (60) days, for an amount equal to or less than seventy-five percent (75%) of the estimated value of the merchandise.

Receivable documents derived from the export of merchandise that were supporting pledge bonds are included in this category.

Art. 4 Conversion of documented credits.- Documented credits that have not been paid at maturity must be converted into credits backed by Deposit Certificates and Pledge Bonds, within a term not exceeding thirty (30) days after maturity.

Art. 5 Provisions for documented credits. 1

Documented credits that have matured and have not been converted into credits backed by Deposit Certificates and Pledge Bonds within the term established in the previous article, must be provisioned at one hundred percent (100%).

Notwithstanding the above, balances of clients who have been declared judicially insolvent, in bankruptcy, or with an unknown domicile in the country must be provisioned at 100% before the scheduled time; in the latter case, supported by the corresponding legal opinion. Their write-off may be immediate or at the latest in the period established in Article 6 of this norm.

Art. 6 Write-off of documented credits.- Documented credits must be written off at one hundred eighty-one (181) days past maturity.

Art. 7 Commercial credits with deposit certificates and pledge bonds.- These are financing granted by warehouses to natural or legal persons, guaranteed with Deposit Certificates and Pledge Bonds issued by the same warehouse, and shall be granted in accordance with the regulations for credits with Pledge Bonds in the norm regulating the operational and financial matters of general warehouses.

Credits granted by a warehouse with a Deposit Certificate and Pledge Bond must not exceed seventy-five percent (75%) of the estimated value of the goods or merchandise consigned in said titles.

Art. 8 Renewal of commercial credits with deposit certificate and pledge bond.- In cases where credits guaranteed with a Deposit Certificate and Pledge Bond are not paid at maturity, the warehouse may renew them once for a term not exceeding one hundred eighty (180) days, counted from their maturity date.

In these cases, the warehouse is obliged to write in the new title to be issued, in the observations section, the legend "Renewal of the title" including in it the number of the title being renewed.

1 Art. 5, amended on April 11, 2014 - Resolution No. CD-SIBOIF-830-2-ABR11-2014

Art. 9. Conditions for the renewal of commercial credits with deposit certificate and pledge bond.- For a credit to be considered as renewed, it must:

a) Cancel in advance the interest and commissions corresponding to pending payments at the time of renewal,

b) Have an updated analysis of the characteristics of the merchandise, with the scope indicated in the norm regulating the operational and financial matters of general warehouses, and,

c) Have an updated acceptable valuation of the goods or merchandise backing the corresponding deposit certificate and pledge bond.

Art. 10. Maturity of commercial credits with deposit certificate and pledge bond.- Commercial credits with Deposit Certificates and Pledge Bonds that have not been paid at maturity must be transferred to overdue commercial credits at sixty-one (61) days past maturity.

Art. 11 Provisions for overdue credits with deposit certificate and pledge bond.- Commercial credits with Deposit Certificates and Pledge Bonds that have been transferred to overdue commercial credits must be provisioned at one hundred percent (100%).

Art. 12 Write-off of overdue credits with deposit certificate and pledge bond. Commercial credits with Deposit Certificate and Pledge Bond must be written off at one hundred eighty-one (181) days past maturity.

Art. 13 Legal and economic information of the debtor.- In all cases of loans granted by the warehouse, there must be the corresponding file, which must contain, at a minimum, the information contained in "Annex 1" of this norm, which is an integral part of it.

CHAPTER IV

EVALUATION OF ASSETS RECEIVED FROM RECOVERIES

Art. 14 Scope of evaluation. 2

The adjudicated assets will be evaluated in their entirety at least once every three years for real estate, and for movable assets with a semi-annual periodicity.

2 Art. 14, amended on April 11, 2014 - Resolution No. CD-SIBOIF-830-2-ABR11-2014

For the purposes of this norm, adjudicated assets are understood as those acquired via judicial or extrajudicial means for the recovery of credit obligations.

Art. 15 Criteria for evaluation. 3

Adjudicated merchandise will be valued in accordance with the analysis and documentation criteria referred to in the norm regulating the operational and financial matters of general warehouses.

In the case of adjudicated real estate, the evaluation of said assets must be performed based on the estimation of the realization value in accordance with the norm regulating the matter of appraisers who provide services to institutions of the Financial System. All real estate whose book value in national currency or foreign currency is greater than the equivalent in cordobas of twenty-five thousand United States dollars (US$25,000.00), at the official exchange rate, must have valuations performed by independent appraisers registered in the Register of Appraisers of the Superintendence of Banks, with the exception of assets located outside the country.

The evaluation of shares and rights in companies, and in general, of financial instruments received in payment in kind or adjudicated, will be performed at fair value in accordance with the criteria defined in IFRS 13.

The general warehouse will determine if the adjudicated asset is registered as non-current assets held for sale in accordance with IFRS 5 criteria, or as assets received from recoveries, in case the criteria established in said IFRS are not met.

Recognition and Measurement of Adjudicated Assets under IFRS 5 Non-Current Assets Held for Sale. An entity will classify an adjudicated asset as a non-current asset held for sale when it meets the criteria established in IFRS 5. The accounting procedure is as follows:

1. Classification to Non-Current Assets Held for Sale (IFRS 5) from the date of adjudication of the asset.

The institution for initial registration in accordance with IFRS 5 must take the lesser of:

3 Art. 15, amended on December 6, 2018 - Resolution No. CD-SIBOIF-1088-2-DIC6-2018 Art. 15, amended on April 11, 2014 - Resolution No. CD-SIBOIF-830-2-ABR11-2014

a) The amount agreed in the transfer in payment, or adjudication at auction according to the General Warehouse Law or in judicial auction as applicable; this is considered as the cost of the asset, and its

b) Fair value (determined in accordance with IFRS 13) minus selling costs (in accordance with IFRS 5).

The financial institution must write off the outstanding balance of the credit against the provision and, in case there is a remaining provision, it must be reversed in the corresponding account of the statement of results, being controlled in the sub-account of Undistributable Current Year Result.

Subsequently, everything established in IFRS 5 applies.

2. Reclassification of Assets Received in Credit Recovery to Non-Current Assets Held for Sale (IFRS 5).

This is the case when an adjudicated asset meets the IFRS 5 criteria after adjudication and registration as Assets Received in Credit Recovery.

The reclassification can be made to the Non-Current Assets Held for Sale account and will be performed at the lesser of:

a) The initial amount recognized in the Assets Received in Credit Recovery account, without considering provisions, and its

b) Fair value (determined in accordance with IFRS 13) minus selling costs (in accordance with IFRS 5).

For assets that are reclassified to IFRS 5 in the Opening Balance Sheet applying what is established in IFRS 1 First-time Adoption of IFRSs, the accumulated provision of these will be reversed in the corresponding sub-account of Transition Adjustment.

The reclassification of Assets Received in Credit Recovery to IFRS 5 can only be performed in a period not exceeding 6 months, counted from the date of adjudication.

In case there is an excess of provision resulting from the reclassification of the asset received in credit recovery to non-current assets held for sale, this must be reversed in the corresponding account of the statement of results, being controlled in the sub-account of Undistributable Current Year Result.

Subsequently, everything established in IFRS 5 applies.

3. Changes in the sales plan of the asset classified as Non-Current Assets Held for Sale (IFRS 5).

When there is a change in the sales plan, because the IFRS 5 criteria are no longer met, the asset will be reclassified to the Assets Received in Credit Recovery account, at the book amount recognized in the Non-Current Assets Held for Sale account, adjusted from the date of adjudication, by the provision established in Article 16 of this norm, for which it must consider the provision constituted as impairment, and in case there is a deficit of provision, this will be constituted against the corresponding expense account of the statement of results.

When the change in the sales plan corresponds to assets that were originally reclassified to IFRS 5 in the financial statements of opening on January 1, 2018, the provision to be constituted from the date of adjudication will be debited from the Transition Adjustment account, provided that the specific asset has a positive balance in said account for this concept. In case there is a deficit of provision as required in Article 16 of this norm, this will be constituted and recognized as an expense in the corresponding account of the statement of results.

Subsequently, the remaining positive balance of the specific asset, registered in the Transition Adjustment account, can be: i) reversed against accumulated results until the asset is sold; ii) and while the asset is not sold, it will complement the provision requirement established in Article 16 of this norm.

An asset registered as IFRS 5 and reclassified to the Assets Received in Credit Recovery account, cannot be reclassified again under the scope of IFRS 5.

4. Treatment of Undistributable Results.

The amounts registered in the sub-account of Undistributable Current Year Result and Undistributable Accumulated Results of Previous Years, will be distributable until the sale of the asset that generated it is carried out or 100% provision is registered.

Art. 16 Constitution of provisions. 4

In the case of an adjudication of assets received in credit recovery, the warehouse must transfer the respective provisions of the credit to provisions for assets adjudicated received in credit recovery until the cancellation by the sale of the asset is performed.

In any case, the accounted provision cannot be less than the following percentages of the value of the asset registered in the books:

4 Art. 16, amended on December 6, 2018 - Resolution No. CD-SIBOIF-1088-2-DIC6-2018

a) In movable assets:

30% From its registration until 6 months from the adjudication of the asset.

100% After 6 months from the adjudication of the asset.

b) In real estate:

30% After 6 months until 12 months from the adjudication.

50% After 12 months and up to 18 months from the adjudication.

75% After 18 months up to 24 months from the adjudication.

100% After 24 months from the adjudication.

Art. 17 Reversal of constituted provisions. 5

The constituted provisions may be reversed once the sale of the corresponding asset is effected, considering previously against these, the possible losses that are determined by the effect of the decrease in the value of the asset at the time of sale.

If the asset in question is sold for a higher value, both the excess of the sale value and the constituted provisions must be registered as gains from the sale of various assets.

The provisions of the assets received in credit recovery, reclassified to non-current assets held for sale (IFRS 5), must be reversed, registering income from the decrease in provision of assets received in credit recovery.

Art. 18 Retention of valuations and supporting background.- The valuations and supporting background of the evaluations performed must be available to the Superintendence of Banks for review.

The warehouse must inform, through a detailed list, the total of the assets received in payment or adjudicated and their respective accounted amounts, with the same periodicity established for the sending of monthly financial reports.

CHAPTER V

FINAL PROVISIONS

Art. 19 Modifications of annexes.- The Superintendent is empowered to modify the information requested in the annex of this norm, to the extent that its application so requires.

5 Art. 17, amended on December 6, 2018 - Resolution No. CD-SIBOIF-1088-2-DIC6-2018

Art. 20. Repeal.- The General Norm on Financing granted by General Warehouses contained in Resolution CD-SIBOIF-557-2-OCT22-2008, published in La Gaceta, Official Diary No. 229, of December 01, 2008, is repealed.

Art. 21 Validity.- This norm will enter into force upon its notification, without prejudice to its publication in La Gaceta, Official Diary.

ANNEX 1 6

LEGAL AND ECONOMIC INFORMATION OF THE DEBTOR

In all cases of loans granted by the warehouse, there must be in the respective file the credit proposal elevated to the corresponding resolving instances, as well as the resolution where the conditions required by said instance are exposed.

A. Natural Persons:

1. Credit application.

2. General (name, marital status, occupation, Identity Card, domicile, activity, telephone).

3. Activity.

4. Business registration and RUC No., when applicable.

5. Financial Status Statement and Statement of Results when the warehouse requires it.

6. Valuation made by the Warehouse of the goods or merchandise received as collateral when appropriate.

7. Document containing the approval of the credit by the corresponding resolving instance.

B. Legal Persons:

1. Credit application.

2. Deed of incorporation and statutes of the Company.

3. Document accrediting legal representation.

4. Business registration and RUC No.

5. Financial Status Statement and Statement of Results when the warehouse requires it.

6. Valuation made by the Warehouse of the goods or merchandise received as collateral when appropriate, and

7. Document containing the approval of the credit by the corresponding resolving instance.

(f) A. Rosales B. (f) V. Urcuyo V. (f) Gabriel Pasos Lacayo (f) F. Reyes B. (f) illegible (Silvio Moisés Casco Marenco) (f) U. Cerna B.

6 Annex amended on December 6, 2018 - Resolution No. CD-SIBOIF-1088-2-DIC6-2018 Annex amended on April 11, 2014 - Resolution No. CD-SIBOIF-830-2-ABR11-2014

URIEL CERNA BARQUERO Secretary of the Board of Directors SIBOIF