CVM Instruction No. 157 of August 21, 1991 (Revoked)

CVM INSTRUCTION NO. 157, OF AUGUST 21, 1991.

Provides for the constitution, administration, and operation of Mutual Privatization Funds capitalized with credits and securities representing Brazilian external debt, admitted within the scope of the National Privatization Program (PND).

THE PRESIDENT OF THE SECURITIES COMMISSION makes public that the Collegiate Body, in a session held on this date, and based on the provisions of item I of Article 8 of Law No. 6,385, of December 7, 1976, and Resolution No. 1,810, of March 27, 1991, of the National Monetary Council,

HAS RESOLVED:

CHAPTER I
On Constitution And Characteristics

Article 1. The Privatization Mutual Fund, constituted in the form of a closed-end condominium, in which only individuals or legal entities residing, domiciled, or headquartered abroad, foreign collective investment funds, or other entities participate, constitutes a pooling of resources destined for the acquisition of securities issued by companies that are to be privatized in accordance with Law No. 8,031 of April 12, 1990. ¹

Article 2. The Fund shall adopt the name Privatization Fund - Foreign Capital and may have its assets capitalized with:

I) medium and long-term external obligations (loans and financing), registered with the Central Bank of Brazil, subject to agreements on the restructuring of Brazilian external debt, and respective charges;

II) foreign currency deposits, constituted at the Central Bank of Brazil under the auspices of agreements resulting from the restructuring of Brazilian external debt, and respective charges;

III) bonuses resulting from agreements on the restructuring of Brazilian external debt, including those provided for in Decree No. 96,673, of September 12, 1988, and respective charges.

IV) foreign currency deposits constituted at the Central Bank of Brazil under the auspices of Resolutions Nos. 229, of September 1, 1972, 432, of June 23, 1977, 479, of June 20, 1978, 980, of December 13, 1984, 1,209, of October 30, 1986, 1,564, of January 16, 1989, and 1,646, of October 6, 1989, and Circular No. 230, of August 29, 1974, and respective charges, regardless of the legal nature of the original debtor (federal, state, and municipal public sector or private sector).

V) new resources ("fresh funds") entered into the Country as foreign capital investment, which are not subject to the minimum periods referred to in Articles 24 and 26 of this Instruction.

§1. The Fund may, by decision of the General Meeting of quota holders, take the form of an open-end condominium after 24 (twenty-four) months from the last acquisition of securities within the scope of the PND, with the minimum period of 12 (twelve) years for the permanence of resources in the Country maintained. ¹

§2. If the General Meeting of quota holders decides on the open-end form, the Fund may transform into a Conversion Mutual Fund - Foreign Capital, becoming governed by CVM Instruction No. 091, of December 6, 1988, including regarding the composition and diversification of its portfolio. ¹

Article 3. The constitution of the Privatization Fund - Foreign Capital, as well as the following acts regarding the Fund, shall depend on prior authorization from the Securities Commission:

I - amendment of the regulations;

II - appointment and substitution of the director responsible for the administration of the Fund;

III - substitution of the administering institution;

IV - transformation;

V - merger;

VI - incorporation;

VII - spin-off;

VIII - liquidation; and

IX - contracts entered into with intermediary agents.

§1. The Central Bank of Brazil shall be notified by the Securities Commission of the authorization of the Fund and the other acts provided for in this article.

§2. The request for authorization to constitute the Fund shall be accompanied by:

I - a resolution of the administering institution regarding the constitution of the Fund, which shall contain the full text of its regulations, which, after authorization, shall be registered at the Registry of Titles and Documents;

II - information regarding the accreditation of intermediary agents.

§3. The Fund's regulations shall provide for: ¹

I - investment policy to be adopted by the administering institution, assets that may compose the Fund's portfolio, and diversification policy;

II - duration period, which shall not be less than 24 (twenty-four) months, counted from the date of the last acquisition of securities within the scope of the PND;

III - management fees for obtaining conversion rights, or criteria for their fixation, remuneration of the fiduciary agent, when applicable, and other expenses and charges of the Fund;

IV - remuneration of administrators;

V - period of permanence of resources in the country, which shall not be less than 12 (twelve) years for each acquisition of securities within the scope of the PND;

VI - quota value for purposes of subscription and redemption; and

VII - period for the liquidation of each investment, through the redemption of quotas, which may be differentiated based on the percentage of the redemption value relative to the Fund's assets.

CHAPTER II
On Administration

Article 4. The administration of the Privatization Fund - Foreign Capital shall be exercised exclusively by a multiple bank with an investment portfolio, investment bank, brokerage firm, securities distribution company, or other equivalent entities, authorized by the Securities Commission to practice the activity provided for in Article 23 of Law No. 6,385, of December 7, 1976.

Sole Paragraph. The administration of the Fund shall be under the direct supervision and responsibility of the director of the administering institution.

Article 5. The administering institution may, with six months' prior notice, via letter, telex, or telegram addressed to each quota holder, resign from the administration of the Fund, being obliged, in the same act, to communicate its intention to the Securities Commission.

Article 6. The Securities Commission, in the exercise of its legal powers, may de-accredit the administering institution if it fails to comply with current regulations.

§1. The de-accreditation process shall begin with notification from the Securities Commission to the administering institution, indicating the facts supporting it and the period for presenting a defense, not less than 15 (fifteen) days counted from the date of receipt of the notification issued by the Commission.

§2. The Securities Commission's decision to de-accredit the administering institution must 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.

Article 7. The Central Bank of Brazil and/or the Department of the Federal Revenue may request the Securities Commission to de-accredit the administering Institution that violates current regulations within their respective competencies, including those related to the registration of foreign capital or the payment of income tax due on the remittance of earnings.

Article 8. In cases of resignation and de-accreditation, the administering institution is obliged to immediately convene the General Meeting to elect its successor or deliberate on the incorporation of the Fund into another Privatization Fund - Foreign Capital.

Sole Paragraph. The administering institution shall remain in the exercise of its functions until its effective substitution.

Article 9. The administering institution shall have the power to exercise all rights inherent to the securities comprising the portfolio of the Privatization Fund - Foreign Capital, including the right to sue and to attend and vote in general or special meetings, and may likewise open and operate bank accounts, freely acquire and alienate securities, settle disputes, and, in short, practice all acts necessary for the administration of the portfolio, observing the limitations of this Instruction.

Sole Paragraph. Custodian institutions of the Fund's securities may only comply with orders signed by the legal representative(s) or mandatary(ies) of the administering institution, duly accredited for this purpose.

Article 10. The administering institution's obligations include:

I - to maintain, at its own expense, updated and in perfect order:

a) records of quota holders and transfers of quotas;

b) minutes book of general meetings;

c) attendance book of quota holders;

d) archive of auditor opinions;

e) accounting regulations regarding the Fund's operations and assets;

f) documentation related to the Fund's operations; and

g) archive of foreign exchange contracts related to the inflow and outflow of foreign currency, including the respective documents that served as the basis for such transfers.

II - to receive dividends, bonuses, and any other earnings or values from the Fund;

III - to exercise or alienate subscription rights for shares and other securities;

IV - to employ, in defense of the quota holders' rights, the diligence required by the circumstances, performing necessary acts and ensuring them, including actions, appeals, and exceptions; and

V - to cover the Fund's advertising expenses.

CHAPTER III
On the General Meeting

Article 11. It is exclusively within the competence of the General Meeting of quota holders:

I - to annually review the accounts related to the Fund and deliberate on the financial statements presented by the administering institution;

II - to amend the Fund's regulations;

III - to deliberate on the substitution of the administering institution;

IV - to deliberate on the transformation, merger, incorporation, spin-off, and eventual liquidation of the Fund, observing the restriction established in item II of paragraph 3 of Article 3;

V - to deliberate on changes in the remuneration rate of the administering institution, including regarding profit participation; and

VI - to authorize the administering institution to subcontract individuals or legal entities to provide technical consulting services, and in this case, to decide whether the payment for these services constitutes a charge on the Fund.

Sole Paragraph. The Fund's regulations may be amended, without a General Meeting or consultation with quota holders, whenever such amendment results exclusively from the need to comply with requirements of the Securities Commission, due to legal or regulatory norms, provided that the necessary communication to quota holders is provided within 30 (thirty) days, in the periodicals designated for the disclosure of information about the Fund, when applicable.

Article 12. The convocation of the General Meeting shall be made by issuing a letter, telex, or telegram to all quota holders registered in the "Register of Quota Holders" up to 15 (fifteen) days before the date fixed for its holding, including, in the calculation of the period, the day of the holding of the General Meeting and excluding the day of issuance of the convocation instrument.

§1. If the General Meeting is not held, a second convocation shall be made with a minimum advance notice of 5 (five) business days.

§2. The convocation shall obligatorily contain the day, time, and location where the meeting will be held, and, even if briefly, the matters to be discussed.

§3. Regardless of the convocation provided for in this article, the General Meeting shall be considered regular if all quota holders attend.

§4. The General Meeting may be convened by the administering institution or by quota holders holding at least 5% (five percent) of the total quotas issued by the Fund.

Article 13. At the General Meeting of quota holders, which may be installed with any number, decisions shall be taken by the quota majority of those present, with each quota corresponding to one vote, except as provided in §1 of this article and §3 of Article 14.

§1. Decisions regarding the matters provided for in items III, IV, and V of Article 11 shall be taken, at first convocation, by a majority of the issued quotas, and, at second convocation, by a majority of the quotas of the quota holders present.

§2. Only quota holders registered in the "Register of Quota Holders" 15 (fifteen) days before the date fixed for its holding may vote at the General Meeting.

Article 14. Decisions of the General Meeting may be taken through a formal consultation process via letter, telex, or telegram addressed by the administering institution to each quota holder for a response within 30 (thirty) days.

§1. The consultation must contain all informative elements necessary for the exercise of the voting right.

§2. The absence of response shall be considered as consent by the quota holders, provided that such interpretation is expressly authorized by the Fund's regulations and stated in the consultation itself.

§3. The "quorum" for decision shall be an absolute majority of the issued quotas, regardless of the matter.

CHAPTER IV
On the Accreditation of Intermediaries Abroad

Article 15. The administering institution of the Privatization Fund - Foreign Capital may accredit intermediary agents, via contract, for the purpose of promoting management abroad to obtain credits eligible for conversion, aiming at the subscription or acquisition of quotas of the Funds, and to provide services of promotion, dissemination, and representation of the Fund and act as a fiduciary agent.

§1. Accredited agents must, as applicable, be qualified to operate and/or act as a fiduciary agent in the financial or capital markets of the country where they maintain their headquarters.

§2. Agency contracts shall only enter into force after being registered with the Securities Commission and the Central Bank of Brazil.

Article 16. Agency contracts, as applicable, shall contain, at a minimum, the following provisions:

I - reference to the Fund's regulations, a copy of which shall be part of the contract;

II - value of the contracted credits, eligible for conversion in the National Privatization Program;

III - management fees for obtaining credits eligible for conversion, borne by the investor;

IV - commitment of the intermediary agent to:

a) provide, in the form of guidance received from the administering institution, all elements necessary for the conversion process at the Central Bank of Brazil;

b) not subcontract the agency of management to obtain credits eligible for conversion, unless previously authorized by the administering institution;

c) submit for prior approval by the administering institution any advertising texts related to prospectuses and brochures, as well as periodic information;

d) ensure the investor has full knowledge of the regulatory provisions of the privatization process and the operation of the Fund; and

e) expressly state, in the document provided to the investor, the net value that will be applied in the subscription of quotas of the Fund;

V - service fee regarding the promotion, dissemination, and representation of the Fund;

VI. remuneration of the fiduciary agent.

CHAPTER V
On Net Worth

Article 17. The Fund's net worth is understood as the sum of available funds plus the value of the portfolio, plus receivables, minus liabilities.

Sole Paragraph. To determine the value of the portfolio, the criteria established by the Accounting Plan issued by the Securities Commission shall be observed.

CHAPTER VI
On the Issuance and Placement of Quotas

Article 18. The quotas of the Privatization Fund - Foreign Capital shall correspond to ideal fractions of its assets and shall take the form of book entries.

§1. Quotas shall be maintained in deposit accounts in the names of their holders.

§2. the quality of quota holder shall be proven by the statement of deposit accounts.

Article 19. Deposit account statements shall constitute the document capable of proving the administering institution's obligation to comply with the contractual provisions contained in the Fund's regulations, and the norms of this Instruction.

Sole Paragraph. Any restrictive or modifying clause of the obligation referred to in this article shall be deemed unwritten.

Article 20. Deposit account statements shall prove the ownership of the number of quotas belonging to the quota holders, according to the Fund's records.

Sole Paragraph. When the system of whole numbers of quotas is adopted, the residual value of reinvestments shall be maintained in a current account for future investments or, if requested, paid to the quota holder in cash.

Article 21. The issuance of quotas shall be carried out in accordance with the provisions of the Fund's regulations.

§1. Subscribed quotas shall be fully paid with the resources mentioned in items I, II, III, and IV of Article 2. For the resources referred to in items I, II, and III, the subscription date shall correspond to the date on which the holders of the mentioned resources formally express their interest in participating in the Fund, with a 25% (twenty-five percent) discount applied to their face value, except for criteria related to the investment registration by the Central Bank of Brazil.

§2. The full payment, in these cases, shall be conditioned on the effective use of such rights and resources in the National Privatization Program.

§3. In the case described in item IV of Article 2, the payment date shall be that on which the resources are effectively available to the administrator.

§4. The Fund's regulations may grant exclusive competence to the General Meeting to deliberate on the quota value for purposes of new issuance while the Fund remains in the form of a closed-end condominium. If there is no provision regarding this in the regulations, the quota value shall be determined based on an asset valuation performed in accordance with the Accounting Plan issued by the CVM.

Article 22. The quotas issued by the Fund shall be destined exclusively for subscription by individuals or legal entities residing, domiciled, or headquartered abroad, or collective investment funds or other entities constituted abroad.

CHAPTER VII
On the Transferability and Negotiability of Quotas

Article 23. The Fund's quotas may be negotiated and transferred only abroad, and this transfer must occur via a capable document, which shall only produce effects against the Fund after being presented to the administering institution, duly formalized.

§1. Upon presentation of the transfer request, the administering institution must effectuate it within a maximum period of 5 (five) business days, providing, in accordance with current regulations, the registration changes with the Central Bank of Brazil.

§2. The administering institution may suspend quota transfer services for a period not exceeding 15 (fifteen) consecutive days, prior to the dates of result distribution or realization, of the General Meeting, with the suspension of these services prohibited during the year for more than 90 (ninety) days.

CHAPTER VIII
On the Redemption of Quotas

Article 24. Total or partial redemption of invested resources shall be permitted in the following cases: ¹

I) before the period established in item II of paragraph 3 of Article 3 has elapsed:

a) for reinvestment of resources in investments in already privatized companies, within the scope of the National Privatization Program, or upon new privatizations within the scope of the said program; or

b) for transfer of the investment to another Privatization Fund - Foreign Capital.

II) after the waiting period cited in item I:

a) in shares or securities comprising the Fund's portfolio; or

b) in cash.

§1. In the redemption request, the quota holder must indicate the amount in cruzeiros or the number of quotas to be redeemed, the Fund to which they intend to transfer the corresponding resources, or the shares they intend to acquire.

§2. When the investment is transferred to another Fund, the originating administering institution must transfer the resources on the redemption date, through a payment order in favor of the receiving administering institution, which shall proceed with the immediate subscription and full payment of quotas.

§3. The administering institution of the Fund to which resources are transferred must, as soon as it receives them, notify the Securities Commission and the Central Bank of Brazil of the fact.

§4. In the case of redemption provided for in item "b" of item II of this article, the administering institution of the Fund must immediately notify the Securities Commission and the Central Bank of Brazil of the fact.

CHAPTER IX
On the Composition and Diversification of the Portfolio

Article 25. The Privatization Fund - Foreign Capital must maintain its assets applied exclusively in: ¹

I) securities issued by privatized companies, in accordance with Law No. 8,031, of April 12, 1990;

II) federal public debt securities;

III) matured debts of the Union, or guaranteed by it, from which their cancellation results, through the corresponding issuance of debentures by a company directly or indirectly controlled by the Union;

IV. Obligations of the National Development Fund (OFND).

Sole Paragraph. The Fund may, after 24 (twenty-four) months, counted from the date of each investment effectively made, sell securities and/or federal public debt securities from its portfolio to acquire shares or other securities issued by open companies. It may apply up to 30% (thirty percent) of the values obtained from the sale of securities issued by privatized companies and/or federal public debt securities in corporate participations in closed companies, always depending on prior authorization of the condominium owners or the entity that has received delegation of administrative powers from the Fund in accordance with item II of Article 32, observing the provisions contained in the Fund's regulations, observing the obligation to widely disseminate the terms of this faculty in the Fund's prospectus. ¹

CHAPTER X
On the Liquidation of the Investment

Article 26. The resources corresponding to each investment originating from the conversion of credits and securities of Brazilian external debt shall be subject to a minimum period of 12 (twelve) years of permanence in the Country, counted from the date of its effective conversion, after which the value calculated upon the liquidation of the investment may be returned. ¹

Art. 27. The settlement of the investment shall be effected through the redemption of quotas, in accordance with the provisions of the Fund's regulations and this Instruction.

§1st The request for investment settlement shall be submitted by the investor to the administrative institution, directly or through the intermediary agent.

§2nd Subject to the provisions of this Instruction, the settlement of the investment shall be effected in cash or in shares or in securities constituting the Fund's Portfolio, within the maximum period established in the Fund's regulations, counted from the date of receipt of the redemption request by the administrative institution.

CHAPTER XI
Financial Statements

Art. 28. The Fund shall have its own accounting records, distinct from those of the administrative institution, and must prepare a trial balance at the end of each month and semi-annual balance sheets.

Art. 29. The Fund's financial statements shall be subject to the accounting standards issued by the Securities and Exchange Commission (CVM), and shall be audited by an independent auditor registered with the Commission.

Sole paragraph. The Accounting Plan issued by the Securities and Exchange Commission shall encompass all standards for the valuation of assets comprising the Fund, as well as for the recognition of revenues and expenses inherent to securities and financial instruments, observing, where applicable, the guidance of the Central Bank of Brazil.

CHAPTER XII
Fiscal Treatment

Art. 30. The Privatization Fund - Foreign Capital shall be subject to the norms and rates of income tax established in the legislation of this tax, observing the fiscal regime of Law No. 4,131, of 09.03.62.

CHAPTER XIII
Prohibitions

Art. 31. It is prohibited for the administrative institution, on behalf of the Fund:

I - to receive deposits in a checking account, except for the case provided for in item IV of Article 2; II - to contract or effect loans, under any modality; III - to provide surety, guarantee, acceptance, or assume obligations in any other form; IV - to acquire or sell, outside the stock exchange auctions, shares of open companies registered for trading on the exchange, except, regarding acquisition, the cases of auctions of the National Privatization Program, subscriptions, and bonuses, observing, furthermore, the provisions of the sole paragraph of Article 25. V - to promise predetermined returns to quota holders.

Art. 32. It is prohibited for the administrative institution:
I - to sell Fund quotas on installment;
II - to delegate powers to manage and administer the Fund, except with specific authorization from the Securities and Exchange Commission.

Art. 33. The values comprising the Fund's Portfolio may not be subject to leasing, lending, pledge, or guarantee, except in cases expressly authorized by the Central Bank of Brazil, or by the Securities and Exchange Commission, within their respective areas of competence.

Art. 34. The Fund may not have cash on hand in excess of the amount necessary to cover the expenses listed in Article 35 or to pay for the redemption of the investment referred to in item "b" of item II of Article 24 and paragraph 2nd of Article 27.

CHAPTER XIV
Fund Charges

Art. 35. The Fund's charges shall include, in addition to the remuneration referred to in item IV of paragraph 3rd of Article 3 of this Instruction, the following expenses, which may be charged to the Fund by the administrative institution:

I - taxes, levies, or contributions, federal, state, municipal, or autonomous, that apply or may apply to the Fund's assets, rights, or obligations; II - expenses with printing, dispatch, and publication of reports and financial statements, forms, and periodic information, provided for in this Instruction or in relevant regulations; III - correspondence expenses of interest to the Fund, including communications to quota holders; IV - fees and expenses of the auditors responsible for reviewing the Fund's financial statements and analyzing its situation and the performance of the administrative institution; V - emoluments and commissions paid for operations of purchase and sale of securities and financial instruments of the Fund; VI - attorneys' fees, costs, and related expenses incurred in the defense of the Fund's interests, in court or out of court, including the value of the judgment, charged to the Fund, if applicable; VII - share of eventual losses not covered by insurance policies and not resulting directly from the fault or negligence of the administrative institution in the exercise of its functions; VIII - insurance premiums, as well as any expenses related to the transfer of resources from the Fund between banks; IX - any expenses inherent to the constitution or liquidation of the Fund or to the holding of a General Meeting of quota holders; X - custody fee for the Fund's securities and financial instruments; XI - fee for dissemination and representation services of the Fund owed to intermediary agents, if applicable; and XII - remuneration of the fiduciary agent, if applicable.

Sole paragraph. Other administrative and operational expenses, essential for the proper functioning of the Fund, may be attributed as charges, provided they are stipulated in an instrument previously approved by the Securities and Exchange Commission.

Art. 36. Promotion expenses to obtain, abroad, credits eligible for conversion shall not be imputed as charges of the Fund.

CHAPTER XV
Information

Art. 37. The administrative institution shall submit to the Securities and Exchange Commission, within a maximum period of 10 (ten) 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; c) statement of source and application of resources.

II - semi-annually:
a) balance sheets; b) copies of the information provided to quota holders, with the submission, within a maximum period of 60 (sixty) days after the end of the period to which they refer, of the audit opinion on the financial statements relating to the semester; c) information regarding the general conditions of insurance coverage, in the case of transit of securities; d) list of institutions responsible for providing custody services for the securities and financial instruments comprising the portfolio; e) list of judicial or extrajudicial demands, whether in defense of quota holders' rights or by them against the administration of the Fund, indicating the date of its start and the stage in which it stands.

Art. 38. The administrative institution shall, semi-annually, within a maximum period of 10 (ten) days after the end of the period, publicly disclose, through a medium approved by the Securities and Exchange Commission, a statement of the composition and diversification of investments.

Art. 39. The administrative institution shall provide, weekly, the value of the quota, the value and date of the last distribution, and the value of the Fund's net asset value to the Stock Exchange of the location of its headquarters, which shall disclose this information.

Art. 40. The administrative institution shall provide each quota holder, at least semi-annually, a document containing the following information:
a) number of quotas held and their value; b) return earned during the semester; c) value and composition of the portfolio, discriminating quantity, type, and quotation of the securities and financial instruments comprising it, value of each investment, and its percentage of the total portfolio value; d) balance sheets and other financial statements relating to the semester, accompanied by the independent auditor's opinion; e) list of institutions responsible for providing custody services for the securities and financial instruments comprising the portfolio; f) remuneration of the administrative institution.

CHAPTER XVI
Final Provisions

Art. 41. The competence to issue norms applicable to the registration of investments made in Privatization Funds - Foreign Capital belongs to the Central Bank of Brazil.

Art. 42. The provisions of Chapter V of Law No. 4,595, of December 31, 1964, and Article 11 of Law No. 6,385, of December 7, 1976, apply to the administrative institution and its administrators responsible for the administration of the Fund, regardless of other legal sanctions that may be applicable.

Art. 43. This Instruction shall enter into force on the date of its publication in the Official Gazette of the Union, revoking CVM Instruction No. 142, of April 16, 1991.

Signed by
JOSÉ ARTHUR ESCODRO
Acting President