Overview

Pursuant to CVM Rule # 358, of January 3, 2002, the CVM revised and consolidated the requirements regarding the disclosure and use of information related to material facts and acts of publicly held companies, including the disclosure of information in the trading and acquisition of securities issued by publicly held companies.

Such requirements include provisions that:

• establish the concept of a material fact that gives rise to reporting requirements. Material facts include decisions made by the controlling shareholders, resolutions of the general meeting of shareholders and of management of the Bank, or any other facts related to the Bank’s business (whether occurring within the Bank or otherwise somehow related thereto) that may influence the price of its publicly traded securities, or the decision of investors to trade such securities or to exercise any of such securities’ underlying rights;
• specify examples of facts that are considered to be material, which include, among others, the execution of shareholders’ agreements providing for the transfer of control, the entry or withdrawal of shareholders that maintain any managing, financial, technological or administrative function with or contribution to the Bank, and any corporate restructuring undertaken among related companies;
• oblige the officer of investor relations, controlling shareholders, other executive officers, members of its board of directors, members of the audit committee and other advisory boards to disclose material facts;
• require simultaneous disclosure of material facts to all markets in which the corporation’s securities are admitted for trading;
• require the acquirer of a controlling stake in a corporation to publish material facts, including its intentions as to whether or not to de-list the corporation’s shares, within one year;
• establish rules regarding disclosure requirements in the acquisition and disposal of a material stockholding stake; and
• restrict the use of insider information.

BM&FBovespa has three differentiated levels of corporate governance: Level 1, Level 2 and Novo Mercado. These levels differ from each other by their requirements. The Bank signed a Level 2 Listing Agreement, reinforcing its commitment to the good practices of corporate governance. Level 2 is a listing segment in BM&FBovespa destined to trading of shares issued by companies which voluntarily commit to adopt differentiated corporate governance practices and disclose additional information than already required by current legislation.

In addition to joining BM&FBovespa’s Level 2 segment, and among corporate governance practices recommended by IBGC in its Code of Best Practice of Corporate Governance, Banco ABC Brasil has adopted the following:

• Apart from the rights laid down by the Brazilian Corporate Law, the Shareholders Meeting may decide on: (i) the election or removal of the members of the Board of Directors at any time; (ii) fixing the total remuneration of the Board of Directors and Executive Board, as well as the Fiscal Council, if installed; (iii) the amendment to the Bank’s Bylaws; (iv) transformation, amalgamation, spin-off, merger, dissolution and liquidation of the Bank; (v) the proposal presented by the management regarding the year’s profit allocation and dividend payment; (vi) the discontinuation of BM&FBovespa’s Level 2 practices; (vii) delisting of the publicly-held company from the CVM, except as provided in the Bylaws of Banco ABC Brasil; and (viii) any matter submitted for approval of the Board of Directors;
• maintenance and disclosure of the register containing the number of shares each member has, identified by their names;

• if the stock option plan results in the transfer of the shareholding control, the offer is mandatory to all shareholders and not just to the majority shareholder. All shareholders should have the option to sell their shares under the same conditions and the transfer of control should be done in a transparent manner;
• hiring of independent audit firm to analyze the balance sheet and financial statements;
• provision in the bylaws for the installation a Fiscal Council;
• choice of venue for the Shareholders Meeting in order to facilitate the attendance of all members or representatives;
• clear definition in the Bylaws (i) the method of summons for the Shareholder Meeting, and (ii) the method of election and term of office of the members of the Board of Directors and Executive Board;
• non-election of alternate members;
• free access to information and facilities of the Bank for the Board of Directors; and
• resolution of conflicts the Bank may have with its shareholders, managers and Fiscal Council members, through arbitration.

Investors residing outside Brazil, including institutional investors, are authorized to purchase equity instruments, including Banco ABC Brasil’s preferred shares, on BM&FBovespa provided that they comply with the registration requirements set forth in Resolution No. 2,689 of the National Monetary Council, which the Bank refers to as Resolution 2,689, and CVM Instruction No. 325.

With certain limited exceptions, under Resolution 2,689 investors are permitted to carry out any type of transaction in the Brazilian financial capital market involving a security traded on a stock exchange, futures exchange or organized over-the-counter market. Investments and remittances outside Brazil of gains, dividends, profits or other payments under Banco ABC Brasil’s preferred shares are made through the new unified exchange rate market.

In order to become a Resolution 2,689 investor, an investor residing outside Brazil must:

• appoint a representative in Brazil with powers to take actions relating to the investment;
• appoint an authorized custodian in Brazil for the investments, which must be a financial institution duly authorized by the Central Bank and CVM; and
• through its representative, register itself as a foreign investor with the CVM and the investment with the Central Bank.

Securities and other financial assets held by foreign investors pursuant to Resolution 2,689 must be registered or maintained in deposit accounts or in the custody of an entity duly licensed by the Central Bank or the CVM. In addition, securities trading by foreign investors is generally restricted to transactions involving securities listed on the Brazilian stock exchanges or traded in organized over-the-counter markets licensed by the CVM.

The Brazilian securities markets are regulated by the CVM, which has regulatory authority over the stock exchanges and securities markets, by the National Monetary Council and by the Central Bank, which has, among other powers, licensing authority over brokerage firms and regulates foreign investment and foreign exchange transactions. The Brazilian securities markets are governed by the principal law governing the Brazilian securities markets, by the Brazilian Corporate Law, and by regulations issued by the CVM, the CMN and the Central Bank. These laws and regulations provide for, among other things, disclosure requirements, restrictions on insider trading and price manipulation and protection of minority shareholders. However, the Brazilian securities markets are not as highly regulated and supervised as U.S. securities markets.

Under the Brazilian Corporate Law, a company is either publicly held and listed, a “companhia aberta”, or privately held and unlisted, a “companhia fechada”. All listed companies are registered with the CVM and are subject to reporting and regulatory requirements. To be listed on the BM&FBovespa, a company must apply for registration with the BM&FBovespa and the CVM and is subject to regulatory requirements and information publishing requirements.

A company registered with the CVM may trade its securities either on the Brazilian exchange markets, including the BM&FBovespa, or in the Brazilian over-the-counter market. Shares of companies listed on the BM&FBovespa may not simultaneously trade on the Brazilian over-the-counter market. The shares of a listed company may also be traded privately, subject to several limitations.

The Brazilian over-the-counter market, whether or not organized, consists of trades between investors through a financial institution registered with the CVM, and authorized to trade in the Brazilian capital market. No special application, other than registration with the CVM, is necessary for securities of a public company to be traded in the non-organized over-the-counter market. The CVM must receive notice of all trades carried out in the Brazilian over-the-counter market by the respective intermediaries.

The trading of securities on the BM&FBovespa may be suspended at the request of a company in anticipation of a material announcement. Trading may also be suspended on the initiative of the BM&FBovespa or the CVM, among other reasons, based on or due to a belief that a company has provided inadequate information regarding a significant event or has provided inadequate responses to inquiries by the CVM or the BM&FBovespa.

The shares of Banco ABC Brasil guarantee to their holders the rights, advantages and restrictions of the Brazilian Corporate Law, Level 2 Regulations and its Bylaws, of which:

(a) restricted voting right at the Bank’s Shareholders Meetings where each preferred share will have the right to one vote in the following matters: (i) transformation, merger, amalgamation or split of the Bank; (ii) based on authorization from the Brazilian Central Bank, approval of contracts between the Bank the Majority Shareholder, directly or through third parties, as well as with other companies in which the Majority Shareholder holds interest, after being discussed at the shareholders meeting, as required by legal or statutory provisions; (iii) appraisal of the assets destined for funding the Bank’s capital increase; (iv) selection of a specialist company to determine the Bank’s economic value, for the purposes mentioned in item (c) below; (v) amendment of the Bank’s Bylaws, except in cases arising from legal and regulatory provisions; and (vi) alteration or annulment of the statutory provisions that alter or modify (1) any of the rights attributed to the shares of Banco ABC Brasil specified in this item (a) and in items (b) and (c) below; (2) a unified mandate of 2 years for the members of the Board of Directors and other requirements laid down by Level 2 Regulations regarding the functioning of the Board of Directors; and (3) the Bank´s commitment to adopt arbitration, following the Arbitration Regulation, to settle the disputes concerning its relationship with the Bank’s Managers and shareholders;

(b) the right to be included in the public share offer under the same conditions and price paid per common share of the controlling block, at the time of divestiture of control in the Bank (“Tag Along”), pursuant to the sole paragraph article 27 of the Bank’s Bylaws;

(c) the right to be included in the public share offer where the minimum price to be offered must correspond to the Bank´s market value as determined by the appraisal report, under the terms established in the Bank´s Bylaws and applicable legislation, arising from (i) the discontinuation of the differentiated practices of Level 2 corporate governance, (ii) a shareholding restructuring process in which the resulting company is not admitted to Level 2, (iii) the exclusion or limitation, except in accordance with the legal provision or regulation of the São Paulo Stock Exchange (BM&FBovespa), provisions of the Bank´s Bylaws dealing with the following: (1) holding of a public acquisition offer arising from divestiture of control, (2) at least 20% of the Board of Directors of the Bank must be Independent Members, (3) adherence to the Arbitration Regulation, and (4) other hypotheses in which a public share offer must be carried out, and its terms and conditions;

(d) the right to a share of the dividends under the same conditions as common shares;

(e) the right of priority in the reimbursement of capital stock, without premium, in the case of liquidation of the Bank; and

(f) the right to full receipt of dividends and other earnings of any kind that may be declared, under the same conditions as common shares.