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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 Pereira Brazilian National Treasury Investors Relations History, Description and Players’ Activities Current Status L A C D E B T G R O U P International Experience

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BRASÍ LIA

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


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


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


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


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


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


How to buy bonds?

  • Directly at the web site

  • Through the Custodian responsible for the investor

    • The Custodian buys bonds on the investor’s 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


How to buy bonds?

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

8


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


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


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


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


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


Account Details

Clicking on a Bond shows its details and transaction characteristics

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


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


Custodian Ranking by Fee

August - 2008

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


Custodian Ranking by Fee

August - 2008

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


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


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, it’s also charged on the coupon payday)

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

19


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


Registered Investors

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


Monthly Value Negotiated (R$)

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


Number of Sales by Range of Investment

Annual Balance - 2007

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


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


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


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


Some international experiences

  • Portugal

  • Sweden

  • United Kingdom

  • United States

  • Plus 19 countries

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


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


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


Agenda

  • Costs:

    • Development of studies for cost reduction

    • Disclosure of charged fees of all custodians. Today, it’s voluntary

  • Improving the system:

    • Changing the investor’s 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


Contact

Investor Relations Office brazildebt@fazenda.gov.br

phone: +55 (61) 3412-3188

Or

Fabio Guelfi Pereira – IRO

fabio.g.pereira@fazenda.gov.br

http://www.tesouro.fazenda.gov.br/english/index.asp

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