CVM Instruction No. 206 of January 14, 1994

CVM INSTRUCTION NO. 206, OF JANUARY 14, 1994.

Establishes accounting standards applicable to the Financial Statements of Real Estate Investment Funds.

THE PRESIDENT OF THE SECURITIES AND EXCHANGE COMMISSION makes public that the Board, in a session held on this date, in view of the provisions of LAW NO. 6,385, of December 7, 1976, in accordance with articles 4 and 15 of LAW NO. 8,668, of June 25, 1993, and article 44 of CVM INSTRUCTION NO. 205, of January 14, 1994,

HAS RESOLVED:

Art. 1 The minimum information to be disclosed semiannually by the administering institutions of Real Estate Investment Funds comprises:

1 - Financial Statements;
1.1 - Balance Sheet;
1.2 - Income Statement;
1.3 - Cash Flow Statement.

2 - Opinion of the Independent Auditor.

3 - Report of the Representatives of the Quotaholders, when elected.

4 - Report of the Administering Institution.

§1 The financial statements, accompanied by explanatory notes, as well as the administration report, shall be disclosed exclusively in currency of constant purchasing power, in accordance with CVM INSTRUCTION NO. 191, of July 15, 1992, and shall also comply, insofar as applicable and not conflicting with this Instruction, with the legal norms and provisions applicable to publicly held companies.

§2 The following explanatory notes shall be disclosed, independently of those provided for in the norms referred to in the preceding paragraph:

I - analytical information on the position of real estate investments, at the date of closing of the period, detailing each undertaking, with address, total/built-up area, stage of completion, characteristics, net value applied, and market value, as specified in item "c" of paragraph III of article 17 of CVM INSTRUCTION NO. 205, as well as its movement during the period;

II - market value of other assets;

III - information on expenses with the Fund's administrative fee and with Investment Consultant, their percentages relative to the average semiannual net equity, and accounting appropriation made, identifying any portion incorporated into assets; and

IV - explanation of the calculation of the distribution of results to quotaholders.

Art. 2 The Balance Sheet shall be prepared according to the following structure:

I - Current Assets - including cash, financial applications, real estate applications, prepaid expenses, and other rights and values realizable within a period of 360 days;

II - Long-Term Receivables - representing financial applications, real estate applications, and other rights and values realizable after 360 days;

III - Non-Current Assets - comprising investments in properties for Rent and Deferred expenses, with the purpose of recording the application of resources that will evidently contribute to the formation of the result of one or more fiscal years and that cannot be directly allocated to other assets;

IV - Current Liabilities - including the Fund's obligations, including provisions constituted according to the accrual basis, with maturity up to 360 days;

V - Long-Term Payables - with the same obligations, whose maturities are greater than 360 days;

VI - Results of Future Fiscal Years - comprising values received in advance, relating to revenues of competence of future periods, net of their respective costs and expenses associated with their obtaining;

VII - Shareholders' Equity - comprising investment quotas subscribed, possible reserves, and accumulated profits or losses.

Sole Paragraph. Real estate applications, referred to in items I and II of this article, are understood to be properties for sale, accounts receivable from leasing, from alienation of rights over properties, and other related transactions.

Art. 3 In the balance sheet, assets and liabilities shall be evaluated according to the following criteria:

I - Current Assets and Long-Term Receivables - financial applications and credits shall be expressed in currency of purchasing power of the date of closing of the period, with earnings accrued up to that date appropriated. A provision for loss shall be constituted whenever the market value of an asset is lower than its book value. In the case where a security does not have a market value, the equivalent value of a security with similar risk characteristics, interest rate, and maturity shall be adopted. Alternatively, the estimated market value may be determined by discounting the expected cash flow of the security, by the prevailing interest rate in the market for financial assets with similar maturity and risk. The other non-monetary items shall be maintained at their monetarily updated cost;

II - Non-Current Assets - applications in properties for rent shall be evaluated at monetarily updated cost, corrected by accumulated depreciation, calculated consistently with the rate compatible with the economically useful life of the asset, which shall be disclosed in an explanatory note. A provision for loss shall be accounted for when the recovery of the capital applied in the undertaking cannot be predicted. Deferred expenses shall be evaluated at monetarily updated cost, corrected by accumulated amortization and provisions for losses incurred on a permanent basis;

III - Current Liabilities and Long-Term Payables - shall be evaluated in currency of purchasing power of the date of closing of the period, considering charges due and the provisioning of contingent values; and

IV - Results of Future Fiscal Years - shall be evaluated at their present values from the times of the transactions, monetarily updated; and

V - Shareholders' Equity - its elements shall be subject to monetary update, except for the annual result, which shall be corrected monetarily from the following year.

§1 Accounts receivable from the sale of properties shall be presented at their present value, as with other monetary assets and liabilities.

§2 In transactions for the sale of properties, the corresponding revenues must be recognized based on the present value of the transaction at the date of transfer of ownership of the asset, at which time eventual future costs, expressed at present value, must be provisioned.

§3 The provisioned costs shall be subject to monetary update by the Civil Construction Index (ICC) - Regional, respecting the location of each project, or by the contract index, for projects contracted with stipulated prices, and by a periodic review, to be made at least every quarter, for estimated costs.

§4 Values received by Real Estate Investment Funds, relating to the sale of units to be delivered, shall be recorded in Current Liabilities and/or Long-Term Payables, as customer advances.

§5 The monetary update of non-monetary balance sheet items shall be made based on the UMC - Accounting Monetary Unit.

§6 Values relating to the commercialization of business points in "shopping malls" and similar ("res sperata") shall be recognized as revenue over the periods of their respective initial lease contracts, and their accounting as assets of any nature before the period of their registration in revenue is not admitted.

§7 In explanatory notes to the financial statements, the administering institution of the Real Estate Investment Fund shall inform the average period of appropriation to revenue of the values provided for in the preceding paragraph.

§8 The leasing or renting of assets belonging to the Fund, which transfer substantially to the lessee the benefits and risks inherent to the ownership of the asset, must be accounted for as a sale of asset when they fall under any of the following hypotheses:

a) - at the end of the contract, ownership is automatically transferred to the lessee, or b) - the contract provides for an option to purchase the asset for a nominal value, or c) - the end of the contract is equal to or greater than 75% of the estimated useful life of the asset, or d) - the present value of the rents, at the time of the contract, is greater than 80% of the market value of the asset.

Art. 4 Semiannually, within 60 (sixty) days after the months of December and June, the administering institutions of Real Estate Investment Funds shall send to the CVM the minimum information provided for in Article 1 of this Instruction.

Sole Paragraph. For comparability purposes, the financial statements referred to in Article 1, closing the first semester and the annual fiscal year, shall be compared with the respective financial statements of the same periods of the previous year.

Art. 5 This Instruction shall enter into force on the date of its publication, with the provisions contrary hereto repealed.

Original signed by
THOMÁS TOSTA DE SÁ
President