Resolution No. 1,286

RESOLUTION No. 001286 ------------------- THE CENTRAL BANK OF BRAZIL, in the form of art. 9 of Law No. 4,595, of 31.12.64, makes public that the NATIONAL MONETARY COUNCIL, in a session held on 19.03.87, in view of the provisions of Laws Nos. 4,728, of 14.07.65, and 6,385, of 07.12.76, R E S O L V E D: I - To approve the attached Regulation, which governs the constitution and operation of Fixed Income Mutual Funds. II - The Central Bank may adopt the measures deemed necessary for the execution of this Resolution. III - This Resolution shall enter into force on the date of its publication. Brasília-DF, 20 March 1987 Francisco Roberto André Gros President REGULATION ATTACHED TO RESOLUTION No. 1,286, OF 20.03.87, WHICH GOVERNS THE CONSTITUTION AND OPERATION OF FIXED INCOME MUTUAL FUNDS. CHAPTER I On the Constitution and Characteristics Art. 1. The Fixed Income Mutual Fund, constituted in the form of an open condominium, is a communion of resources intended for investment in securities and marketable securities. Sole paragraph. The Fund shall have an indefinite term of duration and its denomination, which may not contain terms incompatible with its objective, shall include the expression "Fixed Income". Art. 2. The constitution of a Fixed Income Mutual Fund shall depend on prior authorization from the Central Bank. Paragraph 1. The constitution document, which shall be registered with the Registry of Titles and Documents, shall reproduce the full text of the Fund's regulation and shall contain the qualification of its founders. Paragraph 2. The Central Bank may cancel the authorization for the operation of a Fund that, as of 6 (six) months counted from the respective granting, presents net equity lower than the equivalent of 5,000 (five thousand) National Treasury Obligations - OTN, calculated based on the nominal value of the OTN set for validity in December of the immediately preceding year. Art. 3. The regulation of a Fixed Income Mutual Fund, to which the unit holders must adhere upon joining, shall contain the following information: I - the investment policy to be adopted by the administering institution; II - annual administration fee, or criterion for its setting; III - other fees and/or expenses; IV - setting of a grace period, based on the provisions of art. 25; V - redemption conditions; VI - availability of information to unit holders, in the form of arts. 37 to 40. Sole paragraph. The fees, expenses and terms shall be identical for all unit holders and shall be included in the information referred to in art. 38. CHAPTER II On Administration Art. 4. The administration of a Fixed Income Mutual Fund may be exercised by an investment bank, credit, financing and investment company, brokerage company or securities distribution company, under the supervision and direct responsibility of a director of the institution. Paragraph 1. The appointment and replacement of the director responsible for the Fund's operations shall be subject to immediate
communication to the Central Bank. Paragraph 2. The Central Bank may establish minimum conditions for the administration of a Fixed Income Mutual Fund. Art. 5. The administering institution shall have powers to exercise all rights inherent to the securities and marketable securities comprising the portfolio of the Fixed Income Mutual Fund, including the right to act and to attend and vote at general or special meetings. It may also open and operate bank accounts, acquire and freely dispose of securities and marketable securities, settle, and, finally, perform all acts necessary for the administration of the portfolio, subject to the limitations of this Regulation. Art. 6. The obligations of the administering institution shall include: I - to maintain, at its own expense, updated and in perfect order, in accordance with good administrative technique, the documentation relating to the Fund's operations, as well as: a) the register of unit holders; b) the book of minutes of general meetings; c) the attendance book of unit holders; d) the file of auditors' opinions; e) specific records of all accounting facts relating to the Fund; II - to receive, at the proper times, any income or amounts of the Fund; III - to bear the Fund's advertising expenses; IV - to provide, daily, the values of the Fund's quota and net equity and its profitability in the last 30 (thirty) days to the stock exchange of the location of its headquarters, which, in turn, shall disclose such information; V - to provide annually to unit holders receipts for income tax declaration purposes. Art. 7. The administering institution shall be prohibited, in the specific exercise of its functions and using the resources of the Fixed Income Mutual Fund, from: I - granting loans or advances, or opening credits, under any modality; II - providing surety, guarantee, acceptance or co-obligating itself in any other form; III - trading in securities other than those referred to in this Regulation or those that may be authorized by the Central Bank; IV - investing abroad resources raised in the country; V - investing resources in the acquisition of quotas of the Fund itself, or of any other condominium fund; VI - selling Fund quotas in installments; VII - promising predetermined yield to unit holders; VIII - making, in its advertising or other documents that may be presented to investors, promises of withdrawals or yields, based on its own performance, on the performance of others or on the performance of capital market securities; IX - delegating powers to manage and administer the Fund, except with specific authorization from the Central Bank. Art. 8. The administering institution may, by means of a notice published in the newspaper(s) referred to in item III of arts. 22 and 38 or by letter or telegram addressed to each unit holder, resign from the administration, being obliged, in the same act, to convene a general meeting that shall decide on its replacement or on the liquidation of the Fixed
Income Mutual Fund, subject to the provisions of art. 30. Sole paragraph. In the cases of replacement of the managing institution and liquidation of the Fund, the rules in force on civil or criminal liability of administrators, directors and managers of financial institutions shall apply, as applicable, regardless of those governing the civil liability of the managing institution itself. Art. 9. The managing institution shall stipulate, at its discretion, remuneration to be received for the provision of management and administration services of the Fixed Income Mutual Fund, and the Central Bank may establish rules in this regard. CHAPTER III Of Investments Art. 10. The investments of the Fixed Income Mutual Fund shall be represented, individually or cumulatively, by: I - National Treasury Bonds; II - National Treasury Bills; III - Central Bank Bills; IV - public debt securities of States or Municipalities; V - time deposits, with or without issuance of a certificate; VI - bills of exchange accepted by a credit, financing and investment company; VII - debentures; VIII - real estate bills; IX - mortgage bills; X - operations in interest rate futures markets, subject to the regulations to be issued by the Central Bank; XI - other securities and modalities that may be authorized by the Central Bank; XII - available funds. Sole paragraph. Up to a maximum of 2% (two percent) of the total value of the investments may, for a period not exceeding 60 (sixty) days counted from the date of effective availability for trading, be represented by shares received as a result of the conversion of debentures, and said period may, upon request, be extended at the discretion of the Central Bank. Art. 11. The investments of the Fixed Income Mutual Fund shall be subject to the following diversification requirements: I - the total of investments in securities of the same issuer shall not exceed 10% (ten percent) of the total investments of the Fund, excepting from this percentage the National Treasury Bonds, National Treasury Bills and Central Bank Bills; II - the total of investments in securities issued or co-obligated by a company, its controlling company, companies directly or indirectly controlled by it and its affiliates under common control shall not exceed 30% (thirty percent) of the total investments of the Fund; III - repurchase commitments in repurchase agreements may only be agreed in compliance with the provisions of the Regulation annexed to Resolution No. 1,088, of 30.01.86, and it is prohibited to assume such commitments with the managing institution or with companies linked to it. Art. 12. The Central Bank shall establish rules regarding the conditions under which resources of the Fixed Income Mutual Fund may be invested in securities issued, accepted or co-obligated by its managing institution or by companies linked to it. Art. 13. For the purposes of the provisions of this Regulation, a company is considered linked: I - in which the managing
institution participates, directly or indirectly, with 10% (ten percent) or more of the capital; II - in which administrators of the managing institution and their relatives up to the 2nd degree participate, jointly or individually, with 10% (ten percent) or more of the capital, directly or indirectly; III - in which shareholder(s) with 10% (ten percent) or more of the capital of the managing institution participate(s) with 10% (ten percent) or more of the capital, directly or indirectly; IV - which participates with 10% (ten percent) or more of the capital of the managing institution, directly or indirectly; V - whose administrators and their relatives up to the 2nd degree participate jointly or individually, with 10% (ten percent) or more of the capital of the managing institution, directly or indirectly; VI - whose shareholder(s) with 10% (ten percent) or more of the capital also participate(s) in the capital of the managing institution with 10% (ten percent) or more of its capital, directly or indirectly; VII - whose administrators, in whole or in part, are the same as those of the managing institution, except for positions held in collegiate bodies, provided for in the bylaws or internal rules of the managing institution, as long as their holders do not exercise executive functions, after prior consultation with the Central Bank. Art. 14. Non-compliance with the established composition and diversification requirements must be justified before the Central Bank, which may determine that the managing institution call a general meeting of co-owners to decide on one of the following alternatives: I - transfer of the administration of the Fund to another institution; II - liquidation of the Fund. Art. 15. The Central Bank may establish composition requirements and alter the diversification requirements of the investments of the Fixed Income Mutual Fund. CHAPTER IV Of Net Equity Art. 16. The net equity of the Fixed Income Mutual Fund shall be understood as the sum of available funds plus the value of the portfolio, plus amounts receivable, minus liabilities. To determine the value of the portfolio, the criteria established by the Chart of Accounts referred to in the sole paragraph of art. 34 shall be observed. CHAPTER V Of the Issuance, Placement and Redemption of Quotas Art. 17. The quotas of the Fixed Income Mutual Fund shall correspond to ideal fractions thereof, shall be in registered form and shall be kept in deposit accounts in the name of their holders. Sole paragraph. The status of co-owner is presumed by registration in the quota deposit account opened in their name in the books of the depositary institution. Art. 18. The statements of the deposit accounts shall prove the obligation of the managing institution to comply with the contractual prescriptions contained in the regulation of the Fixed Income Mutual Fund and the rules of this Regulation. Sole paragraph. Any clause restricting or modifying the obligation referred to in this article
shall be deemed not written. Art. 19. The statements of deposit accounts shall refer to whole and/or fractional number of quotas, according to the records of the Fixed Income Mutual Fund. Sole paragraph. When the system of whole quotas is adopted, the residual value of the investments shall be kept in a current account for future investments or, if requested, shall be paid to the co-owner in cash. Art. 20. The quotas of a Fixed Income Mutual Fund may only be placed by: I - commercial bank; II - investment bank; III - credit, financing and investment company; IV - securities brokerage company; V - securities distribution company. Art. 21. The receipt provided to the investor at the time of sale shall expressly state the amount of funds delivered to the managing institution or its agent(s), specifying the form of payment. Art. 22. The following shall be provided to the investor, mandatorily and free of charge, upon becoming a co-owner of a Fixed Income Mutual Fund: I - a copy of the Fund's regulation; II - a document clearly stating the fees and/or expenses borne by the investor; III - indication of the newspaper(s) used for disclosing information about the Fund. Sole paragraph. The documents referred to in the caput of this article may be sent together and upon confirmation of the first investment. Art. 23. In issuing quotas, the value determined at the close of the first business day following the date of effective availability of the funds entrusted by the investor to the managing institution, at its headquarters or branches, shall be used, determining the quota value based on a patrimonial valuation carried out in accordance with the provisions of art. 16 and the rules of the Chart of Accounts referred to in the sole paragraph of art. 34. Sole paragraph. For calculating the number of quotas to which the investor is entitled, the agreed fees and/or expenses shall be deducted from the amount delivered to the managing institution. Art. 24. The quota value shall be calculated daily. Sole paragraph. The calculation of the quota value on a non-business day shall be required whenever it coincides with the last day of the calendar month, considering non-business days Saturdays, Sundays and bank holidays in the location of the headquarters of the managing institution, regardless of the location where the investment or redemption of quotas is made. Art. 25. For the purpose of exercising the right of redemption by the co-owner, the Fixed Income Mutual Fund shall observe a grace period of between a minimum of 30 (thirty) and a maximum of 180 (one hundred and eighty) days counted from the date of issuance of the quotas. Sole paragraph. During the grace period established in the Fund's regulation, redemption(s) may be admitted, provided they are without any yield. Art. 26. The Central Bank may change the grace period for the purpose of exercising the right of redemption of quotas by the co-owner. Art. 27. In the redemption of quotas, the value determined at
the close of the first business day following the date of receipt of the redemption request at the headquarters or branches of the managing institution shall be used. Art. 28. Redemption shall be made in cash, check, payment order or credit order document, without charging any fee or expense, up to and including the 10th (tenth) business day following the receipt of the request at the headquarters or branches of the managing institution. Paragraph 1. In special cases, after prior consultation with the Central Bank, redemption may be made in securities. Paragraph 2. The Fund's regulation may provide for the destination of amounts corresponding to redemptions of quotas requested and not claimed by co-owners within 30 (thirty) days. CHAPTER VI Of the General Assembly Art. 29. The general assembly of co-owners shall have exclusive competence to: I - approve, by 30 (thirty) April of each year, the accounts of the Fund, prepared by the managing institution, and decide on its financial statements; II - amend the Fund's regulation; III - decide on the replacement of the managing institution; IV - decide on the merger, incorporation, spin-off or liquidation of the Fund. Sole paragraph. The Fund's regulation may be amended independently of a general assembly, whenever such amendment arises exclusively from the need to comply with requirements of the Central Bank, as a consequence of legal or regulatory rules, and the necessary communication to the co-owners must be arranged within 30 (thirty) days. Art. 30. The convening of the general assembly shall be made by notice published in the newspaper(s) referred to in item III of arts. 22 and 38, which shall mandatorily include the day, time and place where the assembly will be held and, even if summarily, the matters to be addressed. Paragraph 1. The first convening of the general assembly shall be made at least 8 (eight) days in advance, counting from the publication date of the first notice. Paragraph 2. In the cases of items III and IV of art. 29, if the general assembly is not held, a new notice of second convening shall be published, at least 5 (five) days in advance. Paragraph 3. Except in cases of force majeure, the general assembly shall be held in the building where the managing institution has its headquarters; when it must be held elsewhere, the notices shall clearly indicate the place of the meeting, which in no case may be held outside the locality of the headquarters. Paragraph 4. Regardless of the formalities provided for in this article, the general assembly attended by all co-owners shall be considered regular. Art. 31. In addition to the annual accountability meeting, the general assembly may also meet to address the matters referred to in items II to IV of art. 29, upon convening by the managing institution or by co-owners holding quotas representing at least 30% (thirty percent) of the total. Art. 32. At the general meeting of unit holders, which may be convened with any number of attendees,
resolutions shall be adopted by the criterion of an absolute majority of the units of the unit holders present, with each unit corresponding to one vote. Paragraph 1. In resolutions adopted at a general meeting concerning the situations set forth in items III and IV of Art. 29, the absolute majority shall be calculated in relation to the total units issued. Paragraph 2. Resolutions shall be adopted by a majority of the units of the unit holders present at the general meeting, even in the situations set forth in items III and IV of Art. 29, when the quorum of an absolute majority of the units issued is not reached at a meeting held on first call. Paragraph 3. Only unit holders registered up to 3 (three) days before the date set for the meeting may vote at the general meeting. Paragraph 4. The legal representatives of the unit holders or their duly constituted attorneys-in-fact are qualified to attend the general meeting. CHAPTER VII Financial Statements Art. 33. The Fixed Income Mutual Fund shall keep accounting records separate from those of the managing institution. Art. 34. The financial statements of a Fixed Income Mutual Fund shall be subject to the accounting rules issued by the National Monetary Council and the Central Bank. Sole paragraph. The Chart of Accounts issued by the Central Bank shall set forth all the rules for the valuation of the assets comprising the Fund, as well as for the recognition of revenues and expenses inherent thereto. Art. 35. The Fixed Income Mutual Fund shall be audited semi-annually by an independent auditor registered with the Securities Commission. CHAPTER VIII Disclosure and Submission of Documents Art. 36. The managing institution of a Fixed Income Mutual Fund shall be required to disclose, broadly and immediately, any relevant act or fact pertaining to it, so as to guarantee all unit holders access to information that may, directly or indirectly, influence their decisions regarding remaining in the Fund. Paragraph 1. The disclosure of the information referred to in this article shall be made by publication in the newspaper(s) referred to in item III of Arts. 22 and 38. Paragraph 2. The managing institution shall make the publications provided for in this Regulation always in the same newspaper(s), and any change shall be preceded by notice to the unit holders. Art. 37. The managing institution shall, within a maximum of 10 (ten) days after the end of each month, make available to the unit holders, at its head office and branches, the information referred to in items II and III of Art. 38, based on data relating to the last day of the month to which they refer. Art. 38. The managing institution shall send to each unit holder, semi-annually, based on data relating to the last day of the months of June and December, a document containing, in addition to those provided for in the sole paragraph of Art. 3, the following information regarding the Fixed Income Mutual Fund: I - number of units held and their value;
II - return obtained in the period; III - indication of the newspaper(s) used for disclosure of information. Art. 39. In addition to the information referred to in the preceding article, the managing institution shall publish, semi-annually, based on data relating to the last day of the months of June and December, a document containing the following information regarding the Fixed Income Mutual Fund: I - the return and the nominal value of the unit over the last 3 (three) years, always taking complete fiscal years as the basis; II - value and composition of the portfolio, specifying the quantity, type and quotation of the securities and values comprising it, the value of each investment and its percentage of the total value of the portfolio; III - balance sheets and other financial statements, accompanied by the opinion of the independent auditor; IV - list of the entities responsible for providing custody services for the securities and values comprising the portfolio; V - the charges debited to the Fund in each 1 (one) of the last 3 (three) years, as provided in Art. 47, with their value and percentage in relation to the average monthly net equity of the Fund in each year to be specified; VI - brokerage expenses in each 1 (one) of the last 3 (three) years, as a percentage of the average monthly value of the stock portfolio in each year. Art. 40. The measures provided for in Arts. 38 and 39 shall be adopted within a maximum of 60 (sixty) days after the end of the semester to which they refer. Sole paragraph. The submission of the information referred to in Article 38 shall not be mandatory for unit holders: a) holding units whose total value is less than 10 (ten) National Treasury Bonds; b) whose last submission of information was returned due to an incorrect declared address, and who have not updated it accordingly. Art. 41. Any advertising text for the offering of units, advertisement or promotion of a Fixed Income Mutual Fund may not diverge from the content of the regulation, and the Central Bank may, in the event of inaccuracies or improprieties that could induce the investor to make errors of assessment, require that the corrections and clarifications be made, with equal prominence, through the same vehicle(s) used for disclosure of the original text. Art. 42. The managing institution shall send to the Central Bank, within a maximum 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 relating to the Fixed Income Mutual Fund. I - monthly: a) trial balance; b) statement of the composition and diversification of investments; c) statement of sources and uses of funds; d) advertising text(s) for quota offerings, advertisement or promotion informing the manner of dissemination; II - semi-annually: a) balance sheet; b) information on the general coverage conditions, by insurance, in the case of securities in transit; c) list of institutions responsible for
providing custody services for the securities and marketable securities comprising the portfolio; d) list of judicial or extrajudicial claims, whether in defense of the rights of the unit holders or by them against the Fund's administration, indicating the date of their initiation and the final resolution. Sole paragraph. In addition to the documents referred to in item II of this article, the administering institution must send to the Central Bank, within a maximum period of 60 (sixty) days after the end of the semester to which they refer, a copy of the information provided to the unit holders. Art. 43. The Central Bank may change the form of provision and disclosure of the information provided for in this Regulation. CHAPTER IX General Rules Art. 44. The regulation of a Fixed Income Mutual Fund may provide for the programming of investment plans, subject to the conditions to be established by the Central Bank. Art. 45. The securities and marketable securities comprising the portfolio of a Fixed Income Mutual Fund shall mandatorily be held in custody at a commercial bank, investment bank, stock exchange or entity authorized to provide custody services by the Securities Commission. Funds, when in cash, shall remain deposited in commercial banking establishments. Sole paragraph. Insurance coverage shall be mandatory for all bearer and registered endorsable securities, when in transit outside the custodian entity. Art. 46. The assets comprising the portfolio of a Fixed Income Mutual Fund may not be subject to leasing, lending, pledge or collateral, except in cases expressly authorized by the Central Bank. Art. 47. The following expenses shall constitute charges of the Fixed Income Mutual Fund, in addition to remuneration for the services referred to in art. 9, which may be debited to it by the administering institution: I - federal, state, municipal or autarchic taxes, fees or contributions that fall or may fall on the assets, rights and obligations of the Fund; II - expenses for printing, dispatching and publishing reports, forms and periodic information provided for in the Fund's regulation or pertinent regulation; III - expenses for correspondence of interest to the Fund, including communications to unit holders; IV - fees and expenses of auditors responsible for reviewing the balance sheet and accounts of the Fund and analyzing its situation and the performance of the administering institution; V - fees and commissions paid on the Fund's operations; VI - lawyers' fees, costs and related expenses incurred in defending the Fund's interests, in or out of court, including the amount of the judgment, if the Fund is unsuccessful; VII - insurance premiums on securities as well as any expenses related to the transfer of Fund resources between banks; VIII - any expenses inherent to the constitution or liquidation of the Fund or the holding of a general meeting of unit holders; IX - custody fees for the Fund's securities. Sole paragraph. Any expenses
not provided for as charges of the Fund shall be borne by the administering institution. Art. 48. The following acts relating to a Fixed Income Mutual Fund shall be subject to prior approval by the Central Bank: I - constitution; II - amendment of regulation; III - replacement of the administering institution; IV - merger; V - incorporation; VI - spin-off; VII - liquidation. Art. 49. Non-compliance with the rules set forth in this Regulation shall subject the offending administering institution to the sanctions provided for in art. 44 of Law no. 4.595, of 31.12.64. CHAPTER X Transitional Provisions Art. 50. Until the Chart of Accounts referred to in the sole paragraph of art. 34 is issued, the provisions contained in the Accounting Plan of Mutual Investment Funds (COMIN) shall apply to the Fixed Income Mutual Fund, where applicable.