Policies for the Administration of Contingent Assets of INJUPEMP

Object.- These policies have the purpose of establishing the procedures to be followed for the allocation, registration, accounting, administration and sale of assets of movable and immovable property, received as payment in kind or allocation through judicial sale, for the recovery of obligations of affiliates or other debtors and identified as eventual assets.

Definitions.- For the purposes of these Policies, the following shall be understood as: Eventual Assets of INJUPEMP.- Those movable and immovable assets that the National Institute of Retirements and Pensions of Employees and Functionaries of the Executive Branch (INJUPEMP) receives for the purpose of debt recovery either through payment in kind or allocation via Judicial Sale to cover all or part of the balance of a debt. Allocation Via Judicial Sale or Auction.- It consists of a legal payment instrument, by which after exhausting the legal procedure, the corresponding court issues a judgment of sale or auction in favor of the Claimant, proceeding to allocate the property for a predetermined value and concluding such allocation with the Certification of the Auction Hearing Minutes, duly recorded in the Public Registry of the corresponding locality in favor of INJUPEMP. Lease.- A contract in which the two parties mutually obligate themselves, one to grant the use of a property and the other to pay for it a determined price as consideration for the lease of the immovable property. Immovable Property.- Real estate or real property are things that cannot be transported from one place to another, such as land and those that are permanently attached to it, such as dwellings. Movable Property.- Those that can be transported from one place to another, whether moving themselves or only moved by external force. Committee of Eventual Assets.- It is the technical body responsible for proposing to the Board of Specialists the disposition or lease of eventual assets of INJUPEMP and ensuring compliance with these Policies for the Administration of Eventual Assets. CNBS.- National Commission of Banks and Insurance. Payment in Kind.- It is the transfer of immovable property that the lender or debtor makes in favor of INJUPEMP, for the purpose of making full or partial payment of a loan or obligation, through a title document transferring ownership, for a value appraised by mutual agreement between the parties. Board of Specialists: Superior Body of Administration and Execution of the Institute. Disposition or Sale.- Act by which ownership of an INJUPEMP asset is transferred. INJUPEMP and/or INSTITUTE.- The National Institute of Retirements and Pensions of Employees and Functionaries of the Executive Branch (INJUPEMP). Related Party.- Natural person who maintains a relationship with INJUPEMP, and who also maintains indirect relationships among themselves, by executive management, by kinship or marital relationship within the second degree of consanguinity and first degree of affinity with members of the Assembly of Participants and Contributors, the Board of Specialists and members of the Committee of Eventual Assets. (The Supplementary Rule is established as Article 2, subsection a) and other applicable provisions of the Regulation for Credit Operations of Financial Institutions with Related Parties issued by the Central Bank of Honduras. Participant: Any person who by virtue of the Law is protected by the Institute or maintains expectations of re-entry. For the purposes of these Policies, the concept of participant includes those who are in active status, in suspension, voluntary, and pensioned status. Base Price: It is the minimum price at which the eventual asset must be offered for sale in accordance with its market value, determined through an appraisal or valuation technically accepted for this purpose. Sale: It is the final stage of the allocation of the property. Resale: Sale that the Institute makes of an immovable property to the same participant who was subject to the judicial recovery action. Auction: Process by which INJUPEMP submits for sale and/or lease the eventual assets of the Institute, through free competition among buyers or lessees who have demonstrated the lawful origin of the funds, allocating the property to whoever offers the highest price above the stipulated base price. Value of Allocation by Payment in Kind or via Judicial Sale: It is the value for which INJUPEMP acquired the property, through payment in kind or judicial sale. Value of Sale through Auction: It is the value of base price for which INJUPEMP offers a property registered as an eventual asset for sale. Book Value: It is the value by which a property is recorded in the Institute's accounting books.- CHAPTER II DECISION-MAKING BODIES.- Administrative Instances

Limits of Competence of Decision-Making Bodies.- The sale through auction and temporary lease allocation of eventual assets of INJUPEMP are the responsibility of the following decision-making bodies: a) Board of Specialists: Its attributions, functions and responsibilities are those established in Articles 18 and 23 of the Law of the Institute of Retirements and Pensions of Functionaries and Employees of the Executive Branch (INJUPEMP), its Regulation and Norms. b) Committee of Eventual Assets: Within the scope of its competence, it must propose to the Board of Specialists the disposition and lease, through auction of eventual assets, registered in favor of the Institute.

Composition of the Committee of Eventual Assets.- The Committee of Eventual Assets shall be composed as follows:

• 1)

  A Member of the Board of Specialists, who shall preside over it.

• 2)

  The Chief of the Finance Division, who shall serve as Secretary.

• 3)

  The Officer in Charge of Eventual Assets.

• 4)

  The Chief of the Administrative Division.

• 5)

  The Chief of the Loans Division.

• 6)

  The Chief of the Legal Services Division. In case of absence or legal indisposition of the heads of the aforementioned areas, they shall be represented by their legal successors with the right to speak and vote, with the Board of Specialists appointing the corresponding substitute functionaries, who must be permanent functionaries and meet the competency requirements appropriate to the position. Functionaries who maintain a hierarchical relationship of supervisor and subordinate may not form part of the Committee.

Powers of the Committee of Eventual Assets.- The powers of the Committee of Eventual Assets are the following:

• 1)

  To ensure strict compliance with these policies and the applicable legal framework in this matter.

• 2)

  To request authorization from the Board of Specialists for the auction processes for the disposition and lease of eventual assets.

• 3)

  To open and analyze the offers received and proposals for allocation and/or lease of eventual assets, ensuring that these are carried out under the best conditions in favor of the Institute.

• 4)

  To monitor and control the dispositions and/or leases of Eventual Assets within the terms established in these policies.

• 5)

  To review reports on eventual assets.

• 6)

  To coordinate with the dependencies of the Institution linked to the process of allocation, registration and sale of eventual assets, the generation of timely information in order to avoid delays in said process.

• 7)

  Those others indicated in these policies, laws, applicable norms and sound prudential practices.

Officer in Charge of Eventual Assets.- Reports to the Finance Division and is responsible for coordinating the following activities:

• 1)

  Administer, control and maintain custody of the files of eventual assets, which must contain all corresponding documentation.

• 2)

  To reconcile monthly the inventory of eventual assets against accounting records and with the Area in charge of such assets.

• 3)

  To coordinate with other dependencies that eventual assets are duly legalized, in good condition, insured, cleared and available for sale and/or lease.

• 4)

  To remit for custody to the Treasury Department of the Institution, the originals of public deed documents, relating to eventual assets, registered in favor of the Institute, as well as any document deemed convenient.

• 5)

  To prepare documentation relating to auction processes for disposition or lease.

• 6)

  To prepare and conduct auction processes of the Institute's eventual assets, either for sale and/or lease, prior authorization from the Board of Specialists.

• 7)

  To coordinate with competent areas the processes of publicity, auction, sale and other related activities.

• 8)

  To present to the Committee of Eventual Assets the offers to purchase and lease, received from those interested in acquiring or leasing such properties.

• 9)

  To submit a quarterly report to the Board of Specialists and semiannually to the CNBS, on the inventory of eventual assets.

• 10)

  To request effectiveness from each dependency involved in the eventual assets process for proper functioning and thus comply with CNBS norms.

Acquisition.- INJUPEMP may allocate eventual assets through: 1) Payment in Kind. 2) Judicial Sale.

Reception, Registration and Custody.- The Legal Services Division shall remit a copy of the Sale Minutes and in case of payment in kind, the public deed of ownership in favor of INJUPEMP to the Officer in Charge of Eventual Assets immediately, and the latter in turn shall remit within a maximum period of ten (10) business days said deeds to the Committee of Eventual Assets. Likewise, the Legal Services Division shall be in charge of its registration in the corresponding Public Registry, for its subsequent custody by the Treasury Department of INJUPEMP.

Clearance.- The Legal Services Division in coordination with the involved dependencies, shall investigate and inform the Committee of Eventual Assets, the status of the Eventual Asset, including the payment of municipal rates or taxes, payment of public services in order to be transparent, regarding the legal status thereof.

Reception, Registration and Accounting.- Once the eventual asset is accepted and acquired, it shall be registered in the Public Registry of the corresponding locality and accounted for within ten (10) business days following its acquisition, understood as such, the date on which the payment in kind was made or the date of the Certification of the Judgment issued by the competent Judge when it is a judicial sale. The Institute shall have up to ninety (90) calendar days from the accounting entry to legalize said acquisition, including its registration in the corresponding Public Registry. When due to administrative problems related to the corresponding Public Registry, the registration of the eventual asset is carried out within a period greater than that established in the preceding paragraph, such judgment must be noted by means of the submission document, that the registration process was initiated before the expiration of the established period.

Reception of Movable and Immovable Property as Payment for Debts of Related Parties.- Prior to the reception of payment in kind of movable and immovable property for credits granted to participants related by executive management, INJUPEMP must present to the National Commission of Banks and Insurance (CNBS), a request for authorization, attaching to it an opinion of the Institute's administration regarding the advisability, from the financial and legal perspective, of accepting said eventual assets. Said opinion must also contain the reasons or motives for which related parties cannot comply with the agreed obligations, for which copies of collection actions taken must be attached. For these purposes, the Institute must observe the current norms on credit operations with related parties issued by the Central Bank of Honduras (BCH). If an appraisal from the immediately preceding year does not exist, a new valuation shall be required, conducted by a professional registered in the Registry of Appraisers of Movable and Immovable Assets, Other Assets and Credit Guarantees maintained for that purpose by the CNBS.

Book Value.- Eventual Assets shall be recorded in the accounting books of INJUPEMP considering the lower value of the following cases:

• a)

  That agreed with the debtor in the payment in kind.

• b)

  That of the appraisal conducted by a professional registered in the Registry of Appraisers of Movable and Immovable Assets, Other Assets and Credit Guarantees of the CNBS, net of the discounts contained in the current norms on evaluation and classification of the credit portfolio.

• c)

  That stated in the judicial sale; and,

• d)

  At sixty percent (60%) of the principal balance of the credit. To the value obtained through the application of the procedure indicated, shall be added the legal expenses incurred by INJUPEMP. When a set of assets is received as payment, whose individual value is not detailed in the corresponding deed and which are susceptible to being sold separately by INJUPEMP, the Institute must previously conduct the corresponding appraisal, which must be conducted by an appraiser registered in the Registry of Appraisers of Movable and Immovable Assets, Other Assets and Credit Guarantees maintained by the CNBS, to assign the total value of each asset separately.

Registration of Loss in the Acquisition of Eventual Assets.- When the balance of the credit being canceled is greater than the value of the registration of the asset being incorporated and in the event that no other assets are susceptible to payment in kind or judicial sale, the difference must be written off against the reserves for credit, if the Institute has sufficient reserves for its credits of doubtful recovery, and if these reserves are insufficient, the difference shall be written off against results of the fiscal year.

Expenses Charged to Results Accounts.- Expenses incurred in the recovery of the property, plus the investments made in eventual assets and expenses for clearance shall form part of the price of the property in a sub-account, likewise, expenses for public services, municipal rates or taxes shall be included.

Registration of Gains or Losses in the Sale of Eventual Assets.- The result of the sale of eventual assets must be recorded by the Accounting Department, as applicable, as follows: a) If the sale is cash and the sale price is greater than the value recorded in books, the difference shall be recorded as income at the time of sale; and, b) If the sale is on credit, and for a value greater than that recorded in books, the excess must be accounted for in a liability account and recorded proportionally in an income account as the value is recovered in accordance with the credit payments agreed upon with the participant debtor who acquires said eventual asset. For credit sales, the following conditions must be met: - That according to the financial information and background of the lender of the credit originated by the sale of the asset, capacity to pay has been established and a good payment history in other credit obligations obtained. - That the credit conditions for the purchase of the asset are in accordance with what is established in the current Loan Regulation. In case the transaction results in a loss, it must be recognized at the time of sale and carried to results account.

Registration of Investments in Contingent Assets.- The Institute shall only be able to make investments in contingent assets acquired for the purposes of maintenance and preservation of the property, provided that the execution of such investments obtains a better price for disposition or sale. These investments must be capitalized at the value at which the corresponding contingent asset was registered and amortized over a maximum period of five (5) years, counted from the date of accounting registration of the contingent asset; if the sale has not been completed during that period, the capitalization of investments in acquired contingent assets documents the holding period thereof.

Reserve for Amortization of Contingent Assets.- Upon completion of the second year of the accounting registration of the contingent asset and having exhausted efforts to sell and lease these assets, such actions must be duly approved and documented; proportional monthly amortization of the accounting value of each of the acquired contingent assets shall proceed, over a period not exceeding three (3) years. If the contingent assets are not registered accounting-wise within the timeframe established in Article 10 of these Policies, the amortization process must begin from the date when the accounting registration should have originally been completed. The foregoing without prejudice to the sanctions that such non-compliance may occasion, with the officials and employees who originated such non-compliance being responsible for such sanctions.

Fully Written-Off Contingent Assets.- When a contingent asset is fully written off at one hundred percent (100%), it must be kept recorded on the balance sheet until it is sold or liquidated. Notwithstanding the foregoing, the Commission may order the corresponding write-off when these assets represent no value to the Institute.

Appraisal Requirements.- The appraisal must consider the following aspects:

• 1)

  Location of the land or dwelling and its adjoining properties.

• 2)

  Plans and sketches.

• 3)

  Recent photographs.

• 4)

  Description of the property.

• 5)

  Description of useful and permanent improvements.

• 6)

  General characteristics.

• 7)

  Current use of the property.

• 8)

  Natural risks.

• 9)

  Social risks.

• 10)

  Environmental amenities.

• 11)

  Profitability of the property.

• 12)

  Depreciated value of the property.

• 13)

  Estimated value of each of the assets that the property contains.

Appraisal Practice.- The appraisal indicated in the preceding article must be performed by a professional registered in the Registry of Valuators of Movable and Immovable Assets, Other Assets and Credit Guarantees maintained by the CNBS and in accordance with the database maintained by the Institute. CHAPTER IV PROCEDURE FOR DISPOSITION

Conditions Prior to the Process of Disposition or Sale of Contingent Assets.- Prior to submitting contingent assets to the disposition or sale process, the Institute must have them registered in its favor in the corresponding Public Registries, as well as have effective possession thereof, duly remedied.

Criteria for Disposing of Contingent Assets.- For the purpose of disposing of contingent assets, the following aspects shall be considered:

• a)

  The value of the adjudication.

• b)

  Value of the most recent appraisal performed, provided that it is not older than one (1) year.

• c)

  The book value or accounting value.

• d)

  Investments made for the purpose of maintenance and preservation of the property, provided that thereby a better price for disposition or sale is obtained.

• e)

  Cost for remediation, including payment of taxes and municipal fees.

• f)

  Others that are incurred in the process of asset recovery.

Disposition of Contingent Assets.- The disposition of contingent assets shall be effected for participants of the system and in the case it is appropriate, to the general public, with the proviso that for the latter, the purchase and sale operation must be executed in cash and at market price. Regardless of those interested in acquiring contingent assets, the disposition or sale thereof must be carried out by auction by means of publication notice in two (2) newspapers of greatest circulation at the national level and two (2) radio media of the country, without time restriction, prior approval of the Board of Specialists. Likewise, they must be published by means of the Institute's website. The promotional time prior to the auction shall be one calendar month, during which time offers shall be received from those interested in purchasing the Contingent Asset, which must be submitted in sealed envelopes to the coordination of the Contingent Assets Commission, in whose plenary session the corresponding offers shall be opened.

Minimum Content of the Publication Notice.- The publication referred to in the preceding article must contain at minimum the following information: a) Description of the contingent asset. b) Location. c) Base price. d) Financing conditions for system participants and cash for the general public. e) Cost for taxes and municipal fees. f) It must include that costs inherent to the formalization of such purchase shall be borne by the purchaser. g) Department and official responsible where additional information can be obtained regarding the process of asset acquisition; and, h) Any other information that the Institution considers relevant.

Sale to Related Parties.- The sale of contingent assets to related parties by executive management shall not be granted under more favorable conditions in relation to other system participants and the general public, and prior authorization from the National Banking and Insurance Commission must be requested.

Timeframe for Disposition or Sale of Contingent Assets.- Contingent assets must be disposed of or sold within a maximum period of two (2) years counted from the date of their accounting registration.

Forms of Disposition or Sale.- The disposition or sale of contingent assets may be in cash or on credit; in case the sale is in cash or if there is payment of a down payment and these are paid in cash, the Institute must comply with the provisions established in the Special Law Against Money Laundering and its Regulations. In case the sale is on credit, it must comply with the guidelines established in the Loan Regulations, as applicable to a Participant.

Resale.- In cases where adjudication has been made in favor of INJUPEMP through judicial foreclosure, the resale of the immovable property may be carried out in a special manner at the request of the Participant who was subject to the judicial recovery action, provided that such resale is carried out within the timeframes established in Article 10 of these Policies, that is, within ninety (90) calendar days from the accounting registration to legalize such acquisition, provided that the registration of the immovable property in the Public Registry of the corresponding locality in favor of INJUPEMP has not been materialized or legalized. Such resale may be carried out provided that it is executed in cash under the general conditions of sale established in this Policy and that the foreclosure process of the Immovable Property has not been initiated by the Institute.

Inspection of Contingent Assets.- Participants, related parties, and members of the general public interested in doing so may coordinate with the person in charge of the Institute's property office the inspections of the location where the contingent assets subject to disposition or sale are situated.

Delivery of Contingent Asset.- Every contingent asset disposed of shall be delivered once the sale documents have been formalized, on credit or in cash as applicable. Once the contingent asset is adjudicated, the purchaser may designate the respective Notary; the costs inherent to the formalization shall be borne by such purchaser, and the sale must be formalized within six months, otherwise it may be sold to another person; the six-month period may be extended by mutual agreement of the parties.

Use of Eventual Assets.- INJUPEMP may allocate an eventual asset to its own use, prior to a written request submitted to the National Commission of Banks and Insurance (CNBS), attaching in addition to the background information regarding the property and the reason justifying the use to be given, the adjudication value, the accounting value, the appraisal value, the amortization performed if applicable, as well as the property documents duly registered. Those eventual assets authorized by the CNBS shall be accounted for as fixed assets and registered at book value. The CNBS shall have a period no greater than thirty (30) business days, counted from the date on which all required documentation is received, to grant or deny said request. CHAPTER V LEASE OF EVENTUAL ASSETS

Lease Contract for Eventual Assets.- With the purpose of generating income from unproductive assets, the Institute may lease the eventual assets registered in its favor, for which the term of said lease shall not exceed two (2) years, without prejudice that during such period of time the Specialist Directors, as well as the members of the Committee of Eventual Assets, must manage the sale of said properties, otherwise they shall be responsible for the sanctions that may be applied by the National Commission of Banks for such non-compliance. To this end, INJUPEMP shall inform the CNBS in each case within thirty (30) days following the date of execution of the respective lease contracts, and the CNBS may object to the same if it considers that the Institute did not comply with what is established in these policies, and must include the condition in the contracts executed with the lessor that if the CNBS objects to the same, the Institute shall bear no responsibility for the rescission thereof. The rent shall be established at market price by the technical staff of the Institute using the criteria and parameters that correspond for the performance of said transaction. In cases of leasing of eventual assets to related parties, the lease conditions shall not be preferential in relation to those granted to third parties.

Record of Income Derived from Lease of Eventual Assets.- The income generated by the contracts referred to in the preceding article shall be accounted for in the corresponding income accounts and within the period in which they are accrued. The execution of these contracts and the expiration of the two (2) years referred to in these Policies does not exempt the Institute from recording the annual amortization referred to in Article 17 of these Policies.

In cases where there are requests for lease of eventual assets owned by the Institute, these shall be submitted for evaluation by the Committee of Eventual Assets, through feasibility analysis and the lease amount in accordance with a market analysis, whose result shall be recorded in the Committee's Minutes and subsequently shall be submitted for consideration by the Board of Specialists for its approval.

Lease Contract for Eventual Assets.- The preparation of Lease Contracts shall be the responsibility of the Division of Legal Services of the Institute. CHAPTER VI FINAL AND TRANSITORY PROVISIONS

Information on Eventual Assets.- The Officer in Charge of Eventual Assets shall maintain individual files for each acquired eventual asset containing at minimum the following information and documentation: An Auxiliary Register indicating: a) Name of the debtor to whom the asset belonged, his or her last assigned category in the Institution, as well as the reserves recorded, and b) Description of the eventual asset, detailing: i. Location ii. Date of Accounting iii. Date of Acquisition iv. Accounting Value v. Investments made; and, vi. Amortization for the fiscal year and Accumulated Amortizations. c) Valuation report of the eventual asset prior to its acquisition and appraisal for performing the sale. d) Copy of the adjudication deed or payment in kind, duly registered in the corresponding Public Registry. e) Copy of accounting transactions. f) Publications of auction notices and copy of auction minutes, if applicable. g) Memorandum or liquidation note that must contain at minimum the following: i. Detail of the balance of obligations that were paid, principal and interest when applicable. ii. Category of the debtor at the time of acquisition of the eventual asset. iii. Detail of expenses incurred in the adjudication of the property; and, iv. Comparative of values evidencing that the accounted value is in accordance with what is established in these Policies. h) Report of field visit or inspection performed on the alienable assets not sold within the established term with a period of antiquity not exceeding four years, indicating that the property has no problems of possession or existence.

Submission of Information.- The Officer in Charge of Eventual Assets, reporting to the Division of Finance, shall submit to the CNBS within ten (10) business days following the close of the months of March, June, September and December, a report of eventual assets containing the information referred to in Annex 1 "Inventory and Control of Eventual Assets" and Annex 2 "Reconciliation of Balances of Eventual Assets" in accordance with the definitions in these Policies. Likewise, the Institute shall be responsible for the content, accuracy, validation and submission of the data submitted to the CNBS. The information received by this Commission may be verified at any time; and, in the event of deficiencies due to error, omission or fraud in the reported information, the Institute and responsible official shall be subject to the sanctions that in accordance with the Law and applicable regulatory framework correspond.

Unforeseen Cases.- Cases not foreseen in these Policies shall be resolved by the CNBS in accordance with the provisions of the legislation applicable to the matter.

Sanctions.- Non-compliance with the provisions stated in these Policies shall be sanctioned by INJUPEMP in accordance with the gravity of the offense and what is established in the Sanctions Regulation and Internal Work Regulation issued by said Institute.

Repeal.- These Policies repeal the Manual of Procedures and Constitution of the Commission for the Administration, Accounting Record and Sale of Eventual Assets approved in the ordinary session of February 24, 2010, item N.-05 subsection b) contained in Minutes 1159 of INJUPEMP.

Transitory Provision.- The assets that at the moment of the entry into force of these Policies are registered as eventual assets shall maintain their registration value in accordance with the Manual of Procedures and Constitution of the Commission for the Administration, Accounting Record and Sale of Eventual Assets existing, provided that the registration of eventual assets from the entry into force of these Policies shall be registered in accordance with what is contemplated therein.

Effective Date.- These Policies for the Administration of Eventual Assets may only be reformed or repealed by the Assembly of Participants and Contributors, in accordance with what is stipulated in Article 9 numeral 6 of the INJUPEMP Law and shall enter into force as of the date of their publication in the Official Gazette "La Gaceta"