Congreso International de Gobierno Corporativo Bolsa de Valores de Colombia and Inter American Devel

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Congreso International de Gobierno
CorporativoBolsa de Valores de Colombia and
Inter American Development Bank
Bovespas Corporate Governance Segment Claudio
Avanian Jacob BOVESPA Brazils Stock Exchange

• Cartagena de Indias Colombia
• november/8/2005

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BOVESPAAn overview

• Self regulatory organization
• Under the supervision of the Brazilian Securities
  and Exchange Commission (CVM)
• Since 2000, Brazils only liquidity center for
  equity trading
• 382 listed companies
• Specialized and electronic trading systems for
  equity and corporate bonds
• 68 of the trading in Latin American exchanges
• Market Capitalization US 458 billion (oct/2005)
• Daily Average Trading Value US 563 million

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Brazilian market realityFocus on different issues

• Vast majority of public companies have a defined
  controlling shareholder
• Usually this shareholder is a family or a family
  group
• The Brazilian law allows companies to issue up to
  2/3 of shares as non-voting (misleadingly called
  preferred shares)
• Many sales of control have resulted in large
  premiums for the sellers (no tag along rights)
• Tender offers to delist companies can be maid at
  unfair prices

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Result under pricing
Source Seminário Bradesco Templeton
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Primary Market Activity
of IPOS
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BOVESPAs Strategy

• Reduction of minority shareholders ownership
  risk
• Offering better quality products
• Increase the investors confidence and
  willingness to acquire stocks and pay for them a
  better price that suits the owner of the company
  that is going public
• Fostering companies to assure good practices of
  corporate governance related to investor
  protection
• Disclosure/transparency
• Minority shareholder rights

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Novo MercadoCommitment with corporate governance

• Private sector initiative, based on an enforced
  through a contract with BOVESPA
• Joining is voluntary and market driven
• Companies committed to the highest standards of
  corporate governance
• Set of rules over and above Corporations Law
  reflecting market demands and requirements
• Committed with market arbitration panel to
  resolve conflicts between shareholders, companies
  and their management, controlling shareholders
  and BOVESPA

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Novo MercadoGroups of requirements

• Rights for minoritary investors Only voting
  shares Full tag along rights Public tender
  offer at economic value Board of directors
  with 1 year terms and a minimum of 5 members
• Disclosure additional requirements for quarterly
  statements financial statements in accordance
  with international standards cash flow
  statements contracts with related parties, etc.
• Dispersion 25 minimum free float and ensure
  access for individuals in public offerings

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Bovespas listing segmentsNovo Mercado and
Levels 1 and 2 of Corporate Governance
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How is the Brazilian capital market?
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A Market for IPOsThe success of the Novo Mercado

• Better corporate governance contributed to
  broaden investor interest
• Increased confidence, specially from foreign
  investors
• More favorable pricing, stimulated new IPOs
• Offers occurred at multiples much higher than the
  market average

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Primary Market Activity
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What was the outcome?
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IPOs performance
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IGC x IBOVESPA x IBRX 50Compared performance
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Listed CompaniesNovo Mercado and Level 2

• Novo Mercado 16 companies

• Lojas Renner
• Energias do Brasil
• OHL Brasil
• Light
• Cyrela
• Nossa Caixa

• CCR
• SABESP
• Natura
• CPFL Energia
• Grendene

• DASA
• Porto Seguro
• Renar Maçãs
• Submarino
• Localiza

• Level 2 9 companies

• Net
• Celesc
• Marcopolo

• Gol
• ALL
• Eletropaulo

• Eternit
• Suzano Pet.
• TAM

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Listed companiesLevel 1 35 adhesions

• Alpargatas
• Aracruz
• Bradesco
• Bradespar
• Brasil Telecom
• BT Participações
• Braskem
• Cedro e Cachoeira
• Cemig
• Cia Hering
• Confab
• Duratex

• Sadia
• Suzano Papel e Celulose
• Transmissão Paulista
• Unibanco
• Unibanco Holdings
• Unipar
• Vale do Rio Doce
• VCP
• Vigor
• Weg
• Ultrapar

• Fras-le
• Gerdau
• Itaú
• Itaúsa
• Klabin
• Mangels
• Metalúrgica Gerdau
• Pão de Açúcar
• Perdigão
• Randon
• Ripasa
• Rossi Residencial

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Next Adhesions
Novo Mercado

• Tractebel
• Novo Mercado
• Secondary

• Cosan
• Novo Mercado
• Primary

Levels of Corporate Governance

• Eletrobrás
• Level 1

• Iochpe Maxion
• Level 1

• UOL
• Level 2
• Primary and Secondary

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Novo MercadoBOVESPAs perception

• The standard is set
• The only model for new listing that is being
  accepted by the market is the Novo Mercado
• Only very specific IPO cases will come to Level 2
• The special listings segments represent around
  45 of trading and market cap of Bovespa

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A step further

• Creating an alternative for a greater number of
  companies, especially SMEs

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BOVESPA MAIS Pillars
BOVESPA programs to support companies
Investor with medium-term perspectives
BOVESPAMAIS
Companies committed to CG requirements
Greater flexibility in trading
Companies committed to their development in stock
market
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Thank you

• Claudio Avanian Jacob
• Listing and business development
• Phone [phone]
• E-mail cjacob_at_bovespa.com.br
• Website www.bovespa.com.br