COSRA MeetingCOSRA Meeting

CartagenaCartagena

Capital Markets for SMEs Capital Markets for SMEs and Corporate Governanceand Corporate Governance

Novo Mercado and BOVESPA Novo Mercado and BOVESPA MAISMAIS

Maria Helena SantanaMaria Helena Santana

BOVESPA – Brazil’s Stock BOVESPA – Brazil’s Stock

ExchangeExchange

9/1/059/1/05

2

AgendaAgenda

Facts about BOVESPA

Background: The Brazilian Market Before

the Novo Mercado

Strategy

Results

A Step Further: BOVESPA MAIS

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BOVESPA – Brazil’s Stock ExchangeBOVESPA – Brazil’s Stock Exchange

Since 2000, Brazil’s only liquidity center for equity trading

Specialized trading systems for equities and corporate bonds

Direct Market Access facilities (16% of the trades)

383 listed companies (Jul/05)

US$ 372 billion market capitalization

Daily average trading value: US$ 594 million

68% of the trading in Latin American exchanges

2nd market in the world for equity options (number of contracts)

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BackgroundBackground

BOVESPA’s Mission

Providing liquidity to listed shares

Offering an alternative source of financing

to the Brazilian companies (the

overwhelming majority of them are Small

or Medium Enterprises - SMEs)

Brazilian market reality was very different

Primary market totally stagnated

5

Primary Market ActivityPrimary Market Activity

2

0

1

0

1 1

0

1

0

1995 1996 1997 1998 1999 2000 2001 2002 2003

# of IPOS

6

BackgroundBackground

Performing this mission depended on

reactivating the primary market

And reaching SMEs involved further pre-

requisites

Investors: only QIBs, largely international

Low interest in smaller deals

No individual investors

Smaller intermediaries not engaged in

underwriting operations

Large investment banks do not perform

deals below US$ 100 million

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BOVESPA’s StrategyBOVESPA’s Strategy

Broaden the investor base and the

exchange’s institutional role

Market Popularization Campaign:

“BOVESPA where you are”

Raise awareness on stock market by

Congress, the judicial branch and

government bodies

Improve the ‘quality of the product’:

investor protection, disclosure /

transparency and better corporate

governance

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The Novo Mercado and CG LevelsThe Novo Mercado and CG Levels

Private sector initiative based on and

enforced through a contract with

BOVESPA

Joining is voluntary and market driven

Companies committed to the highest

standards of corporate governance

Set of rules over and above the

Corporations Law, reflecting market

demands and requirements

What was the outcome?What was the outcome?

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Primary Market ActivityPrimary Market Activity

# of IPOS

2

01

01 1

01

0

7 7

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

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Share offerings Share offerings (2004/2005)(2004/2005)

* IPO

Year CompanyVolume of the Public Offering (US$ million)

SpecialListing

Segment

# ofInvestors

Natura* 243 Novo Mercado 4,445Gol* 283 Nível 2 11,397ALL* 189 Nível 2 3,425CPFL Energia* 287 Novo Mercado 2,750Grendene* 216 Novo Mercado 7,905DASA* 158 Novo Mercado 2,892Porto Seguro* 136 Novo Mercado 5,919Renar Maçãs* 6 Novo Mercado 1,698Submarino* 176 Novo Mercado 4,022ALL 235 Nível 2 1,513Gol 235 Nível 2 1,213Localiza* 108 Novo Mercado 2,397TAM* 225 Nível 2 809Lojas Renner* 378 Novo Mercado 1,212Energias do Brasil* 334 Novo Mercado 114

OHL*1 184 Novo Mercado 468TOTAL 3,393

2005

2004

(1) Preliminary data

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A Market for IPOsA Market for IPOsThe success of the Novo MercadoThe success of the Novo Mercado

Better corporate governance contributed

to broaden investor interest

Increased confidence, specially from

foreign investors

More favorable pricing, stimulated new

IPOs

Offers occurred at multiples much

higher than the market average

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A Market for IPOsA Market for IPOsThe success of the Novo MercadoThe success of the Novo Mercado

Better corporate governance contributed to reduce resistance to secondary offerings

Made the exit through a stock exchange listing feasible, even in IPOs Important for recycling private

equity/venture capital portfolios

These players tend to “prepare” and “direct” companies to the access market

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A Step FurtherA Step Further

Creating an alternative for a greater

number of companies, especially SMEs

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Companies committed to CG

requirements

BOVESPA programs to support companies

Greater flexibility in trading

Investors with medium-term

horizons

BOVESPA MAISBOVESPA MAISPillarsPillars

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BOVESPA MAISBOVESPA MAISAn OverviewAn Overview

New listing segment of the organized OTC

market managed by BOVESPA Public companies registered with CVM and

BOVESPA

Signature of a contract with BOVESPA Compliance with listing rules

Mandatory use of arbitration for shareholder/company disputes

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Investor rights (one share one vote; tag

along rights)

Disclosure (cash flow statements; insider

trades; related party transactions; annual

corporate events schedule)

6 month lock-up period after IPO

Ongoing requirements in terms of: Minimum free float (7th year on)

Financial-Economic Performance (minimum

soundness)

BOVESPA MAISBOVESPA MAISListing rulesListing rules

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Electronic trading through the same

platform of the BOVESPA’s main board

Trading rules adapted to liquidity levels: Calls (electronic auctions) at set times during

the trading session and a closing call

Number of calls can increase in accordance

with rise in liquidity

Continuous trading for shares with high

liquidity or employing market makers

BOVESPA MAISBOVESPA MAISFlexible tradingFlexible trading

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Program to Enhance Company Exposure on Market

Fostering regular coverage by analysts and investors in order to improve demand for shares

Professional Training Program Building the internal culture of a public

company Discounts on annual listing fees paid to

BOVESPA 100% in 1st year, with a gradual reduction

through the 4th year after listing

BOVESPA MAISBOVESPA MAISSupport to Listed CompaniesSupport to Listed Companies

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Our perception onOur perception onHow to develop the access How to develop the access marketmarket It is first necessary to activate the main

market

Without investors there is no market

mechanism that will work Larger companies attract more attention from

investors

Divulge success stories and inspiring examples

Strengthen the intermediation industry

Today, there are much better conditions for

the success of the access market for SMEs in

Brazil

BOVESPA is now working to make it happen!

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THANK YOU!THANK YOU!

Maria Helena Santana

Listings and Issuer Relations Executive

Officer

Phone: 55 11 3233-2150

www.bovespa.com.br

e.mail: msantana@bovespa.com.br