Technical Standards for the Transfer or Merger of Investment Funds

CNBCR-12/2017
NDMC-16
TECHNICAL STANDARDS FOR THE TRANSFER OR MERGER OF INVESTMENT FUNDS Approval: 12/01/2017 Validity: 01/02/2018

THE COMMITTEE OF STANDARDS OF THE CENTRAL BANK OF RESERVE 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 monitoring compliance and execution of the provisions of said Law; likewise, supervising Managers, their operations, and other participants regulated by it.

II. That Article 6 of the Investment Funds Law states that it corresponds to the Central Bank of Reserve of El Salvador, within its scope of competence, to issue the technical standards necessary to allow the application of said Law.

III. That Articles 40 and 41 of the Investment Funds Law establish the effects on Open or Closed Investment Funds when the authorization to operate is revoked for the Manager administering them.

IV. That Article 94 of the Investment Funds Law establishes that the Central Bank of Reserve of El Salvador will issue technical standards for the development of the requirements for the transfer of an Investment Fund.

V. That Article 95 of the Investment Funds Law stipulates that the Central Bank of Reserve of El Salvador will issue technical standards to establish the procedure for requesting authorization for the merger of Funds.

VI. That Article 35, subsection c) of the Law on Supervision and Regulation of the Financial System establishes as an obligation for those supervised the adoption and updating of policies on ethical standards of conduct, management of conflicts of interest, use of insider information, prevention of behaviors that could imply market manipulation or abuse, as well as compliance with principles, rules, or standards in the management of business established to achieve corporate objectives.

THEREFORE, by virtue of the regulatory powers conferred by Article 99 of the Law on Supervision and Regulation of the Financial System, AGREES to issue the following:

CNBCR-12/2017
NDMC-16
TECHNICAL STANDARDS FOR THE TRANSFER OR MERGER OF INVESTMENT FUNDS Approval: 12/01/2017 Validity: 01/02/2018

TECHNICAL STANDARDS FOR THE TRANSFER OR MERGER OF INVESTMENT FUNDS

TITLE I
GENERAL ASPECTS

SINGLE CHAPTER
OBJECT, SUBJECTS, AND TERMS

Object
Art. 1.- These Standards aim to establish the legal provisions applicable to the processes of transfer or merger of Investment Funds, which must be carried out by the obligated subjects of these Standards, in accordance with what is provided in the Investment Funds Law.

Subjects
Art. 2.- The subjects obligated to comply with the provisions established in these Standards are:
a) Surveillance Committee; and b) Investment Fund Managers and the Funds they administer.

Terms
Art. 3.- For the purposes of these Standards, the terms indicated below have the following meaning:
a) Central Bank: Central Bank of Reserve of El Salvador; b) Surveillance Committee: Committee responsible for monitoring the operations carried out by the Investment Fund Management Company with its resources, acting exclusively in the best interest of the participants of a Closed Investment Fund, in accordance with what is established in Articles 77 and 78 of the Investment Funds Law; c) Shares: Participation shares; d) Depositary: Company specialized in the deposit and custody of securities constituted in El Salvador and registered with the Superintendence of the Financial System; e) Fund: Investment Fund; f) Open Funds: Open Investment Funds; g) Closed Funds: Closed Investment Funds; h) Manager: Investment Fund Management Company; i) Funds Law: Investment Funds Law; j) Participant: Investor in an Investment Fund; k) Placement Prospectus: Placement prospectus for participation shares; l) Registry: Public Stock Registry of the Superintendence of the Financial System; m) Internal Regulation: Document containing all the characteristics and specific rules governing the operation of a particular Investment Fund; and

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TECHNICAL STANDARDS FOR THE TRANSFER OR MERGER OF INVESTMENT FUNDS Approval: 12/01/2017 Validity: 01/02/2018

n) Superintendence: Superintendence of the Financial System.

TITLE II
TRANSFER OF FUNDS

CHAPTER I
TRANSFER OF OPEN FUNDS

Transfer of an Open Fund
Art. 4.- The transfer of an Open Fund, as a patrimony unit, can only be effected in favor of another Manager authorized by the Superintendence and must comprise all assets, rights, and obligations that constitute the fund's assets and liabilities, as well as guarantees, sureties, or bonds thereof.

Grounds for transfer of an Open Fund
Art. 5.- The transfer of an Open Fund will proceed due to any of the following grounds:
a) Revocation of the authorization to operate of the Manager, after exhausting the due process established in Article 39 of the Funds Law; b) Dissolution of the Manager in accordance with what is established in the Code of Commerce; or c) Decision of the Manager.

In the case of revocation of the authorization to operate of the Manager, once final, on the next business day, the transferring Manager must inform the participants directly about such revocation either by printed, electronic, or magnetic means as requested by them in the share subscription contract, which allow verifiable confirmation of the notification management. It will also inform participants of the operations that the Superintendence has authorized it to perform, while the transfer plan established in Article 8 of these Standards is approved.

Transfer of Open Funds due to revocation of authorization to operate of the Manager Art. 6.- Within three business days following receipt of the notification of revocation to operate, the Manager will send a note to the Superintendence, signed by the Legal Representative or Attorney-in-fact of the same, attaching the following:
a) Suggestion of the Manager to which the Open Fund administered will be transferred; b) Certification of the minute point where the agreement for the transfer of the Fund by the Board of Directors of the transferring Manager is recorded; c) Certification of the Board of Directors agreement of the acquiring Manager stating acceptance of the administration of the Fund to be transferred; d) Sworn Declaration issued by the acquiring Manager stating that it meets the requirements established in Article 7 of these Standards; and

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TECHNICAL STANDARDS FOR THE TRANSFER OR MERGER OF INVESTMENT FUNDS Approval: 12/01/2017 Validity: 01/02/2018

e) Transfer plan of the Fund, in accordance with what is established in Article 8 of these Standards.

Art. 7.- The acquiring Manager must meet at least the following requirements:
a) Have an authorized investment administrator for the type of assets composing the Fund to be received; b) Possess at least one authorized commercial agent for Open Funds by the Superintendence or the subscription of a mandate contract with a commercial entity or mandatary for the marketing of participation shares of Open Funds; and c) Have the necessary human and technological resources to administer the transferred Fund.

Minimum content of the transfer plan for Open Funds Art. 8.- The Fund transfer plan must contain at least the following:
a) Transfer schedule and responsible parties for its execution; b) Report on the Fund to be transferred detailing: its composition, number of participants and their shares, as well as the inventory of assets and liabilities constituting it on the date the revocation of authorization becomes final; c) Process of notification to participants regarding the transfer, in accordance with what is established in Article 13 of these Standards; d) Procedure or mechanism for redemption due to modifications in accordance with what is established in the Internal Regulation, as well as the detail of actions to be taken in case instructions from the participant have not been received or contact with them has not been possible; e) Account statement of the Fund's securities by the Depositary; and f) Other aspects that the transferring Manager deems convenient.

Art. 9.- Within the peremptory period of three business days following the presentation of the request, the Superintendence will authorize the transfer plan and the acquiring Manager or authorize the transfer to another Manager of its choice and recommend the corresponding modifications to the presented plan. The Superintendence will take into account the requirements established in Article 7 of these Standards. The Superintendence will notify the authorization of transfer to the transferring Manager, acquiring Manager, and Depositary on the next business day after authorizing the Fund's transfer plan. The transferring Manager must comply with the transfer plan authorized by the Superintendence.

In the case that the actions of the transferring Manager do not correspond to the presented and authorized plan, the Superintendence will proceed in accordance with what is established in Article 40 of the Funds Law. (1)

Deadline for transfer of Open Funds due to revocation of authorization Art. 10.- Within fifteen days following notification of the revocation, the Manager will proceed with the transfer of the Open Fund.

Transfer of Open Funds due to dissolution agreement or decision of the transferring Manager Art. 11.- Whether or not it involves the dissolution of the Manager, it will request in writing from the Superintendence the authorization for the transfer of the administration of a Fund. Such request will be signed by the Legal Representative or Attorney-in-fact of the Manager, attaching the following:
a) Certification of the minute point where the agreement for the transfer of the Fund by the Board of Directors of the transferring Manager is recorded; b) Justification of the transfer decision if it obeys a dissolution agreement or decision of the transferring Manager; c) Certification of the Board of Directors agreement of the acquiring Manager stating acceptance of the administration of the Fund to be transferred; d) Sworn Declaration issued by the acquiring Manager stating that it meets the requirements established in Article 7 of these Standards; and e) Transfer plan of the Fund established in Article 8 of these Standards, taking into account the reference date of the Fund transfer agreement. The certifications of the minute points referred to in subsections a) and c) of this article will be submitted for processing only once. The Superintendence will authorize the transfer plan and the acquiring Manager, in accordance with what is established in Article 9 of these Standards.

Deadline to carry out the transfer of Open Funds due to dissolution or decision of the Manager Art. 12.- The transfer of the administration of Open Funds due to dissolution or decision of the Manager must be carried out within thirty days following communication to the Superintendence in accordance with Article 11 of these Standards.

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TECHNICAL STANDARDS FOR THE TRANSFER OR MERGER OF INVESTMENT FUNDS Approval: 12/01/2017 Validity: 01/02/2018

At the request of the Manager, the Superintendence may extend, before its expiration, the period referred to in the first paragraph of this article, for which it must present in writing the reasons justifying the request. The extension period cannot exceed thirty days and will begin to run from the expiration date of the original period. In cases of dissolution of the Manager, it may dissolve itself only after having transferred the Funds to the acquiring Manager; likewise, the transferring Manager will maintain the guarantee corresponding to the transferred Fund, in accordance with what is established in Article 22 of the Funds Law. If within the established period the Funds have not been able to be transferred to the acquiring Manager, their liquidation will proceed in accordance with what is established in Articles 103 and following of the Funds Law.

Notification to the participant in the process of transfer of Open Funds Art. 13.- On the next business day following receipt of the authorization for transfer of the Fund, for the different grounds, the transferring Manager must notify the participant in a clear, truthful, complete, and timely manner, so that it is understandable, avoiding hiding or minimizing important warnings, with the following minimum content:
a) Date of authorization of transfer by the Superintendence; b) Justification of the transfer process; c) Name of the acquiring Manager; d) Deadline to request redemption of participation shares; and e) Place and person designated to handle inquiries related to the communication. Such communication to the participant will be made in accordance with what is established in Article 59 of these Standards.

Communication to the public of the transfer process Art. 14.- Within three business days counted from receipt of the notification of transfer authorization, the transferring Manager must communicate to the public the transfer of the Open Fund by means of a prominent notice, published in the newspaper established in the Fund's Internal Regulation. Likewise, the transfer process must be disseminated as Essential Information or Relevant Event, in accordance with what is stipulated in the [Standards omitted in source text, likely referring to specific NBC standards], issued by the Central Bank through its Committee of Standards.

Request for modification of the registry entry Art. 15.- In all cases and once the authorization for transfer of the Open Fund is received, the Legal Representative or Attorney-in-fact of the acquiring Manager, within a period not exceeding five business days, must present to the Superintendence the request for modification of the registry entry of the Fund to be transferred, accompanied by the following documentation and information:

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TECHNICAL STANDARDS FOR THE TRANSFER OR MERGER OF INVESTMENT FUNDS Approval: 12/01/2017 Validity: 01/02/2018

a) Drafts of Internal Regulation, Placement Prospectus, and model of participation share contract; b) Documents related to the constitution of the Fund's guarantee according to its nature; c) Certification of the Board of Directors agreement of the Manager in which the entity that will be the representative of the beneficiaries of the guarantee is designated; d) Acceptance of the entity as representative of the beneficiaries of the guarantee; e) Method of valuation of investments in securities, in accordance with what is established in Article 102 of the Funds Law; f) Name(s) of the person(s) designated as investment administrator(s), duly authorized by the Superintendence; g) Accounting system of the Fund that will be used by the Manager and the description of the computer platform on which it has been developed, description of its information systems, description of information backups, security and controls in the systems; and h) Other documentation that the acquiring Manager considers necessary. The request and documentation may be presented through the means made available by the Superintendence, which may be electronic. In any case, the period referred to in the first paragraph of Article 15-A of these Standards will begin to run from the next business day after the request has been presented. (1)

Procedure for authorization of modification of the registry entry of the Fund to be transferred (1) Art. 15-A.- Upon receipt of the request for modification of the registry entry of the Fund, in accordance with what is established in Article 15 of these Standards, the Superintendence will proceed to verify compliance with the requirements defined by the Funds Law and these Standards, having a period of up to thirty business days to authorize and carry out the modification of the corresponding registry entry. (1)

If the request is not accompanied by the complete and duly formatted information detailed in Article 15 of these Standards, the Superintendence, due to the lack of necessary requirements, may require the Manager to present the missing documents within a period of ten business days counted from the day following the notification, a period that may be extended at the request of the acquiring Manager when there are reasons justifying it. (1)

The Superintendence in the same warning will indicate to the acquiring Manager that if it does not complete the information within the aforementioned period, it will proceed without further procedure to archive the request, leaving it free to present a new request. (1)

If after the analysis of the documentation presented in accordance with Article 15 of these Standards, the Superintendence has observations or when the documentation or information presented is not sufficient to establish the facts or information intended to be accredited; the Superintendence will warn the respective acquiring Manager only once to remedy the deficiencies communicated or present additional documentation or information requested. (1) The acquiring Manager will have a maximum period of ten business days counted from the day following the notification, to resolve the observations or present the information required by the Superintendence. (1)

The Superintendence by reasoned resolution will extend by up to another ten business days the period indicated in the previous paragraph, when the nature of the observations or warned deficiencies so require. (1)

Extension Period (1)
Art. 15-B.- The acquiring Manager may present to the Superintendence a request for extension of the periods indicated in the fifth paragraph of Article 15-A of these Standards, before the expiration of said period, must express the grounds on which it is based and propose, if applicable, the relevant proof. (1)

The extension period cannot exceed ten business days and will begin from the next business day after the expiration date of the original period. (1)

Suspension of the period (1)
Art. 15-C.- The thirty-day period indicated in Article 15-A of these Standards will be suspended for the days that elapse between the notification of the request to complete information or documentation referred to in the second and fifth paragraphs of said article, until the interested parties remedy the observations required by the Superintendence. (1)

Resolution (1)
Art. 16.- Upon receipt of complete and duly formatted documentation, in accordance with the procedure established in Article 15-A of these Standards, the Superintendence will agree to the modification of the Fund's registry entry. The Superintendence will notify the agreement of modification of the registry entry to the acquiring Manager, transferring Manager, and Depositary within three business days following, counted from the date of its approval. (1) Notified of the agreement, the transferring Manager will send to the Depositary of the Fund's securities, the instruction to transfer them to the destination account that the acquiring Manager holds for the administration of the securities of the portfolio of the transferred Fund. The transferring Manager, the Investment Committee or whoever acts in its stead, as well as the Depositary of the securities of the Fund to be transferred, will cease in their functions once the modification of the respective registry entry of the Fund is registered and the acquiring Manager has registered in its accounts the securities that constitute the Fund.

CNBCR-12/2017
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TECHNICAL STANDARDS FOR THE TRANSFER OR MERGER OF INVESTMENT FUNDS Approval: 12/01/2017 Validity: 01/02/2018

Once the securities are transferred to the destination account of the acquiring Manager, the transferred Fund may begin operations under its administration.

Communication to the Tax Administration
Art. 17.- The Superintendence will communicate to the Tax Administration the transfer of Open Funds, within a period of three business days counted from the next business day after the transfer agreement was taken.

Responsibility
Art. 18.- The acquiring Manager will succeed by operation of law to the transferring Manager in its rights and obligations, including tax ones, once the transfer of the Fund is finalized and the respective registry entry is modified, without prejudice to the responsibility of the transferring Manager during its administration of the Fund. Once the Registry is modified, the acquiring Manager will have one hundred and eighty days to carry out the necessary adaptations to comply with the provisions of the Funds Law.

Art. 19.- Upon completion of the transfer process, the External Auditor of the Fund will certify the transfer of the Fund in accordance with what is established in the Funds Law.
Such certification must be sent by the transferring Manager to the Superintendence on the next business day after receipt.

CHAPTER II
TRANSFER OF CLOSED FUNDS

Transfer of a Closed Fund
Art. 20.- The transfer of a Closed Fund, as a patrimony unit, can only be effected in favor of another Manager authorized by the Superintendence and must comprise all assets, rights, and obligations that constitute the fund's assets and liabilities, as well as guarantees, sureties, or bonds thereof.

Grounds for transfer of a Closed Fund
Art. 21.- The transfer of a Closed Fund will proceed due to the following grounds:
a) Revocation of the authorization to operate of the Manager after exhausting the procedure established in Article 39 of the Funds Law; and b) Agreement of the Extraordinary Assembly of Participants, in accordance with what is established in Article 81, subsection b) of the Funds Law.

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TECHNICAL STANDARDS FOR THE TRANSFER OR MERGER OF INVESTMENT FUNDS Approval: 01/12/2017 Validity: 02/01/2018

Transfer of Closed Funds due to Revocation of Operating Authorization

Art. 22.- Once the resolution revoking the operating authorization is final, the Superintendence will notify the Surveillance Committee, which will urgently convene an Extraordinary Special Assembly of participants, to be held five days after notification by the Manager.

The Extraordinary Special Assembly of participants shall be constituted in accordance with Article 41 of the Funds Law. In said Assembly, the Manager or, failing that, the Surveillance Committee, must inform on the financial situation of the Fund, and with that information, the participants will decide on the transfer of the Fund to another Manager of their choice or on its liquidation, simultaneously appointing the liquidator.

Within five business days following the holding of the Extraordinary Special Assembly of participants, the Surveillance Committee will communicate to the Superintendence the decision taken in said Assembly.

The Surveillance Committee will communicate the agreements taken in the Extraordinary Special Assembly to the participants who did not attend, in accordance with Article 59 of these Standards.

Art. 23.- When the Extraordinary Special Assembly of participants agrees to the transfer of the Fund to another Manager in accordance with the preceding article, the Surveillance Committee will inform the Superintendence within five business days following the agreement and request the corresponding transfer authorization, attaching the following documentation:
a) Certification of the minutes point stating the agreement of the Extraordinary Special Assembly of participants, in which the transfer of the Fund was approved and requesting the corresponding authorization from the Superintendence; b) Certification of the minutes point of the Board of Directors meeting stating the agreement of acceptance of the Fund by the acquiring Manager; c) Sworn Statement issued by the acquiring Manager stating that it meets the requirements established in Article 24 of these Standards; and d) Transfer Plan of the Fund in accordance with Article 27 of these Standards.

Art. 24.- The acquiring Manager must meet the following requirements:
a) Be managing at least one Closed Fund with a similar type of assets; b) Have an authorized investment administrator for the type of assets comprising the Fund to be transferred; and c) Have the necessary human and technological resources to administer the transferred Funds.

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TECHNICAL STANDARDS FOR THE TRANSFER OR MERGER OF INVESTMENT FUNDS Approval: 01/12/2017 Validity: 02/01/2018

Timeframe for the Transfer of Closed Funds due to Revocation of Authorization

Art. 25.- Within fifteen days following notification of the revocation, the Manager will proceed with the transfer of the Closed Fund.

Request for Transfer Authorization of a Fund by Agreement of an Extraordinary Assembly of Participants

Art. 26.- Once the agreement to transfer a Fund is made by an Extraordinary Assembly of participants, whether or not involving the dissolution of the Manager, the Surveillance Committee must inform the Superintendence, attaching the following information:
a) Certification of the minutes point stating the agreement of the Extraordinary Assembly of participants, in which it was approved to request the Superintendence for authorization of the Fund's transfer, in case of the participants' decision; b) Certification of the minutes point of the Board of Directors meeting of the transferring Manager, stating the agreement to transfer the Fund and requesting the corresponding authorization from the Superintendence; c) Certification of the minutes point of the Board of Directors meeting where the acceptance of the Fund by the acquiring Manager is agreed; d) Sworn Statement issued by the acquiring Manager stating that it meets the requirements established in Article 24 of these Standards; and e) Transfer Plan of the Fund, with the minimum content of information in accordance with Article 27 of these Standards. The certification referred to in letter b) shall be presented when the cause of transfer originates from the Manager.

Minimum Content of the Transfer Plan for Closed Funds

Art. 27.- The Fund's transfer plan must contain at least the following:
a) Transfer schedule and responsible parties for its execution; b) Report on the Fund to be transferred detailing: its composition, number of participants and their quotas, as well as the inventory of assets and liabilities comprising it as of the date of the Fund's transfer agreement; c) Account statement or report on the Fund's securities by the Depositary; and d) Other aspects the transferring Manager deems convenient.

Art. 28.- Within the peremptory timeframe of three business days following the submission of the request referred to in Articles 23 and 26 of these Standards, the Superintendence will authorize the transfer plan and the acquiring Manager.

The Superintendence will notify the transfer authorization to the transferring Manager, Surveillance Committee, acquiring Manager, and Depositary on the next business day after authorizing the Fund's transfer plan.

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TECHNICAL STANDARDS FOR THE TRANSFER OR MERGER OF INVESTMENT FUNDS Approval: 01/12/2017 Validity: 02/01/2018

The transferring Manager must comply with the transfer plan authorized by the Superintendence; and the Surveillance Committee will act in the best interest of the participants in the Fund transfer processes.

In the event that the actions of the transferring Manager do not correspond to the presented and authorized plan, the Superintendence must appoint an inspector, with the rules for the appointment of inspectors with administrative powers or charged to the treasury established in the Law on Supervision and Regulation of the Financial System being applicable in this regard.

Timeframe to Effect the Transfer of Closed Investment Funds

Art. 29.- The transfer of Closed Funds by agreement of the Extraordinary Assembly of participants, by decision or dissolution of the Manager, must be carried out within thirty days following the notification of approval of the transfer plan submitted to the Superintendence.

The Superintendence may extend the aforementioned timeframe, upon request of the Surveillance Committee, for which, before expiration, it must submit a written document justifying the reason for the extension request. The extension timeframe may not exceed thirty days and will begin to count from the date of expiration of the original timeframe. If, within the established timeframe, the Funds have not been transferred to the acquiring Manager, their liquidation will proceed in accordance with Articles 103 and following of the Funds Law.

Public Communication of the Transfer Process

Art. 30.- Within three business days counted from receiving the transfer authorization notification, the transferring Manager must communicate to the public the transfer of the Closed Fund by means of a prominent notice, published in the newspaper established in the Fund's Internal Regulations. Furthermore, the transfer process must be disseminated as Essential Information or Material Event, in accordance with what is stipulated in the [Circulars/Regulations referenced as -13), issued by the Central Bank through its Standards Committee].

Request for Modification of the Registry Entry

Art. 31.- Once the authorization for the transfer of Closed Funds is received, the Legal Representative or Attorney-in-fact of the acquiring Manager, within a timeframe not exceeding five business days, must submit to the Superintendence the request for modification of the registry entry of the Fund to be transferred, accompanied by the following documentation and information:
a) Drafts of Internal Regulations and Placement Prospectus; b) Documents related to the constitution of the Fund's guarantee according to its nature; c) Certification of the Board of Directors meeting agreement designating the entity that will be the representative of the beneficiaries of the guarantee; d) Acceptance of the entity as representative of the beneficiaries of the guarantee; e) Method for valuing securities investments, in accordance with Article 102 of the Funds Law; f) Name(s) of the person(s) designated as investment administrator(s), duly authorized by the Superintendence; g) Accounting system of the Fund to be used by the Manager and the description of the computer platform on which it has been developed, description of its information systems, description of information backups, security and controls in the systems; and h) Other documentation the Manager considers necessary.

The request and documentation may be submitted through the means made available by the Superintendence, which may be electronic. In any case, the timeframe referred to in the first paragraph of Article 31-A of these Standards will begin to count from the next business day after the request has been submitted. (1)

Procedure for Authorizing the Modification of the Registry Entry of the Closed Investment Fund to be Transferred (1)

Art. 31-A.- Upon receiving the request for modification of the Fund's registry entry, in accordance with Article 31 of these Standards, the Superintendence will proceed to verify compliance with the requirements defined in the Funds Law and these Standards, having a timeframe of up to thirty business days to carry out the corresponding Registry entry modification. (1)

If the request is not accompanied by the complete and proper information detailed in Article 31 of these Standards, the Superintendence, due to the lack of necessary requirements, may require the acquiring Manager to submit the missing documents within a timeframe of ten business days counted from the day following notification, a timeframe that may be extended upon request of the Manager when there are reasons justifying such extension. (1)

The Superintendence, in the same notice, will indicate to the acquiring Manager that if the information is not completed within the aforementioned timeframe, it will proceed without further procedure to archive the request, leaving the right to submit a new request intact. (1)

If, after analyzing the documentation presented in accordance with Article 31 of these Standards, the Superintendence has observations or when the documentation or information presented is not sufficient to establish the facts or information intended to be accredited; the Superintendence will notify the acquiring Manager once to rectify the deficiencies communicated or submit additional documentation or information requested. (1)

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TECHNICAL STANDARDS FOR THE TRANSFER OR MERGER OF INVESTMENT FUNDS Approval: 01/12/2017 Validity: 02/01/2018

The acquiring Manager will have a maximum timeframe of ten business days counted from the day following notification, to resolve the observations or submit the information requested by the Superintendence. (1) The Superintendence, through a reasoned resolution, will extend by up to another ten business days the timeframe indicated in the previous paragraph, when the nature of the observations or notified deficiencies so require. (1)

Extension Timeframe (1)

Art. 31-B.- The acquiring Manager may submit to the Superintendence a request for extension of the timeframes indicated in the fifth paragraph of Article 31-A of these Standards, before the expiration of said timeframe, must express the grounds for such request and propose, if applicable, the relevant evidence. (1)

The extension timeframe may not exceed ten business days and will begin from the next business day following the expiration date of the original timeframe. (1)

Suspension of Timeframe (1)

Art. 31-C.- The thirty-day timeframe indicated in Article 31-A of these Standards, will be suspended for the days that elapse between the notification of the request to complete information or documentation referred to in the second and fifth paragraphs of said article, until the interested parties rectify the observations required by the Superintendence. (1)

Resolution (1)

Art. 32.- Upon receiving the complete and proper documentation, in accordance with the procedure established in Article 31-A of these Standards, the Superintendence will agree to modify the Fund's registry entry regarding the change of its administrator. The Superintendence will notify the agreement to modify the registry entry to the acquiring Manager, transferring Manager, and Depositary within three business days following, counted from the date of its approval. (1)

Once notified, the transferring Manager will send to the Fund's securities Depositary the instruction to transfer said securities to the destination account that the acquiring Manager will open for the administration of the Fund's portfolio securities.

Once the securities are transferred to the acquiring Manager's destination account, the transferred Fund may begin operations under its administration.

The transferring Manager, Investment Committee or its substitute, the Surveillance Committee, as well as the Depositary of the securities of the Fund to be transferred, will cease their functions of administering the transferred Fund once the respective modification of the registry entry is registered and the acquiring Manager has received in its accounts the securities comprising the Fund.

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TECHNICAL STANDARDS FOR THE TRANSFER OR MERGER OF INVESTMENT FUNDS Approval: 01/12/2017 Validity: 02/01/2018

Communication to the Tax Administration

Art. 33.- The Superintendence will communicate to the Tax Administration the transfer of the Closed Funds, within a timeframe of three business days counted from the next business day following the agreement to transfer.

Responsibility

Art. 34.- The acquiring Manager will succeed the transferring Manager in its rights and obligations, including tax ones, once the transfer of the Fund is completed and the respective registry entry is modified, without prejudice to the responsibility of the transferring Manager during its administration of the Fund.

Once the Registry is modified, the acquiring Manager will have one hundred eighty days to make the necessary adaptations to comply with the provisions of the Funds Law.

Modifications at the National Registry Center

Art. 35.- In case the Fund possesses real estate, the acquiring Manager will carry out the necessary procedures at the National Registry Center to register the respective modifications.

The acquiring Manager will submit to the Real Estate and Mortgage Registry the documentation requested by it, adding the transfer authorization by the Superintendence.

Art. 36.- Upon completion of the transfer process, the Fund's External Auditor will certify the transfer of the Fund.

Such certification must be sent by the transferring Manager to the Superintendence on the next business day after receipt.

TITLE III
MERGER OF FUNDS
CHAPTER I
GENERAL ASPECTS

Merger of Funds

Art. 37.- Two or more Funds may merge, provided that such merger is carried out between similar Funds of the same classification, considering at minimum the following characteristics:
a) Participant profile; b) Investment policy; c) Risks inherent to the Fund; and

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TECHNICAL STANDARDS FOR THE TRANSFER OR MERGER OF INVESTMENT FUNDS Approval: 01/12/2017 Validity: 02/01/2018 d) Others that are consistent with the characteristics of the Funds to be merged.

Art. 38.- The merger of Funds may occur in two forms:
a) Creation of a new Fund: when one or more Funds integrate a new Fund; and b) Merger by absorption: when an existing Fund absorbs one or more others.

The merger of Funds comprises all assets, rights, and obligations constituting the assets and liabilities of each Fund, as well as guarantees, sureties, or bonds.

Merger of Managers

Art. 39.- The merger of Managers requires prior authorization from the Superintendence and must be carried out in accordance with the rules established in the Commercial Code.

In the case of the merger of Managers, the conditions established in the subscription agreements for participation quotas, Internal Regulations, and Placement Prospectus of each Fund will be respected as originally stipulated.

CHAPTER II
MERGER OF OPEN FUNDS

Request for Authorization of Merger of Open Funds

Art. 40.- The request for authorization of merger of Open Funds to be submitted to the Superintendence must be signed by the Legal Representative or Attorney-in-fact of the Manager, detailing the reasons justifying the merger and must contain the following information and documentation:
a) Board of Directors meeting agreement of the Manager approving the request for merger of the Funds; b) Merger scheme, stipulating the form, which may be the creation of a new Fund or by absorption, identifying the Fund that survives; c) Schedule to carry out the merger and responsible parties for its execution; d) Draft Internal Regulations, Placement Prospectus, and model of subscription agreement for the quotas of the absorbing Fund; e) Documentation proving the constitution of the guarantee required in Article 22 of the Funds Law, in case of creation of a new Fund; f) Request for deregistration of the absorbed Funds; g) Financial Statements as of the date of the agreement approving the request for merger of the Funds; h) Method for exchange for the conversion of quotas; i) Report on the Funds to be merged detailing: their composition, number of participants and their quotas, as well as the inventory of assets and liabilities comprising them as of the date of the merger request; j) Investment policy of the Fund resulting from the merger; and

CNBCR-12/2017
NDMC-16
TECHNICAL STANDARDS FOR THE TRANSFER OR MERGER OF INVESTMENT FUNDS Approval: 01/12/2017 Validity: 02/01/2018 k) Tax Clearance Certificates of the respective Funds.

In merger processes, the exchange method for the conversion of quotas referred to in paragraph h) of this article, will be carried out in accordance with Annex No. 1 of these Standards.

The request and documentation may be submitted through the means made available by the Superintendence, which may be electronic. In any case, the timeframe referred to in the first paragraph of Article 42 of these Standards will begin to count from the next business day after the request has been submitted. (1)

Art. 41.- The Manager requiring authorization from the Superintendence for the merger of Funds must simultaneously request the registration of the new Fund or the modifications of the registry entry of the merged Funds, as applicable, (NDMC-06), issued by the Central Bank through its Standards Committee.

Procedure for Authorizing Merger

Art. 42.- Upon receiving the request for merger of the Funds, in accordance with Article 40 of these Standards, the Superintendence will proceed to verify compliance with the requirements defined by the Funds Law and these Standards regarding the merger of Funds, having a timeframe of up to fifteen business days for the authorization or denial of the merger of the Funds. (1)

If the request is not accompanied by the complete and proper information detailed in Article 40 of these Standards, the Superintendence, due to the lack of necessary requirements, may require the Manager to submit the missing documents within a timeframe of ten business days counted from the day following notification, a timeframe that may be extended upon request of the Manager when there are reasons justifying such extension. (1)

The Superintendence, in the same notice, will indicate to the Manager that if the information is not completed within the aforementioned timeframe, it will proceed without further procedure to archive the request, leaving the right to submit a new request intact. (1)

If, after analyzing the documentation presented in accordance with Article 40 of these Standards, the Superintendence has observations or when the documentation or information presented is not sufficient to establish the facts or information intended to be accredited; the Superintendence will notify the Manager once to rectify the deficiencies communicated or submit additional documentation or information requested. (1)

CNBCR-12/2017
NDMC-16
TECHNICAL STANDARDS FOR THE TRANSFER OR MERGER OF INVESTMENT FUNDS Approval: 01/12/2017 Validity: 02/01/2018

The Manager will have a maximum timeframe of ten business days counted from the day following notification, to resolve the observations or submit the information requested by the Superintendence. (1) The Superintendence may, through a reasoned resolution, extend by up to another ten business days, the timeframe indicated in the previous paragraph, when the nature of the observations or notified deficiencies so require. (1)

Extension Timeframe (1)

Art. 42-A.- The Manager may submit to the Superintendence a request for extension of the timeframe indicated in the fifth paragraph of Article 42 of these Standards, before the expiration of said timeframe, must express the grounds for such request and propose, if applicable, the relevant evidence. (1)

The extension timeframe may not exceed ten business days and will begin from the next business day following the expiration date of the original timeframe. (1)

Suspension of Timeframe (1)

Art. 42-B.- The fifteen-business-day timeframe indicated in the first paragraph of Article 42 of these Standards, will be suspended for the days that elapse between the notification of the request for information or documentation referred to in the second and fifth paragraphs of said article, until the observations required by the Superintendence are rectified. (1)

Resolution (1)

Art. 43.- Upon completion of the authorization procedure for the merger, once the documents are submitted in proper form, the Superintendence will proceed to issue the agreement authorizing or denying the merger of Funds corresponding. (1)

On the next business day following the agreement to authorize the merger of Funds, the Superintendence will notify it to the Manager and to the Depositary of the securities of the Funds to be merged.

CNBCR-12/2017
NDMC-16
TECHNICAL STANDARDS FOR THE TRANSFER OR MERGER OF INVESTMENT FUNDS Approval: 01/12/2017 Validity: 02/01/2018

Issuance of the registry entry for the new Fund or modifications by absorption of a Fund Art. 44.- In the event that the agreement by the Superintendence is favorable, the Manager, within a maximum period of fifteen business days from the communication of said agreement, shall make the payment of the registration fees for the new Fund or of the modifications in the registry in case of a merger by absorption into an existing Fund, and shall remit within a period of fifteen business days to the Superintendence, in definitive character, the following documentation:
a) Internal Regulations of the Fund, signed by the person authorized to do so, including all annexes referenced therein;

b) Placement Prospectus, signed by the person authorized to do so, including all annexes referenced therein; c) Model of subscription contract for participation shares; and d) Documentation proving the constitution of the guarantee required in article 22 of the Funds Law.

Upon receipt of the documentation and verifying its conformity with what authorized by the Superintendence, the latter shall proceed to issue the registry entry or the modifications of the Fund within a maximum period of five business days, which it will communicate to the Manager within a maximum period of three business days from the date on which the registry entry was issued or modified.

Information to the participant regarding the merger process Art. 45.- The day following the receipt of the merger authorization, the Manager must notify the participant in a clear, truthful, complete, and timely manner, so that it is understandable, avoiding hiding or minimizing important warnings to the participant regarding the merger process, with the following minimum content:
a) Copy of the certification of the minutes point in which the agreement of the Board of Directors is recorded, in which the request to the Superintendence for the merger of the Funds was approved, including the justification of this decision; b) Merger authorization by the Superintendence; c) Value of their participation shares valid on the date; d) Deadline to request redemption of participation shares; and e) Method of exchange of the participation share.

The communication to the participant shall be carried out in accordance with what is established in article 59 of these Standards.

In merger processes, the exchange method shall consider that participants receive participations in the proportion equivalent to those they previously held.

Communication to the public regarding the merger Art. 46.- Within three business days counted from the notification of the merger authorization, the Manager must communicate it to the public through a prominent notice, published in the newspaper established in the Internal Regulations of the Fund. Likewise, the merger process must be disseminated as Essential Information or Fact (NDMC-13), issued by the Central Bank through its Standards Committee.

Communication to the Custodian
Art. 47.- The Manager shall send to the Custodian of the Fund's securities, the instruction for transfer to the destination account that has been opened for the administration of the securities of the portfolio of the absorbing Fund or of the new Fund. Such instruction shall enter into force from the date of the issuance of the registry entry or modification thereof, in accordance with what is established in article 44 of these Standards.

Presentation of Financial Statements
Art. 48.- After the transfer of the securities to the new destination account, the Manager shall present to the Superintendence, the following business day, the Financial Statements of the new Fund or absorbing Fund.

CHAPTER III
MERGER OF CLOSED FUNDS

Request for merger authorization of Closed Funds Art. 49.- The request for merger authorization of Closed Funds to be submitted to the Superintendence must be signed by the Legal Representative or Attorney-in-fact of the Manager, detailing the reasons justifying the merger and must contain the following information and documentation:
a) Agreement of the Board of Directors of the Manager in which the request for merger of the Funds is approved; b) Agreement of the Extraordinary Assembly of participants in which the merger is agreed; c) Merger scheme, stipulating the form, which may be the creation of a new Fund or by absorption, identifying the Fund that survives; d) Schedule to carry out the merger and those responsible for its execution; e) Draft Internal Regulations and Placement Prospectus of the absorbing Fund; f) Documentation proving the constitution of the guarantee required in article 22 of the Funds Law, in case of creation of a new Fund; g) Request for deregistration of the absorbed Funds; h) Financial Statements as of the date of the agreement in which the request for merger of the Funds was approved; i) Exchange method for the conversion of shares; j) Report of the Funds to be merged detailing: composition thereof, including number of participants and their shares, as well as the inventory of assets and liabilities that constitute it as of the date of the merger request; k) Investment policy of the Fund resulting from the merger; and l) Tax Clearance Certificates from the Tax Administration of the respective Funds.

In merger processes, the exchange method for the conversion of shares referred to in subsection i) of this article, shall be carried out in accordance with Annex No. 1 of these Standards.

The request and documentation may be submitted through the means made available by the Superintendence, which may be electronic. In any case, the period referred to in the first paragraph of article 51 of these Standards shall begin to count from the business day following the submission of the request. (1)

Art. 50.- The Manager that requires authorization from the Superintendence for the merger of Funds must simultaneously request the registration of the new Fund or the modification of the registry entry of the absorbing Fund, as applicable, attaching -06), issued by the Central Bank through its Standards Committee.

Procedure for merger authorization
Art. 51.- Upon receipt of the request for merger authorization of the Funds, in accordance with what is established in article 49 of these Standards, the Superintendence shall proceed to verify compliance with the requirements defined by the Funds Law and these Standards regarding the merger of Funds, having a period of up to fifteen business days for the authorization or denial of the merger of the Funds. (1)

If the request is not accompanied by the complete and duly formatted information detailed in article 49 of these Standards, the Superintendence, due to the lack of necessary requirements, may require the Manager to present, within a period of ten business days counted from the day following the notification, the missing documents, a period that may be extended at the request of the Manager when there are reasons justifying such extension. (1)

The Superintendence in the same notice shall indicate to the Manager that if the information is not completed within the aforementioned period, it shall proceed without further procedure to archive the request, leaving it free to submit a new request. (1)

If after the analysis of the documentation presented in accordance with article 49 of these Standards, the Superintendence has observations or when the documentation or information presented is not sufficient to establish the facts or information intended to be accredited; the Superintendence shall notify the Manager only once to remedy the deficiencies communicated or present additional documentation or information requested. (1)

The Manager shall have a maximum period of ten business days counted from the day following the notification, to resolve the observations or present the information requested by the Superintendence. (1)

The Superintendence may, through a reasoned resolution, extend by up to another ten business days, the period indicated in the previous subsection, when the nature of the observations or deficiencies notified so requires. (1)

CNBCR-12/2017
NDMC-16
TECHNICAL STANDARDS FOR THE TRANSFER OR MERGER OF INVESTMENT FUNDS Approval: 01/12/2017 Validity: 02/01/2018

Extension Period (1)
Art. 51-A.- The Manager may submit to the Superintendence a request for extension of the period indicated in the fifth paragraph of article 51 of these Standards, before the expiration of said period, stating the reasons on which it is based and proposing, if applicable, the relevant proof. (1)

The extension period may not exceed ten business days and shall begin from the business day following the expiration date of the original period. (1)

Suspension of the Period (1)
Art. 51-B.- The fifteen business day period indicated in article 51 of these Standards, shall be suspended for the days that elapse between the notification of the request for information or documentation referred to in the second and fifth paragraphs of said article, until the observations requested by the Superintendence are remedied. (1)

Resolution (1)
Art. 52.- Upon completion of the merger authorization procedure, once the documents are presented in due form, the Superintendence shall proceed to issue the agreement authorizing or denying the merger of the corresponding Funds. (1)

The business day following the taking of the agreement to authorize the merger of Funds, the Superintendence shall notify the Manager and the Custodian of the securities of the Funds to be merged.

Issuance of the registry entry for the new Fund or modifications by absorption of a Fund Art. 53.- In the event that the agreement by the Superintendence is favorable, the Manager, within a maximum period of fifteen business days from the communication of said agreement, shall make the payment of the registration fees for the new Fund or of the modifications in the registry in case of a merger by absorption into an existing Fund, and shall remit within a period of fifteen business days to the Superintendence, in definitive character, the following documentation:
a) Internal Regulations of the Fund, signed by the person authorized to do so, including all annexes referenced therein; b) Placement Prospectus, signed by the person authorized to do so, including all annexes referenced therein; and c) Documentation proving the constitution of the guarantee required in article 22 of the Funds Law.

Upon receipt of the documentation and verifying its conformity with what authorized by the Superintendence, the latter shall proceed to issue the registry entry of the Fund within a maximum period of five business days, which it will communicate to the Manager within a maximum period of three business days from the date on which the registry entry was issued or modified.

Information to the participant regarding the Merger process Art. 54.- Upon receiving the merger authorization, the Manager, the day prior to the publication of the notice referred to in article 57 of these Standards, must notify the participant in a clear, truthful, complete, and timely manner, so that it is understandable, avoiding hiding or minimizing important warnings to the participant regarding the merger process, with the following minimum content:
a) Copy of the certification of the minutes point in which the agreement of the Board of Directors is recorded, in which the request to the Superintendence for the merger of the Funds was approved, including the justification of this decision; b) Merger authorization by the Superintendence; c) Value of their participation shares valid on the date; and d) Method of exchange of the participation share.

The communication to the participant shall be carried out in accordance with what is established in article 59 of these Standards.

Communication to the Custodian
Art. 55.- The Manager shall send to the Custodian of the Fund's securities, the instruction for transfer to the destination account that has been opened for the administration of the securities of the portfolio of the absorbing Fund or of the new Fund. Such instruction shall enter into force from the date of the issuance of the registry entry or modification thereof, in accordance with what is established in article 53 of these Standards.

Presentation of Financial Statements
Art. 56.- After the transfer of the securities to the new destination account, the Manager shall present to the Superintendence, the following business day, the Financial Statements of the new Fund or absorbing Fund.

Communication to the public regarding the merger Art. 57.- Within three business days counted from the notification of the merger authorization, the Manager must communicate it to the public through a prominent notice, published in the newspaper established in the Internal Regulations of the Fund. Likewise, the merger process must be disseminated as Essential Information or Relevant Fact, in accordance with what is stipulated in the -13), issued by the Central Bank through its Standards Committee.

Modifications in the National Registry Center
Art. 58.- In case the Fund possesses real estate, the Manager shall carry out the necessary procedures at the National Registry Center to register the respective modifications.

The acquiring Manager shall present before the Real Estate and Mortgage Registry, the documentation requested by it, adding the transfer authorization by the Superintendence.

TITLE IV
OTHER PROVISIONS AND VALIDITY

SINGLE CHAPTER

Communication to the participant
Art. 59.- In both transfer or merger processes of Open or Closed Investment Funds, the communication to the participant shall be carried out in accordance with the means established in the respective subscription contract for participation shares.

For the case of transfer or merger of Open Funds, the Manager shall consider what is established in article 45 of the -06).

Sanctions
Art. 60.- Non-compliance with the provisions contained in these Standards shall be sanctioned in accordance with what is established in the Law on Supervision and Regulation of the Financial System.

Unforeseen Aspects
Art. 61.- Aspects not provided for in the matter of regulation in these Standards shall be resolved by the Central Reserve Bank of El Salvador, through its Standards Committee. (1)

Validity
Art. 62.- These Standards shall enter into force from January 02, two thousand eighteen.

MODIFICATIONS:
(1) Modifications to articles 9, 15, 16, 31, 32, 40, 42, 43, 49, 51, 52, 61 and incorporation of articles 15-A, 15-B, 15-C, 31-A, 31-B, 31-C, 42-A, 42-B, 51-A and 51-B, approved by the Central Bank through its Standards Committee, in Session CN-11/2021, on August 31, two thousand twenty-one, with validity from September 17, two thousand twenty-one.

CNBCR-12/2017
NDMC-16
TECHNICAL STANDARDS FOR THE TRANSFER OR MERGER OF INVESTMENT FUNDS Approval: 01/12/2017 Validity: 02/01/2018

Annex No. 1

Merger by absorption

Number of equivalent shares = (VCabsorbed ÷ VCabsorbing) ∗ N Where:
Number of equivalent shares: Number of shares in the Absorbing Fund to which the participant of the Absorbed Fund is entitled.
VCabsorbed: Value of the participation share of the Absorbed Fund on the date of the merger.
VCabsorbing: Value of the participation share of the Absorbing Fund on the date of the merger.
N: Number of participation shares of the Absorbed Fund that the participant held at the time of the merger.

Example:
VCabsorbing: $ 2,000
VCabsorbed: $ 1,000
N: 100
Number of shares = (1000 ÷ 2000) ∗ 100
Number of shares = (0.5) ∗ 100
Number of shares = 50

Merger by creation of a new Fund

Number of equivalent shares = (VCabsorbed ÷ VCnew) ∗ N

Where:
Number of equivalent shares: Number of shares in the new Fund to which the participant of the Absorbed Fund is entitled.
VCabsorbed: Value of the participation share of the Absorbed Fund on the date of the merger VCnew: Value of the participation share of the new Fund established in the Placement Prospectus N: Number of participation shares of the Absorbed Fund that the participant held at the time of the merger

Example:
VCabsorbed: $ 2,000
VCnew: $ 1,000
N: 100
Number of shares = (2000 ÷1000) ∗ 100
Number of shares = (2) ∗ 100
Number of shares = 200