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

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

3Evaluation  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 Consolidation 5 years after launching % 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 the strengthening 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) from 70% 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