Slide 1: Corporate Disclosure Conference
Corporate Disclosure Conference Rio de Janeiro, Brazil March 28, 2008
Slide 2: Slide 2
Slide 3: Corporate disclosure and the regulatory environment: Presenters
Corporate Disclosure Conference Corporate disclosure and the regulatory environment Rio de Janeiro, Brazil March 28, 2008 1 Presenters Moderator Pedro Freitas Vale, General Council Panelists Marcelo Trindade former President of CVM João Batista Fraga Bovespa, Institutional Relations Director Nor
Slide 4: Bear Stearns
Corporate Disclosure Conference Corporate disclosure and the regulatory environment Rio de Janeiro, Brazil Stephen Wallenstein March 28, 2008 Bear Stearns Time Line of Executive Statements 1
Slide 5: Background; Denial of Liquidity Problems
Background ► January 12th, 2007 Share price: $171.51. ► January 9th 2008 Alan Schwartz named new CEO ► January 11th Share price: $79.90 Denial of Liquidity Problems ► Monday March 10th Shares close at $62.30. Schwartz says: “Bear Stearns’s balance sheet, liquidity and capital remain strong,”
Slide 6: Assurance that liquidity problems have been addressed; JP Morgan buy out offer
Assurance that liquidity problems have been addressed ► Friday March 14th Shares close at $30.00 Bear agrees to a Secured Loan from JPMorgan Chase. Schwartz says: "Bear Stearns has been the subject of a multitude of market rumors regarding our liquidity. We have tried to confront and dispel thes
Slide 7: Corporate Disclosure and the Confidentiality of Negotiations: Presenters
Corporate Disclosure Conference Corporate Disclosure and the Confidentiality of Negotiations Rio de Janeiro, Brazil March 28, 2008 1 Presenters Moderator Fabio Barbosa Vale, Chief Financial Officer Panelists Marcos Pinto CVM-Comissão de Valores Mobiliários, Director Carlos Conceição Clifford Cha
Slide 8: The UK Perspective
The UK Perspective Vale Corporate Disclosure Conference Introduction Key Principles The UK Market Abuse Regime and Disclosure Rules The City Code on Takeovers & Mergers Confidentiality of Negotiations 4 2
Slide 9: Key Principles; Disclosure Rules
Key Principles Limited periodic disclosure Continuous disclosure obligations Disclosure Rules Market Abuse Special provisions apply on takeovers – The Takeover Panel 5 Disclosure Rules Obligation to announce inside information as soon as possible (DTR 2.2.1) Establish effective arrange
Slide 10: Market Abuse Relating to Disclosure; UK Sanctions
Market Abuse Relating to Disclosure Improper disclosure disclosure of inside information otherwise than in proper course of employment, profession or duties eg. selective briefings or disclosure in social contexts Misuse of information improper disclosure of information not generally avail
Slide 11: Recognising Inside Information in Practice
Recognising Inside Information in Practice Inside information is information: of a precise nature not generally available which would have a significant effect on the price of the Company’s securities The "reasonable investor test" If and only if the reasonable investor would be likely t
Slide 12: Announce as Soon as Possible; Grounds for Delay
Announce as Soon as Possible The basic obligation is to release inside information as soon as possible Must be clear, not misleading and through prescribed channels Directors should "carefully and continuously monitor" whether changes in circumstances require announcement 11 Grounds for Delay
Slide 13: Selective Disclosure; Rumours/Press Speculation
Selective Disclosure Where publication delayed selective disclosure is permitted to those: under a duty of confidentiality who have a valid reason to receive the information For example advisers, transaction counterparties, lenders, key shareholders 13 Rumours/Press Speculation Where press
Slide 14: The US Perspective
The US Perspective Confidential Negotiations and the Law of Corporate Disclosure—U.S. Perspective The case of Veba and Viag Basics under U.S. law How a U.S. lawyer analyzes confidential negotiations 16 8
Slide 15: The Case of Veba and Viag
The Case of Veba and Viag Two German power companies, merged in 1999 to become E.ON AG Veba ADRs listed on NYSE April 1999: Veba and Viag begin discussing merger June 28, 1999: Veba and Viag agree on a policy of “absolute denial” 17 The Case of Veba and Viag, continued July 29, 1999: First
Slide 16: The Case of Veba and Viag, continued; The Carnation Case
The Case of Veba and Viag, continued September 28, 2000: SEC settlement with E.ON AG (formerly Veba) SEC finds that E.ON violated U.S. federal law SEC orders E.ON to cease and desist No other sanctions No findings against any individual Company argued that the press would understand its
Slide 17: The Fluor Case; Basics Under U.S. Law
The Fluor Case February 28: Fluor Corp. signs a major new contract Embargo on publicity until March 10 March 3-7: Fluor makes no comment Extremely high trading volume; widespread rumors, repeated inquiries NYSE suspends trading Friday, March 7 Monday, March 10: Fluor announces new contra
Slide 18: Basics Under U.S. Law, continued
Basics Under U.S. Law, continued As to purchases or sales of securities No material misstatement or omission Insider trading liability As to periodic reports No material misstatement or omission If you’re buying, selling, or reporting, silence about a material development is usually not
Slide 19: Basics Under U.S. Law, continued; Six Questions a U.S. Lawyer Will Ask
Basics Under U.S. Law, continued Exchange rules NYSE 202.05: release quickly any news that might materially affect the market NYSE 202.01: premature public announcement may properly be avoided NASDAQ 4310 and 4320: prompt disclosure of any material information, absent unusual circumstances
Slide 20: Three Contrasts With Brazilian Law; Basics Under Brazilian Law
Three Contrasts With Brazilian Law There is no equivalent to the diretor de relações com investidores There is no general duty to disclose material developments The class action lawyers are on the lookout 27 Basics Under Brazilian Law Duty to inform (dever de informar) Corporation Law Di
Slide 21: Hypotheticals
Hypotheticals Typical Scenario A Major acquisition, negotiations top secret, probability high Buyer wants to sell debt securities Can buyer keep the deal confidential? What if the probability is only medium? 30 15
Slide 22: Typical Scenario B; Typical Scenario C
Typical Scenario B Major acquisition, negotiations top secret, probability high Buyer regularly repurchase its shares on the open market Can buyer keep the deal confidential? 31 Typical Scenario C Major acquisition, negotiations top secret, probability high Buyer’s quarterly report is due
Slide 23: Typical Scenario D; Typical Scenario E
Typical Scenario D Major commercial contract being negotiated, negotiations top secret, probability high Contract will be a significant competitive win for the public company No quarterly report is coming up, no purchases or sales of securities Can public company keep the negotiations confid
Slide 24: Typical Scenario F; Typical Scenario G
Typical Scenario F A major customer has said it no longer wants to purchase services from the company Will lead to a significant gap in income Company is currently negotiating with other potential customers to fill that gap – but negotiations will not be concluded soon Can company delay anno
Slide 25: Corporate disclosure and guidance: Presenters
Corporate Disclosure Conference Corporate disclosure and guidance Rio de Janeiro, Brazil March 28, 2008 1 Presenters Moderator Elizabeth Machado CVM, Superintendent Panelists Arleu Anhalt FIRB-Financial Investor Relations Brazil, Chief Executive Officer Roberto Castello Branco Vale, Investor Rel
Slide 26: Corporate Disclosure and Guidance
Corporate Disclosure Conference Corporate Disclosure and Guidance Arleu Aloisio Anhalt Rio de Janeiro, Brazil FIRB–Financial Investor Relations Brazil March 28, 2008 © 2007 - FIRB - Todos os direitos reservados Corporate Disclosure e Orientação (Guidance) Apresentação: Arleu Aloisio Anhalt
Slide 27: Guidance como instrumento de gestão; Valor de Mercado - Bovespa
Guidance como instrumento de gestão ATUAÇÃO DE RI Falar a Valorização coisa certa potencial Desconto aplicado pelo Falar com mercado o público certo Valuation da Empresa Valuation dos Analistas Valor de Mercado © 2007 - FIRB - Todos os direitos reservados Valor de Mercado - Bovespa Upside de Valores
Slide 28: Valor de Mercado – VCP; Valor de Mercado – CEMIG
Valor de Mercado – VCP Upside de Valores em R$ bilhões 23% Valuation dos Analistas Desconto do Mercado (para Dez/08) Valor de Mercado (Dez/07) 2,2 11,5 Estudo envolveu: 11 instituições financeiras 9,3 Fonte: FIRB / Reuters Knowledge Obs: A VCP fornece guidance ao mercado regularmente © 2007 - FIRB -
Slide 29: Comparativo Brasil x EUA
Comparativo Brasil x EUA A empresa fornece guidance? Brasil EUA 24% 29% 76% 71% Não Não Sim Sim Fonte: 5º Enquete IBRI: Guidance Fonte: NIRI 2007 Earnings Guidance Practice Survey Results © 2007 - FIRB - Todos os direitos reservados Comparativo Brasil x EUA Tipo de guidance Brasil EUA 77% 76% 71% 50
Slide 30: Comparativo Brasil x EUA: periodicidade do guidance
Comparativo Brasil x EUA Periodicidade do guidance Brasil EUA 58% 51% 42% 19% 18% 15% 9% 3% 2% 1% No meio do Trimestral Anual Outros necessário atualizações atualizações Anual Trimestral Eventual Anual, com Anual, com trimestre Quando eventuais Fonte: 5º Enquete IBRI: Guidance. trimestrais Fonte: NI
Slide 31: Fornecimento de guidance no Brasil - Novatas
Fornecimento de guidance no Brasil - Novatas Desempenho das 64 ações que estrearam na Bovespa desde janeiro de 2007 © 2007 - FIRB - Todos os direitos reservados Fornecimento de guidance no Brasil - Novatas Fornecem Guidance Tipo de Guidance 17% 29% 28% 55% 71% Operacional Não Operacional e Financeir
Slide 32: Pesquisa FIRB - Visão dos Analistas
Fornecimento de guidance no Brasil - Novatas Desempenho das 64 ações que estrearam na Bovespa desde janeiro de 2007 © 2007 - FIRB - Todos os direitos reservados Pesquisa FIRB - Guidance no Brasil - Visão dos Analistas Pesquisa realizada com analistas Você é a favor do fornecimento das seguintes inst
Slide 33: Pesquisa FIRB - Guidance no Brasil - Visão dos Analistas
Pesquisa FIRB - Guidance no Brasil - Visão dos Analistas Vantagens • Menor volatilidade no preço das ações • Maior confiança e aproximação com os profissionais do mercado • Aumento da cobertura da empresa • Ação mais próxima do preço justo • Redução do custo de capital • Alinhamento de projeções Des
Slide 34: Índice de Transparência; CODIM
Índice de Transparência* Pesquisa considerou 6 categorias de informações 1) Informações gerais: produção, vendas e mercado de atuação 2) Relação da empresa com empregados e administradores 3) Informações não-financeiras: visão sobre o segmento de atuação, participação de mercado e volume de vendas 4
Slide 35: Orientação guidance - CODIM
Orientação guidance - CODIM 1) Política de Guidance - Período adotado (anual/trimestral e prazo) - Tipo de guidance (qualitativo e/ou quantitativo) - Restrição no quiet period Guidance classifica-se como Fato Relevante 2) Equidade - Divulgação ampla, igual e simultânea para todos os agentes do merca
Slide 36: Conclusões e Recomendações; Under promise, over deliver
Conclusões e Recomendações Guidance complementa programa de Relações com Investidores O fornecimento de guidance deve contemplar: Experiência da empresa com projeções Sazonalidade de resultados define periodicidade (anual ou trimestral) Práticas usuais do setor Compromisso de longo prazo Consistênci
Slide 37: Over promise, under deliver; Valorização clientes FIRB
Mas na prática o erro mais comum é... Over promise, under deliver © 2007 - FIRB - Todos os direitos reservados Valorização clientes FIRB De 2001 a 2007 1500 A FIRB auxiliou operações de estruturação de empresas em diversos setores 1273 1250 1000 750 637 500 510 351 250 0 jan-01 jul-01 jan-02 jul-02
Slide 38: Arleu Aloisio Anhalt
Arleu Aloisio Anhalt Sócio fundador da FIRB, já coordenou projetos de Por sua atuação na área de Relações com Investidores , estruturação financeira de mais de 100 companhias. recebeu por dois anos consecutivos (1996 e 1997) o prêmio Executivo com larga experiência nas áreas de finanças, “Os Destaqu
Slide 39: FIRB - Financial Investor Relations Brasil
FIRB - Financial Investor Relations Brasil Rua Funchal, 375 São Paulo - SP www.firb.com Arleu Aloisio Anhalt Fone (11) 38976899 arleu.anhalt@firb.com Francisca Stella Fagá Fone (11) 38976857 francisca.stella@firb.com 27 © 2007 - FIRB - Todos os direitos reservados
Slide 40: The earnings guidance games
Corporate Disclosure Conference Corporate Disclosure and Guidance The earnings guidance games Roberto Castello Branco Rio de Janeiro, Brazil Vale March 28, 2008 1 Disclaimer “This presentation may contain statements that express management’s expectations about future events or results rather than hi
Slide 41: A short history; The Brazilian case
A short history Earnings guidance became more common in the US in the late 90’s after legislation protecting companies from liability derived from projections. Regulation FD – public disclosure of guidance. Downward trend in the 21st century. 3 The Brazilian case 76% of listed companies prov
Slide 42: Why companies supply guidance to analysts?; The games
Why companies supply guidance to analysts? Project an image of a well-managed business with a fairly predictable earnings stream. End-goal is to minimize stock price volatility and cost of capital. 5 The games Earnings guidance – managing information and expectations to guide analysts and prof
Slide 43: The negative consequences; the Enron case
The negative consequences Company management => biased towards maximization of near term earnings. Creating a potential for negative effects on corporate strategy. Investors => potential to be mislead about the risk of holding a company’s stock. Sell-side analysts => potential to undermine the
Slide 44: The potential benefits of guidance; The reaction against guidance
The potential benefits of guidance Mckinsey found no evidence that guidance affect valuation multiples, shareholder returns or stock price volatility¹. Academic literature: no evidence of an increase in share price volatility or a decrease in analyst following². ¹ “The misguided practice of earn
Slide 45: The downward trend of earnings guidance in the US; The experience of Vale
The downward trend of earnings guidance in the US Companies providing earnings guidance 77% 71% 66% 51% 2003 2005 2006 2007 Source: NIRI – National Investor Relations Institute 11 The experience of Vale Focus on maximization of understanding. No quantitative guidance, policy made public on May 1
Slide 46: Analyst forecast error of Vale's quarterly EBITDA and EPS
Analyst forecast error of Vale’s quarterly EBTIDA in US$ million 400 300 µ+σ=240.5 200 µ=131 100 µ−σ=21.5 0 03 04 04 04 04 05 05 05 05 06 06 06 06 07 07 07 07 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q Source: Vale 13 Analyst forecast error of Vale’s quarterly EPS in US$ per share 0.14 0.12
Slide 47: Vale: a global leader
: a global leader www.vale.com rio@vale.com 15 8