Operational Manual for the Creation, Placement, and Transfer of CDN
Approved by the Board of Directors in session JD-05/2021 dated 27/04/2021	Version: 01	Page: 1 of 11

Operational Manual for the Creation, Placement, and Transfer of CDN

Identification of Changes
# Changes	Addition, Suppression, or Modification	Reference of Change – Date of Previous Version

Operational Manual for the Creation, Placement, and Transfer of CDN
Approved by the Board of Directors in session JD-05/2021 dated 27/04/2021	Version: 01	Page: 2 of 11

OBJECTIVE

To establish the processes involved in the enrollment, registration, and deposit of Negotiable Deposit Certificate Programs, and to serve as a guide in the processes of creation, placement, and transfer of Certificates belonging to a Program.

APPLICABLE DOCUMENTATION

Internal Regulations

CEDEVAL Procedure for Deposits, Transfer, and Withdrawal of Securities.
CEDEVAL Operations Manual.

External Regulations

Minimum Guidelines for Negotiable Deposit Certificates (CDN) approved by the Central Reserve Bank of El Salvador.
Instruction for the Approval of New Financial Products and Services, approved by the Central Reserve Bank of El Salvador.
Stock Exchange Operational Instruction of the Stock Exchange of El Salvador.
Securities Issuance Instruction of the Stock Exchange of El Salvador.
Stock Exchange Placement Instruction of the Stock Exchange of El Salvador.
Securities Market Law.
Law on Electronic Annotations of Securities in Account.
Banking Law.
Law on Cooperative Banks and Savings and Credit Societies.

DEFINITIONS

BCR: Central Reserve Bank of El Salvador.
BVES: Stock Exchange of El Salvador, S.A. de C.V.
CCB: Stockbrokerage House. Entity authorized by the Stock Exchange and by the Superintendence of the Financial System, which provides intermediary services in the negotiation of Negotiable Deposit Certificates in the Stock Exchange. CDN: Negotiable Deposit Certificate. CEDEVAL: Securities Depository Center, S.A. de C.V.

Operational Manual for the Creation, Placement, and Transfer of CDN
Approved by the Board of Directors in session JD-05/2021 dated 27/04/2021	Version: 01	Page: 3 of 11

Buying Client: Person who wishes to acquire a CDN through negotiation in the Stock Exchange, in the secondary market.
Selling Client: Holder(s) of CDN who wish(es) to sell their certificate through the Stock Exchange.
Placement of CDN in Primary Market: Placement of a CDN, through the Issuance, Registration, and Placement Service of CDN.
Custody Account under the Issuing Entity (or Custody Account): Securities account granted to CDN issuing Entities in CEDEVAL systems, under which the initial deposit of placed Certificates is made.
Third-Party Account: Securities account of an investor, opened in CEDEVAL through a Stockbrokerage House, in which CDNs issued by an Issuing Entity are deposited, for the purpose of negotiating them in the BVES.
Issuing Entity: Bank, Cooperative Bank, or Savings and Credit Society responsible for issuing and placing Negotiable Deposit Certificates in the Primary Market in the Stock Exchange.
IGD: Deposit Guarantee Institute.
Monetary Settlement: Daily process of collections and payments of stock market operations.
Securities Settlement: Process in which the transfer of securities to the Buying Client's account is carried out.
Macro-title: Unique document representing the entirety of a CDN Program, represented by means of account annotation and containing the maximum availability of individual CDNs that each Issuing Entity can place, as well as their general characteristics. MERVAL: Stock Market System, of BVES. Negotiation of CDN in Secondary Market: Negotiation of a CDN, through the Electronic Negotiation System, of the Stock Exchange of El Salvador. SECAV: Electronic Custody and Administration of Securities System, of CEDEVAL. SEM: Electronic Registration of Issuances System, of CEDEVAL. SERC: Issuance, Registration, and Placement Service of CDN, of CEDEVAL.

DEVELOPMENT

1. Norm Documentation, Creation, Enrollment, and Deposit of CDN Program Macro-title

1.1 Elaboration and Presentation of Product Norm To place CDNs, the Issuing Entity must be duly authorized by the BCR having approved a Norm based on the Minimum Guidelines for Negotiable Deposit Certificates (CDN), and in the Instruction for the Approval of New Financial Products and Services.

Operational Manual for the Creation, Placement, and Transfer of CDN
Approved by the Board of Directors in session JD-05/2021 dated 27/04/2021	Version: 01	Page: 4 of 11

1.2 Enrollment and Registration of a CDN Program through a Macro-title. Upon having the approval of the Norm by the BCR Board of Directors, in accordance with what is established in the Minimum Guidelines for Negotiable Deposit Certificates (CDN) and the Instruction for the Approval of New Financial Products and Services, the Issuing Entity can initiate the process of enrollment of the program in the BVES, as well as the Registration of the same in CEDEVAL, which must be carried out through a CCB, presenting:

Request from the CCB.
Request from the Issuing Entity.
Certification of agreement of its board of directors or competent body, of the approval of the program.
Macro-title.
Account deposit form.
Document where the issuing entity establishes the conditions and requirements that investors who wish to acquire in the secondary market the CDNs issued by it must comply with.

The Macro-title must contain the following conditions of the CDN Program:

Program Mnemonic: is the name of the program and must contain a maximum of 10 characters. It is structured as follows: the first three characters must be the name of the product (CDN), the following characters (5 maximum) are free for the issuing entity to identify its program, and the last two characters will be the program correlative (01, 02, 03, etc);
Placement Form: establish that the primary placement will be at the counter, and its negotiability only through the Stock Exchange;
Total Amount of the CDN Program: total amount of the availability that the program will have for all CDNs that are issued under the program;
Minimum Opening Amount of the CDNs: establish the minimum opening amount that the CDNs issued under the program will have;
Currency of Program Issuance: United States Dollars;
Range of Terms in Days: establish the minimum and maximum terms to which each CDN can be placed;
Range of Interest Rates: establish the minimum and maximum rates at which a CDN can be placed;
Form of Payment of Interest, and Principal at Maturity: Determine that the payment of interest and capital can be made in two ways: if the CDN is in a custody account, the issuing entity will make payments directly to the client. When the CDN is transferred to a third-party account, payments will be made by the issuing entity through the procedure established by CEDEVAL and will be transferred to the client through their Stockbrokerage House;
Interest Payment Frequency: establish that interest payments can be made bimonthly, monthly, bimonthly, quarterly, semi-annually, annually, or at maturity, as the issuing entity wishes to establish; and
Non-Renewability: establish that the term of the CDNs is not renewable, so that at maturity the capital will be paid.

Operational Manual for the Creation, Placement, and Transfer of CDN
Approved by the Board of Directors in session JD-05/2021 dated 27/04/2021	Version: 01	Page: 5 of 11

The macro-title must contain the authorized signatures for its validity.

1.3 Enrollment in the BVES
Once the Stock Exchange carries out the enrollment of the program, as stipulated in the Securities Market Law for individual titles, the Registration and deposit in CEDEVAL will proceed.

1.4 Registration and Deposit in CEDEVAL
Once enrolled in the BVES, this will transfer the documentation to CEDEVAL so that, in accordance with the Depositary's Operations Manual, the program is registered in the SEM, thus creating the availability for CDN placement. Finally, the Macro-title will be deposited in administration in the SECAV.

Once the process is finished, the Issuing Entity can place CDNs, whose amounts will be deducted from the available balance, as placements are made, crediting to their clients' accounts the negotiated securities, in accordance with what is stipulated in Art. 19 of the Law on Electronic Annotations of Securities in Account.

2. Placement of CDN in Primary Market
When the respective program has been registered and deposited, the Issuing Entity can place CDNs. When a CDN is created, no physical certificate will be issued, as it is created and issued as a dematerialized security title. The primary placement of CDNs will be carried out at the counter in accordance with applicable regulation.

2.1 Client requests CDN
When a Client wishes to acquire a CDN, they must do so in the offices defined by the Issuing Entity, or the electronic means that this defines for product placement.

The Issuing Entity will consult online, through an interface or directly in the SERC, regarding the availability for the creation of a new CDN within the CDN Program.

Once availability in the Program has been verified, the issuing entity will carry out the opening process following its internal policies and procedures, and will remit to CEDEVAL, through the SERC, the client information and the characteristics of the CDN, according to the following detail:

Type of Information	Field
Issuer	Account in which the CDN Program was deposited
CDN Holder(s)	Full Name / Corporate Name
	Type of Person
	Nationality

Operational Manual for the Creation, Placement, and Transfer of CDN
Approved by the Board of Directors in session JD-05/2021 dated 27/04/2021	Version: 01	Page: 6 of 11

	Economic Activity Sector
	Address
	Telephone Number
	Institutional Sector
	Sector Type (Public or Private)
	Date of Birth
	Sex
	Marital Status
	NIT Number
	Document Type*
	Document Number*
	Size and Type of Enterprise
	Occupation
	Representative (Legal Person)
CDN Data to Open	Program Code
	CDN Number
	CDN Amount
	Term
	Opening Date
	Maturity Date
	Interest Rate
	Interest Payment Frequency
Beneficiaries (information of each one)	Name
	Address
	Telephone
	NIT Number
	Document Type*
	Document Number*
	Kinship
	Percentage Distribution

Fields used to store the DUI number, for Natural Person

When the CDN is opened in co-ownership, all holders have the same rights; however, to comply with what is established in article 15 of the Law on Annotations of Securities in Account, the issuing bank will document the appointment of the common representative and enter it as the first of the holders in the SERC, for the purpose of opening the securities account in which the co-owned certificate will be deposited.

Operational Manual for the Creation, Placement, and Transfer of CDN
Approved by the Board of Directors in session JD-05/2021 dated 27/04/2021	Version: 01	Page: 7 of 11

2.2 Creation of the CDN and delivery of receipt. When the Issuing Entity has completed the opening process, and remits the information through the SERC (either through manual entry of information on its screen, or via an interface), the creation of the CDN is carried out automatically.

The SERC will generate a CDN creation receipt, which will be delivered to the Client along with a copy of the contract signed with the Issuing Entity. The registration of the CDN is carried out in accordance with what is established in the Law on Electronic Annotations of Securities in Account, so it is not necessary to generate a physical Certificate.

The placed CDN is registered in CEDEVAL under a Custody Account in the name of the Issuing Entity, for which a sub-account in the name of the Client is created automatically. The account number is specified in the creation receipt, and is available in the SERC.

3. Negotiation of CDN in Secondary Market
The CDN can only be negotiated in the Stock Exchange, through the intermediation of a CCB, in accordance with the Law on Electronic Annotations of Securities in Account.

3.1 Transfer of CDN
To negotiate a CDN, its holder must request from the Issuing Entity that it be transferred from the Custody Account in which it was initially deposited, to a Third-Party Account, which said holder must possess with the CCB with which the operation will be carried out. Both the holder(s) of the Custody Account, and that of the Third-Party Account must be the same.

In case the holder does not have a Third-Party Account, they must first go to a CCB and request its opening.

To carry out the transfer, the Issuing Entity will request from the holder the Destination Account number, which must be in the name of the holder, and the number of the CDN to be transferred. If all information is correct, the Issuing Entity carries out the transfer through the SERC, specifying the CDN being transferred, the Destination Account, and attaching the Transfer Form for CEDEVAL. It will be automatically validated that the holder(s) of the account match(es) and the transfer will be carried out.

3.2 Generation of CDN Negotiation Availability Once the transfer is carried out, the CDN is already enabled for its negotiation, through the BVES systems.

When a CDN is in a third-party account, the CCB will be responsible for entering the CDN denomination in the BVES systems, so that said system requests the specific characteristics from the SERC, and in that way the stock exchange negotiation process can be carried out.

Operational Manual for the Creation, Placement, and Transfer of CDN
Approved by the Board of Directors in session JD-05/2021 dated 27/04/2021	Version: 01	Page: 8 of 11

3.3 CDN Negotiation in Stock Exchange
When the CDN is already available for negotiation, any person interested in buying or selling must do so through their CCB. The CCB representing the seller will enter the CDN number in the BVES negotiation system, so that in said system the specific characteristics of the certificate to be negotiated are displayed.

CDNs can also be negotiated at agreed prices, in accordance with what is stipulated in article 15 of the Stock Exchange Operational Instruction.

The term conditions, as well as the interest calculation conditions do not vary with respect to those initially agreed, so the new holder(s) of the CDN will be subject to the initial conditions of the same.

3.4 Entry and Validation of Additional Buyer Information For the purpose of keeping the information of the new holder registered, for regulatory reporting purposes to the SSF and IGD, as well as for money laundering and asset mitigation risks, prior to the settlement of the operation, the buying client's CCB must enter the same day of the stock exchange operation, the additional information required by the Issuing Entity, through the SERC, to complete the information specified in section 2.1. This information includes the scan of identification documents. The CCB must obtain the client's authorization to share their information with the issuing entity through the Depositary and make known to the buying client that the acquisition of a CDN is subject to the validation of the Issuing Entity, so their approval is required to complete the respective compensation and settlement process.

Once the additional information is entered, the Issuing Entity will receive a notification and must consult it in the SERC; this information can be downloaded to carry out validation related to its internal policies, or any other related to money laundering and asset prevention, prior to approving or not the operation in the SERC, which must be done within a maximum of 2 business days (one business day before the operation settlement date).

In case the operation is not approved, both the buying CCB, the selling CCB, and the Stock Exchange will be notified, by the means established by CEDEVAL, for its cancellation in the BVES systems, in this way the operation will not enter the Stock Market Settlement process, and the CDN will remain in the property of the original holder.

If the Issuing Entity has not modified the status of the change of holder to Accepted or Denied in the SERC, and the day of the operation settlement arrives, the SERC module will include the operation in the CEDEVAL stock market compensation and settlement process. Subsequently, the CDN will be transferred to the new holder's account and the Issuing Entity must register it.

Operational Manual for the Creation, Placement, and Transfer of CDN
Approved by the Board of Directors in session JD-05/2021 dated 27/04/2021	Version: 01	Page: 9 of 11

3.5 CDN Purchase-Sale Operation Settlement Once the additional information is completed and validated, the operation enters the Stock Market Settlement process (it will always be carried out at T+3 from the date the negotiation was closed). This operation is included in the daily Settlement processes executed by CEDEVAL, and established in the Operational Instruction Monetary Compensation and Settlement of Stock Market Operations.

Once Stock Market Settlement is concluded, the information about the new holder of the CDN will be updated for the CDN, with the information of the holder who acquired it, a change that will be available in the SERC, and can be downloaded, so that the Issuing Entity updates the information in its Systems.

4. Registration of Beneficiaries
The CDN allows registering an unlimited number of beneficiaries, as established in article 62 of the Law on Electronic Annotations of Securities in Account, article 56 of the Banking Law, and article 37 of the Law on Cooperative Banks and Savings and Credit Societies.

When a Client carries out the opening of a CDN, the Issuing Entity will request from the Client to name their Beneficiaries, which will be registered in the SERC. These beneficiaries will remain valid, while the CDN is not transferred to a Third-Party Account.

Beneficiaries can be modified at any time by the CDN holder, while this remains in the custody account in which it is initially deposited. The modification will be requested from the Issuing Entity, who can carry out the maintenance in the SERC.

When a transfer to a Third-Party Account is carried out, the Beneficiaries will be those registered in said account. The SERC will notify a user designated by the Issuing Entity of the change of said beneficiaries, the information will also be available in the SERC.

When a CDN is negotiated, the Beneficiaries will be those that its new holder has registered in their Third-Party Account. This information will be available through the SERC, and the Issuing Entity will be notified, so that it can update its Systems.

5. Exercise of Patrimonial Rights (Payment of Periodic Interest and Capital at Maturity). The exercise of patrimonial rights for payment of interest and capital will be executed as follows:
a) Through the Issuing Entity, in case the CDN is deposited in the Holder's Custody Account, registered by the financial institution in CEDEVAL; that is, the account in which it is initially deposited.

Operational Manual for the Creation, Placement, and Transfer of CDN
Approved by the Board of Directors in session JD-05/2021 dated 27/04/2021	Version: 01	Page: 10 of 11

b) Through CEDEVAL, in case the CDN is deposited in the Third-Party Account, either of its original holder, or a new holder as a result of a negotiation.

CEDEVAL will send to the Issuing Entity the detail of the payments that the Issuing Entity must send to the Depositary, corresponding to the CDNs deposited in Third-Party Accounts, which will be carried out through the Depositary, complying with the procedure already established for payment of interest and capital at maturity, which is applied for other securities.

This information will also be available through the SERC module.

When payments are made through CEDEVAL, the Issuing Entity will carry out the withholding of income tax that corresponds, and will remit to the Depositary the net amounts, as well as a certificate in which it specifies the withholdings made, for the purpose of reconciliation in the Depositary's systems.

In both cases, the Holder will receive the payment of interest, in accordance with the conditions agreed during the opening of the CDN.

6. Treatment of CDNs by Judicial Orders
In attention to what is established in article 36 of the Law on Electronic Annotations of Securities in Account, seizures or restrictions on securities annotated in account, will be inscribed in the securities accounts register in accordance with the mandate contained in the respective official letter, therefore the depositary will execute any judicial instruction in accordance with what is regulated in the referred law and the procedures determined in its Operations Manual.

In the case that the issuing entity receives any judicial requirement regarding the CDNs issued under its charge and deposited in securities accounts in CEDEVAL, it will immediately notify CEDEVAL about the requirement, and must explain to the competent authority that any judicial order regarding a CDN must be executed directly in the securities accounts records. CEDEVAL will place a restriction on the securities while it receives the respective judicial order.

7. Treatment of CDNs in case of death of its holder In the case of death of the holder of a CDN, the following process will be carried out:
If the CDN is in a third-party account, it must be restricted by CEDEVAL immediately when the CCB communicates the death of its holder. The CCB must remit to CEDEVAL the pertinent documentation that proves the death of the CDN holder. CEDEVAL will remit the information to the issuing entity for the opening of the account in the name of the beneficiaries and will transfer the CDN to the custody account in the issuing entity in the name of the beneficiaries. Once the CDN has been transferred to a custody account under the issuing entity, it will be this one who must continue the process of payment of interest and capital at maturity, for which there will no longer be any obligation of any CCB or CEDEVAL in the execution of the patrimonial rights of the CDN.

Operational Manual for the Creation, Placement, and Transfer of CDN
Approved by the Board of Directors in session JD-05/2021 dated 27/04/2021	Version: 01	Page: 11 of 11

Operational Manual for the Creation, Placement, and Transfer of Negotiable Deposit Certificates