Circular Letter CVM/SIN No. 03/2010

CIRCULAR LETTER/CVM/SIN/No. 03/ 2010
Rio de Janeiro, October 15, 2010.

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 interpretation of the rule set forth in Article 68, Paragraph 1, of CVM Instruction No. 409/04, reproduced below:

"If the fund holds positions or ongoing operations that could be harmed by their disclosure, the portfolio composition statement may omit the identification and quantity of such positions, recording only their value and percentage of the total portfolio."

In a meeting held on September 9, 2010, the CVM Collegiate Board analyzed a consultation from this Superintendence regarding the allegations that could be considered legitimate to justify the concealment of the identification and quantity of fund positions or operations, based on Article 68, Paragraph 1, of CVM Instruction No. 409/04.

Accordingly, the Collegiate Board decided that, in principle, justifications based on the following would be legitimate:

1. The illiquidity of the assets comprising the fund's portfolio, provided it is based on objective and verifiable criteria;
2. The fact that the fund is exclusive or intended exclusively for qualified investors who, under Article 110-B of Instruction 409/04, are obligated by the fund's regulations to make a minimum investment of 1 million reais, provided additionally that the fund's shares have been distributed through a public offering with restricted efforts;
3. The existence of positions in rentals of thinly traded stocks, especially when the fund has "stop loss" limits or margin commitment limits.

On the other hand, the CVM Collegiate Board also understood that, in principle, justifications based on the following would not meet the provisions of Article 68, Paragraph 1, of Instruction 409/04:

1. The generic claim of illiquidity of federal public bonds, including NTNBs, present in the fund's portfolio;
2. The claim that the disclosure of the fund's position in time deposits with special guarantee – DPGE could impact the market price of these financial instruments;
3. The claim that the disclosure of the fund's position in a specific bond whose "rating" was downgraded could result in losses to unitholders; and
4. The claim that the disclosure of the fund's portfolio composition would generate unfair competition, allowing competing administrators to copy the strategy adopted by the fund.

Therefore, we alert administrators who may be postponing the disclosure of any fund position or operation under their responsibility to analyze whether the justifications presented are in line with the statement issued by the CVM Collegiate Board, making any necessary adjustments to comply with the regulation.

Finally, we communicate that the Institutional Investor Relations Superintendence – SIN, starting with the presentation of the portfolio composition and diversification statement for the October 2010 position, will no longer require the submission of justification for the concealment of portfolio positions and assets, as previously determined by CIRCULAR LETTER/CVM/SIN/No. 01/2009, dated April 30, 2009. However, such justifications must be kept with the administrator and presented to the CVM whenever requested.

Sincerely,

(Signed Original)
Francisco José Bastos Santos
Institutional Investor Relations Superintendent