Peru Regulation FUNDS AND FUND MANAGEMENT 2010 2.1 Kind of funds There are two kinds of fund management companies, called mutual funds and investments funds, especially organized to operate solely in this matter. 2.2 Laws Mutual funds are regulated by the Securities Market Law, approved by Legislative Decree N 861, and its regulations. Investment funds are regulated by the Law on Investment Funds and their Management Companies, approved by Legislative Decree N 862, and its provisions, approved by CONASEV Regulation Nº 042-2003-EF/94.10, and recently modified by CONASEV Regulations Nº 055-2007-EF/94.01.1 and Nº 081-2008-EF-94.01.1. Regulations on trust funds are also contained in Banking Law. Legal basis Law of Investment Funds and their Management Companies, approved by Legislative Decree N 862 Banking Law approved by Law N 26702 Securities Market Law, approved by Legislative Decree N 861 Regulation SBS N 1725-2003, concerning money laundering Bylaws of Investment Funds and their Management Companies approved by CONASEV N 042-2003-EF/94.10 Regulation Bylaws of Mutual Funds of Investment in Securities and their Management Companies approved by CONASEV N 026-2000-EF/94.10 Regulation Supreme Decree N 076-2000-EF, Diversification Criteria for Investment of Resources of Mutual Funds for Investment in Securities
2 Peru Regulation Income Tax Law, Supreme Decree N 179-2004-EF General Sales Tax Law (Peruvian VAT), Supreme Decree N 055-99-EF 2.3 Managers, trustees, and custodians Manager, director, or representative of the management entities are not allow to work for CONASEV, or have relatives working for that institution; must not be convicted of a crime or be declared bankrupt. According to Banking Law the following may act as fund trustees only: COFIDE (the governmental investment company), financial companies (banks, finance companies, savings and loans, and others), companies especially organized to operate as trustees, insurance, and reinsurance companies. Trustees fees are established under contract. Otherwise, fees should not exceed 1 percent of the market value of the fund. 2.4 Investment restrictions The following restrictions apply to mutual funds: Financial instruments representing interest in a single entity: in relation to the total in circulation. Financial instruments or transactions which constitute debts or liabilities of a single entity: in relation to the debts or liabilities of the issuer. Financial instruments representing interest in, and/or financial instruments or transactions which constitute debts or liabilities of a single entity in relation to the total assets of the mutual fund. The limitations referred to herein shall not apply to those investments in financial instruments or transactions that constitute debts or liabilities of governments, central banks, or international organizations of which Peru is a member, which can be equal to up to 100 percent of the total assets of the mutual fund, provided they meet the liquidity, risk, information, and diversification requirements established by CONASEV. Financial instruments representing interest, as well as financial instruments or transactions which constitute debts or liabilities of one or several entities owned by the same financial group: in relation to the total assets of the mutual fund. For purposes of application of diversification criteria, as used herein, the term entity encompasses individuals, legal entities, mutual funds, investment funds, any equity created by securitization processes, governments, central banks, or international organizations, as appropriate.
3 Peru Regulation As a general rule CONASEV will establish the percentages applicable to the aforementioned criteria. The following restrictions apply to investment funds: A single individual or company shall not hold, whether directly or indirectly, an interest in excess of 33 percent of the net worth of a mutual fund. Diversification criteria for investments of resources of investments funds will be established under Internal Participation Bylaws. CONASEV could establish diversification criteria in terms of the characteristics of each fund. 2.5 Borrowing An investment fund may issue bonds and borrow with prior authorization of the surveillance board and the consent of the holders meeting. The same rule is applicable to the cases in which the assets and resources of the mutual fund are to be furnished as collateral. If the bonds issuance is made by public offering and it exceeds the net worth of the fund, specific collateral is required to be furnished as provided in the Securities Market Law. If the issuance is made by private offering, the restrictions of Corporate Law shall apply. Fund management companies are not allowed to incur debts or furnish guarantees, except in those cases approved by CONASEV. 2.6 Accounts and prospectus The fund management company is required to keep the accounts and records of its operations as well as those of each fund it manages separately, as provided by CONASEV. The accounts are subject to inspection and review by an auditing firm registered in the Single Registry of Auditing Firms. At the time the mutual fund and investment fund companies apply for its registration before the Public Security Market Registry carried out by CONASEV, a prospectus of the fund must be submitted. 2.7 Supervision The supervisory authority for funds in Peru is: Comisión Supervisora de Empresas y Valores (CONASEV) Av. Santa Cruz 315 Miraflores Lima 18
4 Peru Regulation 2.8 Fund ownership No person or company is allowed to have interest that represents more than the third part of the equity of an Investment Fund. In the case of mutual funds a single individual or a single legal entity may hold up to 10 percent of the fund units. Mutual funds for investment in securities are required to have at least 50 holders. 2.9 Fund structure Umbrella funds are not allowed in Peru. Fund of funds are allowed to invest in other funds. 2.10 Stock exchange National or overseas funds are not quoted on the stock exchange. 2.11 Bank secrecy A regulation issued by the National Superintendence of Banking and Insurance on money laundering requires financial entities to have a system in place to prevent such laundering and to report unusual transactions. Cash transactions over USD 10,000 or multiple monthly transactions over USD 50,000 are ought to be reported. 2.12 Fund set-up It takes approximately seven business days to establish a mutual funds company. 20 business days are required to obtain the operating license from CONASEV and 20 additional business days for registration of the fund. The cost of handling these requirements is approximately USD 10,000. 2.13 Foreign funds There are no legal restrictions on the marketing of foreign funds. Foreign funds invested in a local mutual fund do not require approval from the supervisory authorities. There are no exchange control restrictions that could prevent the marketing of foreign funds.
5 Peru Regulation 2.14 Bearer shares Bearer stock is not allowed in Peru. All stock has to be issued in the name of the investor. 2.15 Use of the internet Electronic means including Internet, ATM, or a dedicated telephone line, could be used to subscribe and rescue the fund participations, with the exception of the initial subscription process. User must previously sign a written agreement that states its acceptance on the use of that electronic mean. KPMG in Peru Rocio Bances Grellaud y Luque, Abogados S.C.R.L. Javier Prado Oeste 203 Lima 27 Peru Tel. +51(1)611-3000 e-mail: rrbances@kpmg.com The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation.