Annual and Extraordinary Shareholders' Meeting - 04.20.2010 - Management Proposal

7/30/2019 Annual and Extraordinary Shareholders' Meeting - 04.20.2010 - Management Proposal

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So Paulo, March 19, 2010.

We, the Board o Directors o BM&FBOVESPA S.A. Bolsa de Valores, Mercadorias e Futuroshereby submit to Shareholders convening in annual and extraordinary meetings on April

20, 2010, the Management Proposal set orth below.

I AT THE ANNUAL SHAREHOLDERS MEETING

1. Financial statements as o and or the year ended December 31, 2009.

The Management Report, the Financial Statements prepared under Management

responsibility as o and or the year ended December 31, 2009, and the independent auditors

report, which have been published on February 24, 2010 in the Valor Econmico newspaper and

in the Ocial Gazette o the State o So Paulo, were approved by us at a board meeting held

on February 23, 2010.

Attached to this proposal as Attachment I, you will nd Managements discussion and

analysis o nancial condition and results o operations, which was prepared similarly to

the management report, but including additional discussion on nancial inormation, as

required under section 10 o the Reerence Form adopted pursuant to CVM Instruction

No. 480 dated December 7, 2009 (CVM Instruction 480), issued by the Brazilian Securities

Commission (Comisso de Valores Mobilirios), or CVM.

2. Proposal on the allocation o net income or the year to December 31, 2009.

At a meeting held on February 23, 2010, we approved and put orward a proposal regarding

the ollowing allocations o net income or the year to December 2009, which totaled

R$881,050,370.16:

(a) R$20,859,264.91 to oset losses related to sales o treasury stock;

(b) R$155,191,105.25 to the bylaws reserve or investments and the special saeguard unds

and clearing and settlement mechanisms adopted by the Company;

(c) R$705,000,000.00 to the dividend account. A breakdown o this R$705,000.000.00

allocation is set out as ollows: the amount o R$183,500,000.00 corresponds to

interim dividends distributed in the course o 2009; R$273,500,000.00 is the amount

previously distributed by way o interest on shareholders equity; and the balance

o R$248,000,000.00 we propose to distribute as dividends. This is the proposal

Management is submitting to the annual meeting, which also sets May 14, 2010, as the

dividend payment date. As estimated by Management, the proposal will correspond

to a distribution o R$0.12360196 per share (which amount may change as a result o

treasury stock being reissued or ulllment o stock options exercised pursuant to the

Companys stock option plan).

The proposed dividend payment date is May 14, 2010. The book closure date that will

determine the ownership structure pursuant to which holders o record will be entitled to

dividends is April 30, 2010.


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Set orth in Attachment II to this proposal is the inormation on net income allocations

required under Annex 9-1-II o CVM Instruction 481 dated December 17, 2009.

3. Proposal on Aggregate Compensation or the Board and Management.

At our February 23 meeting, we approved and put orward a compensation proposal or

the Company to pay to members o the board o directors an aggregate annual amount up

to R$ 4.074.538,92 and to members o the board o executive ocers an aggregate annual

amount up to R$ 15.307.807,26.

Set orth in the table below is the nancial data related to the compensation proposal:

Compensation Proposal or 2010(in thousands o R$)

Directorsand/

executive ocers

Fixed remu-neration

Short-term variableremuneration (maxi-

mum amount)Benets TOTAL

Board members 4,074 4,074

Board o executive ocers 4,420 10,154 734 15,308

TOTAL 8,494 10,154 734 19,382

Fixed remuneration and benets.The xed remuneration is paid in 13 installments, adjusted on a yearly basis as required

under the collective bargaining agreement. Benets represent the aggregate o the amounts

attributable to health and dental care plan, lie insurance, meal vouchers, car, and pension

und.

Short-term variable remuneration.

The key perormance indicator the board elected as the 2010 target perormance will be

the adjusted net income, as determined on a quarterly basis. The aggregate amount o the

2010 short-term variable remuneration payable to executive ocers and employees o the

Company will represent 3.5% o adjusted net income actually ascertained, i the amount

thus ascertained is within the range o 70% to 130% o the target.

I adjusted net income actually ascertained alls under 70% o the target, the short-term

variable remuneration will be reduced to 2.0% o adjusted net income.

However, i adjusted net income actually ascertained exceeds 130% o the target, the

aggregate o the short-term variable remuneration will equal the sum o: (i) the amount that

corresponds to 3.5% computed over 130% o the target, and (ii) the amount that corresponds

to 2.0% computed over that portion o adjusted net income which exceeds 130% o the

target. A portion o this aggregate amount will be attributable to the executive ocers,

as allocated pursuant to certain base salary multiples that will dier based on individualperormance.

The aggregate compensation amount submitted to annual meeting, as set orth in the above


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table, assumes that quarterly adjusted net income is 10% above the elected target. In case

adjusted net income ascertained at year-end exceeds this 10% threshold, it is conceivable

the remuneration payable to executive ocers pursuant to the compensation policy set

orth herein could exceed the aggregate remuneration proposed or approval at the annualmeeting, in which event the excess amount will require conrmation rom shareholders

attending the 2011 annual meeting.

Set orth in Attachment III to this guide is inormation on board and management

compensation which CVM Instruction 480 requires to be provided under section 13 o the

Reerence Form.

II AT THE EXTRAORDINARY SHAREHOLDERS MEETING

1. Proposal on Acquisition o Shares issued by the CME Group Inc.

Furthermore, at the February 23 meeting, pursuant to article 16.(j) o the Company Bylaws,

we decided to call the extraordinary shareholders meeting to vote on BM&FBOVESPAs

proposed acquisition o shares issued by the CME Group, Inc. (CME), such that the 1.8%

ownership interest it currently owns in CME shares would increase to about 5%.

The investment to acquire stock in CME is approximately US$620 million, which added by

the market value attributable to existing shares as o the date o the notice o material act

would equate to total market value o US$1 billion. In addition, lock-up restrictions would

apply to the additional shares through to February 26, 2012, which is the same lockup period

originally applicable to the parties cross holdings.

Shareholders are called to vote to approve the proposed acquisition and investment, and

authorize BM&FBOVESPAs management to proceed with the negotiations and execute

denitive agreements with CME, in keeping with the general terms and conditions set orth

in the notice o material act.

We remain at your disposal or any additional clarication you may require.

Yours sincerely,

Carlos Kawall Leal Ferreira

Chie Financial and Investor Relations Ocer


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Managements discussion and analysis o nancial condition and results

o operations, required under Section 10 o the Reerence Form un-

der CVM Instruction No. 480 dated December 7, 2009

10. Managements discussion and analysis

11. Management should discuss the ollowing with regard to the nancial

statements:

a) the nancial condition and net equity position;

The year 2009 dawned in anxiety, amid the uncertainties o a distressed economic

environment, bleak projections or the global economic uture, which redoubled at every

turn o events, and with every news headline or market development. This was the economic

outlook that emerged rom the subprime mortgage crisis started in the United States in

2007 to turn into the worst global nancial crisis since the Great Depression in the 1930s.

In the years beore the crisis, in the olly o the housing derivatives eeding renzy, lending

behavior changed, credit policies became ever more liberal, securitization ubiquitous,

players operated in highly-leveraged mode, regulation was lax or lacking, and there was too

little transparency in over-the-counter transactions. As a result, the scenario that emerged

early in 2009 ater the crisis peaked was one o severe credit crunch, pointing to general

deleveraging, amidst a lively debate over the need or more stringent and ecient regulation

or the nancial and capital markets, strong contraction in the prices o commodities and

nancial assets, and governments across the board moving towards quantitative easing.

This combination o actors directly impacted perormance in markets BM&FBOVESPA

operates. In the equities market (Bovespa segment), volumes tumbled due mainly to the

alling prices o stocks prompted by bearish sentiments and risk aversion, whereas in the

derivatives market (BM&F segment), hedging activities sank due mainly to the credit crunch,

which coupled with general risk aversion and deleveraging signicantly depressed volumes.This low-volume scenario prevailed or most o the rst hal o 2009.

However, despite the doom-and-gloom acing world economies, Brazil dierently rom

developments in previous crises reacted positively and was one o the ew countries to

emerge relatively unscathed rom the crisis. While the level o economic activity did decrease,

the country was less aected by the downturn than most other countries, fow o oreign

investment increased in strides in the second hal o the year, pushing strong appreciation

in the Brazilian real against the U.S. dollar.

In the latter hal o the year, an improved landscape and brighter prospects or the domesticeconomy positively impacted the equities markets. The Bovespa Index soared in the highest

rise on record, the biggest gainer among securities markets across the world. The IPO market

rebounded and boomed as the worlds most active ater China, closing 2009 as our second


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best year on record in total proceeds, making Brazil the 4th best perorming country in terms

o proceeds rom IPOs, and 7th by overall oering proceeds, in addition to having hosted the

countrys largest IPO ever, conducted by Banco Santander Brasil. These movements were

topped by a surging stock market, which in the ourth quarter reached the highest everaverage daily trading volume.

Meanwhile, in the BM&F segment the market move towards deleveraging continued to

aect volumes traded negatively including in the second hal o 2009. Key indicators that

directly aect our overall perormance include the ollowing:

lThe target interest rate, or Selic Meta, dened by the Brazilian Monetary Policy

Committee (Comit de Poltica Monetria), or Copom, ell to 8.75% in December

2009 rom 13.75% at start-o-year, evidencing the expansionist monetary policy the

Brazilian government has adopted;lThe exchange rate or the Brazilian real against the U.S. dollar (per the PTAX selling

rate compiled by the Central Bank) closed the year at R$1.7412, down 25.5% in the

year rom a March 3 peak o R$2.4218, but up rom November 9 when it reached its

lowest at R$1.7024;

lAvailability o domestic credit grew, with the credit-to-GDP ratio going up to 45.0% in

December rom 40.0% in January 2009; and

lThe market prices or some o the most actively traded commodities produced in

Brazil and exported by the country, such as oil, pulp and soybean, rebounded.

However, while these improvements in the economic landscape and the outlook or the local

market positively impacted our perormance and results o operations or the second hal o theyear, they were insucient to prevent 2009 revenues rom alling on a year-over-year basis.

Another actor infuencing perormance in our markets was the creation o two new types

o taxes on nancial transactions (IOF). On October 20, 2009, with the stated objective o

arresting the appreciation o the Brazilian real, the government adopted a 2.0% tax on

money infows or portolio investments (stocks, xed-income securities and derivatives)

in domestic capital markets Then, because the actual impact o the tax (IOF) would have

been to divert trading away rom the local markets, draining precious onshore liquidity, on

November 19 the Brazilian government announced a 1.5% IOF tax on issuances o American

Depositary Receipts (ADRs), admittedly in a move to eliminate the competitive disadvantageit had created with the IOF tax on money infows, or it increased the cost o raising capital in

the Brazilian market. These two measures negatively impacted our markets, in particular the

equities markets, both because o the increased cost oreign investors now incur to invest

in the local market and as a result o uncertainty about additional measures the Brazilian

government could take.

These two government measures impacted the fow o oreign capital to our markets and

negatively aected trading activities particularly in the Bovespa segment, as they increased

the cost o trading in local markets, in addition to having added to the equation an element

o uncertainty about other measures the government may take in the uture.

Finally, dierently rom the economic outlook at the end o 2008, this time there are good

prospects or Brazilian economy to resume the growth trend, whereas there are encouraging

signs recovery is on course in most economies. I the positive projections do materialize, this


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will positively impact our results o operations. In addition, while 2010 should continue see the

roaring debate evolve around re-regulating the international nancial and capital markets, which

was so pervasive last the year, in Brazil substantive regulation already is in place, more or less in

keeping with the models in debate, including in the orm o regulation by BM&FBOVESPA, whichencourages and preers transactions in exchange-traded assets to over-the-counter trades.

b) the capital structure and likelihood o a redemption o shares or quotas,

including:

levents o redemption;

l reimbursement value calculation method.

Other than as legally provided, the Company is not contemplating any share redemption,

nor any event that would trigger redemption rights.

c) the Companys capacity to service its debt;

Our nancial income or the year to December 2009 reached R$253,862 thousand and breaks

down as ollows: interest income R$289,686 thousand, down 20.6% year-on-year, mainly

due to decline in the benchmark interest rate paid to nancial investments; and R$35,824

thousand in nancial expenses, which were 39.2% down rom a year ago.

EBITDA was R$975,108 thousand, representing a 6.7% rise rom R$913,493 thousand in the

previous year, whereas EBITDA margin rose to 64.9% rom 57.0% previously.

Net income or the year amounted to R$881,050 thousand, 36.5% up year-on-year, primarily

due to the reduction in expenses. Our year-end consolidated balance sheet registered total

assets o R$21,201,183 thousand, where 15.3% or R$3,236,211 thousand represent cash and

cash equivalents and nancial investments.

As a percentage, non-current assets o R$18,422,215 thousand accounted or 86.9% o

total assets, under which the main account is intangible assets o R$16,117,930 thousand,

ollowed by investments totaling R$1,319,439 thousand.

As a percentage o total liabilities, current liabilities o R$1,162,075 thousand accounted or 5.5%and correlates mainly with cash collaterals received rom customers in the amount o R$810,317

thousand, and liabilities under repurchase agreements on the order o R$144,513 thousand.

Non-current liabilities o R$313,002 thousand accounted or 1.5% o total liabilities, primarily

made up o deerred income tax and social contribution amounting to R$261,060 thousand,

which correlate with the provision on temporary dierences rom tax amortization o

goodwill in the year.

Shareholders equity as o December 31, 2009, totaled R$19,709,749 thousand, composed

by capital stock o R$2,540,239 thousand (12.9%), capital reserve o R$16,666,489 thousand

(84.6%), revaluation reserves o R$23,551 thousand (0.1%), statutory reserves o R$706,119thousand (3.6%), legal reserve o R$3,453 thousand (0.02%) and in addition, by treasury

stock resulting rom the share buyback program and recorded in a contra-equity account at

R$230,102 thousand.


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We should note that our policy calls or low risk investment o cash balances, earning relatively

low interest rates, which correlates with a substantial volume o government bonds in our

portolio, oten bought through investment unds. We typically direct our nancial investments

to more conservative investment unds, whose assets are invested in diversied bond portolioswhose perormance benchmark ollows the interbank deposit rate or the Selic rate.

Given the above, refecting our consolidated short- and long-term liabilities, our low

indebtedness, and liquidity and cash positions, we understand our Company is ully capable

o paying the service o out short- and long-term indebtedness.

lthe sources o nancing or working capital and capital expenditures (non-current

assets);

lthe sources o nancing or working capital and capital expenditures (non-current

assets), which the Company plans to use to cover liquidity deciencies;

We primarily nance our working capital and investments in non-current assets rom our

operating cash fow.

In addition, we have entered into certain leasing agreements, which substantially correlate

with IT-related equipment. Pursuant to the accounting standard under pronouncement CPC

06 Leases, approved by CVM Resolution 554/08, we classiy lease contracts as either nancial

or operating leases based on the characteristics o each. The balance o lease arrangements

as o December 31, 2009 was R$11,790 thousand, with uture payments through to 2011,

versus a balance o R$4,087 thousand as o December 31, 2008.

d) the level o indebtedness level and the characteristics o such debt obligations,including the ollowing particular inormation:

i) material nancing arrangements and loan agreements;

ii) other long-term arrangements with nancial institutions;

iii) degree o subordination o debt obligations;

iv) restrictions possibly applicable to the registrant under existing nancing

arrangements, including in particular restrictions concerning indebtedness level

and capacity to undertake new debt, and on dividend distributions, asset sales,

issuance o new securities and disposition o control;

Not applicable.

e) limitations on use o the proceeds o nancing previously undertaken;

Not applicable.

) signicant changes to any line item in the nancial reports;

Statements of income comparison - Years ended December 31, 2009 and 2008

Gross operating revenues

Gross operating revenues in the amount o R$1,672,894 thousand or the year to December31, 2009, declined 6.2% rom R$1,783,358 thousand one year ago, primarily as a result o

a 4.3% all in volumes traded on the equities markets and a 3.3% drop in volumes or the

derivatives markets, in either case due to actors correlated with the global nancial crisis


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which peaked in 2008 but continued to adversely aect the capital markets primarily in the

rst hal o 2009.

Trading and/or settlement system BM&F segment

The revenues rom transaction ees we charge on trading and clearing activities on the

derivatives markets (BM&F segment) tumbled 12.9% to R$552,492 thousand at year-end

rom R$634,230 thousand in the prior year. This decrease correlates mainly with the ollowing

items:

Derivatives

The revenues rom ees charged on derivatives trading and clearing transactions (derivatives

clearinghouse) ell 14.2% year-on-year, to R$516,052 thousand or the year rom R$601,275thousand previously, as a result o the 3.3% decline in volume traded in derivatives contracts

and 10.3% slump in average revenue per contract (RPC).

Foreign exchange

The revenues rom ees charged on orex trading and clearing transactions (oreign exchange

clearinghouse) tossed 2.1% year-on-year, to R$20,849 thousand or the year rom R$21,302

thousand in the earlier year, due mainly to appreciation o the Brazilian real against the U.S. dollar.

Government securities

The revenues rom ees charged on trades in government bonds and debt securities, and

on clearing transactions (debt securities clearinghouse) sank 53.0% year-on-year, to R$155

thousand at end o year rom R$330 thousand the year beore, as a result o the 76.9% plunge

in volume traded.

Bolsa Brasileira de Mercadorias

The revenues rom trades in agricultural commodities on the exchange operated through

Bolsa Brasileira de Mercadorias ell 9.1% year-on-year, to R$7,146 thousand or the year rom

R$7,865 thousand in the year beore, due to the all in volume traded in agricultural notes.

Settlement bank

The revenues rom the operations o BM&FBOVESPAs settlement bank increased by 139.7%

year-on-year, to R$8,290 thousand at end o year rom R$3,458 thousand previously, as a

result o the rise in volume o services sold.

Trading and/or settlement system Bovespa segment

The revenues rom trading and transaction ees we charge on trading and clearing activitiesin the equities markets (Bovespa segment) ell 2.2% year-on-year, to R$1,032,201 thousand

or the year rom R$1,055,028 thousand one year earlier. This drop correlates mainly with the

ollowing items:


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Trading trading ees

The revenues rom ees charged on trading in equities tossed 2.2% year-on-year, at R$617,000

thousand at year-end rom R$635,091 thousand one year ago, refecting the 4.3% decline involumes traded on the equities markets.

Clearing and settlement transaction ees

The revenues rom ees charged on clearing and settlement transactions tumbled 10.5%

year-on-year, to R$232,166 thousand at the close o year rom R$259,355 thousand in the

year beore, also the 4.3% decline in volumes traded on the equities markets and due to a

change in our pricing policy.

Loans o marketable securities

The revenues rom securities lending services through the depository acility known as CBLC

ell 32.0% year-on-year, to R$48,528 thousand or the year rom R$32,989 thousand in the

prior year, due to a slump in the volume o securities lending.

Listings o marketable securities

The revenues rom listing ees we charge on securities listings climbed 32.8% year-on-

year, to R$39,549 thousand rom R$29,776 thousand in the previous year, mainly due to

implementation o a new price schedule or listings o securities which we adopted in

January 2009, gradually terminating discounts we had been granting in the last ew years topromote listings in our special corporate governance trading segments.

Depository, custody and back oce

The revenues rom ees charges or depository, custody and back-oce services increased

by 12.3% year-on-year, to R$62,523 thousand at year-end rom R$70,231 thousand in the

earlier year, primarily as a result o a 3.1% increase in the number o custody accounts, and

to implementation o our new pricing policy as o May 2009, which adopted a custody ee

by volume deposited with the depository acility.

Participant access ees

We charge access ees rom participants acquiring trading rights or access to our markets.

The revenues rom access ees soared 103.8% year-on-year to R$40,266 thousand rom

R$19,755 thousand one year ago, due primarily to the new policy or access to our markets

which we adopted in January 2009.

Other operating revenues

Other operating revenues decreased 6.3% year-over-year, to R$88,201 thousand rom R$94,100

thousand in the previous year. This drop correlates mainly with the ollowing items:

Vendors market data


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The revenues rom distribution and sale o market data comprising quotations and other

market inormation were up 33.1% year-on-year to R$57,691 thousand rom R$43,359

thousand the year beore, as a result o our new pricing policy or these services implemented

as o April 2009.

Commodity classication ees

The revenues rom ees we charge or grading commodities have climbed 21.8% year-over-

year, to R$4,304 thousand at end o year rom R$3,535 thousand in the prior year, due mainly

to increase in the volume to cotton bags graded at our testing acilities.

Other

Other revenues dropped 44.5% year-on-year, to R$26,206 thousand at end o year romR$47,206 thousand in the earlier year, due primarily to lower than average dividends paid to

us by the CME Group, and to the reversal o provisions recorded in previous years.

Deductions rom revenues

The deductions rom revenues decreased by 6.1% to R$170,350 thousand at end o year

rom R$181,347 thousand previously, which is consistent with the all in gross operating

revenues.

Net operating revenue

As a result o the year-over-year changes in revenues discussed above, net operating revenue

ell 6.2% to R$1,502,544 thousand or the year versus R$1,602,011 thousand one year ago.

Operating expenses

The operating expenses tossed 21.3% year-on-year to R$569,832 thousand rom R$723,658

thousand one year ago, due primarily to the synergy identication plan we established in

connection with the integration o BM&F S.A. and Bovespa Holding S.A., and implemented

with the aim o capturing synergy savings by eliminating duplicate work and through action

related to the items discussed below.

Personnel and related charges

The expenses with personnel and related charges increased by 17.2% year-on-year to

R$289,806 thousand rom R$247,349 thousand in the previous year, due primarily to increase

in expenses or the year with stock options granted to key management personnel 2009,

which reached R$59,634 thousand versus R$26,359 thousand in the year beore.

Data processing

The data processing expenses dropped 27.4% year-on-year to R$102,596 thousand rom

R$141,282 thousand in the prior year, due primarily to synergy savings captured rom the

integration process (Bovespa and BM&F).


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Depreciation and amortization

The expenses with depreciation and amortization increased by 20.6% year-on-year to

R$42,396 thousand rom R$35,140 thousand one year earlier, due primarily to acquisitionsin the asset group o computer equipment and IT acilities.

Outsourced services

The expenses with outsourced services remained virtually unchanged with slight rise o 3.3%,

to R$45,495 thousand or the year versus R$44,043 thousand the year beore. The synergy

savings we had captured in connection with this line item were more than cancelled out by

expenses with outsourced services related to specic and strategic projects, in particular

in the quarter to December 2009 when ongoing projects included, among other things,

some o the magnitude o the partnerships with the CME Group and Nasdaq OMX, and theoperating qualication program (PQO) or brokerage rms.

General maintenance

The expenses with general maintenance dropped by 18.7% year-on-year to R$11,007

thousand rom R$13,536 thousand in the earlier year, due to synergy savings captured rom

the integration process (Bovespa and BM&F).

Communications

The expenses with communications were up 25.1% year-on-year to R$23,428 thousand romR$18,721 thousand in the prior year, due mainly to increase in volume traded on Bovespa

markets, as the exchange sends notices o trade execution by mail addressed to the investors,

or conrmation o the transactions.

Rents

The expenses with rents incurred in the year to December 31, 2009, dropped 30.0% to

R$3,032 thousand rom R$4,351 thousand one year ago, due to synergy savings captured

rom the integration process (Bovespa and BM&F).

Supplies

The expenses with supplies ell 30.8% year-on-year to R$2,510 thousand rom R$3,629 thousand

one year ago, due to synergy savings captured rom the integration process (Bovespa and BM&F).

Promotion and marketing

The expenses with promotion and marketing declined 37.8% year-on-year to R$19,555

thousand rom R$31,446 thousand the year beore, due to synergy savings captured rom

the integration process (Bovespa and BM&F).

Taxes


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Taxes on ees paid by us increased by 40.4% year-on-year to R$2,323 thousand rom R$1,655

thousand one year ago, primarily due to taxes charged on remittances abroad or payment

o outsourced services related to certain specic and strategic projects o ours.

Board members compensation

The expenses with remuneration paid to directors in the year to December 31, 2009,

dropped 43.0% year-on-year to R$5,252 thousand rom R$9,219 thousand in the earlier year.

This decline is due to the existence o two exchanges and two dierent boards prior to the

May 2008 integration process that combined Bovespa and BM&F into BM&FBOVESPA, and

due also to the act that the members o both boards continued to provide services to our

Company or a ew more months during the transition period towards our consolidation.

Integration expenses

The expenses with the integration process amounted to R$129,576 thousand in the year

ended December 31, 2008, and did not recur in the year to December 31, 2009.

Sundry

Sundry expenses dropped 48.7% year-on-year to R$22,432 thousand orm R$43,711

thousand one year earlier, due to synergy savings captured rom the integration process

(Bovespa and BM&F).

Goodwill amortization

The expenses with amortization o goodwill which in the year to December 31, 2008,

amounted to R$324,421 thousand collapsed to R$0 (naught) in the year to December 31,

2009, due to the change in the accounting standard determining the accounting treatment

o goodwill, as under certain CPC pronouncements issued in 2008, starting rom January 1,

2009, goodwill is no longer subject to amortization recognized in the income statement.

Financial income

Financial inorm or the year ended December 31, 2009, dropped 17.0% to R$305,972thousand rom R$ 253,862 thousand in the prior year, due mainly to the decline in interest

rates that remunerate our demand deposits and nancial investments.

Income beore taxes

Income beore taxes increased by 38.0% to R$1,186,574 thousand or the year rom R$859,904

thousand a year ago, and correlates mainly with the 21.3% decrease in operating expenses

and the change in the accounting standard that determines the accounting treatment o

goodwill, as previously discussed.

Income tax and social contribution

Income tax and social contribution or the year increased 43.1% and amounted to R$304,505


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thousand at end o year, as compared to R$212,741 thousand one year earlier as ollows:

l The line item or current income tax and social contribution, which at December 31,

2008, registered an expense o R$331,879 thousand, at December 31, 2009, registeredrevenue o R$32,085 thousand, or a 109.7% decrease.

l The line item or deerred income tax and social contribution, which at December 31,

2008, registered a revenue o R$119,138 thousand, at December 31, 2009, registered

an expense o R$336,590 thousand, or a 382.5% decrease.

Ater Bovespa Holding S.A. merged with BM&F S.A. in November 2008, the goodwill came to

be deductible or purposes o income tax and social contribution on net income. As a result,

starting rom December 2008 we took advantage o the tax benet, such that the portion

o goodwill which had been amortized but not taken as a deduction gave rise to income tax

and social contribution credits recorded as tax assets in the amount o R$76,702 thousand.In addition to recording tax assets rom amortized goodwill, we recorded tax assets or tax

losses in the amount o R$35,036 thousand.

Deerred income tax and social contribution liabilities as o December 31, 2009, derived rom

recognition o the temporary dierence between the tax base o goodwill and its carrying

value in the balance sheet, considering that while goodwill continued to be amortized or

tax purposes, starting rom January 1, 2009, goodwill is no longer amortized or accounting

purposes, thus resulting in a goodwill tax base that is lower than its carrying value. As o

December 31, 2009, the total deerred tax liabilities related to amortization o goodwill or

tax purposes was R$333,917 thousand.

In the second quarter o 2009, we recognized income tax and social contribution credits in

the amount o R$35,503 thousand, as related to tax losses and negative tax base o social

contribution o the ormer Bovespa Holding, which had not been used at the time o the

merger o Bovespa Holding due to the supposed deductibility limitation set at 30% o

adjusted net income. Our Company reconsidered this procedure in the second quarter o

2009, in conjunction with our legal advisors, based on the understanding that this limitation

is not applicable in the event o a merger o the investee, as in such case there is no continuity

and the investee ceases to exist, such that thereore the purported limitation on deductibility

is removed and the tax losses may be used in ull. As a result, the Company has recorded the

tax credits previously mentioned.

Minority interests

Minority interests reer to those portions o our subsidiaries Bolsa Brasileira de Mercadorias

and Bolsa de Valores do Rio de Janeiro consolidated in our nancial statements, which are

not owned by us. Minority interests amounted to R$1,019 thousand in the year to December

31, 2009, versus R$1,567 thousand the year beore, a 35.0% decrease.

Net income or the year

Net income or the year o R$881,050 thousand surged 36.5% year-over-year rom R$645,596

thousand one year ago. This rise is due primarily to the 21.3% reduction in operating expenses

and expenses rom the change in the accounting standard determining the accounting


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19

treatment o goodwill, which were only partially counterbalanced by the 43.1% increase in

the income tax and social contribution line item, resulting rom recognition o deerred tax

liabilities.

Comparison o the main line items in the balance sheet Years ended December 31,

2009 and 2008

Current assets

Current assets as o December 31, 2009, increased 41.4% year-on-year to R$2,778,968

thousand (13.1% o total assets) rom R$1,965,461 thousand one year earlier (9.6% o total

assets). The main changes to current assets were the ollowing:

Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and demand deposits, together with

short- and long-term, liquid investments through prime banks, nancial investment unds,

government bonds and so orth. As o December 31, 2009, cash and cash equivalents and

nancial investments amounted to an aggregate o R$3,236,211 thousand, which accounted

or 15.3% o our total assets at that date, and represented increase o 34.0% over R$2,414,241

thousand one year ago, when they accounted or 11.8% o our total assets. This increase

in cash and cash equivalents and nancial investments was pushed by the higher volume

o cash collaterals deposited by market participants as margin or transactions, which in

turn was driven by the soaring volume o trades on the equities markets in the quarter to

December 2009, versus the same quarter one year earlier. The collaterals are included incurrent assets and in current liabilities.

Accounts receivable, net

Accounts receivable largely comprise trading and transactions and other ees receivable rom

customers, and market data transmission ees receivable rom vendors. Accounts receivable

dropped by 61.8% year-over-year, to R$40,205 thousand rom R$105,169 thousand in the

prior year. This all is attributable to change in the due date or payment o most trading and

transaction ees charged in the equities markets, which starting rom October 1, 2009, we

collect as o the third business day ater the trade date, whereas previously these ees wouldbe paid up to two months ater the trade date.

Deerred income tax and social contribution

Deerred income tax and social contribution recorded under both current and non-current

assets were reduced by 61.9% year-on-year, rom R$122,070 thousand in the prior year

to R$46,541 thousand as o December 31, 2009. This decrease resulted rom a change in

the accounting standard related to the accounting treatment o goodwill amortization,

according to which we now recognize a deerred tax liability on tax amortizations o goodwill.

The balance o deerred tax assets recorded one year ago (in the amount o R$76,702thousand) was reclassied as a liability in 2009, thus representing the net amount o tax

credit attributable to goodwill.


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21

do total liabilities). This change correlates with an increase in margin received rom market

participants and deposited in the orm o cash, as a result mainly o volume growth in the

quarter to September 2009 as compared to the same period in the prior year.

Earnings and rights on securities in custody

The 11.4% decline in earnings and rights on securities in custody, which at end o year

amounted to R$31,897 thousand as compared to R$36,020 thousand one year ago, is due

primarily to the all in earnings rom judicial deposits.

Financing

The 127.4% climb in nancing, which at end o year amounted to R$9,295 thousand

as compared to R$ 4,087 thousand in the year beore, is due mainly to nancial leasearrangements or IT-related equipment.

Other liabilities

The line item other liabilities climbed 15.7% to R$194,895 thousand at end o year (0.9% o

total liabilities) rom R$168,404 thousand in the previous year (0.8% o total liabilities), which

correlates primarily with deposits and repurchase agreements related to the operations o

Banco BM&F, the settlement bank.

Non-current liabilities

Non-current liabilities in the amount to R$313,002 thousand at December 31, 2009, (1.5% o

total liabilities) surged 569.8% when compared to R$46,729 thousand at the end o the prior

year (0.2% o total liabilities). This change is due primarily to our having recognized deerred

income tax and social contribution at end o year in the amount o R$261,060 thousand, as

derived rom the temporary dierence between the tax base o goodwill and its carrying

value in the balance sheet, considering that while goodwill continues to be amortized or

tax purposes, starting rom January 1, 2009, goodwill is no longer amortized or accounting

purposes, thus resulting in a goodwill tax base that is lower than its carrying value.

Shareholders equity

Shareholders equity rose 2.2% to R$19,709,749 thousand at December 31, 2009, when it

represented 93.0% o total liabilities, rom R$19,291,724 thousand one year earlier, when

it represented 94.4% o total liabilities, and as resulting rom the ormation o a reserve

or investments and unding o saeguard mechanisms and guarantee unds we keep in

connection with clearing and settlement activities, as required under our bylaws (under the

statutory reserve line item) and pursuant to the proposal on allocation o net income or

the year.

1. Management is expected to discuss:

a) The results o operations and, in particular:


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MANAGEMENT PROPOSAL

22

i) Important revenue components;

Our consolidated gross operating revenues or the year ended December 31, 2009, totaled

R$1,672,894 thousand, down 6.2% rom R$1,783,358 thousand one year ago, primarilyrefecting the ollowing:

l revenues rom transaction ees we charge on trading and clearing activities on the

equities markets (Bovespa segment) accounted or 50.8% o gross operating revenues,

or R$849,166 thousand, in a 5.1% year-on-year decline as a result o the 4.3% drop in

volumes traded when compared to the prior year. Despite having tumbled in the rst

hal o 2009, volumes bounced signicantly in the second hal, and revenues rom ees

on trading and clearing transactions surged 34.5% over the period to June 2009, to

peak in the quarter to December 2009, which registered record high volumes; and

l revenues rom transaction ees we charge on trading and clearing activities in BM&F

markets accounted or 32.1% o gross operating revenues, or R$537,056 thousand,plunging 13.8% year-over-year. This decline correlates with a 10.3% all in average revenue

per contract (RPC), while overall volume traded tossed 3.3% rom one year earlier.

As a result, revenues derived rom transaction ees we charge on trading and clearing

activities in the equities and derivatives markets accounted or 82.9% o our total revenues

in the year to December 2009, versus 85.1% o total revenues or 2008.

Taxes charged on these revenues amounted to R$170,350 thousand, or approximately 10.2%

o our gross operating revenues.

ii) Factors that have materially aected the results o operations;

Income tax, social contribution and goodwill amortization

Income beore taxes or the year amounted to R$1,186,574 thousand. The income tax and

social contribution line item totaled R$304,505 thousand, substantially represented by

deerred income tax and social contribution in the aggregate o R$336,590 thousand, and

with no eect on cash fow.

As recorded, income tax and social contribution resulted rom the ollowing:

l deerred tax liabilities amounting to R$333,917, and recognized in relation to taxabletemporary dierences rom amortization o goodwill in the year, with no impact on

cash fow;

l recognition o tax credits in the amount o R$35,503 thousand related to tax losses and

negative tax base o social contribution absorbed rom ormer Bovespa Holding.

EBITDA o R$975,108 thousand rose 6.7% year-over-year rom R$913,493 thousand, whereas

EBITDA margin climbed to 64.9% rom 57.0% one year ago.

Net income or the year to December 2009, in the amount o R$881,050 thousand, is 36.5%

up rom the year beore, due mainly to certain previously mentioned cost savings. In addition,(i) unlike 2008, when we incurred R$129,576 thousand in non-recurring expenses rom the

integration o the ormer two exchanges, BM&F S.A. and Bovespa Holding S.A., in 2009 we

incurred no such expenses; (ii) also in 2008 we recognized through prot and loss the expense


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23

related to proportionate amortization o goodwill rom the merger o shares o Bovespa

Holding S.A., in the amount o R$324,421 thousand, with net impact o R$235,075 thousand;

whereas (iii) in the year we recorded deerred tax liabilities o R$333,917 thousand on temporary

dierences rom tax amortization o goodwill in the year, with no impact on cash fow.

Taking the above amounts into account, the actual tax rate or 2009 was 25.7%.

b) Any variation in revenues attributable to changes in prices, exchange rates,

infation rates, changes in volumes and oerings o new products and services;

Variations in our revenues correlate primarily with changes in our pricing policy and the

impact o fuctuations in exchange rates, as set orth below.

l

Listing ees: a 32.8% year-over-year climb in listing ees, due to a change in pricesand the end o certain discounts previously granted to companies listing securities to

trade on our special corporate governance trading segments;

l Depository acility: revenues rom depositary and custody and back oce services

went up 12.3% rom one year ago, ollowing a change in our pricing policy which

established an additional ee charged rom Brazilian-resident investors holding

custody accounts in excess o R$300,000 thousand, which is based on the market

price o securities and other assets held in custody;

l Access ees: revenues rom access ees surged 103.8%, as a result o the policy or

access to markets within both segments;

l Sales o market data to vendors: sales o market data rose 33.1% year-on-year due to

implementation o our revised pricing policy in April 2009;

l Securities lending: revenues rom securities lending dropped 32.0% primarily due

to the plunge in transaction volume in the rst hal o 2009, ater which however

volumes in this market bounced back to show signicant improvement; and

l Average revenue per contract (RPC) traded on BM&F markets: RPC ell 10.3% rom a

year ago primarily due to (i) the August 2008 decision to terminate certain discountson transaction ees ater November 2008. The discount period had pushed volumes

driving revenue per contract upwards in the period; (ii) strong appreciation o the

Brazilian real against the U.S, dollar, which negatively infuenced revenues rom FC

contracts, rom USD interest rate contracts, and rom commodities contracts; and (iii)

the granting o discounts or access to our systems via certain DMA (Direct Market

Access) models, and or high requency traders.

c) The impact o infation, o changes in the prices or the principal raw materials

and other supplies, and o changes in exchange and interest rates, on the results

o operations and nancial condition.

For inormation on impacts o our pricing policies and changes in exchange rates impacting

the results o operations, see item (b) under paragraph 10.2 above.


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MANAGEMENT PROPOSAL

24

1.1. Management should discuss the material eects any o the events listed below

have had or are expected to have on the nancial statements and results o

operations:

a) Formation a new operating segment; disposition o an operating segment;

No new operating segment has been ormed and not operating segment was disposed o

by the Company in the years to December 2009 and 2008, and no such event has had or is

expected to have eects on our nancial statements and results o operations.

b) Organization o associate entities, acquisition or disposition o equity interest;

On February 11, 2010, we released a notice o material act disclosing negotiations held

within the scope o the relationship we maintain with the CME Group, Inc, which resulted inthe execution o a protocol o intent pursuant to which the two exchanges agree a global

preerred strategic partnership (i) or both parties to cooperate in identiying and pursuing

opportunities or co-investment in, and joint commercial partnerships with, third-party

international exchanges on a shared and equal basis; (ii) or the two exchanges to combine

eorts or joint development o a multi-asset class electronic trading platorm; and (iii) or

the Company to acquire additional shares in the CME, and increase to 5% its total ownership

interest in CME shares, which as o the date o the notice o material act would represent

aggregate investment o approximately US$1 billion. The investment the Company will be

making in raising its equity interest in the CME is on the order o US$620 million, and will give

BM&FBOVESPA the right to designate a representative to the CME board. The transaction

will require approval rom our shareholders.

In addition, the denitive transaction documents or implementation o this global

strategic partnership will require, among other things, approval rom our board o directors.

Depending on the terms o the denitive agreements, ater consummated our investment

could be designated investment in an associate entity, meaning one where the investor has

signicant infuence but not control or joint control o the entity, which under the accounting

standard provided in CPC 18 would require us to record the investment pursuant to the

equity method o accounting.

c) Special events and operations.

In the years to December 31, 2009 and 2008, there were no special or unusual events or

operations related to the Company and/or its activities, which have had, or are expected to

have a material impact on our nancial statements or results o operations.

1.2. Management should discuss:

a) Signicant changes in accounting practices;

Law 11,638/07 and Provisional Measure 449/08, asconverted into Law 11,941/09

With the enactment o Law 11,638/07 and publication o Provisional Measure 449/08, converted


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25

into Law 11,941/09, certain provisions o Brazilian Corporation Law were changed, revoked and

introduced as regards accounting practices and the presentation o the nancial statements,

eective as rom the scal year ended December 31, 2008. The main purpose o this law and

MP was to adapt Brazilian corporate legislation to acilitate the process o convergence o theaccounting practices adopted in Brazil with the International Financial Reporting Standards

issued by the International Accounting Standards Board (IASB). Moreover, as a result o the

enactment o this law and provisional measure, certain accounting pronouncements were

published in 2008 by the Brazilian Accounting Pronouncements Committee (CPC), applicable

to all corporations, including publicly traded and large-sized companies.

The main changes to the accounting practices and their eects on the nancial statements

o BM&FBOVESPA as o and or the years ended December 31, 2009 and 2008 include the

ollowing:

(i) Share-based Compensation Pursuant to CPC 10 Share-based compensation,approved by CVM Deliberation 562/08, BM&FBOVESPA recognized as expense

portions o the contracts existing at December 31, 2008 relating to the Stock Option

Plans granted to administrators and employees. The main eatures and inormation

relating to the stock option plans are presented in Note 19.

(ii) Deerred Charges Expenditures recorded in deerred charges related to sotware

licenses acquired and sotware development were reclassied to intangible assets.

(iii) Non-operating results MP 449/08, converted into Law 11,941/09, eliminated the

segregation o the non-operating result group in the statement o income or the

year. The revenues and expenses previously presented as non-operating results are

now presented in the operating results group.

(iv) Financial Leases BM&FBOVESPA had nancial lease agreements mainly related toinormation technology equipment. In accordance with the provisions determined in

accounting pronouncement CPC 06 Leases, approved by CVM Resolution 554/08,

the Company classied the lease agreements as either nancial or operating, based

on their specic characteristics.

The IT equipment leased under the nancial lease agreements was recorded in property and

equipment and the corresponding obligation in the Financing account. In the addition, the

related eects were recognized in the statement o income.

Recent Accounting Pronouncements

The standards and interpretations listed below were published and are mandatory or

nancial years starting as o or ater January 1, 2010. Besides these, other standards and

interpretations were published that change generally accepted accounting principles

adopted in Brazil, or BR GAAP, in the process o convergence towards International Financial

Reporting Standards, or IFRS. The standards and interpretations set orth below are expected

to impact our nancial statements:

CVMResolution577/2009CPC20BorrowingCosts;

CVMResolution581/2009CPC21InterimReporting; CVMResolution582/2009CPC22SegmentReporting;

CVMResolution583/2009CPC27FixedAssets;

CVMResolution592/2009CPC23AccountingPractices,ChangesinAccounting


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MANAGEMENT PROPOSAL

26

Estimates and Correction o Errors;

CVMResolution593/2009CPC24EventsAftertheBalanceSheetDate;

CVMResolution594/2009CPC25Provisions,ContingentLiabilities,Contingent

Assets; CVMResolution595/2009CPC26PresentationofFinancialStatements;

CVMResolution597/2009CPC30Revenues;

CVM Resolution 598/2009 CPC 31 Non-Current Assets Held for Sale and

Discontinued Operations;

CVMResolution599/2009CPC32IncomeTaxes;

CVMResolution600/2009CPC33EmployeeBenets;

CVMResolution601/2009ICPC08AccountingforProposedDividendPayments;

CVM Resolution 604/2009 CPC 38 Financial Instruments: Recognition and

Measurement;

CVMResolution604/2009CPC39FinancialInstruments:Presentation; CVMResolution604/2009CPC40FinancialInstruments:Disclosures;

CVMResolution605/2009CPC18InvestmentsinAssociates;

CVMResolution606/2009CPC19InterestsinJointVentures;

CVMResolution607/2009CPC35SeparateFinancialStatements;

CVMResolution608/2009CPC36ConsolidatedFinancialStatements;

CVMResolution609/2009CPC37First-timeAdoptionofInternationalFinancial

Reporting Standards;

CVM Resolution 610/2009 CPC 43 First-time Adoption of Accounting

Pronouncements CPC 15 to 40;

CVMResolution613/2009ICPC03SupplementalAspectsofLeaseAccounting;

CVMResolution614/2009ICPC04ScopeofAccountingPronouncementCPC10 Share-based Payments;

CVMResolution615/2009ICPC05AccountingPronouncementCPC10Share-based

Payments Transactions in Equity Instruments o a Group Entity or Treasury Stock;

CVMResolution 618/2009 ICPC 09 Individual Financial Statements, Separate

Financial Statements, Consolidated Financial Statements and Application o the

Equity Method;

CVMResolution619/2009ICPC10ClaricationsonAccountingPronouncements

CPC 27 Fixed Assets and CPC 28 Investment Properties.

The above pronouncements and interpretations are applicable to the nancial statementsor the year ending December 31, 2010, and also to the 2009 nancial statements which will

be presented together with the 2010 nancial statements or comparison purposes.

b) Signicant eects o changes in accounting principles;

Management does not expect the adoption o the new pronouncements and interpretations

above to generate signicant impacts on the net income and shareholders' equity o the

Company, except with respect to the accounting or the investment in CME Group

CPC38 Financial Instruments: Recognition and Measurement

Under the accounting standards eective up to December 31, 2009, the investment in CME

Group has been recorded at historical cost as an investment, in accordance with CPC 14,


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27

and the carrying value o the investment has been subject to an impairment analysis. This

impairment analysis has been based on the discounted cash fow rom the investment

(value in use), as allowed by CPC 01 or investments recorded under the cost method.

Eective rom January 1, 2010, which is the date o CPC 38, the investment in CME Group will

be reclassied to nancial instruments as a nancial asset available or sale and adjusted to

air value. In accordance with CPC 38, the quoted stock price o the investee should be used

to determine the air value.

As a nancial asset available or sale, CPC 38 will require the impairment analysis to be made

by comparing the market value o the shares with their acquisition cost, and a loss should be

recognized i there is a signicant or prolonged decline in the market price o the shares.

Because o the signicant decline in the market price o the shares o CME Group in theourth quarter o 2008, the initial adoption, or comparison purposes, o CPC 38 as o

December 31, 2008 (beginning o 2009) will result in the recognition o an impairment o the

investment in CME Group in the amount o R$ 460,610, net o tax, which will be recognized

in shareholders equity as o December 31, 2008. The new cost basis o the investment at

that date will thereore become R$ 578,306. Additionally, during the year ended December

31, 2009, using this new cost basis as a reerence, the market value o the investment in CME

Group stock increased, generating a positive eect o R$ 77,396, net o tax.

Under the new accounting standards, considering the eects mentioned above, the adoption

o CPC 38 will reduce the balance o shareholders equity o the Company at December 31,

2009 by R$ 383,214, net o tax eects. It should be noted that these adjustments will notalter the bases or the distribution o dividends and interest on own capital in 2008 and

2009, which were based on the standards in eect at the time.

CPC10 Share-based Payments

Pursuant to pronouncement CPC 10 Share-Base Payments, approved and conrmed

by CVM Resolution 562/08, our obligations under stock options existing at December 31,

2008, were recognized or the period in which the options vested (typically at the end o

the period in which the services are provided), which impacted our nancial statements in

the ollowing ways: (i) directly, on shareholder equity or the previous year, with regard toshare-based payments or services provided prior to the date o adoption o the accounting

standard under pronouncement CPC 10, i.e., January 1, 2008; (ii) in the statement o income,

through recognition o expenses regarding stock options attributable to services provided

over 2008; (iii) prospectively, or the coming three years, which is the period or ulllment o

the agreed exercise conditions (provision o uture services).

Accordingly, as a result o having adopted pronouncement CPC 10, the Company recognized

R$229,519 thousand in prot reserves with a contra account to capital reserves and, in

addition, recognized expenses o R$26,359 thousand incurred in 2008 in a contra account to

capital reserves in the statement o income .

b) Qualications and emphasis o matter paragraphs included in the independent

auditors report.


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MANAGEMENT PROPOSAL

28

There have no qualications or emphasis o matter paragraphs in the independent auditors

reports regarding the nancial statements as o and or the years ended December 31, 2008

and 2009.

1.2 Management is expected to indicate and discuss critical accounting practices

adopted by the registrant, analyzing in particular estimates requiring

Managements judgment on, and subjective assumptions related to uture

events and uncertainties, which can materially infuence the nancial condition

and results o operations. Critical accounting estimates may relate to provisions,

contingencies, recognition o revenues, tax credits, long-term assets, the useul

lie o non-current assets, pension plans, adjustments rom oreign currency

translations, environmental recovery costs, or impairment and recoverability

testing standards or assets and nancial instruments, among other things.

In preparing the nancial statements Management is required to use estimates and

assumptions or the measurement and recognition o certain assets, liabilities and other

transactions. As a result, our nancial statements include estimates related to contingent

provisions, the air value o certain nancial instruments, the determination o certain

income tax provisions and the useul lie o certain assets, recognition o asset impairment

and analysis o recoverability and similar other elements. Actual results may dier rom

our estimates and assumptions, which we revise at least once every year at the time o

preparation o the nancial statements o BM&FBOVESPA and the consolidated entities.

Signicant accounting practices

a. Determination o income

Income and expenses are recognized on an accrual basis. The amounts received as annual

ees, such as ees or listings o securities and certain contracts or sale o market data, are

recognized proportionately on a monthly basis in the statement o income or the period.

b. Cash and cash equivalents

The balances o cash and cash equivalents or cash fow statement purposes comprise cash

and bank deposits.

c. Financial instruments

(i) Classication; measurement

The Company classies nancial assets in the ollowing categories: recorded at air value

through prot or loss, loans and receivables, held to maturity and available or sale. The

classication depends on the purpose or which the nancial assets are acquired. Management

determines the classication o the nancial assets when they are rst recorded.

Financial assets measured at air value through prot and loss

Financial assets measured at air value through prot or loss are nancial assets held or active

and requent trading or assets designated by the entity, when rst recorded, as measurable


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29

at air value through prot or loss. Derivatives are also classied as held or trading and

accordingly, are recorded in this category. The assets in this category held or trading are

classied as current assets. Gains or losses arising rom changes in the air value o nancial

assets recorded at air value through prot or loss are recorded in the statement o incomein the "nancial results" line item or the period in which they occur.

Loans and receivables

These comprise loans granted and receivables which are non-derivative nancial assets with

xed or determinable payments, not quoted in an active market. Loans and receivables are

included in current assets, except or those maturing more than 12 months ater the balance

sheet date (which are classied as non-current assets). The Company's loans and receivables

comprise trade accounts receivable and other accounts receivable. Loans and receivables

are recorded at amortized cost, based on the eective interest rate method.

Financial assets held to maturity

These are nancial assets quoted in an active market which are acquired with the intent and

nancial ability to be held in the portolio up to maturity. They are recorded at the acquisition

cost, plus related earnings with a contra-entry to income or the year, based on the eective

interest rate method.

Available-or-sale nancial assets

Available-or-sale nancial assets are non-derivatives which are classied in this categoryor not classied in any other. They are included in non-current assets, unless management

intends to sell the investment within 12 months subsequent to the balance sheet date.

Available-or-sale nancial assets are recorded at air value. Interest on available-or-sale

securities, calculated based on the eective interest rate method, is recognized in the

statement o income as interest income. The amount related to changes in air value is

recorded in shareholders' equity, in the carrying value adjustments account, and is realized

in net income when the asset is sold or becomes impaired.

Fair value

Fair values o investments with public quotations are based on current market prices. For

nancial assets without an active market or public quotation, the Company determines air

value through valuation techniques, such as option pricing models.

The Company evaluates, at the balance sheet date, i there is objective evidence that

a nancial asset or a group o nancial assets is overstated (impaired) in relation to its

recoverable value.

(ii) Derivatives Instruments and hedging activities

Derivatives are initially recognized at air value as o the date o the derivatives instrument

and, subsequently, measured at their air value, with changes in air value recorded in income,

except where a derivative is recorded as a cash fow hedge.


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MANAGEMENT PROPOSAL

30

While the Company trades in derivatives through exclusive investment unds or protection

purposes, it does not adopt hedge accounting.

d. Accounts receivable, other credits; allowance or doubtul accounts

Accounts receivable and other receivables are initially stated at present value, less the

allowance or doubtul accounts. Management adopts a policy o recording a ull provision

or doubtul debts on credits overdue or more than 60 days.

e. Prepaid expenses

Prepaid expenses mainly recognize amounts related to sotware maintenance contracts and

insurance premiums, which are amortized based on the terms o the contracts in orce.

. Investments

Investments in entities and subsidiaries are recorded and evaluated based on the equity

method o accounting, with the related income (or expense) recognized in income or the

year as operating income (or expense). The accounting practices o the subsidiaries are

consistent with the practices adopted by the Company.

Other investments are recorded at cost o acquisition or merger, less the provision or

adjustment to realizable value when the loss is considered permanent.

g. Intangible assets

An intangible asset is an identiable non-monetary asset without physical substance, such

as goodwill.

Goodwill

Goodwill or negative goodwill on the acquisition o an investment is calculated as the

dierence between the purchase amount and book value o the shareholders' equity o

the company acquired. Goodwill or negative goodwill is subdivided into two categories: (i)

market value adjustment, either upward or downward, o assets, comprising the dierencebetween the book value o the company acquired and the air value o assets and liabilities

and (ii) uture protability, comprising the dierence between the air value o assets and

liabilities and the purchase amount.

The portion corresponding to the market value adjustment o assets was allocated to the

corresponding acquired/merged assets. The upward market value adjustment is amortized

as the corresponding assets are realized over a period o up to 22 years.

The portion based on estimated uture protability is recorded in the intangible group

and until December 31, 2008, was amortized over a 10-year period, to the extent o andin proportion to the projected results on which it was based. The portion based on the

expectation o uture protability is no longer amortized as rom January 1, 2009.


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Sotware and projects

Sotware licenses acquired are capitalized and amortized over their estimated useul lie, at

the rates described in Note 9.

Costs o sotware development or maintenance are expensed as incurred. Expenditures

directly associated with identiable and unique sotware, controlled by the Company and

which will probably generate economic benets greater than the costs or more than one

year, are recognized as intangible assets. Direct expenditures include remuneration o the

sotware development team

Expenditures or development o sotware recognized as assets are amortized using the

straight-line method over their useul lives.

h. Property and equipment (xed assets)

Fixed assets are recorded at cost o acquisition or construction. Depreciation is calculated on

the straight-line method and takes into consideration the useul economic lie o the assets,

i. Contingent assets and liabilities, and legal obligations

The recognition, measurement, and disclosure o contingent assets and liabilities and legal

obligations comply with the criteria dened in CVM Resolution 489/2005

Contingentassets-Thesearenotrecorded,exceptwhenmanagementhasfullcontrolover their realization or when there are secured guarantees or avorable decisions

to which no urther appeals are applicable, such that the gain is almost certain.

Contingent assets with realization considered probable, where applicable, are only

disclosed in the nancial statements

Contingentliabilities-Thesearerecognizedbasedonanumberoffactorsincluding:

the opinion o legal advisors; the nature o the lawsuits; similarity to precedents;

the complexity o the proceedings; and prior court decisions. They are recognized

whenever the loss is evaluated as probable, since this would give rise to a probable

outfow o resources or the settlement o the obligations, and the sums involved are

measurable with sucient reliability. The contingent liabilities classied as possiblelosses are not recorded and are only disclosed in the notes to the nancial statements,

and those classied as remote are neither recognized nor disclosed.

LegalobligationsLegalobligationsresultfromtaxlawsuitsinwhichtheCompany

is discussing the validity or constitutionality o certain taxes and charges. These are

ully recognized in the nancial statements, regardless o the assessment o their

probability o success.

j. Judicial deposits

Judicial deposits are monetarily restated and presented in non-current assets.

k. Other assets and liabilities


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These are stated at their known and realizable/settlement amounts plus, where applicable,

related earnings and charges and monetary and/or exchange rate variations up to the

balance sheet date.

l. Impairment o assets

Property, plant and equipment and other non-current assets, including goodwill and

intangible assets, are reviewed annually to identiy evidence o unrecoverable losses, and

also whenever events or changes in the circumstances indicate that the book value may

not be recoverable. In this case, the recoverable value is calculated to veriy i there is any

loss. Loss is recognized at the amount by which the book value o the asset exceeds its

recoverable value, which is the higher o net sales price and the value in use or an asset.

For evaluation purposes, assets are grouped at the lowest level (smallest identiable group

o assets) or which there are separately identiable cash fows.

m. Leases

Leases o property and equipment in which the Company substantially assumes all ownership

risks and benets are classied as nancial leases. These nancial leases are recorded as a

nanced purchase, by recognizing at the beginning o the lease a property and equipment

item and a nancing liability (lease).

A lease in which a signicant portion o the ownership risks and benets remains with the

lessor is classied as an operating lease. Operating lease payments (net o all incentives

received rom the lessor) are charged directly to results

n. Provisions

Provisions are recognized when the Company has a legal or inormal present obligation as

a result o past events, a cash outfow to settle the obligation is probable and a reliable

estimate o the amount can be made.

o. Employee benets

(i) Pension obligations

The Company has no dened benet plans. The Company oers its employees a dened

contribution plan and pays contributions on contractual or voluntary bases. Once the

contributions have been made, the Company has no obligations related to additional

payments. The regular contributions comprise net periodic costs or the period in which

they are payable and, thereore, are included in the personnel costs. A

(ii) Share-based compensation (stock options)

The Company oers to its employees and executives share-based remuneration plans, to besettled in Company stock, according to which the Company receives services in consideration

or stock options. The air value o options granted related to services to be provided is

recognized as an expense during the period in which the right is obtained, i.e., the period


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during which specic vesting conditions must be met. On the date o the balance sheet,

the Company revises the estimated number o options which will vest and subsequently,

recognizes the impact o the change on initial estimates, i any, in the statement o income,

with a contra-entry to the capital reserve in shareholders' equity on a prospective basis.

p. Financing

Financing is initially recognized at air value, upon receipt o the unds, net o transaction

costs. Subsequently, the nancing is presented at amortized cost, that is, plus charges and

interest in proportion to the period incurred ("pro rata temporis").

q. Current and non-current assets and liabilities

The segregation between current and non-current assets/liabilities is based on a period o365 days as rom the base date o the nancial statements.

r. Foreign currency translation

Transactions in oreign currency are translated into Brazilian reais using exchange rates as

o the transaction dates. Balance sheet account balances are translated at the exchange rate

in eect on the balance sheet date. Foreign exchange gains and losses resulting rom the

settlement o these transactions and rom the translation o monetary assets and liabilities

denominated in oreign currency are recognized in results.

s. Taxes and contributions

BM&FBOVESPA is a or-prot business corporation, and its income is thus subject to certain

taxes and other contributions which are listed below.

Provisions or income tax, social contribution and other taxes are calculated at the rates set

orth below.

Incometax 15,00%

Additionalincometax 10,00%

CSLL(contributiononnetincome) 9,00%

PIS(socialparticipationprogramcontribution) 1,65%

Cons(socialsecuritynancingcontribution) 7,60%

Banco BM&F de Servios de Liquidao e Custdia S.A. calculates the contributions to PIS and

to COFINS at the rates o 0.65% and 4%, respectively, and CSLL at 15% rom May 1, 2008.

The subsidiaries Bolsa Brasileira de Mercadorias and BVRJ are not-or-prot entities and

calculate the contribution to PIS at the rate o 1% on payroll.

The subsidiaries Bolsa Brasileira de Mercadorias (Brazilian Commodities Exchange) andBolsa de Valores do Rio de Janeiro (Rio de Janeiro Stock Exchange), or BVRJ, are not-or-prot

entities and calculates PIS contributions at the rate o 1% over the payroll.


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t. Deerred income tax and social contribution

Deerred taxes are calculated on income tax and social contribution losses and the temporary

dierences between the tax calculation bases o assets and liabilities and the respectivebook values in the nancial statements. The currently dened tax rates o 25% or income

tax and 9% or social contribution are used to calculate deerred tax assets and liabilities

Deerred tax assets are recognized to the extent that it is probable sucient uture taxable

prot will be available to be oset by temporary dierences and/or tax losses, considering

projections o uture income prepared based on internal assumptions and uture economic

scenarios which may, accordingly, undergo change.

Deerred tax liabilities are recognized in relation to all taxable temporary dierences, that

is, dierences that will result in taxable amounts in determining taxable prot (tax loss) outure periods when the carrying amount o the asset or liability is recovered or settled.

u. Net Income per share

Net income per share is determined based on the number o outstanding shares at the date

o the nancial statements

1.3 With respect to internal controls used to ensure reliable nancial reporting,

Management is expected to discuss:

a) the degree o eciency o such controls, possible imperections and actionsadopted to correct them;

Internal Audit

Internal audit activities at BM&FBOVESPA are under responsibility o the internal audit

ocer, who runs the internal audit department. Internal audit activities perormed by the

department in the year to December 2009 comprised evaluations o the internal controls

o the Company pursuant to the internal audit plan approved by the audit committee, and

included internal audits o the nancial and accounting department; the IT general control

department; the market monitoring and management department, and the activities o thesettlement bank, or Banco BM&F.

The internal audit reports are presented to the audited departments, the chie executive

ocer and the audit committee. The internal audit ndings and evaluation results are

reviewed, discussed and action plans designed or improvement o internal controls.

In addition, the internal audit department monitors compliance with the policy and guidelines

on trading in securities by employees, as established in the Companys Code o Conduct,

addressing notices o violations to the code o conduct committee, where appropriate.

Inormation Security Policy

A new inormation security management model was adopted in 2009, which denes and


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implements new and improved controls. In addition, the inormation management security

department was entirely restructured pursuant to the ISO/IEC 27001 standard, the only

auditable international standard which denes the requirements or an Inormation Security

Management System (ISMS).

These measures permitted reconciling, integrating and uniying policies and procedures

previously adopted by Bovespa and BM&F, improved our internal controls, reduced risks

and the Companys exposure to potential loss, in addition to strengthening important

governance support mechanisms.

Improvements to Internal Controls

The improvements to internal controls planned or 2009 were part o an audit and action

plan designed to ensure ecient and reliable controls and procedures or nancial reportingacross the combined structure emerged rom the integration o the two ormer exchanges

as BM&FBOVESPA and its subsidiaries.

For this purpose, multiple initiatives were implemented with the aim o improving our

internal controls, which included revising nancial reporting procedures, mapping and

revising processes and the inormation fow, monitoring the rst stage o the ERP system

integration, and improving accounting support reports.

Going orward, we intend to implement in 2010 a coordinated ERP workfow model or all

purchases, hirings and payments; a new budget and management inormation system and

a costing by activity system; in addition to a unied chart o accounts or the BM&FBOVESPA

group and the ormation o a corporate risk department.

These planned initiatives, coupled with those that have been implemented previously, will

enhance our the quality o internal controls structure and nancial reporting procedures,

ensure the reliability o our internal processes, whereas giving us the ability to capture gains

rom eciency, and reinorce our dependability vis--vis customers and suppliers.

a) Deciencies and recommendations on internal controls included in the

independent auditors report.

Having received preliminary internal controls report prepared by our independent auditors,

and considered their ndings and recommendations, we discuss below those that we believe

to be their more meaningul recommendations:

Issue raised Recommendation:

The auditors nd that although BSM is awholly-owned subsidiary o BM&FBOVESPA, theinvestment in this company is recorded at theacquisition cost.

The Company should reconsider the consolidationprinciples pursuant to which it prepares nancialreports or compliance with the express requirementso Brazilian Corporate Law with regard to BSM.


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The auditors note that approximately 700meters separate the data center located at RuaXV de Novembro, in downtown So Paulo, and

the backup data center acility located at RuaFlorncio de Abreu, also downtown in So Paulo,which is not in keeping with best recommendedpractices and international standards, since thesepropose it is advisable or the recovery location tobe suciently aar to ensure the backup systemwill not be exposed to similar risks as the primarydata center in case a disaster were to disable theprimary location.

The Company should reconsider location o thecontingency data center to ensure the primary andbackup data centers are appropriately aar and oer

reasonable saety margin.

The auditors remark the ollowing regarding ourbusiness continuity and IT contingency plan:Absence o a business impact analysis, or BIA,dening recovery priority requirements regardingkey business processes.The business continuity and IT contingency planwas not released or publication.Absence o business continuity plans or the RM,TEM, SGR, CTB, EB and SRE systems.

The business continuity and IT contingency planshould be revised or improvements and the Companyshould consider the ollowing:(i) conducting business impact analysis under disasterand contingency scenarios;(ii) gradually raising complexity levels to test ormultiple and increasingly adverse disaster scenarios,assigning ever shorter recovery point objectives(RPO) and recovery time objectives (RTO), which oran eective response demand well trained and highlyintegrated teams, quite amiliar with the recoveryprocess and the procedures or specic crisis types;(iii) establishing a crisis management plan and processto continually improve the plan, the procedures andthe documentation related to damage assessment,recovery and validation; to manage and circulate the

plan and the updates, and to manage team training.

1.4 In the event an oering o securities has been carried out, Management should

discuss:

a) how the proceeds o the oering have been used;

b) whether any o the proceeds o the oering were materially diverted rom the

proposed allocation and use stated in the relevant oering documents;

c) i a diversion did occur, which were the reasons determining this event.

Not applicable.

1.5 Management is expected to discuss o-balance sheet arrangements, and

indicating:

a) O-balance sheet items (assets and liabilities directly or indirectly held by the

registrant), such as:

Collaterals or transactions

Transactions carried out in BM&FBOVESPA markets require customers to provide guarantees

in the orm o margin deposits, and consist mainly o cash, government bonds, private debt

securities, sureties and stocks, among other things. These collaterals are segregated and


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treated o-balance sheet, except or cash collaterals deposited as margin. For additional

inormation, see the discussion under item 10.9 below.

i) Operating lease arrange

Annual and Extraordinary Shareholders' Meeting - 04.20.2010 - Management Proposal

Documents

Transcript of Annual and Extraordinary Shareholders' Meeting - 04.20.2010 - Management Proposal