Tesouro Direto Brazilian Retail Sales Bonds Program

1
B   R   A   S   Í  L   I   A O C T O B E R 2 0 0
8
Tesouro Direto Brazilian Retail Sales Bonds
Program
Fabio Guelfi PereiraBrazilian National Treasury
Investors Relations
2
History, Description and Players Activities
Current Status
L A C D E B T G R O U P
International Experience
Ongoing and Future Challenges
2
3
Main objectives and some history aspects

• Allows resident individuals in Brazil to buy
  Government Bonds through the internet
• The Brazilian Treasury guarantees the Bonds
  liquidity by buying back them every Wednesday
• To democratize the access and investment in
  Government Bonds
• To encourage the establishment of long term
  savings
• To demystify the securities bad image among
  Brazilians
• The three Brazilian clearings were contacted to
  make the partnership, but only CBLC manifested
  and created the system in about 3 months

L A C D E B T G R O U P
3
4
Main objectives and some history aspects
Annual Borrowing Plan
National Treasury Auctions
Tesouro Direto

• Financial Institutions Proprietary Holdings
• Mutual Funds
• Institutional Investors

L A C D E B T G R O U P

• In 2002, Tesouro Direto was created by the
  Brazilian Treasury in partnership with CBLC
• But, it is established that the others clearings
  may be able to operate
• Financial intermediation is adopted
• Register and capillarity

5
Advantages

• Safe investment alternative
• Bond Yield Rates are determined by the
  composition of the portfolio managed by the
  investors
• Competitive Costs
• Simple and easy to operate internet based

L A C D E B T G R O U P
It is a safe and profitable investment, with high
liquidity and practicality due to the internet
access
5
6
Working Hours

• Consulting the system
• The system can be accessed for consulting
  purposes 24 hours a day, 7 days a week
• Buying Bonds
• It is possible to buy Bonds on weekdays, weekends
  and holidays
• Except from 5am to 9am on weekdays
• Selling Bonds to the Brazilian Treasury
• The selling of Bonds to the Brazilian Treasury
  can be done every Wednesday

L A C D E B T G R O U P
6
7
How to buy bonds?

• Directly at the web site
• Through the Custodian responsible for the
  investor
• The Custodian buys bonds on the investors behalf
• Directly at the website of the Custodian
  responsible for the investors qualification
• Only for institutions integrated with the Tesouro
  Direto website

L A C D E B T G R O U P
7
8
How to buy bonds?
L A C D E B T G R O U P
8
9
Paying the acquired bonds

• After the purchase is confirmed, a protocol
  number and the payment due date are displayed
• The financial resources should be made available
  to the Custodian until the day that follows the
  purchase
• The investor is responsible for
• Contacting the Custodian to obtain its banking
  details
• Transferring the money to the appropriate account

L A C D E B T G R O U P
9
10
Buying limits

• Buying limits per CPF (Natural Person Register)
• Minimum buying limit of 0.2 Bonds (approximately
  US 70.00)
• Maximum monthly limit of R 400,000.00
  (approximately US 200,000.00)
• No limits for outstanding

L A C D E B T G R O U P
10
11
How to buy bonds?

• Similar to buying Bonds
• The investor accesses its exclusive area
• Requests the Custodian to execute the sale
• Accesses directly the web site of the Custodian

L A C D E B T G R O U P
The investor enters the quantity of Bonds or the
total value of the sale
11
12
Interest payments, redemptions and selling bonds

• Payment is made to the Custodians
• They are responsible for transferring the
  resources to their clients
• Financial values concerning the redemption and
  interest payments are transferred on the payday
• Financial values concerning the sale of bonds to
  the Brazilian Treasury are transferred on the
  following Thursday

L A C D E B T G R O U P
12
13
Account Details
CBLC sends a monthly statement of account to the
investors (by email) and allows its online
verification
L A C D E B T G R O U P
14
Account Details
Clicking on a Bond shows its details and
transaction characteristics
L A C D E B T G R O U P
15
Characteristics
Fees

• CBLC charges 0.40 per year over the total value
  of the purchase
• The Custodian fee is freely agreed with the
  investor
• There is market competition on that about 70
  institutions included in the Program

L A C D E B T G R O U P
15
16
Custodian Ranking by Fee
August - 2008
L A C D E B T G R O U P
17
Custodian Ranking by Fee
August - 2008
L A C D E B T G R O U P
18
Characteristics
Depositary Services

• The Depository services for the Government Bonds
  negotiated at Tesouro Direto are provided by
  SELIC (Brazilian Federal Bonds Depository) under
  a CBLC account
• At CBLC, the Bonds are registered in accounts in
  the name of the investor, under the
  responsibility of the Custodians
• CBLC conciliates its Bonds position with SELIC on
  a daily basis

L A C D E B T G R O U P
18
19
Characteristics
Taxes

• The securities offered at Tesouro Direto are
  subject to the same taxes of any Fixed Income,
  which means regressive IOF (Financial Operations
  Tax) (for less than 30 days term applications)
  and Income Tax
• 22.5 up to 180 days
• 20.0 from 181 to 360 days
• 17.5 from 361 to 720 days
• 15.0 above 720 days.
• Income tax is charged on selling time or maturity
  date (if there are coupons, its also charged on
  the coupon payday)

L A C D E B T G R O U P
19
20
History, Description and Players Activities
Current Status
L A C D E B T G R O U P
International Experience
Ongoing and Future Challenges
20
21
Registered Investors
L A C D E B T G R O U P
22
Monthly Value Negotiated (R)
L A C D E B T G R O U P
23
Number of Sales by Range of Investment
Annual Balance - 2007
L A C D E B T G R O U P
24
Participação dos Títulos no Estoque (posição de
31/12/2007)
Annual Balance - 2007
L A C D E B T G R O U P
Mutual Fund Industry R 1.2 tn Mutual Funds
represents 42 of DPF
25
Participação dos Títulos no Estoque (posição de
31/12/2007)
Annual Balance - 2007
L A C D E B T G R O U P
26
History, Description and Players Activities
Current Status
L A C D E B T G R O U P
International Experience
Ongoing and Future Challenges
26
27
Some international experiences

• Portugal
• Sweden
• United Kingdom
• United States
• Plus 19 countries

L A C D E B T G R O U P
28
History, Description and Players Activities
Current Status
L A C D E B T G R O U P
International Experience
Ongoing and Future Challenges
28
29
Agenda

• Increase the capillarity
• Working together with the Custodians to improve
  the distribution and studying the creation of new
  channels
• Making efforts for the integration of the IT
  CBLC system with the Custodians system
• Switch also to new products aiming at broader
  segments
• Post Office
• Lotteries
• Create a secondary market
• Upgrade the program exposition
• Propaganda on communication channels by National
  Treasury and all involved institutions
• Increasing the participation on specialized
  events

L A C D E B T G R O U P
30
Agenda

• Costs
• Development of studies for cost reduction
• Disclosure of charged fees of all custodians.
  Today, its voluntary
• Improving the system
• Changing the investors extract, increasing the
  number of information and improving the quality
  of that information
• Continuous improvement of the bond negotiation
  system by CBLC

L A C D E B T G R O U P
31
Contact
Investor Relations Office brazildebt_at_fazenda.gov.b
r phone [phone] Or Fabio Guelfi
Pereira IRO fabio.g.pereira_at_fazenda.gov.br
http//www.tesouro.fazenda.gov.br/english/index.
asp
31