Overview

The following table sets forth the principal holders of M. Dias Branco outstanding common shares and their respective shareholdings.

Total Shares of the Company: 339,000,000

M. Dias Branco shares are traded on the Brazilian stock exchange B3 in the listing segment of the Novo Mercado (New Market) under the ticker MDIA3.

In 2000, the B3 (formerly BM&FBOVESPA) introduced three special listing segments, aiming at fostering a secondary market for securities issued by Brazilian companies with securities listed on the B3, by prompting such companies to follow good practices of corporate governance. The introduced listing segments are: Level 1 and Level 2 of Differentiated Corporate Governance Practices, and Novo Mercado. The listing segments are intended for the trading of shares issued by companies voluntarily undertaking to abide by corporate governance practices and disclosure requirements in addition to those already imposed by Brazilian law. These rules generally increase shareholders’ rights and enhance the quality of information provided to shareholders.

The Novo Mercado is the most demanding listing segment at B3, and its rules require compliance with the following requirements, among others:

• Issue only common shares;
• Grant all shareholders the right of tag-along in case of transfer of controlling interest in the Company, with the acquirer of control being required to hold a public offer for acquisition of the shares from other shareholders, offering the same price paid for shares of the controlling block;
• Ensure that M. Dias Branco’s shares, representing at least 20%, or 15% under specific conditions, of the total capital, are effectively available for trading in the market;
• Adopt offering procedures that promote widespread ownership of shares;
• Comply with minimum quarterly disclosure information standards;
• Follow stricter disclosure policies regarding transactions made by controlling shareholders, directors, and officers involving securities issued by the Company;
• Submit any shareholders’ agreements and stock option plans to the B3;
• Disclose a schedule of corporate events to the shareholders;
• Limit the mandate of all members of M. Dias Branco’s Board of Directors to a maximum of two years, with a minimum of five members, of which at least 2 members or 20% of them should be independent;
• Within two years after listing shares on the Novo Mercado, prepare annual financial statements in English, including cash flow statements, in accordance with international accounting standards, such as U.S. GAAP or International Financing Report Accounting Standards (IFRS);
• Adhere exclusively to the arbitration rules of the B3, pursuant to which the exchange, the Company, the controlling shareholder, the management, and the members of fiscal council, if any, agree to resolve by arbitration any dispute or controversy related to the Novo Mercado listing rules;
• Hold at least once a year a public meeting with analysts and other interested third parties to disclose information regarding its financial and economic situation, projects, and prospects;
• Provide in its Bylaws that the positions of Chairman of the Board of Directors and CEO or Chief Executive Officer of the company may not be held by the same person;
• Prepare and disclose the internal rules of the Board of Directors, its advisory committees, and the fiscal council; see the internal rules here;
• Prepare and disclose the following policies or equivalent formal documents, approved by the Board of Directors: compensation policy, policy for appointment of members to the Board of Directors, its advisory committees and statutory officers, risk management policy, related party transactions policy, and securities trading policy; see the policies here;
• Simultaneously disclose, in English, alongside their respective Portuguese disclosure: relevant information, dividend information, and communication of financial results;
• Implement compliance, internal controls, and corporate risk functions, with no amassment of operational activities; and
• In case of a decision to delist from the Novo Mercado, the issuer´s controlling shareholder must make a public offer to acquire shares in circulation at the economic value determined by an appraisal report prepared by an independent specialized company.

To access the full text of the Novo Mercado’s regulation, click here. (Most recent version available in Portuguese only)

The M. Dias Branco’s shares guarantee to their holders the following rights:

• The right to vote on the Company’s General Meetings
• The compulsory minimum dividend right, in each fiscal year, not less than 25.0% of net profit of that year, adjusted pursuant to article 202 of Law 6,404, of December 15, 1976 and later changes (“Lei das Sociedades por Ações”);
• In case of directly or indirectly control sale of the Company, even by successive operations, it must be contracted under suspensive or resolutive condition that the acquirer will realize a tender offer to the other shareholders regarding the conditions and terms of the current legislation and New Market (“Novo Mercado”) rules, ensuring equal treatment among the Selling Controlling Shareholder and the others shareholders;
• In case of M. Dias Branco deregistering as a publicly-held company or delisting from the New Market (“Novo Mercado”) of BM&FBOVESPA, the right to sell its shares on tender offer launched by the Selling Controlling Shareholder or by M. Dias Branco, for at least the economic value calculated by an appraisal report made by an specialized and independent firm (that has no connection with the Company, its management, controlling shareholders and that is not under its decision power). The firm must have proven experience and will be chosen during the Shareholders Meeting from a list of three firms presented by the M. Dias Branco’s Board of Directors;
• All the other rights assured to the shares, pursuant to BM&FBOVESPA New Market Regulation (“Regulamento do Novo Mercado da BM&FBOVESPA”), M. Dias Branco Bylaws and the Corporate Law (“Lei das Sociedades por Ações”).

The Brazilian securities markets are regulated by the CVM, which has regulatory authority over the stock exchanges and securities markets, by the National Monetary Council and by the Central Bank, which has, among other powers, licensing authority over brokerage firms and regulates foreign investment and foreign exchange transactions.

The Brazilian securities markets are governed by the principal law governing the Brazilian securities markets, by the Brazilian Corporation Law, and by regulations issued by the CVM, the CMN and the Central Bank. These laws and regulations provide for, among other things, disclosure requirements, restrictions on insider trading and price manipulation and protection of minority shareholders. However, the Brazilian securities markets are not as highly regulated and supervised as U.S. securities markets.

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

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

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

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

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

Such requirements include provisions that:

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

To access the full text of the CVM’s Resolution, click here. (Portuguese only)