GLOSSARY

Financial Services

ADR (American Depositary Receipt) : Dollar-denominated certificates issued and traded in the US markets, giving non-American companies access to the American capital . They represent the company's shares traded in its country of origin, with each ADR corresponding to a determined number of these shares (see ADR Ratio). To launch an ADR program, the company must hire a Depositary in the United States, as well as its Custodian Bank in its own country. There are three different levels of ADR, each with distinct requirements regarding disclosure, transparency and compliance with the rules and regulations of the US regulatory bodies: Level I ADR - also known as OTC (Over-the-Counter) and traded only on the US over-the-counter market (i.e. not on the stock exchanges). They possess the lowest level of regulatory and disclosure requirements. The creation of a Level I ADR program is considered to be the first step in the issuer's entry to the American , although no new shares are issued. Level II ADR - traded on the US stock exchanges (see NYSE, NASDAQ, Amex), but also without the issue of new shares nor the need to register a public offering. Their regulatory and disclosure criteria are much stricter than for Level I, requiring the preparing and filing of an F-6 Form upon registration and, subsequently, of 6-K Forms detailing all material facts and releases published in the company's country of origin, plus the 20-F Annual Report Form, which is drawn up in line with US GAAP.

ADR Ratio: Expresses the ratio between a company's ADRs and its shares in its country of origin.

AMEX American : America's second largest stock exchange after the NYSE (New York Stock Exchange), handling around 10% of the country's total traded volume.

Amortization: The gradual reduction of a via periodic payments previously agreed upon between creditor and debtor. It also refers to the periodic reduction of an asset's value by a certain percentage over several years. In accounting, it is also used to designate amounts withdrawn annually by a firm's controlling stockholder to cover the depreciation of certain assets, such as property, plant and equipment. In the case of limited-liability companies, it refers to the distribution of sums among the stockholders to which they are entitled should the company be wound up.

Arbitrage: A financial strategy that aims to take advantage of mismatches between the current and future or two assets or markets.

Asset Quality: The quality of an asset, assessed by the number of payed back to the bank.

Assets: A group of values representing a company's capital and equity investments. In the case of companies in general, it includes bank balances, , financial investments, product inventories, accounts receivables, vehicles, buildings, machinery, trademarks, etc. In the case of , it refers to operations, marketable securities, interbank liquidity operations and others. In the balance sheet, assets are divided into current, -term and permanent.

Average Real : The difference between Selic rates and average inflation.

Balance Sheet: An accounting statement covering one year, detailing a company's economic, financial and equity situation and constituting the official document winding up the accounting operations for the so-called fiscal year. The accounts are not shown as and debits (as in the trial balance), but as assets and liabilities. The balance sheet only has legal value when it is taken from the firm's official books and when signed by its partners or directors and by the accountant. In the case of a balance sheet for a smaller period (one month, three months or six months), the correct term is trial balance.

Basic Interest Rate (SELIC Rate): The basic interest reference rate used by the government, fixed by the Monetary Policy Committee (Copom).

Benchmark: A term used in the to determine an index used as a reference for comparing investments. A foreign-exchange fund, for example, may have the variation in the dollar as its benchmark.

Beta: A means of measuring the volatility of a or portfolio of securities in comparison with the market as a whole. Beta is calculated using regression analysis. A beta of 1 indicates that the security's price will move with the market. A beta greater than 1 indicates that the security's price will be more volatile than the market. A beta less than 1 means that it will be less volatile than the market.

Bias (systematic error): - Statistics - the systematic distortion between the measurement of a statistical variable and its real value. The introduction of bias into a statistical calculation may be due to the imperfection or distortion of the sample under analysis or of the evaluation method itself.

Bid: The price offered for the purchase (or sale) of a share lot.

BIS Ratio: Net Worth/Loan Portfolio; Indicates how much leverage a bank has. If the bank makes too many loans, it might not be able to honor its term debt.

Block Trade: The sale or purchase of a large quantity of securities.

Bonus: A free distribution of new shares to existing stockholders, proportional to those holdings, when a company incorporates capital reserves and income. Since the stock-market price is adjusted accordingly, the company's stockholders' equity does not change.

Book Value: Calculated by dividing the net worth of a company by the number of shares outstanding. This is considered the accounting value of a firm's stock, the value of the company's assets a shareholder would theoretically receive if a company were liquidated.

Book Value (BV): The book value of a given share refers to the company's stockholders' equity divided by its total number of shares. For example, a firm with 5 million shares and a stockholders' equity of R$ 10 million would have a book vale per share of R$ 2.00. Bradies: Emerging-country foreign debt bonds, rescheduled in line with the Brady Plan (in reference to the former US Treasury Secretary, Nicholas Brady), which restructured these countries' debt by issuing bonds to replace it. The exchange ratio of the bonds was lower than that of the original loans.

Brokerage Firms: Financial institutions authorized to trade marketable securities or futures contracts during trading sessions, accredited by the Central Bank and members of the stock and the futures exchanges.

Call : Agreement that gives an investor the right but not the obligation to buy a stock, , or other instrument at a specified price within a specific time period.

Capital Call: When a company subscribes new shares, with or without a premium, for a capital increase.

Capital Gains: All profits obtained from commercial transactions due to capital and not as a result of work, including the purchase and sale of shares, rent, the sale of vehicles or property and interest on financial investments, among others.

Capital Increase: The incorporation by a company of new funds or capital reserves, approved by a Special Stockholders' Meeting. It is normally effected via a bonus (or increase in the shares' par value) and/or a rights subscription for the stockholders, but can also be effected by the incorporation of other companies.

Capital Market: A market handling the supply, demand and price of marketable securities. Law 4,728 of 07/14/1965 regulates the and established development targets, while Decree 69,554, of 11/18/71, created the capital-market development fund.

Capitalization: The sum of a corporation's stock, long-term debt and retained earnings. It can also be a company's outstanding shares times its share price - known as market capitalization.

Cash and Cash Equivalents: An Asset account in a company's balance sheet, comprising company resources with liquidity, such as money, investment funds or securities that can be sold immediately.

Cash Flow: Refers to the inflow and outflow of company cash. The concept is also the heading for a table showing the volume and date of estimated cash inflow and outflow for a future period (days, months or years), considered to be of prime importance in ongoing financial programming or when a new project is about to be implanted. In the latter case, cash-flow analysis allows one to determine the undertaking's break-even point.

CDB: Portuguese abbreviation for Bank Deposit Certificate, the oldest and most-used funding security issued by commercial, investment, development and multiple banks with this type of portfolio, officially known as time deposits. The funding obtained are then onlent to clients. The minimum term is 30 days for previously-fixed (pre-fixed) rate securities, whose nominal rate has a built-in inflationary expectation, since the real gain (nominal less inflation) will only be known on the date of redemption. For post-fixed rate securities, always in TR (Referential Rate), the minimum term is 4 months date-to-date. (Source: Fenaban) CDI: Portuguese abbreviation for Interbank Deposit Certificate, a certificate traded exclusively between banks. These transactions are closed electronically and registered in the computers of the institutions involved and in the CETIP terminals. Most operations are negotiated for one day. The average daily rate of a one-day CDI is used as reference for interest rates. They are therefore also used as a benchmark for evaluating investment-fund returns.

CETIP: Portuguese abbreviation for System for the Custody and of Private Securities, CETIP is an organized over-the-counter market for registry and negotiation of securities. A non-profit organization that was jointly settled by financial institutions and the Brazilian Central Bank, in March 1986, to ensure safer and more agile operations in the Brazilian financial market.

Charge Off: a) A debt that is deemed uncollectable and written off. Also known as a bad debt. b) A one time expense incurred by a company that negatively affects earnings.

Circuit Breaker: A stock-exchange mechanism whereby the trading session is immediately suspended every the time the index drops by ten percentage points.

Combined Ratio: Index used by insurance companies referring to total operating, administrative and selling expenses divided by premiums earned. The lower this ratio, therefore, the more efficient the company is.

Commercial Dollar: The dollar value used as a parameter for import/export operations and many financial operations, such as investments in Brazil, dividend remittances, foreign capital inflow, interest payments, etc.

Committed Operation: A financial investment whereby a bank sells public or private securities to a client, simultaneously undertaking to repurchase the securities in question, with a parallel commitment by the client to sell, within a specified period.

Commodity: Any bulk good traded on an exchange or in the cash market. Some examples include grain, oats, gold, oil, beef, silver, and natural gas.

Commodity / : In the financial market it refers to a particular product, generally agricultural or mineral, which is of major global economic importance, being widely traded between importers and exporters, such as oil, soybean, meat, coffee, cotton, steel, copper, etc.

Compulsory Deposit: How much a bank has to deposit in the Central Bank relative to what is deposited in the bank itself.

Copom: Portuguese abbreviation for the Monetary Policy Committee, set up on June 20, 1996, to establish monetary-policy directives and define the Selic rate, and occasionally its bias, to be used between one of its monthly meetings and the next.

Corporate Governance: The continuous effort to ensure that the corporate management aims are in line with the interests of the stockholders. This involves the practices of and the relations between Stockholders/Quotaholders, Board of Directors, Executive Board, independent auditors and a Fiscal Advisory Board. Good corporate governance allows for better management and the monitoring of executive officers' performance. Companies adopting such practices are guided by transparency, accountability and equitability.

CPMF: Portuguese abbreviation for Provisional Tax on Financial Transaction, levied at 0.38% on any debit from a current bank account, whether individual or corporate. The resources are used to finance federal government projects. The tax reforms, currently being debated in Congress, envisage making this duty a permanent feature.

Credit Risk: The risk that the issuer of a given security (, promissory notes, commercial papers, etc.) may not honor the principal and/or interest payments.

Cum-rights share: A share whose rights - dividends, bonuses and subscription - have not yet been exercised. See also Ex-rights share.

CUSIP: An identification number given in the United States to a share or security issue to facilitate the of operations, so called because the system is run by the CUSIP - Committee on Uniform Security Identification Procedures.

Custodian Bank (ADRs): Responsible for issuing, canceling, selling, repurchasing, redeeming and reappraising ADRs, collecting and distributing ADR-holders' rights and controlling the foreign-exchange operations associated with ADR programs.

Custody Fee: The fee charged by a brokerage house for the maintenance of of the clients under its responsibility.

Debenture: backed only by the worthiness of the borrower. There is no collateral, and the agreement is documented by an indenture.

Debentures: Securities which represent a loan contracted by a company, aiming at the obtainment of funding to investments or working capital financing, through a public or private issuance. The is a versatile security, which allows the company to optimize it indebtness profile, as it can be a long-term security and can be gradually amortized. (Source: Bovespa). There are two types of debentures: Simple, which merely generate returns on the value of the investment, and Convertible, which, should their holders so wish, can be converted to shares at a specified time and under specified conditions.

Default: Declaration of a debtor's insolvency, decreed by creditors when are not paid within the agreed-upon terms.

Depositary Bank (ADRs): A US-based bank responsible for all share-issue and transfer services for a DR (Depositary Receipt) program, including stockholder registration, control and also dollar-dividend payments.

Derivatives: Financial operations whose trading value is derived from the asset which is being used as its reference, as stocks, foreign exchange or interest rates. They cover a wide spectrum of operations, including forward transactions, futures, options and swaps, involving commodities or financial assets, such as interest rates, future , etc. Given the increasing globalization of financial activities, their ample use worldwide has lead to growing worries among central banks, monetary authorities, banking overseers and specialists, given the difficulty of assessing their size and their consequences in terms of risk.

Derivatives: A security, such as an option or , whose value depends on the performance of an underlying security.

DI-OVER: Released by the CETIP, it is the average interbank deposit rate for one business day. The calculation method excludes operations between financial institutions belonging to the same group (ex-group concept).

Discount: The depreciation of the nominal value of a security or the official price of a merchandise over their real market value.

Discount Line: A monetary-policy instrument used by the Central Bank to regularize the liquidity of the banking system.

Dividends: That part of a company's profits corresponding to each share. Once the firm's profits have been calculated according to the financial statements for the fiscal year established in the by-laws, management must propose what should be done with this income at a stockholders' meeting. If it is distributed among the stockholders, the resulting payments are known as dividends.

Dow Jones Industrial Average: The index used to measure the performance of the US stock market. With the exception of Microsoft and Intel, the 30 companies making up the index are listed on the NYSE, are major performers in their respective industries (blue chips), reflecting the American economy.

DRI: - Portuguese Abbreviation of Investor Relations Director: A member of the executive board of listed companies whose duty is to establish and maintain relations with investors and stockholders. Such directors are responsible for disclosing relevant information to the market, as well as other corporate communications and clarifications and attending the interests of stockholders.

Dumping: The sale of products at a price lower than their manufacturing cost in order to eliminate competition and gain market share.

Earnings Per Share (EPS): A company's net income divided by the total number of its shares.

Equities: Financial investments whose returns are uncertain, due to the greater volatility of the assets comprising them.

Eurobonds: Securities whose par value is expressed in US dollars or other , issued by banks via foreign institutions, whose resources are used to fund loan operations in Brazil. These securities are medium or long-term, have fixed or floating rates and may possess a premium or discount, depending on market demand. The eurobond market is an important source of capital for multinational companies and governments, including those of the developing nations. Exercise of options: When option holders exercise their right to purchase or sell the assets that are the object of the option, at the exercise price.

Export Notes: The assignment of credit taken out by an exporting firm guaranteed by future shipments. Based on this future revenue, the company issues a forward note for the investor. In practical terms, the company borrows money in reais, but pays the investor the principal corrected by the exchange rate variation.

Ex-rights share: A share that does not have right to the next dividend payment. An outstanding share becomes ex-rights betwen the release of the dividend's value and its effective payment date.

FED: Federal Reserve, the US Central Bank.

FGC: Portuguese abbreviation of Fundo Garantidor de Créditos - A private entity, whose regulations are approved by the National Monetary Council and which administers a protection mechanism for current and savings account-holders and financial-market investors. The guarantee, limited to R$ 20,000, takes into account the sum of all deposits in checking and savings accounts and CDBs.

FGV-100: An index prepared by Fundação Getúlio Vargas (FGV) comprising Brazil's 100 most- traded shares, excluding government-owned companies and banks, i.e. the theoretical portfolio contains private-sector firms only, selected on grounds of their corporate quality and the liquidity and/or traded volume of their shares.

FIESP: Portuguese abbreviation of Industry Federation of São Paulo State.

FIF: Portuguese abbreviation of Fundo de Investimento Financeiro - A fund whose resources are invested in various markets uin line with legal limits and/or those determined by its own regulations.

Financial Market: The combined money and capital markets. It covers all transactions involving currencies and securities and the institutions that handle them: central banks, S&Ls, state banks, commercial and investment banks, brokerage firms, securities dealers, mutual funds, stock exchanges, etc.

Financial Market: The combined money and capital markets. It covers all transactions involving currencies and securities and the institutions that handle them: central banks, S&Ls, state banks, commercial and investment banks, brokerage firms, securities dealers, mutual funds, stock exchanges, etc.

FIPE: Portuguese abbreviation of Institute Foundation of Economic Research.

Fiscal Committee: Monitors a company's financial situation. It must have at least three permanent members and three alternate members who are not linked to the firm.

Fiscal Responsibility Law: Legislation which imposes rules or limits on the management of public recourses.

Fixed Income: Financial investments whose tenor and returns are known in advance. Float: Three distinct meanings, depending on the area. In banking, it refers to a check's clearing period, i.e. the gap between when a check is deposited in a bank and when it is honored. Long clearing periods are advantageous for the issuer, whose money earns interest until the check is cleared, and disadvantageous for the depositor, who must wait until the check is cleared before gaining access to the funds. As a general rule, the further away the issuer's bank is from the depositor's bank, the longer the check will take to be cleared. In the investment area, it refers to the number of shares outstanding (i.e. in circulation and available for trading with the public). A small number of shares outstanding means that the share will be more volatile, since a big purchase or sell order could substantially alter its price. Conversely, a large number of shares outstanding means less price volatility. In the financial system, float means the permanence of clients' temporary resources in the bank.

Floating Dollar: The dollar value used as a parameter for the purchase and sale of foreign currencies for the purpose of trips abroad and certain operations defined by rhe Central Bank, such as: the execution of international guarantees, swaps, the movement of overseas accounts, etc.

Floor Traders: Brokerage firm representatives who execute buy and sell orders in the stock exchange itself.

Foreign Exchange/ Risk: The risk associated with variations in the exchange rate, especially that of the dollar. These oscillations can increase or reduce the value of fund quotas depending on the strategy adopted.

Foreign Investment Fund: At least 80% of such a fund's resources must be invested in Brazilian federal debt bonds, traded abroad. The remainder can be invested in securities traded on the international market (but up to a limit of 10% in those of a single issuer).

Forward Market: Refers to stock and commodity-market transactions with settlement, agreed upon between buyer and seller, (normally) 30, 60, 90 or 180 days after the operation is completed.

Fractional Share: Less than a single share of stock. Fractional shares often result from stock splits, stock dividends and similar actions. The fractional share is either paid out in cash or credited to a dividend reinvestment plan.

Funding: The obtaining of resources by financial institutions for short, medium and long-term investments. For example, when an investor invests a given sum into a mutual fund, from the point of view of the institution in which the investment is made, this sum is considered as "funding".

Futures Market: Transactions handled by commodity and stock markets (valid, therefore, for commodities, shares and securities), implying a commitment to buy and sell, at a future date determined by the markets, specified quantities of assets at a specified price. They are designed to protect buyers and sellers against unforeseen circumstances, such as big price swings, massive speculation or chance events. GDP (Gross Domestic Product): The total value of all the goods produced and services provided within a given country's economic territory, irrespective of the nationality of the owners of the units producing goods or providing the services. It excludes intermediate transactions, is measured at market prices and can be arrived at in three ways. In the case of production, GDP corresponds to the total net value of the economy's primary, secondary and tertiary sectors, plus indirect taxes and capital depreciation, less government subsidies. From the point of view of income, it refers to the total remuneration paid within the country's economic territory in the form of wages, interest, rent and shared profits, plus unshared profits, indirect taxes and capital depreciation, less government subsidies. From the point of view of expenditure, it is the total spent by family units and the government, plus inventory variations, less imports (goods and services), plus exports. In this case GDP is also known as Gross Domestic Expenditure.

General Stockholders' Meeting: A meeting of a company's stockholders, stipulated in the its by-laws with mandatory call for meeting, for the presentation and approval of results, the discussion and voting of managerial reports, the approval of dividend payments and the election of the company's Fiscal Committee. It is abbreviated to AGO in Portuguese.

Going Public: A company goes public by means of public share issue, or IPO (initial public offering), whose main aim is to raise capital. The decision to do so should be subject to a feasibility study showing that, for a given level of the firm's activity, it would be more advisable to incur the cost of going public than to raise the necessary capital by borrowing (although it may choose do do both). The use of other marketable securities, such as convertible debentures or subscription bonuses, can be considered as a preliminary stage to a full-blown share issue. In order to become a publicly-held company, a firm must be constituted as a limited-liability corporation in accordance with Law 6,404/76 and pre-registered as publicly- traded so that its shares can be traded on the over-the-counter market. At the same time the going-public order is being held, it is possible to ask for the registry and authorization for the distribution of new securities through a public underwriting, being the analisys process the registry and the deferral in accordance to the terms of CVM Instructions 13/80 and 202/93.

Goodwill: The positive difference between the amount paid for a security and its book value. Also used to designate the positive difference between the amount effectively paid for a company and its respective book value, in the case of an acquisition.

Gross Margin: Gross profit divided by net revenue. It is one of the best productivity indicators - if we compare companies with the same activity, the one with the highest gross margin is the most productive (whether due to process efficiency, gains of scale, cost structure, etc.).

Gross Profit: The difference between net revenue and the cost of products sold.

Gross Revenue: The total amount received by a company for the sale of of its products or services, with no deductions.

Hedge: An instrument used by buyers and sellers to protect them from price swings, very common in the commodity markets. High : High rate of return. Loans on which the interest is substantial, usually taken out on the European market, are classified as high-yield. Mutual funds investing in high-yield securities normally have a high credit risk.

Holding Company: A company which owns other companies by retaining a majority of their shares. Such companies do not normally produce anything, merely concentrating control over these subsidiaries.

Home Broker: An electronic system linking investors and brokerage firms for the purpose of stock-market trading. Among other attributes, it allows investors to make buy and sell orders over the internet, gives them access to share prices and allows them to monitor portfolios.

IBGC: Portuguese abbreviation for the Brazilian Institute of Corporate Governance.

IBGE: Portuguese abbreviation for the Brazilian Institute of Geography and Statistics.

IBOVESPA: Portuguese abbreviation for the Bovespa Index. It is Brazil's most important share- performance indicator since it comprises the leading shares traded on the BOVESPA (São Paulo Stock Exchange). It is made up of a hypothetical investment (in reais) in a theoretical number of shares (portfolio) and its purpose is to serve as an indicator of average market performance. Since its shares account for more than 80% of stock-market trades and traded volume, when it moves up or down, the market as a whole can be said to be following suit.

IBRI: Portuguese abbreviation for the Brazilian Institute of Investor Relations. Founded in 1997, it is an association of professionals directly or indirectly linked to Investor Relations activities, including , marketing and communications between companies and stockholders, market analysts and institutional investors, as well other market participants and members of the Brazilian and international financial community.

IBX: The IBX, or Brazil Index measures the performance of a theoretical portfolio of 100 shares from among the BOVESPA's most traded (in terms of number of trades and traded volume). The IBX-50, whose portfolio comprises 50 shares, is a more recent creation. (Source: Bovespa)

IGC: Portuguese abbreviation for Corporate Governance Index, which measures the performance of a theoretical share portfolio comprising companies admitted to the BOVESPA's Level 1 of Corporate Governance segment. The weight of the companies in the index is reviewed every time a new company adheres to any of the Corporate Governance's levels.

IGP-DI: Portuguese abbreviation for the General Price Index - Internal Availability. Although it has the same composition as the IGP-M (see below), it is calculated by measuring prices between the 1st and 30th of each month, while the IGP-M's period is between the 21st of the previous month and the 20th of the current one.

IGP-M: Portuguese abbreviation for the General Price Index calculated by the Fundação Getúlio Vargas, following a May 1989 agreement between the FGV and the CNF (National Federation of Financial Institutions). It is a combination of the IPA-M (Wholesale Price Index), the IPC-M (Consumer Price Index) and the INCC-M (Construction Cost Index), with respective weights of 60, 30 and 10. See also IGP-DI. In this section, you can check the meaning of the main financial terms and others related to banking activities. To access the term you are looking for, click on the initials below or type it in the search mechanism.

Increase in par value: Occurs during a capital increase, when the company incorporates reserves to its capital without issuing new shares.

Inflation: A persistent increase in overall prices, resulting in a continuous decline of a currency's spending power.

Inflationary Risk: - Due to economic conditions (normally during crises) asset markets can pass through periods of restricted liquidity, i.e. when there are no buyers and/or sellers for certain assets. This makes it difficult to execute orders and also affects negotiable-asset prices.

INPC: Portuguese abbreviation for the National Consumer Price Index, the weighted average of the indices drawn up by the IBGE for 10 Brazilian metropolitan regions (Rio de Janeiro, Porto Alegre, Belo Horizonte, Recife, Belém, São Paulo, Fortaleza, Salvador, Curitiba and Brasília), plus the municipality of Goiânia. There are two versions - the expanded version, corresponding to families earning between 1 and 30 minimum wages per month, and the restricted version, corresponding to families earning between 1 and 5 minimum wages.

Insider Trading: A term used chiefly in the stock market to describe the use of privileged information (i.e. not yet known to the public) on the situation of a listed company or companies by a person privy to such information (an insider) to make huge profits from buying or selling shares. Insider trading is illegal and the penalties vary from country to country.

Interest: Interest is the remuneration paid by a borrower to a lender on the amount lent.

Interest Rate Risk: The risk associated with the possibility of a change in interest rates within the duration of a given investment. According to a Central Bank regulation, the returns from pre-fixed rate funds are calculated by the variation in the price of the securities in each fund's portfolio. If the Brazilian Central Bank increases interest rates, the current values of these pre- fixed rate securities suffer a reduction to bring them into line with the new level of interest (although their redemption value remains unaltered). This reduction is passed on to the value of the quota and, consequently, the fund's returns. Conversely, if interest rates are reduced, the current value of the securities increases.

IOF: Portuguese abbreviation for the federal Financial Operations Tax ,levied on such banking and insurance operations, such as loans, insurance premiums, etc., and also on checking account overdrafts.

IPC: Portuguese abbreviation for the Consumer Price Index calculated by the FIPE. It measures consumer-price trends in the city of São Paulo for families earning between 1 and 20 minimum wages per month. Publishes previews on a weekly basis, referring to a four-weeks period.

IPCA: Portuguese abbreviation for the Amplified National Consumer Price Index, based on the variation in the price of a basket of consumer goods for families earning between 1 and 40 minimum wages per month between the 1st and the 30th of each month. Calculated by the IBGE, it covers the same regions as the INPC (see above).

Joint Venture: An association between companies for the joint development and execution of a specific project. While the joint venture lasts, both firms are responsible for the entire project.

LBC: Portuguese abbreviation for Central Bank Bills, a post-fixed rate security with returns pegged to the overnight (one-day) interest rate. If the Brazilian Central Bank raises or lowers interest rates, the security adopts the new rate immediately.

LC: Portuguese abbreviation for Bill of Exchange, a three-party instrument whereby the issuer, or drawer, gives a second person, the drawee, an order for the payment of a certain cash sum at a specified time and place to a third party, the payee or beneficiary of the order.

Level 1 of Corporate Governance: Implanted on June 26, 2001, it is a special trading segment of the BOVESPA (São Paulo Stock Exchange) which lists only those companies whose management and controlling stockholders voluntarily undertake to observe a stricter code of practice than that determined by Brazilian legislation. The idea is to improve capital-market disclosure and encourage good corporate governance practices.

Level 2 of Corporate Governance: In order to be classified as Level 2, a company's management and controlling stockholders must accept all the Level 1 requirements, plus a much broader set of governance practices and additional rights for minority stockholders.

Leverage: The degree to which third-party resources are used to increase the possibility of gains and profits, consequently increasing the operation's risk. When applied to companies, and not to financial institutions, the greater the debt, the greater the leverage (usually referred to as capital leverage).

LFT: Portuguese abbreviation for Financial Treasury Bills, a post-fixed rate security with returns pegged to the overnight (one-day) rate. If the Brazilian Central Bank subsequently raises or lowers interest rates, the securities adopt the new rate immediately.

Liabilities: A group of values designating a company's debts and obligations. In the case of companies in general, it includes bank loans, , accounts payable, etc. In the case of banks, it refers to funding operations, like demand and time deposits, mutual funds and funding from issuances. In the balance sheet, liabilities are divided into current, long-term and stockholders' equity.

Libor: Abbreviation for London Interbank Offered Rate, the nominal interbank lending rate charged by London banks, which floats daily in line with the market.

Liquidity: Cash and cash equivalents (securities rapidly convertible into money). In accounting terms, it refers to a company's available short-term assets that guarantee the honoring of an obligation with another company or individual on a specified date. Absolute liquidity, however, applies to cash only. Long Term Financing: The total financing (debt) obtained from banks, in local or foreign currency, due in more than 12 months.

LTN: Portuguese abbreviation for National Treasury Bills, a pre-fixed rate security whose precise redemption value is known in advance.

Management Fee: The fee paid to a mutual-fund manager for management and administration services.

Mark to Market: The adjustment of a security or portfolio's value to current market values. For example, futures and options contracts are adjusted to market prices at the end of each year for mutual recognition for taxes on unrealized gains or losses.

Market Capitalization (or Market Cap): A company's stock-market value, or how much an investor would hypothetically spend to acquire all the shares of a company at their current market price. The figure is arrived at by multiplying the price of each type of a company's share by their respective number of outstanding shares.

Market Risk: The risk associated with the possibility of an increase or reduction in the value of a given asset due to national or international political, economic or social changes, or to a change in the individual situation of a company or bank. All financial assets are subject to this risk.

Market value of a share: The most up-to-date value of a share traded on the stock exchange, which may be higher or lower than its book value.

Mercosur: Spanish abbreviation for the Southern Cone Common Market (Mercosul in Portuguese). Founded on 11/21/1991 by the Treaty of Assuncion (Paraguay), it aims to create a common economic community between Brazil, Argentina, Paraguay and Uruguay in order to facilitate and increase mutual trade via the progressive removal of customs barriers. The barriers with Argentina will be removed first, followed a year later by those with the other two countries. Mercosur maintains a Common External Tariff for countries outside the block.

Merval: The Argentine Stock Exchange index, comprising the most-traded shares on the Argentine market.

Mutual Fund: The total amount of resources invested by various investors and managed by a brokerage firm or investment bank. Each investor holds quotas in the fund (see Quota).

NASDAQ: National Association of Securities Dealers Automated Quotations. An electronic stock exchange. Since there is less red tape involved in going public on the NASDAQ than on the NYSE, the exchange contains most of the technology firms that have held their IPO's in recent years.

NASDAQ 100 Index: A NASDAQ trading index launched in 1985, it comprises 100 of the biggest non-financial companies (both American and foreign). NASDAQ Composite Index: The main index used for NASDAQ trading, expressing the average daily trading variation. It comprises all the companies traded on the NASDAQ, weighted by their market capitalization.

Nasdaq Index: An American stock-market market index, mostly comprising technology firms.

NBC-E: Portuguese abbreviation for Central Bank Note - series E, a post-fixed rate security issued by the Brazilian Central Bank, whose returns are pegged to the commercial dollar exchange rate variation.

Net Financial Margin: Is the result of the following calculation: (financial intermediation revenue - provisions for doubtful loans) / (average total assets - average permanent assets).

Net Margin: Net income divided by net revenue. It is a profitability indicator - if we compare companies with the same activity, the one with the highest net margin is the most profitable (including operational, financial and non-operational aspects).

Net Profit/Income: The bottom line in a company's income statement, it refers to the difference between total revenue and total expenses.

Net Revenue: The amount that a company effectively receives from the sale of its products or services, i.e. billings (gross revenue) less taxes.

Nominal Interest: The interest on loans and financing including the inflationary correction of the amount lent.

Non-Systemic Risk: Risk directly related to the financial situation of the company issuing the shares.

NTN: Portuguese abbreviation for National Treasury Note, a post-fixed rate public security which yields real interest plus the variation in an index, which may be the dollar (for the NTN- D) or the TR (for the NTN-H).

NYSE (New York Stock Exchange): The world's largest and most important stock exchange, also known as the Big Board. It is self-regulated by a 20-member commission which regulates and monitors the commercial activities of more than 3,000 companies, both American and foreign.

NYSE Specialists: Independent companies or parts of corporations who operate directly in NYSE sessions. Specialists are responsible for a group of shares (normally between 5 and10 each) and their duties include ensuring that the market is as transparent, fair and efficient as possible, keeping violent price swings to a minimum. They execute trading orders and also mediate trades.

Open : The balance of an investor's positions in the futures and options markets.

Operating Expenses: Can be subdivided into administrative expenses (managerial payroll, office rental(s), office phone and electricity bills, etc.) and selling expenses (marketing, publicity, discounts, commission, etc.). Operating expenses therefore refer to all expenses indirectly related to a company's activities (the direct ones are grouped under cost of products sold).

Operating Income: Profits from a company's primary operations only. For example, a steel manufacturer's operating income derives only from those activities related to the production and sale of steel, while a supermarket’s comes from the purchase and sale of goods plus selling, marketing and administrative expenses (the latter including payroll, rent, office materials, electricity bills, etc.). Operating income therefore excludes such items as expenses from interest payments on loans, extraordinary results, taxes, etc.

Operating Margin: Operating income divided by net revenue. It is an operational-efficiency indicator – if we compare companies with the same activity, the one with the highest operating margin has the best results for every item sold, i.e. the lowest operating costs.

Option: A negotiable right to purchase merchandise, shares, securities, etc. for a specified price at a future date. Options are mostly used in the (coffee, sugar, cocoa, soybean, etc.) and the future stock market. In foreign-exchange operations, an option is a contractual agreement between two parties – traders and banks or finance agencies – one of whom has the right to choose the delivery and settlement date of the object of the contract.

Options Market: A capital-market investment instrument. An option to buy shares is a contract giving the buyer the right to acquire, during the validity of the contract, a block of shares of a specified company at a specified price. In other words, someone pays a specified amount to the owner of these shares for the right to purchase them at a determined price during a determined period. While the contract remains valid, the buyer may exercise the option at any time, paying the agreed-upon price, even if the shares are being traded at a higher price. The difference between the specified price and the market one represents the buyer’s profit.

Oscillation: The price variation of a given asset within a certain period of time.

Overnight/Open: One-day investments which can be pegged to public or private securities. They are transactions between two financial institutions involving the sale, with a commitment to repurchase after a defined period (normally a day), of a security at an interest rate previously established between the parties.

Over-The-Counter Market: A market where operations are not registered on the organized markets (stock exchanges). It handles shares and other assets, including derivatives. Since such transactions meet specifications determined by the client (unlike in the stock market), they are also known as tailor-made

P/BV: Price to Book Value ratio, arrived at by dividing a company’s market capitalization by its stockholders’ equity, hence the stock price per book value (P/BV). A P/BV of 80% indicates that the value of the firm in question’s market capitalization is 80% that of its stockholders’ equity; similarly, a firm with a P/BV of 140% has a market capitalization 40% higher than its equity. Thus the smaller the P/BV, the more its stock is undervalued. P/E: Price to Earnings ratio, arrived at by dividing a company’s market capitalization by its net income. It is an indication of the number of years a firm will take to generate a net income equal to the amount the investor paid for his or her shares if the firm maintains its current profitability.

Portfolio: A group of loans and financial assets (bonds, shares, debentures, etc.) belonging to a company, classified by maturity term, debtor, interest rates, expected returns, etc. Although the word is normally associated with financial assets, real assets can also be included.

Post-fixed rate: The rate of remuneration from an investment in a given asset, to be disclosed only on the maturity date.

Pre-Fixed Rate: The rate of remuneration from an investment in a given asset, fixed in advance.

Premium: The value that buyers of options pay on the present date for their purchases.

Price: An economic figure which translates the value of goods and services offered on the market. In production theory, the expenditure on labor, raw materials, etc. which goes towards the cost price. The level of supply and demand and the price of alternative goods or services all influence the consumer price.

Price/Earnings Ratio (P/E): A company’s market share price at any given moment divided by its annual net income. Thus the P/E represents the number of years it will take to recoup the purchase price of the share via dividend payments.

Primary Market: The term has at least three distinct meanings. Firstly, a market where loans are negotiated directly, unlike the , where securities, the result of the primary-market loans, are traded. Secondly, a market where government public-debt securities are sold at first-hand via auctions. Traders subsequently resell them on the secondary market to investors in general. Thirdly, a market on which new marketable-security issues and futures and options contracts are sold.

Primary Surplus/Deficit: The difference between a government’s revenue and expenditure, excluding interest payments on the public debt. If positive, it is a surplus; if negative, a deficit.

Prime Rate: The rate charged by US banks – serves as the basis for most of the international loans and financing.

Promissory Note: A document signed by a borrower promising to repay a loan under agreed- upon terms.

Public Offering: The making available of a new securities issue to the public through an underwriting. It is extensive to non-stockholders of the company. It is called a Tender Offer when a public invitation is made to shareholders to sell their stock in a takeover bid

Public Securities: Securities issued and guaranteed by federal, state or municipal governments. They are instruments economic and monetary-policy instruments which can serve as a financial investment, a budget deficit, to anticipate revenue or to guarantee money-market equilibrium. Depending on their characteristics, they can be in the form of policies, bonds, notes or bills.

Put Option : Gives its holder the right to sell an asset on a specified date for a price stipulated in the contract. In Brazil, put options can only be exercised on the maturity date.

Quota: A fraction of a fund. All the resources invested in a fund are transformed into a number of quotas which will then evolve in line with the portfolio’s performance. All fund investors are quota-holders. To arrive at how much money their investment is worth, investors merely multiply their number of quotas by the current value of the quota.

Quotation: The price offered on the stock exchange or any other market for the purchase and sale of shares, securities, foreign currencies, etc. A share's first registered price in a daily stock- market trading session is known as the Opening Price and the last one as the Closing Price.

Rating: An analysis of the securities issued by a company or government, which appraises the quality of the issuer’s credit. The best-known international rating agencies are Standard & Poor’s, Moody’s and FitchRatings.

Rating Agencies: Companies responsible for appraising the credit risk of public and private institutions, financial or not, including countries. By means of meticulous analyses, they then attribute a rating to the company, institution or country in question, which serves as an indication of the risk to investors of investing in them. The best-known rating agencies are Moody's and Standard & Poor's.

RDB: Portuguese abbreviation for Bank Deposit Receipt, a fixed-rate security with predetermined term, which profitability is defined when the transaction is contracted, either pre- or post-fixed. It is an untransferable security destinated to individuals and companies with bank accounts. RDB’s cannot be redeemed in advance nor traded on the secondary market.

Real Interest: The interest on loans and financing excluding the inflationary correction of the amount lent.

Retail Bank: Banking services for individual clients.

ROAA (Return on Average Assets): A measure of a corporation’s profitability, calculated as its net income divided by assets, in ROA, and by average assets, in ROAA. It shows what earnings were generated from invested capital (assets). ROA for public companies can vary substantially, depending on the industry they are in.

ROE/ROAE (Return on Equity/Return on Average Equity): A measure of a corporation's profitability, calculated as its net income divided by stockholders' equity, in ROE, and by average stockholders' equity, in ROAE. In other words, how much profit the company is able to generate given the resources provided by its stockholders. Investors usually look for companies with returns on equity that are high and growing.

Savings: That portion of income not spent and accumulated. In macroeconomic analysis, there is always ex-post-facto equality between savings and investments; when ex-ante-facto, investments are superior to total savings, indicating an inflationary situation; when, ex-ante- facto, investments are less than savings, indicating a recessive tendency.

Secondary Market: A market where securities originating in the primary market are traded, typically via stock-market and over-the-counter operations.

Securities and Exchange Commission (SEC): The US stock-market’s regulatory, controlling and supervisory body, whose main function is to protect investors and maintain the integrity of the US marketable-securities market.

SELIC: Portuguese abbreviation for the Special System for Settlement and Custody, a service provided by the Brazilian Central Bank and ANDIMA (National Association of Open Market Institutions), used by banks and brokerage houses to register operations involving federal, state and municipal public securities. Affiliated institutions are connected to the SELIC’s central computer via a network of terminals. Established in November, 1979.

Share: It is an equity security, issued by companies, which represents the smallest fraction of the company’s capital. Individuals or institutions acquiring shares in the company become its co-owners, being entitled to a share in its profits always in the same proportion as the total number of shares they hold. Shares can be held by the controlling stockholders or traded on the market (see Float). There are mainly two share categories: - Common – Common shares give their holders the right to vote at the company’s stockholders’ meetings. A firm’s controlling stockholder must therefore retain at least 50% plus one of these shares. They are abbreviated to ON in Portuguese. – Preferred – Holders of preferred shares have preference (over the common ones) in receiving part of the division of the company’s assets in the event of the company’s liquidation, but do not have the right to vote at stockholders’ meetings. Currently, however, many firms are including a representative elected by their minority stockholders on their boards, as part of their Corporate Governance policy. Preferred stockholders receive dividends 10% higher than those granted to common stockholders. They are abbreviated to PN in Portuguese.

Share Split: Increasing the number of shares representing a company’s capital by subdividing them, with a corresponding reduction in their nominal value. (Source: Febraban)

Short Term Financing: The total financing (debt) obtained from banks, in local or foreign currency, due in less than 12 months.

SISBACEN: Portuguese abbreviation for Central Bank Information System. It is an interactive information system managed by the Brazilian Central Bank, allowing on-line input and output and real-time consultations.

SND: Portuguese abbreviation for National Debentures System.

SOMA: Portuguese abbreviation of Asset Market Operator. An organized over-the-counter market, whose operations are undertaken electronically, similar to the NASDAQ in America. Business hours correspond to those of the country’s stock-market trading sessions. Sovereign Debt Bonds: Securities put at the disposal of Brazil’s international creditors, in the context of the Brady Plan, for the rescheduling of due and unpaid sovereign debt.

Special Stockholders’ Meeting: A meeting of a company’s stockholders that is not laid down in the firm’s by-laws. They are normally held to analyse and discuss unforeseen events or attend to eventual occurrences. It is abbreviated to, AGE in Portuguese.

Speculation: The systematic purchase and sale of securities, shares, property, commodities, etc., in order to obtain rapid (and high) profits by taking advantage of price swings. Speculators acquire such assets when their prices are low, or falling, and sell them when the price is rising or when it reaches their peak. The preferred areas are the stock markets, merchandise and staple goods.

Split / Spin-off: The fragmentation of a company into new companies, sometimes including the extinction of the original company when all of latter’s assets and liabilities are transferred to the new companies. (Source: Fenaban)

Spot Market: In the stock market, transactions that are settled in up to the fifth business day after the operation is completed, with the seller delivering the shares to the buyer on receipt of payment; in the commodities market, transactions characterized by immediate merchandise delivery and payment.

Spread: Diference between the fee charged by banks for loans to borrowers and the funding fee paid to clients.

Stock Exchange: A place that offers the necessary conditions and systems for buying and selling securities in a transparent manner. It also has a self-regulatory mechanism to preserve the high ethical trading standards and to disclose the transactions quickly, widely and in a detailed manner.

Stock Market: A subdivision of the capital market which handles the purchase and sale of shares. Its main functions are to evaluate the amounts traded, share liquidity and companies’ market capitalization.

Structured Finance: A combination of two or more financial instruments (e.g. a committed operation plus a ), aiming to take advantage of market opportunities or to seek protection against financial risks.

Subscription: When a company issues new shares on the market to raise investment capital.

Subscription Right: When a company makes an offer to issue or sell new shares to its stockholders at a specified price, which is normally lower than the market price. The offer remains open for a predetermined period only.

Swap: A reciprocal loan between banks, in different currencies and with identical exchange rates, used to anticipate receivables in foreign currency.

Systemic Risk: The inherent risk from changes in the national and international economy that affect interest rates, exchange rates and asset prices in general. TR: Portuguese abbreviation for the Referential Rate, the average monthly remuneration from 30 to 35-day pre-fixed rate CDBs/RDBs. It contains a reducer instituted by the Brazilian Central Bank, which can be altered at any time deemed necessary to ensure that savings accounts are competitive with other products.

Treasury Shares: Shares repurchased by the issuing company via a specific buy-back program and held in its treasury for subsequent cancellation or sale. These shares are not considered as outstanding and are not, therefore, computed when calculating dividends or earnings per share. In addition, they do not entitle voting rights.

Trial Balance: A partial balance sheet, containing the main accounts. It is an accounting statement of a company’s assets, liabilities and stockholders’ equity, released quarterly for the Stock Exchanges, the CVM (Brazilian SEC) and the Brazilian Central Bank.

Underwriting: A term used internationally to designate the issue of shares or debentures by public subscription, normally handled by financial institutions authorized by the CVM (Brazilian SEC), via three types of contract with the issuing company: straight (the underwriter subscribes to the entire issue, paying the issuer directly); stand-by (the underwriter undertakes to acquire only those securities not acquired by the public; and best-efforts (the underwriter acquires nothing itself, returning all those securities not acquired by the public to the issuer).

Unlisted Company: A limited-liability company whose share capital is divided among few stockholders and whose shares are not traded on the stock market , being transferred or sold only with the consensus of the stockholders.

US GAAP: United States Generally Accepted Accounting Principles – the accounting practices recognized and used in the USA. They must be adopted by any firm from another country wishing to trade its shares and/or bonds on the US stock markets.

VaR (Value at Risk): The maximum potential loss expected for an investment portfolio, with a given probability within a specified time horizon.

Volatility: The sensitivity of the price of a share or a portfolio of shares to the overall 20variation in stock-market prices.

Worth/Equity: Group of goods belonging to a company that is capable of generating profits or income. It normally consists of the difference between assets and liabilities.