NON-RESIDENT INVESTOR S GUIDE

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2 NON-RESIDENT INVESTOR S GUIDE INTRODUCTION This new edition of the BOVESPA Guide for Non-Resident Investors was developed to incorporate the changes introduced by the CMN Resolution 2689/2000, CVM Instruction 325/2000 and other rules providing on the non-resident investor s investments in financial and capital markets. Such changes include the option of simplified registration and full tax exemption for investments in equities. According to the relevant regulations, non-resident investors, whether individual or collective, private bodies or legal entities, funds or other collective investment entities are those with residence, principal place of business or domicile abroad. The major aspects of Resolution 2689/2000 in force since March 31, 2000 are the following: Non-resident investors may invest in the same products available to local investors. They may also invest in CVM regulated investment funds with free transit from equity- related to fixed income investments and vice-versa observing the differences of tax treatment; Both institutional and individual investors may invest in Brazil; Non-resident investors must appoint a representative that will be responsible for the provision of information and filings with the Central Bank and CVM; The financial assets and securities as well as other types of investments must be registered, maintained under custody or in deposit accounts in institution authorized for such purposes or yet in registration, settlement and custody systems recognized or authorized by CVM or the Central Bank. This Guide consists of three parts. The first addresses the operational aspects arising out of the regulations in force. The second presents a series of model document that must be provided by the non-resident investor and its representative in order to obtain the required registration with CVM and the Central Bank and make the subsequent financial investments. Finally the third part contains the full text of relevant regulations. Prepared by Inter-Link Consultoria de Mercado de Capitais ( Back Next Index 1

3 TABLE OF CONTENTS PART I: OPERATIONAL ASPECTS 1. Choosing a Representative Registration with the CVM Investor Classification Types of Account Types of Applications Contracting and Registration with Custodian Registration at the Central Bank Registration of Non-Resident Investor with Local Brokerage Firms Portfolio Monitoring and Inspection Prohibitions and Operational Restrictions Taxation...16 PART II: MODEL DOCUMENTS AND FORMS 1. Non-Resident Investor Identification Form Non-Resident Investor Representation Contract Model Instrument of Adhesion to Representation Contract The Form to be completed by the Non Resident Investor s Representative Model Contract of Provision of Securities Custody Services Model Instrument of Adhesion to the Custody Contract List of CVM Registered Custodians Model of Designation of Tax Representative List of Countries and CVM s codes Model Contract between Foreign Intermediary and Brokerage Firm Model Contract between Local Custodian or Local Legal Representative and Global Custodian or Group Account Holder...44 PART III: REGULATIONS I - List of Regulations as relevant to the Type of Participant II - Basic Rules 01) CMN Resolution No of 26/01/00 - Provides for investments by non-resident in the financial and capital markets ) Circular Letter from BACEN No of 26/01/00 - Establishes conditions for electronic declaratory registration (RDE) and for investments by non-resident investors provided for in Resolution No. 2689/ ) CVM Instruction No. 325 of 27/01/00 Deals with the registration, at the Brazilian Securities and Exchange Commission, of investors not resident in Brazil as provided for in CMN Resolution 2689/ Back Back Next Next Index Index2

4 III - Complementary Rules 02) CVM Deliberation No. 366 of 10/11/00 - Addresses the non-resident investor s registration ) CVM Instruction No. 89 of 08/11/88 - Provide on the authorization for provision of services of registered stock, custody of securities and certificate issuing agent ) CVM Instruction No. 387 of 28/04/03 - Establishes rules and procedures which must be complied with in transactions performed with securities stock exchanges and futures and commodities exchanges ) CVM Instruction No. 419 of 02/5/05 - Provides for the enrollment of non-resident investors, amends and adds provisions to CVM Instruction No. 387 of April 28, 2003, and adds provision to CVM Instruction No. 325 of January 27, IV - Electronic Declaratory Registration (RDE) at the Central Bank 06) CMN Resolution No of 28/11/96 Authorizes electronic declaratory registration the Central Bank of Brazil and changes provisions related to foreign investments in portfolio ) Circular Letter from BACEN No of 28/11/96 - Announces the procedures related to the registration addressed by Resolution No / V - Taxation I.R - Income Tax 08) SRF Regulatory Instruction No. 188 of 6/08/02 - Lists the countries or dependencies with favorable taxation or in which legislation imposes the confidentiality related to the shareholding of legal entities ) SRF Regulatory Instruction No. 208 of 27/09/02 - Provides on taxation through income tax on earnings received from sources located abroad and capital gains verified in sale of goods and rights located abroad by individuals residing in Brazil and earnings received and capital gains verified in the Country by individuals non-resident in Brazil ) SRF Regulatory Instruction No. 487 of 30/12/04 - Provides on income tax applicable to net earnings and gains received in fixed and equity-related operations and in investment funds IOF - Tax over Financial Transactions 11) MEF Administrative Rule No. 85 of 24/04/97 - Provides on IOF tax rates calculated on the counter value in Reais of the foreign currency entering the country ) MEF Administrative Rule No. 306 of 18/08/99 - Alters the rates of the Tax on Credit, Exchange and Insurance Transactions or related to Securities - IOF in the events mentioned therein...86 CPMF - Provisional Contribution on Financial Movements 13) Constitutional Amendment No. 37 of 12/06/02 - Alters Articles 100 and 156 of the Federal Constitution and adds Articles 84, 85, 86, 87 and 88 to the Constitutional Transitory Provisions Act ) Law No. 11,312 of 27/06/ Reduces to zero the rates of Income Tax and the Provisional Contribution on Financial Activities or Transfer of Values and of Credits and Rights of a Financial Nature (CPMF) on venture capital funds, IPOs and public offerings of listed companies...89 VI - Registration with the Federal Internal Revenue Department - SRF 15) SRF IN No. 190 of 09/08/02 - Provides on the General Taxpayer s Register (CPF)...91 Back Back Next Next Index Index3

5 PART I: Operational Aspects 1. Choosing a Representative Prior to starting its operations a non-resident investor must appoint one or more representatives in the Country. When such representative is an individual or a non-financial institution the investor must also appoint a financial institution or institution authorized to operate by the Brazilian Central Bank that will be jointly and severally responsible for the performance of the representative s obligations. The representative does not necessarily perform the requirements of the tax legislation although in practice he may also perform such duties. REPRESENTATIVE S RESPONSABILITIES a. Maintain under its safeguard and submit to the Central Bank and CVM whenever requested the Non- Resident Investor Identification Form (Annex to Resolution 2689/2000, see Part II hereof), as well as the representation and custody contracts entered into; b. Effect and maintain current the registrations with CVM and the Central Bank; c. Provide the Central Bank and CVM with information requested; d. Guarantee the non-resident investor s signature in the identification form; e. Immediately notify the Central Bank and CVM of the termination of the representation contract as well as observing the relevant competencies, the occurrence of any irregularity that may come to its knowledge; f. Monthly present to CVM information bulletins on the portfolio composition; g. Collect the portfolio monitoring fee to CVM (see Item 9); h. Sign a Custody Contract for financial assets and securities held by the non-resident investor (optional); i. Submit, in case of remittance abroad, to the intervening bank, such documents proving the distribution of earnings, the ownerships and sale of assets that generated them or were sold and the collection of taxes (such duty may be alternatively performed by the custodian); j. Inform to the Central Bank the transfers of foreign investment under Resolution No. 2689/2000 for the Depositary Receipts mechanism. In case of non-performance of the obligations previously provided to the representative, it will be subject to the suspension of the exercise of its duties and the non-resident investor should appoint its substitute. In case of omnibus account the participant non-account holder ( passenger ) may appoint the same representative as the account holder signing an Adhesion Instrument to the Representation Contract thereof. The forms of the Representation Contract and the Instrument of Adhesion to the Representation Contract and the Representative Form are in Part II hereof. Back Next Index 4

6 2. Registration with the CVM After filling out the identification form (see Part II, Item 1), the non-resident investor should, through its representative, obtain registration at CVM. The application is made electronically forwarding the following documents to the CVM Gerência de Investidores Estrangeiros at the address or fax no. (21) : FORMS FORWARDED FOR CVM ELECTRONIC REGISTRATION Non-Resident Investor Identifi cation Form (Annex to Resolution 2689/2000); NON-RESIDENT INVESTOR REGISTRATION CMN RESOLUTION 2689 of 26/01/2000 I IDENTIFICATION OF NON-RESIDENT INVESTOR 1 NAME OR CORPORATE NAME OF INVESTOR: 2 ADDRESS STREET ADDRESS: COMPLEMENT: CITY: STATE / PROVINCE: COUNTRY: ZIP CODE: NATIONALITY: (when investor is an indiviual) 4 COUNTRY OF INCORPORATION: (when investor is not an individual) 5 QUALIFICATION (CMN RESOLUTION NO OF 26/01/2000): ( ) a - Commercial banks, investment banks, savings and loan associations, global custodians and similar institutions regulated and monitored by the relevant governmental authorities; ( ) b - Insurance companies regulated and monitored by the relevant governmental authorities; ( ) c - Corporations or entities whose purpose is the distribution of issue of securities or act as underwriters in the trading of securities, acting on their own account or for third parties, registered and regulated by bodies recognized by CVM; ( ) d - Pension funds regulated by the relevant governmental authorities; ( ) e - Non-profi t institutions as long as regulated by the relevnat governmental authorities; Back Next Index 5

7 ( ) f.i - Any entity whose purpose is the application of funds in money and capital markets and in which only those individuals and legal entities domiciled abroad participate, provided that they are registered and regulated by a body recognized by CVM; ( ) f.ii - Any entity whose purpose is the application of funds in money and capital markets and in which only those individuals and legal entities domiciled abroad partipate, provided that the portofl io is managed in a discretionary form by a professional manager registered and regulated by entitiy recognized by CVM ( ) g - Other collective investment funds or entities; ( ) h - Legal entities incorporated abroad; ( ) I - Individuals domiciled abroad. 6 TYPE OF INVESTOR: ( ) Account Holder of an Own Account; ( ) Account Holder of an Omnibus (Colllective) Account; ( ) Participant (passenger) in Omnibus Account. 7 - TAX TREATMENT OF INVESTOR IN BRAZIL 1 TAXATION ON CAPITAL GAINS: ( ) Exempt ( ) Not exempt 2 TAXATION ON INCOME: ( ) Exempt ( ) Not exempt II IDENTIFICATION OF REPRESENTATIVE: 1 REPRESENTATIVE NAME OR CORPORATE NAME: CNPJ/CPF RESPONSIBLE FOR REGISTRATION OF FOREIGN CAPITAL? ( ) yes ( ) no 2 CO-OBLIGOR (included in Paragraph Two of Article Three of Resolution 2689/2000) (To be filled out only when the investor is the holder of own account or omnibus account and the representative is not a fi nancial insitution authorized to operate by the Brazilian Central Bank) CORPORATE NAME: CNPJ: Back Next Index 6

8 3 TAX REPRESENTATIVE CORPORATE NAME: CNPJ: III IDENTIFICATION OF CUSTODIAN: CORPORATE NAME: CNPJ: In case of constitution of own account or omnibus account the representative shall Inform CVM the Electronic Declaratory Registration (RDE) number at the Brazilian Central Bank as soon it becomes available; and Forward, within 15 days after application for registration, a copy of the form Annex to CMN Resolution Number 2689 of 26/01/2000 duly fi lled out and signed by the non-resident invsetor as well as a copy of the Representation and Custody Contract. CVM will respond to the registration within 24 hours from the application made by the representative. In case of constitution of own or omnibus account the representative shall: Inform CVM, as soon as available, the Electronic Declaratory Registration (RDE) number in the Brazilian Central Bank; Foward, within 15 days after requesting the registration, a copy of the Non-Resident Investor Identification Form duly filled out and signed by the non-resident investor as well as a copy of the Representation Contract; Maintain under its safeguard and whenever requested provide CVM with the Securities Custody Contract entered into by the non-resident investor and the institution authorized by CVM to provide such service; Fill out the Non-Resident Investor Identification Form for each participant in the omnibus account and make such registrations with the CVM. The CVM operational code structure follows the configuration below: aaaaa.bbbbbb.cccccc.x-y Where: aaaaa is the code of the representative (the same code as the local administrator); bbbbbb is the account holder of the individual or omnibus account; cccccc is the individual code of the non-resident investor; X is 0 when an individual account or 1 in the case of omnibus account: and Y is the digit for verification. A Tax ID number (CNPJ) is also required, but issued automatically along with the CVM code by the Tax Authority. Back Next Index 7

9 3. Investor Classification The non-resident investor must qualify under one of the following classifications to be registered with the Central Bank and the CVM CLASSIFICATIONS a. Commercial banks, investment banks, savings and loans associations, global custodians and similar institutions, regulated and supervised by the appropriate government authorities; b. Insurance companies regulated and supervised by the appropriate government authorities; c. Corporations and entities acting as underwriters or traders in the negotiation of securities, acting on their own account or third parties registered and regulated by a CVM recognized body; SIE-CVM Code d. Pension funds regulated by the appropriate government authorities; 104 e. Non-profit institutions as long as they are regulated by the appropriate government authorities; 105 f. Any entity whose purpose is the investment of funds in money and capital markets whose participants are exclusively individuals and legal entities residing and domiciled abroad, as long as registered and regulated by a CVM recognized body; 106 g. Any entity whose purpose is the investment of funds in money and capital markets whose participants are exclusively individuals and legal entities residing and domiciled abroad as long as the portfolio management is carried out at the discretion of a professional manager registered and regulated by a CVM recognized entity; h. Other funds or collective investment entities; 108 i. Legal entities organized abroad; 109 j. Individuals residing abroad Types of Account The non-resident investor can operate through the following types of accounts: a) as the Account Holder of an Own Account; or b) as a Account Holder of an Omnibus (Collective) Account; and/or c) as a Participant (passenger) in an Omnibus Account. The registration of own account holder enables the investor to operate in its own account. The registration of an omnibus account holder authorizes the account holder to operate both in its own name and on account of other non-resident investors admitted as participants in the omnibus account and known in the market as passengers. Finally, the registration of an omnibus account participant is granted to the client of the omnibus account holder previously described. Besides investing its own funds, the holder of an omnibus account has the possibility of bringing clients thus earning revenues for services provided to client participants and pro-rating the costs thereof. The non-resident investor may be holder and participate in one or more accounts. The holder of an omnibus Back Next Index 8

10 account may operate its own funds in such account, as long as the registration for that purpose has been applied for in its own name. The registration number assigned by CVM must appear in all operations carried out in the name of each investor participating in an omnibus account or holder of own account thus allowing: The identification of final investors in operations carried out; and The segregation between the holder s and each participant s orders. Corporate investors under qualification i or individuals under qualification j may not be holders of omnibus accounts. Depending on the investor s characteristics, the alternative to operate as a passenger in an omnibus account facilitates its entrance into the Brazilian capital markets. The table below sums up the advantages and disadvantages of each type of account TYPE Advantages HOLDER OF OWN ACCOUNT Own and exclusive control of portfolio; Choice of representative and custodian PARTICIPANT OF OMNIBUS ACCOUNT ( PASSENGER ) Operational simplicity: - Adhesion to the holder s representation and custody contracts; - Same RDE as the Holder s; Sharing of costs; Disadvantages Higher cost Greater operational complexity Opening of the portfolio position to the omnibus account holder. 5. Types of Applications Non-resident investors may invest in the same products available to local investors with free transit from equity-related investments to fixed income investments and vice-versa, observing the applicable tax treatment differences. Financial assets and securities as well as other modes of financial operations carried out by non-resident investors resulting from applications under Resolution 2689/2000 must, according to the nature thereof: Be registered, custodied or maintained in deposit account in institution or entity authorized to provide such services by the Central Bank or CVM; or Be duly registered in registration, settlement and custody systems recognized by the Central Bank or authorized by CVM in their relevant scopes as the case of CBLC - Brazilian Clearing and Depository Corporation. Whenever requested, depository institutions and entities providing custody and registration should make available to the Central Bank and CVM the registrations concerning the applications, in individualized form, by non-resident investor. 6. Contracting and Registration with Custodian Non-resident investors intending to operate as account holder must sign, directly or through their representative, a contract for provision of securities custody services with an institution authorized by CVM to provide such service. Omnibus account participants (passengers) may adhere to the custody contract of the omnibus account holder. The forms of Custody Contract and Custody Contract Adhesion Instrument are in Part II hereof. Back Next Index 9

11 CUSTODIAN S RESPONSABILITIES a. Whenever requested, make available to the Central Bank and CVM, in individualized form, by nonresident investor, the registrations concerning the applications addressed by Resolution 2689/2000; b. Inform CVM the transfer of securities between the various accounts in which the investor participates; c. By the fifth (5th) business day of the following month make available to the Central Bank Departamento de Capitais Estrangeiros - Foreign Capital Department (FIRCE) the individualized information by nonresident investor on the custody positions held; d. In case of remittances abroad submit to the intervening bank the documents proving the distribution of earnings, the ownership and sale of assets that generated them or that were sold and the collection of appropriate taxes; e. Inform the Central Bank on transfers of foreign investment of the Depositary Receipts mechanism for the systematic set forth by Resolution 2689/2000. CVM Instruction 419/2005 (detailed in Item 8.1) establishes that Central Depositories, the Settlement and Clearing Houses and their respective clients may adopt the Simplified Registration form of the non-resident investor within the scope of the relationship with Global Custodians exercising the activities of custody of securities of such investors. A non-resident investor may be holder and participate in one or more accounts and in case it elects to maintain its securities in separate custody accounts or in more than one custodian institution, the custody contract should contain clauses providing on operational procedures for the transactions between accounts including information to be provided to the holder and representatives. When the non-resident investor acts through a foreign institution it is admitted that the contract for provision of services of securities custody may be entered into by the foreign institution in the name of the nonresident investor, provided that, according to provision in CVM Instruction 419/2005 the custodian institution will make sure that the non-resident investor is duly registered with the foreign institution. The custodian must send the positions which it holds for each non-resident investor to the Central Bank via the PSTAW10 application, available on the Central Bank site on the Internet which may be accessed by authorized operators in the PSTA300 screen of the Central Bank Information System (SISBACEN). The transfer of securities between the various accounts in which the investor participates is automatic but should be informed to CVM, according to CVM Instruction 301/99. Said transfer can only be made when the CVM operational code group (see Item 2) identifying the holder of funds is the same, what ensures the maintenance of ownership of the investment. The transfers of custody positions between non-resident investors occurred abroad resulting from merger, incorporation, split and other corporate changes as well as those resulting from causa mortis succession depend on CVM previous authorization. The application should be accompanied by the documentation proving the event. Back Next Index 10

12 7. Registration at the Central Bank The funds brought into the Country under terms of Resolution 2689/2000 are subject to electronic registration at the Central Bank under the electronic declaratory form. The non-resident investor s representative will be responsible for the registration of operations. The initial RDE - Electronic Declaratory Registration and updates thereof are a mandatory requirement for any transactions abroad and must be obtained prior thereto. The RDE number should appear on the appropriate field of every foreign exchange contract made in the non-resident investor s name. The RDE is mandatory in all applications, redemptions, earnings, capital gains, transfers and other transactions resulting from investments made under terms of Resolution 2689/2000. Registrations are made through the following SISBACEN transactions: PEMP500 for input of investors, representatives and custodians registration data if not yet registered; PRDE530 for generation of electronic declaratory registration. The holder of own account or omnibus account, its representative, depository institutions or entities providing registration services must provide to FIRCE Department of Registration and Supervision of Foreign Capital of the Central Bank, whenever requested, the documentation detailing, by participant, the transactions carried out, the assets portfolio, custody transactions or any other additional information requested. On remittances abroad by way of earnings, repatriated capital and capital gains, the intervening bank is responsible for checking the documents to be submitted by the custodian or the non-resident investor s representative, which must prove the distribution of earnings, the ownership and sale of assets that generate them or were sold and the due tax collection. Remittances of repatriated capital and capital gains abroad are limited to the updated value of custody positions appearing in PRDE530 transaction of SISBACEN. The transfer of investments under Annex V to Resolution 1289/1987 (Depositary Receipts) to the system under Resolution 2689/2000 should be informed on the day of its occurrence using the following SISBACEN transaction: PRDE510/Option 8 transfer of a foreign investment from the Depositary Receipts mechanism to the system set forth by Resolution 2689/2000 under the custodian institution s responsibility. The custodian or the non-resident investor s representative must update the net worth or equity value of custody positions before making the above transfer. 8. Registration of Non-Resident Investor with Local Brokerage Firms Non-resident investors as well as resident investors must effectuate the registration with a local brokerage firm and keep it updated. In case of non-resident investors there are two options described below: Back Next Index 11

13 8.1 Simplified Registration for Foreign Investor (CVM Instruction 419/2005) Aiming at the recognition of the existing relationship between the Local Brokerage Firm and the Foreign Intermediary as well as the flexibilization of foreign investments rules and expedition and facilitation of registration process of foreign investor in Brazil, the brokerage firms received the option to register, in simplified form, their non-resident investors, adopting for that, the rules set forth by the Stock Exchanges and entities managing the organized over-the-counter market, previously approved by CVM. For the adoption of simplified registration form the non-resident investor shall be a client of a foreign intermediary institution where the investor must be properly registered under the applicable legislation in the country of origin thereof. Besides, the foreign intermediary shall assume, before the local broker, the obligation to submit, duly updated and whenever requested, the following information: All information required by CVM on the registration of investors within the stock exchange scope; and Other information required by Brazilian public bodies with supervision powers. For adoption of simplified registration, the foreign intermediary institution s country of origin can neither be assessed as a high-risk country in terms of money laundering and terrorism financing nor considered as a noncooperating country with international bodies in combating those. Besides the regulating body of the capital market of the country of origin of the foreign intermediary institution must have entered into with CVM a mutual cooperation agreement enabling the interchange of investors financial information. The local broker shall set forth the criteria allowing for the assessment of the foreign intermediary institution s degree of reliability by adopting measures that will ensure that the client s registration information will, whenever requested, be readily provided by the foreign institution. The local broker shall also assure that the foreign institution adopts the appropriate practices of client identification and registration according to the applicable legislation in the country of origin where such institution is located. The written contract between the local brokers and foreign intermediaries must mandatoryly contain at least the following clauses: a) Foreign intermediary s declaration that it has the registration information required in CVM Instructions providing on registration of investors within the securities market scope and that it keeps them constantly updated; b) Foreign intermediary s obligation to submit to the broker or directly to CVM whenever requested and under terms established by the Stock Exchange, the entities managing the organized over-the-counter market, or by CVM, such complementary registration information duly updated of non-resident investors; c) Clauses setting forth the contract submission to Brazilian laws and the Brazilian Judiciary Branch s competency to examine any claims filed due to controversies arising out of the contract admitting the existence of arbitration clause setting forth that the arbitration shall take place in Brazil; and d) Clause providing the termination in case of default of the obligation to provide non-resident investors registration information by request from the broker, the Stock Exchange, the entity managing the organized over-the-counter market, or by Brazilian public entity with supervising powers. It is forbidden to any local brokerage firm the use of simplified registration to its clients acting through foreign intermediaries that will have defaulted the obligation to provide information on non-resident investors. Stock Exchanges and entities managing the over-the-counter market shall maintain at CVM s disposal an updated list of contracts entered into by foreign intermediaries and brokers subject to self-regulation thereof. Back Next Index 12

14 SUMMARY OF REQUIREMENTS FOR SIMPLIFIED REGISTRATION NON- RESIDENT INVESTOR FOREIGN INTERMEDIARY INSTITUTION LOCAL BROKERAGE FIRM EXCHANGES & ENTITIES MANAGING THE OVER- THE-COUNTER MARKET OTHER REQUIREMENTS 1) Be a client of a foreign intermediary institution in which it must be properly registered under the applicable legislation in the institution s country of origin. 1) Enter into written agreement with Local Broker assuming before it the obligation to submit, whenever requested, and duly updated, the following information: a) All information required by CVM on the registration of investors within the securities market scope; and b) Other information required by Brazilian public bodies with supervising powers. 1) Enter into written agreement with the Foreign Intermediary; 2) Set forth criteria enabling the assessment of the foreign intermediary institution s degree of reliability; 3) Adopt measures ensuring that the client s registration information will be readily provided by the foreign institution, whenever requested; 4) Assure that the foreign institution adopts the appropriate practices for identification and registration of clients according to the applicable legislation of the country of origin where the institution is located. 1) Set forth the rules related to the simplified registration of non-resident investors which shall be previously approved by CVM 2) Maintain at CVM s disposal an updated list of contracts entered into by foreign intermediaries and to the self-regulation thereof. 1) The foreign intermediary institution s country of origin can neither be assessed as a highrisk country in terms of money laundering and terrorism financing nor considered as non-cooperating country with international bodies combating those; 2) The capital market regulating body in the foreign intermediary institution s country of origin shall have entered into a mutual cooperation agreement with CVM enabling the interchange of investors financial information. Back Next Index 13

15 8.2 Registration for Foreign Investor (CVM Instruction 387/2003) Brokerage firms not electing the Simplified Registration provided for in CVM Instruction No.419/2005 or not complying with requirements set forth by such Instruction shall register their non-resident investors according to the rules in CVM Instruction No. 387/2003. According to such Instruction, brokers should effectuate the registration of their clients and keep them updated and should further provide to Stock Exchanges and the Settlement and Clearing Houses according to standard defined thereby, such basic registration data of each client in order to enable their perfect identification and qualification The registration should also contain the names of persons authorized to issue order and as the case may be, of the managers of the institution or those in charge of managing the portfolio as well as the legal representative or the person responsible for the custody of the securities thereof. Brokerage firms should attach to their clients registration files: a) If individuals, copy of identification card, CPF and proof of residence or domicile; b) If legal entities, copy of CNPJ and organizational regulations or corporate bylaws filed at the competent agency. Additionaly must attached a document duly signed and dated by the client or, as the case may be, by a duly appointed attorney, stating that: a) The information provided for the filling out of registration are true and correct; b) It undertakes to inform within ten (10) days any changes or alterations that may occur in their registration data; c) It operates on its own account and if it authorizes or not the transmission of order by a duly identified representative or attorney; d) It operates on third party s account in the case of investment funds managers and managed portfolios; e) It is or not a person in any way connected to the brokerage firm (Article 15 of Instruction 387/2003); f) It is not impeded from operating in the stock market; g) By express option, as the case may be, its orders will be exclusively transmitted in writing; h) It is aware of provision in Instruction 387/2003 and of the broker s rules and performance parameters; i) It is aware of rules referring to guarantee fund and operational rules issued by Stock Exchanges and Settlement and Clearing Houses which shall be available on the respective institutions web pages on the Internet j) It authorizes the brokers, in case of outstanding debts in its name, to settle, in stock exchange or settlement and clearing houses, the contracts, rights and assets acquired on its account and order as well as to execute rights and goods given as guarantee of the operations thereof or that may be in the broker s possession, applying the sale proceeds to the payment of outstanding debts, regardless of judicial or extra-judicial notice. Back Next Index 14

16 The registration file should contain at least the information provided in CVM Instruction No. 301/1999 (Article 3, 1) a regulation that addresses the combat to money laundering crimes (Law No. 9613/1998). In case of institutional clients or financial institutions, the lack of signature in the registration card is admitted up to twenty (20) days counting from the first operation ordered by such clients. Brokers can only make changes in the address appearing in the registration file upon the client s express and written order accompanied by the relevant proof of address. Brokers must enforce appropriate control procedures to prove the service as required for the regular registration of their clients. Furthermore they should maintain in their corporate office or in the headquarters of the financial group of which they are part and at the disposal of CVM, stock exchanges and clients for the period of five (5) years, counting from the date of operations: a) All documents related to operations with securities; and b) In case of existing Recording System, the entirety of recordings of all dialogs between clients, broker and their trade operators. The submission of the respective images instead of original documents made through scanning system is admitted. 9. Portfolio Monitoring and Inspection The representative shall submit to CVM, monthly, by the fifth business day of the following month, through electronic medium, such information referring to non-resident investors accounts according to the database structure and programs provided by CVM. Such information should be maintained available to the Central Bank All depositary and custodian institutions should also provide whenever requested to Central Bank and CVM such records referring to applications by investor. CVM charges a portfolio monitoring fee from own and omnibus accounts (Law 7940/1989), to be collected quarterly by the representative. The calculation basis is the portfolio net worth value calculated on December 31 of the previous year. CVM QUARTERLY MONITORING FEE SECURITIES PORTFOLIO - FOREIGN CAPITAL (NON-RESIDENT INVESTOR) Net worth below R$ 4,143, VALUE OF FEE 0.1% of Net Worth. Net Worth above R$ 4,143, R$ 7, Source: CVM 10. Prohibitions and Operational Restrictions Non-resident investors are forbidden to acquire or sell: Securities of publicly listed companies by other means than the trade at the stock exchanges, electronic systems or organized over-the-counter market authorized by CVM; Securities traded in non-organized over-the-counter markets or organized by entities not authorized by CVM; Securities of closely held companies (permitted indirectly only via quotas of CVM-registered investment which regulation considers them). Back Next Index 15

17 The above prohibitions do not apply to cases of subscriptions (of securities and closed investment fund quotas), bonuses, conversion of debentures into shares, indexes referenced in securities, acquisition and sale of open investment fund quotas and with CVM authorization, cases where the capital is going private, cancellation or suspension of negotiation, court transactions and trading of shares bound to shareholders agreements. Any references or assignments of ownership abroad of investments or securities owned by non-resident investor are forbidden, and in the Country in other forms than those establisehd in Resolution 2689/2000. This prohibition does not apply to cases of transfer resulting from merger, incorporation, split and other corporate changes made abroad as well as the cases of hereditary succession observing the regulation issued by the Central Bank of Brazil and CVM. It is forbidden to make any transfer of funds brought into the country under Law 4131/1962 (foreign direct investment and foreign indebtedness) or under Circular 3280/2005 (foreign exchange operations applicable to non-resident accounts) into the mechanism provided for in Resolution 2689/2000 and vice-versa. 11. Taxation Non-resident investors shall appoint a Central Bank authorized institution as responsible in the Country for the performance of tax obligations resulting from its operations Income Tax (IR) a) Non-resident investors carrying out financial operations in Brazil according to rules and conditions set forth by the National Monetary Council (CMN) shall comply with tax rules especially provided in the following regulations: Law No of 20/01/95 (Article 81) SRF Declaratory Act No.60 of 03/08/00 SRF Regulatory Instruction No.25 of 06/03/01 Provisional Act No of 24/08/01 Provisional Act No of 24/08/01 SRF Regulatory Instruction No. 188 of 06/08/02 SRF Regulatory Instruction No. 208 of 27/09/02 SRF Regulatory Instruction No.487 of 30/12/04 Earnings received by non-resident investors admitted under terms of Resolution No. 2689/2000 are subject to income tax at the following tax rates: NON-RESIDENT INVESTOR (Funds brought in under CMN Resolution No. 2689/2000) OPERATION / EVENT TAX RATE 1. Capital Gains on equities Exempt 2. Distributed Profit and Dividend Exempt 3. Interest on equity 15% 4. Fixed Income Products: 4a) Corporate Bonds 4b) Federal Government Bonds 5. Applications in stock funds, swap operations and operations carried out in future settlement markets off stock exchanges 15% Exempt 10% Back Next Index 16

18 In cases of taxation, the income tax calculation basis as well as the timing of its applicability on earnings received by non-resident investors complies with rules applicable to earnings of same nature received by investors resident in Brazil. Exceptions are the applications in investment funds where the income tax solely applies to the redemption of quotas. b) Non-resident investors carrying out financial operations in Brazil in other form than the provision in Resolution No. 2689/2000 and foreign investors from a country that has no income tax or has income tax at a rate below 20% (the list of such countries is in SRF Regulatory Instruction 188/2002 appearing in Part III hereof) are equivalent to the resident investors for purposes of Income Tax applicability especially observing the rules contained in the following regulations: Law No of 20/01/95 (Article 78) SRF Regulatory Instruction No. 25 of 06/03/01 SRF Regulatory Instruction No. 208 of 27/09/02 Law No of 21/12/04 Earnings received by such non-resident investors are subject to income tax at the following tax rates: NON-RESIDENT INVESTOR TREATED AS RESIDENT (Other Funds Brought in) OPERATION / EVENT TAX RATE 1. Net Gains in stock market, in stock exchanges 15% 2. Stock Funds 15% 3. Gains in other equity-related markets in stock exchanges and organized over-the-counter markets 4. Fixed Income in general and Swaps 5. Future Settlement Market off Stock Exchanges including flexible options 15% According to the investment term: - Up to 180 days: 22.5% - Between 181 and 360 days: 20% - Between 361 and 720 days: 17.5% - Above 720 days: 15% 15% 6. Dividend Exempt 7. Interest on equity 15% Income Tax at source, at tax rate of 0.005% (Article 10 of Regulatory Instruction 487/2004) will be applied to operations carried out at Stock Exchanges by such non-resident investor as a pre-payment. The transfer of domicile of non-resident investors resulting from applicable tax regime must be submitted to CVM by sending of documentation proving the event issued by an official registration body. CVM will answer with an Official Letter with retroactive effect to the event date Tax over Financial Transaction (IOF) Non-resident investor s investments are subject to IOF taxation upon the entrance of funds in the Country at a rate varying from 0% to 25%. The tax calculation basis is the amount in national currency received delivered or made available, corresponding to the amount in foreign currency of the foreign exchange operation. For non-resident investors the current IOF rate is zero for applications in fixed income funds and investments in securities and portfolios. Back Next Index 17

19 11.3 Provisional Contribution on Financial Movements (CPMF) CPMF applies on the entrance into the Country of funds from non-resident investors or on the remittance abroad, and the funds in such occasions must mandatorily go through a current account of deposit of the investment holder in a financial institution. CPMF does not apply on postings in foreign investors accounts related to entries in the Country and remittances abroad of financial funds solely used in operations aiming at the purchase and sale of shares carried out at the Stock Exchange and in organized over-the-counter market or contracts referenced in stock or index of stock traded in Stock Exchanges and Futures and Commodities Exchanges. On February 2006, through the issuing of the Law 13312/2006 this exemption was expanded to include public offerings, either primary or secondary of new companies and listed companies. Back Next Index 18

20 PART II: MODEL DOCUMENTS AND FORMS 1. Non-Resident Investor Identification Form 2. Non-Resident Investor Representation Contract 3. Model Instrument of Adhesion to Representation Contract 4. Non-Resident Investor s Representative Form 5. Model Contract of Provision of Securities Custody Services 6. Model Instrument of Adhesion to the Custody Contract 7. List of CVM Registered Custodians 8. Model of Designation of Tax Representative 9. List of Countries and CVM s codes 10. Model Contract between Foreign Intermediary and Brokerage Firm 11. Model Contract between Local Custodian or Local Legal Representative and Global Custodian or Group Account Holder 1 - Non-Resident Investor Identification Form (Annex to Resolution 2689/2000); NON RESIDENT INVESTOR REGISTRATION CMN RESOLUTION 2689 of 26/01/2000 I IDENTIFICATION OF NON RESIDENT INVESTOR 1 NAME OR CORPORATE NAME OF INVESTOR: 2 ADDRESS STREET ADDRESS: COMPLEMENT: CITY: STATE / PROVINCE: COUNTRY: ZIP CODE: NATIONALITY: (when investor is an individual) 4 COUNTRY OF INCORPORATION: (when investor is not an individual) Back Next Index 19

21 5 QUALIFICATION (CMN RESOLUTION NO OF 26/01/2000): ( ) a Commercial banks, investment banks, savings and loan associations, global custodians and similar institutions regulated and monitored by the relevant governmental authorities; ( ) b Insurance companies regulated and monitored by the relevant governmental authorities; ( ) c Corporations or entities whose purpose is the distribution of issue of securities or act as underwriters in the trading of securities, acting on their own account or for third parties, registered and regulated by bodies recognized by CVM; ( ) d Pension funds regulated by the relevant governmental authorities; ( ) e Non-profit institutions as long as regulated by the relevnat governmental authorities; ( ) f.i Any entity whose purpose is the application of funds in money and capital markets and in which only those individuals and legal entities domiciled abroad participate, provided that they are registered and regulated by a body recognized by CVM; ( ) f.ii Any entity whose purpose is the application of funds in money and capital markets and in which only those individuals and legal entities domiciled abroad partipate, provided that the portoflio is managed in a discretionary form by a professional manager registered and regulated by entitiy recognized by CVM ( ) g Other collective investment funds or entities; ( ) h Legal entities incorporated abroad; ( ) i Individuals domiciled abroad. 6 TYPE OF INVESTOR: ( ) Account Holder of an Own Account; ( ) Account Holder of an Omnibus (Colllective) Account; ( ) Participant (passenger) in Omnibus Account. 7 - TAX TREATMENT OF INVESTOR IN BRAZIL 1 TAXATION ON CAPITAL GAINS: ( ) Exempt ( ) Not exempt 2 TAXATION ON INCOME: ( ) Exempt ( ) Not exempt II IDENTIFICATION OF REPRESENTATIVE: 1 REPRESENTATIVE NAME OR CORPORATE NAME: CNPJ/CPF RESPONSIBLE FOR REGISTRATION OF FOREIGN CAPITAL? ( ) yes ( ) no 2 CO-OBLIGOR (included in Paragraph Two of Article Three of Resolution 2689/2000) (To be filled out only when the investor is the holder of own account or omnibus account and the representative is not a financial insitution authorized to operate by the Brazilian Central Bank) CORPORATE NAME: CNPJ: Back Next Index 20

22 3 TAX REPRESENTATIVE CORPORATE NAME: CNPJ: III IDENTIFICATION OF CUSTODIAN: CORPORATE NAME: CNPJ: In case of constitution of own account or omnibus account the representative shall Inform CVM the Electronic Declaratory Registration (RDE) number at the Brazilian Central Bank as soon it becomes available; and Forward, within 15 days after application for registration, a copy of the form Annex to CMN Resolution Number of 26/01/2000 duly filled out and signed by the non resident investor as well as a copy of the Representation and Custody Contract. 2 Model Non Resident Investor Representation Contract MODEL OF A NON RESIDENT INVESTOR REPRESENTATIVE CONTRACT AND OTHER AGREEMENTS By this private Instrument entered into between:... (the non resident investor as a private individual: complete name, nationality, profession, passport number, resident and domiciled in... street, state, country...)... (or corporation: denominated, registered in..., with principal place of business at...street, state, country..., organized under the laws of... country...), in this instrument duly represented through its articles of association, the undersigned and from henceforth denominated the INVESTOR on the one part and, on the other:... ( the representative as a private individual or corporation: classification: name/denomination, enrolled in the General Taxpayers Register under number CPF or CNPJ, with domicile/principal place of business in...) the undersigned, from henceforth denominated the REPRESENTATIVE; where appropriate, include the co-obligor, required when the representative is a private individual or a nonfinancial corporation, as follows:... (co-obligor, classification: denomination, enrolled in the General Taxpayers Register under number CNPJ, address), herein represented by its legal representatives as signed below and from henceforth denominated CO-OBLIGOR; WHEREAS The INVESTOR, non resident in Brazil, pursuant to the terms of this Instrument as set forth in paragraph 1 of Art. 1 of the CMN Resolution 2.689, of , intends to apply funds in the financial and capital markets in Brazil under the terms of the Resolution above and complementary legislation, as the accountholder of an OWN ACCOUNT as set forth in item 1.5, sub-paragraph (complete according to the classification in subparagraphs a to i ) of the Attachment to the above mentioned Resolution or an OMNIBUS ACCOUNT, Back Next Index 21

23 according to the classification in 1.5, sub-paragraph --- (complete according to the classifications set forth in the sub-paragraphs a to g observing that a private individual or corporation cannot be accountholders of an Omnibus Account) of the Attachment to the above mentioned Resolution, and, as such, wishes to appoint a representative in Brazil to perform this activity; The REPRESENTATIVE, having the appropriate CVM code, wishes to sign together with the INVESTOR the present contract which has the object of representing the INVESTOR in Brazil for the purpose of applying overseas funds brought into Brazil by the non resident INVESTOR pursuant to Resolution and complementary legislation. (if appropriate, include as the object of the contract the services of fund management, custody and the nomination or otherwise of the tax representative.) Now, therefore, the parties enter into this Investor Representation Contract, which shall be governed by the clauses and conditions established herein: THE OBJECT: FIRST CLAUSE - The REPRESENTATIVE will provide the INVESTOR with the following services described below: I) Certify the signature of the INVESTOR and hold in its safekeeping for disclosure to the Central Bank and the CVM when requested, the form in the Attachment to Resolution 2.689, as well as the present Representation Contract; II) Effect and maintain current the INVESTOR registration with the CVM; III) Effect and maintain current the Central Bank registration of funds brought into Brazil; IV) Whenever called upon, provide the Central Bank with any and all information that they may request; V) Immediately notify the Central Bank and the CVM when appropriate as to the cancellation of the contract; VI) Process the remittance of income on investments, capital gains and repatriation of the investment in the name of the INVESTOR effecting the foreign exchange transactions concomitant to such remittances; VII) Hold current and in perfect order and at the disposal of the INVESTOR, all documentation relative to the transactions and the composition of the financial assets and traded securities as well as all other types of operations transacted by the INVESTOR; VIII) Safe-keep all and any documents evidencing compliance with tax and exchange obligations, as well as the obligations assumed as per the regulatory bodies and where responsible for tax matters, hold available for inspection by the appropriate authorities; IX) On a monthly basis, deliver electronically to the CVM, by the fifth business day of the following month, information pertaining to the INVESTOR, to be detailed by the CVM itself in due course; X) Hold duly registered, either in custody or in a deposit account at an institution authorized by the Central Bank and the CVM to provide such services, or registered in registration, settlement and custody systems recognized by the Central Bank or authorized by the CVM, all traded financial assets and negotiated securities as well as all remaining types of financial operations, transacted by the INVESTOR. First Paragraph In the case of failure to observe its obligations provided for in the contract, the REPRESENTATIVE is subject to the loss of its rights to perform its functions, the INVESTOR being required to indicate its substitute. Second Paragraph The REPRESENTATIVE will make every effort to carry out its functions for which it is responsible, with full and habitual diligence in the same manner as with its own business activities, although it will not be responsible for any losses or damages suffered by the INVESTOR, except in the case of bad faith or fraud, responsibilities for which will be decided in accordance with Article 402 and subsequent articles of the Civil Code/2002. Back Next Index 22