COSRA Meeting Cartagena Capital Markets for SMEs and Corporate Governance Novo Mercado and BOVESPA MAIS Maria Helena Santana BOVESPA – Brazil’s Stock Exchange 9/1/05

2Agenda  Facts about BOVESPA  Background: The Brazilian Market Before the Novo Mercado  Strategy  Results  A Step Further: BOVESPA MAIS

3 BOVESPA – 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)

4Background  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 Activity # of IPOS

6Background  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

7 BOVESPA’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

8 The 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?

10 Primary Market Activity

11 Share offerings (2004/2005) * IPO (1) Preliminary data

12 A Market for IPOs The 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

13 A Market for IPOs The 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

14 A Step Further  Creating an alternative for a greater number of companies, especially SMEs

15 Companies committed to CG requirements BOVESPA programs to support companies Greater flexibility in trading Investors with medium-term horizons BOVESPA MAIS Pillars

16 BOVESPA MAIS An 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

17  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 MAIS Listing rules

18  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 MAIS Flexible trading

19  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 MAIS Support to Listed Companies

20 Our perception on How to develop the access market  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!

21 THANK YOU! Maria Helena Santana Listings and Issuer Relations Executive Officer Phone: e.mail: