Circular Letter CVM/SIN No. 7/2021

SECURITY AND EXCHANGE COMMISSION OF BRAZIL (CVM) Rua Sete de Setembro, 111/2-5th and 23-34th Floors - Center - Rio de Janeiro - RJ - ZIP Code: 20050-901 - Brazil Tel.: (21) 3554-8686 - www.cvm.gov.br

CIRCULAR LETTER/CVM/SIN/No. 7/2021
Rio de Janeiro, September 1, 2021

To investment fund administrators regulated by CVM Instruction 555 Subject: Daily Report – Information on expected cash outflows from the fund

Dear Sirs,

CVM Instruction No. 555, of December 17, 2014, provides in its Article 91 that the administrator and manager of an investment fund must jointly adopt the policies, procedures, and internal controls necessary so that the fund's portfolio liquidity is compatible with (i) the deadlines established in its regulations for payment of redemption requests; and (ii) the fulfillment of its obligations.

These policies, practices, and controls must take into account, at a minimum, (i) the liquidity of assets; (ii) obligations, including expected margin deposits and other guarantees; (iii) expected redemption values under ordinary conditions, calculated using consistent and verifiable statistical criteria; and (iv) the degree of dispersion of share ownership.

Circular Letter/CVM/SIN/No. 2/2015, of June 9, 2015, points out as an important point to be observed in the context of investment fund liquidity management, without diminishing the importance of other procedures, the consistent estimation of expected cash outflows, which must consider applications and redemptions requested within the relevant time window of the fund (given by the redemption conditions established in the regulations).

Based on the above, in consonance with the regulation applicable to investment funds, combined with the experience gathered by this technical area in supervision activities related to the matter, we publish this Circular Letter with the objective of providing guidance on filling in the daily values of "Expected Cash Outflows" to occur within the period established in the regulations for the payment of redemptions (item 9 of the Daily Report), especially its applicability, the assumptions adopted, and a practical example.

Information to be provided in item 9 of the Daily Report

(i) Total balance of redemptions already requested but still unpaid in investment funds whose regulations establish a payment period for redemptions equal to or greater than D+1 from the date of the unitholders' request;

Other Information that impacts the fund's cash flow, but should not be reported in item 9, as it should appear in item 10 (net assets)

(ii) Charges and operational expenses already accounted for by the investment fund, in accordance with Article 132 of CVM Instruction No. 555;

(iii) Adjustments, margin calls, and/or other operational events related to derivative operations that the fund maintains in its portfolio and that will impact its cash flow in the future, estimated based on a consistent and verifiable criterion by the CVM oversight.

(iv) Other portfolio events or events regarding unitholders that may impact, positively or negatively, the fund's cash flow (for example, receipt of dividends or JCP, possible distributions or amortizations expected to be paid to unitholders, etc.).

We emphasize that investment funds with settlement periods for applications or redemptions scheduled for the same day as the request ("D+0") should not report cash inflows or outflows related to these applications or redemptions in item 9 of the Daily Report, as, by the end of the reporting day, the operations requested on that day will have already been processed, and the fund's cash flow will already have been impacted.

On the other hand, if the settlement of redemptions, for any reason, has not occurred in full in investment funds whose regulations establish payment on the same date as the unitholders' request ("D+0"), the values related to these unfulfilled redemptions must be included in the cash outflow balance.

Funds registered with this Agency as exclusive funds and funds constituted in the form of a closed condominium are exempt from providing the information mentioned above, given their nature and structure regarding liquidity.

Practical Examples

With the aim of illustrating the criteria presented, two practical examples were prepared for reporting the information in item 9 of the daily report.

Fund with application subscription on D+0 and redemption payment on D+3

In this example, on 10/01/XX, the sum of the disbursements expected to occur in the fund's cash flow totals R$ 3,500.00, which is the information that should be provided in item 9 of the Daily Report regarding 10/01/XX. And so on.

The expected value of R$ 150.00 for operational expenses to be paid on 10/01/XX, as well as the adjustments caused by derivative positions on the same date, do not impact the information in item 9, as they already sensitize the liquidity information sent to the CVM by being included in item 10 (net assets).

Data	Resgates Solicitados Pelos Cotistas	Encargos / Despesas Operacionais a Pagar já Contabilizados na Data (D)	Saldo de Saídas de Caixa na Data (A + B + C)
em D-3	1.000,00 R$
em D-2 (A)	1.500,00 R$
em D-1 (B)	700,00 R$
em D0 (C)	1.300,00 R$	150,00 R$	3.500,00 R$
01/10/XX	1.000,00 R$	1.500,00 R$	700,00 R$	1.300,00 R$	150,00 R$	3.500,00 R$
02/10/XX	1.500,00 R$	700,00 R$	1.300,00 R$	500,00 R$	90,00 R$	2.500,00 R$
03/10/XX	700,00 R$	1.300,00 R$	500,00 R$	800,00 R$	120,00 R$	2.600,00 R$
04/10/XX	1.300,00 R$	500,00 R$	800,00 R$	900,00 R$	100,00 R$	2.200,00 R$

It is worth noting that the total of redemptions of R$ 1,000.00 requested by unitholders on D-3 and paid by the fund on 10/01/XX should not be considered for the calculation of the Cash Outflow balance on that date, as it has already impacted the fund's cash flow at the end of the day.

It is worth emphasizing that this information must be updated daily, observing the moving window of redemption settlement established in the fund's regulations.

Example 2 – Fund with redemption payment scheduled for 180 days after the request ("D+180")

Charges:

• Semi-annual Audit – 15,000.00 (per semester)
• Regulatory Fee – 10,000.00 (per quarter)

In this second example, there would be the recording of audit charges and regulatory fees in the amount corresponding to R$ 35,000.00 as "amounts payable" in the fund's accounting, composed by the charge of 2 regulatory fees and 1 semi-annual audit service within the relevant horizon (180 days), thus deducting the amount of net assets to be reported in item 10 of the Daily Report.

It is worth emphasizing that this information must be updated daily, observing the fund's moving settlement window (180 days), observing the entries expected throughout this window. In practice, in the case of the example provided, the calculated amount above will usually appear, as a rule, permanently and constantly in item 10 of the fund's daily reports.

Additional clarifications regarding the values to be reported

i. The redemption settlement date 1 must be considered for the calculation of the information, and not the fund's subscription date;

ii. The information on expenses and charges that are part of the fund's accounting entries will impact the information in item 10 of the Daily Report, respecting the relevant time window (in the case of the example above, 180 days), and observing the list of expenses provided in Article 132 of CVM Instruction No. 555;

iii. The impacts on the fund's cash flow caused, for example, by daily adjustments related to derivative operations must be computed in the net assets field of the daily report (item 10) according to the best estimates of the fund's administrator and manager.

Sincerely,

Digitally signed by
DANIEL WALTER MAEDA BERNARDO
Superintendent of Institutional Investor Supervision

1 Date on which the event effectively impacts the fund's cash flow