Congreso International de Gobierno CorporativoCongreso International de Gobierno CorporativoBolsa de Valores de Colombia and Inter American Bolsa de Valores de Colombia and Inter American Development BankDevelopment Bank

Cartagena de Indias – Cartagena de Indias – ColombiaColombia

november/8/2005november/8/2005

Bovespa`s Corporate Bovespa`s Corporate Governance SegmentGovernance Segment

Claudio Avanian JacobClaudio Avanian JacobBOVESPA – Brazil´s Stock ExchangeBOVESPA – Brazil´s Stock Exchange

2

BOVESPABOVESPAAn overviewAn overview

Self regulatory organization Under the supervision of the Brazilian Securities and

Exchange Commission (CVM)

Since 2000, Brazil’s 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

3

Brazilian market realityBrazilian market realityFocus on different issuesFocus 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

4

Result: Result: under pricingunder pricing

Companies´ Risk Value Misinformation underpricing

Unbalanced rights underpricing

Companie´s Value Adjusted

Source: Seminário Bradesco Templeton

5

Primary Market ActivityPrimary Market Activity

2

0

1

0

1 1

0

1

0

1995 1996 1997 1998 1999 2000 2001 2002 2003

# of IPOS

6

BOVESPA´s StrategyBOVESPA´s Strategy

Reduction of minority shareholder’s 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 MercadoNovo MercadoCommitment with corporate Commitment with corporate governancegovernance 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

8

Novo MercadoNovo MercadoGroups of requirementsGroups 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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Bovespa`s listing segmentsBovespa`s listing segmentsNovo Mercado and Levels 1 and 2 Novo Mercado and Levels 1 and 2 of Corporate Governanceof Corporate Governance

Traditional Market

Novo Mercado

Level 1 Level 2

Law requirements

Disclosure requirements

Diclosure and governance

requirements non voting shares

are allowed

Only voting shares

How is the Brazilian How is the Brazilian capital market?capital market?

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A Market for IPOsA Market for IPOsThe success of the Novo MercadoThe 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 ActivityPrimary Market Activity

# of IPOS

2

01

01 1

01

0

7 7

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

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What was the outcome?What was the outcome?

Company Date SegmentConsolidated net revenues¹, US$

million

Value of public offering, US$

millionNatura 05/ 26/ 2004 Novo Mercado 460 243Gol 06/ 24/ 2004 Nível 2 485 283ALL 06/ 25/ 2004 Nível 2 263 189CPFL Energia 09/ 29/ 2004 Novo Mercado 2.096 287Grendene 10/ 29/ 2004 Novo Mercado 367 216DASA 11/ 19/ 2004 Novo Mercado 126 158Porto Seguro 11/ 22/ 2004 Novo Mercado 781 136Renar Maçãs 02/ 28/ 2005 Novo Mercado 18 6Submarino 03/ 30/ 2005 Novo Mercado 104 176Localiza 05/ 20/ 2005 Novo Mercado 232 116TAM 06/ 14/ 2005 Nível 2 1.703 226EDP 07/ 13/ 2005 Novo Mercado 1.395 505OHL 07/ 15/ 2005 Novo Mercado 101 212Nossa Caixa 10/ 28/ 2005 Novo Mercado 3641. In the previous year

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IPO’s performanceIPO’s performance

BOOK 10/ 31/2005 STOCK IBOVESPA IGC IBRx50CCR 01/ 02/ 02 16,24 59,50 266% 139% 221% 205%Natura Cosméticos 26/ 05/ 04 34,50 89,12 158% 58% 91% 77%CPFL Energia ON 29/ 09/ 04 16,29 23,50 44% 30% 55% 43%Grendene 29/ 10/ 04 30,05 17,71 -41% 31% 49% 41%DASA 19/ 11/ 04 20,00 36,50 83% 26% 45% 38%Porto Seguro 22/ 11/ 04 18,01 22,40 24% 24% 45% 37%Renar Maçãs 28/ 02/ 05 1,60 0,68 -58% 7% 15% 12%Submarino 30/ 03/ 05 21,62 30,80 42% 14% 24% 20%Localiza 23/ 05/ 05 11,33 19,30 70% 25% 33% 31%EDP 13/ 07/ 05 18,00 22,40 24% 17% 24% 20%OHL 15/ 07/ 05 18,00 21,00 17% 20% 26% 23%Banco Nossa Caixa 28/ 10/ 05 31,00 37,30 20% 4% 5% 4%Gol PN 24/ 06/ 04 26,32 39,21 49% 46% 85% 68%ALL PN 25/ 06/ 04 9,20 16,50 79% 46% 83% 67%TAM PN 14/ 06/ 05 19,50 28,50 46% 17% 26% 23%

Level 2

COMPARISON BETWEEN STOCKS OFFERED IN IPOS AND BOVESPA'S INDEX

SEGMENT COMPANY DATE OF THE ADHESION

PRICE

Novo Mercado

VARIATION

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IGC x IBOVESPA x IBRX 50IGC x IBOVESPA x IBRX 50Compared performanceCompared performance

500

1.000

1.500

2.000

2.500

3.000IGC

IBOVESPA

IBRX 50

aug/ 2005 2005 since 06/ 26/01IGC 9,74% 14,26% 191%

IBOVESPA 7,69% 7,05% 93%IBRX50 10,28% 15,80% 155%

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Listed CompaniesListed CompaniesNovo Mercado and Level 2Novo Mercado and Level 2 Novo Mercado – 16 companies

CCR SABESP Natura CPFL Energia Grendene

DASA Porto Seguro Renar Maçãs Submarino Localiza

Lojas Renner Energias do Brasil OHL Brasil Light Cyrela Nossa Caixa

Level 2 – 9 companies Net Celesc Marcopolo

Gol ALL Eletropaulo

Eternit Suzano Pet. TAM

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Listed companiesListed companiesLevel 1 – 35 adhesionsLevel 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 AdhesionsNext Adhesions

Tractebel Novo Mercado Secondary

Cosan Novo Mercado Primary

Novo Mercado

Levels of Corporate Governance

Eletrobrás Level 1

Iochpe Maxion

Level 1

UOL Level 2 Primary and Secondary

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Novo MercadoNovo MercadoBOVESPA’s perceptionBOVESPA’s perceptionThe 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 furtherA step further

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

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BOVESPA MAIS BOVESPA MAIS PillarsPillars

Companies committed to

CG requirements

BOVESPA programs to support companies

Greater flexibility in

trading

Investor with medium-term perspectives

Companies committed to their development in

stock market

BOVESPAMAIS

22

Thank youThank you

Claudio Avanian JacobListing and business development

Phone: 55 11 3233 2004E-mail: cjacob@bovespa.com.br

Website: www.bovespa.com.br