Circular Letter CVM/SIN GIE 348/00

CIRCULAR LETTER CVM/SIN/GIE NO. 348/2000
Rio de Janeiro, 02/28/2000
Subject: Non-Resident Investors – CMN Resolution No. 2,689/00 and CVM Instruction No. 325/00

Dear Sir,

With the objective of liberalizing and simplifying the operational mechanisms for foreign investment in the Brazilian financial and capital markets, the National Monetary Council approved Resolution No. 2,689 on January 26, 2000.

The new regulation will replace Annexes I, II, and IV to CMN Resolution No. 1,289/87 and also CMN Resolution No. 2,034/93, which regulated investments made in Fixed Income Funds – Foreign Capital. These and their respective complementary norms issued by the CVM and the Central Bank of Brazil will be replaced by a single norm for all non-resident investors who wish to invest in the financial and capital markets in Brazil. Previously, the existing norms applied only to institutional investors. With the new norm, any investor, including natural and legal persons, who is not a resident may invest in the Brazilian markets.

Regardless of the market to which the resources are destined, the operational mechanism will be unique. The investor must appoint a representative in Brazil, fill out the form attached to Resolution No. 2,689/00, and obtain registration with the CVM. When the representative is not a financial institution authorized to operate by the Central Bank of Brazil, the investor must indicate a co-responsible representative, who must be qualified by the Central Bank to operate as a financial institution. In accordance with item I of Article 6 of CMN Resolution No. 2,689/00, the securities of the non-resident investor must be custodied in an entity authorized by the CVM or the Central Bank to provide such service.

Within the scope of the CVM, the registration of non-resident investors is regulated by CVM Instruction No. 325/00. The structure of individual or collective accounts is the same as that previously used for foreign investment entered through Annex IV to Resolution No. 1,289/87. Only institutional investors may be holders of collective accounts. Individual investors must request their registration as a participant in a collective account or as the holder of an individual account. The use of the operational code issued by the CVM for each investor is mandatory in all operations carried out in the country.

LOCAL ADMINISTRATOR
At. Responsible Director
Address
ZIP Code City State
CIRCULAR LETTER CVM/SIN/GIE NO. /2000
Pg. 02

Below we clarify the main operational procedures to be adopted from the entry into force of Resolution 2,689/00, on 03/31/2000.

I – TRANSITION TO THE NEW RESOLUTION

1. Investors from Annex IV
   All current investors from Annex IV must fill out the form attached to CMN Resolution No. 2,689/00. The forms must be signed by the investor themselves or by an agent authorized to sign on their behalf.
   The forms, after being duly signed by the investor, must be kept by the representative.
   The representative must present the data of the non-resident investor to the CVM. The information must be sent to the CVM, electronically, in a format to be established opportunistically.
   The CVM will be validating the operational codes already existing in the period from 03/31/2000 to 06/30/2000 and will cancel all codes of investors who do not sign the form by 06/30/2000, leaving their custody position blocked until the situation is regularized. The structure of the CVM operational code will follow the current structure, with no alteration in any of the digits that compose it, namely:
   aaaaa.bbbbbb.cccccc.XY, where:
   aaaaa is the representative code (which will be identical to the local administrator code); bbbbbb is the code of the holder of the individual or collective account; cccccc is the individual code of the non-resident investor; X is equal to 0 when it is an individual account and X is equal to 1 when it is a collective account, and Y is a check digit.

When requesting the conversion of the investment modality established in Annex IV to that established in CMN Resolution No. 2,689/00, the investor's representative must CIRCULAR LETTER CVM/SIN/GIE NO. /2000 Pg. 03 inform, electronically, to the CVM the assets that make up the investor's portfolio and the institution where they are custodied, in a format to be disclosed opportunistically.

Holders of individual and collective accounts must also fill out and sign the form attached to CMN Resolution No. 2,689/00, as well as celebrate new representation and custody contracts, when applicable.

2. Investors from Annex I
   Shareholders of Investment Companies – Foreign Capital must fill out and sign the form attached to CMN Resolution No. 2,689/00 and their representative must inform the CVM of the assets that make up their portfolio and the institution where they are custodied to proceed with the transfer of their resources to the new regulation. The deadline for such transfer extends from 03/31/2000 to 03/31/2001, with the shareholders also having the possibility of opting for the liquidation of the company.

3. Investors from Annex II
   Unitholders of Investment Funds – Foreign Capital must fill out and sign the form attached to CMN Resolution No. 2,689/00 and their representative must inform the CVM of the assets that make up their portfolio and the institution where they are custodied to proceed with the transfer of their resources to the new regulation. The deadline for such transfer extends from 03/31/2000 to 03/31/2001, with the unitholders also having the possibility of deliberating on the liquidation of the fund.

4. Investors in Fixed Income Funds – Foreign Capital
   Unitholders of Fixed Income Funds – Foreign Capital must fill out and sign the form attached to CMN Resolution No. 2,689/00 and their representative must inform the CVM of the assets that make up their portfolio and the institution where they are custodied to proceed with the transfer of their resources to the new regulation. The deadline for such transfer extends from 03/31/2000 to 03/31/2001, with the unitholders also having the possibility of deliberating on the liquidation of the fund.

II REGISTRATION OF NEW INVESTORS FROM 03/31/2000

1. New Participants in Collective Accounts
   After the non-resident investor fills out the form, their representative must request registration with this Commission, informing, electronically, the information required by the system to be implemented by the CVM.
   The CVM will respond to the registration request within 24 hours.

2. Constitution of new individual and collective accounts
   After the non-resident investor fills out the form and the celebration of representation and custody contracts, the representative must request the registration of the non-resident investor with this Commission, informing, electronically, the information required by the system to be implemented by the CVM. After obtaining the registration, the representative must send copies of the representation and custody contracts with an entity duly authorized to operate by the CVM, in accordance with item I of Article 6 of Resolution 2,689/00, as well as a copy of the form attached to CMN Resolution No. 2,689/00.

3. Cases where the representative does not yet have data registered with the CVM
   In cases where the representative does not yet have their data registered with the CVM, they must send the information required by the system to be implemented by the CVM, according to the model to be made available opportunistically.

III TRANSFER OF RESOURCES BETWEEN VARIOUS ACCOUNTS MAINTAINED BY THE SAME INVESTOR Provided that the non-resident investor has the same individual code, transfers of resources between different accounts may be made. For this, the representatives of the non-resident investor must previously inform the CVM of the source account, the destination account, the date, the value, and the assets transferred.

IV CASES OF MERGER, ACQUISITION, SPIN-OFF, AND OTHER CORPORATE CHANGES OCCURRED ABROAD The representative must submit to the CVM for approval a copy of the documentation that supported the merger, acquisition, spin-off, or other corporate change of the non-resident investor (Article 8 of CVM Instruction No. 325/00). CIRCULAR LETTER CVM/SIN/GIE NO. /2000 Pg. 05

V CHANGE OF NAME OF THE NON-RESIDENT INVESTOR
The representative must send to the CVM a copy of the documentation that determined the change of name of the non-resident investor.

VI TRANSFER OF REPRESENTATIVE OF THE INVESTOR IN BRAZIL The new representative must present to the CVM a copy of the form attached to CMN Resolution No. 2,689/00, duly filled out and signed by the account holder, as well as copies of the representation and custody contracts. When it is a collective account, the holder must declare that all participants are aware of and agree with the transfer of the representative. The former representative must express their agreement with the transfer.

VII TRANSFER OF DOMICILE OF THE NON-RESIDENT INVESTOR The representative must send to the CVM a copy of the documentation that supported the transfer of domicile of the non-resident investor.

Any other clarifications may be obtained from the Foreign Investors Management by phone (021) 2120298 or by electronic address gie@cvm.gov.br.

Sincerely,

CARLOS EDUARDO P. SUSSEKIND
Superintendent of Relations with
Institutional Investors

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