CENTRAL SECURITIES DEPOSITORIES FUNCTIONS: EL SALVADOR CASE

1. CENTRAL SECURITIES DEPOSITORIES FUNCTIONS: EL SALVADOR CASE MARIANO NOVOA FLORESCEDEVAL-President ACSDA2005 Seminar Punta del Este, Uruguay, October de 2005.

2. CENTRAL SECURITIES DEPOSITORIES FUNCTIONS:EL SALVADOR CASE: • Presentation Estructure • Antecedents. • El Salvador Securitie’s Market Evolution • Central Securities Depository Evolution • Goals Achieved • Depository Benefits • Proyects in Development

3. 1. ANTECEDENTS

4. 1986 The promoting members of the actual stock exchange 1961 Established the first stock exchange in El Salvador. 1976 The low negociation levels brought the closing of the stock exchange. 1989 Constitution of the society named “Mercado de Valores de El Salvador” (BVES) 1994 Issue of the Securities Market Law 1992 Inauguration and first trade in the stock exchange. 1999 Implementation of the Electronic Settlement System 1997 Beguinning operations of Securities Superitendence of El Salvador 1998 CEDEVAL begins operations 1999 Implementation of Risk Clasification to both Issuers and Securities Issues 1999 Inscription and trading of international securites 2002 Inauguration of the Electronic Trading System, SIBE 2002 The Congress approved the Electronic Book-Entry Law 2004-2005 Dematerialization of securites issued by the goverment of El Salvador and the Reserve Central Bank of el Salvador (BCR) 2004 Dematerialization of securities 1.1 El Salvador Securitie’s Market Evolution.

5. 1.2 Evolution of Central de Depósito de Valores: CEDEVAL CEDEVAL S.A. DE C.V. Within the salvadorean securities market, is the specialized entity in safekeeping and administration of securities via its higly secure electronic system. Main objectives of CEDEVAL: • To contribute to the reduction of risk in the securities processing industry. • To insure investors the availability of the securities adquired by the investors. • To provide information in a safe and flexible inviroment, to contribute the investor’s best decision.

6. 1.2 Evolution of Central de Depósito de Valores (Cont...) • Operations begining. 1998 2001 • In 2001 in force The Money Integration Law. • International Custodian’s agreements: • Clearstream Banking and Deutsche Bank 2002 • Electronic Book-entry Securitie’s Law approbation. • The creation of The Issue’s Electronic Register and Securities Accounts Electronic Register. • Improvements in the technologic platform of CEDEVAL.

7. 2003 • September of 2003 CEDEVAL and BURSATEC (México) sign a contract of permanent and actualized maintenance of the operations and values accounts in custody. • Dematerialization of securities. 2004 • TrueSecure’s Certification as a entity that offers safe, effective technologist and communication services for its customers using international best practices and standars. 2005 • Begins electronic registration of the values issued by the Goverment and the Central ReserveBank of El Salvador. 1.2 Evolution of Central de Depósito de Valores (Cont...)

8. Opening of securities accounts Safekeeping and management of securities Transactions Clearing and settlement Settlement of crossborder transactions Guaranties processing Collection Agents Share Splits Local and International safekeeping 1.2 Evolution of Central de Depósito de Valores (Cont...) CEDEVAL provides their Participants main services such as follow:

9. 2. GOALS ACHIEVED

10. 2.1 Increase of Values on Deposit VALUES ON DEPOSIT 4500 4,088.4 $ Millions US 4000 3,342.0 3500 3000 2,583.0 2500 2,130.0 1,695.0 2000 1,237.0 1500 722.1 1000 517.7 500 0 1998 1999 2000 2001 2002 2003 2004 Sept.-05

11. 2.1 Increase of Values on Deposit Banco Central de Reserva de El Salvador, Superintendencia Sistema Financiero.

12. 2.1 Increase of values on deposit balances Physical 30% Desmaterialized 70% International 37% Domestic 63%

13. 2.2 Dematerialization: 2003-2005 EVOLUTION BY ISSUE TYPE 3500 2,863 $ MILLIONS US 3000 2,172 2500 1,796 2000 1,225 1,061 1500 1,145 1,170 1,069 991 787 700 550 1000 518 245 22 500 0 1998 1999 2000 2001 2002 2003 2004 Sep-05 PHYSICAL DESMATERIALIZED • Finish the transformation process from phsycal securities to Book-Entry. • The creation of Electronic Register Issues and Securities Accounts.

14. 2.3 International Safekeeping agreements • The Bank of New York, USA • State Street, USA • Latin Clear, Panamá • CEVAL, Costa Rica • Clearstream banking, Luxemburgo • Caja de Valores, Guatemala

15. 2.4 Technological Systems Security and Technical Support Internet • Operations and Values Accounts back-up continue and automatically. Bursatec Pachuca EL SALVADOR • Platform Technologic Certification in terms of information and communication security sistems.

16. 2.5 Special Agreements CEDEVAL is the institution trust conferred of register dematerialized values issued by Central Reserve Bank ans the Goverment of El Salvador

17. 3. BENEFITS OFFERED BY THE DEPOSITORY

18. 3. Benefits offered by the Depository FOR THE SECURITIES´ MARKET. To Contribute directtly to the VALUE MARKET DEVELOPMENT, within reflects the amount and volume of operations traded trough the Stock Exchange. Furthermore, to contribute trough: • Clearity in the securities managment by higly secure electronic sistems. • To reduce Disminución de distorsiones de precios generados por la demora ocasionada por entrega física de valores • To become more efficent reducing times for clearing and settlement cycles • To reduce the risk of unexecute operations • To facilitate acces to new investors.

19. 3. Benefits offered by the Depository FOR THE INVESTORS. • SECURITY. Especialized safekeeping, accomplishing with higly securities standars electronics ans operations. • OPORTUNITY. To make the best decisiton with the cuality and promt information on the first hand of investments and value accounts. • ECONOMY. To reduce the costs of safekeeping and administration. • SIMPLIFY THE INVESTMENT ADMINISTRATION, through the execution of cuopon payments.

20. 3. Benefits offered by the Depository FOR THE STOCKBROKERS. • AGILITY. To Contribute a minimizar el tiempo de las transacciones efectuándose éstas con mayor rapidez y eficiencia. • TO REDUCE THE RISK FOR THE COUNTERPARTY. • HELPS TO IMPROVE THE SERVICE THAT THE BROKERAGE OFFERS TO THEIR CUSTOMERS. • INFORMATION ON LINE. Direct Participants coul acces their values accounts and facilitate their decisitions to invest and register of values. • INTERNATIONALS: DVP Y FVP.

21. 3. Benefits offered by the Depository FOR THE SECURITIE´S´ ISSUERS COMPANIES. • COSTSMINIMIZATION. Related to the safekeeping and phisic travel (security vaults, insurance contracts and other), • CONTROL OVER THEIR SECURITIES AND HOLDERS. • REDUCING THE RISKS OF LOST, ROBBER AND FALSIFICATION. • MANAGEMENT FACILITIES. Avoiding the signature process, physical securities transfers, etc.

22. 3. Benefits offered by the Depository FOR THE GOVERNMENT OF EL SALVADOR AS SECURITIES ISSUER. • Notes and BillsDematerialized Issues • Setting a issues calendar • Best opportunities to the market • An atractive market for trading • Issuer´s lower costs

23. 4. INITIATIVES IN DEVELOPMENT

24. WEB SITE IMPLEMENTATION • Principal service: ON LINE CONSULT. • To generate trust to the market. • To give access to foreign investors. • To foment the interest and development of the stock market culture. WEB SITE: www.cedeval.com

25. ISIN CODE • ANNA’S certification to CEDEVAL as a National Numbering Agency. • To facilitate trading and management of local securities in international operations. • To help the recognition of securites as a unique way around the world. ASSOCIATION OFNATIONAL NUMBERING AGENCIES

26. SHARES DEMATERIALIZATION • To increase share’s market trading. • To make a faster shares’ transfer. • To eliminate the risks los riesgos inherentes al manejo físico de acciones. • Give the oportunity to develop the regional share´s market.

27. DESMATERIALIZATION OF CERTIFICADOS DE TRASPASO • Efficent manage of certificados de traspaso through the new Pensions Savings System. The Integration of cash and securities settlement • Developing an infoprmation system to manage the integration of the clearing and settlement cycle of cash and securities to achieve delivery versus payment. OTROS PROYECTOS

28. THANK YOU