Technical Standards for Investment Fund Investments

THE COMMITTEE OF NORMS OF THE CENTRAL RESERVE BANK OF EL SALVADOR,

CONSIDERING:

I. That Article 5 of the Investment Funds Law establishes that the Superintendence of the Financial System, within its scope of competence, is the administrative authority responsible for supervising Managers, their operations, and other participants regulated by the same; this includes supervising the investments made by Managers with resources from Investment Funds.

II. That Article 6 of the Investment Funds Law establishes that the Central Reserve Bank of El Salvador, within its scope of competence, is responsible for issuing the necessary technical standards to allow the application of the Investment Funds Law.

III. That Chapter II, Title III of the Investment Funds Law, referred to as the Investment Regime, establishes the authority of the Central Reserve Bank of El Salvador to issue the necessary technical standards for the application of said Chapter, allowing for the adequate realization of investments made with resources from Investment Funds.

IV. That Article 96 of the Investment Funds Law establishes that investments made with resources from Investment Funds shall have the sole objective of obtaining adequate profitability, based on the risk level and liquidity requirements defined in the investment policy.

V. That Article 35 of the Supervision and Regulation of the Financial System Law establishes that directors, managers, and other officials holding positions of direction or administration in the members of the financial system must conduct their business, acts, and operations complying with the highest ethical standards of conduct and acting with the due diligence of a good merchant in their own business.

VI. That for the development of investments with resources from Investment Funds, it is necessary to have minimum provisions that Managers of Investment Funds must follow, in order to achieve adequate profitability, security, and diversification for the benefit of investors.

THEREFORE,

by virtue of the regulatory powers conferred by Article 99 of the Supervision and Regulation of the Financial System Law,

AGREES to issue the following:

TECHNICAL STANDARDS FOR INVESTMENT FUND INVESTMENTS

CHAPTER I
OBJECT, SUBJECTS, AND TERMS

Object

Art. 1.- These Standards aim to establish guidelines regarding investments made with resources from Investment Funds, with the objective of obtaining adequate profitability, based on the Fund's risk level, liquidity requirements, diversification, and limits defined in the investment policy according to the nature of the Fund, in accordance with the Internal Regulations and in concordance with what is provided in the Investment Funds Law.

These Standards develop minimum provisions to be considered for investments by Open Funds and Closed Funds that invest in securities. For the case of Closed Real Estate Investment Funds, as well as Closed Funds that invest in securities issued by companies whose shares are not traded on the stock exchange and whose purpose is investment in specific business projects to be developed in the medium and long term, the specific provisions contained in the technical standards issued for this effect by the Central Reserve Bank of El Salvador through its Committee of Norms shall apply.

Subjects

Art. 2.- The subjects obligated to comply with these Standards are the following:
a) Investment Fund Managers authorized by the Superintendence of the Financial System, in accordance with what is established in the Investment Funds Law; b) Investment Administrators of Investment Funds authorized by the Superintendence of the Financial System, who work for an Investment Fund Manager; and c) Members of the Investment Committee, if the Manager has constituted one.

Terms

Art. 3.- For the purposes of applying these Standards, the terms indicated below have the following meaning:
a) Central Bank: Central Reserve Bank of El Salvador; b) Stock Exchange: Stock Exchange constituted in El Salvador and registered with the Superintendence of the Financial System; c) House: Brokerage House; authorized and registered with the Superintendence of the Financial System; d) Forward Contracts: Non-standardized contracts through which the buyer or seller acquires the obligation to buy or sell, respectively, in a future pre-established period, a specific number of units of a previously defined and characterized underlying asset, at a pre-defined price at the time of contract celebration; e) Futures Contracts: Standardized contracts through which the buyer or seller acquires the obligation to buy or sell, respectively, in a future pre-established period, a specific number of units of a previously defined and characterized underlying asset, at a pre-defined price at the time of contract celebration; f) Options Contracts: Standardized contracts through which the buyer or holder acquires, for a pre-established period, the right to buy or sell, as applicable, at a fixed price, a specific number of units of an underlying asset, previously defined and duly characterized; g) Swap Contracts: Non-standardized contracts through which the buyer and seller agree to exchange monetary flows or underlying assets in future pre-established periods, considering certain conditions previously defined and characterized at the time of contract celebration; h) Derivatives: Financial operations whose value is determined by the value of other known financial instruments called underlying assets, which have the exclusive objective of hedging the risks of Fund investments and which, according to what is established in Article 97 of the Investment Funds Law, may be carried out in organized markets in El Salvador or abroad; i) Funds: Investment Funds; j) Open Funds: Open Investment Funds; k) Closed Funds: Closed Investment Funds; l) Manager: Investment Fund Management Company; m) Business Group: In accordance with Article 5 letter n) of the Securities Market Law, it is that in which a company or set of companies have a common controller, who acting directly or indirectly participates with fifty percent as a minimum in the share capital of each of them or that have common shareholders who, directly or indirectly, are holders of fifty percent as a minimum of the capital of another company, which allows to presume that the economic and financial performance is determined by common interests or subordinate to the group; n) Funds Law: Investment Funds Law; o) Participants: Investors in an Investment Fund; p) Related persons or entities: Refers to persons or entities in which another company, without controlling it, participates in its share capital, directly or through other companies, with more than ten percent of the shares with voting rights, as defined in Article 5 of the Securities Market Law; q) Investment Policy: In accordance with Article 99 of the Investment Funds
Law, it corresponds to the investment policy defined in the Internal Regulations and Prospectus of each Fund, which indicates the minimum and maximum investment limits in each of the types of assets contemplated in Article 4 of these Standards; r) Registry: Public Stock Registry of the Superintendence of the Financial System;

s) Internal Regulations: Document containing all the specific characteristics and rules governing the operation of a specific Investment Fund; and t) Superintendence: Superintendence of the Financial System.

CHAPTER II
PERMITTED INVESTMENTS AND MECHANISMS

Permitted Investments and Operations

Art. 4.- The resources of Open and Closed Funds, without prejudice to the amounts kept in cash, current account deposits, savings, or time deposits, must be invested according to the investment policy in the following public offer securities:
a) Securities issued or guaranteed by the State of El Salvador or by autonomous institutions of El Salvador; b) Bonds and other securities issued or guaranteed by local banks; c) Securities representing the individual participation of the investor in a collective credit of Salvadoran companies or securities that represent participation in the equity of Salvadoran companies, such as bonds and shares; d) Participation shares of Open or Closed Funds regulated in accordance with the Funds Law; e) Securities issued in a securitization process, according to Salvadoran regulation; f) Repos with public offer securities, defined in the Fund's Internal Regulations; g) Securities issued or guaranteed by foreign states, central banks, or foreign banking entities or international organizations; shares and bonds issued by foreign companies; securities issued in a securitization process abroad and participation shares of foreign investment funds; and h) Securities issued by the State of El Salvador and the Central Reserve Bank of El Salvador, placed in the counter window.

The Committee of Norms of the Central Bank may, through modification of these Standards, authorize investment in other public offer securities, in accordance with what is established in letter h) of Article 97 of the Funds Law.

In addition to the above, Open and Closed Funds may also acquire shares in the primary market. In the case of exercising preemptive rights, Funds that invest in the subscription of shares due to capital increases may have the possibility to subscribe the proportional part corresponding to them directly with the Issuer.

Fund investments must be carried out diligently in order to obtain adequate returns, in accordance with the limits established in these Standards and the investment policy defined for each type of Fund.

Art. 5.- The Manager is authorized to carry out repo operations on behalf of the Funds, which may be carried out with public offer securities defined in the Fund's Internal Regulations and in which the Funds will participate as lenders or sellers of Funds.

The Manager may carry out passive repo operations, solely to meet liquidity needs arising from the withdrawal of its participants or Fund expenses or other cases indicated in the Fund's Internal Regulations and based on what is established in the Funds Law, which may not exceed twenty percent of the Fund's total assets.

The conditions of the operation, as well as the respective guarantees, must be established in accordance with what is regulated in the Securities Market Law, other laws, and applicable regulations for repo operations.

Shares Issued by Foreign Companies

Art. 6.- Shares issued by foreign companies in which Fund resources are invested must have the characteristics defined in the Fund's investment policy, be recorded in the Registry and inscribed in a Salvadoran stock exchange.

Participation Shares Issued by Foreign Investment Funds

Art. 7.- Funds may invest in participation shares of Foreign Investment Funds that are recorded in the Registry and comply with what is established in the technical standards issued by the Committee of Norms of the Central Bank regarding the commercialization of Foreign Investment Funds.

Additionally, Funds may invest in participation shares of Foreign Closed Investment Funds, referred to in Article 135 of the Funds Law.

Securities Trading Mechanisms

Art. 8.- Investments in public offer securities in which Fund resources are permitted to be invested must be carried out only if the investment administrator has a documented analysis of their characteristics and risks and has the necessary information and experience for investment decision-making.

To carry out Fund investments, the investment administrator must know the functioning of the instruments and have the necessary means for their recognition, valuation, measurement, and ability to ensure compliance with the criterion taken to value the instruments to be acquired; if the foregoing is not met, the Manager must not enter into negotiations for such instruments.

Securities issued abroad in which Fund resources are invested must be recorded in the Registry and subsequently inscribed in a stock exchange, in accordance with what is established in the Securities Market Law and comply with the requirements established in the Standards regulating the Trading of Foreign Securities.

Liquidity Requirements for Investments

Art. 9.- Open Funds must maintain at least twenty percent of their resources in cash, bank deposits, and high-liquidity, low-risk securities.

For these purposes, high-liquidity, low-risk securities are understood to be those that meet the following requirements:
a) That the securities have a maturity term of less than 365 days; b) That they can be received as collateral in passive operations; c) That their market price can be obtained through one or more price provider sources, a recognized international stock or financial information system by the Superintendence, or, in its absence, can be obtained from a previously established methodology or other reliable price source; and, d) That foreign securities must be investment grade and that local debt instruments have a long-term risk classification no lower than category BBB and N-2 for short-term instruments.

Investments in Treasury Bills of El Salvador, issued by the State of El Salvador, and Negotiable Liquidity Certificates issued by the Central Reserve Bank of El Salvador are also considered liquid.

In case any of the securities considered high-liquidity and low-risk cease to meet the requirements established in this article, the Manager, in order to maintain the minimum limit established in the Funds Law, must substitute the referred securities no later than the next business day after the non-compliance is detected.

On the contrary, low-liquidity assets are those that are not traded frequently and in significant volumes in formal secondary markets, and therefore would have difficulty being sold immediately at market price.

For these purposes, low-liquidity assets are those that do not comply with what is established in letters a, b, c, and d, and the third paragraph of this article.

Investments During the Subscription and Placement Period

Art. 10.- During the period in which the Fund reaches the minimum equity and number of participants established in the Funds Law, the Manager, in order to preserve Equity, must keep monetary contributions in deposits at banks domiciled in El Salvador or invest them in high-liquidity, low-risk securities, which meet the requirements established in the previous article.

For diversification purposes, the Manager must define in the investment policy the maximum limit of deposits that can be maintained in the same banking entity, in order to manage possible concentration risk.

Basic Conditions of Operability

Art. 11.- The securities in which Fund resources are invested, when applicable according to their nature, must be under the custody of an entity authorized to provide this service in accordance with the Securities Market Law, which must keep them in separate accounts per Fund and be duly identified with the corresponding Fund, in accordance with what is established in the seventh paragraph of Article 97 of the Funds Law.

For cases of investments that cannot be denominated with the clause “For the Investment Fund”, the Manager must formally evidence the ownership of the assets, through the respective receipt, in which the amount and type of instrument are stated.

The Manager must constitute separate bank accounts for each Fund, in which the total contributions, the proceeds from their investments, and all other income received in the name of the Fund must be deposited directly. From these accounts, withdrawals may only be made destined for the acquisition of instruments or financial operations carried out in the name of the Fund, for the payment of redemptions, to distribute benefits, for the payment of the Manager's remuneration, and for the other expenses established in the Fund's Internal Regulations and in Article 24 letter e) of the Funds Law.

Each Manager, with respect to the Funds they administer, is obligated to comply with the following requirements:
a) Comply with the responsibilities derived from the compensation and settlement processes of the transactions carried out; b) The approval by the Senior Administration of employees delegated to make electronic banking transactions and withdrawals from bank accounts, including limits and the use of joint signatures; and c) Design an information and monitoring system with daily and detailed updates of assets, transactions, documentation of failures and errors with the application of necessary corrections for each Fund.

Investment Control

Art. 12.- The Manager, for the control of investments carried out on behalf of each Fund, must maintain the documentation, record, or receipt of the transaction containing the detailed information of the operations carried out, for which it must maintain an updated investment register in chronological order, in accordance with what is required in the “Technical Standards for the Authorization of Constitution, Start of Operations, Registration, and Management of Operations of Investment Fund Managers” (NDMC-02), approved by the Committee of Norms of the Central Bank and which includes as a minimum the detailed information in Annex No. 1 of these Standards.

The information regarding the investments carried out by the Manager on behalf of each Fund must be available to the Superintendence at the time it requests it. Likewise, the Manager must document the aspects taken into consideration in the investment process.

The Manager, for the control of investments carried out on behalf of each Fund, must ensure that the orders issued have been executed by the House in accordance with what was requested.

CHAPTER III
OPERATIONS FOR HEDGING INVESTMENT RISKS

Derivatives for Risk Hedging

Art. 13.- Open Funds and Closed Funds may carry out operations with derivatives of the forward, futures, swap, and options types that have the exclusive objective of hedging the risks of Fund investments. Investment in such derivative instruments may be carried out in organized markets in El Salvador or abroad, such as stock exchanges, electronic markets, over-the-counter markets, or their equivalent, which have similar or superior supervision and regulation requirements with respect to those of El Salvador.

To carry out operations in derivative instruments, the investment administrator must know their functioning and have the necessary means for their valuation, risk identification, measurement, and ability to ensure compliance with the criterion taken to value the instruments; if the foregoing is not met, the Manager must not carry out operations with such instruments. In case hedging operations are carried out in international markets, they must comply with the required documentation and be subject to the regulations of the jurisdiction in which they are carried out.

The analyses carried out to carry out operations with derivative instruments must be duly documented.

Art. 14.- Risk hedging operations for Fund investments may be carried out through master contracts, preferably following international market standards, subject to the following conditions:
a) Contracts entered into within a centralized mechanism must have as a counterparty an entity authorized and supervised by the Superintendence, or, in the case of operations abroad, by an entity of superior or similar competence to the Superintendence. Contracts entered into outside a centralized mechanism must have as a counterparty an entity authorized by the Superintendence, or, in the case of operations abroad, by an entity constituted in member countries of the Group of Action

International Financial Institution or some intergovernmental organization of a regional basis equivalent, intended to combat money laundering and asset forfeiture, and the financing of terrorism, and that are not considered by these organisms as jurisdictions that present strategic deficiencies in the prevention of money laundering and asset forfeiture, and the financing of terrorism, referred to as high-risk or non-cooperative jurisdictions; b) Be associated with an instrument or group of instruments that are considered in the Investment Policy; c) A hedge of the same underlying asset can be structured in at most two currencies; d) That in the case of contracts entered into in stock markets, their settlement be through a Clearing House, which is duly authorized and supervised by the Superintendence or an entity of similar competence to the Superintendence within the country where they have been constituted; and e) That in the case of contracts entered into outside a centralized mechanism, the settlement process must be a financial settlement.

Derivatives Control
Art. 15.- The Manager, for the control of derivative operations that have as their object exclusive hedging of investment risks of the Funds, must maintain the documentation and record containing the detailed information of the operations carried out, indicating clearly their characteristics and the minimum requirements established in Annex No. 2 of these Standards.

The information regarding the operations carried out by the Manager with derivatives that have as their object exclusive hedging of investment risks of the Funds, must be available to the Superintendence at the time it requests it.

CHAPTER IV
INVESTMENT LIMITS

Investment Limits
Art. 16.- The investment limits in Open Funds will be fixed within the Internal Regulations of the Fund as part of its object and its investment policy, having to adhere to the following percentages:
a) The sum of the investments of an Open Fund, different from those established in letter g) of the present article, may reach up to a maximum of eighty percent of the assets of the Fund; b) Limits with respect to the assets of the Investment Fund:
i. The Fund cannot be the holder of debt-representative securities that represent
more than eighty percent of the Fund's assets; and
ii. The Fund cannot be the holder of shares that represent more than fifty percent
of the Fund's assets.

CNBCR-05/2016
NDMC-07
TECHNICAL STANDARDS FOR INVESTMENT FUND INVESTMENTS Approval: 22/06/2016 Validity: 11/07/2016 Alameda Juan Pablo II, between 15 and 17 Av. Norte, San Salvador, El Salvador.
Tel. (503) 2281-8000 www.bcr.gob.sv c) Limits with respect to the assets of the issuer and same issuer:
i. The Fund cannot be the holder of debt-representative securities that represent
more than thirty percent of the issuer's assets based on the last Financial Statements published by the issuer. This percentage is also applicable to the investment that a Fund can make in the same issuance of securities. In these limits include repo operations; and
ii. The Fund shall not hold directly or indirectly shares of the same company above twenty percent of the issuer's assets.
d) Limits with respect to the business group or conglomerate:
i. The Fund shall not hold more than twenty-five percent of its total assets, in
securities issued or guaranteed by societies belonging to the same financial conglomerate or business group other than that to which the Manager belongs; this limit includes securities issued against independent estates administered by these societies, as well as money deposits, in the bank of the referenced conglomerate. Also included are the securities that guarantee the operations of repo. Accounts current or savings used for the Fund's operationality are excepted from this limit; and
ii. The Fund may hold up to ten percent of its total assets in fixed income securities issued by an entity linked to the Manager, provided that these
instruments are investment grade in the case of foreign securities and the local debt instruments have a long-term risk classification no lower than the BBB category and N-2 for short-term instruments.(1) e) The Fund shall not hold above fifty percent of the total participation quotas placed by another Investment Fund. Additionally, the sum of the participation quotas acquired by funds administered by a Manager shall not exceed fifty percent of the participation quotas placed by the same Investment Fund. In case that investments in participation quotas are of Funds administered by the same Manager, this must be communicated to the participants; f) The Fund may hold securities of the same Securitization Fund up to fifty percent of the assets of the Securitization Fund. The sum of the securitization securities acquired by funds administered by a Manager, shall not exceed fifty percent of the securities issued by the same Securitization Fund. This type of securities will not be included within the debt-representative securities indicated in letters b) and c) of the present article; and g) At least twenty percent of its resources must be kept in cash, in bank deposits and in liquid securities that comply with what is established in article 9 of these Standards.

In the case of Closed Funds that invest in securities, the limits established in this article will be applicable to them, with the exception of letters a) and g) which are exclusively for Open Funds.

The Manager will be responsible for ensuring that investments in securities that are made with resources of the Funds, comply with the limits established in this article.

Art. 17.- Open or Closed Funds may invest their resources in the same type of instrument, respecting the limits established in these Standards.

The investments that Open or Closed Funds make in the securities established in letter g) article 4 of these Standards, shall not exceed eighty percent of the Fund's assets. Additionally, investments by type of instrument must adhere to the limits established in article 16 of these Standards.

The Manager is responsible for carrying out the control of investment limits on a daily basis.

Debt Limits
Art. 18.- The Fund shall not have debts, which added up exceed in the case of Open Funds, twenty-five percent of its net worth and for Closed Funds, fifty percent of its net worth. In these limits include repo operations.

The Fund's assets can only be encumbered to guarantee the payment of its own obligations, according to what is established in the Internal Regulations and additionally in the case of Open Funds, those related to attending quota redemptions.

Debts acquired by a Fund can only be collected against its assets.

Prohibition of Investment
Art. 19.- The Fund's resources cannot be invested in the securities established in article 100 of the Funds Law.

Deadline for Compliance with Limits
Art. 20.- The investment limits for Open Funds and Closed Funds that invest in securities established in these Standards must be complied with by the Manager, within the period contemplated in the investment policy, which shall not exceed thirty business days from the moment that the net worth and minimum number of participants are reached.

The Manager must comply with debt limits immediately from the start of Fund operations.

For the purposes of the application of the limits indicated in this Chapter, the registered issuance of the securities in question will be considered.

Requirements for the acquisition, alienation, lease or usufruct of goods Art. 21.- The acquisition, alienation, lease or usufruct of goods of or for the Fund to persons related to the Manager, to other Funds administered by it, to Funds administered by Managers related to it, to societies of the same financial conglomerate or business group of the Manager or to Funds administered by Managers of the same financial conglomerate or business group of the Manager, must comply with the requirements and conditions following:
a) That the goods to be traded be demonstrably necessary and of the necessary quality for the adequate performance of the Fund; b) That all operations be carried out based on current market prices at the moment of them. For this purpose, the Internal Regulations must identify the mechanisms that the Manager will use to ensure independence in the determination of prices and for the operations to be carried out in conditions that are not disadvantageous for the Fund in relation to other options available in the market if there are any; and c) The transactions must be authorized by the Board of Directors of the Manager in the case of Open Funds and by the assembly of participants in the case of Closed Funds when so defined in the Internal Regulations of the Fund. The foregoing is excepted for transactions with public offering instruments, provided they comply with what is established in the investment policy.

In the case of transactions with securities, these must be contemplated in the investment policy of the Fund and traded in organized markets, such as stock exchanges, electronic markets, over-the-counter markets or their equivalent, which have similar or superior regulatory and supervisory requirements with respect to those of El Salvador.

Investment Policy
Art. 22.- The investment policy, defined in the Internal Regulations of each Fund, must indicate the minimum and maximum investment limits in each of the types of assets permitted according to the investment objective, the Funds Law and these Standards, considering for these purposes, among others, the aspects contemplated in article 99 of the Funds Law.

The Manager will be responsible for revealing to the investor the Fund's investment policy, the profile of the investor to whom the Fund is directed, avoiding making statements that could lead to false, misleading or inaccurate appraisals about the characteristics of the Fund, indicating that the amount originally contributed may increase or decrease depending on the financial result of the Fund. Additionally, they must inform the investor about the functioning, risks and characteristics of the Funds, as established in the "Technical Standards for the Authorization, Registration and Operation of Investment Funds" (NDMC-06), approved by the Standards Committee of the Central Bank.

CHAPTER V
INVESTMENT EXCESSES

Identification and Communication of Investment Excesses Art. 23.- If excesses occur regarding the investment or debt limits indicated in the Funds Law, in these Standards or in the respective internal regulations of the Funds, by effect of market fluctuations or by another justified cause, the Manager must notify it and inform its plan to reduce the excess to the Superintendence within three business days following the occurrence of the excess, indicating in the same the cause of the excess, the effect on the participants and the activities that will be carried out to reduce the excess. The Manager will have a period of up to ninety days, counted from the date on which the excess occurred, to regularize it to the percentages established. The period may be extended for justified cause and when so authorized by the Superintendence. The Manager shall not make new acquisitions of instruments of the entities or instruments involved in the excess, until its situation is regularized.

In cases where the excesses do not obey the reasons mentioned in the previous paragraph and are caused by errors of the investment administrator, the Manager, without prejudice to the sanctions that may apply, must regularize the Fund's situation within a period of up to ninety days, counted from the date on which the excess occurred, to regularize it to the percentages established. The period may be extended for justified cause and when so authorized by the Superintendence.

The Manager, for the purposes of regularizing the Fund's investments to the established percentages, may acquire for itself the instruments in excess or the investments not provided for in the investment policy of the Fund. In case that the investment excesses are caused by errors of the investment administrator, the acquisition of said instruments must be made at the highest value recorded in its valuation during the stage of the excess or of the investment not provided for in the investment policy of the Fund.

If for justified cause, the Fund receives in payment securities, assets or rights whose investment does not comply with what is established in the Law, in these Standards or in the respective internal regulations, the Manager will communicate this situation to the Superintendence, within the third business day counted from the date on which it was received in payment, must proceed to its valuation and sale within a maximum period of ninety days counted from the date of said communication. For the case of real estate assets, the maximum period to proceed to their valuation and sale will be one year counted from the date of the communication.

The Superintendence, for justified causes, may extend the previous periods at the request of the Manager. In this case, the Manager must present to the Superintendence the extension request at least twenty days in advance of the expiration of the period, who will rule within a maximum period of ten days of receiving the request, authorizing or denying the request.

In the case that an investment excess occurs and while it lasts, the Manager must inform this situation to the participants, as well as the effect of the regularization by means of the statement of account, its Web page or other means determined by the participant.

Justified Investment Excesses or Not Attributable to the Manager Art. 24.- Excesses in the investment limits defined in the investment policy of the Funds occur for causes not attributable to the Manager, in the following cases:
a) When, having acquired instruments within the established limits, variations occur in the prices, causing excesses; b) When, having acquired instruments within the established limits, variations occur in the exchange rates of foreign currencies in which those instruments or securities in which the Fund's resources are invested are expressed, causing excesses; c) When redemptions of quotas of the Open Fund occur that represent significant amounts of the total net worth that produce a decrease in its total assets; d) As a consequence of changes in the corporate structure of the issuer in which the Fund has invested; e) In the case that any of the investments indicated in article 4 of these Standards ceases to comply with any of the conditions to be considered as permitted; f) In the case that for justified cause, the Fund receives in payment securities, assets or rights whose investment does not comply with what is established in the Funds Law, in these Standards or in the respective internal regulations; and g) Other cases in which the Superintendence, according to the justification made by the Manager, determines that they were caused by causes unrelated to its management.

CHAPTER VI
INVESTMENT COMMITTEE AND INVESTMENT ADMINISTRATORS

Investment Committee
Art. 25.- The Board of Directors of the Manager will be responsible for ensuring compliance with the investment policy and the adequate exercise of the functions of administration of the investments of the Fund. For these purposes, it may constitute an Investment Committee that will be responsible for evaluating, recommending and approving the guidelines for making investment decisions, which will be executed by the Fund's investment administrators.

The Manager will have the faculty to appoint the Investment Committee which will be composed of a minimum of three members and their respective alternates, who must have capacity and knowledge related to the type of assets in which the Fund invests and be ratified annually by the Board of Directors.

The Manager through its Board of Directors must approve the Regulations for the Investment Committee, which must contain as a minimum the duties, obligations, periodicity of the meetings, policies for selection of Committee members, number of members, voting scheme, mechanisms or indicators of analysis, and the periodicity and minimum content of the reports that the investment administrator must present, all the previous information must be kept in minutes and their respective backups.

The Manager must document in the organization and procedures manual of the entity the formation of the Investment Committee, defining its responsibilities and attributes.

Requirements for Members of the Investment Committee Art. 26.- The Manager must ensure that the members of the Investment Committee act with diligence, skill and reasonable care in the exercise of their functions and comply with at least the following requirements:
a) Be of recognized honorability; b) Have a university degree registered or incorporated in the Ministry of Education for the case of degrees in the country. In case the degree was obtained abroad, it must comply with what is established in article 334 of the Civil and Mercantile Procedural Code or the apostille procedure, in the case of countries signatories to the "Hague Convention Abolishing the Requirement of Legalization for Foreign Public Documents", ratified by Legislative Decree No. 811, dated September 12, 1996, published in the Official Journal No. 194, Volume No. 333, of October 16 of that same year; c) Have at least three years of experience and knowledge in topics related to the financial sector, securities market, investment administration and in the field of specialty of the nature of the Fund they administer; d) Not have been judicially qualified as responsible for a negligent or fraudulent bankruptcy; e) Not have been convicted by a final judgment in the country or abroad, for having committed or participated fraudulently in the commission of any crime; f) Not have been judicially convicted for their participation in infractions to laws and norms of a financial nature; g) That it has not been judicially proven participation in activities related to narcotics trafficking and related crimes, and with money laundering and other assets, in the country or abroad; and h) Members of the Investment Committee may participate as members of other investment committees of other funds provided that they are administered by the same Manager. The quantity and quality of the members of the Investment Committee will be governed by what is established in articles 25 and 26 of these Standards.

Functions
Art. 27.- The Manager will establish the main functions that as a minimum must be fulfilled by the members of the Investment Committee or whoever acts in their place, considering as a minimum the

CNBCR-05/2016
NDMC-07
TECHNICAL STANDARDS FOR INVESTMENT FUND INVESTMENTS Approval: 06/22/2016 Effective Date: 07/11/2016 Alameda Juan Pablo II, between 15 and 17 Av. Norte, San Salvador, El Salvador.
Tel. (503) 2281-8000 www.bcr.gob.sv

following:
a) Define the general investment guidelines of the Fund, supervise the work of the investment manager, and ensure the proper performance of the portfolio; b) Propose to the Board of Directors the valuation methodology for the Fund's investments, in accordance with the technical standards issued by the Central Bank for such purposes, in cases where information regarding the price or quotation of any instrument or operation by an agent specialized in securities valuation or the corresponding information systems is not available; c) Approve the Fund's investment strategy, based on the investment policy established in the Internal Regulations; d) Establish processes to evaluate potential investments of the Fund; e) Provide adequate follow-up to the assets that make up the Fund's investments; f) Evaluate whether the recommendations of the risk unit are taken into account; if not, evaluate the respective justifications; g) Supervise the management of treasury; h) Supervise compliance with the Fund's investment policy, as well as the fulfillment of the stated objectives; i) Propose the carrying out of audits on the Fund's investments; j) Evaluate the necessary strategies for regularization in case of non-compliance with investment policies; and k) Present reports to the Board of Directors on the investments made, at the frequency determined by the Manager.

Art. 28.- The Manager shall establish the main functions that investment managers of the Fund must fulfill at a minimum, considering at least the following:
a) Analyze and identify investment opportunities in accordance with the guidelines of the Investment Committee and the Fund's investment policy; b) Make investment decisions in accordance with what is established in the Fund's investment policy; c) Propose to the Investment Committee modifications to the investment policy if necessary; d) Supervise and ensure that recommendations issued by the risk unit are implemented, informing the Investment Committee of the corresponding justifications if it decides not to adopt them; e) Supervise that control and monitoring of the Fund's owned assets are carried out and report this to the Investment Committee; f) Supervise that the valuation of the Fund's investments is done in accordance with the applicable valuation methodology, in accordance with the segregation of functions; g) Prepare a report for the Investment Committee describing the management performed in accordance with its functions, which must respect the frequency and minimum content established in the organization and procedures manuals in accordance with the segregation of functions; and

h) Propose the necessary strategies for regularization in case of non-compliance with investment policies.
The functions of the members of the Investment Committee or those acting on their behalf and of the investment managers are non-delegable, and in case of non-compliance with them, they may be removed by the Board of Directors of the Manager.

Applicable Principles
Art. 29.- The members of the Fund's Investment Committee or those acting on their behalf, in the exercise of their functions, must observe the following principles:
a) Confidentiality: The Manager must provide conditions of confidentiality and secrecy during the exercise of said functions. The same principle must be applied in the communications required to execute the Fund's investment decisions; b) Independence: This means that members of the Investment Committee, in order to avoid conflicts of interest, cannot provide their services to persons linked to the Manager, unless expressly authorized by the General Assembly of participants for Closed Funds or by the Board of Directors for Open Funds, in which case, it must be previously disclosed and when these persons are participants in the Fund they cannot exercise the right to vote; and c) Autonomy: This implies that the investment decision-making carried out by the investment manager and the members of the Investment Committee must be without subordination to the interests of third parties. For these purposes, investment decision-making is understood as the adoption of the agreement to acquire, hold, or dispose of assets for the Fund's managed portfolio and in accordance with the investment policy.

Meetings
Art. 30.- The Investment Committee or those acting on their behalf must meet at least once a month and draw up minutes of each session, which must guarantee their authenticity and truthfulness; likewise, they must be kept in places that ensure their proper conservation. The minutes documenting the agreements of the Investment Committee must include details to understand the foundations of the agreements taken, must implement a sequential numbering system for meeting minutes, and must include at least the following aspects:
a) Place, date, and time of the session; b) Session agenda; c) Information supporting the sessions; d) Matters discussed; e) Voting results; f) Agreements taken, as well as observations or incidents that occurred; and, g) Name and signature of attendees.

The Manager is responsible for having the minutes, reports, and supporting documentation of the topics reviewed.

CHAPTER VII
OTHER PROVISIONS AND EFFECTIVE DATE

Compliance with the investment policy
Art. 31.- The Manager, in order to ensure compliance with the investment policy, must ensure the following:
a) Maintain control of the Fund's assets, detailing their characteristics, ownership, price, compensation and settlement process, as well as information regarding their custody; b) That the securities in the Fund's investment portfolio are properly custodied by an entity authorized under the Securities Market Law, when applicable; c) Maintain in strict confidence information about the Fund and its participants that comes to their knowledge by reason of their functions; d) Have an internal auditor's report, specifying compliance with the investment policy or, failing that, follow up on the recommendations and observations made therein; and e) Communicate to the Superintendence any irregularity detected regarding the administration of investments, no later than the next business day that the fact is known; as well as provide any information that the Superintendence requests related to said functions.

Obligations
Art. 32.- Managers are obligated to supply timely and truthful information about their situation and that of the Funds they administer, in accordance with what is established in the technical standards issued by the Standards Committee of the Central Bank related to publication and dissemination. In accordance with what is established in Article 89 of the Funds Law, under no circumstances may the Manager directly dispose of assets belonging to the Fund, nor can they be seized or subject to any type of precautionary or preventive measure by the creditors of the Manager or the participants.

Submission of information
Art. 33.- The Manager must submit monthly to the Superintendence information on the investments and operations with derivatives that have as their exclusive object the hedging of risks of the investments made by the Funds, no later than the first five business days of the month, detailing the information required in Annexes No. 1, 2, and 3 of these Standards. The Superintendence will transmit the technical details related to the sending of the information requested in this article, which will be communicated within a maximum period of thirty days following the entry into force of these Standards. The information requests will be limited to the collection of information as regulated in these Standards.

Sanctions
Art. 34.- Non-compliance with the provisions contained in these Standards will be sanctioned in accordance with what is established in the Law on Supervision and Regulation of the Financial System.

Unforeseen Aspects
Art. 35.- Aspects not provided for in the regulation in these Standards will be resolved by the Standards Committee of the Central Bank.

Effective Date
Art. 36.- These Standards will enter into force on July 11, 2016.

MODIFICATIONS:
(1) Modification approved by the Standards Committee of the Central Reserve Bank of El Salvador, in Session No. CN-09/2016 dated September 14, 2016, with effect from September 14, 2016.

Annex No. 1
MINIMUM CONTENT OF THE FUND INVESTMENT RECORD
Fund Name: _______ Manager Name: _____ Reference Month: _______ 1 GENERAL INFORMATION
1.1 Account number at the Specialized Society for the Deposit and Custody of Securities
1.2 Identification of the intermediary involved in the operation
1.3 Identification of the stockbroker agent that executed the operation
1.4 Classification of the Investment Fund (Open or Closed)(1)
2 OPERATION INFORMATION
2.1 Trading date
2.2 Settlement date
2.3 Date and time the order was issued to the House
2.4 Type of market in which the operation is carried out
2.5 Purpose of the operation (trading or maturity)
2.6 Type of operation (purchase, sale, or repo)
2.7 Quantity of securities traded, when applicable
2.8 Transacted price
2.9 Total transacted amount
2.10 Stock Exchange Commission
2.11 Intermediary Commission
2.12 Taxes paid
2.13 Other expenses
3 INSTRUMENT INFORMATION
3.1 Type of instrument
3.2 Identification of the instrument
3.3 Currency in which the instrument was issued
3.4 Identification of the issuer
3.5 Country of origin of the issuer
3.6 Country of registration of the issuer
3.7 Nominal value
3.8 Market value
3.9 Source of market value
3.10 Term
3.11 Maturity Date
3.12 Days to maturity of the instrument
3.13 Interest rate
3.14 Payment frequency

Annex No. 1
MINIMUM CONTENT OF THE FUND INVESTMENT RECORD
Fund Name: _______ Manager Name: _____ Reference Month: _______
3.15 Risk classification
3.16 Rating agency
3.17 The instrument is part of high liquidity and low risk assets
Name of the person preparing the Report: _______________________________ Phone: __________________________ Email: _______________________

Annex No. 2
OPERATIONS WITH DERIVATIVE INSTRUMENTS THAT HAVE AS THEIR EXCLUSIVE OBJECT THE HEDGING OF RISKS OF INVESTMENTS Fund Name: ____ Manager Name: _______ Reference Month: _________ 1 OPERATION INFORMATION
1.1 Type of operation, indicating if it is a forwards, futures, swaps, and/or options contract
1.2 Entity with which the operation was carried out
1.3 Identification of the instrument or group of instruments covered by the operation (Underlying)
1.4 Identification of where the operation was carried out, indicating if it was celebrated outside or within a centralized mechanism
1.5 Date of the operation
1.6 Settlement date
1.7 Term of the operation/contract
1.8 Price of the operation
1.9 Amount of the operation (Notional)
1.10 Contract conditions: agreed rate, exchange rate when applicable
Name of the person preparing the Report: _______________________________ Phone: __________________________ Email: _______________________

Annex No. 3
REPORT OF TOTAL AMOUNTS OF INVESTMENT OF THE INVESTMENT FUND PORTFOLIO Fund Name: ____ Manager Name: _____ Reference Month: __________ 1 Identification of the Manager 2 Identification of the Fund 3 Identification of the Fund's Investment Manager 4 Classification of the Investment Fund (Open or Closed)(1) 5 Reference date of the information 6 Type of investment (time deposit, bank deposits, checking accounts, financial instrument, etc.) 7 Identification of the Issuer 8 Economic sector of the investment (Banking, Industry, Commerce, Agriculture, Construction, Insurance Companies, Foreign, Service Companies, and Public Institutions, etc.) 9 Identification of the instrument 10 Quantity of securities, when applicable 11 Status (available or reported) 12 Identification of the Specialized Society for the Deposit and Custody of Securities or Banking Entity in which the investment is safeguarded 13 Market value as of the report date 14 Nominal value 15 Total amount invested 16 Interest rate 17 Accrued interest 18 Days to maturity 19 Total amount of capital gain or loss 20 Purpose of the instrument (trading or maturity) Name of the person preparing the Report: _______________________________ Phone: __________________________ Email: _______________________

Technical Standards for Investment Fund Investments

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