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Gilberto Mifano CEO June/ 2006

The 2006 meeting of the LATIN AMERICAN CORPORATE GOVERNANCE ROUNDTABLE. BOVESPA´s Initiatives to Better Promote Corporate Governance. Gilberto Mifano CEO June/ 2006. Novo Mercado.

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Gilberto Mifano CEO June/ 2006

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  1. The 2006 meeting of the LATIN AMERICAN CORPORATE GOVERNANCE ROUNDTABLE BOVESPA´s Initiatives to Better Promote Corporate Governance Gilberto Mifano CEO June/ 2006

  2. Novo Mercado • Special listing segment with additional Corporate Governance requirements, beyond those established in current Brazilian regulation • Transparency: more information is required • Broadening the rights of minority shareholders • Voluntary decision based on a contract between the company, its controlling shareholders, board of directors, senior executives and BOVESPA • Agreement to comply with Novo Mercado Listing Rules • Agreement to settle any shareholder disputes by arbitration - Câmara de Arbitragem do Mercado

  3. Evaluation • Goal • To create a favorable environment for public offerings, mainly IPOs, revitalizing the Brazilian Capital Market • Results • Revival of IPOs • Increasing investors’ confidence and interest, especially foreign investors’ • Higher multiples stimulating more IPOs • Less resistance to secondary offerings • Good acceptance of smaller companies offerings

  4. Revival of IPOs

  5. IPOs since 2004 • Preliminary data

  6. Novo Mercado´s Consolidation5 years after launching 78 65 47 36 29 18 20% of total listed companies 49% of total market capitalization 55% of total daily trading value Number of companies

  7. What is next?Maintain the image value and thestrengthening of NM • Environment – ongoing changes: • Regulation evolution • Domestic and International markets evolution • Companies evolution • Investors’ growing demand for better Corporate Governance • Update and modernization of Novo Mercado rules in order to maintain its attractiveness and effectiveness

  8. Special Segments Rules´ Revision • Effective since February/2006 • Approved by companies listed in Levels 1, 2 and Novo Mercado after hearing among all companies listed on each level (NM, Level 2 and 1) • The new companies which were up to adhere to Novo Mercado and the Special Levels considered the changes very positive • Understanding and wish to distinguish the adhesion decision

  9. Revision due to Evolution of the Brazilian Regulation • Standardization of some definitions with the CVM’s • Terms of the public offers in case of delisting, NM or N2 delisting or disposal of control • Increasing the tag along value for preferred shares (Level 2) from70% to 80% • Arbitration: improvements in the writing style and higher disclosure about the arbitration adhesion

  10. Revision due to the Evolution of the Capital Market • Inclusion of “Dispersed ownership” definition • Recognizing the new reality emerging in Brazil • Increasing importance of Independent Board Members • At least 20% of the Board must be composed of independents members (not linked to the company or to the controlling shareholders) • Unified term of office from 1 to 2 years

  11. What is next?Listed companies migration • In 2005/2006: adhesion of 11 listed companies • The structural barriers for listed companies are bigger than those for the companies that are going public • Main leverages: • Investors • Initiatives like Companies Circle

  12. What is next?Increase the number of companies going public • BOVESPA MAIS • New corporate governance listing segment • Natural path to Novo Mercado • For companies that want to access the market gradually, with more concentrated or smaller offerings, particularly small and medium enterprises • Basically aimed at medium term investors • Segment counts on BOVESPA’s programs to support companies in terms of their market exposure and in building the internal culture of public company • Launching yet to be defined – prospecting phase and preparation of companies to be listed on this segment

  13. Thank you! Gilberto Mifano BOVESPA - Bolsa de Valores de São Paulo www.bovespa.com.br bovespa@bovespa.com.br

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