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So Paulo, March 19, 2010.
We, the Board o Directors o BM&FBOVESPA S.A. Bolsa de Valores, Mercadorias e Futuroshereby submit to Shareholders convening in annual and extraordinary meetings on April
20, 2010, the Management Proposal set orth below.
I AT THE ANNUAL SHAREHOLDERS MEETING
1. Financial statements as o and or the year ended December 31, 2009.
The Management Report, the Financial Statements prepared under Management
responsibility as o and or the year ended December 31, 2009, and the independent auditors
report, which have been published on February 24, 2010 in the Valor Econmico newspaper and
in the Ocial Gazette o the State o So Paulo, were approved by us at a board meeting held
on February 23, 2010.
Attached to this proposal as Attachment I, you will nd Managements discussion and
analysis o nancial condition and results o operations, which was prepared similarly to
the management report, but including additional discussion on nancial inormation, as
required under section 10 o the Reerence Form adopted pursuant to CVM Instruction
No. 480 dated December 7, 2009 (CVM Instruction 480), issued by the Brazilian Securities
Commission (Comisso de Valores Mobilirios), or CVM.
2. Proposal on the allocation o net income or the year to December 31, 2009.
At a meeting held on February 23, 2010, we approved and put orward a proposal regarding
the ollowing allocations o net income or the year to December 2009, which totaled
R$881,050,370.16:
(a) R$20,859,264.91 to oset losses related to sales o treasury stock;
(b) R$155,191,105.25 to the bylaws reserve or investments and the special saeguard unds
and clearing and settlement mechanisms adopted by the Company;
(c) R$705,000,000.00 to the dividend account. A breakdown o this R$705,000.000.00
allocation is set out as ollows: the amount o R$183,500,000.00 corresponds to
interim dividends distributed in the course o 2009; R$273,500,000.00 is the amount
previously distributed by way o interest on shareholders equity; and the balance
o R$248,000,000.00 we propose to distribute as dividends. This is the proposal
Management is submitting to the annual meeting, which also sets May 14, 2010, as the
dividend payment date. As estimated by Management, the proposal will correspond
to a distribution o R$0.12360196 per share (which amount may change as a result o
treasury stock being reissued or ulllment o stock options exercised pursuant to the
Companys stock option plan).
The proposed dividend payment date is May 14, 2010. The book closure date that will
determine the ownership structure pursuant to which holders o record will be entitled to
dividends is April 30, 2010.
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Set orth in Attachment II to this proposal is the inormation on net income allocations
required under Annex 9-1-II o CVM Instruction 481 dated December 17, 2009.
3. Proposal on Aggregate Compensation or the Board and Management.
At our February 23 meeting, we approved and put orward a compensation proposal or
the Company to pay to members o the board o directors an aggregate annual amount up
to R$ 4.074.538,92 and to members o the board o executive ocers an aggregate annual
amount up to R$ 15.307.807,26.
Set orth in the table below is the nancial data related to the compensation proposal:
Compensation Proposal or 2010(in thousands o R$)
Directorsand/
executive ocers
Fixed remu-neration
Short-term variableremuneration (maxi-
mum amount)Benets TOTAL
Board members 4,074 4,074
Board o executive ocers 4,420 10,154 734 15,308
TOTAL 8,494 10,154 734 19,382
Fixed remuneration and benets.The xed remuneration is paid in 13 installments, adjusted on a yearly basis as required
under the collective bargaining agreement. Benets represent the aggregate o the amounts
attributable to health and dental care plan, lie insurance, meal vouchers, car, and pension
und.
Short-term variable remuneration.
The key perormance indicator the board elected as the 2010 target perormance will be
the adjusted net income, as determined on a quarterly basis. The aggregate amount o the
2010 short-term variable remuneration payable to executive ocers and employees o the
Company will represent 3.5% o adjusted net income actually ascertained, i the amount
thus ascertained is within the range o 70% to 130% o the target.
I adjusted net income actually ascertained alls under 70% o the target, the short-term
variable remuneration will be reduced to 2.0% o adjusted net income.
However, i adjusted net income actually ascertained exceeds 130% o the target, the
aggregate o the short-term variable remuneration will equal the sum o: (i) the amount that
corresponds to 3.5% computed over 130% o the target, and (ii) the amount that corresponds
to 2.0% computed over that portion o adjusted net income which exceeds 130% o the
target. A portion o this aggregate amount will be attributable to the executive ocers,
as allocated pursuant to certain base salary multiples that will dier based on individualperormance.
The aggregate compensation amount submitted to annual meeting, as set orth in the above
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table, assumes that quarterly adjusted net income is 10% above the elected target. In case
adjusted net income ascertained at year-end exceeds this 10% threshold, it is conceivable
the remuneration payable to executive ocers pursuant to the compensation policy set
orth herein could exceed the aggregate remuneration proposed or approval at the annualmeeting, in which event the excess amount will require conrmation rom shareholders
attending the 2011 annual meeting.
Set orth in Attachment III to this guide is inormation on board and management
compensation which CVM Instruction 480 requires to be provided under section 13 o the
Reerence Form.
II AT THE EXTRAORDINARY SHAREHOLDERS MEETING
1. Proposal on Acquisition o Shares issued by the CME Group Inc.
Furthermore, at the February 23 meeting, pursuant to article 16.(j) o the Company Bylaws,
we decided to call the extraordinary shareholders meeting to vote on BM&FBOVESPAs
proposed acquisition o shares issued by the CME Group, Inc. (CME), such that the 1.8%
ownership interest it currently owns in CME shares would increase to about 5%.
The investment to acquire stock in CME is approximately US$620 million, which added by
the market value attributable to existing shares as o the date o the notice o material act
would equate to total market value o US$1 billion. In addition, lock-up restrictions would
apply to the additional shares through to February 26, 2012, which is the same lockup period
originally applicable to the parties cross holdings.
Shareholders are called to vote to approve the proposed acquisition and investment, and
authorize BM&FBOVESPAs management to proceed with the negotiations and execute
denitive agreements with CME, in keeping with the general terms and conditions set orth
in the notice o material act.
We remain at your disposal or any additional clarication you may require.
Yours sincerely,
Carlos Kawall Leal Ferreira
Chie Financial and Investor Relations Ocer
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Managements discussion and analysis o nancial condition and results
o operations, required under Section 10 o the Reerence Form un-
der CVM Instruction No. 480 dated December 7, 2009
10. Managements discussion and analysis
11. Management should discuss the ollowing with regard to the nancial
statements:
a) the nancial condition and net equity position;
The year 2009 dawned in anxiety, amid the uncertainties o a distressed economic
environment, bleak projections or the global economic uture, which redoubled at every
turn o events, and with every news headline or market development. This was the economic
outlook that emerged rom the subprime mortgage crisis started in the United States in
2007 to turn into the worst global nancial crisis since the Great Depression in the 1930s.
In the years beore the crisis, in the olly o the housing derivatives eeding renzy, lending
behavior changed, credit policies became ever more liberal, securitization ubiquitous,
players operated in highly-leveraged mode, regulation was lax or lacking, and there was too
little transparency in over-the-counter transactions. As a result, the scenario that emerged
early in 2009 ater the crisis peaked was one o severe credit crunch, pointing to general
deleveraging, amidst a lively debate over the need or more stringent and ecient regulation
or the nancial and capital markets, strong contraction in the prices o commodities and
nancial assets, and governments across the board moving towards quantitative easing.
This combination o actors directly impacted perormance in markets BM&FBOVESPA
operates. In the equities market (Bovespa segment), volumes tumbled due mainly to the
alling prices o stocks prompted by bearish sentiments and risk aversion, whereas in the
derivatives market (BM&F segment), hedging activities sank due mainly to the credit crunch,
which coupled with general risk aversion and deleveraging signicantly depressed volumes.This low-volume scenario prevailed or most o the rst hal o 2009.
However, despite the doom-and-gloom acing world economies, Brazil dierently rom
developments in previous crises reacted positively and was one o the ew countries to
emerge relatively unscathed rom the crisis. While the level o economic activity did decrease,
the country was less aected by the downturn than most other countries, fow o oreign
investment increased in strides in the second hal o the year, pushing strong appreciation
in the Brazilian real against the U.S. dollar.
In the latter hal o the year, an improved landscape and brighter prospects or the domesticeconomy positively impacted the equities markets. The Bovespa Index soared in the highest
rise on record, the biggest gainer among securities markets across the world. The IPO market
rebounded and boomed as the worlds most active ater China, closing 2009 as our second
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best year on record in total proceeds, making Brazil the 4th best perorming country in terms
o proceeds rom IPOs, and 7th by overall oering proceeds, in addition to having hosted the
countrys largest IPO ever, conducted by Banco Santander Brasil. These movements were
topped by a surging stock market, which in the ourth quarter reached the highest everaverage daily trading volume.
Meanwhile, in the BM&F segment the market move towards deleveraging continued to
aect volumes traded negatively including in the second hal o 2009. Key indicators that
directly aect our overall perormance include the ollowing:
lThe target interest rate, or Selic Meta, dened by the Brazilian Monetary Policy
Committee (Comit de Poltica Monetria), or Copom, ell to 8.75% in December
2009 rom 13.75% at start-o-year, evidencing the expansionist monetary policy the
Brazilian government has adopted;lThe exchange rate or the Brazilian real against the U.S. dollar (per the PTAX selling
rate compiled by the Central Bank) closed the year at R$1.7412, down 25.5% in the
year rom a March 3 peak o R$2.4218, but up rom November 9 when it reached its
lowest at R$1.7024;
lAvailability o domestic credit grew, with the credit-to-GDP ratio going up to 45.0% in
December rom 40.0% in January 2009; and
lThe market prices or some o the most actively traded commodities produced in
Brazil and exported by the country, such as oil, pulp and soybean, rebounded.
However, while these improvements in the economic landscape and the outlook or the local
market positively impacted our perormance and results o operations or the second hal o theyear, they were insucient to prevent 2009 revenues rom alling on a year-over-year basis.
Another actor infuencing perormance in our markets was the creation o two new types
o taxes on nancial transactions (IOF). On October 20, 2009, with the stated objective o
arresting the appreciation o the Brazilian real, the government adopted a 2.0% tax on
money infows or portolio investments (stocks, xed-income securities and derivatives)
in domestic capital markets Then, because the actual impact o the tax (IOF) would have
been to divert trading away rom the local markets, draining precious onshore liquidity, on
November 19 the Brazilian government announced a 1.5% IOF tax on issuances o American
Depositary Receipts (ADRs), admittedly in a move to eliminate the competitive disadvantageit had created with the IOF tax on money infows, or it increased the cost o raising capital in
the Brazilian market. These two measures negatively impacted our markets, in particular the
equities markets, both because o the increased cost oreign investors now incur to invest
in the local market and as a result o uncertainty about additional measures the Brazilian
government could take.
These two government measures impacted the fow o oreign capital to our markets and
negatively aected trading activities particularly in the Bovespa segment, as they increased
the cost o trading in local markets, in addition to having added to the equation an element
o uncertainty about other measures the government may take in the uture.
Finally, dierently rom the economic outlook at the end o 2008, this time there are good
prospects or Brazilian economy to resume the growth trend, whereas there are encouraging
signs recovery is on course in most economies. I the positive projections do materialize, this
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will positively impact our results o operations. In addition, while 2010 should continue see the
roaring debate evolve around re-regulating the international nancial and capital markets, which
was so pervasive last the year, in Brazil substantive regulation already is in place, more or less in
keeping with the models in debate, including in the orm o regulation by BM&FBOVESPA, whichencourages and preers transactions in exchange-traded assets to over-the-counter trades.
b) the capital structure and likelihood o a redemption o shares or quotas,
including:
levents o redemption;
l reimbursement value calculation method.
Other than as legally provided, the Company is not contemplating any share redemption,
nor any event that would trigger redemption rights.
c) the Companys capacity to service its debt;
Our nancial income or the year to December 2009 reached R$253,862 thousand and breaks
down as ollows: interest income R$289,686 thousand, down 20.6% year-on-year, mainly
due to decline in the benchmark interest rate paid to nancial investments; and R$35,824
thousand in nancial expenses, which were 39.2% down rom a year ago.
EBITDA was R$975,108 thousand, representing a 6.7% rise rom R$913,493 thousand in the
previous year, whereas EBITDA margin rose to 64.9% rom 57.0% previously.
Net income or the year amounted to R$881,050 thousand, 36.5% up year-on-year, primarily
due to the reduction in expenses. Our year-end consolidated balance sheet registered total
assets o R$21,201,183 thousand, where 15.3% or R$3,236,211 thousand represent cash and
cash equivalents and nancial investments.
As a percentage, non-current assets o R$18,422,215 thousand accounted or 86.9% o
total assets, under which the main account is intangible assets o R$16,117,930 thousand,
ollowed by investments totaling R$1,319,439 thousand.
As a percentage o total liabilities, current liabilities o R$1,162,075 thousand accounted or 5.5%and correlates mainly with cash collaterals received rom customers in the amount o R$810,317
thousand, and liabilities under repurchase agreements on the order o R$144,513 thousand.
Non-current liabilities o R$313,002 thousand accounted or 1.5% o total liabilities, primarily
made up o deerred income tax and social contribution amounting to R$261,060 thousand,
which correlate with the provision on temporary dierences rom tax amortization o
goodwill in the year.
Shareholders equity as o December 31, 2009, totaled R$19,709,749 thousand, composed
by capital stock o R$2,540,239 thousand (12.9%), capital reserve o R$16,666,489 thousand
(84.6%), revaluation reserves o R$23,551 thousand (0.1%), statutory reserves o R$706,119thousand (3.6%), legal reserve o R$3,453 thousand (0.02%) and in addition, by treasury
stock resulting rom the share buyback program and recorded in a contra-equity account at
R$230,102 thousand.
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We should note that our policy calls or low risk investment o cash balances, earning relatively
low interest rates, which correlates with a substantial volume o government bonds in our
portolio, oten bought through investment unds. We typically direct our nancial investments
to more conservative investment unds, whose assets are invested in diversied bond portolioswhose perormance benchmark ollows the interbank deposit rate or the Selic rate.
Given the above, refecting our consolidated short- and long-term liabilities, our low
indebtedness, and liquidity and cash positions, we understand our Company is ully capable
o paying the service o out short- and long-term indebtedness.
lthe sources o nancing or working capital and capital expenditures (non-current
assets);
lthe sources o nancing or working capital and capital expenditures (non-current
assets), which the Company plans to use to cover liquidity deciencies;
We primarily nance our working capital and investments in non-current assets rom our
operating cash fow.
In addition, we have entered into certain leasing agreements, which substantially correlate
with IT-related equipment. Pursuant to the accounting standard under pronouncement CPC
06 Leases, approved by CVM Resolution 554/08, we classiy lease contracts as either nancial
or operating leases based on the characteristics o each. The balance o lease arrangements
as o December 31, 2009 was R$11,790 thousand, with uture payments through to 2011,
versus a balance o R$4,087 thousand as o December 31, 2008.
d) the level o indebtedness level and the characteristics o such debt obligations,including the ollowing particular inormation:
i) material nancing arrangements and loan agreements;
ii) other long-term arrangements with nancial institutions;
iii) degree o subordination o debt obligations;
iv) restrictions possibly applicable to the registrant under existing nancing
arrangements, including in particular restrictions concerning indebtedness level
and capacity to undertake new debt, and on dividend distributions, asset sales,
issuance o new securities and disposition o control;
Not applicable.
e) limitations on use o the proceeds o nancing previously undertaken;
Not applicable.
) signicant changes to any line item in the nancial reports;
Statements of income comparison - Years ended December 31, 2009 and 2008
Gross operating revenues
Gross operating revenues in the amount o R$1,672,894 thousand or the year to December31, 2009, declined 6.2% rom R$1,783,358 thousand one year ago, primarily as a result o
a 4.3% all in volumes traded on the equities markets and a 3.3% drop in volumes or the
derivatives markets, in either case due to actors correlated with the global nancial crisis
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which peaked in 2008 but continued to adversely aect the capital markets primarily in the
rst hal o 2009.
Trading and/or settlement system BM&F segment
The revenues rom transaction ees we charge on trading and clearing activities on the
derivatives markets (BM&F segment) tumbled 12.9% to R$552,492 thousand at year-end
rom R$634,230 thousand in the prior year. This decrease correlates mainly with the ollowing
items:
Derivatives
The revenues rom ees charged on derivatives trading and clearing transactions (derivatives
clearinghouse) ell 14.2% year-on-year, to R$516,052 thousand or the year rom R$601,275thousand previously, as a result o the 3.3% decline in volume traded in derivatives contracts
and 10.3% slump in average revenue per contract (RPC).
Foreign exchange
The revenues rom ees charged on orex trading and clearing transactions (oreign exchange
clearinghouse) tossed 2.1% year-on-year, to R$20,849 thousand or the year rom R$21,302
thousand in the earlier year, due mainly to appreciation o the Brazilian real against the U.S. dollar.
Government securities
The revenues rom ees charged on trades in government bonds and debt securities, and
on clearing transactions (debt securities clearinghouse) sank 53.0% year-on-year, to R$155
thousand at end o year rom R$330 thousand the year beore, as a result o the 76.9% plunge
in volume traded.
Bolsa Brasileira de Mercadorias
The revenues rom trades in agricultural commodities on the exchange operated through
Bolsa Brasileira de Mercadorias ell 9.1% year-on-year, to R$7,146 thousand or the year rom
R$7,865 thousand in the year beore, due to the all in volume traded in agricultural notes.
Settlement bank
The revenues rom the operations o BM&FBOVESPAs settlement bank increased by 139.7%
year-on-year, to R$8,290 thousand at end o year rom R$3,458 thousand previously, as a
result o the rise in volume o services sold.
Trading and/or settlement system Bovespa segment
The revenues rom trading and transaction ees we charge on trading and clearing activitiesin the equities markets (Bovespa segment) ell 2.2% year-on-year, to R$1,032,201 thousand
or the year rom R$1,055,028 thousand one year earlier. This drop correlates mainly with the
ollowing items:
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Trading trading ees
The revenues rom ees charged on trading in equities tossed 2.2% year-on-year, at R$617,000
thousand at year-end rom R$635,091 thousand one year ago, refecting the 4.3% decline involumes traded on the equities markets.
Clearing and settlement transaction ees
The revenues rom ees charged on clearing and settlement transactions tumbled 10.5%
year-on-year, to R$232,166 thousand at the close o year rom R$259,355 thousand in the
year beore, also the 4.3% decline in volumes traded on the equities markets and due to a
change in our pricing policy.
Loans o marketable securities
The revenues rom securities lending services through the depository acility known as CBLC
ell 32.0% year-on-year, to R$48,528 thousand or the year rom R$32,989 thousand in the
prior year, due to a slump in the volume o securities lending.
Listings o marketable securities
The revenues rom listing ees we charge on securities listings climbed 32.8% year-on-
year, to R$39,549 thousand rom R$29,776 thousand in the previous year, mainly due to
implementation o a new price schedule or listings o securities which we adopted in
January 2009, gradually terminating discounts we had been granting in the last ew years topromote listings in our special corporate governance trading segments.
Depository, custody and back oce
The revenues rom ees charges or depository, custody and back-oce services increased
by 12.3% year-on-year, to R$62,523 thousand at year-end rom R$70,231 thousand in the
earlier year, primarily as a result o a 3.1% increase in the number o custody accounts, and
to implementation o our new pricing policy as o May 2009, which adopted a custody ee
by volume deposited with the depository acility.
Participant access ees
We charge access ees rom participants acquiring trading rights or access to our markets.
The revenues rom access ees soared 103.8% year-on-year to R$40,266 thousand rom
R$19,755 thousand one year ago, due primarily to the new policy or access to our markets
which we adopted in January 2009.
Other operating revenues
Other operating revenues decreased 6.3% year-over-year, to R$88,201 thousand rom R$94,100
thousand in the previous year. This drop correlates mainly with the ollowing items:
Vendors market data
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The revenues rom distribution and sale o market data comprising quotations and other
market inormation were up 33.1% year-on-year to R$57,691 thousand rom R$43,359
thousand the year beore, as a result o our new pricing policy or these services implemented
as o April 2009.
Commodity classication ees
The revenues rom ees we charge or grading commodities have climbed 21.8% year-over-
year, to R$4,304 thousand at end o year rom R$3,535 thousand in the prior year, due mainly
to increase in the volume to cotton bags graded at our testing acilities.
Other
Other revenues dropped 44.5% year-on-year, to R$26,206 thousand at end o year romR$47,206 thousand in the earlier year, due primarily to lower than average dividends paid to
us by the CME Group, and to the reversal o provisions recorded in previous years.
Deductions rom revenues
The deductions rom revenues decreased by 6.1% to R$170,350 thousand at end o year
rom R$181,347 thousand previously, which is consistent with the all in gross operating
revenues.
Net operating revenue
As a result o the year-over-year changes in revenues discussed above, net operating revenue
ell 6.2% to R$1,502,544 thousand or the year versus R$1,602,011 thousand one year ago.
Operating expenses
The operating expenses tossed 21.3% year-on-year to R$569,832 thousand rom R$723,658
thousand one year ago, due primarily to the synergy identication plan we established in
connection with the integration o BM&F S.A. and Bovespa Holding S.A., and implemented
with the aim o capturing synergy savings by eliminating duplicate work and through action
related to the items discussed below.
Personnel and related charges
The expenses with personnel and related charges increased by 17.2% year-on-year to
R$289,806 thousand rom R$247,349 thousand in the previous year, due primarily to increase
in expenses or the year with stock options granted to key management personnel 2009,
which reached R$59,634 thousand versus R$26,359 thousand in the year beore.
Data processing
The data processing expenses dropped 27.4% year-on-year to R$102,596 thousand rom
R$141,282 thousand in the prior year, due primarily to synergy savings captured rom the
integration process (Bovespa and BM&F).
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Depreciation and amortization
The expenses with depreciation and amortization increased by 20.6% year-on-year to
R$42,396 thousand rom R$35,140 thousand one year earlier, due primarily to acquisitionsin the asset group o computer equipment and IT acilities.
Outsourced services
The expenses with outsourced services remained virtually unchanged with slight rise o 3.3%,
to R$45,495 thousand or the year versus R$44,043 thousand the year beore. The synergy
savings we had captured in connection with this line item were more than cancelled out by
expenses with outsourced services related to specic and strategic projects, in particular
in the quarter to December 2009 when ongoing projects included, among other things,
some o the magnitude o the partnerships with the CME Group and Nasdaq OMX, and theoperating qualication program (PQO) or brokerage rms.
General maintenance
The expenses with general maintenance dropped by 18.7% year-on-year to R$11,007
thousand rom R$13,536 thousand in the earlier year, due to synergy savings captured rom
the integration process (Bovespa and BM&F).
Communications
The expenses with communications were up 25.1% year-on-year to R$23,428 thousand romR$18,721 thousand in the prior year, due mainly to increase in volume traded on Bovespa
markets, as the exchange sends notices o trade execution by mail addressed to the investors,
or conrmation o the transactions.
Rents
The expenses with rents incurred in the year to December 31, 2009, dropped 30.0% to
R$3,032 thousand rom R$4,351 thousand one year ago, due to synergy savings captured
rom the integration process (Bovespa and BM&F).
Supplies
The expenses with supplies ell 30.8% year-on-year to R$2,510 thousand rom R$3,629 thousand
one year ago, due to synergy savings captured rom the integration process (Bovespa and BM&F).
Promotion and marketing
The expenses with promotion and marketing declined 37.8% year-on-year to R$19,555
thousand rom R$31,446 thousand the year beore, due to synergy savings captured rom
the integration process (Bovespa and BM&F).
Taxes
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Taxes on ees paid by us increased by 40.4% year-on-year to R$2,323 thousand rom R$1,655
thousand one year ago, primarily due to taxes charged on remittances abroad or payment
o outsourced services related to certain specic and strategic projects o ours.
Board members compensation
The expenses with remuneration paid to directors in the year to December 31, 2009,
dropped 43.0% year-on-year to R$5,252 thousand rom R$9,219 thousand in the earlier year.
This decline is due to the existence o two exchanges and two dierent boards prior to the
May 2008 integration process that combined Bovespa and BM&F into BM&FBOVESPA, and
due also to the act that the members o both boards continued to provide services to our
Company or a ew more months during the transition period towards our consolidation.
Integration expenses
The expenses with the integration process amounted to R$129,576 thousand in the year
ended December 31, 2008, and did not recur in the year to December 31, 2009.
Sundry
Sundry expenses dropped 48.7% year-on-year to R$22,432 thousand orm R$43,711
thousand one year earlier, due to synergy savings captured rom the integration process
(Bovespa and BM&F).
Goodwill amortization
The expenses with amortization o goodwill which in the year to December 31, 2008,
amounted to R$324,421 thousand collapsed to R$0 (naught) in the year to December 31,
2009, due to the change in the accounting standard determining the accounting treatment
o goodwill, as under certain CPC pronouncements issued in 2008, starting rom January 1,
2009, goodwill is no longer subject to amortization recognized in the income statement.
Financial income
Financial inorm or the year ended December 31, 2009, dropped 17.0% to R$305,972thousand rom R$ 253,862 thousand in the prior year, due mainly to the decline in interest
rates that remunerate our demand deposits and nancial investments.
Income beore taxes
Income beore taxes increased by 38.0% to R$1,186,574 thousand or the year rom R$859,904
thousand a year ago, and correlates mainly with the 21.3% decrease in operating expenses
and the change in the accounting standard that determines the accounting treatment o
goodwill, as previously discussed.
Income tax and social contribution
Income tax and social contribution or the year increased 43.1% and amounted to R$304,505
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thousand at end o year, as compared to R$212,741 thousand one year earlier as ollows:
l The line item or current income tax and social contribution, which at December 31,
2008, registered an expense o R$331,879 thousand, at December 31, 2009, registeredrevenue o R$32,085 thousand, or a 109.7% decrease.
l The line item or deerred income tax and social contribution, which at December 31,
2008, registered a revenue o R$119,138 thousand, at December 31, 2009, registered
an expense o R$336,590 thousand, or a 382.5% decrease.
Ater Bovespa Holding S.A. merged with BM&F S.A. in November 2008, the goodwill came to
be deductible or purposes o income tax and social contribution on net income. As a result,
starting rom December 2008 we took advantage o the tax benet, such that the portion
o goodwill which had been amortized but not taken as a deduction gave rise to income tax
and social contribution credits recorded as tax assets in the amount o R$76,702 thousand.In addition to recording tax assets rom amortized goodwill, we recorded tax assets or tax
losses in the amount o R$35,036 thousand.
Deerred income tax and social contribution liabilities as o December 31, 2009, derived rom
recognition o the temporary dierence between the tax base o goodwill and its carrying
value in the balance sheet, considering that while goodwill continued to be amortized or
tax purposes, starting rom January 1, 2009, goodwill is no longer amortized or accounting
purposes, thus resulting in a goodwill tax base that is lower than its carrying value. As o
December 31, 2009, the total deerred tax liabilities related to amortization o goodwill or
tax purposes was R$333,917 thousand.
In the second quarter o 2009, we recognized income tax and social contribution credits in
the amount o R$35,503 thousand, as related to tax losses and negative tax base o social
contribution o the ormer Bovespa Holding, which had not been used at the time o the
merger o Bovespa Holding due to the supposed deductibility limitation set at 30% o
adjusted net income. Our Company reconsidered this procedure in the second quarter o
2009, in conjunction with our legal advisors, based on the understanding that this limitation
is not applicable in the event o a merger o the investee, as in such case there is no continuity
and the investee ceases to exist, such that thereore the purported limitation on deductibility
is removed and the tax losses may be used in ull. As a result, the Company has recorded the
tax credits previously mentioned.
Minority interests
Minority interests reer to those portions o our subsidiaries Bolsa Brasileira de Mercadorias
and Bolsa de Valores do Rio de Janeiro consolidated in our nancial statements, which are
not owned by us. Minority interests amounted to R$1,019 thousand in the year to December
31, 2009, versus R$1,567 thousand the year beore, a 35.0% decrease.
Net income or the year
Net income or the year o R$881,050 thousand surged 36.5% year-over-year rom R$645,596
thousand one year ago. This rise is due primarily to the 21.3% reduction in operating expenses
and expenses rom the change in the accounting standard determining the accounting
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treatment o goodwill, which were only partially counterbalanced by the 43.1% increase in
the income tax and social contribution line item, resulting rom recognition o deerred tax
liabilities.
Comparison o the main line items in the balance sheet Years ended December 31,
2009 and 2008
Current assets
Current assets as o December 31, 2009, increased 41.4% year-on-year to R$2,778,968
thousand (13.1% o total assets) rom R$1,965,461 thousand one year earlier (9.6% o total
assets). The main changes to current assets were the ollowing:
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand deposits, together with
short- and long-term, liquid investments through prime banks, nancial investment unds,
government bonds and so orth. As o December 31, 2009, cash and cash equivalents and
nancial investments amounted to an aggregate o R$3,236,211 thousand, which accounted
or 15.3% o our total assets at that date, and represented increase o 34.0% over R$2,414,241
thousand one year ago, when they accounted or 11.8% o our total assets. This increase
in cash and cash equivalents and nancial investments was pushed by the higher volume
o cash collaterals deposited by market participants as margin or transactions, which in
turn was driven by the soaring volume o trades on the equities markets in the quarter to
December 2009, versus the same quarter one year earlier. The collaterals are included incurrent assets and in current liabilities.
Accounts receivable, net
Accounts receivable largely comprise trading and transactions and other ees receivable rom
customers, and market data transmission ees receivable rom vendors. Accounts receivable
dropped by 61.8% year-over-year, to R$40,205 thousand rom R$105,169 thousand in the
prior year. This all is attributable to change in the due date or payment o most trading and
transaction ees charged in the equities markets, which starting rom October 1, 2009, we
collect as o the third business day ater the trade date, whereas previously these ees wouldbe paid up to two months ater the trade date.
Deerred income tax and social contribution
Deerred income tax and social contribution recorded under both current and non-current
assets were reduced by 61.9% year-on-year, rom R$122,070 thousand in the prior year
to R$46,541 thousand as o December 31, 2009. This decrease resulted rom a change in
the accounting standard related to the accounting treatment o goodwill amortization,
according to which we now recognize a deerred tax liability on tax amortizations o goodwill.
The balance o deerred tax assets recorded one year ago (in the amount o R$76,702thousand) was reclassied as a liability in 2009, thus representing the net amount o tax
credit attributable to goodwill.
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do total liabilities). This change correlates with an increase in margin received rom market
participants and deposited in the orm o cash, as a result mainly o volume growth in the
quarter to September 2009 as compared to the same period in the prior year.
Earnings and rights on securities in custody
The 11.4% decline in earnings and rights on securities in custody, which at end o year
amounted to R$31,897 thousand as compared to R$36,020 thousand one year ago, is due
primarily to the all in earnings rom judicial deposits.
Financing
The 127.4% climb in nancing, which at end o year amounted to R$9,295 thousand
as compared to R$ 4,087 thousand in the year beore, is due mainly to nancial leasearrangements or IT-related equipment.
Other liabilities
The line item other liabilities climbed 15.7% to R$194,895 thousand at end o year (0.9% o
total liabilities) rom R$168,404 thousand in the previous year (0.8% o total liabilities), which
correlates primarily with deposits and repurchase agreements related to the operations o
Banco BM&F, the settlement bank.
Non-current liabilities
Non-current liabilities in the amount to R$313,002 thousand at December 31, 2009, (1.5% o
total liabilities) surged 569.8% when compared to R$46,729 thousand at the end o the prior
year (0.2% o total liabilities). This change is due primarily to our having recognized deerred
income tax and social contribution at end o year in the amount o R$261,060 thousand, as
derived rom the temporary dierence between the tax base o goodwill and its carrying
value in the balance sheet, considering that while goodwill continues to be amortized or
tax purposes, starting rom January 1, 2009, goodwill is no longer amortized or accounting
purposes, thus resulting in a goodwill tax base that is lower than its carrying value.
Shareholders equity
Shareholders equity rose 2.2% to R$19,709,749 thousand at December 31, 2009, when it
represented 93.0% o total liabilities, rom R$19,291,724 thousand one year earlier, when
it represented 94.4% o total liabilities, and as resulting rom the ormation o a reserve
or investments and unding o saeguard mechanisms and guarantee unds we keep in
connection with clearing and settlement activities, as required under our bylaws (under the
statutory reserve line item) and pursuant to the proposal on allocation o net income or
the year.
1. Management is expected to discuss:
a) The results o operations and, in particular:
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i) Important revenue components;
Our consolidated gross operating revenues or the year ended December 31, 2009, totaled
R$1,672,894 thousand, down 6.2% rom R$1,783,358 thousand one year ago, primarilyrefecting the ollowing:
l revenues rom transaction ees we charge on trading and clearing activities on the
equities markets (Bovespa segment) accounted or 50.8% o gross operating revenues,
or R$849,166 thousand, in a 5.1% year-on-year decline as a result o the 4.3% drop in
volumes traded when compared to the prior year. Despite having tumbled in the rst
hal o 2009, volumes bounced signicantly in the second hal, and revenues rom ees
on trading and clearing transactions surged 34.5% over the period to June 2009, to
peak in the quarter to December 2009, which registered record high volumes; and
l revenues rom transaction ees we charge on trading and clearing activities in BM&F
markets accounted or 32.1% o gross operating revenues, or R$537,056 thousand,plunging 13.8% year-over-year. This decline correlates with a 10.3% all in average revenue
per contract (RPC), while overall volume traded tossed 3.3% rom one year earlier.
As a result, revenues derived rom transaction ees we charge on trading and clearing
activities in the equities and derivatives markets accounted or 82.9% o our total revenues
in the year to December 2009, versus 85.1% o total revenues or 2008.
Taxes charged on these revenues amounted to R$170,350 thousand, or approximately 10.2%
o our gross operating revenues.
ii) Factors that have materially aected the results o operations;
Income tax, social contribution and goodwill amortization
Income beore taxes or the year amounted to R$1,186,574 thousand. The income tax and
social contribution line item totaled R$304,505 thousand, substantially represented by
deerred income tax and social contribution in the aggregate o R$336,590 thousand, and
with no eect on cash fow.
As recorded, income tax and social contribution resulted rom the ollowing:
l deerred tax liabilities amounting to R$333,917, and recognized in relation to taxabletemporary dierences rom amortization o goodwill in the year, with no impact on
cash fow;
l recognition o tax credits in the amount o R$35,503 thousand related to tax losses and
negative tax base o social contribution absorbed rom ormer Bovespa Holding.
EBITDA o R$975,108 thousand rose 6.7% year-over-year rom R$913,493 thousand, whereas
EBITDA margin climbed to 64.9% rom 57.0% one year ago.
Net income or the year to December 2009, in the amount o R$881,050 thousand, is 36.5%
up rom the year beore, due mainly to certain previously mentioned cost savings. In addition,(i) unlike 2008, when we incurred R$129,576 thousand in non-recurring expenses rom the
integration o the ormer two exchanges, BM&F S.A. and Bovespa Holding S.A., in 2009 we
incurred no such expenses; (ii) also in 2008 we recognized through prot and loss the expense
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related to proportionate amortization o goodwill rom the merger o shares o Bovespa
Holding S.A., in the amount o R$324,421 thousand, with net impact o R$235,075 thousand;
whereas (iii) in the year we recorded deerred tax liabilities o R$333,917 thousand on temporary
dierences rom tax amortization o goodwill in the year, with no impact on cash fow.
Taking the above amounts into account, the actual tax rate or 2009 was 25.7%.
b) Any variation in revenues attributable to changes in prices, exchange rates,
infation rates, changes in volumes and oerings o new products and services;
Variations in our revenues correlate primarily with changes in our pricing policy and the
impact o fuctuations in exchange rates, as set orth below.
l
Listing ees: a 32.8% year-over-year climb in listing ees, due to a change in pricesand the end o certain discounts previously granted to companies listing securities to
trade on our special corporate governance trading segments;
l Depository acility: revenues rom depositary and custody and back oce services
went up 12.3% rom one year ago, ollowing a change in our pricing policy which
established an additional ee charged rom Brazilian-resident investors holding
custody accounts in excess o R$300,000 thousand, which is based on the market
price o securities and other assets held in custody;
l Access ees: revenues rom access ees surged 103.8%, as a result o the policy or
access to markets within both segments;
l Sales o market data to vendors: sales o market data rose 33.1% year-on-year due to
implementation o our revised pricing policy in April 2009;
l Securities lending: revenues rom securities lending dropped 32.0% primarily due
to the plunge in transaction volume in the rst hal o 2009, ater which however
volumes in this market bounced back to show signicant improvement; and
l Average revenue per contract (RPC) traded on BM&F markets: RPC ell 10.3% rom a
year ago primarily due to (i) the August 2008 decision to terminate certain discountson transaction ees ater November 2008. The discount period had pushed volumes
driving revenue per contract upwards in the period; (ii) strong appreciation o the
Brazilian real against the U.S, dollar, which negatively infuenced revenues rom FC
contracts, rom USD interest rate contracts, and rom commodities contracts; and (iii)
the granting o discounts or access to our systems via certain DMA (Direct Market
Access) models, and or high requency traders.
c) The impact o infation, o changes in the prices or the principal raw materials
and other supplies, and o changes in exchange and interest rates, on the results
o operations and nancial condition.
For inormation on impacts o our pricing policies and changes in exchange rates impacting
the results o operations, see item (b) under paragraph 10.2 above.
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1.1. Management should discuss the material eects any o the events listed below
have had or are expected to have on the nancial statements and results o
operations:
a) Formation a new operating segment; disposition o an operating segment;
No new operating segment has been ormed and not operating segment was disposed o
by the Company in the years to December 2009 and 2008, and no such event has had or is
expected to have eects on our nancial statements and results o operations.
b) Organization o associate entities, acquisition or disposition o equity interest;
On February 11, 2010, we released a notice o material act disclosing negotiations held
within the scope o the relationship we maintain with the CME Group, Inc, which resulted inthe execution o a protocol o intent pursuant to which the two exchanges agree a global
preerred strategic partnership (i) or both parties to cooperate in identiying and pursuing
opportunities or co-investment in, and joint commercial partnerships with, third-party
international exchanges on a shared and equal basis; (ii) or the two exchanges to combine
eorts or joint development o a multi-asset class electronic trading platorm; and (iii) or
the Company to acquire additional shares in the CME, and increase to 5% its total ownership
interest in CME shares, which as o the date o the notice o material act would represent
aggregate investment o approximately US$1 billion. The investment the Company will be
making in raising its equity interest in the CME is on the order o US$620 million, and will give
BM&FBOVESPA the right to designate a representative to the CME board. The transaction
will require approval rom our shareholders.
In addition, the denitive transaction documents or implementation o this global
strategic partnership will require, among other things, approval rom our board o directors.
Depending on the terms o the denitive agreements, ater consummated our investment
could be designated investment in an associate entity, meaning one where the investor has
signicant infuence but not control or joint control o the entity, which under the accounting
standard provided in CPC 18 would require us to record the investment pursuant to the
equity method o accounting.
c) Special events and operations.
In the years to December 31, 2009 and 2008, there were no special or unusual events or
operations related to the Company and/or its activities, which have had, or are expected to
have a material impact on our nancial statements or results o operations.
1.2. Management should discuss:
a) Signicant changes in accounting practices;
Law 11,638/07 and Provisional Measure 449/08, asconverted into Law 11,941/09
With the enactment o Law 11,638/07 and publication o Provisional Measure 449/08, converted
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into Law 11,941/09, certain provisions o Brazilian Corporation Law were changed, revoked and
introduced as regards accounting practices and the presentation o the nancial statements,
eective as rom the scal year ended December 31, 2008. The main purpose o this law and
MP was to adapt Brazilian corporate legislation to acilitate the process o convergence o theaccounting practices adopted in Brazil with the International Financial Reporting Standards
issued by the International Accounting Standards Board (IASB). Moreover, as a result o the
enactment o this law and provisional measure, certain accounting pronouncements were
published in 2008 by the Brazilian Accounting Pronouncements Committee (CPC), applicable
to all corporations, including publicly traded and large-sized companies.
The main changes to the accounting practices and their eects on the nancial statements
o BM&FBOVESPA as o and or the years ended December 31, 2009 and 2008 include the
ollowing:
(i) Share-based Compensation Pursuant to CPC 10 Share-based compensation,approved by CVM Deliberation 562/08, BM&FBOVESPA recognized as expense
portions o the contracts existing at December 31, 2008 relating to the Stock Option
Plans granted to administrators and employees. The main eatures and inormation
relating to the stock option plans are presented in Note 19.
(ii) Deerred Charges Expenditures recorded in deerred charges related to sotware
licenses acquired and sotware development were reclassied to intangible assets.
(iii) Non-operating results MP 449/08, converted into Law 11,941/09, eliminated the
segregation o the non-operating result group in the statement o income or the
year. The revenues and expenses previously presented as non-operating results are
now presented in the operating results group.
(iv) Financial Leases BM&FBOVESPA had nancial lease agreements mainly related toinormation technology equipment. In accordance with the provisions determined in
accounting pronouncement CPC 06 Leases, approved by CVM Resolution 554/08,
the Company classied the lease agreements as either nancial or operating, based
on their specic characteristics.
The IT equipment leased under the nancial lease agreements was recorded in property and
equipment and the corresponding obligation in the Financing account. In the addition, the
related eects were recognized in the statement o income.
Recent Accounting Pronouncements
The standards and interpretations listed below were published and are mandatory or
nancial years starting as o or ater January 1, 2010. Besides these, other standards and
interpretations were published that change generally accepted accounting principles
adopted in Brazil, or BR GAAP, in the process o convergence towards International Financial
Reporting Standards, or IFRS. The standards and interpretations set orth below are expected
to impact our nancial statements:
CVMResolution577/2009CPC20BorrowingCosts;
CVMResolution581/2009CPC21InterimReporting; CVMResolution582/2009CPC22SegmentReporting;
CVMResolution583/2009CPC27FixedAssets;
CVMResolution592/2009CPC23AccountingPractices,ChangesinAccounting
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Estimates and Correction o Errors;
CVMResolution593/2009CPC24EventsAftertheBalanceSheetDate;
CVMResolution594/2009CPC25Provisions,ContingentLiabilities,Contingent
Assets; CVMResolution595/2009CPC26PresentationofFinancialStatements;
CVMResolution597/2009CPC30Revenues;
CVM Resolution 598/2009 CPC 31 Non-Current Assets Held for Sale and
Discontinued Operations;
CVMResolution599/2009CPC32IncomeTaxes;
CVMResolution600/2009CPC33EmployeeBenets;
CVMResolution601/2009ICPC08AccountingforProposedDividendPayments;
CVM Resolution 604/2009 CPC 38 Financial Instruments: Recognition and
Measurement;
CVMResolution604/2009CPC39FinancialInstruments:Presentation; CVMResolution604/2009CPC40FinancialInstruments:Disclosures;
CVMResolution605/2009CPC18InvestmentsinAssociates;
CVMResolution606/2009CPC19InterestsinJointVentures;
CVMResolution607/2009CPC35SeparateFinancialStatements;
CVMResolution608/2009CPC36ConsolidatedFinancialStatements;
CVMResolution609/2009CPC37First-timeAdoptionofInternationalFinancial
Reporting Standards;
CVM Resolution 610/2009 CPC 43 First-time Adoption of Accounting
Pronouncements CPC 15 to 40;
CVMResolution613/2009ICPC03SupplementalAspectsofLeaseAccounting;
CVMResolution614/2009ICPC04ScopeofAccountingPronouncementCPC10 Share-based Payments;
CVMResolution615/2009ICPC05AccountingPronouncementCPC10Share-based
Payments Transactions in Equity Instruments o a Group Entity or Treasury Stock;
CVMResolution 618/2009 ICPC 09 Individual Financial Statements, Separate
Financial Statements, Consolidated Financial Statements and Application o the
Equity Method;
CVMResolution619/2009ICPC10ClaricationsonAccountingPronouncements
CPC 27 Fixed Assets and CPC 28 Investment Properties.
The above pronouncements and interpretations are applicable to the nancial statementsor the year ending December 31, 2010, and also to the 2009 nancial statements which will
be presented together with the 2010 nancial statements or comparison purposes.
b) Signicant eects o changes in accounting principles;
Management does not expect the adoption o the new pronouncements and interpretations
above to generate signicant impacts on the net income and shareholders' equity o the
Company, except with respect to the accounting or the investment in CME Group
CPC38 Financial Instruments: Recognition and Measurement
Under the accounting standards eective up to December 31, 2009, the investment in CME
Group has been recorded at historical cost as an investment, in accordance with CPC 14,
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and the carrying value o the investment has been subject to an impairment analysis. This
impairment analysis has been based on the discounted cash fow rom the investment
(value in use), as allowed by CPC 01 or investments recorded under the cost method.
Eective rom January 1, 2010, which is the date o CPC 38, the investment in CME Group will
be reclassied to nancial instruments as a nancial asset available or sale and adjusted to
air value. In accordance with CPC 38, the quoted stock price o the investee should be used
to determine the air value.
As a nancial asset available or sale, CPC 38 will require the impairment analysis to be made
by comparing the market value o the shares with their acquisition cost, and a loss should be
recognized i there is a signicant or prolonged decline in the market price o the shares.
Because o the signicant decline in the market price o the shares o CME Group in theourth quarter o 2008, the initial adoption, or comparison purposes, o CPC 38 as o
December 31, 2008 (beginning o 2009) will result in the recognition o an impairment o the
investment in CME Group in the amount o R$ 460,610, net o tax, which will be recognized
in shareholders equity as o December 31, 2008. The new cost basis o the investment at
that date will thereore become R$ 578,306. Additionally, during the year ended December
31, 2009, using this new cost basis as a reerence, the market value o the investment in CME
Group stock increased, generating a positive eect o R$ 77,396, net o tax.
Under the new accounting standards, considering the eects mentioned above, the adoption
o CPC 38 will reduce the balance o shareholders equity o the Company at December 31,
2009 by R$ 383,214, net o tax eects. It should be noted that these adjustments will notalter the bases or the distribution o dividends and interest on own capital in 2008 and
2009, which were based on the standards in eect at the time.
CPC10 Share-based Payments
Pursuant to pronouncement CPC 10 Share-Base Payments, approved and conrmed
by CVM Resolution 562/08, our obligations under stock options existing at December 31,
2008, were recognized or the period in which the options vested (typically at the end o
the period in which the services are provided), which impacted our nancial statements in
the ollowing ways: (i) directly, on shareholder equity or the previous year, with regard toshare-based payments or services provided prior to the date o adoption o the accounting
standard under pronouncement CPC 10, i.e., January 1, 2008; (ii) in the statement o income,
through recognition o expenses regarding stock options attributable to services provided
over 2008; (iii) prospectively, or the coming three years, which is the period or ulllment o
the agreed exercise conditions (provision o uture services).
Accordingly, as a result o having adopted pronouncement CPC 10, the Company recognized
R$229,519 thousand in prot reserves with a contra account to capital reserves and, in
addition, recognized expenses o R$26,359 thousand incurred in 2008 in a contra account to
capital reserves in the statement o income .
b) Qualications and emphasis o matter paragraphs included in the independent
auditors report.
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There have no qualications or emphasis o matter paragraphs in the independent auditors
reports regarding the nancial statements as o and or the years ended December 31, 2008
and 2009.
1.2 Management is expected to indicate and discuss critical accounting practices
adopted by the registrant, analyzing in particular estimates requiring
Managements judgment on, and subjective assumptions related to uture
events and uncertainties, which can materially infuence the nancial condition
and results o operations. Critical accounting estimates may relate to provisions,
contingencies, recognition o revenues, tax credits, long-term assets, the useul
lie o non-current assets, pension plans, adjustments rom oreign currency
translations, environmental recovery costs, or impairment and recoverability
testing standards or assets and nancial instruments, among other things.
In preparing the nancial statements Management is required to use estimates and
assumptions or the measurement and recognition o certain assets, liabilities and other
transactions. As a result, our nancial statements include estimates related to contingent
provisions, the air value o certain nancial instruments, the determination o certain
income tax provisions and the useul lie o certain assets, recognition o asset impairment
and analysis o recoverability and similar other elements. Actual results may dier rom
our estimates and assumptions, which we revise at least once every year at the time o
preparation o the nancial statements o BM&FBOVESPA and the consolidated entities.
Signicant accounting practices
a. Determination o income
Income and expenses are recognized on an accrual basis. The amounts received as annual
ees, such as ees or listings o securities and certain contracts or sale o market data, are
recognized proportionately on a monthly basis in the statement o income or the period.
b. Cash and cash equivalents
The balances o cash and cash equivalents or cash fow statement purposes comprise cash
and bank deposits.
c. Financial instruments
(i) Classication; measurement
The Company classies nancial assets in the ollowing categories: recorded at air value
through prot or loss, loans and receivables, held to maturity and available or sale. The
classication depends on the purpose or which the nancial assets are acquired. Management
determines the classication o the nancial assets when they are rst recorded.
Financial assets measured at air value through prot and loss
Financial assets measured at air value through prot or loss are nancial assets held or active
and requent trading or assets designated by the entity, when rst recorded, as measurable
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at air value through prot or loss. Derivatives are also classied as held or trading and
accordingly, are recorded in this category. The assets in this category held or trading are
classied as current assets. Gains or losses arising rom changes in the air value o nancial
assets recorded at air value through prot or loss are recorded in the statement o incomein the "nancial results" line item or the period in which they occur.
Loans and receivables
These comprise loans granted and receivables which are non-derivative nancial assets with
xed or determinable payments, not quoted in an active market. Loans and receivables are
included in current assets, except or those maturing more than 12 months ater the balance
sheet date (which are classied as non-current assets). The Company's loans and receivables
comprise trade accounts receivable and other accounts receivable. Loans and receivables
are recorded at amortized cost, based on the eective interest rate method.
Financial assets held to maturity
These are nancial assets quoted in an active market which are acquired with the intent and
nancial ability to be held in the portolio up to maturity. They are recorded at the acquisition
cost, plus related earnings with a contra-entry to income or the year, based on the eective
interest rate method.
Available-or-sale nancial assets
Available-or-sale nancial assets are non-derivatives which are classied in this categoryor not classied in any other. They are included in non-current assets, unless management
intends to sell the investment within 12 months subsequent to the balance sheet date.
Available-or-sale nancial assets are recorded at air value. Interest on available-or-sale
securities, calculated based on the eective interest rate method, is recognized in the
statement o income as interest income. The amount related to changes in air value is
recorded in shareholders' equity, in the carrying value adjustments account, and is realized
in net income when the asset is sold or becomes impaired.
Fair value
Fair values o investments with public quotations are based on current market prices. For
nancial assets without an active market or public quotation, the Company determines air
value through valuation techniques, such as option pricing models.
The Company evaluates, at the balance sheet date, i there is objective evidence that
a nancial asset or a group o nancial assets is overstated (impaired) in relation to its
recoverable value.
(ii) Derivatives Instruments and hedging activities
Derivatives are initially recognized at air value as o the date o the derivatives instrument
and, subsequently, measured at their air value, with changes in air value recorded in income,
except where a derivative is recorded as a cash fow hedge.
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While the Company trades in derivatives through exclusive investment unds or protection
purposes, it does not adopt hedge accounting.
d. Accounts receivable, other credits; allowance or doubtul accounts
Accounts receivable and other receivables are initially stated at present value, less the
allowance or doubtul accounts. Management adopts a policy o recording a ull provision
or doubtul debts on credits overdue or more than 60 days.
e. Prepaid expenses
Prepaid expenses mainly recognize amounts related to sotware maintenance contracts and
insurance premiums, which are amortized based on the terms o the contracts in orce.
. Investments
Investments in entities and subsidiaries are recorded and evaluated based on the equity
method o accounting, with the related income (or expense) recognized in income or the
year as operating income (or expense). The accounting practices o the subsidiaries are
consistent with the practices adopted by the Company.
Other investments are recorded at cost o acquisition or merger, less the provision or
adjustment to realizable value when the loss is considered permanent.
g. Intangible assets
An intangible asset is an identiable non-monetary asset without physical substance, such
as goodwill.
Goodwill
Goodwill or negative goodwill on the acquisition o an investment is calculated as the
dierence between the purchase amount and book value o the shareholders' equity o
the company acquired. Goodwill or negative goodwill is subdivided into two categories: (i)
market value adjustment, either upward or downward, o assets, comprising the dierencebetween the book value o the company acquired and the air value o assets and liabilities
and (ii) uture protability, comprising the dierence between the air value o assets and
liabilities and the purchase amount.
The portion corresponding to the market value adjustment o assets was allocated to the
corresponding acquired/merged assets. The upward market value adjustment is amortized
as the corresponding assets are realized over a period o up to 22 years.
The portion based on estimated uture protability is recorded in the intangible group
and until December 31, 2008, was amortized over a 10-year period, to the extent o andin proportion to the projected results on which it was based. The portion based on the
expectation o uture protability is no longer amortized as rom January 1, 2009.
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Sotware and projects
Sotware licenses acquired are capitalized and amortized over their estimated useul lie, at
the rates described in Note 9.
Costs o sotware development or maintenance are expensed as incurred. Expenditures
directly associated with identiable and unique sotware, controlled by the Company and
which will probably generate economic benets greater than the costs or more than one
year, are recognized as intangible assets. Direct expenditures include remuneration o the
sotware development team
Expenditures or development o sotware recognized as assets are amortized using the
straight-line method over their useul lives.
h. Property and equipment (xed assets)
Fixed assets are recorded at cost o acquisition or construction. Depreciation is calculated on
the straight-line method and takes into consideration the useul economic lie o the assets,
i. Contingent assets and liabilities, and legal obligations
The recognition, measurement, and disclosure o contingent assets and liabilities and legal
obligations comply with the criteria dened in CVM Resolution 489/2005
Contingentassets-Thesearenotrecorded,exceptwhenmanagementhasfullcontrolover their realization or when there are secured guarantees or avorable decisions
to which no urther appeals are applicable, such that the gain is almost certain.
Contingent assets with realization considered probable, where applicable, are only
disclosed in the nancial statements
Contingentliabilities-Thesearerecognizedbasedonanumberoffactorsincluding:
the opinion o legal advisors; the nature o the lawsuits; similarity to precedents;
the complexity o the proceedings; and prior court decisions. They are recognized
whenever the loss is evaluated as probable, since this would give rise to a probable
outfow o resources or the settlement o the obligations, and the sums involved are
measurable with sucient reliability. The contingent liabilities classied as possiblelosses are not recorded and are only disclosed in the notes to the nancial statements,
and those classied as remote are neither recognized nor disclosed.
LegalobligationsLegalobligationsresultfromtaxlawsuitsinwhichtheCompany
is discussing the validity or constitutionality o certain taxes and charges. These are
ully recognized in the nancial statements, regardless o the assessment o their
probability o success.
j. Judicial deposits
Judicial deposits are monetarily restated and presented in non-current assets.
k. Other assets and liabilities
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These are stated at their known and realizable/settlement amounts plus, where applicable,
related earnings and charges and monetary and/or exchange rate variations up to the
balance sheet date.
l. Impairment o assets
Property, plant and equipment and other non-current assets, including goodwill and
intangible assets, are reviewed annually to identiy evidence o unrecoverable losses, and
also whenever events or changes in the circumstances indicate that the book value may
not be recoverable. In this case, the recoverable value is calculated to veriy i there is any
loss. Loss is recognized at the amount by which the book value o the asset exceeds its
recoverable value, which is the higher o net sales price and the value in use or an asset.
For evaluation purposes, assets are grouped at the lowest level (smallest identiable group
o assets) or which there are separately identiable cash fows.
m. Leases
Leases o property and equipment in which the Company substantially assumes all ownership
risks and benets are classied as nancial leases. These nancial leases are recorded as a
nanced purchase, by recognizing at the beginning o the lease a property and equipment
item and a nancing liability (lease).
A lease in which a signicant portion o the ownership risks and benets remains with the
lessor is classied as an operating lease. Operating lease payments (net o all incentives
received rom the lessor) are charged directly to results
n. Provisions
Provisions are recognized when the Company has a legal or inormal present obligation as
a result o past events, a cash outfow to settle the obligation is probable and a reliable
estimate o the amount can be made.
o. Employee benets
(i) Pension obligations
The Company has no dened benet plans. The Company oers its employees a dened
contribution plan and pays contributions on contractual or voluntary bases. Once the
contributions have been made, the Company has no obligations related to additional
payments. The regular contributions comprise net periodic costs or the period in which
they are payable and, thereore, are included in the personnel costs. A
(ii) Share-based compensation (stock options)
The Company oers to its employees and executives share-based remuneration plans, to besettled in Company stock, according to which the Company receives services in consideration
or stock options. The air value o options granted related to services to be provided is
recognized as an expense during the period in which the right is obtained, i.e., the period
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during which specic vesting conditions must be met. On the date o the balance sheet,
the Company revises the estimated number o options which will vest and subsequently,
recognizes the impact o the change on initial estimates, i any, in the statement o income,
with a contra-entry to the capital reserve in shareholders' equity on a prospective basis.
p. Financing
Financing is initially recognized at air value, upon receipt o the unds, net o transaction
costs. Subsequently, the nancing is presented at amortized cost, that is, plus charges and
interest in proportion to the period incurred ("pro rata temporis").
q. Current and non-current assets and liabilities
The segregation between current and non-current assets/liabilities is based on a period o365 days as rom the base date o the nancial statements.
r. Foreign currency translation
Transactions in oreign currency are translated into Brazilian reais using exchange rates as
o the transaction dates. Balance sheet account balances are translated at the exchange rate
in eect on the balance sheet date. Foreign exchange gains and losses resulting rom the
settlement o these transactions and rom the translation o monetary assets and liabilities
denominated in oreign currency are recognized in results.
s. Taxes and contributions
BM&FBOVESPA is a or-prot business corporation, and its income is thus subject to certain
taxes and other contributions which are listed below.
Provisions or income tax, social contribution and other taxes are calculated at the rates set
orth below.
Incometax 15,00%
Additionalincometax 10,00%
CSLL(contributiononnetincome) 9,00%
PIS(socialparticipationprogramcontribution) 1,65%
Cons(socialsecuritynancingcontribution) 7,60%
Banco BM&F de Servios de Liquidao e Custdia S.A. calculates the contributions to PIS and
to COFINS at the rates o 0.65% and 4%, respectively, and CSLL at 15% rom May 1, 2008.
The subsidiaries Bolsa Brasileira de Mercadorias and BVRJ are not-or-prot entities and
calculate the contribution to PIS at the rate o 1% on payroll.
The subsidiaries Bolsa Brasileira de Mercadorias (Brazilian Commodities Exchange) andBolsa de Valores do Rio de Janeiro (Rio de Janeiro Stock Exchange), or BVRJ, are not-or-prot
entities and calculates PIS contributions at the rate o 1% over the payroll.
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t. Deerred income tax and social contribution
Deerred taxes are calculated on income tax and social contribution losses and the temporary
dierences between the tax calculation bases o assets and liabilities and the respectivebook values in the nancial statements. The currently dened tax rates o 25% or income
tax and 9% or social contribution are used to calculate deerred tax assets and liabilities
Deerred tax assets are recognized to the extent that it is probable sucient uture taxable
prot will be available to be oset by temporary dierences and/or tax losses, considering
projections o uture income prepared based on internal assumptions and uture economic
scenarios which may, accordingly, undergo change.
Deerred tax liabilities are recognized in relation to all taxable temporary dierences, that
is, dierences that will result in taxable amounts in determining taxable prot (tax loss) outure periods when the carrying amount o the asset or liability is recovered or settled.
u. Net Income per share
Net income per share is determined based on the number o outstanding shares at the date
o the nancial statements
1.3 With respect to internal controls used to ensure reliable nancial reporting,
Management is expected to discuss:
a) the degree o eciency o such controls, possible imperections and actionsadopted to correct them;
Internal Audit
Internal audit activities at BM&FBOVESPA are under responsibility o the internal audit
ocer, who runs the internal audit department. Internal audit activities perormed by the
department in the year to December 2009 comprised evaluations o the internal controls
o the Company pursuant to the internal audit plan approved by the audit committee, and
included internal audits o the nancial and accounting department; the IT general control
department; the market monitoring and management department, and the activities o thesettlement bank, or Banco BM&F.
The internal audit reports are presented to the audited departments, the chie executive
ocer and the audit committee. The internal audit ndings and evaluation results are
reviewed, discussed and action plans designed or improvement o internal controls.
In addition, the internal audit department monitors compliance with the policy and guidelines
on trading in securities by employees, as established in the Companys Code o Conduct,
addressing notices o violations to the code o conduct committee, where appropriate.
Inormation Security Policy
A new inormation security management model was adopted in 2009, which denes and
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implements new and improved controls. In addition, the inormation management security
department was entirely restructured pursuant to the ISO/IEC 27001 standard, the only
auditable international standard which denes the requirements or an Inormation Security
Management System (ISMS).
These measures permitted reconciling, integrating and uniying policies and procedures
previously adopted by Bovespa and BM&F, improved our internal controls, reduced risks
and the Companys exposure to potential loss, in addition to strengthening important
governance support mechanisms.
Improvements to Internal Controls
The improvements to internal controls planned or 2009 were part o an audit and action
plan designed to ensure ecient and reliable controls and procedures or nancial reportingacross the combined structure emerged rom the integration o the two ormer exchanges
as BM&FBOVESPA and its subsidiaries.
For this purpose, multiple initiatives were implemented with the aim o improving our
internal controls, which included revising nancial reporting procedures, mapping and
revising processes and the inormation fow, monitoring the rst stage o the ERP system
integration, and improving accounting support reports.
Going orward, we intend to implement in 2010 a coordinated ERP workfow model or all
purchases, hirings and payments; a new budget and management inormation system and
a costing by activity system; in addition to a unied chart o accounts or the BM&FBOVESPA
group and the ormation o a corporate risk department.
These planned initiatives, coupled with those that have been implemented previously, will
enhance our the quality o internal controls structure and nancial reporting procedures,
ensure the reliability o our internal processes, whereas giving us the ability to capture gains
rom eciency, and reinorce our dependability vis--vis customers and suppliers.
a) Deciencies and recommendations on internal controls included in the
independent auditors report.
Having received preliminary internal controls report prepared by our independent auditors,
and considered their ndings and recommendations, we discuss below those that we believe
to be their more meaningul recommendations:
Issue raised Recommendation:
The auditors nd that although BSM is awholly-owned subsidiary o BM&FBOVESPA, theinvestment in this company is recorded at theacquisition cost.
The Company should reconsider the consolidationprinciples pursuant to which it prepares nancialreports or compliance with the express requirementso Brazilian Corporate Law with regard to BSM.
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The auditors note that approximately 700meters separate the data center located at RuaXV de Novembro, in downtown So Paulo, and
the backup data center acility located at RuaFlorncio de Abreu, also downtown in So Paulo,which is not in keeping with best recommendedpractices and international standards, since thesepropose it is advisable or the recovery location tobe suciently aar to ensure the backup systemwill not be exposed to similar risks as the primarydata center in case a disaster were to disable theprimary location.
The Company should reconsider location o thecontingency data center to ensure the primary andbackup data centers are appropriately aar and oer
reasonable saety margin.
The auditors remark the ollowing regarding ourbusiness continuity and IT contingency plan:Absence o a business impact analysis, or BIA,dening recovery priority requirements regardingkey business processes.The business continuity and IT contingency planwas not released or publication.Absence o business continuity plans or the RM,TEM, SGR, CTB, EB and SRE systems.
The business continuity and IT contingency planshould be revised or improvements and the Companyshould consider the ollowing:(i) conducting business impact analysis under disasterand contingency scenarios;(ii) gradually raising complexity levels to test ormultiple and increasingly adverse disaster scenarios,assigning ever shorter recovery point objectives(RPO) and recovery time objectives (RTO), which oran eective response demand well trained and highlyintegrated teams, quite amiliar with the recoveryprocess and the procedures or specic crisis types;(iii) establishing a crisis management plan and processto continually improve the plan, the procedures andthe documentation related to damage assessment,recovery and validation; to manage and circulate the
plan and the updates, and to manage team training.
1.4 In the event an oering o securities has been carried out, Management should
discuss:
a) how the proceeds o the oering have been used;
b) whether any o the proceeds o the oering were materially diverted rom the
proposed allocation and use stated in the relevant oering documents;
c) i a diversion did occur, which were the reasons determining this event.
Not applicable.
1.5 Management is expected to discuss o-balance sheet arrangements, and
indicating:
a) O-balance sheet items (assets and liabilities directly or indirectly held by the
registrant), such as:
Collaterals or transactions
Transactions carried out in BM&FBOVESPA markets require customers to provide guarantees
in the orm o margin deposits, and consist mainly o cash, government bonds, private debt
securities, sureties and stocks, among other things. These collaterals are segregated and
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treated o-balance sheet, except or cash collaterals deposited as margin. For additional
inormation, see the discussion under item 10.9 below.
i) Operating lease arrange