CVM Instruction 177 (Repealed) - Mutual Equity Funds - Free Portfolio

Dispenses with the constitution, operation, and administration of Mutual Equity Funds - Free Portfolio.

The PRESIDENT OF THE SECURITIES AND EXCHANGE COMMISSION makes public that the Collegiate Body, in a session held on this date, and in view of the provisions of Resolution No. 1,787, of February 1, 1991, of the National Monetary Council,

HAS RESOLVED:

CHAPTER I
On Constitution and Characteristics

Art. 1 The Mutual Equity Fund - Free Portfolio, constituted in the form of an open-end fund - when it admits redemption of shares -, or closed-end - when it does not admit -, is a pooling of resources destined for application in a diversified portfolio of securities and financial assets.

§1o The Fund may have a determined or undetermined duration, and its denomination must include the expression “Mutual Equity Fund - Free Portfolio”.

§2o The closed-end Mutual Equity Fund - Free Portfolio may be transformed into an open-end fund, by decision of the General Meeting of unitholders, after 24 (twenty-four) months counted from the date of commencement of its operations, which will also depend on prior authorization from the Securities and Exchange Commission.

§3o If the transformation of the Fund is approved, the Managing Institution will have a period of 180 (one hundred and eighty) days to adapt it to its new form, counted from the date of the General Meeting that deliberated on it.

Art. 2 Once constituted, the Mutual Equity Funds - Free Portfolio must request authorization from the Securities and Exchange Commission for their operation.

Sole Paragraph. The authorization request must be accompanied by the deliberation of the managing institution regarding the constitution of the Fund, which must contain the full text of its bylaws, which, after authorization, will be registered in the Registry of Titles and Documents.

Art. 3 The bylaws of the Mutual Equity Fund - Free Portfolio must necessarily provide for:

I - qualification of the managing institution; II - investment policy to be adopted by the managing institution, assets that may compose the Fund's portfolio, including considering the possibility of application in affiliated companies and the establishment of the diversification policy; III - entry fee or criteria for its fixation; IV - remuneration of administrators; V - fixation of a waiting period based on the provisions of Article 26; VI - availability of monthly information for unitholders; VII - expenses and charges of the Fund; VIII - conditions for the redemption of shares, which may be differentiated based on the number of shares to be redeemed; IX - competence of the General Meeting of unitholders. X - responsibility for any negative equity of the Fund and liquidation of the Fund in the event of this situation.

Sole Paragraph. The fees, expenses, and timeframes will be identical for all unitholders and will be included in the information referred to in items III and IV of Article 40.

Art. 4 The following acts relating to the Fund must be sent to the CVM, which may, at its discretion, approve or not:
I - amendment of the bylaws;
II - indication and replacement of the director responsible for the administration of the Fund (Article 5, paragraph 2); III - replacement of the managing institution; IV - transformation; V - merger;

VI - incorporation;
VII - spin-off;
VIII - liquidation.

Sole Paragraph. The Central Bank of Brazil will be informed by the Securities and Exchange Commission upon authorization for the operation of the Fund, as well as in the cases provided for in items II to VIII of this article.

CHAPTER II
On Administration

Art. 5 The administration of the Fund will be exercised exclusively by a multiple bank with an investment portfolio, investment bank, brokerage company, or securities distribution company or other equivalent entities, authorized by the Securities and Exchange Commission to exercise the activity provided for in Article 23 of Law No. 6,385, of December 7, 1976.

§1o The managing institution must maintain or contract the technical services necessary for the correct performance of the activity referred to in the "caput" of this article.

§2o The administration of the Fund will be under the direct supervision and responsibility of a director of the managing institution.

Art. 6 The managing institution will have the power to exercise all rights inherent to the securities and financial assets comprising the Fund's portfolio, including the right to sue and to attend and vote in general and special meetings.

§1o The managing institution may also open and operate bank accounts, acquire and alienate securities and financial assets freely, settle, practice, in short, all acts necessary for the administration of the portfolio, observing the limitations of this Instruction.

§2o The custodian institutions of the securities and financial assets of the Fund may only comply with orders signed by the legal representative(s) or agent of the managing institution duly accredited with it for this purpose.

Art. 7 The managing institution will fix the remuneration to be received for the provision of management and administration services of the Fund, including, if applicable, provision for participation in the Fund's results.

Art. 8 The managing institution may, by prior notice published in the periodical(s) referred to in item III, letter “d”, of Article 40, or by means of a letter, telex, or telegram addressed to each unitholder, resign from the administration of the Fund, and must immediately communicate this fact to the Securities and Exchange Commission.

Sole Paragraph. In the case of Funds with shares traded on stock exchanges or organized over-the-counter markets, the same disclosure required for material facts must be adopted by the respective entities and by the managing institution.

CHAPTER III
On Decertification of the Managing Institution

Art. 9 The Securities and Exchange Commission, in the exercise of its legal powers, may decertify the managing institution that fails to comply with current regulations.

§1o The decertification process will begin with notification from the Securities and Exchange Commission to the managing institution, indicating the facts that supported it and the deadline for presenting a defense, which shall not be less than 15 (fifteen) days counted from the date of receipt of the notification issued by the Commission.

§2o The decision of the Securities and Exchange Commission that decertifies the managing institution will be reasoned, with an appeal to the National Monetary Council, without suspensive effect, within 15 (fifteen) days counted from the date of receipt of the communication issued by the Commission.

Art. 10. In the cases of resignation and decertification, the managing institution will be obliged to immediately convene the General Meeting to elect its successor or deliberate on the liquidation of the Fund.

Sole Paragraph. The managing institution must remain in the exercise of its functions until its effective replacement.

CHAPTER IV
On Obligations of the Managing Institution

Art. 11. The obligations of the Managing Institution include:
I - to maintain, at its own expense, updated and in perfect order:
a) the register of unitholders and transfers of shares;

b) the minutes book of general meetings; c) the attendance book of unitholders; d) the archive of auditors' reports; e) the accounting records relating to the operations and assets of the Fund; f) the documentation relating to the operations of the Fund, for a period of five years. II - to receive dividends, bonuses, and any other income or values from the Fund; III - to exercise or alienate the rights of subscription of shares and other financial assets; IV - to employ, in the defense of the rights of unitholders, the diligence required by the circumstances, practicing all acts necessary to ensure them, including lawsuits, appeals, and exceptions; V - to bear the advertising expenses of the Fund; VI - to keep custodied in a commercial bank, multiple bank with an investment portfolio, investment bank, stock exchange, or authorized custodian entities by the Securities and Exchange Commission, the securities and financial assets comprising the Fund. VII - the manager is responsible for the acts practiced in the management and administration of the Fund.

CHAPTER V
On the General Meeting

Art. 12. It is exclusively the competence of the General Meeting of unitholders:
I - to take, annually, the accounts relating to the Fund and deliberate on the financial statements presented by the managing institution; II - to amend the bylaws of the Fund; III - to deliberate on the replacement of the managing institution; IV - to deliberate on the transformation, merger, incorporation, spin-off, or eventual liquidation of the Fund;

V - to deliberate on changes in the remuneration rate of the managing institution, including regarding participation in the Fund's results.

Sole Paragraph. The bylaws of the Fund may be amended independently of a General Meeting or consultation with unitholders whenever such amendment results exclusively from the need to meet requirements of the Securities and Exchange Commission, as a consequence of legal or regulatory norms, and it must be provided, within 30 (thirty) days, for the necessary communication to unitholders, when applicable, in the periodicals intended for the dissemination of information about the Fund.

Art. 13. The convening of the General Meeting will be made by means of an announcement published in the periodical(s) intended for the dissemination of information about the Fund.

§1o The convening must necessarily include the day, time, and place where the meeting will be held, and also, in a brief manner, the matters to be addressed.

§2o The first convening of the General Meeting must be made at least 8 (eight) days in advance, counted from the date of publication of the first announcement.

§3o In the cases provided for in items III, IV, and V of Article 12, if a second convening is necessary, it must be made 5 (five) days in advance.

§4o Regardless of the convening provided for in this article, the General Meeting will be considered regular if all unitholders attend.

§5o The General Meeting may be convened by the managing institution or by unitholders who hold at least 5% (five percent) of the total shares issued by the Fund.

Art. 14. At the Meeting, which may be installed with any number, decisions will be taken by the criterion of majority of shares present, with each share corresponding to one vote, except as provided in the sole paragraph of this article and in paragraph 3 of Article 15.

Sole Paragraph. Decisions regarding the matters provided for in items III, IV, and V of Article 12 will be taken, in the first convening, by the majority of issued shares, and in the second convening, by the majority of shares present.

Art. 15. Decisions of the General Meeting may be taken through a formalized consultation process by letter, telex, or telegram directed by the managing institution to each unitholder for response within a maximum period of 30 (thirty) days.

§1o The consultation must contain all necessary informational elements for the exercise of the right to vote.

§2o The absence of response will be considered as consent by the unitholders, provided that such interpretation is expressly authorized by the bylaws of the Fund and is included in the consultation itself.

§3o The deliberation "quorum" will be an absolute majority of issued shares, regardless of the matter.

Art. 16. Only unitholders registered in the "Register of Unitholders" or in the deposit account, as applicable, three (3) days before the date fixed for its holding, may vote at the General Meeting.

Art. 17. Legal representatives of unitholders or their legally constituted proxies will have the quality to attend the General Meeting or to vote in the deliberation process by consultation.

CHAPTER VI
On Issuance, Placement, Negotiability, and Redemption of Shares

Art. 18. The shares of the Mutual Equity Fund - Free Portfolio will correspond to ideal fractions of its assets and will assume the book-entry, registered, or black-endorsable form.

§1o The shares may be represented by Investment Certificates or kept in deposit accounts in the name of their holders, as established by the bylaws of the Fund.

§2o The quality of unitholder is proven by the Investment Certificate or by the statement of deposit accounts.

Art. 19. The Investment Certificate, when adopted, will contain:
I - the denomination “INVESTMENT CERTIFICATE”; II - the name of the Mutual Equity Fund - Free Portfolio and the number of its registration in the General Register of Taxpayers of the Ministry of Economy, Treasury, and Planning; III - the following information about the managing institution:
a) denomination and location of headquarters;

b) reference to the authorization of the Securities and Exchange Commission (Article 2); c) number of registration in the General Register of Taxpayers of the Ministry of Economy, Treasury, and Planning; IV - registered or black-endorsable form, as applicable; V - name of the unitholder(s), jointly or severally, when applicable; VI - serial number of the certificate; VII - quantity of shares represented by it; VIII - place and date of issuance; IX - authorized signature of the responsible director of the managing institution, mechanical stamp admitted.

Art. 20. The Investment Certificate or deposit account statement will represent an integer and/or fractional number of shares belonging to the unitholder, according to the records of the Mutual Equity Fund - Free Portfolio.

Sole Paragraph. When the system of integer share numbers is adopted, the residual value of investments or reinvestments will be kept in a current account for future investments or, if requested, will be paid to the unitholder in cash.

Art. 21. In the case of Open-End Mutual Equity Funds - Free Portfolio, in the issuance of shares, the value calculated at the close of the first business day subsequent to the effective availability of resources entrusted by investors to the managing institution, at its headquarters or branches, will be used, determining the share value based on a net asset valuation carried out in accordance with the norms of the Chart of Accounts referred to in paragraph 2 of Article 37.

Sole Paragraph. For the calculation of the number of shares, the commission or entry fee in effect at the time of investment, as well as other agreed expenses, will be deducted from the value delivered to the managing institution.

Art. 22. The share value of Open-End Mutual Equity Funds - Free Portfolio will be calculated daily.

Art. 23. The shares of Closed-End Mutual Equity Funds - Free Portfolio may only be placed with the public through a multiple bank with an investment portfolio, investment bank, brokerage company, or securities distribution company.

Sole Paragraph. The shares of Closed-End Mutual Equity Funds - Free Portfolio may only be negotiated on stock exchanges or organized over-the-counter markets.

Art. 24. In the investment proposal, or in the receipt provided to the investor at the time of sale, the value of the resources delivered to the managing institution or its agent must be expressly stated, specifying if represented by a registered check, payment order, bank check, deposit receipt in favor of the managing institution, debit in current account, or cash.

Art. 25. The shares of Open-End Mutual Equity Funds - Free Portfolio may be subject to assignment and transfer, observing the formalities provided for in the bylaws of the Fund.

Art. 26. The shares of the open-end Fund may have a waiting period, counted from the date of their issuance, for the exercise of the redemption right by the unitholder, which must be highlighted in its bylaws.

Art. 27. In the redemption of shares, the value calculated at the close of the first business day subsequent to the entry of the redemption request at the headquarters or branches of the managing institution will be used.

Art. 28. Redemption will be made in cash, check, credit in current account, or payment order, without charging any fee or expense.

Sole Paragraph. In special cases, after preliminary consultation with the Securities and Exchange Commission, redemption may be made in securities or financial assets.

Art. 29. In Closed-End Mutual Equity Funds - Free Portfolio, there will be no redemption of shares, except by the end of the duration period or liquidation of the Fund.

CHAPTER VII
On Composition and Diversification of the Portfolio

Art. 30. The Mutual Equity Fund - Free Portfolio must maintain, daily, a minimum of 51% (fifty-one percent) of its assets applied in shares issued by open companies, share options, share futures, share indices, and options on share indices, acquired on stock exchanges, organized over-the-counter market by an entity authorized by the CVM, or by subscription.

§1o The statute and prospectus of the Fund must define the maximum percentage that may be applied in options and futures markets, of shares and indices, and options on share indices.

§2o The balance of resources may be applied in shares of Financial Application Funds and fixed-income securities of free choice by the administrator.

Art. 31. Mutual Equity Funds - Free Portfolio must, mandatorily, highlight in their prospectuses the risks inherent to the concentration of the portfolio resulting from their applications.

Sole Paragraph. Every unitholder subscribing to their first share(s) must take notice, in writing, of the high degree of risk of this investment.

Art. 32. Orders to buy and sell securities and financial assets will always be issued with precise identification of the Mutual Equity Fund - Free Portfolio.

CHAPTER VIII
On Fund Charges

Art. 33. The charges of the Fund, in addition to the remuneration referred to in Article 7, include the following expenses, which may be debited to the Fund by the managing institution:
I - taxes, levies, or contributions, federal, state, municipal, or autonomous, that fall or may fall on the assets, rights, and obligations of the Fund; II - expenses with printing, dispatch, and publication of reports, forms, and periodic information, provided for in this Instruction or in relevant regulation; III - correspondence expenses of interest to the Fund, including communications to unitholders; IV - fees and expenses of auditors responsible for reviewing the financial statements of the Fund and analyzing its situation and the performance of the managing institution, including regarding the investment policy fixed in the statutes and prospectuses. V - emoluments and commissions paid for purchase and sale operations of securities and financial assets of the Fund; VI - attorneys' fees, court costs, and related expenses incurred in the defense of the Fund's interests, in court or out of court, including the value of the condemnation, imputed to the Fund, if applicable;

VII - portion of eventual losses not covered by insurance policies and not resulting directly from fault or negligence of the managing institution in the exercise of its functions; VIII - insurance premiums, as well as any expenses relating to the transfer of resources of the Fund between banks; IX - any expenses inherent to the constitution, transformation, merger, incorporation, spin-off, or liquidation of the Fund and to the holding of the General Meeting of unitholders; X - custody fee for securities and financial assets of the Fund.

Sole Paragraph. Any expenses not provided for as charges of the Fund will be borne by the managing institution.

CHAPTER IX
On Financial Statements

Art. 34. The Mutual Equity Fund - Free Portfolio will have accounting records distinct from those of the managing institution.

Art. 35. The financial statements of the Fund will be subject to the accounting standards issued by the Securities and Exchange Commission, and will be audited semi-annually by an independent auditor registered with the Commission.

§1o The financial statements will be published within 60 (sixty) days after the closing of the semester or calendar year to which they refer, in the periodicals intended for the dissemination of information relating to the Fund.

§2o The Chart of Accounts issued by the Securities and Exchange Commission will contemplate all standards for the evaluation of assets comprising the Fund, as well as for the appropriation of revenues and expenses inherent to securities and financial assets, observing, with regard to securities, the guidance of the Central Bank of Brazil.

CHAPTER X
On Information

Art. 36. The investor must be provided, obligatorily and free of charge, at the time of their entry as a unitholder of the Mutual Equity Fund - Free Portfolio:

I - a copy of the bylaws of the Fund, referred to in Article 3; II - a brief history of the managing institution; III - a document clearly stating the expenses with commissions or subscription fee, distribution, and other fees that the investor must bear.

Art. 37. The managing institution of the Fund is obliged to widely and immediately disclose any act or material fact relating to it, in order to guarantee all unitholders access to information that may, directly or indirectly, influence their decisions regarding staying in the Fund and other investors regarding the acquisition of shares.

Art. 38. The managing institution of the Fund must:
I - provide, for dissemination to the market, the following information:
a) daily, the share value and the net asset value of the Fund; b) monthly, the yield earned in the period.
II - send monthly to unitholders, when there has been movement:
a) number of shares and value of investments and redemptions; b) unitholder balance, in number of shares and value.
III - send semi-annually to unitholders, or publish in the periodical(s) referred to in letter “d” of this item, within 15 (fifteen) days after the closing of the semester, the following information:
a) yield earned in the semester; b) value and composition of the portfolio, discriminating quantity, type, and quotation of the securities and financial assets that compose it, the value of each investment and its percentage on the total value of the portfolio, highlighting, when applicable, investments in affiliated companies. c) balance sheets and other financial statements, accompanied by the report of the independent auditor; d) indication of the periodical(s) used for information dissemination;

e) list of institutions responsible for providing custody services for securities components of the portfolio;

IV - annually send the following information to unitholders, together with that contained in the preceding item:
a) unitholder balance, in number of units and value; b) profitability over the last 6 (six) semesters, taken as complete fiscal years; c) the nominal value of the unit, at the time of balance sheets, over the last 6 (six) semesters, in addition to the adjusted value for reinvestments occurring each year; d) the charges debited to the Fund in each of the last 3 (three) years, as provided in Article 33, specifying their value and percentage relative to the Fund's average monthly net assets, in each year; e) brokerage expenses in each of the last 3 (three) years, as a percentage of the average monthly value of the stock portfolio, in each year; f) proof for income tax declaration purposes;

§1o The institution administering a Closed Mutual Investment Fund in Stocks - Free Portfolio must keep updated information available to unitholders at its headquarters, at least every fifteen days, regarding the Fund's portfolio composition.

§2o The administering institution must, within a maximum of 10 (ten) days after the end of each month, make available to unitholders at its headquarters or branches the information referred to in items “a” and “b” of item III of this Article.

§3o The dispatches referred to in items III and IV of this Article are not mandatory to unitholders:
I - holders of units whose value is less than three minimum wages; or II - whose last dispatch of information was returned due to incorrect declared address and who have not proceeded with the respective update.

§4o The communications provided for in item IV of this Article must be sent within 60 (sixty) days after the end of the civil year to which they refer.

§5o The information referred to in item III must be available to the unitholder within 15 (fifteen) days after the end of the semester, except for that contained in item “c”, which will have a period of 60 (sixty) days for its disclosure.

§6o The disclosure of the information referred to in this Article must be made through publication in the periodical(s) intended for the disclosure of the Fund's information.

§7o The administering institution must make the publications provided for in this Instruction always in the same periodical(s), and any change in this regard must be preceded by notice to unitholders.

Art. 39. Any advertising text for the offer of units, advertisement, or promotion of the Fund must not diverge from the content of its regulations.

Sole Paragraph. If the advertising text presents inaccuracies or improprieties that may induce the investor to evaluation errors, the Securities and Exchange Commission may require that corrections and clarifications be disseminated, with equal prominence, through the same medium(s) used to disseminate the original advertising text.

Art. 40. The administering institution must send to the Securities and Exchange Commission, within 15 (fifteen) days after the end of the period to which they refer, without prejudice to others that may be required, the following documents regarding the Fund:

I - monthly:
a) trial balance; b) statements of the composition and diversification of investments, highlighting, when applicable, investments in affiliated companies; c) statement of sources and applications of resources;

II - semi-annually:
a) balance sheets; b) copies of the information provided to unitholders; c) information regarding the general conditions of coverage by insurance, in the case of transit of securities;

d) list of institutions responsible for providing custody services for securities included in the portfolio; e) list of judicial or extrajudicial demands, whether in defense of unitholders' rights or by them against the Fund's administration, indicating the date of its start and the final solution.

Sole Paragraph. The opinion of the independent auditor regarding the financial statements must be sent to the Securities and Exchange Commission, within 60 (sixty) days from the date of the end of the semester.

CHAPTER XI
Prohibitions

Art. 41. It is prohibited for the administering institution, in the name of the Fund:

I - receive deposits in a checking account;
II - contract or make loans under any modality:
III - provide surety, guarantee, acceptance, or assume obligation under any other form; IV - trade with duplicate bills, promissory notes, except those referred to in CVM Instruction No. 134, of November 1, 1990, or other securities not authorized by the Securities and Exchange Commission; V - promise predetermined returns to unitholders; VI - buy or sell off-exchange stocks of open companies registered for trading on stock exchanges, except for the cases of subscription, bonus, and conversion of debentures into shares regarding acquisition; VII - Apply resources:
a) abroad; b) in the acquisition of real estate; c) in the subscription or acquisition of shares of its own issuance;

d) in the acquisition of shares traded in an unorganized or unorganized by an entity not authorized by the Securities and Exchange Commission over-the-counter market segment.

Art. 42. It is prohibited for the administering institution to sell the provision of Fund units.]

CHAPTER XII
Transitional and Final Provisions

Art. 43. The provisions of Article 11 of Law No. 6.385, of December 7, 1976, apply to the administering institution and its administrators directly responsible for the administration of the Fund, regardless of other legal sanctions applicable.

Art. 44. The Securities and Exchange Commission will cancel the authorization for the Fund's operation if, within 90 (ninety) days from the date of authorization, it has not obtained the resources necessary to form its initial capital.

Art. 45. This Instruction enters into force on the date of its publication in the Official Gazette of the Union.

Signed by
ARY OSWALDO MATTOS FILHO
President