Regulation of the Capital Improvement Program

OBJECT: The purpose of this Regulation is to regulate the operations related to the opening, administration and cancellation of the Savings Account for Contingencies, hereinafter CAP, established in the first paragraph, numeral three (3) of article 28 of the Law of the National Institute for Teacher Social Security (INPREMA), as reformed by Legislative Decree number 267-2013 of December 16, 2013.

REGULATION OF THE CAP: The CAP is regulated by the INPREMA Law, this Regulation, the complementary resolutions that the Board of Specialists authorizes on this matter, the provisions issued by the National Commission of Banks and Insurance (CNBS), as well as other applicable legal provisions.

DEFINITIONS: For the purposes of this Regulation, the following shall be understood as:

• a)

  Supplementary Benefits: Any of the three life insurance options contracted by participants charged to the accumulated savings in their CAP accounts, or other benefits provided by the Institute through this scheme in accordance with the reformed article 49 of the INPREMA Law.

• b)

  CAP: Savings Account for Contingencies.

• c)

  Commission or CNBS: National Commission of Banks and Insurance.

• d)

  Ordinary Contribution: Monthly amount that the participant makes to keep a CAP active and enjoy, as applicable, the social security rights and supplementary benefits derived from the CAP. The contribution shall be equal to, at a minimum, four percent (4%) of the monthly base salary of a primary education teacher.

• e)

  Extraordinary or Voluntary Contributions: Amounts in excess of the ordinary contribution that may be made periodically or occasionally by the participant or their employer; in case of periodic contributions, the participant or their employer may suspend it with only written notification to INPREMA.

• f)

  Board of Specialists or Board: The supreme governing and executive body for the administration of INPREMA.

• g)

  Institute or INPREMA: National Institute for Teacher Social Security.

• h)

  Law: Law of the National Institute for Teacher Social Security (INPREMA) and its amendments.

• i)

  Active Participant: Active teacher who contributes to INPREMA with the right to receive the benefits of the Institute's social security system and to opt for the services it provides.

• j)

  Voluntary Participant: Teacher in suspension status who does not withdraw from the System, voluntarily choosing to continue contributing to the Institute, with the right to applicable benefits and corresponding services.

• k)

  PPCI: Credit Protection Program of INPREMA.

• l)

  Basic Scheme: Benefits that the Institute grants to participants when the established requirements and parameters are met, including technical or budgetary conditions, which are the following: old-age pension, disability pension and benefits, survivor pension and funeral benefits, separation benefit from the Institute, continuation of retirement or pension or others that may be approved in the future.

• m)

  Semi-official Sector: Sector comprised of educational centers financed by parents, municipalities or any other natural or legal person, which receive periodic subsidies from the State, subject to Honduran legal framework.

OBJECTIVE OF THE CAP: The CAP is a service provided by the Institute to active or voluntary participants, whose objective is to improve, through savings, the social security benefits that they will obtain at the time of their retirement.

ACTIVATION AND OPENING OF THE CAP: The activation or opening of the CAP shall be done ex officio once the participant has made the first ordinary contribution to it.

FORMALIZATION OF CAP CONTRACT: Notwithstanding the provisions of the preceding article, participants shall formalize the opening of their Savings Account for Contingencies by signing, in duplicate and jointly with the Institute, an Adhesion Contract, in which the rights, obligations and responsibilities of each party shall be established. Each party shall retain a copy of said contract, which shall contain the minimum information established in the Transparency Standards issued by the CNBS.

DESIGNATION OF BENEFICIARIES: For the purposes of the CAP, the participant shall designate the names of their beneficiaries in the annex to the contract referred to in the preceding article, retaining the right to change them at any time, using and signing the form prepared by the Institute for such purpose. This information shall be properly safeguarded and registered by the Institute.

RESIGNATION FROM THE CAP: Participants who have an active CAP and do not wish to continue contributing to it may resign from it in writing, whenever they wish, by filling out and signing the form that the Institute provides for such purpose. In cases of resignation from the CAP, the Institute, through the Department that administers this service, shall communicate to the Secretary of Education and the administrators of private and semi-official educational centers the suspension of contributions to the CAP, returning to the resigning teacher the amounts in their account within a maximum period of sixty (60) calendar days. Henceforth, automatic withholding to their CAP must be canceled and the amounts to their benefit, including accrued interest and deducting the cost of administrative expenses and insurance coverage if they have contracted any, shall be returned to them. Resignation from the CAP does not imply the return or renunciation of benefits generated by the actuarial reserves that the Teacher Associations transfer to INPREMA, as provided in article 9 of the Law and its amendments. These returns, when applicable, shall be subject to the provisions of the Regulation issued for such purpose.

PROHIBITION OF RE-ENTRY TO THE CAP: Participants who resign from the CAP may not re-enter the benefits plan generated by said account, as provided in Article 28 of the Law and its amendments.

PARTIAL WITHDRAWALS: The participant may not make partial withdrawals of the funds contributed to their CAP.

DEDUCTIONS FROM THE CAP: The Institute shall apply to each participant's CAP the administrative charges or costs corresponding to the supplementary benefits that they have requested and were granted.

INACTIVITY OF THE CAP: Any CAP account that has three (3) consecutive months of inactivity due to the participant's lack of contributions, regardless of the cause, shall be automatically transferred to an inactive status; however, the charges corresponding to the supplementary benefits that the participant has optionally requested and accepted shall always be applied to said accounts, for the purpose of not leaving them unprotected, but only to the extent that those amounts are sufficient to cover the cost thereof. Inactivity shall be suspended at the moment the participant's contributions are reactivated.

DELIVERY OF CAP BALANCES: In case of death of the participant, after the fees for supplementary benefits, if any, have been paid, the remaining balance of the CAP, with its accrued interest, shall be delivered to the beneficiaries designated in the respective Adhesion Contract or in the beneficiary change form, as applicable, which must be registered obligatorily at the time of the CAP opening; this information must be updated at a minimum once per year. In case of not having beneficiaries in said contract, the beneficiaries established in the basic scheme shall be considered, which must be duly identified, and if there are no beneficiaries, said balance shall be delivered to the heirs of the participant declared by court judgment. The Institute shall be obliged to manage the payment of the amounts owed to the registered beneficiaries or those declared by court judgment, so that no outstanding balances remain unpaid. If the CAP beneficiary is a participant pensioned for old age or disability, the Institute must automatically deliver the amounts in their favor, including accrued interest.

CANCELLATION OF THE CAP: Savings Accounts for Contingencies may be cancelled only in the following situations:

• a)

  When the participant expressly requests the cancellation of their account, by means of a resignation form, extinguishing any direct or supplementary benefit generated by said account, as of the date of resignation, with the exception of the return of amounts owed.

• b)

  In case of death of the participant who holds the account.

• c)

  At the moment the participant is pensioned for old age or disability by the Institute.

• d)

  At the request of the competent authority.

LEGALLY ESTABLISHED CONTRIBUTION: The value of the ordinary contribution or fee that each participant must pay to their CAP must not be less than four percent (4%) of the monthly base salary of a primary education teacher. Contributions less than that percentage that are paid to the institute by the Secretary of Education in the Public Educational System, Private Educational Centers, as well as directly by voluntary participants, shall not form part of this savings and shall be returned by the institute to the participant from whose salary they were deducted or who paid them directly. In this case, the institute must communicate to the educational agencies previously described that the return of amounts is due to non-compliance with

numeral 3) of the Law and its amendments.

MODIFICATION OF THE ORDINARY CONTRIBUTION TO THE CAP: The value of the ordinary contribution shall be modified with each increase to the monthly base salary of a primary education teacher, as determined by the competent authority, in such a manner that it always corresponds to four percent (4%) of the new base salary.

EXTRAORDINARY CONTRIBUTIONS TO THE CAP: Participants may make extraordinary and voluntary contributions to their CAP, whether on a periodic or occasional basis; likewise, employers may voluntarily increase contributions to the account of one or more participants on a periodic or occasional basis without such action representing a permanent obligation.

MECHANISMS OF CONTRIBUTION TO THE CAP: The value of the ordinary contribution shall be automatically deducted from the monthly salary of teachers and remitted to the Institute by the respective employer, on an individualized or separate basis, in such manner that a record of the contribution is maintained, without being confused with employer contributions and individual contributions to the Pension Fund and the amount corresponding to other obligations owed by teachers, which shall also be deducted and remitted to the Institute by employers. When automatic deductions are not made and without prejudice to the applicable employer liability, the Institute, through the CAP Administrator Department shall notify employers, regardless of the educational sector to which they belong, of the obligation to deduct from the salary of participants the amount of their CAP contribution, unless the participant has renounced such account. Voluntary participants shall make their monthly CAP contribution effective through a deposit made in the financial system, directly into the bank account in favor of INPREMA, designated by the Institute for these purposes, or by other authorized means, and must remit to the Institute the respective receipt.

EMPLOYER LIABILITY: To the employer who makes the deduction of the CAP contribution from participants and fails to remit the corresponding amount to the Institute, the provisions established in Articles 38, 111, and 113 second paragraph of the INPREMA Law shall be applied.

CONTROL OF CONTRIBUTIONS TO THE CAP: The Institute shall maintain a record and control of the ordinary, extraordinary, or voluntary contributions corresponding to each participant, as well as the profitability generated by these and the charges applied, as appropriate. The record of CAP contributions for each participant shall be comprised of the following items:

• a)

  Ordinary contributions made by the participant.

• b)

  Extraordinary contributions made by the participant.

• c)

  Voluntary contributions made by the employer, whether for one or several participants, in the corresponding proportion in the latter case.

• d)

  Interest generated by the contributions.

• e)

  Deduction of insurance premiums or supplementary benefits that the participant voluntarily contracts.

• f)

  Transfer to the participant for payment of the premiums of the Supplementary Insurance Benefit, plus investment that the participant may have contracted and paid during the agreed contribution period, in the event that the participant survives beyond the maximum insurable age.

• g)

  Actuarial reserves, in the corresponding proportion, intended to support the continuity of separation benefits, self-insurance programs, and benefit plans self-administered by Teachers' Associations, which are transferred by them to the Institute, referred to in Article 55 of this Regulation. The operational and administrative expenses occasioned by the management of Savings and Benefit Accounts (CAP) must be covered by the administration commissions for CAP established in Article 53 of this Regulation. CHAPTER IV SUPPLEMENTARY BENEFITS OF THE CAP

SUPPLEMENTARY BENEFITS AND ADDITIONAL SERVICES OF THE CAP: Participants may make use of their CAP contributions, in the concept of savings, to access the supplementary benefits established in the third paragraph of Article 49 of the INPREMA Law. The subscription of any of these benefits by participants shall be voluntary; the amount of premiums for each coverage modality shall be calculated on an individual basis, and must be covered with the contribution established as an ordinary CAP contribution, in such manner that the periodic contribution of each participant must cover the total cost of the supplementary benefits contracted by him or her. The active or voluntary participant who does not desire any of the supplementary benefits described in Article 49 of the INPREMA Law may maintain solely the savings through the CAP to improve his or her benefits at the time of retirement, while also preserving the right of his or her beneficiaries, in the event of death, to receive, if applicable, the survivor benefit described in Article 61-A of the INPREMA Law. The amount of premiums for insurance coverage shall be determined on the basis of the technical note of the "CAP Savings Life Insurance."

TYPES OF SUPPLEMENTARY BENEFITS OF THE CAP. The Institute provides, in accordance with the provisions of Article 49 of the Law and its amendments, supplementary benefits at the option of participants who maintain their CAP Account, provided that they require them. The contracting of services containing supplementary benefits in favor of Institute participants must be carried out on the basis of the best price and competitive conditions in the insurance institutions market; for which purpose, the Institute must comply with the normative provisions issued by CNBS in the matter of Insurance Contracting by Supervised Institutions.

NEW INSURANCE PRODUCTS. The Board of Specialists of INPREMA may approve new insurance products as supplementary benefits

of CAP Accounts, in the branches of life and property damage, through an actuarial study conducted for such purpose by the Institute itself, which must be presented for favorable opinion from CNBS.

REGULATION OF THE SUPPLEMENTARY BENEFITS OF THE CAP. The supplementary benefits of the CAP are governed by this Regulation, of which the annexes, technical notes, general conditions and exclusions corresponding to each benefit form a part, and by the resolutions adopted for its application and development by the Board of Specialists of INPREMA.

TRANSPARENCY. The Institute must inform the Participant of the terms and conditions of each of the insurance modalities offered or contracted and especially of the exclusion clauses and their contestability.

ELIGIBILITY. The applicable requirements to opt for any of the supplementary life insurance benefits of CAP are the following: a) CAP PLUS LIFE INSURANCE. The permitted entry age for participants is from eighteen (18) years of age up to forty-five (45) years, guaranteeing automatic annual renewal of coverage until reaching sixty-five (65) years of age, observing in all cases the provisions of Article 34 of this Regulation. b) CAP SAVINGS LIFE INSURANCE. The permitted entry age for participants is from eighteen (18) years to forty-five (45) years, for a period of twenty (20) years, until reaching, as applicable, sixty-five (65) years of age. The Institute may offer this product for different terms, insured amounts, and insurable ages as determined in the actuarial studies. c) CAP FAMILY LIFE INSURANCE.

• 1)

  Direct Insured Participant: Shall be eligible provided that his or her age is between eighteen (18) years and sixty-five (65) years, with his or her maximum coverage age up to sixty-five (65) years;

• 2)

  Spouse or household partner of the Direct Insured Participant, whose name appears in the enrollment application as such, shall be eligible provided that his or her age is between eighteen (18) years and sixty-five (65) years, with his or her maximum coverage age up to sixty-five (65) years;

• 3)

  Child: Any minor, single, current or future dependent, whether a child, child of his or her spouse or household partner, or child legally adopted by the Direct Insured Participant, whose name appears in the enrollment application; shall be eligible provided that his or her age is between twelve (12) years and eighteen (18) years, with his or her maximum coverage age up to twenty-one (21) years;

• 4)

  Parents: Father and/or mother of the Direct Insured Participant, whose name appears in the enrollment application as such, shall be eligible provided that his or her age is between eighteen (18) years and sixty-five (65) years, with his or her maximum coverage age up to sixty-five (65) years.

REQUEST FOR INSURANCE CONTRACTING. For the inclusion of the Participant in any of the supplementary benefits established in Article

49 of the INPREMA Law, his or her consent shall be required, and for such purpose the corresponding request must be presented and, if eligible, signed in his or her own handwriting on the respective Insurance Contract. Additionally, the Participant must present the following documents:

• a)

  Health history declaration, in the form provided to him or her by the Institute;

• b)

  Copy of his or her Identity Card;

• c)

  In the case of contracting Family Insurance, copy of the Identity Card of the spouse or household partner, children and/or parents of the participant and original birth certificates of children under eighteen (18) years of age; The Institute reserves the right to request from the participant any additional information it deems necessary, including tests of insurability, for the purposes of subscription of these supplementary benefits.

ABSENCE OF RESTRICTIONS. The supplementary benefits offered to participants through the CAP shall not have any restriction, except for the exclusion clauses established in the respective contracts.

TESTS OF INSURABILITY. INPREMA reserves the right to request medical examinations based on the health status described in the respective health history form, signed by the Participant and his or her designated beneficiaries, in order to verify the health condition and establish the coverage or non-coverage of his or her risk, also considering the age and type of insurance requested. The cost of these examinations shall be borne by the Participant.

BENEFITS. The benefits granted by CAP Life Insurance are classified as follows:

• a)

  Upon death of the Insured Participant. In the event that a Contract is in force on the date of death of the Insured Participant, the Institute shall pay to his designated beneficiaries the contracted sum insured;

• b)

  Upon survival of the Insured Participant. Only in cases of contracting CAP Savings Life Insurance, if the Insured Participant survives the end of the contracted term, the Institute shall pay to him the amount of premiums paid in accordance with what is established in the technical note.

COVERED RISKS. The risks covered through CAP Life Insurance contracts are the following:

• a)

  Death. In case of death of the Insured Participant for any cause, during the term of this coverage, the Institute shall pay to his designated beneficiaries the contracted sum insured, in the percentages indicated in the last beneficiary designation of which it has knowledge, without prejudice to what is indicated in the following Subsections b) and c), as applicable. In cases of presumed death, these contracts shall be governed by what is established in the Civil Code and any other law that may be applicable at the time the claim occurs.

• b)

  Death by Suicide. In case of death of the Insured Participant by suicide, whether in a state of sanity or dementia, the Institute shall pay the sum insured to his designated beneficiaries, except when suicide occurs before two (2) complete and uninterrupted years of coverage of the Insured Participant have passed, in which case the Institute's liability shall be limited to reimbursement of the mathematical reserve amount of the Contract, if any exists.

• c)

  Death from Preexisting Diseases. In case of death of the Insured Participant from a preexisting disease that he declared and whose risk was duly accepted, the Institute shall pay the sum insured to his designated beneficiaries, provided that death occurs after two (2) complete and uninterrupted years of coverage of the Insured Participant have passed, counted from the date of the insurance contract, without prejudice to what is established in Article 32, subsection d) below.

EXCLUSIONS. The benefits of CAP Life Insurance contracts shall not apply in the following cases:

• a)

  When the death of the Insured Participant is a consequence of his direct participation in criminal acts, duly proven by competent authority.

• b)

  When the death of the Insured Participant is a consequence of his participation in military activities or operations.

• c)

  Death caused in case of war or acts related thereto.

• d)

  Benefits under the Contract are not payable if the death of the Insured Participant results from a disease or injury duly declared, for which he received medical attention, consultation, or treatment at any time prior to the date of the Contract, unless death occurs twenty-four (24) months after that date. In the event that death occurs during the first twenty-four (24) months of the contract's term, the sum insured shall be automatically reduced to 20% of the contracted amount. If it is established that death was caused by a preexisting disease not declared by the Insured Participant, the Institute shall have no obligation to indemnify the claim.

DESIGNATION OF BENEFICIARIES. The Participant shall designate, as an annex to the Insurance Contract, his primary beneficiaries, as well as contingency beneficiaries, to whom shall be delivered, as applicable, the indemnities derived from these complementary benefits in case of his death; at any time during the term of the Contract, he may also change the beneficiary or beneficiaries he had designated, provided that he communicates this in writing to the Institute, such change taking effect from the date on which the respective communication is received. In the absence of such designation, the beneficiaries of any indemnity that corresponds shall be the legal heirs of the Participant, duly declared by judgment of a competent court. In case of death of one of the designated primary beneficiaries, if the Insured Participant has not notified his change, the sum insured to be paid shall be distributed equally among the surviving primary beneficiaries, unless otherwise agreed. If only one beneficiary has been designated and he dies before or at the same time as the Insured Participant and there is no designation of a new beneficiary or contingency beneficiary, the insurance amount shall be paid to the judicially declared succession of the Insured Participant. Contingency beneficiaries may receive indemnities provided for in the contract, provided that none of the designated primary beneficiaries exists. Payment of insurance benefits to beneficiaries is excluded if the competent authority certifies the beneficiary's culpability in the death of the insured.

TERM. The term of CAP insurance contracts shall be one year, automatically renewable for a maximum period of twenty (20) years and shall enter into force as of the date of execution, provided that the risk has been accepted by the Institute; without prejudice to contracting Life Insurance plans with shorter terms expressly granted by INPREMA.

PREMIUM. The premium of the insurance policies that constitute the complementary benefits of the CAP Account shall be equal to one hundred percent (100%) of the CAP savings contribution, which shall not be less than four percent (4%) of the monthly Base Salary of a primary education teacher. Therefore, participants who opt for insurance coverage may also authorize an additional deduction to maintain their savings in the pension account. The Institute may review these rates by means of an actuarial study, in which case changes must be approved by the Board of Specialists.

PAYMENT OF PREMIUMS. Premiums shall be payable by the Participant through automatic debits to his CAP Account, or, if applicable, in the form of payment that he agrees with the Institute. In case of default and with prior authorization of the Insured Participant, the insurance premiums in arrears shall be collected from the balance of the CAP Account, until the operation is brought current.

APPLICATION OF PREMIUM PAYMENT. No payment of any premium or group of premiums shall be considered effective, unless it appears as such in the statement of account of the CAP.

EARLY TERMINATION. In case an Insured Participant under the CAP Savings Life Insurance coverage early terminates his policy, he shall have the right to the return of his premiums effectively paid during the term of the contract, multiplied by the percentage that applies according to the premium return table approved on the date of termination. In this case, no interest shall be recognized on the premiums paid.

GRACE PERIOD. If the Participant does not make the payment of the premium or the corresponding fraction on its due date, due to default in payment of his contributions to the CAP, he shall have, upon written notice, a grace period of thirty (30) calendar days to proceed with the corresponding payment. If at the end of such term the premium has not been paid, the effects of the Contract shall cease immediately without need for further notice or special declaration. If any event covered by the contracted insurance occurs during the grace period, the Institute shall proceed with payment of the corresponding indemnity and shall deduct from it the total of the premiums pending payment to complete the policy year.

NOTICE OF CLAIM. As soon as beneficiaries become aware of a claim, they must communicate it in writing to the Institute. Notice of the death of the Insured Participant shall be made by presenting the corresponding information to the Institute in the forms that it provides for such purpose. The Institute shall have the right to require the beneficiaries all kinds of information regarding the facts related to the claim, in order to determine the circumstances in which it occurred and its consequences. The obligations of the Institute shall be extinguished if it is demonstrated that the beneficiaries, or their representatives, in order to cause error, conceal or state inaccurately facts that would exclude or could restrict such obligations. The same shall apply in case they fail to send the information or documentation referred to in the previous paragraph in a timely manner and in proper form for the same purpose. In cases where, for reasons beyond or not imputable to the beneficiaries, delays occur in the issuance of opinions or certifications by competent authorities and/or the required data are not presented within the allotted period, or if it is demonstrated to the Institute the impossibility of complying with the required conditions within the fixed time, it may not be considered that the notice or requested information was given in an untimely manner.

MEDICAL INVESTIGATION. The Institute shall be authorized to conduct or perform investigations with doctors or hospitals and to request the reports it requires, in relation to the insurance contract in case of death of the Insured. If beneficiaries prevent the exercise of this authority for fraudulent purposes, the Institute shall be exempt from the obligation to pay the indemnity.

PROCESS IN CASE OF CLAIM. Without prejudice to the provisions of Articles 40 and 41 above, the eligible benefits described in the contract shall be made effective provided that the designated beneficiaries or their representatives accompany the following documents:

• a)

  Claim form provided by the Institute. (Annex 14)

• b)

  Copy of the identity card and/or certification of the original birth certificate of the insured and the designated beneficiaries in the Contract.

• c)

  Medical certification or certification from the competent authority indicating the cause of death of the insured participant;

• d)

  Certification of original Death Certificate issued by the National Registry of Persons.

• e)

  Any other information that may be required by the Institute. For this process, the procedure P-SEG-05 INDEMNITY FOR SAVINGS ACCOUNT COVERAGE (CAP) included in Annex 14 shall apply.

MANAGEMENT OF INDEMNITY PAYMENT. To proceed with the management of indemnity payment, the Institute, through the PPCI, must follow the procedure detailed below:

• a)

  Preparation of a claim file, identified by means of a unique numerical code, with all the documentation indicated in Articles 40, 41, and 42 of this Regulation, depending on the cause of the claim presented;

• b)

  To the file shall be added the documentation relating to the insurance contract filed and kept by the PPCI;

• c)

  The PPCI shall prepare a technical opinion with the evaluation of all elements presented for each claim, concluding on the admissibility or inadmissibility of the claim;

• d)

  The technical opinions of the PPCI for each claim presented shall be submitted for review, discussion, and approval by the INPREMA Claims Committee;

• e)

  The claim opinion records prepared by the Claims Committee shall be presented to the Board of Specialists of INPREMA for its analysis and consideration, and, where applicable, for authorization of payments to beneficiaries, as indemnities that correspond;

• f)

  Once the payment approval resolution issued by the Board of Specialists of INPREMA is received, the PPCI shall proceed to prepare the claim settlements and to obtain from the beneficiaries the signature of releases and authorizations for the corresponding bank transfers;

• g)

  The PPCI shall send to the Departments in charge of planning and budget, process management and investments, the transfer requests together with the claim files, so that they proceed with the review of the documentation and with the payment procedure for the indemnities due;

• h)

  Once the documentation corresponding to the payments made is received, a copy shall be sent to the Accounting Department for its recording and the originals shall remain safeguarded in the respective claim file, in the archive of the PPCI.

TERMINATION OF CONTRACT. The coverage of an Insured Participant shall terminate for any of the following causes:

• a)

  By cancellation of the Insurance Contract;

• b)

  By resignation of the insured participant from his Pension Savings Account maintained at the Institute;

• c)

  By the occurrence of the risk covered by the Contract;

• d)

  By the expiration of the term covered by the insurance;

• e)

  By failure to pay the premium at the end of the grace period.

FALSE DECLARATIONS. Coverage shall terminate early when the participant has omitted, withheld, or falsified information that alters the concept of the risk assumed by the Institute, or when he or his beneficiaries submit fraudulent claims, misleading claims, or claims supported by false declarations. In these cases, all responsibility of the Institute shall cease and it shall have no obligation whatsoever with respect to the risks affecting the Insured Participant or, as the case may be, his insured family members. In this case, the proportional amount of unearned premiums must be returned to the participant.

PRESCRIPTION. All actions deriving from the insurance contract shall prescribe in three (3) years, counted from the date of the event that gave rise to them. Inaccurate declarations and omissions by the contracting party, relating to circumstances such that INPREMA would not have given its consent or would not have given it under the same conditions had it known the true state of affairs, shall be causes for annulment of the contract, when the contracting party has acted with fraud or gross negligence. INPREMA shall lose the right to challenge the contract if it does not manifest to the contracting party its intention to perform the challenge within the three months following the day on which it became aware of the inaccuracy of the declarations or the omission.

RESOLUTION OF CONFLICTS AND CONTROVERSIES. The parties agree that all differences, conflicts, controversies related to the nature, execution, performance, non-performance, interpretation, or any aspect directly or indirectly derived from the Insurance Contract that cannot be resolved in a conciliatory manner shall be resolved through judicial proceedings, before the competent courts and tribunals of justice of the Republic of Honduras. CHAPTER V SURVIVORSHIP BENEFIT CAUSED BY CONTRIBUTORS TO THE CAP

SURVIVORSHIP BENEFIT PAYABLE TO THIRD PARTIES: In the event of death of a participant who has contributed as active or voluntary to the CAP and who does not have on the date of his death a spouse, minor children or ascendants, with the right, as the case may be, to a pension for widowhood, orphanhood or ascendancy, the following shall be granted to his other beneficiaries designated by him under the basic plan or, failing that, to his successors designated by court: a) In the case of death of active, voluntary, or suspended participants, a single payment, whichever is greater, equivalent to the amount of the separation benefit that would have corresponded to the deceased according to what is established in article 65 of the INPREMA Law, or an amount equivalent to thirty (30) times the basic monthly salary. b) In the case of death of pensioned participants, a single payment of thirty-six (36) times the corresponding monthly income. This benefit shall be granted according to the distribution that the participant may have established, charged to the basic plan of the Institute, being exclusive of the separation benefit established in article 65 of the INPREMA Law, so that if the latter has been paid to the deceased, the survivorship benefit referred to in this article shall not be granted in any case. CHAPTER VI SAVINGS FUND OF THE CAP

COMPOSITION OF THE SAVINGS FUND OF THE CAP: The Savings Fund of the CAP shall be composed of the set of contributions to the CAP made by the participants and the investment returns on those values, less the administrative or operational expenses incurred by the Institute; said Fund shall be exclusively for those affiliated with the Provisional Savings Account Administration Program (CAP) and shall be administered by INPREMA independently of the Pension Fund assets.

ACCOUNTING: The Institute shall maintain separate accounting records of the Savings Fund of the CAP, observing the guidelines established in the Accounting Reference Framework that may be established by the National Banking and Insurance Commission regarding the preparation of annual accounts, valuation criteria for the elements making up the accounts, as well as the regime for approval, verification, deposit and publication thereof, all with the purpose that the real financial situation of INPREMA and the Savings Fund of the CAP, whose administration corresponds to it, is reflected separately and independently.

COMPLIANCE WITH INVESTMENT POLICY: The values of the Savings Fund of the CAP shall be invested in accordance with the Institute's investment policy, under adequate conditions of security, profitability and liquidity, seeking optimal balance of these variables. The CAP funds shall not be used for purposes other than investment under the indicated conditions, the return of contributions made and accrued returns to participants in case of withdrawal from their account, payment of claims arising from contracted complementary benefits, premium refunds in case of participant survival in insurance with investment, transfer of funds between the CAP bank accounts, payment of the administration commission to the Institute, and other commissions and financial costs associated with investments and bank accounts. If the CAP Fund, at the time of making an investment or returning values that do not correspond to it or that have been paid to it in excess, does not have a bank account in the financial entity with which the transaction will be operated, INPREMA may use other bank accounts in its name solely to carry out the transfer of funds to said financial entity, making the necessary records and compensations, provided that said transaction has been previously evaluated by the Investment Committee, as appropriate, and approved by the Board of Specialists.

DISTRIBUTION OF NET RETURNS: The Department in charge of CAP administration shall calculate and credit at the end of each month the net returns obtained from the investments specific to CAP administration, increasing these proportionally to the resources that active or voluntary participants have allocated to savings in the aforementioned accounts. The method for the distribution of returns is called "Quota Value," which considers the weight of participation of each active member in the Fund. The procedure for determining net returns and the Quota Value of the CAP is described in Annex 13 of this Regulation. To determine the number of quotas corresponding to all quotas that have been received as of the updating date, the quota value corresponding to that date shall be used.

ADMINISTRATION COMMISSIONS: The Institute shall deduct, by way of Administration Commission, ten percent (10%) of the financial income generated by the investment of funds deposited in the CAPs; the Administration Commission percentage may be reviewed and modified according to the management costs associated with CAP administration through a resolution of the Board of Specialists. Excepted from what is provided here are the income received by way of CAP insurance premium collection, which shall generate their own investment returns in order to constitute the necessary reserves for the covered risks. The foregoing shall require approval by way of a Resolution of the Board of Specialists of INPREMA. CHAPTER VII FINAL PROVISIONS

INFORMATION TO THE SAVER: The participant may request free of charge from the Institute by different means and at any time, a statement of account for his CAP, which must register the number of contributions made and its value updated to the date corresponding to the account statement.

DESTINATION OF ACTUARIAL RESERVES TRANSFERRED TO THE CAP: The value of actuarial reserves and redemption values that the Magistrate Associations transfer to the Institute in accordance with article 9 of the INPREMA Law and its amendments shall be exclusively for the purposes of the CAP Program, according to the calculation established by the National Banking and Insurance Commission. The aforementioned reserves shall be distinguished in two values: 1) Those intended for the constitution of a collective reserve to guarantee coverage for death and disability of the self-insurances of participants who were managing them with their magistrate associations; and, 2) The values intended to support the survivorship coverage of the CAP Life Insurance Savings, which shall be transferred to the account of the Insured Participant as appropriate, whose value shall be delivered to him when the retirement age established in the Institute Law is reached. At present, no actuarial reserves and redemption values have been received from any of the Magistrate Associations; should they be received, the quota value methodology of annex 13 of this same regulation shall be applied; in case of acquiring a CAP insurance, the values of the premium applied and updated at the time of providing the respective reserves shall be applied.

UNFORESEEN CASES: Cases not provided for in this Regulation shall be resolved by the Board of Specialists of the Institute.

EFFECTIVE DATE. This Regulation shall come into force on the date of its publication in the Official Journal "La Gaceta." Given in the city of Tegucigalpa, on the fourth day of the month of December in the year two thousand twenty. Lic. HÉCTOR WILFREDO DÍAZ ROMERO Commissioner President