CVM Instruction No. 495 of April 20, 2011 (Revoked) - Preparation and Disclosure of Investment Club Financial Statements

CVM INSTRUCTION NO. 495, OF APRIL 20, 2011
Provides for the preparation and disclosure of the Financial Statements of Investment Clubs.

The ACTING PRESIDENT OF THE SECURITIES AND EXCHANGE COMMISSION makes public that the Collegiate Body, in a meeting held on April 19, 2011, based on the provisions of Articles 2, item V, and 8, item I, of Law No. 6,385, of December 7, 1976, APPROVED the following Instruction:

CHAPTER I – SCOPE AND PURPOSE

Article 1. This Instruction provides for the rules applicable to the preparation and disclosure of financial statements and to the accounting criteria for recognition, classification, and measurement of assets and liabilities, as well as for the recognition of revenues and allocation of expenses of Investment Clubs.

CHAPTER II – ACCOUNTING CRITERIA

Article 2. Clubs must apply the accounting practices for recognition, classification, and measurement of assets and liabilities, as well as for the recognition of revenues and allocation of expenses, set forth in Annex A of this Instruction.

Article 3. The organized market administrator entity may determine the observance of additional accounting procedures, provided they are provided for in the Investment Funds Accounting Plan – COFI, approved by CVM Instruction No. 438, of July 12, 2006, or any other that replaces it.

CHAPTER III – FINANCIAL STATEMENTS AND DISCLOSURE OF INFORMATION

Article 4. The financial statements of Clubs are composed of the following documents:
I - statement of financial position (Annex B); II - statement of income (Annex C); and III - statement of changes in equity (Annex D).

§ 1. The financial statements of Investment Clubs must be prepared on the date established in the special regulation governing their operation.

§ 2. The financial statements of Investment Clubs are comparative with the previous social year.

§ 3. The explanatory notes are an integral part of the financial statements and must include, at a minimum, the following information:
I – operational context;
II – presentation of the financial statements and the main practices used in their preparation; III – information on the portfolio, including the discrimination, by type and value, of all financial assets that make up the Club's portfolio, separated by category; IV – illiquid assets in the market, disclosing the methodology adopted to determine the fair value of assets without liquidity in the market; V – regarding financial derivative instruments, inform:
a) utilization policy; b) risks associated with each market operation strategy; c) evaluation criteria, methods, and significant assumptions applied in determining fair value; and d) values grouped by underlying asset and maturity ranges, highlighting reference values, cost, and fair value; VI – issuances, redemptions, and other movements occurring in equity during the year; VII – value allocated as an administration fee and performance fee during the year, disclosing:
a) the criteria adopted for calculation and payment, including, where applicable, third-party services on behalf of the administrator; and b) the current administration and performance fee percentages and any changes occurring during the year; VIII – changes in the statutes occurring during the year and the previous social year used for comparison; IX – regarding the liquidation of the club, analysis regarding whether redemptions were or were not carried out under equitable conditions and in accordance with the relevant regulation, as well as regarding the existence or non-existence of unrecorded debts, credits, assets, or liabilities; X – identification of the accountant and the director responsible for the club; and XI – subsequent events.

Article 5. The organized market administrator entity may require other information that, in its discretion, it deems necessary in the explanatory notes.

Article 6. The rules regarding the disclosure of financial statements must be established by the organized market administrator entity.

Article 7. The audit of the financial statements of Clubs, when applicable, must observe the criteria and procedures applicable to investment funds.

CHAPTER IV – FINAL PROVISIONS

Article 8. Any specific formal inquiries regarding the interpretation of accounting norms and procedures provided for in this Instruction must be directed to the organized market administrator entity and must be signed by the administrator and the qualified professional responsible for the accounting.

Sole Paragraph. Inquiries regarding the change or adoption of new accounting practices must be accompanied by the statement of the independent auditor, where applicable.

Article 9. This Instruction enters into force on the date of its publication, applying to social years starting after the adaptation period referred to in § 1 of Article 45 of CVM Instruction No. 494, of April 20, 2011.

Signed originally by
OTAVIO YAZBEK
President
In exercise

ANNEX A
Accounting Evaluation and Allocation Criteria

1. General Provisions

1.1 – The assets comprising the portfolios of Clubs must be recorded at the value effectively contracted or paid, and adjusted daily to market value, recognizing accounting appreciation or depreciation in counterpart to the appropriate revenue or expense account, in the period's result.

1.2 – Market price is considered the value that can be obtained with the negotiation of the title or security in an active market, where buyer and seller are independent, without corresponding to a compulsory transaction or resulting from a liquidation process. In turn, a market is defined as one in which the asset is traded in a habitual and frequent manner, and must be selected, among the available markets, the one in which the largest volume of transactions of the asset occurs.

1.3 – In the absence of a trading market for a given asset, its accounting must be made using one of the following criteria:
a) by the value that can be obtained with the negotiation of another asset of at least similar nature, term, risk, and indexers; b) by the present value of future cash flows to be obtained, adjusted based on the interest rate in effect in the market, on the date of the financial statement; or c) by the net realization value obtained by mathematical-statistical pricing technique or model.

1.4 – Atypical quotes must be excluded when performing the economic evaluation of the asset. The documents constituting the atypicality of the excluded quote and the documents, criteria, and methods used for the economic evaluation of the asset must be preserved by the administrator according to the criteria established by the organized market administrator entity.

1.5 – If impropriety or inconsistency is found in the classification and evaluation processes, the organized market administrator entity may determine the reclassification and re-evaluation of the Club's assets, with the consequent recognition of the effects in the financial statements, without prejudice to any applicable sanctions.

1.6 – The adoption of the procedures referred to in this Instruction must produce immediate effects on the value of the Club's share, observing the other conditions provided for in its statutes.

1.7 – The adjustments resulting from the application of the procedures referred to in the previous item must be recorded in counterpart to the appropriate revenue or expense account in the period's result.

2. Fixed Income Assets

2.1 – The fixed income assets comprising the portfolios of Clubs must be recorded at the value effectively paid, including brokerage and fees, and classified into the following categories:
a) assets for trading; and b) assets held to maturity.

2.2 – The category of assets for trading must record securities acquired with the intention of being actively and frequently traded.

2.3 – The category of assets held to maturity must record securities when, on the date of acquisition, there is an intention of the shareholders to preserve a volume of applications compatible with the maintenance of such assets in the Club's portfolio until maturity, provided that the following conditions are cumulatively observed:
a) there is a formal request to all shareholders, which must contain a declaration that they have the financial capacity to hold to maturity the assets classified in this category; and b) all shareholders who enter the Club after classification in this category formally declare, through the adherence term to its regulations, their financial capacity and consent to the classification of securities comprising the Club's portfolio in the category mentioned in this item.

2.4 – Securities classified in the category of assets for trading must be adjusted daily by market value, computing appreciation or depreciation in counterpart to the appropriate revenue or expense account, in the period's result.

2.5 – The methodology for determining market value is the responsibility of the administrator and must be established based on consistent and verifiable criteria, which take into account the independence in data collection regarding the rates practiced in their trading desks, and the average negotiation price on the date of calculation may be used as a parameter.

2.6 – When market price is not available for a given asset, the Club's administrator must use the techniques provided for in item 1.3.

2.7 – The administrator, in any case, must adjust the evaluation of the assets comprising the Club's portfolio whenever there is indication of probable losses in the realization of their value.

2.8 – Securities classified in the category of assets held to maturity must be evaluated daily at their respective acquisition costs, plus the earnings earned, computing appreciation or depreciation in counterpart to the appropriate revenue or expense account in the period's result.

2.9 – The allocation of earnings must be carried out considering the business days between the date of contracting and the date of maturity of the operation, excluding the date of the operation and including the date of maturity.

2.10 – Permanent losses with securities classified in the category of assets held to maturity must be recognized immediately in the period's result, observing that the value adjusted as a result of the recognition of such losses becomes the new cost basis.

2.11 – The reversal of the losses mentioned in the previous item is admitted, provided it is for a justified reason subsequent to that which led to its recognition, limited to the acquisition cost, plus the earnings earned.

3. Variable Income Assets

3.1 – The variable income assets comprising the Club's portfolio must be recorded at the value effectively paid, including brokerage and fees, and adjusted daily by market value.

3.2 – Acquisition cost is understood as the purchase price of the title in the current exercise or the evaluation value of the last statement of the Club's financial position.

3.3 – The evaluation of variable income assets must be made using the last daily closing quote of the market in which the asset presents greater liquidity, provided it has been traded at least once in the last 90 (ninety) days.

3.4 - In the case of assets without trading in the last 90 (ninety) days, the value of the asset must be evaluated by the lowest of the following values:
a) acquisition cost; b) last available quote; c) last net asset value of the asset disclosed to the CVM; or d) probable net realization value obtained by adopting a pricing technique or model.

3.5 – The administrator, in any case, must adjust the evaluation of the assets comprising the Club's portfolio whenever there is indication of probable losses in the realization of their value.

4. Derivatives

4.1 – Financial derivative instruments are understood as those whose value varies, according to contractual forecast, as a result of changes in interest rates, price of title or security, commodity price, exchange rate, stock exchange index, price index, index or credit rating, or any other similar specific variable and that are settled on a future date.

4.2 – Operations with financial derivative instruments carried out by Clubs must be recorded observing the following procedures:
I – on the date of the operation:
a) in forward operations, the acquired or alienated assets must be accounted for at their market spot quotes, with the installments to be received or paid fixed for a future date adjusted to present value, taking as a basis the rate of each contract; b) in options operations, record the value of premiums paid or received in the appropriate asset or liability account, respectively, remaining there until the effective exercise of the option, if applicable, when it must be written off as a reduction or increase in the cost of the good or right, by effective exercise, or as revenue or expense, in the case of non-exercise, as applicable; c) in operations with other financial derivative instruments, record in asset or liability accounts according to the characteristics of the contract. II – daily: evaluate at market value.

4.3 – The recording of the result calculated in the operations referred to in item 4.2 above must be carried out individually, with compensation of revenues with expenses in distinct contracts being prohibited.

4.4 – The reference value of operations with financial derivative instruments must be recorded in clearing accounts.

4.5 – Assets acquired through operations with derivatives or resulting from the splitting of these operations must be classified, on the date of receipt of the asset object of the operation, in one of the categories provided for in this Annex.

4.6 – In futures market operations, the value of the contract must be recorded in clearing accounts, recognizing in result accounts its daily adjustments.

4.7 – In options operations:
I – contracts must be evaluated at market price, in consonance with the criteria used for the evaluation of the underlying asset and its market volatility; II – exercise, payable, and receivable values must be accounted for in clearing accounts.

4.8 – Titles, securities, and other assets given as collateral for operations carried out in stock exchanges, futures, and organized over-the-counter markets, must be recorded in the respective equity accounts that highlight the linkage, maintaining the original evaluation criteria.

5. Loans

5.1 – Titles and securities lent by loans must be recorded in the ACCOUNTS FOR LOAN OF TITLES AND SECURITIES account and evaluated at market.

5.2 – The remuneration contracted in the operation of titles and securities lent by loans must be allocated for the duration of the contract, ‘pro rata temporis’, and recorded in the REVENUE FROM LOAN OF TITLES AND SECURITIES account.

5.3 – Titles and securities borrowed by loans must be recorded in the CREDITORS FOR LOAN OF TITLES AND SECURITIES account and evaluated at market.

5.4 – The charge and fee contracted in the operation of titles and securities borrowed by loans must be allocated for the duration of the contract, ‘pro rata temporis’, and recorded in the EXPENSES OF LOAN OF TITLES AND SECURITIES account.

6. Revenues and Expenses

6.1 – The allocation of revenues and expenses of the Club is made ‘pro rata’ business day, observing, where applicable, the following criteria:
I – Operations with Fixed Rates:
a) active and passive operations contracted with earnings and charges fixed for a future date are accounted for at present value, registering the earnings and charges to be allocated in a subheading for internal use of the title or accounting subheading used to record the operation; b) the earnings and charges of these operations are allocated daily, to the credit or debit of the effective revenue or expense accounts, as applicable, due to the flow of their terms; c) the allocation of the earnings and charges of these operations is made by using the exponential method, with the allocation according to the linear method being admitted in those contracted with simple interest clauses. II – Operations with Post-fixed or Floating Rates:
a) active and passive operations contracted with post-fixed or floating earnings and charges are accounted for at the value of the principal, to the debit or credit of the accounts that record them. These same accounts accommodate the interest and monthly adjustments resulting from the variations of the update indices or the charges contracted, in the case of floating rates; b) the earnings and charges of these operations are allocated daily to the credit or debit of the effective revenue or expense accounts, as applicable, due to the flow of their terms; c) the allocation of the daily earnings and charges of these operations is made by using the exponential method, with the allocation according to the linear method being admitted in those contracted with simple interest clauses, according to the indexer used for the correction of the following month relative to the current month, ‘pro rata temporis’ in the case of operations with post-fixed rates, or with observance of the contracted rates, in the case of operations with floating charges.

6.2 – Fixed income titles are recorded at the value effectively paid and updated daily, and, if applicable, the premium or discount must be recognized due to the flow of the maturity term of the papers.

6.3 – The profits or losses calculated on the sale of titles are accounted for in the appropriate result accounts.

6.4 – Dividends and equity earnings are recorded as revenue when the corresponding shares are considered ex-right on the stock exchange.

6.5 – The Club's expenses and charges, allocated daily and per business day, are recorded in specific accounts, with the exception of those that, according to current regulations, are at the expense of the administrator.

6.6 – Brokerage and fees paid upon the sale of titles and securities are recorded to the debit of the appropriate result account.

6.7 – The administration fee and performance fee, if any, must be calculated per business day, according to the Club's regulations and allocated daily, in accordance with current regulations.

6.8 – Payments made directly by the Club to service providers, included in the administration fee, must have registration in specific subaccounts of liability and result.

6.9 – Expenses occurring in a contingent manner, the responsibility of the Club, that do not fit into the other result accounts, are recorded to the debit of the OTHER ADMINISTRATIVE EXPENSES account.

ANNEX B
Statement of Financial Position

Years ended
Club Name: CNPJ:
Administrator: CNPJ:

ASSETS
DD/MM/YY
YY
DD/MM/YY
YY
In R$
%
Equity In R$
% Equity

Cash
Shares
Debentures
Other Securities Issued by Public Companies
Investment Fund Shares
Federal Public Bonds
Securities Issued by Financial Institutions
Financial Derivative Instruments
TOTAL ASSETS

LIABILITIES
DD/MM/YY
YY
DD/MM/YY
YY
In R$
% Equity In R$
% Equity

Financial Derivative Instruments
Administration/Performance Fee Payable
Other Amounts Payable
TOTAL LIABILITIES

TOTAL EQUITY BELONGING TO SHAREHOLDERS
TOTAL LIABILITIES AND EQUITY BELONGING TO SHAREHOLDERS

ANNEX C
Statement of Income

Years ended
Club Name: CNPJ:
Administrator: CNPJ:
DD/MM/YYYY DD/MM/YYYY
In R$ In R$

Securities of Variable Income Issued by Public Companies Other Securities Issued by Public Companies Investment Fund Shares Federal Public Bonds Securities Issued by Financial Institutions Financial Derivative Instruments Club Expenses PROFIT (LOSS) OF THE YEAR

ANNEX D
Statement of Changes in Equity

Years ended
Club Name: CNPJ:
Administrator: CNPJ:
DD/MM/YY
YY
DD/MM/YY
YY
Quantity In R$ Quantity In R$

SHARE VALUE AT THE BEGINNING OF THE YEAR/PERIOD EQUITY AT THE BEGINNING OF THE YEAR/PERIOD SHARES ISSUED SHARES REDEEMED SHAREHOLDERS' INTEGRATION FOR NEGATIVE EQUITY NET PROFIT (LOSS) OF THE YEAR/PERIOD EQUITY AT THE END OF THE YEAR/PERIOD SHARE VALUE AT THE END OF THE YEAR/PERIOD