Circular Letter CVM/SIN No. 01/2009

CIRCULAR LETTER / CVM / SIN / No. 01/ 2009
Rio de Janeiro, April 30, 2009.
To the Directors Responsible for the administration of Investment Funds regulated by CVM Instruction No. 409/04.
Subject: Disclosure of investment fund portfolios

Dear Sir,

This Circular Letter aims to alert you to the correct compliance with rules regarding the disclosure of investment fund portfolios.

Article 71 of CVM Instruction No. 409/04 determines that the administrator must send monthly to the CVM, within a period of up to 10 days after the end of the month, the statements of portfolio composition and diversification of the administered funds.

This rule allows the investor, whether a quota holder of the fund or not, to perform their own assessments of the fund's risk and yield perspectives, by researching information on portfolio composition and other information required by the Instruction. With this objective, the CVM maintains an internet service for public consultation of received documents, making available regulations, prospectuses, portfolios, and daily data for all funds registered with the Commission.

As an exception to the general rule of Article 71, Article 68, § 1st provides: "If the fund has positions or ongoing operations that may be harmed by their disclosure, the statement of portfolio composition may omit the identification and quantity of such positions, recording only the value and its percentage of the total portfolio."

It occurs that many administrators are incorrectly interpreting the provision in the exception rule as the general rule and, consequently, hiding, for the maximum period allowed in paragraph 2 of the cited article, all positions held and assets resulting from operations carried out by investment funds, without specifying which positions or assets are the subject of the disclosure omission or even without carefully evaluating what risks the disclosure of such positions or assets would bring to the fund.

There is no doubt that the criterion of hiding the entire portfolio is a distortion of the prerogative granted by the cited provision of the regulation, which was created to protect the fund from the public disclosure of its strategy in trading a specific asset, which could be harmed if certain held positions were revealed. Similarly, the indiscriminate use of the maximum period is also inadequate.

Aiming to correct such distortions, the Superintendence of Relations with Institutional Investors – SIN will require, starting from the presentation of the portfolio composition and diversification statement of 30.6.2009, the justification for the omission of positions and assets from the portfolios.

Such justifications must individually cover each position or asset and the necessary period to protect the fund from harm due to its disclosure. They must be sent to the electronic address justificativa.fundos@cvm.gov.br, within the same period for sending the portfolios, and must contain a clear and objective explanation of the risks to the fund's strategy that the publicity of the held positions entails.

Notwithstanding they must observe the general rule of portfolio disclosure, exclusive funds, as defined by Article 111A, which do not have another investment fund as a quota holder, are not subject, for now, to the routine of submitting the justifications indicated above.

In case of doubts in preparing the requested justifications, we ask that you contact the Fund Monitoring Management – GIF, by phone (21) 35548299 or by the electronic address gif@cvm.gov.br.

Sincerely,

(Signed Original)

Carlos Alberto Rebello Sobrinho
Superintendent of Relations with Institutional Investors