Lima, 12 February 2003

S.B.S. Resolution No. 167-2003

The Superintendent of Banking and Insurance

WHEREAS:

That, subsection q) of Article 25 of the Single Ordered Text of the Law of the Private System of Administration of Pension Funds, approved by Supreme Decree No. 054-97-EF and its amendments, hereinafter the Law, allows the AFP to invest in financial instruments issued or guaranteed by States and Central Banks of foreign countries; as well as in shares and securities representing rights over shares in deposit registered in Stock Exchanges; in debt instruments, participation quotas of mutual funds and risk hedging operations issued by foreign institutions;

That, by Resolution No. 233-2000-EF/SAFP the Regulation of Investments of Pension Funds Abroad was approved;

That, in order to achieve greater diversification of the resources of the Managed Portfolios, it is convenient to expand the currencies of denomination of the investment instruments, the places of issuance or registration of the investment instruments and of the custody institutions, the settlement periods of the transactions carried out, as well as to allow investment in foreign exchange risk hedging operations;

That, by Official Letter No. GG-124-2002 of 26 July 2002 the Central Reserve Bank of Peru communicated to this Superintendency the favorable opinion of its board of directors regarding the amendments to the aforementioned Regulation, in accordance with the provisions of Article 25 of the Law;

In accordance with the opinion of the Deputy Superintendencies of Private Administrators of Pension Funds and of Legal Advice; and,

In use of the powers conferred by numeral 9 of Article 349 of the General Law of the Financial System and the Insurance System and Organic Law of the Superintendency of Banking and Insurance, Law No. 26702 and its amendments, subsection a) of Article 57 of the Law and, the Third Final and Transitory Provision of the Regulation of the Law, approved by Supreme Decree No. 004-98-EF;

RESOLVES:

Article 1.- To approve the Regulation for the Investment of Pension Funds Abroad, which is part of this Resolution.

Article 2.- This Resolution shall enter into force on the day following its publication in the Official Gazette El Peruano, from which date Resolution No. 233-2000-EF/SAFP shall be without effect.

JUAN JOSÉ MARTHANS LEÓN
Superintendent of Banking and Insurance

REGULATION FOR THE INVESTMENT OF PENSION FUNDS ABROAD

CHAPTER I GENERAL PROVISIONS

Scope

Article 1.-

This Regulation establishes the provisions that regulate the investment of the resources of the Portfolios Managed by the AFP in the investment instruments and risk hedging operations indicated in subsection q) of Article 25 of the Law.

Definitions

Article 2.-

For purposes of this Regulation, the following terms shall be understood to refer to:

a) Underlying asset: Asset on which forward, futures and option contracts are made, and whose quotation serves as a reference for the transfer of the asset or for the compensation of differences, with respect to the exercise price, at the maturity of the aforementioned contracts, as applicable. Likewise, it includes the reference assets on which structured securities are constituted.

b) AFP: Private administrators of pension funds.

c) Banks: Financial institutions duly authorized by the corresponding regulatory authorities to take deposits from the public or to carry out investment banking activities, among others.

d) Benchmark: Index of investment instruments used as a reference parameter for the evaluation of the performance of the profitability obtained by a given investment portfolio.

e) Brokers-dealers: Institutions duly authorized by the regulatory authorities of the securities or financial markets to provide the securities intermediation service on their own account or on behalf of third parties, by virtue of compliance with the respective registration requirements in the corresponding registries and the respective minimum capital requirements.

f) Clearing Houses: Entities that act as counterparties in futures and options contracts entered into in the centralized negotiation mechanisms of these operations.

g) Managed Portfolios: Total assets in which the resources of the pension fund and the reserve are invested.

h) Risk hedging: Operation whose sole objective is to limit the risks related to fluctuations in exchange rates between currencies.

i) Commodities: Primary or basic merchandise consisting of physical products, which can be exchanged in a secondary market.

j) Forward contracts: Non-standardized contracts through which the buyer or seller acquires the obligation to buy or sell, respectively, within a pre-established future term, a determined number of units of a previously defined and characterized underlying asset, at a predefined price at the time of entering into the contract.

k) Futures contracts: Standardized contracts through which the buyer or seller acquires the obligation to buy or sell, respectively, within a pre-established future term, a determined number of units of a previously defined and characterized underlying asset, at a predefined price at the time of entering into the contract.

l) Option contracts: Standardized contracts through which the buyer or holder acquires, for a pre-established term, the right to buy or sell, as applicable, at a pre-fixed price, a determined number of units of an underlying asset, previously defined and duly characterized.

m) Custody: Service provided by specialized institutions that includes the physical safekeeping, the correct allocation of securities, the verification of settlement, the collection of benefits, the valuation of securities in custody, the payment of taxes and others related to these services.

n) Delivery versus payment: Modality through which the settlement of traded securities is carried out through the delivery of the same in exchange for the receipt of cash according to the terms agreed upon in the transaction.

o) Derivatives: Financial instruments whose value is determined by the value of other financial instruments known as underlying assets.

p) Issue or launch option contracts: Act by which an agent (issuer) undertakes to buy or sell, as applicable, the underlying asset of an option contract when the buyer or holder of the option exercises it.

q) Mutual funds: Open-end funds, closed-end funds, unit investment trust and others with similar characteristics that the Superintendency determines.

r) Custody institutions: Institutions authorized by the regulatory authorities of the financial markets to provide custody services.

s) Depository institutions: Institutions authorized by the regulatory authorities of the securities or financial markets to provide centralized securities depository services. Such services include the registration of securities issued by book-entry, the activities of physical safekeeping of securities, the clearing and settlement of transactions and the collection and payment of benefits, on a scale that involves a significant portion of the assets in circulation in the securities markets.

t) Institutional investors: Investors called “Qualified Institutional Investors” authorized by the regulatory entities of the corresponding markets.

u) Margin: Requirement in cash or investment instruments, which an investor must establish to guarantee to its counterparty the fulfillment of forward or futures contracts.

v) Centralized trading mechanisms: Trading mechanisms that are regulated and supervised by the regulatory authorities of the securities markets.

w) Omnibus account: Account denominated in favor of a legal entity which is used in representation of a group of clients, who are the final beneficiaries of the rights or obligations generated by said account.

x) International organizations: Organizations of a supranational nature.

y) Over-the-counter (OTC): Trading mechanisms that are not regulated or supervised by the regulatory authorities of the securities markets.

z) Special purpose estates: Estates that serve as backing for the payment of the rights incorporated in securities issued in a securitization process.

a1) Exercise price: Pre-established price at which the purchase or sale of the underlying asset of option contracts must be made, in case the right granted by them is exercised.

b1) Option premium: Price paid for the right to buy or sell an option contract.

c1) Rebates: Commission refund policy applied by mutual fund management companies to the owners of their investment shares.

d1) Superintendency Registry: Registry of natural persons, legal entities, securities and acts established by the legal and administrative norms on the matter, in order to contribute to a better organization of the Private Pension System, in accordance with the provisions of Title VIII of the Compendium of Regulatory Superintendency Norms of the Private Pension Fund Administration System.

e1) Exchange Risk: Probability of loss generated by the appreciation or depreciation of the currencies in which the investments made with the resources of the Managed Portfolios are denominated.

f1) Superintendency: Superintendency of Banking and Insurance. g1) Settlement: Settlement and clearing resulting from the trading of a security that is carried out within generally pre-established terms. The successful conclusion of the settlement and clearing determines the transfer of ownership of the securities between the trading participants.

h1) Mutual fund management companies: Institutions duly authorized and supervised by the regulatory authorities of the securities or financial markets to manage mutual funds and place their investment shares among investors.

i1) Net terms (in the case of forward and futures contracts): Result of subtracting the value of the underlying asset bought forward or future from the value of the underlying asset sold forward or future. This netting will be carried out only in the case that the contracts have equal maturity dates or that differ, at most, by thirty calendar days, and have the same underlying asset.

j1) Net terms (in the case of option contracts): Result of subtracting the value of the underlying asset that one has the right to buy from that which one has the right to sell. This netting will be carried out only in the case in which the option contracts have the same maturity, underlying asset and exercise price.

k1) Securitization: Process through which an estate is constituted whose exclusive purpose is to back the payment of the rights conferred to the holders of securities issued against said estate. It also comprises the transfer of the assets to the aforementioned estate and the issuance of the respective securities.

l1) Guaranteed debt securities: Debt securities that have the guarantee of a State or a foreign central bank, when one of these must respond for the entire principal, plus the corresponding interest.

m1) Convertible securities: Debt securities that grant the holder or the issuer the option to convert them into another type of instrument or asset.

n1) Structured securities: Debt securities that incorporate into their structure derivative instruments or units of participation in mutual funds that index the performance of the securities to the price variation of other investment instruments called underlying assets.

Eligible instruments and operations

Article 3.-

The AFPs are authorized to invest abroad the resources of the Managed Portfolios in the following investment instruments:

a) Debt securities, time deposits and time deposit certificates;

b) Units of participation in mutual funds; and,

c) Shares and securities representing rights over shares on deposit registered in stock exchanges.

Likewise, the AFPs may invest abroad the resources of the Managed Portfolios in the following risk hedging operations:

d) Forward contracts;

e) Futures contracts; and,

f) Option contracts.

The investment instruments and operations indicated in the preceding paragraphs must be expressed in the currency of a State that possesses, for its long-term debt securities, an international rating not lower than "AA", in accordance with the rating equivalences that the Superintendence establishes by Circular, granted by at least two of the rating agencies indicated in said Circular.

CHAPTER II REQUIREMENTS FOR INVESTMENT IN ELIGIBLE INSTRUMENTS AND OPERATIONS

Requirements for investment in eligible instruments and operations

Article 4.-

The AFP, the issuer of the investment instruments, the counterparty of the risk hedging operations or the mutual fund management company, which presents the investment instrument or the operations indicated in article 3 of this regulation must send to the Superintendence the information and documentation that accredits compliance with the requirements established in articles 5, 6, 7 or 8 of this Regulation, as applicable, in accordance with the provisions of Title VIII of the Compendium of Regulatory Superintendence Norms of the Private Pension System. At the discretion of the Superintendence, it may request additional information beyond that included in the aforementioned articles.

The Superintendence will inform the registration of the aforementioned instruments and operations in the Superintendence Registry to the AFPs that have not presented the information referred to in the preceding paragraph.

Debt instruments

Article 5.-

The requirements for investment in debt securities, time deposits and time deposit certificates indicated in subsection a) of article 3 of this regulation are:

a) The debt securities are issued by States, central banks, international organizations, financial or non-financial institutions and constitute public offerings;

b) The time deposits and time deposit certificates are issued by financial institutions and constitute negotiable securities;

c) The debt securities, time deposits and time deposit certificates are issued or registered in the States referred to in the last paragraph of article 3 of this regulation;

d) The debt securities, time deposits and time deposit certificates are issued in book-entry form registered in depository institutions;

e) The debt securities, time deposits and time deposit certificates possess a credit risk rating not lower than "BBB-" for long-term debt instruments and not lower than A-3 for short-term debt instruments, in accordance with the rating equivalences that the Superintendence establishes by Circular, granted by at least two of the rating agencies indicated in said Circular. Likewise, in the case of instruments that are fully guaranteed, in one hundred percent (100%) of the principal plus interest, by States or central banks, the risk rating of the same corresponds to the international ratings obtained by the instruments issued by said States or central banks. On the other hand, in the event that the instrument ceases to be rated by at least one of the rating agencies, or any of them lowers the rating granted below the minimum required rating, the rating of the instrument will pass to category V according to the equivalences that the Superintendence establishes by Circular. In that event, the AFPs must sell said securities within a period no greater than thirty (30) calendar days or, in those cases duly justified, within a longer period determined by the Superintendence;

f) The debt securities possess a value not less than one hundred million United States dollars (US$ 100 000 000) per series or its equivalent in the currencies indicated in article 3 of this regulation;

g) The underlying assets of the debt securities, time deposits and time deposit certificates that have the characteristic of being structured securities, are made up of indices of debt securities, indices of shares and securities representing rights over shares on deposit registered in stock exchanges, commodities, foreign currencies, units of participation in mutual funds or others authorized by the Superintendence;

h) The payment of the principal of the debt securities, time deposits and time deposit certificates that have the characteristic of being structured securities is guaranteed in one hundred percent (100%) at maturity; and the volatility risk of the performance of said instruments is fully covered by the acquisition of options or units of participation in mutual funds;

i) Debt securities, time deposits and time deposit certificates that have the characteristic of being convertible securities may only be exchanged for investment instruments that are registered in the Registry of the Superintendency; and,

j) Debt securities representing securitized assets correspond only to special purpose estates made up of mortgage loans, credit card receivables, automotive loans or trade accounts receivable and other assets that the Superintendency determines.

Units of participation of mutual funds

Article 6.-

The requirements for investment in units of participation of mutual funds indicated in subsection b) of Article 3 of this rule are:

a) The investments of the mutual funds are made in the instruments indicated in subsections a) and c) of the aforementioned Article 3, in a combination thereof or in the indices that have been constructed from said instruments. For these purposes, said indices must correspond to those whose dissemination and disclosure have a daily frequency and are of a mass nature;

b) The instruments indicated in subsections a) and c) of Article 3 of this rule, in which the investments of the mutual funds are made, are issued or registered in the States referred to in the last paragraph of Article 3 of this rule;

c) The investments of the mutual funds in the instruments indicated in subsection a) of Article 3 of this rule, or in the indices that have been constructed from said instruments, specialize in securities whose credit ratings made in any of the States referred to in the last paragraph of Article 3 of this rule are not lower than investment grade, "BBB-" for long-term instruments or "A-3" for short-term instruments. The rating of the instruments and of the debt of the States indicated above shall be considered in accordance with the risk classification equivalences that the Superintendency establishes by Circular, granted by at least two of the rating agencies indicated in said Circular;

d) The investments of the mutual funds in the instruments indicated in subsection c) of Article 3 of this rule, or in the indices that have been constructed from said instruments, specialize in securities that comply with the following: (i) they are constituted in public offerings; (ii) they are registered and listed in centralized negotiation mechanisms; and, (iii) they are not issued by recently constituted companies (3 years) or in the process of bankruptcy or liquidation;

e) For the purposes of the provisions of subsections c) and d) above, the investments of a mutual fund shall be considered specialized when the value of the assets that comply with the criteria indicated in said subsections represents at least sixty-five percent (65%) of the value of the mutual fund's equity;

f) The mutual fund management companies, or their respective parent companies, are supervised and regulated by the corresponding securities market or

financial authorities of any State referred to in the last paragraph of Article 3 of this rule. For this purpose, among others, the registration in the corresponding regulatory bodies shall be verified. Likewise, the management company must show a direct relationship in terms of management and equity with the parent company or the group to which it belongs;

g) The experience of the mutual fund management company, or its parent company, in fund management is not less than ten (10) years;

h) The amount of assets managed by the mutual fund management company is not less than ten billion United States dollars (US$ 10 000 000 000) or its equivalent in the currencies indicated in Article 3 of this rule;

i) The total value of the mutual fund's equity is not less than fifty million United States dollars (US$ 50 000 000) or its equivalent in the currencies indicated in Article 3 of this Regulation;

j) The mutual fund is diversified. For this purpose, it shall be verified that in no case do the ten (10) largest participants of the mutual fund together have a concentration greater than fifty percent (50%) of the value of said fund. Likewise, in no case may an individual participant concentrate more than twenty percent (20%) of the value of the mutual fund. For these purposes, omnibus account accounts shall be excluded, which must be duly justified;

k) The mutual fund does not have indebtedness as one of its policies, unless it is only temporary and due to liquidity requirements. This restriction must be explicitly indicated within the investment policy;

l) The mutual fund uses derivatives only with the express objective of risk hedging. Likewise, that the assets offered as collateral by the mutual fund are solely a consequence of carrying out said risk hedging operations;

m) The liquidity of the mutual fund's units of participation is high. For this purpose, open mutual funds must not have restrictions on the subscription and redemption of their units of participation, which must be made on a daily basis. Likewise, the unit value must be determined daily and its dissemination must be of a public nature. In the case of closed-end mutual funds, these must be listed on one of the centralized trading mechanisms referred to in subsection b) of Article 7, the trading frequency of their participation quotas must not be less than 70% and the average daily trading volume thereof must not be less than US$ 100 thousand, in both cases measured over annual periods, or their equivalent in the currencies indicated in the last paragraph of Article 3 of this regulation.

n) The valuation of the investment portfolios of mutual funds is carried out on a daily basis, respecting international principles of valuation and presentation of results;

Shares and securities representing rights over shares in deposit

Article 7.-

The requirements for investment in shares and securities representing rights over shares in deposit registered on a stock exchange indicated in subsection c) of Article 3 of this norm are:

a) The issuers of the shares and securities representing rights over shares in deposit registered on stock exchanges are supervised by the securities or financial market authorities of a State referred to in the last paragraph of Article 3 of this norm;

b) The shares and securities representing rights over shares in deposit registered on stock exchanges are listed on one of the centralized trading mechanisms approved by the Superintendency. The Superintendency shall approve, by Circular, ex officio or at the request of the AFPs, the list of centralized trading mechanisms, taking into consideration, among others, country risk, the characteristics of the institutional systems of regulation, supervision and sanction over the issuer and its securities in the respective country, the liquidity of the secondary market,

and the minimum requirements that the stock exchanges demand from issuers and their respective securities for them to be listed thereon.

c) The shares and securities representing rights over shares in deposit registered on stock exchanges have an average market capitalization, during the last twelve (12) months, of not less than five hundred million United States dollars (US$ 500 000 000) or their equivalent in the currencies indicated in Article 3 of this norm. However, the securities representing rights over shares in deposit registered on stock exchanges that represent rights over indices or baskets of shares that comply with the provisions of this regulation must have an average market capitalization, over the last twelve (12) months, of not less than fifty million United States dollars (US$ 50 000 000) or their equivalent in the currencies indicated in Article 3 of this norm.

Risk hedging operations

Article 8.-

The requirements for investment in operations with forward, futures and options contracts indicated in subsections d), e) and f) of Article 3 of this norm are:

a) The AFPs, for the sole purpose of obtaining hedging against exchange rate risk, may only enter into, on behalf of the Managed Portfolios, purchase or sale contracts of forwards and futures, provided that the underlying assets thereof are the currencies indicated in Article 3 of this norm; for the same purpose, they may acquire purchase or sale options in the aforementioned currencies. The AFPs are prohibited from issuing or launching option contracts with the resources of the Managed Portfolios.

b) In forward contracts, only banks that are supervised by the financial market authorities of a State referred to in the last paragraph of Article 3 of this norm may be counterparties. Likewise, the banks must have, for their long-term debt securities, a risk classification of not less than "A" and for their short-term instruments a risk classification of not less than "A-1", in accordance with the risk classification equivalences that the Superintendency establishes by Circular, granted by at least two of the rating agencies indicated in the aforementioned Circular.

c) The clearing houses of the futures and options exchanges are supervised by the securities or financial market authorities of a State referred to in the last paragraph of Article 3 of this norm. For these purposes, the Superintendency shall approve, by Circular, ex officio or at the request of the AFPs, the list of clearing houses referred to in this subsection, considering, among others, their equity, volume of contracts traded, degree of compliance with obligations arising from contracts, experience, regulatory systems to which it is subject by virtue of the competent regulatory bodies and authorities in its jurisdiction, self-regulatory systems implemented, regulation and control systems over counterparties and the type of safeguard against counterparty contract default.

CHAPTER III INVESTMENT LIMITS

Maximum investment limits

Article 9.-

The investments of the AFPs in the investment instruments and in the risk hedging operations referred to in Article 3 of this norm shall be subject to the maximum investment limits indicated in Articles 10, 11 and 12 of this regulation, which refer to the following types of limits:

a) Global limit for investment abroad;

b) Limits by issuer, series or management company; and,

c) Limits on the execution of risk hedging operations.

Global limit for investment abroad

Article 10.-

The total sum of investments made abroad must not exceed the maximum investment limit established for this purpose in article 25° of the Law, according to the maximum percentages that, in accordance with the powers indicated in said article, the Central Reserve Bank of Peru determines.

Within the investments referred to in the preceding paragraph, investments made with the resources of the Managed Portfolios in option contracts are considered, based on the valuation of the premiums of said options. Likewise, the value of the resources delivered as guarantee margins for operations carried out with forward and futures contracts is included.

Limits per issuer, series or management company

Article 11.-

The investments made by the AFP with the resources of the Managed Portfolios shall be subject to the following limits per issuer, series or management company:

a) The sum of the investments made in the investment instruments issued by the same State, central bank or international organization that hold for their long-term debt securities an international rating of "AAA", in accordance with the rating equivalences that the Superintendency establishes by Circular, granted by at least two rating companies indicated in the aforementioned Circular, must not exceed four percent (4%) of the value of the Managed Portfolio;

b) The sum of the investments made in the investment instruments indicated in subparagraphs a) and c) of article 3° of this Regulation, issued by the same financial or non-financial institution, or by the same State, central bank or international organization not considered in subparagraph a) of this article, must not exceed one-half percent (0.5%) of the value of the Managed Portfolio;

c) For the purposes of calculating the limits indicated in subparagraphs a) and b) above, forward contracts calculated based on the underlying asset and measured in net terms must be included.

d) The sum of the investments made in participation units of the same mutual fund must not exceed one percent (1%) of the value of the Managed Portfolio;

e) The sum of the investments made in the debt securities referred to in subparagraph a) of article 3° of this regulation must not exceed ten percent (10%) of the value of each series in circulation;

f) The sum of the investments made in shares and securities representing rights over shares on deposit registered in stock exchanges, indicated in subparagraph c) of article 3° of this regulation, must not exceed five percent (5%) of the value of each series in circulation;

g) The sum of the investments made in the participation units of the mutual funds mentioned in subparagraph b) of article 3° of this regulation must not exceed ten percent (10%) of the value of the mutual fund's equity;

h) The sum of the investments made in participation units of mutual funds issued by the same mutual fund management company must not exceed three percent (3%) of the value of the Managed Portfolio;

Limit on carrying out risk hedging operations

Article 12.-

The risk hedging operations carried out by the AFP with the resources of the Managed Portfolios shall be subject to the following limits:

a) The sum of the operations in forward contracts with the same counterparty entity, calculated based on the underlying asset and measured in net terms, must not exceed one-half percent (0.5%) of the value of the Managed Portfolio;

b) The sum of the premiums of the call and put option contracts, measured based on the valuation of the option premiums, must not exceed one-half percent (0.5%) of the value of the Managed Portfolio;

c) The sum of the absolute values of the operations with forward, futures and option contracts, calculated based on the value of the underlying assets of these contracts and measured in net terms, must not exceed the global limit of investment abroad;

d) The sum of the purchases of foreign currencies made through forward and futures contracts, plus the sum of the amounts of foreign currencies that one has the right to acquire through the possession of option contracts, calculated based on the value of the underlying asset of said operations and measured in net terms, must not exceed the total value of the investments abroad. In the case of the same currency, said sum may not exceed the total value invested abroad minus the sum of the investments abroad in that currency; and,

e) The sum of the sales of foreign currencies made through forward and futures contracts, plus the sum of the amounts of foreign currencies that one has the right to sell through the possession of option contracts, calculated based on the value of the underlying asset of said operations and measured in net terms, must not exceed the total value of the investments abroad. In the case of the same currency, said sum must not exceed the total value invested abroad in that currency.

f) The sum of the resources delivered as guarantee margins in risk hedging operations may not exceed two percent (2%) of the value of the Managed Portfolio.

CHAPTER IV NEGOTIATION

Markets (trading venues)

Article 13.-

The negotiation of the investment instruments referred to in article 3° of this regulation may be carried out in the centralized negotiation mechanisms authorized in Peru and abroad. However, in the case of the investment instruments and risk hedging operations referred to in subparagraphs a), b) and d) of article 3° of this regulation, negotiation may also be carried out in the OTC markets abroad.

For this purpose, negotiation in foreign OTC markets shall be restricted to brokers-dealers, banks, institutional investors and mutual fund management companies that are duly authorized, regulated and supervised by the competent authorities of the corresponding markets.

Acquisition and disposal

Article 14.-

The period for settlement, corresponding to transactions carried out with the instruments indicated in article 3 of this regulation, shall not exceed the number of days representing the usages and customs established in the corresponding markets (trading venues).

The recording of purchases and sales in the assets of the Managed Portfolios shall be made on the same day of the negotiation, and must be supported by the corresponding confirmations and settlements. The charges and credits in the current accounts of the Managed Portfolios for the payment or collection of purchases or sales, as applicable, of the instruments indicated in article 3 of this regulation, shall be made on the settlement date, under the delivery versus payment modality.

The AFPs may not enter into repurchase or sale agreements or other similar agreements that affect the resources of the Managed Portfolios. Nor may they pledge or give as guarantee the securities acquired for the Fund, except as provided in article 15 of this regulation. Likewise, they may not acquire investment instruments that are subject to pledge, embargo, prohibitions or limitations of any kind, both with respect to their acquisition or disposal, as well as with respect to their flows or the recovery of the investment.

Guarantee margins

Article 15.-

The AFPs may grant guarantee margins with the resources of the Managed Portfolio, for the purpose of carrying out the operations indicated in subparagraphs d) and e) of article 3 of this regulation. For this purpose, the AFPs may deliver to the counterparty entities with which they contract abroad, cash or investment instruments. The investment instruments that may be delivered as guarantee margin must correspond to any of those mentioned in subparagraphs a) and c) of the aforementioned article 3.

The guarantee margins delivered to the Managed Portfolios must be credited in their favor on the same day they originate. In the event of non-compliance by the counterparty, the AFPs may retain the guarantee margins constituted by investment instruments that comply with the requirements of this regulation; otherwise, the Superintendency shall establish a period for their sale.

CHAPTER V CUSTODY

Custody current accounts

Article 16.-

The AFPs shall open current accounts in the name of the Managed Portfolios denominated in any of the currencies indicated in article 3 of this regulation, in domestic or foreign banks designated by the respective foreign custody institution contracted by the AFP.

In the case of foreign banks, if they are not the custody institutions themselves, they must have a risk rating, for their long-term debt, of no less than "A" and for their short-term debt no less than "A-1", according to the classification equivalences that the Superintendency establishes by Circular, granted by at least two of the rating agencies indicated in the aforementioned Circular. These accounts shall be used exclusively to make charges and credits resulting from transactions carried out with the investment instruments referred to in the aforementioned article 3 in local or foreign markets. The interest and any other gains generated by these accounts must be credited in favor of the Managed Portfolios.

Custody

Article 17.-

Each AFP shall maintain the total value of the investments made in the instruments referred to in article 3 of this regulation, acquired with the resources of the Managed Portfolios and capable of being custodied, in a single foreign custody institution, which must be duly registered in the foreign custody institutions section of the Superintendency's registry.

To provide custody services, such foreign custody institutions must satisfy the following requirements:

a) Be a bank, constituted as a global custody institution, duly registered as a custody institution with the corresponding regulatory authority of a State referred to in the last paragraph of article 3 of this regulation;

b) Be a participant, directly or through a subcustodian, in the depository institutions of foreign instruments and debt securities, except for instruments and debt securities that by the nature of their issuance are not registered in depository institutions;

c) Maintain a risk rating of its long-term debt no less than "A", and of its short-term debt no less than "A-1", according to the rating equivalences that the Superintendency establishes by Circular, granted by at least two of the rating agencies indicated in the aforementioned Circular. In the event of a reduction in the rating of the corresponding custody institution such that it represents a risk category lower than the minimum established in this subparagraph, the AFP shall be unable to continue operating with said custody institution, unless it complies with the requirements indicated in the following paragraph. Alternatively, if the custody institution does not comply with the foregoing requirement, it must satisfy the following requirements: (i) one of its main income-generating activities is the custody business; (ii) it has extensive experience providing custody services among pension funds; (iii) it has at least one rating, granted to it or to any of its debt instruments that complies with the guidelines set forth in the preceding paragraph, in accordance with the equivalences that the Superintendency establishes by Circular; and, (iv) the average equity of the custody institution over the last three years is not less than two hundred million United States dollars (US$ 200 000 000) or its equivalent in the currencies indicated in article 3 of this regulation.

d) Be able to open and administer cash accounts and securities accounts in the name of the Managed Portfolios, guaranteeing the operation of a centralized file with daily updating of the detailed information on the investment instruments belonging to said portfolios;

e) Guarantee the execution of the credits and debits corresponding to the rights and obligations of the investment instruments of the Managed Portfolios;

f) Execute and verify the clearing and settlement process of the transactions carried out with the investment instruments of the Managed Portfolios;

g) Guarantee the safekeeping and integrity of the investment instruments under custody, whether they are in physical safekeeping or in transit, through insurance policies taken out for these purposes; and,

h) Value the investment instruments of the Managed Portfolios daily.

Custody agreement

Article 18.-

The custody agreements entered into by the AFPs with foreign custody institutions must be sent to the Superintendency before they enter into force and must include the following minimum stipulations and obligations of the custody institution:

a) Declaration by the foreign custody institution that it complies with the requirements indicated in article 17 of this regulation. For this purpose, in addition to the supporting documentation of the case to be submitted by the custody institution, a report issued by an international audit firm shall be attached to the agreement, stating its opinion or observations regarding compliance with the operational and custody procedure requirements indicated in the aforementioned article 17. Said audit entity must have a recognized international prestige and be registered as such with the corresponding regulatory body of a State referred to in the last paragraph of article 3 of this regulation;

b) Submission of the foreign custody institution to the pertinent provisions indicated in this regulation;

c) Include a clause stating that the breach of one or several of the requirements established in article 17 of this regulation will be grounds for termination of the custody agreement;

d) Commitment by the custody institution that any debts the AFP may have with it may under no circumstances be enforced against the resources of the Managed Portfolios that are subject to custody;

e) Obligation of the custody institution to send the AFP a report of movements each time a transaction occurs with the instruments referred to in article 3 of this regulation, or with their rights or obligations;

f) Obligation of the custody institution to provide the Superintendency, at least at the beginning of each week, with a report detailing the movements and the stock of the instruments subject to custody corresponding to the previous week, using the format included in annex I of this regulation. Likewise, the obligation to provide the Superintendency with any information it requires, in the modalities and formats that the Superintendency determines;

g) Commitment of the custody institution not to carry out lending operations with the resources of the Managed Portfolio, under any of its modalities, nor other operations not expressly authorized by this regulation;

h) State that the custody institution is the sole party in charge of and responsible for the transportation and transfer of accounts of the corresponding instruments;

i) Specify the responsibilities that the custody institution assumes before the AFP for acts or omissions; as well as the declaration of the custody institution to the effect that it assumes direct responsibility for the safekeeping and replacement of the instruments before the AFP and the respective Managed Portfolio in the following cases: 1) in any case of loss or damage occurring within the physical scope of the custody institution; or, 2) when the loss or damage occurs while the instruments concerned are in transit;

j) If the parties include a clause by which the parties are empowered to terminate the agreement before its expiration, without stating a cause, prior notice with a term of thirty (30) calendar days shall be required;

k) Include a clause by which the custody institution authorizes the Superintendency so that, when the latter considers it necessary, it may verify the instruments of the Managed Portfolios held in custody at its facilities and the records of those held in subcustodians or central securities depositories.

In the event of a breach by the custody institution, the AFP must terminate the agreement and contract the service with another custody institution that effectively complies with the requirements established in this regulation.

In the event of any loss or damage occurring with respect to the investment instruments in custody, without prejudice to the liability of the custody institution, the AFP must cover the amount equivalent to the value of the damaged instruments, as well as the respective interest, under the conditions and terms determined by the Superintendency.

FINAL PROVISIONS

Information to the Superintendency

First.- The information regarding purchases and sales of investment instruments and risk hedging operations, coupon payments, maturities, current accounts designated by the foreign custody institution, guarantee margins and others, must be sent by the AFP to the Superintendency through the Daily Investment Report referred to in Article 103 of Title VI of the Compendium of Regulatory Superintendency Rules of the Private Pension Fund Administration System, approved by Resolution No. 052-98-EF/SAFP and its amendments, on the day following these transactions.

Valuation

Second.- For the valuation of the investment instruments and risk hedging operations referred to in Article 3 of this Regulation, the Superintendency shall take into account the following criteria:

a) The market price of the investment instruments and risk hedging operations, determined considering the relevant trading venues;

b) The unit value provided by the mutual funds; and,

c) The exchange rates between the currencies indicated in Article 3 cited above, determined considering the relevant trading venues.

Transaction expenses

Third.- All transaction expenses, brokerage commissions, custody commissions, current account maintenance costs, or other similar expenses, generated by the investments made in the investment instruments and in the operations referred to in Article 3 of this Regulation, whether in local or foreign markets, must be covered with the resources of the AFP. Likewise, the entry or exit expenses or commissions and any other expense generated by the investments in the participation units of the mutual funds shall be covered with the resources of the AFP.

The payment of taxes as a consequence of the aforementioned investments shall be borne by the corresponding Managed Portfolio. In the event of a tax refund, these must be considered as profitability and therefore shall be entered into the patrimony of the Managed Portfolio.

The Superintendency, by Circular, shall approve the criteria and guidelines that will be applicable to the evaluation of the commissions and to the rebates policy that the mutual funds determine to apply to the investments of the resources of the Managed Portfolios.

Liability

Fourth.- Without prejudice to the right of the AFP to seek reimbursement from the custody institution, the losses or impairments generated by actions attributable to the custody institutions shall be covered by the AFP with its own resources, and may not, under any circumstance, affect the Managed Portfolios.

Exception to the custody requirement and to the requirements for the constitution of time deposits with resources of the custody current accounts

Fifth.- The Superintendency, by Circular, shall determine for each case the investment instruments that, due to their characteristics, the nature of their issuance or the uses and customs of the market, shall not be subject to the custody procedure established in this regulation, indicating instead the registration and information reporting procedures that shall apply.

Likewise, those time deposits constituted for the purpose of earning returns on the balances maintained in the custody current accounts of the Managed Portfolios shall be exempted from the custody requirement and from compliance with the requirements established in subparagraphs b) and d) of Article 5 of this Regulation.

Custody of Brady Bonds and sovereign bonds

Sixth.- Foreign custody institutions that comply with the requirements of this regulation may carry out the custody of Peruvian Brady bonds and Peruvian sovereign bonds acquired by the Managed Portfolios. For this purpose, the participation of the local custody institutions referred to in Resolution No. 283-98-EF/SAFP shall not be required.

Publication of the profitability of investments abroad

Seventh.- The Superintendency shall publish monthly the profitability indicators obtained by the investments abroad of the resources of the Managed Portfolios by the AFP. Likewise, the Superintendency shall publish the profitability indicators corresponding to one or more benchmarks determined for this purpose.

Risk classification

Eighth.- For the purposes of the provisions of this regulation, the risk classification equivalences and the rating agencies that the Superintendency approves by Circular shall be considered. The classifications must be related to the rating granted to the issuer's debt in foreign currency. In the event of divergence between the ratings granted, the equivalence corresponding to the highest risk rating shall be considered valid.

Likewise, when a State, international organization, custody institution, financial or non-financial institution has more than one rated investment instrument, short or long term, for the purposes of the provisions of this Regulation, the highest risk rating assigned to said securities shall be considered.

Authorized centralized negotiation mechanisms and clearing houses

Ninth.- For the purposes of the provisions of articles 7 and 8 of this Regulation, the centralized negotiation mechanisms and clearing houses authorized by the Superintendency by Circular shall be considered.

Non-compliance with eligibility criteria

Tenth.- In the event that the investment instruments cease to comply with the eligibility criteria established in this norm, the Superintendency shall establish the term for the AFP to sell said investments.

Registration procedure

Eleventh.- The Superintendency, by Resolution, may establish an alternative registration procedure to that indicated in article 4 of this norm

TRANSITORY PROVISIONS

Exception to compliance with the issuer limit

First.- The issuer limit indicated in subsection b) of article 11 of this norm is not applicable in the case that investments in the instruments indicated in subsection c) of article 3 of this norm have been made through a process of exchange for shares issued by legal entities incorporated in Peru. Instead, the issuer limit applicable to the respective foreign institution shall be the one established by the Superintendency in each case on the day following the completion of the corresponding exchange process, so that the interests of the Managed Portfolios are safeguarded. Likewise, in each case, the Superintendency determines the adaptation period to the issuer limit indicated in subsection b) of article 11 of this norm.

Adaptation of the custody contract

Second.- The AFP have a maximum period of three (3) months from the entry into force of this norm to adapt the custody contracts to its provisions.

ANNEX I WEEKLY SUMMARY OF INVESTMENTS

Custody institution:
Account name: AFP.....
AFP account code:

1. Investment instruments in custody

Initial stock

Instrument name	ISIN code	Stock	Date	Unit price	Total value

Transactions

Instrument name	ISIN code	Purchases	Sales	Transfer1/	Trade date	Settlement date	Trade price	Total value	Intermediary	Trading venue

Final stock

Instrument name	ISIN code	Stock	Date	Unit price	Total value

2. Summary of the rights and obligations of the investment instruments in custody

Instrument name	ISIN code	Concept	Reference stock2/	Cut-off date 3/	Payment date	Factor4/	Total value5/

Notes:

1/ In the case of outgoing transfers, indicate the movement with a negative sign.

2/ Total holdings under custody subject to the delivery of rights

3/ Date up to which the rights corresponding to the reference stock are recognized

4/ Rate applicable to the reference stock to determine the right

5/ Indicate the cash amount or the number of units of the instrument in the case of released shares.