Explanatory Note to CVM Instruction No. 237 of July 27, 1995

EXPLANATORY NOTE TO CVM INSTRUCTION NO. 237, OF JULY 27, 1995.

Ref.: CVM Instruction No. 237, of July 27, 1995, which alters the wording of CVM Instruction No. 215, of June 8, 1994, regarding the composition of the portfolio and redemption of shares of Mutual Funds for Investment in Stocks - Free Portfolio.

The issuance of CVM Instruction No. 237 was a consequence of CMN Resolution No. 2183, of July 21, 1995, through which the Economic Stabilization Plan was continued, specifically aiming at policies of de-indexation and extension of terms in fixed-income applications.

The aforementioned Resolution aims to reach only funds whose applications are characterized as fixed income, therefore, in theory, outside the area of the family of funds regulated by the CVM. In reality, however, it is observed that some Mutual Funds for Investment in Stocks - Free Portfolio (FMIA-CL) have structured their portfolios in such a way as to synthesize, via derivatives, portfolios where market risk arising from fluctuations in the quotes of their underlying assets is practically eliminated. Such practice, although lawful within the current regulation, lies outside the scope for which these norms are intended.

The CVM, when regulating FMIA-CL, aimed to enable the creation of funds that had the freedom to offer their shareholders risks pertinent to the securities derivatives markets, recognizing the growing importance of this market and allowing the growth of the industry through the diversification of more sophisticated products that satisfied the wide range of investor desires.

It was not its objective, nor is it now, to regulate funds that, although using derivatives, transferred market risk to funds, nominally of equities, but in every way similar to fixed-income funds.

For these reasons, and in view of CMN Resolution No. 2183, it is necessary to redirect this family of funds to their true objectives, altering the norms that allowed that migration.

The new wording given to Art. 49 seeks to redirect the portfolios of FMIA-CL so that 51% of their applications are effectively in securities or derivatives that have an unequivocal characteristic of risk, due to fluctuations in the market quotes of their underlying assets, prohibiting the synthesis, via derivatives, of operations whose yields can be fixed at the time of their realization. In this way, the existence of market risk is ensured, which will be reflected in the shares of these funds, disqualifying them as fixed-income applications.

Furthermore, it was determined that the share of the first business day subsequent to the effective receipt by the administrator of the redemption request would be used to calculate the value thereof, similar to what already occurs with the Mutual Fund for Investment in Stocks.

The other determinations aim to regulate the deadlines granted for adaptation to new norms and the information to be provided to the CVM. In the latter, it is intended to explicitly clarify, in a clear manner, the operations carried out in markets with future settlement and that have as a basic characteristic, either to "hedge"

EXPLANATORY NOTE TO CVM INSTRUCTION NO. 237, OF JULY 27, 1995.
2 positions held spot, or to carry out complex operations with derivatives whose yields are fixed or limited at the time of their realization in the market, such as "box" operations, spreads, financing, and similar.

In the case of funds with inherent market risk, the option of daily redemption of shares, with or without an initial lock-up period, to be defined in the fund's bylaws, was maintained.

Original signed by
THOMÁS TOSTA DE SÁ
President