SFC - Anexo Circular Externa 28 de 2014 (1)

CODE OF BEST CORPORATE PRACTICES

- COUNTRY CODECOLOMBIA

Participating entities: ANDI

[Asociación Nacional de Empresarios de Colombia – Colombian National Business Association] Asobancaria [Banking Association] Asofiduciarias [Asociación de Fiduciarias de Colombia – Association of Trust Companies of Colombia] Asofondos [Asociación Colombiana de Administadores de Fondos de Pensiones y de Cesantía – Colombian Association of Pension and Severance-pay Funds] Bolsa de Valores de Colombia [Colombia Stock Exchange] Confecámaras [Red de Cámaras de Comercio – Network of Chambers of Commerce] Fasecolda [Federación de Aseguradores Colombianos – Federation of Colombian Insurers] Comité de Emisores de la Bolsa de Valores de Colombia [Issuers Committee of the Colombian Stock Exchange] CAF [Banco de Desarrollo de América Latina – Development Bank of Latin America] Superintendencia Financiera de Colombia [Financial Superintendency of Colombia] 2014

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CODE OF BEST CORPORATE PRACTICES 2014

COUNTRY CODE

INTRODUCTION Background Ever since the Financial Superintendency of Colombia (FSC) published the Code of Best Corporate Practices, through its 2007 External Circular Letter 028, the concern for its actual and effective implementation, by both security issuers and companies at large, remains relevant for the FSC and for other stakeholders of the Colombian business community. Since then until today, there have been remarkable developments in Corporate Governance, both globally and in Latin America, in order to meet new business circumstances. This was particularly true after the world economic crisis, which revealed, among many other things, the deep weaknesses that lingered in the governance of many companies and entities.

Today, more than ever, it is evident that Corporate Governance is not an end in itself, which is completed through the implementation of good governance practices through diverse company documents. It must rather be understood as a tool that companies have for adequate management and control amid dynamic and changing processes. Clearly, monitoring the extent of the enforcement of the practices implemented represents a great challenge for companies, supervisors, and investors in the years to come. Several international reports and assessments of Colombia’s standing on diverse worldwide standards1 have highlighted the significant progress that the country has made in concrete Corporate Governance matters in recent times. They have also mentioned areas and possibilities for improvement. Facing this new landscape, the FSC, with the CAF’s financial support, has led a process of discussion with several economic sectors, resource providers, and other representative institutions of the Colombian business environment, in order to update the 2007 Code of Best Corporate Practices. This has been in line with developments on the subject, and has taken as a key referent the CAF’s 2013 publication Lineamientos para un Código Latinoamericano de Gobierno Corporativo [Guidelines for a Latin American Corporate Governance Code]. Indeed, that text, among others that were analyzed, served as a basis for the development of this new Country Code. To attain this objective, the FSC fostered the creation of a Working Table, highly representative of the Colombian securities market and business environment. Such a Table was the vehicle for the discussion processes and the consensus necessary to produce a final Country Code text, which, through its high standards, would create 1 Financial Sector Assessment Program (FSAP); IMF/World Bank Observance of Standards and Codes (ROSC); IOSCO; OECD; Basel Principles, etc. FINANCIAL SUPERINTENDENCY OF COLOMBIA Page 3 value for its targets, promote the development of the country’s securities market, and ensure the protection and confidence of investors. It is worth mentioning that the new Country Code illustrates the evolving nature of the Corporate Governance fundamentals, as the OECD has rightly suggested, and the

need to adopt them based on the kind of company implementing and enforcing them. Moreover, there is the unavoidable duty to revise them periodically in order to adapt the governance practices to the business environment. In this vein, because the Corporate Governance subjects are dynamic, the FSC and the Working Table that has drafted this Code will have as a task thereafter and permanently, the review of any eventual recommendations. When needed, those recommendations will be implemented or the existing norms modified so that the Country Code will fit the market conditions at all times. Structure of the Code In its formal structure, the new Country Code is similar to its 2007 version. Consequently, it still identifies five (5) major Corporate Governance areas, and within them, thirty-three (33) concrete measures on key governance aspects. For better understanding and progression, some measures are divided into several recommendations, which are enumerated on a sequential basis. Therefore, the Country Code proposes up to one hundred and forty-eight (148) Corporate Governance recommendations. The Corporate Governance areas featured by the Country Code are:

I. Shareholder Rights and Equal Treatment.

II. General Assembly of Shareholders.

III. Board of Directors.

IV. Control Architecture.

V. Financial and Non-Financial Transparency and Information.

The recommendations are presented in a concise and practical way to ease their understanding, the analysis of their convenience and implications, and if appropriate, their formal adoption and actual implementation. Several aspects of the 2007 Country Code have been reviewed, among them, the recommendations on the dynamics and operation of the Board of Directors. Moreover, a new complete area on Control Architecture has been developed (which contemplates risk management and internal control matters). The remuneration of the members of the Board of Directors and of the senior management has been addressed on a separate basis. And some Corporate Governance recommendations have been added, which are particularly applicable to the financial sector and to conglomerates. Such conglomerates feature controlling companies and/or business groups in configurations

that are becoming increasingly important. The international experience demonstrates that making progress on good governance practices requires the joint action of authorities, companies, and investors, combining obligatory rules with self-regulatory and voluntary schemes.

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Page 4 The FSC highlights that the new Country Code features voluntary good governance practices, which may eventually become regulated, if the FSC deems it necessary, while performing its supervisory duties. Scope The Country Code in general and the proposed Corporate Governance measures, in particular, are addressed to Colombian security issuers, regardless of their size and level of capitalization. However, some recommendations may be inappropriate for small issuers, and/or their implementation may be difficult to them. In that situation, the corporations with such limitations will explain their reasons and/or alternative to implement or not the recommendations. This does not mean that other types of non-issuing companies or structures2, either private or public, family-owned or not, may not take advantage of the Country Code to strengthen their governance schemes, based on their selective analysis of the recommendations. From this perspective, the ultimate goal of the Country Code is to generate a solid culture of Corporate Governance in Colombia. Such awareness must spread to the country’s entire business milieu, instead of remaining exclusively within the large issuing companies. In line with the 2007 Country Code, and based on the companies’ self-regulatory capacities, the new Country Code for Colombia and the Corporate Governance measures that it features are voluntary. Therefore, each corporation may decide freely which aspects of the Country Code it will adopt and which it will not, depending on its own particular conditions. Nevertheless, every year, the securities issuers have the duty to draft and forward to the FSC, a Reporte de Implementación de Mejores Prácticas Corporativas [Report on the Implementation of Best Corporate Practices]. Its purpose is to describe, in general, their Corporate Governance practices and their adoption of the Country Code

recommendations so that shareholders, investors, and the market at large may evaluate them. The methodology that the companies required to draft the Report on the Implementation of Best Corporate Practices must follow obeys the principle of “comply or explain.” Hence, in all cases, the issuers must indicate whether they adopted or not the recommendations during the period reported. In the case of positive answers, the issuers will describe the formal mechanisms through which the actual implementation of a given recommendation took place (such as bylaws, regulations, codes or other internal norms, agreements among shareholders), and the way it was practically enforced. If the issuer did not implement some recommendation during the reported period, it will explain its related reasons. 2 Pension Funds (under either the obligatory or voluntary savings regimes), collective portfolios or investment funds, private capital funds, etc.

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Page 5 The N.A. response can only be provided by the issuer in cases that for legal reasons it is not possible to adopt the recommendation. In this case, the issuer must indicate precisely the rule which prevents it. The issuer will publish the Report on the Implementation of Best Corporate Practices on its web site, and it will update it with the same periodicity that it presents it to the FSC. The FSC, in fulfillment of its powers, may request the corporations to correct any omissions, or data mistaken or not fully based on facts. This document is a guide of the best corporate practices that the security-issuing companies are expected to adopt and implement. Therefore, it must be regarded as a complement to the Corporate Governance practices that Colombian corporations currently carry out. A Glossary is included in the final part of this Code, in which the scope of the definition of certain relevant terms is given for the best understanding of the Recommendations.

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I. SHAREHOLDER RIGHTS AND EQUAL TREATMENT From a Corporate Government perspective, acknowledging the rights of shareholders and the mechanisms to enforce them is very relevant, for shareholders, whether they

are controlling, significant or minority, are the actual owners of a company, and those who provide the capital for its activities. Consequently, shareholders must have their key property rights acknowledged, among them:  Having an influence in the corporation, basically through their participation and vote in the General Assembly of Shareholders.  Receiving and requesting information.  Participating in the corporation’s benefits (or being liable for losses). Because the administration and management of a corporation are complex activities, which require fast decisions and demand particular abilities, shareholders must not exercise these functions directly (except in the case of very small companies). Commonly, they delegate the administration of a company to the Board of Directors, which, in turn, trusts its ordinary course of business to the members of the senior management. This, then, determines the three (3) key governance levels: the owners (shareholders); the administration (Board of Directors, among others), and the ordinary course of business (senior management). Therefore, when shareholders are only and exclusively shareholders (without being members of the Board of Directors and/or of the senior management), they have a set of rights concerning key property matters. The Corporate Governance approach pays attention to the acknowledgement of those rights, but even more so, to the mechanisms for their equitable enforcement. Measure No. 1: The principle of equal treatment. 1.1. The corporation gives equal treatment to all the shareholders who have similar shares and conditions, without granting access to privileged information to some shareholders above others. 1.2. The Board of Directors has approved concrete procedures to determine the corporation’s ways to relate to the different types of shareholders, regarding matters such as: access to information; answer to information requests; communication channels; interaction between the shareholders and the corporation, its Board of Directors, and the remaining managers. Measure No. 2: Information about shares. 2.1. Through its web site, the corporation informs the public, in a clear, precise, and comprehensive way, the different types of shares issued by the corporation, the

quantity issued per type, and the quantity of shares reserved, as well as the rights and obligations inherent to each type of share. Measure No. 3: No capital dilution. FINANCIAL SUPERINTENDENCY OF COLOMBIA Page 7 3.1. In transactions that may cause the dilution of the capital of minority shareholders (i.e. a capital increase with a waiver of preemptive rights in the subscription of shares, a merger, a segregation (spinoffs), among others), the corporation will explain them to the shareholders in detail through a previous report of the Board of Directors. Such a report will contain the opinion, about the terms of the transaction, of a renowned external independent advisor appointed by the Board of Directors (fairness opinion). These reports will be made available to the shareholders before the Assembly, within the terms for the exercise of inspection rights. Measure No. 4: Information and communication with shareholders. In the context of the right of shareholders to receive information, and beyond the minimum legal requirements, the corporation promotes the general principle that: “The information must go to the shareholders and not the shareholders to the information,” thereby reinforcing the right of shareholders to receive information, and transforming its provision into an obligation to the corporation. To reach this objective, the following recommendations are proposed: 4.1. The corporation has an institutional web site in Spanish and English, with a link of Corporate Governance, or of relations with shareholders and investors, or equivalent. It will include financial and non-financial information in the terms proposed by recommendations 32.3 and 33.3. Furthermore, under no circumstance, it will include the corporation’s confidential information, or that relative to company secrets, or any other whose disclosure could be used to the detriment of the corporation. 4.2. The corporation has permanent-access mechanisms targeted exclusively to shareholders, such as a web link (only for them), or an office devoted to the relations with shareholders and investors, periodical information sessions, among others. These

spaces should permit them state their opinions, concerns or suggestions on the corporation’s development, or about their condition as shareholders. 4.3. The corporation organizes events to present quarterly results to its shareholders and to market analysts. These may be in person or through distantcommunication media (conference, video conference, etc.). 4.4. The corporation organizes or takes part in presentations, events, or fora on fixed-yield instruments, mostly addressed to debt-security investors and market analysts. These events offer updates on the issuer’s business indicators, the management of its liabilities, its financial policy, its ratings, its behavior concerning covenants, etc. 4.5. The corporation’s bylaws provide that a shareholder or group of shareholders, representing at least five percent (5%) of the capital, may request the performance of Specialized Audits on matters other than those pertaining to the audits carried out by the corporation’s Statutory Auditor (Revisor Fiscal). Depending on its capital structure, the corporation may determine a proportion below five percent (5%). 4.6. For the exercise of this right, the corporation has a written procedure that specifies:

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1. The reasons why the corporation defined a proportion below five percent (5%). ii. The applicable requirements to request a Specialized Audit. iii. The corporation’s duty to reply in writing, through its Board of Directors, to the applicant shareholders as soon as possible. iv. The mechanism to appoint the respective auditor.
2. Who should assume the cost of a Specialized Audit. vi. Precise terms for each of the stages or steps of the procedure.

Measure No. 5: Behavior of managers before takeovers or transactions to change the corporation’s control. 5.1. The members of the Board of Directors and of the senior management have agreed expressly, in their letters of acceptance or contracts, that as soon as they learn of a take-over bid or other relevant transactions, such as mergers or segregation

(spinoffs), there will be periods during which they will not negotiate, directly or indirectly through a third party, any shares of the corporation. Measure No. 6: Listing of corporations clustered in conglomerates. In some cases, the goals and interest of a conglomerate and those of the companies that it comprises are not fully aligned; therefore, there may be potential conflicts of interest. This is mostly the case in related-party transactions among conglomerate companies that involve the participation of subsidiary enterprises that have external shareholders, usually minority, different from those of the holding company. To manage these situations, the following recommendations are made: 6.1. Without prejudice to the independence of every single company of the conglomerate and to the responsibilities of its management bodies, the conglomerate has an organizational structure that defines for the three (3) governance levels (Shareholders Assembly, Board of Directors, and senior management), the key bodies and individual positions and the relations between them. Such a structure is public, evident, and transparent; it determines clear responsibility and communication channels; it facilitates the conglomerate’s strategic direction, and its effective supervision, control, and management. 6.2. Under the previous provision, the holding company and its most important subordinates have defined a framework for institutional relations through the subscription of an agreement. Such an agreement is public, has been approved by the Board of Directors of each of the companies, and it regulates:

1. The definition of the interest of the conglomerate to which they belong, understood as the primary interest that all the companies must pursue and defend. ii. The recognition and use of synergies between conglomerate’s companies, under the premise of respect for the minority shareholders. iii. The respective areas of activity and the eventual businesses between them. iv. The common services provided by the holding company, a subordinate, and/or by third parties.
2. The criteria or way to set price and conditions to the businesses between companies of the conglomerate, and to the common services provided by any

of them or by third parties. FINANCIAL SUPERINTENDENCY OF COLOMBIA Page 9 vi. The search for the conglomerate’s cohesion, through a shared perspective of the key elements of its Control Architecture, such as the internal and external auditing, and the management of risks. vii. The performance and coordination of the committees of the Board of Directors of the holding company, and the committees that it may be convenient or mandatory to appoint within the Boards of Directors of the subordinates. viii. The mechanisms foreseen to solve any possible conflicts of interest between the companies. ix. The taking of precautions so that when there are related-party transactions between a subordinate issuer of securities and its holding company, whether it is an issuer company or not, the conflict-of-interest policies will be applied with particular care and rigor to ensure, among other aspects, that the transactions lean toward market prices and conditions. Measure No. 7: Conflict resolution. 7.1. Except for the disputes between shareholders, or between shareholders and the corporation or its Board of Directors that by explicit legal mandate must be settled necessarily before the ordinary jurisdiction, the corporation’s bylaws include conflict-resolution mechanisms such as direct agreements, amiable composition, settlement, or arbitration.

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II. GENERAL ASSEMBLY OF SHAREHOLDERS The General Assembly of Shareholders3 is the sovereign and supreme governance body of corporations. Moreover, it is the first and most important tool to provide information to shareholders.

However, the General Assembly of Shareholders is more than a space to gather information. From a Corporate Governance perspective, it might be said that the key competence of the General Assembly of Shareholders is the exercise of an effective control by the shareholders over the corporation’s progress, and consequently, over the performance of the Board of Directors. This competence is even more critical regarding the General Assemblies of Shareholders of issuing companies listed on the stock exchange. In these Assemblies, the existence of many shareholders as passive individual investors (included in the socalled Floating Capital or free float, as mere capital providers), instead of that of true shareholders devoted to the company, has progressively eroded the active role of the General Assembly of Shareholders as a key body for control. In light of these facts, there has been a whole set of recommendations worldwide, which, through good Corporate Governance, seeks to revitalize the role of the General Assembly of Shareholders as an effective body for governance and control available to managers. The idea is to move the shareholders from an apathetic to an activist shareholding attitude. These recommendations are very aligned with an increased use of new technologies within corporations. There must be an optimal access to information, to the existing channels of communication between the corporation and its shareholders, to the voting or representation mechanisms, and to the shareholders associations. It must be said that, except for any exceptions herein mentioned, these recommendations are applicable to both the meetings of the ordinary assembly and those of extraordinary assemblies. Measure No. 8: Functions and competence. 8.1. Besides other functions assigned to the General Assembly of Shareholders by the legal framework, the bylaws explicitly confer the following functions upon it, and emphasize their exclusive and non-delegable nature:

1. Approving the general compensation policy for the Board of Directors; and, in the case of the senior management, if a variable remuneration component tied to the value of the shares will be granted. ii. Approving the succession policies for the Board of Directors. iii. The acquisition, sale, or encumbrance [gravamen] of strategic assets that the Board of Directors deems essential to the performance of activities, or when those transactions might actually and effectively modify the corporate purpose. iv. Approving the corporation’s segregation-spinoffs (escisión impropia). 3 In the case of non-corporate issuers, this Code’s reference to the General Assembly of Shareholders and to the Board of Directors will apply to the bodies that fulfill those duties.

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Page 11 Measure No. 9: Regulation of the General Assembly of Shareholders. 9.1. The corporation has a regulation for the General Assembly of Shareholders, which set up norms for any tasks within its competence. They range from its meeting calls, to the preparation of the information intended for shareholders, their attendance, the development and exercise of their political rights, so that they are fully aware about the regime that governs the Assembly’s sessions. Measure No. 10: Meeting Call for the Assembly. The meeting call for the General Assemblies of Shareholders have many facets. From a good Corporate Governance perspective, the following set of related recommendations applies to them: - Term of the meeting call. 10.1. To ease the shareholders’ exercise of their information rights, the bylaws provide that the meeting call for the ordinary General Assembly of Shareholders must take place no less than thirty (30) common days in advance; in the case of the extraordinary meetings, the call will take place with at least fifteen (15) common days of anticipation. This will be without prejudice to the legal terms set forth for company restructuring (e.g. mergers, segregation (spinoffs), or transformations). - Media to convey the meeting call. 10.2. Besides the traditional and obligatory media set forth within the legal framework, the corporation ensures the widest communication and publicity for the meeting call. This will be done by using e-media, such as the corporate web site, individual alerting e-mails, and even the social networks if deemed appropriate. - Contents of the meeting call. 10.3. For increased transparency during the decision-making process of the General Assembly, besides its Agenda, stating point by point the subjects for discussion, the corporation ensures that simultaneously with the meeting call, or at least fifteen (15) common days before the meeting, the shareholders receive the Agreement Proposals that the Board of Directors will submit to the General Assembly of Shareholders concerning each of those points. - Agenda for the meeting.

The points on the Agenda should be precise to facilitate their understanding and analysis. The block voting of subjects or Agreement Proposals that should be decided individually must be avoided. For these purposes, the corporation adopts the following recommendations: 10.4. The General Assembly of Shareholders will analyze and approve the corporation’s segregation (spinoffs) (escisión impropia) only when this subject had been included explicitly in the respective meeting call. FINANCIAL SUPERINTENDENCY OF COLOMBIA Page 12 10.5. The Agenda that the Board of Directors is proposing features the subjects for discussion accurately. It does not permit that any significant issues become obscured under imprecise, nonspecific, overly general, or very wide expressions such as “others” or “proposals and miscellaneous.” 10.6. In the case of amendments to the bylaws, each article or group of articles substantially different will be voted separately. In any case, an article will be voted separately if any shareholder or group of shareholders, representing at least five percent (5%) of the corporate capital, request it during the Assembly. The shareholders will be informed of this right beforehand. - Power to include subjects on the Agenda of the ordinary General Assembly of Shareholders. 10.7. Without prejudice to the article 182 of the Code of Commerce, to strengthen and ensure the shareholders’ rights of inspection and information before the Assembly, the bylaws recognize their right to propose the inclusion of one or more points for discussion within the Agenda of the General Assembly of Shareholders, regardless of the size of their stock participation. This will take place within reasonable period of time and provided that their request includes a justification. The shareholders will make such a request within five (5) common days following the publication of the meeting call. 10.8. If the Board of Director refuses the request, it must reply in writing to those requests supported by at least five percent (5%) of the corporate capital, or a lower

proportion as provided by the company based on its degree of ownership concentration. In such a reply, it will explain the reasons for its decision, and inform the shareholders of their right to make proposals during the Assembly, under the provisions of the abovementioned article 182 of the Code of Commerce. 10.9. If the Board of Directors accepts the request, once expired the shareholders’ term to propose subjects –as set forth in the preceding recommendations, a complement to the meeting call for the General Assembly of Shareholders will be published at least fifteen (15) common days before the meeting. 10.10. Within the same term provided in the paragraph 10.7, the shareholders may submit new and well-grounded Agreement Proposals to matters previously included on the Agenda. For these requests, the Board of Directors will act according to the provisions of the paragraphs 10.8 and 10.9 above. - Shareholders’ right to information. 10.11. The corporation will use e-media, and particularly the institutional web site available only to shareholders, to convey to them the documents and information related to each of the points of the Agenda for the meeting. 10.12. The corporation bylaws recognize the shareholders’ right to request the information or clarification that they deem appropriate with enough anticipation, either through traditional channels and/or, if suitable, through new technologies, or to express in writing their questions on the subjects of the Agenda, the documentation received, or the public information issued by the corporation. Depending on the term of the corporation to call for a General Assembly of Shareholders, it will determine the period within which the shareholders will exercise this right. FINANCIAL SUPERINTENDENCY OF COLOMBIA Page 13 10.13. The corporation foresees that the requested information may be denied if, based on internal procedures, it may be considered: i) non-reasonable; ii) irrelevant to learn about the corporation’s progress or