Crystal Sugar Futures Contract Specifications

Transcription

1 Crystal Sugar Futures Contract Specifications 1. Underlying commodity Crystal sugar with minimum 99.7 degrees of polarization, maximum 0.08% moisture, color maximum 150 ICUMSA, maximum 0.07% ashes, to be delivered in the city of São Paulo, State of São Paulo, Brazil. 2. Price quotation Dollars of the United States of America per 50-net kilogram bag to two decimal places, free of any charges both tax-related and not tax-related. 3. Minimum price fluctuation US$0.01 (one cent of a U.S. Dollar) per 50-net kilogram bag. 4. Maximum daily price fluctuation As established by BM&F in Circular Letters. At any time, the Exchange may alter the price fluctuation limits, as well as their applicability to any delivery month. 5. Contract size 270 bags of 50 net kilograms each. 6. Delivery months February, April, July, September, and November. 7. Number of authorized delivery months Minimum of seven, as authorized by BM&F. 8. Last trading day The sixth business day of the delivery month. On that day, neither opening of new short positions nor day trading shall be allowed. 9. Business day For the purposes of this contract, a trading day at BM&F shall be considered a business day. However, for the purposes of the payment and receipt of amounts, as referred to in items 10, 11, 13.5, and 18.1, a day that is not a banking holiday in New York, USA, and is a trading day at BM&F shall be considered a business day. 10. Day trading Buying and selling on the same day the same number of contracts for the same contract month shall be offset provided the transactions are executed on behalf of the same customer through the same Commodities Brokerage House and registered by the same Clearing member, or performed by the same Local and registered by the same Clearing Member. These transactions shall be cash settled on the following business day and their amounts shall be calculated in accordance with item 11(a), in observance to the provisions of item 19, where applicable. 11. Daily settlement of accounts (variation margin) The positions outstanding at the end of each session shall be settled according to that day s settlement price established on the closing call, as determined by BM&F rules and regulations, and cash settled on the following business day, in observance to the provisions of item 19, where applicable. The variation margin shall be calculated by the following formulas: (a) For the positions initiated on the day t ( ) (b) For the positions initiated on a former trading day AD = PA PO 270 n (1) t t 1 ( ) AD = PA PA 270 n (2) where: AD = the variation margin value; PA t = the day s settlement price; PO = the trading price; n = the number of contracts; PA t 1 = the previous day s settlement price. The variation margin value, if positive, shall be credited to the buyer and debited to the seller; if negative, it shall be debited to the buyer and credited to the seller. The variation margin for open positions shall be made up to the day preceding the day a Delivery Notice has been designated to the buyer, as described in items 13.1 and 13.2.

2 12. City of price formation and delivery point definition The city of price formation shall be the city of São Paulo, State of São Paulo. The delivery points shall be the Exchange-licensed depository entities located in the State of São Paulo. Whenever a delivery is made in a city other than São Paulo, freight costs, based on a price table published by BM&F, shall be deducted when the cash settlement value is calculated. 13. Settlement conditions on expiration 13.1 Period for tendering Delivery Notices The sellers who decide not to offset their positions up to the last trading day shall electronically register a Delivery Notice at BM&F, through the Physical Delivery System, during the period that initiates on the first business day of the delivery month and terminates on the fifth business day of the delivery month Procedures for electronic registration and designation of Delivery Notices Up to the electronic registration date, the seller, or substitute or assigned customer, shall mandatorily send his/her/its Brokerage House the documentation detailed in Annex II. The Brokerage House, in turn, must send said documentation to BM&F. The Delivery Notices shall be designated by BM&F to the buyer on the business day subsequent to their electronic registration via the Physical Delivery System. The Delivery Notices shall remain available on the floor to be chosen by the customers who hold long positions. BM&F shall offer the lots in the Delivery Notices to the buyers on a first in, first out basis that is, the customers who have held long positions for the greatest amount of time shall have priority. Should there be no parties interested in receiving all or part of the commodity in the Delivery Notices, BM&F shall determine that the customer(s) who has(ve) held long position(s) for the greatest amount of time shall take delivery of the sugar Third party assignment The sellers residing in Brazil may assign a third party to make delivery of sugar, provided they do so before the electronic registration of the Delivery Notice. The buyers may also assign a third party to take delivery of sugar, provided they do so by no later than 09:00 of the third business day subsequent to the day of the Delivery Notice designation to the buyer. It shall be mandatory for a nonresident seller to assign a resident in Brazil to whom delivery rights and obligations must be transferred. It shall be mandatory for a nonresident buyer to appoint a legal representative to provide transportation and shipment, as well as to meet all further requirements as defined by the Foreign Trade Office (SECEX) of the Development, Industry and Commerce Ministry (MDIC). The assigned customers must provide all information needed for invoice purposes and shall be bound to the contract up to the delivery s final settlement. In any case, the original buyer and seller shall assume responsibility for any of the obligations of the third parties they have assigned, up to the delivery s final settlement. Third party assignment must observe the related procedures required by BM&F involving the mandatory presentation of the documentation established in Circular Letter 141/2000-DG (Annex IX) Physical delivery period and procedures The physical delivery period and procedures shall be those listed in Annex III Delivery cash settlement 1. Payment by the buyer relating to a physical delivery shall be made on the third business day subsequent to the day of the Delivery Notice designation to the buyer. 2. The funds transfer to the seller shall be made on the first business day following the lot withdrawal by means of the processing of a fiscal document by the Exchange-licensed depository on behalf of the buyer designated by BM&F. 3. Both the payment by the buyer and the receipt of payment by the seller shall meet the provisions of item 19, where applicable. 4. The cash settlement value per contract shall be calculated by the following formula: Where: VL C F ICMS R [( C F) 270] ( ) [ 1 ICMS+ R ICMS PIS, PASEP, COFINS] ( ) VL = 1+ IPI = the cash settlement value per contract; = the settlement price of the business day preceding the day of the Delivery Notice designation to the buyer; = the value of freight costs, if any; = Tax on the Circulation of Merchandises and Services (ICMS); = ICMS basis calculation reduction; (3)

3 PIS, PASEP, COFINS = Social Integration Program (PIS), Contribution for the Financing of Social Security (COFINS), Program of Assistance to Civil Servants (PASEP); IPI = Tax on Industrialized Products. 5. Should the buyer not withdraw the sugar either totally or partially up to the thirteenth business day subsequent to the day the buyer was designated a Delivery Notice, the payment of the remaining balance shall occur on the fifteenth business day subsequent to the day the buyer was designated the Delivery Notice. In order to be entitled to an extension in the withdrawal period, the buyer must meet the provisions of subitem (e) of item 2 of Annex III. 6. In order to meet the buyer s written request that the acquired commodity resulting from the physical delivery of the futures contract is destined exclusively to exportation and after BM&F receives the Exportation Invoice Letter (Annex VII) and agrees with its contents, the settlement value shall not be subject to any taxation. In this case, the following formula shall be adopted: VL = [(C F)] 270 (4) 7. Taxes are not included in expression (4) s settlement value due to the fact that the commodity has only been acquired to be exported, with both the buyer and the seller assuming responsibility for the principal and accessory obligations pursuant to current fiscal legislation Further conditions BM&F shall issue a certificate which shall include the type of the delivered commodity, its quantity, and the cash settlement value (attached to a copy of the Certificate of Analysis and Classification), which shall be used, as the case may be, by the legal representative of the nonresident buyer to obtain sale and export registrations. 14. Ex-pit transactions Ex-pit transactions shall be allowed, up to the last day of the period for tendering Delivery Notices, provided the conditions established by BM&F are met. These transactions shall be disclosed by BM&F, but shall not be subject to market interference. 15. Hedgers Sugar mills, refineries, industrial consumers, cooperatives, producer associations, wholesalers, importers, exporters, and suppliers of agricultural equipment. 16. Margin requirements A value per contract, published by BM&F in its Daily Bulletin, which shall be altered at any time, at the Exchange s discretion. Hedgers shall be granted a 20% discount on the initial margin. Margins shall be due on the first business day following the trading day. For nonresidents, should the first business day following the trading day be a banking holiday in New York, the margin shall be due on the first day following the trading day when there is no banking holiday in that city. Whenever margin requirements are met with cash, the provisions of item 19 shall be observed, where applicable. 17. Assets eligible to meet margin requirements For residents, cash, gold, shares of the Fund for Broker Financing (FIF), and upon prior approval by the Exchange, federal bonds, private securities, letters of credit, shares of stocks, and equity fund units. For nonresidents, United States Dollars and upon prior approval by the Exchange, U.S. T-Bonds, T-Notes, and T-Bills. 18. Trading costs Basic Commission Rate Regular trading: 0.30%; day trading: 0.07%. The Basic Commission Rate shall be applied to the previous day s settlement price of the second delivery month and shall be subject to a minimum value established by the Exchange and published in its Daily Bulletin. Physical Delivery Fee 0.45% of the delivery cash settlement value. Exchange Fee 6.32% of the basic commission rate and of the physical delivery fee, if any. Registration Fee A fixed value established by BM&F. Classification Fee

4 A value in Reals established by the companies accredited by BM&F, to be paid by the classification s requestor. Arbitration Fee A value in Reals established by the companies accredited by BM&F, to be paid by the buyer. Common Members shall pay no more than 75% of the Basic Commission Rate and of the Physical Delivery Fee, and 75% of the Registration and Exchange Fees Due dates (a) The Basic Commission Rate, the Exchange, and Registration Fees shall be due on the first business day following the trading day, in observance to the provisions of item 19, where applicable. (b) The Physical Delivery Fee shall be due on the physical delivery cash settlement date, in observance to the provisions of item 19, where applicable. (c) The Classification and Arbitration Fees shall be due when the corresponding service is requested. 19. Additional provisions for cash settlement The following shall apply to the payment and receipt of amounts resulting from day trades, variation margin, physical deliveries, margin deposits in cash, and trading costs not expressed in Reals: i. For nonresidents: the amounts shall be payable and receivable in United States Dollars in New York, USA, through the Settlement Bank appointed by BM&F; ii. For residents: the amounts shall be in Reals, in accordance with the regular procedures of the other BM&F contracts not authorized to be traded by foreign investors. When the conversion of the respective amounts is necessary, the BM&F Exchange Rate Benchmark, as described in Annex I and verified on a specific date, according to the nature of each payment, shall be used as follows: (a) Amounts resulting from day trades: the BM&F Exchange Rate Benchmark verified on the trading day; (b) Amounts resulting from variation margin: the BM&F Exchange Rate Benchmark verified on the day to which the variation margin refers; (c) Amounts resulting from physical deliveries: the BM&F Exchange Rate Benchmark verified on the business day preceding the cash settlement date; (d) Amounts resulting from trading costs not expressed in Reals: the BM&F Exchange Rate Benchmark verified on the trading day. 20. Further provisions This contract shall be subject to Annexes I through IX and, where applicable, to the legislation in force and to BM&F rules, regulations, and procedures, as defined in its Bylaws, Operating Rules, and Circular Letters, as well as to the specific rules set forth by the Brazilian governmental authorities that may affect the terms stated herein. LAST UPDATE: CIRCULAR LETTER 126/2002-DG, OF 09/13/2002

5 Annex I Methodology for the Calculation of the BM&F Exchange Rate Benchmark: Reals per Dollar of the United States of America The calculation of the BM&F Exchange Rate Benchmark of Brazilian Reals per United States Dollar, to be used in the cash settlement of residents transactions in the crystal sugar futures market, shall be made in accordance with the following criteria: 1. BM&F, together with the Settlement Bank of its transactions abroad, shall list the 14 institutions, among the best positioned in the interbank foreign exchange market which for this purpose shall be called informing banks from which it shall collect daily bid and asked quotations for the U.S. Dollar for cash delivery on T+2, that is, on the second business day both in New York and in Brazil; 2. The daily survey shall be made with at least 10 institutions from among the 14 previously selected. This survey shall be conducted during the period that coincides with the last 30 minutes of the open outcry session of the U.S. Dollar futures contract; 3. The prices shall be firm since BM&F may close the necessary foreign exchange operation for the cash settlement of nonresidents transactions with any of the informing banks; 4. BM&F shall calculate the average bid asked price of each informing bank; 5. After excluding the two highest and the two lowest average individual prices, a simple arithmetic mean of the remaining average individual prices shall be calculated; 6. The BM&F Exchange Rate Benchmark shall be the average calculated in accordance with item 5 above adjusted to T+1, that is, to the first day when there is not a banking holiday in New York and when there is a trading day at BM&F. This adjustment shall be made by adding or deducting the cost of remuneration in U.S. Dollars, based on the LIBOR, and the cost of the banking reserve in Reals at the Average One-Day Interbank Deposit Rate (ID), whenever applicable; 7. The Exchange shall also disclose an ID reference rate for the adjustment referred to in item 6. The procedures for the calculation of the ID reference rate shall be similar to those used in the calculation of the BM&F Exchange Rate Benchmark, as defined in items 1 to 5, by using the same list of informing banks; 8. Upon mutual agreement with the Settlement Bank located abroad, BM&F may increase or reduce the number of informing banks in the sample, as well as the number of prices to be excluded from the daily sample; 9. At its own discretion, the Exchange may arbitrate a price for the BM&F Exchange Rate Benchmark should it not consider the quotations collected from the informing banks to be representative; 10. This annex is an integral part of the Sugar Futures Contract Specifications. LAST UPDATE: CIRCULAR LETTER 126/2002-DG, OF 09/13/2002

6 Annex II Documentation To Be Sent to the Member Brokerage House Upon the Electronic Registration of the Delivery Notice by the Seller Certificate of Analysis and Classification To be issued by an Exchange-licensed Quality Supervisor and valid for 30 calendar days. The cost of the Certificate shall be paid by the seller. Commodity Ownership Declaration and Weight Certificate (Annex IV shows an example) To be issued and signed by the legal representative of the Exchange-licensed depository and the customer attesting that the commodity is free of any and all charges, including fiscal debts related to the stored goods, and that the bags are new and in perfect order, as defined in the contract specifications. Nonnegotiable Delivery Order (Annex V shows an example) To be issued and signed by the legal representative of the Exchange-licensed depository on behalf of BM&F authorizing BM&F to release the commodity to the buyer. In this same document the legal representative of the Exchange-licensed depository attests to storage, expedition, and insurance expenses being paid and covering a 21 business-day period, counted as from the day of the Delivery Notice designation to the buyer. Delivery Schedule (Annex VI shows an example) To be issued and signed by the Exchange-licensed depository. Delivery must be scheduled between the sixth and the thirteenth business day subsequent to the day of the Delivery Notice designation to the buyer. Only the lots that do not exceed the storage capacity of the depository during the delivery period shall be eligible for delivery. CIRCULAR LETTER 126/2002-DG, OF 09/13/2002

7 Annex III Physical Delivery Period and Procedures 1. Lot formation The sugar shall be packed in bags and weigh 50 net kilograms (excluding the bag weight). The bag must be new, double, brown, and polypropylene, with a polyethylene lining and a minimum weight of 160 grams, printed with the standard Brazilian stamps. The sugar must meet the free flowing condition (unhardened and unsticky sugar). Each contact lot shall be formed in only one licensed depository entity where the sugar has been stored. Sugar in bulk shall be eligible for delivery at a premium or discount agreed upon by the parties, which must be notified to BM&F. 2. Sugar transfer, delivery, and withdrawal (a) The buyer that decides to take delivery or that is designated by BM&F to do so must send to BM&F, through his/her/its Brokerage House, the information required for invoicing and, when the case may be, the Exportation Invoice Letter (Annex VII) before 09:00 (local time) of the third business day subsequent to the day the buyer was designated a Delivery Notice. The original Exportation Invoice Letter must be tendered to BM&F by no later than 17:00 (local time) of the fifth business day subsequent to day of the Delivery Notice designation to the buyer. (b) By no later than the fourth business day subsequent to the day of the Delivery Notice designation to the buyer and in possession of the information corresponding to the buyer or assigned customer, the seller must transfer the sugar to the buyer and issue the bill of sale for invoice purposes, where the seller must print all information required by law and the Delivery Notice numbers. A facsimile of the bill of sale must be sent to BM&F on the fourth business day subsequent to the day of the Delivery Notice designation to the buyer. The original bill of sale must be tendered to BM&F before 17:00 (local time) of the sixth business day subsequent to the day of the Delivery Notice designation to the buyer. When this is the case, the bill of sale must identify the addressee as the exporter and the circumstances for release from taxation, with the addition by name of all applicable statutes. (c) The buyer must withdraw the commodity accompanied by the competent documentation. The delivery regularity shall conform to the Delivery Schedule (Annex VI), issued and signed by the seller, which must be comprised of between the sixth and the thirteenth business day subsequent to the day of the Delivery Notice designation to the buyer. In this case, the quantity delivered each day must be comprised of between 1/8 and 1/6 of the total to be delivered. Alternatively, delivery can be made under a mutual agreement by the parties. Such an agreement must be notified to BM&F by no later than the fifth business day subsequent to the day of the Delivery Notice designation to the buyer, thus exempting BM&F from any responsibility regarding the delivery period and process. (d) The buyer must provide enough transportation to meet the Delivery Schedule. The vehicles must register their arrival at the Exchange-licensed depository during business hours. Loading must occur within 24 hours, counted as from the arrival of the vehicle at the licensed depository indicated for delivery. Should any delay occur in the scheduled delivery, the licensed depository shall reprogram the delivery of the delayed quantity, parceling it into the following periods in an attempt to secure the least possible change in the preciously scheduled delivery program. (e) Should the buyer be unable to totally or partially withdraw the commodity during the period referred to in subitem (c), the buyer may extend it for another eight days, provided the buyer notifies BM&F and the licensed depository with a 24 hours advance notice and sends the Exchange the Declaration of Quality and Delivery (TQR) (Annex VIII) by no later than the fourteenth business day subsequent to the day of the Delivery Notices designation to the buyer. In this case, the quantity delivered each day must be comprised of between 1/8 and 1/6 of the remaining quantity to be delivered. (f) The procedure referred to in subitem (e) means that BM&F shall consider the corresponding lot(s) to have been delivered. (g) On the day subsequent to the end of the withdrawal period (the twentieth business day subsequent to the day of the Delivery Notice designation to the buyer) or of its extension, the buyer shall assume all responsibilities for any expenses and losses that may result from the lack of withdrawal, without prejudice to any applied penalty, pursuant to the provisions of item 3. (h) The buyer is responsible for contracting and paying the freight costs to withdraw the deposited commodity from the licensed depository. i) BM&F shall only accept the refusal of a depository to load a vehicle against the presentation of an inspection form that justifies the reason for the refusal. 3. Penalties The delay in sending the data for invoice purposes, the Exportation Invoice Letter by the buyer, and the bill of sale by the seller, as established in subitems (a) and (b) of item 2, shall result in the application of

8 a minimum fine by BM&F, at its own discretion and in its favor, of 1% per day upon the settlement value to be paid by the party at fault. The delay in delivering the TQR, as established in subitem (e) of item 1, shall imply the application of a minimum fine, at BM&F s discretion and in its favor, of 1% per day upon the settlement value to be paid by the buyer. The nonfulfillment of the delivery and/or withdrawal period, pursuant to the provisions of subitems (c), (d), and (e) of item 2, shall subject the violator to a minimum fine, at BM&F s discretion and in its favor, of 3% upon the amount of the undelivered or not withdrawn commodity. Any new incidence shall imply a new penalty, pursuant to the aforementioned provisions. The fine shall not be applied to the seller in case the depository proves that it was not responsible for the delivery delay. The fine shall not be applied to the buyer in case the buyer proves that he/she/it was not responsible for not withdrawing the commodity on time by presenting the arrival registration of the vehicle at the depository as per the Delivery Schedule. 4. Conflicts/arbitration Should there be any difference in regard to the sugar grades described in the contract specifications, the buyer and the seller may agree upon a premium or discount to be applied to the settlement value. Such an agreement must be registered at BM&F. Should they not reach an agreement, the buyer may request an arbitration to BM&F through his/her/its Brokerage House by no later than the thirteenth business day subsequent to the day of the Delivery Notice designation to the buyer, provided the commodity has not been withdrawn from the depository. BM&F shall choose one of the licensed Quality Supervisors for this arbitration. After the thirteenth day subsequent to the day of the Delivery Notice designation to the buyer, BM&F shall not accept any arbitration requests for the lots remaining at the depository. The Arbitration Award shall be final and without recourse. Should the buyer verify that the delivered sugar is different from the grades established in the contract specifications, the seller shall be obliged to replace the corresponding lots for other lots that correspond to the deliverable grades within two business day from the Arbitration Award notification. In addition to the Arbitration Fee, BM&F shall charge the seller a 1% fine on the value of the lot replaced, calculated on the settlement price of the nearest futures delivery month verified on the day the Arbitration Award was issued; plus 0.5% for the replacement of a second lot; plus 0.3% for the replacement of each subsequent lot. Should the sugar grades conform to the contract specifications, the Arbitration Fee shall be paid by the buyer. Should the Arbitration Award be favorable to the buyer, withdrawal and storage periods shall be extended, as well as the transfer of the settlement value to the seller, for the same duration as the Arbitration Award issuance period. Arbitration Awards shall have venue in the city of São Paulo, State of São Paulo. CIRCULAR LETTER 126/2002-DG, OF 09/13/2002

9 (Exchange-licensed depository s/mill s letterhead) (place and date) Annex IV COMMODITY OWNERSHIP DECLARATION AND WEIGHT CERTIFICATE To the BRAZILIAN MERCANTILE & FUTURES EXCHANGE (BM&F) Attn. Settlement and Participant Registration and Licensing Department São Paulo, SP Dear Sirs: We hereby inform that crystal sugar bags, registered with the number of the lots listed below and deposited in the depository/mill located in belong to. The sugar is free of any and all charges, including fiscal debts related to the stored goods, and it is packed in new bags weighing net kilograms each. Report/Certificate of Analysis and Classification XXXX XXXX XXXX Total XXX bags Bags XXX XXX XXX Yours sincerely, (seller s name and signature) depository s name and signature and position of responsible party (in the case of a warehouse, trustee s signature) CIRCULAR LETTER 126/2002-DG, OF 09/13/2002

10 (Exchange-licensed depository s/mill s letterhead) (place and date) Annex V NONNEGOTIABLE DELIVERY ORDER To the BRAZILIAN MERCANTILE & FUTURES EXCHANGE (BM&F) Attn. Settlement and Participant Registration and Licensing Department São Paulo, SP Dear Sirs: The depositor,, authorizes the delivery to this Exchange of the commodity of its ownership deposited in our depository/mill, as listed below: Report/Certificate of Analysis and Classification XXXX XXXX XXXX Total XXX Bags Bags XXX XXX XXX Storage, expedition, and insurance expenses have been paid by the depositor and cover a 21 business-day period, counted as from the day of the Delivery Notice designation to the buyer. Yours sincerely, depository s name and signature and position of responsible party (in the case of a warehouse, trustee s signature) CIRCULAR LETTER 126/2002-DG, OF 09/13/2002

11 Exchange-licensed depository s/mill s letterhead) (place and date) Annex VI To the BRAZILIAN MERCANTILE & FUTURES EXCHANGE (BM&F) Attn. Settlement and Participant Registration and Licensing Department São Paulo, SP Dear Sirs: DELIVERY We hereby declare that our Mill or Depository,, located in the city of, will deliver the lots listed below and distribute daily their delivery as of / / in observance to the number sequence, pursuant to BM&F s rules or as established by mutual agreement with (name of the buyer or assigned customer), thus exempting BM&F from any interference (in case of an agreement reached by the parties): Delivery Day Quantity Yours sincerely, depository s name and signature and position of responsible party (in the case of a warehouse, trustee s signature) CIRCULAR LETTER 126/2002-DG, OF 09/13/2002

12 Annex VII Exportation Invoice Letter (buyer s letterhead) (place and date) To the Brokerage House (address) Re.: Exportation Invoice Letter. Dear Sirs: We hereby inform that the bags of crystal sugar corresponding to the physical delivery of futures contracts ( delivery) are destined to exportation. Therefore, we hereby request the invoice to be made by the seller without the amounts corresponding to the taxation (including PIS and COFINS) that would apply should the sugar be destined to the domestic market. In view of the above and without prejudice to the responsibility we have already assumed by virtue of the provisions of the Sugar Futures Contract and the rules and regulations established by BM&F, we take full responsibility: (i) for effecting the aforementioned exportation; (ii) for evidencing it properly by presenting to the seller the applicable fiscal documentation, within the established time frame; and (iii) for any damage or loss suffered by the seller, by your Brokerage House, or by BM&F as the result of any delay in the fulfillment of the obligations referred to herein or of the failure in their fulfillment. Yours sincerely, Buyer (authorized signature) Agreed: Brokerage House (authorized signature) CIRCULAR LETTER 126/2002-DG, OF 09/13/2002

13 Annex VIII (letterhead) DECLARATION OF QUALITY AND DELIVERY (TQR) We hereby declare that (buyer s name), as the result of transactions in BM&F s Crystal Sugar Futures Market corresponding to the delivery, we have received from (seller s name) (quantity) lots of crystal sugar deposited in the mill/depository (name) in the city of ; and that such lots are in perfect order and meet thoroughly the contracted specifications. In evidence of our full conformity with this delivery we execute this declaration this day of (date) in (place). Delivered and invoiced quantity Brokerage House/buyer/receiver CIRCULAR LETTER 126/2002-DG, OF 09/13/2002

14 October 27, /2000-DG Annex IX BM&F CIRCULAR LETTER Re.: Sugar and Alcohol Physical Delivery Improvement. In order to improve the physical delivery procedures of the sugar and alcohol futures contracts, BM&F has established rules, as listed below, in addition to those referred to in their contract specifications which are to be observed in the upcoming deliveries. 1. Documentation Required from Buyers/Receivers Buyers/receivers shall present to BM&F the Term of Fiscal Responsibility (an example is shown in Attachment I) signed by the legal representative of the buyer/receiver. 2. Additional Rules for an Assigned Seller or Buyer (a) The substitute seller and buyer, who shall be assigned in accordance with the above-referred contracts, shall be registered with the Brokerage House responsible for their assignment. (b) The declaration to be issued by the original seller or buyer for an assigned seller or buyer shall be attached to the Term of Responsibility (an example is shown in Attachment II) and signed by the assigned seller or buyer. (c) Pursuant to the provisions of the contract specifications, the original seller or buyer shall remain coresponsible for the obligations of the assigned seller or buyer, up to the delivery s final settlement. Further information may be obtained from the areas of Trading and Market Development (Garbato, Branco, and Félix) and Clearing and Settlement (Nestor and Radislau). Edemir Pinto Chief Executive Officer ATTACHMENT I TO THE141/2000-DG CIRCULAR LETTER TERM OF FISCAL RESPONSIBILITY (The buyer particulars, including of the individuals that represent the buyer) hereby declares for the due legal purposes that he/she/it assumes responsibility for the possible tax incidence upon the commodity (sugar or alcohol) to be received by (the seller particulars) by reason of the long position assumed by (the assigned customer) in the Brazilian Mercantile & Futures Exchange s (crystal sugar or alcohol) futures market. (place and date) Buyer (authorized signature properly evidenced)

15 ATTACHMENT II TO THE 141/2000-DG CIRCULAR LETTER TERM OF RESPONSIBILITY In the best legal form we hereby declare that as of this date we are assuming as the assigned buyer/seller the long/short position of the customer identified below and that as the assigned buyer/seller we take responsibility for taking/making delivery of the commodity underlying the contract also listed below. We also declare that as a customer of the (name) Brokerage House we are aware of and commit to observe the provisions of the Brazilian Mercantile & Futures Exchange s Bylaws, as well as the specifications of the contracts traded therein and the obligations corresponding to the contracts operations, especially those related to the physical delivery of the (sugar or alcohol) futures contract. ORIGINAL BUYER/SELLER DATA CONTRACT S COMPLETE DATA (place and date) ASSIGNED BUYER/SELLER COMPLETE DATA (as well as of the responsible party) DRAFT I OF THE ATTACHMENT II TO THE 141/2000-DG CIRCULAR LETTER (customer s letterhead, if possible) (place and date) To the Brokerage House (address) Re.: Third Party Assignment for Physical Delivery. We hereby indicate (name and particulars) as the assigned (buyer/seller) to (take/make) delivery of (quantity) lots of (commodity, delivery month, and other needed data), pursuant to the provisions of the (sugar or alcohol) futures contract, the Operating Rules, the Bylaws, and further regulations of the Brazilian Mercantile & Futures Exchange (BM&F). Pursuant to the provisions of such rules and regulations, we hereby take all of the responsibilities that directly or indirectly result from such an assignment, especially in regard to the obligations of the third party thus assigned, for which we remain jointly and subsidiarily responsible. Yours sincerely, Undersigned (authorized signature name and particulars)

16 DRAFT II OF THE ATTACHMENT II TO THE 141/2000-DG CIRCULAR LETTER (Brokerage House s letterhead) (place and date) To the BRAZILIAN MERCANTILE & FUTUERS EXCHANGE (BM&F) Attn. Settlement and Participant Registration and Licensing Department São Paulo, SP Re.: Third Party Assignment for Physical Delivery. Dear Sirs: We hereby inform that by order and for the account of (number and name) customer, (number, name, address, corporate/individual taxpayer register of the Ministry of Finance/CPF or CNPJ, and State tax registration) customer has been indicated as the assigned (seller/buyer) to (make/take) delivery of (quantity) lots (or Delivery Notice numbers). At the same time, the referred customer has also assumed all obligations and requirements determined by the Exchange s contract and regulations, up to the contract s final settlement, as per the attached Term of Responsibilty. Yours sincerely, (stamp and signature of the Brokerahe House s legal representative) CIRCULAR LETTER 126/2002-DG, OF 09/13/2002