On March 30, 2007, the Brazilian Securities and
Exchange Commission (“CVM”) issued Instruction nº
450 (“ICVM 450”) in order to bring some changes to
Instructions CVM nos. 409 (regulating the creation,
administration and operational procedures of
Investment Funds in Brazil) and 306 (regulating the
administration of securities? portfolios). Besides aiming
at the protection of investors, these changes also seek
to implement an innovation that makes possible for
investment funds in Brazil to hold their assets abroad.
This ICVM 450 brought important changes in relation to
the denomination of investment funds, prospectus,
by-laws and information to be provided to CVM as well
as to the general public; to agreements with Rating
agencies; to the standards of behavior for funds?
managers; to guarantees; to limitations upon the
issuers and on financial assets; to Qualified
Institutional Buyer (“QIBs”); to penalties arising from
illicit conducts; and to the ability of all types of
Brazilian investment funds to maintain their assets

Specifically, the investment funds called “External
Debt” previously were the only kind of investment fund
allowed by CVM and the Brazilian Central Bank to hold
investments abroad. Now, with the issuance of ICVM
450, the funds known as “Multimercado” and all
others, may also maintain as part of their portfolios
international financial assets, up to a limit of 20% and
10%, respectively.

On May 3, 2007, in order to make this types of external
investment viable, the Brazilian Central Bank issued
the Circular no. 3.348, which changed the
International Capital and Foreign Exchange Market
Regulation (“RMCCI”), thus, authorizing such
operations, in accordance and pursuant to CVM?s
regulations. For example, Pension Funds and Insurance
Companies are still not allowed to keep investments
abroad, given that, as of late 2005, all individuals and
corporations have been able to invest abroad.
Finally, the Brazilian press announced that CVM is now
considering the possibility of creating a new and
specific kind of investment fund, which shall allow up
to 100% of investments abroad. Yet, at this stage, the
prime idea is to develop this fund especially for QIBs,
with minimum quotas valued in the amount of