NOTE 1 – REPORTING ENTITY

Grupo Aval Acciones y Valores S.A. (hereinafter the “The Group” or “Grupo Aval”) was established under Colombian law in January 7, 1994, with its main offices and business address registered in Bogotá, D.C., Colombia. The corporate purpose of Grupo Aval is the purchase and sale of securities issued by financial and commercial entities. Grupo Aval is the majority shareholder of Banco de Bogotá S.A., Banco de Occidente S.A., Banco Popular S.A. and Banco Comercial AV Villas S.A., entities whose main purpose is to perform all transactions, operations and services inherent to the banking business, pursuant to applicable laws and regulations. Furthermore, through its direct and indirect investments in Corporación Financiera Colombiana S.A. (“Corficolombiana”) and in Sociedad Administradora de Fondos de Pensiones y Cesantías Porvenir S.A. (“Porvenir”), Grupo Aval engages in investment banking activities, invests in the non-financial sector and manages pensions and severance funds in Colombia.

In performing its activities and pursuant to the corporate bylaws, Grupo Aval may (i) promote the creation of all types of companies relating to its corporate purpose; (ii) represent individuals and companies involved in similar or complementary activities; (iii) grant or receive loans with or without interest; (iv) submit its properties as collateral; (v) issue, endorse, acquire, protest, cancel, or pay bills of exchange, checks, promissory notes or any other type of financial instruments, accept or submit them as payment; (vi) acquire, sell, tax, lease or manage any kind of assets; (vii) subscribe or acquire any kind of investments and sell or otherwise dispose of them; (viii) acquire and sell shares in companies that purse similar or complementary corporate interests ; (ix) render services in areas relating to its activities, experience and knowledge; and (x) carry out or participate, in acts and contracts relating to the aforementioned activities, enabling the exercise of rights and compliance of the obligations of The Group.

The duration of Grupo Aval set forth under the bylaws is until May 24, 2044, but the Company may be dissolved before such term expires, or it may be extended by free decision of the Grupo Aval shareholders meeting.

When preparing its consolidated financial statements, Grupo Aval Acciones y Valores S.A., directly consolidates the following entities:

Banco de Bogotá S.A.

Banco de Bogotá S.A., in which Grupo Aval holds 68.74% of the voting rights and 68.74% of the ownership interest as of December 31, 2018, was established as a bank on November 15, 1870. It was authorized to operate under the terms of the renewal resolution No. 3140 dated September 24, 1993 issued by the Superintendency of Finance. The commercial purpose of Banco de Bogotá is to participate and perform all operations and contracts legally authorized to commercial banking, subject to the limitations and requirements set forth under Colombian laws and regulations.

The following table presents details of Banco de Bogotá’s most significant subsidiaries which are indirectly consolidated by Grupo Aval as of December 31, 2018:


					Total
			Total voting		ownership
			rights held by		interest held
Subsidiary	Core business	Location	Grupo Aval		by Grupo Aval
Main local direct subsidiaries
Almaviva S.A. and its subsidiaries	Logistics services.	Bogotá, Colombia	95.81	%	65.85	%
Fiduciaria Bogotá S.A.	Management of trust funds.	Bogotá, Colombia	94.99	%	65.29	%
Porvenir S.A. and its subsidiary	Management of pension and severance funds.	Bogotá, Colombia	100	%	75.67	%
Main international direct subsidiaries
Leasing Bogotá Panamá S.A.	Holding company of BAC Credomatic Inc.	Panamá, Republic of Panamá	100	%	68.74	%
Banco de Bogotá Panamá S.A.	Commercial banking services.	Panamá, Republic of Panamá	100	%	68.74	%
Main indirect subsidiaries
BAC Credomatic Inc.	Holding company in charge of managing the banking and related subsidiaries in Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and Panamá, among others. (Subsidiary of Leasing Bogotá Panamá S.A.).	Panamá, Republic of Panamá	100	%	68.74	%

Banco de Occidente S.A.

Banco de Occidente S.A., in which Grupo Aval holds 72.27% of the voting rights and 72.27% of the ownership interest as of December 31, 2018, was established as a banking entity on September 8, 1964, It was authorized to operate under the terms of the renewal resolution No. 3140 dated September 24, 1993 issued by the Superintendency of Finance. The commercial purpose of Banco de Occidente is to participate and perform all operations and contracts legally authorized to commercial banks, subject to the limitations and requirements set forth under Colombian laws and regulations.

The following table presents the details of Banco de Occidente’s most significant subsidiaries, which are indirectly consolidated by Grupo Aval, as of December 31, 2018:


					Total
			Total voting		ownership
			rights held by		interest held
Subsidiary	Core business	Location	Grupo Aval		by Grupo Aval
Banco de Occidente (Panamá). S.A.	Commercial banking services.	Panamá, Republic of Panamá	95.00	%	68.66	%
Fiduciaria de Occidente S.A.	Management of trust funds.	Bogotá, Colombia	99.99	%	70.76	%
Occidental Bank Barbados Ltd.	Commercial banking services.	Barbados	100	%	72.27	%

Banco Popular S. A.

Banco Popular S. A., in which Grupo Aval holds 93.74% of the voting rights and 93.74% of the ownership interest as of December 31, 2018, was established as a banking entity on July 5, 1950. It was authorized to operate under the terms of the renewal resolution No. 3140 dated September 24, 1993 issued by the Superintendency of Finance. Its commercial purpose is to participate in and perform all operations and contracts legally authorized to commercial banks, subject to the limitations and requirements set forth under Colombian laws and regulations.

The following table presents the details of Banco Popular’s most significant subsidiaries which are indirectly consolidated by Grupo Aval, as of December 31, 2018:


					Total
			Total voting		ownership
			rights held by		interest held
Subsidiary	Core business	Location	Grupo Aval		by Grupo Aval
Alpopular S.A.	Conservation and custody of documents; transportation of products at national and international levels.	Bogotá, Colombia	71.10	%	66.65	%
Fiduciaria Popular S.A.	Management of trust funds.	Bogotá, Colombia	94.85	%	88.91	%

Banco Comercial AV Villas S. A.

Banco Comercial AV Villas S. A., in which Grupo Aval holds 80.37% of the voting rights and 79.87% of the ownership interest as of December 31, 2018, was incorporated as a banking entity on November 24, 1972. It was authorized to operate under the terms of the renewal resolution No. 3352 dated August 21, 1992 issued by the Superintendency of Finance. The commercial purpose of Banco AV Villas is to participate and perform all operations and contracts legally authorized to commercial banks, subject to the limitations and requirements imposed by Colombian laws and regulations.

The following table presents the details of Banco AV Villas’ most significant subsidiary which is indirectly consolidated by Grupo Aval, as of December 31, 2018:


					Total
			Total voting		ownership
			rights held by		interest held
Subsidiary	Core business	Location	Grupo Aval		by Grupo Aval
A Toda Hora S.A. ATH	ATM network services and maintenance and software development	Bogotá, Colombia	100	%	78.90	%

Corporación Financiera Colombiana S.A. – Corficolombiana S.A.

Corficolombiana S.A., in which Grupo Aval holds 52.96% of voting rights and 38.25% of the ownership interest as of December 31, 2018 is a merchant bank authorized to operate by the Superintendency of Finance by the resolution of October 18, 1961. Corficolombiana´s core business is the active management of an equity portfolio through controlling and non-controlling investments in key strategic sectors, including infrastructure, energy and gas, agriculture and hotels among, others.

The following table presents the details of Corficolombiana´s most significant subsidiaries which are indirectly consolidated by Grupo Aval, at December 31, 2018:


					Total
			Total voting		ownership
			rights held by		interest held
Subsidiary	Core business	Location	Grupo Aval		by Grupo Aval
Casa de Bolsa S.A.	Brokerage firm	Bogotá, Colombia	97.30	%	61.18	%
Colombiana de Licitaciones y Concesiones S.A.S.	Infrastructure projects.	Bogotá, Colombia	100	%	38.25	%
Concesionaria Nueva Vía Al Mar S.A.S.	Infrastructure projects.	Cali, Colombia	100	%	38.25	%
Concesionaria Vial Del Pacifico S.A.S.	Infrastructure projects.	Sabaneta Antioquia	89.90	%	34.38	%
Estudios y Proyectos del Sol S.A.S. and its subsidiaries	Infrastructure projects.	Bogotá, Colombia	100	%	38.25	%
Estudios, Proyectos e Inversiones de los Andes S.A. and its subsidiaries	Infrastructure projects.	Bogotá, Colombia	99.98	%	38.24	%
Fiduciaria Corficolombiana S.A.	Management of trust funds.	Bogotá, Colombia	100	%	38.25	%
Hoteles Estelar S. A. and its subsidiaries	Construction and operation of hotels, directly or by third parties, in Colombia and abroad.	Bogotá, Colombia	84.96	%	32.49	%
Leasing Corficolombiana S.A.	Financial services	Bogotá, Colombia	100	%	38.25	%
Organización Pajonales S. A. and its subsidiaries	Investment and promotion of agricultural, livestock, forestry and agro industrial companies.	Bogotá, Colombia	99.35	%	38.00	%
Plantaciones Unipalma de los Llanos S.A.	Development, production and sale of African palm products.	Bogotá, Colombia	54.53	%	20.86	%
Promigas S.A. E.S.P. and its subsidiaries	Transportation and distribution of natural gas.	Barranquilla, Colombia	50.88	%	19.46	%
Proyectos de Infraestructura S.A. – PISA and its subsidiaries	Infrastructure projects.	Cali, Colombia	88.25	%	33.75	%

On September 5, 2018, Corficolombiana issued 40,000,000 common shares and 1,529,542 preferred shares without voting rights. The total amount of this issue was Ps. 988,072. Neither Grupo Aval nor its subsidiaries exercised their right of preferential subscription of common shares. As a result, Grupo Aval’s stake in Corficolombiana was diluted as follows:


	Total voting rights held by		Total ownership interest
	Grupo Aval		held by Grupo Aval
Before the issuance	62.42	%	44.79	%
After the issuance	52.96	%	38.25	%

Grupo Aval transferred its preferential subscription rights to all of its shareholders.

Grupo Aval Limited

Grupo Aval Limited is a subsidiary of Grupo Aval in Cayman Islands. It was established on December 29, 2011. Grupo Aval Limited is a limited liability company registered with the Assistant of the Registrar of Companies of Cayman Islands under registry number MC‑265169, with its Main Office located in Ugland House, South Church Street, George Town, Grand Cayman KY1‑1104. It was constituted as a special purpose vehicle for issuing foreign debt.

Grupo Aval International Limited

Grupo Aval International Limited is a subsidiary of Grupo Aval in Cayman Islands and was established on October 8, 2012. Grupo Aval International Limited is a limited liability company registered with the Assistant of the Registrar of Companies of Cayman Islands under registry number MC‑272253, with its Main Office located in Ugland House, South Church Street, George Town, Grand Cayman KY1‑1104.

Other dispositions

Grupo Aval and its Colombian subsidiaries are subject to the following restrictions to transfer profits or perform transactions, in accordance with the legal requirements in Colombia:

Before distributing any dividends to their shareholders, the companies should assign 10% of their profits to a legal reserve until the reserve equals 50% of paid-in capital.

The Subsidiaries operating in the financial sector may not grant loans to other companies of Grupo Aval that exceed 10% of their regulatory capital if the loan is unsecured or 25% if it is granted with an acceptable security or third party guarantee, as per Superintendency of Finance rules. There is an exception to this rule that extends the maximum quota up to 25% (without guarantee) when it comes to loans to 4G infrastructure projects.

Pursuant to article 2.1.2.1.8 of Decree 2555 of 2010, banks in Colombia have a lending limit of 30% of their regulatory capital with respect to loans granted to financial entities.

Foreign subsidiaries of Grupo Aval do not have any restriction to transfer dividends to the parent company, except for the legal reserve mentioned above. Lending operations in general have restrictions similar to those of banks in Colombia, as described above.

Grupo Aval and its subsidiaries do not have significant restrictions on their ability to access or use their assets and settle their liabilities other than those resulting from the supervisory frameworks within which subsidiaries of the financial sector operate. The supervisory frameworks require subsidiaries of the financial sector to keep certain levels of regulatory capital (see note 4.4) and liquid assets (see note 4.3), limit their exposure to other parts of Grupo Aval and its subsidiaries and comply with other ratios.