Technical Standards for the Calculation of the Participation Share Value and Allocation of Participation Shares

NDMC-11
TECHNICAL STANDARDS FOR THE CALCULATION OF THE PARTICIPATION SHARE VALUE AND ALLOCATION OF PARTICIPATION SHARES Approval: 09/14/2016 Effective Date: 10/03/2016

THE COMMITTEE OF STANDARDS 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 responsible for the supervision of Investment Fund Managers, their operations, and other participants regulated by the same.

II. That Article 6 of the Investment Funds Law stipulates that it is the responsibility of the Central Reserve Bank of El Salvador to issue the necessary technical standards that allow for the application of said Law.

III. That Articles 54 letter x) and 67 letter x) of the Investment Funds Law establish that the Internal Regulations of each Fund must contain, at a minimum, the procedure for the calculation of the participation share value based on technical standards established by the Central Reserve Bank of El Salvador.

IV. That Article 60 of the Investment Funds Law establishes that participation shares shall be valued daily, by dividing the value of the Fund's net assets by the number of subscribed and paid participation shares.

V. That Article 90 of the Investment Funds Law establishes that the value of the Fund's net assets shall be calculated by subtracting its liabilities from the value of its assets.

VI. That Article 102 of the Investment Funds Law establishes that in the process of valuing the investments made by Funds, for the case of local financial instruments, they must consider the prices provided by an agent specialized in securities valuation, or when the financial instruments are from foreign issuers, they may additionally consider the prices of a recognized international stock or financial information system by the Superintendence of the Financial System, and that in both cases, when it is not possible to obtain information from the aforementioned sources, the Managers may define their own methodology for such purpose.

VII. That Article 2 of the Law on Supervision and Regulation of the Financial System establishes that the Financial Supervision and Regulation System has the object of preserving the stability of the financial system, for which it will issue technical standards in accordance with the best international practices on the matter.

THEREFORE,

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

NDMC-11
TECHNICAL STANDARDS FOR THE CALCULATION OF THE PARTICIPATION SHARE VALUE AND ALLOCATION OF PARTICIPATION SHARES Approval: 09/14/2016 Effective Date: 10/03/2016

AGREES to issue the following:

TECHNICAL STANDARDS FOR THE CALCULATION OF THE PARTICIPATION SHARE VALUE AND ALLOCATION OF PARTICIPATION SHARES

CHAPTER I
OBJECT, SUBJECTS AND TERMS

Object
Art. 1.- These Standards have the object of establishing the provisions for the determination of the Investment Fund's net assets, the calculation of the participation share value, its periodicity, and the allocation of participation shares to the participants of Investment Funds.

For the case of the valuation of participation shares of Closed Real Estate 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 such effect by the Committee of Standards of the Central Reserve Bank shall apply.

Subjects
Art. 2.- The subjects obliged to comply with these Standards are the Investment Fund Managers authorized by the Superintendence of the Financial System to administer Investment Funds in accordance with what is established in the Investment Funds Law.

Terms
Art. 3.- For the purposes of application of these Standards, the terms indicated below have the following meaning:

a) Specialized Agent in Securities Valuation: Entity authorized by the Superintendence of the Financial System in accordance with Chapter III of Title IV of the Securities Market Law for the provision of the service of calculation, determination, and provision or supply of information on prices for the valuation of securities of the entities of the financial system and those they administer on behalf of third parties;

b) Central Bank: Central Reserve Bank of El Salvador;

c) Stock Exchange: Stock Exchange constituted in El Salvador and registered in the Superintendence of the Financial System;

d) Portfolio or Investment Portfolio: The total of instruments or operations in which the resources of the Investment Funds are invested.

e) House: Stockbroker House, authorized and registered in the Superintendence of the Financial System;

f) Open Funds: Open Investment Funds;

NDMC-11
TECHNICAL STANDARDS FOR THE CALCULATION OF THE PARTICIPATION SHARE VALUE AND ALLOCATION OF PARTICIPATION SHARES Approval: 09/14/2016 Effective Date: 10/03/2016

g) Closed Funds: Closed Investment Funds;

h) Funds: Open and Closed Investment Funds;

i) Manager: Investment Fund Management Company;

j) Financial Instrument: Any contract that gives rise to a financial asset, a financial liability, or an equity instrument in an entity;

k) Funds Law: Investment Funds Law;

l) Methodology: Valuation model that incorporates technical and statistical criteria, considering economic variables provided by official specialized sources in this matter, which provides for each of the assets according to its nature, a price vector for its valuation;

m) Participant: Investor in an Investment Fund;

n) Price Provision: Service of calculation, determination, and provision or supply of information on prices for securities valuation;

o) Registry: Public Stock Registry of the Superintendence of the Financial System;

p) Internal Regulations: Document that contains all the characteristics and specific rules that govern the operation of a specific Investment Fund;

q) Superintendence: Superintendence of the Financial System;

r) Value or Security: Any financial instrument, contract, or financial title that is part of the investments of the entities of the financial system, in accordance with what is established in the International Financial Reporting Standards;

s) Fair Value: The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants, informed individuals who participate freely and independently, on the measurement date; and

t) Price Vector: Unique daily report with prices for securities or financial titles, established under a technical procedure and a methodology previously authorized by the Superintendence of the Financial System.

CHAPTER II
GENERAL PROVISIONS FOR THE VALUATION OF FINANCIAL INSTRUMENTS

Art. 4.- The valuation of the financial instruments that constitute the investments of the Funds must be carried out individually for each of them at market prices under the premise of fair value, in accordance with the scope established in these Standards and on a daily basis, including weekends and holidays.

Art. 5.- The valuation of the Fund's financial instruments is the responsibility of the Manager, even if it has contracted the services of price provision. Likewise, the Manager is responsible for maintaining the valuations of the financial instruments of the Funds it administers in accordance with market conditions and in accordance with what is established in the "Accounting Manual for Investment Funds" (NDMC-08), approved by the Committee of Standards of the Central Bank.

Art. 6.- The valuation of the financial instruments that constitute the assets of the Funds for the determination of their net assets, as well as the calculation of the participation share value, must be carried out in accordance with what is established in these Standards and through an automated information system in accordance with what is established in the "Technical Standards for the Authorization of Constitution, Start of Operations, Registration and Management of Operations of Investment Fund Managers" (NDMC-02). Said automated information system must include, at a minimum, the daily information according to the following fields:

a) General Information
i. Name of the Investment Fund;
ii. Classification of the Investment Fund (Open or Closed);
iii. Total value of the Fund's assets (properly valued);
iv. Total value of the Fund's liabilities (properly valued);
v. Fund's Net Assets (in accordance with what is established in Article 10 of these Standards);
vi. Total number of participation shares of the Fund;
vii. Number of participation shares of the Fund by class of participation, when applicable;
viii. Value of the Fund's participation share; and
ix. Value of the Fund's participation share by class of participation, when applicable.

b) Information on the Fund's investment portfolio
i. Type of instrument;
ii. Code of the security issuance. (Mnemonic name or that which allows identifying it in the Fund's investment registry);
iii. Tranche or Series of the security issuance;
iv. Currency in which the instrument was issued;
v. Exchange rate used (when the instrument was not issued in US dollars);
vi. Reference date of the exchange rate used (when the instrument was not issued in US dollars);
vii. Source of the exchange rate (when the instrument was not issued in US dollars);
viii. Market price (used for the daily valuation of the instrument obtained from any of the sources established in Article 7 of these Standards);
ix. Quantity of portfolio securities, when applicable;
x. Nominal value;
xi. Market value (result of the daily valuation of the total amount of the investment in the security);
xii. Source of market price;
xiii. Daily variation of the market price per instrument (expressed in amount and percentage);
xiv. Daily variation of market value (Capital gain or loss); and
xv. Status (available or reported).

NDMC-11
TECHNICAL STANDARDS FOR THE CALCULATION OF THE PARTICIPATION SHARE VALUE AND ALLOCATION OF PARTICIPATION SHARES Approval: 09/14/2016 Effective Date: 10/03/2016

c) Information on assets
i. Total market value of the Fund's investment portfolio;
ii. Total value of capital gain or loss of the Fund's investments;
iii. Total value of the Fund's deposit certificates or bank accounts (excluding contributions for subscriptions credited before the cut-off time of day "t");
iv. Detail and value of assets other than financial investments; and
v. Total value of assets other than financial investments of the Fund.

d) Information on liabilities
i. Total redemptions paid on the day, when applicable;
ii. Detail and amount of commissions and expenses applied to the fund; and
iii. Detail and value of the total liabilities of the fund.

For valuation purposes, the financial information that the automated information system uses must be in United States dollars with a minimum of eight (8) decimal places.

Art. 7.- For the purposes of valuing financial instruments at fair value, the Manager, in attention to Article 102 of the Funds Law, must obtain the respective prices from the following sources:

a) Specialized Agents in Securities Valuation authorized by the Superintendence, in the case of financial instruments from local issuers, in accordance with letter a) of Article 3 of these Standards; and

b) International stock or financial information systems recognized by the Superintendence or Specialized Agents in Securities Valuation, in the case of financial instruments from foreign issuers.

In the event that it is not possible to obtain the prices of the Fund's financial instruments for their respective fair value valuation from any of the sources indicated in the previous letters, the Manager may develop its own methodology for the valuation of said instruments, which must be presented to the Superintendence at the time of requesting the registration of the respective Fund in accordance with what is established in the Investment Funds Law and required in the "Technical Standards for the Authorization, Registration and Operation of Investment Funds" (NDMC-06), approved by the Committee of Standards of the Central Bank.

Valuation Methodologies
Art. 8.- The methodologies developed by each Manager must comply, at a minimum, with the requirements on the development of valuation methodologies in accordance with the "Technical Standards for Specialized Agents in Securities Valuation" (NDMC-09), approved by the Committee of Standards of the Central Bank.

Art. 9.- The Manager that contracts the price provision service of a Specialized Agent in Securities Valuation and identifies an error in the price vector calculated by this, must carry out the respective challenge of said vector before the corresponding Agent, in accordance with the "Technical Standards for Specialized Agents in Securities Valuation" (NDMC-09), approved by the Committee of Standards of the Central Bank.

CHAPTER III
PARTICIPATION SHARE VALUE

Calculation of the participation share value
Art. 10.- The participation shares of a Fund shall be valued daily, including weekends and holidays, from the day it receives the first contribution. The daily valuation aims to generate the value of the Fund's net assets to obtain the value of the participation shares; all expenses applied to the Fund must be reflected on a daily basis.

For the case of credited subscriptions, on the first day of operations of the Fund, the value of the share will correspond to the nominal value.

To obtain the value of the participation share on a specific date "t", the following steps must be followed:

a) Daily Balance: preparation of a balance that includes the valuation of financial instruments in accordance with the last active price vector. The value of the Fund's net assets will be the result of subtracting creditor accounts from the sum of all its assets at fair value;

b) Calculation of the participation share value: the value of the participation shares of day "t" is established by dividing the value of the Fund's net assets of day "t" without considering the subscriptions and redemptions of the day, by the number of participation shares subscribed and paid at the beginning of day "t". The value of the net assets and the quantity of shares correspond to those calculated based on what is established in this article.

From the above, the calculation of the participation share value of a Fund will be obtained by the following formula:

VCt = PNt / NCt

Where:

VCt = Value of the participation share on day "t".

PNt = Daily net assets on day "t" without considering contributions for credited subscriptions nor redemption requests presented before the cut-off time of day "t". However, they include redemption payments made.

NCt = Number of participation shares subscribed and paid, without considering contributions for credited subscriptions, nor redemption requests presented before the cut-off time of day "t".

NDMC-11
TECHNICAL STANDARDS FOR THE CALCULATION OF THE PARTICIPATION SHARE VALUE AND ALLOCATION OF PARTICIPATION SHARES Approval: 09/14/2016 Effective Date: 10/03/2016

Art. 11.- During the subscription period for shares, while the minimum net assets and number of participants are not reached, the Manager must update the value of the shares daily, observing for the case of Closed Funds what is established in Article 64 of the Funds Law. However, the Manager must value daily the investments in which it has invested the received resources, in accordance with the criteria established in these Standards.

Value of participation shares by class
Art. 12.- The value of the participation shares of each class will be the result of dividing the value of the portion of the Fund's net assets corresponding to said class by the number of subscribed and paid shares of that class.

Validity of the participation share value
Art. 13.- The validity of the participation share value will be 24 hours based on the cut-off time. The value of the Fund's participation share will be determined after the operational closing of each day, established in the internal regulations.

Disclosure of the participation share value
Art. 14.- The publication of the value of the participation shares must be made daily and will be the responsibility of the Manager. This publication must be available on the Manager's website and must be delivered either physically or electronically to the participants when requested by them, in accordance with the medium determined by the same.

Art. 15.- For the disclosure of the value of the participation shares of the Funds, the Manager must do so considering at least four (4) decimal places and in United States dollars.

Art. 16.- The Manager must remit to the Superintendence on the next business day the price vector used to value the managed portfolio of each Fund and the values of the participation shares by class for each of them. This information must be remitted with a minimum of four (4) decimal places.

CHAPTER IV
ALLOCATION OF PARTICIPATION SHARES OF THE FUNDS

Art. 17.- The method of allocation of the value of the participation share will be carried out in accordance with the rules indicated below:

a) Subscriptions made before the cut-off time of day "t" will be assigned to the value of the participation share calculated at the close of day "t".

Subscriptions are considered made before the cut-off time of day "t" when the request has been presented to the Manager or corresponding commercial entity before said cut-off time, indicated in the internal regulations and in the placement prospectus of participation shares, and the funds are credited and definitively applied in the Fund's bank accounts, that is, when the contribution is confirmed in the Investment Fund's account before the operational closing of the day defined by the Manager.

Subscriptions made after the cut-off time of day "t" will be assigned as if they had been made on the next business day, assigning them the value of the participation share calculated corresponding to that day.

b) Redemptions made before the cut-off time of day "t" will be assigned to the value of the participation share calculated at the close of day "t".

Redemptions made after the cut-off time of day "t" will be assigned as if they had been made on the next business day, assigning them the value of the participation share calculated corresponding to that day.

Art. 18.- If due to situations or facts attributable to the participants, the allocation of participation shares is not carried out in accordance with what is stipulated in the subscription request presented before the cut-off time on day "t", the Manager must communicate such situation to the participant on that same day.

If the situations or facts attributable to the participants that made such situation impossible are overcome on another day different from the request day, this allocation must be carried out considering the value of the participation share, calculated at the close of the day in which the situation that made impossible the allocation of the respective participations was solved, in accordance with the request made by the participant originally.

CHAPTER V
OTHER PROVISIONS AND VALIDITY

Information Disclosure
Art. 19.- The entities subject to these Standards, when carrying out the contracting of the price provision service to value financial instruments, must reveal on their websites their source or the name of the contracted company, as well as reveal if there is any type of linkage.

Sanctions
Art. 20.- 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. 21.- The aspects not foreseen in regulatory matters in these Standards will be resolved by the Committee of Standards of the Central Bank.

Validity
Art. 22.- These Standards will enter into force as of October three, two thousand sixteen.