annual shareholders' meeting - 03.24.2014 - management proposal

8/12/2019 Annual Shareholders' Meeting - 03.24.2014 - Management Proposal

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BM&FBOVESPA S.A. - BOLSA DE VALORES, MERCADORIAS E FUTUROS

MANAGEMENTSPROPOSAL

ANNUAL SHAREHOLDERS MEETING CONVENING ON MARCH 24, 2014

1

So Paulo, February 20, 2014.

BM&FBOVESPA S.A. - Bolsa de Valores, Mercadorias e Futuros submits to theAnnual Shareholders Meeting to be held on March 24, 2014 the Proposal by

Management (Proposal) described below.

1. Financial Statements for the fiscal year ended December 31, 2013

The Management Report and the Financial Statements of the Company prepared

by the Management, together with the opinion of the independent auditors, as

well as the report of the Audit Committee, relative to the fiscal year ended

December 31, 2013, published on February 14, 2014 in the Valor Econmiconewspaper and on February 15, 2014 in the Official Gazette of the State of So

Paulo, were approved by the Board of Directors in a meeting held on February

13, 2014.

Comments of the board members on the financial situation of the Company

required by item 10 of the Reference Form, as per Instruction No. 480, of

December 7, 2009, of the Brazilian Securities Commission (CVM Instruction

No. 480), shown in Exhibit I to this Proposal.

2. Proposal for allocation of the net income for the fiscal year ended

December 31, 2013

The Board of Directors of the Company, at meeting held on February 13, 2014,

proposed to allocate the net income for the fiscal year ended December 31, 2013,

corresponding to R$1,081,516,765.50, as follows:

(i) R$865,213,000.00 for the mandatory dividends, which after offsettingthe interim dividends paid relative to fiscal year 2013, in the amount ofR$669,510,000.00, and of the interest on equity paid for fiscal year

2013, in the amount of R$50,000,000.00, will result in an outstanding

balance of R$145,703,000.00, which it is proposed be distributed to the

shareholders on account of dividends, resulting in a value of

R$0.07847515 per share (estimated value, which can be modified on

account of the disposal of treasury shares to fulfill the exercise of

purchase options for shares granted based on the Purchase Option Plan

for Shares of the Company and for any acquisition of shares within the

scope of the Plan for Repurchase of Shares of the Company); and


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(ii) R$216,303,765.50 for accrual of the statutory reserve for investmentsand composition of the funds and mechanisms for safeguarding the

Company.

The dividends will be paid on June 27, 2014, using as a calculation base the

equity position on June 11, 2014.

Thus, BM&FBOVESPAs stocks will trade cum-dividend up until and including

June 11, 2014, and ex-dividend starting from June 12, 2014.

Pursuant to article 193, paragraph 1 of Law No. 6404/76, there is no proposal for

allocation of the net income for the creation of legal reserve, in view that theLegal Reserve balance, plus Capital Reserves (article 182, paragraph 1 of Law

No. 6404/76), has exceeded 30% of the amount of the capital stock of the

Company.

The information concerning allocation of net income required by Exhibit 9-1-II of

CVM Instruction No. 481 of December 17, 2009 (CVM Instruction No. 481) is

shown in Exhibit II hereto.

3. Proposal for Remuneration of the Managers

In a meeting held February 13, 2014 the Board of Directors of the Company

resolved that the proposal for annual overall remuneration to be presented to the

Annual Shareholders Meeting is ofnot more than R$5,967,000.00 for the Board

of Directors and not more than R$18,085,000.00 for the Executive Board. These

amounts of remuneration concern the period comprised from January to

December 2014.

The mentioned proposed remuneration is presented below:


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Proposal of Remuneration for Fiscal Year 2014 (R$M)

DIRECTORS AND

OFFICERS

Fixed

RemunerationBenefits

Short-Term

Variable

Remuneration

TOTAL

Board Members 5,967 - - 5,967

Executive Office 4,778 917 12,390 18,085

TOTAL 10,745 917 12,390 24,052

Fixed Remuneration

The fixed remuneration of the Executive Board consists of 13 salaries per year,

restated annually based on the collective bargaining agreement.

For the members of the Board of Directors there is attribution of a monthly fixed

remuneration, an additional monthly fixed remuneration for those that participate

in advisory committees of the Board of Directors and, for the Chairperson of theBoard of Directors, there is an additional fixed six-monthly remuneration.

Benefits

A benefits package that includes medical and dental care, life insurance, meal

vouchers, private pension plan, benefit of use of vehicle, checkup, parking and

use of cell phone, having the purpose of offering an attractive package that is

minimally compatible with the market standards for performance in similar

functions.

Short-Term Variable Remuneration

As regards the short-term variable remuneration, the performance indicators that

are taken into account for determination of the remuneration are: (i) our variable

remuneration policy, which is based on the concept of salary multiples that vary

according to the seniority of each position; (ii) the individual performance

evaluations; and (iii) the overall performance indicators of the Company as

described below.


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In 2014 the total amount of the short-term variable remuneration established by

the Board of Directors, which will be paid to the administrative officers and

employees of the Company during fiscal year 2014, will be calculated based on

the Adjusted Net Income of the Company effectively assessed, considering the

limit of expenses provided in the budget for the fiscal year, and will represent

3.5% of such result if the expenses target established by the Board of Directors is

effectively accomplished. If the expenses budgeted for fiscal year 2014 are

exceeded, there will be application of a reducing factor on the percentage of the

Adjusted Net Income to be distributed to the administrative officers and

employees. Of this total, a portion will be allocated to the Statutory Executive

Board and its distribution will follow the rule of salary multiples per level anddifferentiation based on individual performance.

The information on the remuneration of the administrative officers required by

item 13 of the Reference Form provided by CVM Instruction No. 480 is shown in

Exhibit III hereto.

We remain at your disposal for any additional clarification you may require.

Yours sincerely,

Eduardo Refinetti Guardia

Chief Products and Investor Relations Officer


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ATTACHMENTS


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ATTACHMENT I

Executive Officers Review of Financial Condition of BM&FBOVESPA

(Reference Form, Section 10)

10. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OFOPERATIONS

10.1 Managements discussion and analysis.a. financial condition and net equity position

Year ended December 31, 2013 compared with year ended December 31, 2012.

The year 2013 was marked by important developments pertaining to the markets we operate as well asdevelopments related to our products and offerings.The stock market has seen a boost in trading activity whichled to record high average value traded, to R$7.42 billion in 2013 from R$7.25 billion in 2012, in the wake of anupsurge in turnover velocity1, despite the unmoving equity market capitalization2. In contrast, while the volumestraded in financial and commodity derivatives were somewhat subdued, to 2.85 million in 2013 from 2.90 millionin 2012, a slightly decrease of 1.8% in the average daily traded value, and the average rate per contract (RPC)went up 7.6%, to R$1.282 in 2013 from R$1.191 in 2012, raising revenues, primarily because a substantialportion of the volumes correlate with contracts for which we charge U.S. dollar-denominated fees, so thatultimately these revenues were positively influenced by the depreciation of the Brazilian real against the U.S.dollar.

In a striking note of market performance, while in the first half of 2013 value traded in cash equities as well asvolume traded in financial derivatives hit record highs, in the second half of the year trading value and volumesplummeted, unveiling a shift in market mood triggered by sinking risk appetite and deteriorating marketexpectations, as portfolios investment outflows soared.

Ultimately, our diversified revenue base and innovative products and services offerings (including securitieslending and Treasury Direct services, products as exchange-traded real estate funds (FIIs) and agribusinesscredit bills (LCAs) added to the positive effects of our market making program for options on single stocks, andequity offerings worth R$23 billion in gross proceeds (the largest equity-financing volume in three years), allcontributed to spring a 3.5% year-on-year climb in total revenues.

Reflecting this performance, our consolidated total revenues climbed 3.5% year-over-year, to R$2,370,229thousand in 2013 from R$2,289,023 thousand one year ago, as the outcome of a 5.9% rise in revenues fromtrading and clearing fees earned in our BM&F segment coupled with a 1.0% drop in revenues from trading andclearing fees earned in our Bovespa segment; and an important contribution from revenues unrelated to tradingvolumes, which surged 10.4% year-over-year.

Once again, our unwavering efforts to controlling costs and expenses drove us to successfully contain the build-upin adjusted expenses3below the average inflation rate to R$575,764 thousand in 2013 from R$563,487 thousand in2012, an increase of 2.2%. In addition, we continue to pledge steadfast commitment to return capital toshareholders by combining cash distributions and share buybacks effectively and without affecting our solidfinancial position.

Thus, our consolidated operating income climbed 2.5% year-on-year to R$1,334,635 thousand from R$1,301,670thousand previously, while the consolidated GAAP net income (attributable to BM&FBOVESPA shareholders)increased 0.7% to R$1,081,516 thousand from R$1,074,290 thousand one year ago.

Last, but not least, BM&FBOVESPA is well-positioned to capture future growth opportunities the Brazilian market

1Turnover velocity for the year is defined as the ratio of annualized turnover (value) of stocks traded on the cash market over a twelve-month period

to average market capitalization for the same period.2

Equity market capitalization is a measure of the si ze of the stock market given by the total market capitalization of all listed issuers, where the market

capitalization by issuer is calculated as stock price multiplied by the number of shares outstanding of each listed issuer (B ovespa segment).3The operating expenses have been adjusted to eliminate expenses with depreciation, the stock options plan, taxes related to equity in results of investees (CME

Group), allowance for doubtful accounts, and a R$92,342 thousand contribution to the Investor Compensation Mechanism (MRP) late in 2011. The purpose ofthese adjustments is to measure operating expenses after eliminating expenses with no impact on cash flow and non-recurring expenses.


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will certainly continue to offer, though it must be said the economic outlook as 2013 came to a close became morechallenging in light of the present macroeconomic conditions. Nonetheless, we believe our investments in productdevelopment and technology infrastructure are key factors for the future growth and diversification of our revenue

base, for the improvement of our services, and will be critical in consolidating the efficiency and strength of theBrazilian capital markets. It is our firm belief the development and implementation of our business strategy willcontinue to bear fruit in the years ahead.


BM&FBOVESPA delivered solid operating performance in 2012, which in our BM&F segment (financial andcommodity derivatives) translated into growth and record high volumes, whereas growth in our Bovespa segment(equities, equity-based derivatives and index-based derivatives) was driven primarily by increase in turnovervelocity, spurred mainly by the increase in average daily value traded by foreign investors. The primary reasons forthis are twofold: one, the fact that most of the high frequency trading volume originates cross border; two, a shiftin monetary policy which in December 2011 led the Government to remove the 2% tax on financ ial transactions(IOF tax) levied on hot money inflows for investments in variable-income securities.

In turn, the record growth in the BM&F segment was pushed mainly by increase in average daily volume traded in

Brazilian-interest rate contracts, the most actively traded contract group. In addition, the average rate per contract(RPC) climbed both as a result of the increase in volumes traded in longer-maturity Brazilian-interest rate contractsand because the RPC for FX contracts was positively influenced by the depreciation of the Brazilian real against theU.S. dollar, since our rates for these contracts are denominated in U.S. dollars. A combination of factors explainsthe increase in trading volume and greater concentration on longer term interest rate contracts, prime amongwhich are the structural change brought about by drastic cuts in the real interest rate, coupled with increasedcredit availability and the greater portion of fixed interest-bearing government debt relative to total public debt.

Reflecting this operating performance, our consolidated total revenues climbed 8.2% year-over-year, toR$2,289,023 thousand from R$2,115,983 thousand one year ago, driven by (i) a 7.2% rise in revenues fromtrading and clearing fees derived in the Bovespa segment; (ii) a 13.9% climb in revenues from trading and clearingfees earned in the BM&F segment; and (iii) a 0.5% drop in other operating revenues unrelated to trading volume.

The consolidated total expenses fell 6.6% year-over-year, to R$763,080 thousand from R$816,664 thousand in theprior year. As adjusted to eliminate non-recurring expenses and expenses with no impact on cash flow, theadjusted expenses decreased 3.6% to close the year quite near the lower endpoint of the revised budget interval.In August 2012, true to our commitment to controlling costs and expenses, we revised the adjusted opex guidanceto an interval between R$560,000R$580,000 thousand from R$580,000R$590,000 thousand previously.

Contrasting to operating performance, which the slash in real interest rates strengthened by spurring tradingvolumes in the BM&F segment, our interest revenues dwindled as a result of a plunge in interest earned on ourcash availabilities and financial investments (the large part of which earn fixed-interest rates), coupled with a jumpin interest expenses attributable to the appreciation of the U.S. dollar against the Brazilian real, as most ourinterest expenses are denominated in U.S. dollars. As a result, net interest income shrank 25.6% year-over-year toR$208,851 thousand from R$280,729 thousand one year earlier.

Thus, the consolidated operating income climbed 19.6% from one year ago, while the consolidated net incomeattributable to shareholders rose 2.5%. Our performance in 2012 bolstered our strong financial position further.

b. Capital structure; likelihood of share redemption.The table below sets forth year-end data on the composition of consolidated capital structure in the last three

years:(i) at December 31, 2013 - 74.5% equity and 25.5% liabilities, (ii) at December 31, 2012 - 80.4% equity and19.6% liabilities, (iii) at December 31, 2011 - 81.6% equity and 18.4% liabilities.

Year ended December31,



2013 2012 2011

(in R$ thousands, except for percentages)

Current and noncurrent liabilities 6,597,767 25.5% 4,733,232 19.6% 4,332,431 18.4%

Shareholders equity 19,298,892 74,5% 19,413,882 80.4% 19,257,491 81.6%

Total liabilities and shareholdersequity

25,896,659 100.0% 24,147,114 100.0% 23,589,922 100.0%

Under total liabilities, part of our onerous liabilities relates mainly to debt issued abroad in connection with global

senior notes issued in a cross-border bond offering completed on July 16, 2010 (see subsection 10.1(f)).


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Year ended December 31, Year ended December 31, Year ended December 31,

2013 2012 2011

(in R$ thousands, except for percentages)

Total onerous liabilities 1,468,322 7.1% 1,279,121 6.2% 1,172,225 5.7%

Interest payable on debt issued abroad and loans 42,129 36,882 33,566

Debt issued abroad and loans 1,426,193 1,242,239 1,138,659

Shareholders equity 19,298,892 92.9% 19,413,882 93.8% 19,257,491 94.3%

Total onerous liabilities and shareholders equity 20,767,214 100.0% 20,693,003 100.0% 20,429,716 100.0%

Thus, taking into account both total liabilities (current and noncurrent liabilities) and onerous liabilities (debt andinterest on debt), the above data show we adopt conservative leveraging practices.

i. events of redemptionii. redemption price calculation method

Other than as legally prescribed, we are not contemplating any share redemption and do not anticipate any eventoccurring that would trigger redemption rights.

c. Capacity to service the debt.Our Company has strong cash generation capacity, as evidenced by consolidated operating income of R$1,334,635thousand in 2013, R$1,301,670 thousand in 2012 and R$1,088,020 thousand in 2011, and consolidated operatingmargins of 62.6%, 63.0% and 57.1%, respectively, as well as yearly net income attributable to shareholdersamounting to R$1,081,516 thousand, R$1,074,290 thousand and R$1,047,999 thousand for the same three years,respectively.

Additionally, our consolidated cash and cash equivalents coupled with short- and long-term financial investmentsreached R$4,870,760 thousand in 2013 (18.8% of total assets), R$3,850,639 thousand in 2012 (15.9% of totalassets) and R$3,782,411 thousand in 2011 (16.0% of total assets). Moreover, we should note that cash and cashequivalents, as well as financial investments include cash collateral pledged by market participants in the course oftheir dealings, which, as registered under current liabilities in our balance sheet, totaled R$2,072,989 thousand atyear-end in 2013 versus R$1,134,235 thousand and R$1,501,022 in 2012 and 2011, respectively.

Accordingly, our net indebtedness ratio (see subsection 10.1(f) below) at December 31, 2013, was a negative

number (R$1,279,524 thousand, negative) which compares with equally negative figures for 2012 and 2011(R$1,393,308 thousand and R$1,070,126 thousand, negative, respectively), in each case denoting our low degreeof financial leverage and very strong capacity to service our debt. Given the nature of our available cash flows,which include our own financial resources as well as cash pledged as collateral by customers, our policy calls forlower-risk investing of cash balances, which we typically accomplish by seeking very conservative, highly liquid, safeinvestments, often by taking positions in Brazilian government bonds, notes and other debt securities whose yield andcoupon rates typically track the base rate (interbank lending rates or the Selic rate), whether or not including aspread. We therefore believe our Company is fully capable of servicing its debt both in the short- and long-term.

d. Sources of working capital and capital expenditure financing.We finance working capital and capital expenditure requirements primarily from our operating cash flow, which issufficient to support all of the former and most of the latter. In a particular case we have also accessed the capitalmarkets (by issuing global senior notes in a 2010 bond offering) as an alternative to finance noncurrent assets. Foradditional information on the nature and characteristics of our debt obligations, see the discussion under

subsection 10.1(f) below.

e. Sources of working capital and capital expenditure financing to be used to cover liquiditydeficiencies.

As previously noted, operating cash flow is the primary source for funding our own working capital and capitalexpenditure requirements. Moreover, should the need arise, we may cases consider alternative sources of funding,which include taking bank loans or accessing government financing programs or the domestic or internationalcapital markets.

In any event, while there are no reasons to believe we could experience liquidity deficiencies, should there be anyneed for us to source additional funding in order to cover deficiencies, we would benefit from investment graderatings4 (foreign and local currency) assigned to us by prime credit rating agencies in order to obtain financingthrough any of the above sources.

f. Indebtedness level and characteristics of existing debt obligations4Standard & Poors Issuer credit rating of BBB+(foreign and local long-term); Outlook: Credit Watch / Issuer credit rating of A-2(foreign and local short-term);

Moodys Issuer ratings of A3on the global scale and A3on the Brazilian national scale / Notes rating ofBaa1. The outlook is stable.


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(i) material loans and financing transactions

On July 16, 2010 BM&FBOVESPA completed an offering of global senior unsecured notes priced at 99.635% of the

aggregate principal nominal amount of US$612,000 thousand, which after deducting underwriting discounts nettedproceeds of US$609,280 thousand (at the time equivalent to R$1,075,323 thousand). The notes mature on July16, 2020, and pay interest coupon of 5.50% per annum payable every six months, in January and July. However,as computed to include the transaction expenses, in particular underwriting discounts, commissions paid to thearranging and structuring banks and other offering expenses, listing fees, legal fees, rating fees paid to Standard& Poors and Moodys,and ongoing administration and custody expenses, the actual cost will represent a rate of5.64% per annum. Effective from July 16, 2010, we used the net offering proceeds to purchase additional interestin the shares of the CME Group, thereby increasing our ownership interest to 5.1% of the shares of common stock(from 1.8% earlier).

As translated into Brazilian reais, the balance of our debt under the global notes as of December 31, 2013, wasR$1,468,322 thousand (including accrued interest of R$42,129 thousand), as compared to R$1,279,121 thousand(accrued interest of R$36,882 thousand) at December 31, 2012 and R$1,172,225 thousand (accrued interest ofR$33,566 thousand) at December 31, 2011. Moreover, at December 31, 2013, the fair value of our debt underthe notes, as determined based on market data, was R$1,528,651 thousand (Source: Bloomberg).

Starting from the notes issue date (July 16, 2010), we have designated as hedging instrument that portion of theprincipal under the notes which correlates with changes in exchange rates in order to hedge the foreign currencyrisk affecting that portion of our investment in the CME Group Inc. which correlates with the notional amount ofUS$612 million (a hedging instrument in a hedge of net investment in a foreign operation, per Note 7 to ourfinancial statements as of and for the year ended December 31, 2013). Accordingly, we have adopted netinvestment hedge accounting pursuant to accounting standard CPC-38 (IAS 39 -Financial Instruments: Recognitionand Measurement), for which purpose the hedging relationship has been formally designated and documented,including as to (i) risk management objective and strategy for undertaking the hedge, (ii) category of hedge, (iii)nature of the risk being hedged, (iv) identification of the hedged item, (v) identification of the hedging instrument,(vi) evidence of the actual statistical relationship between hedging instrument and hedged item (retrospectiveeffectiveness test) and (vii) a prospective effectiveness test.

Under CPC 38 (IAS 39) we are required to assess the hedge effectiveness periodically by conducting retrospectiveand prospective tests. On testing backward-looking effectiveness, we adopt the ratio analysis method, also called

dollar offset method, as applied on a cumulative and spot-rate basis. In other words, this method compareschanges in fair values for the hedging instrument and hedged item attributable to the hedged risk, as measuredon a cumulative basis over a given period (from the hedge inception to the reporting date) using the foreigncurrency spot exchange rate at each relevant date in order to determine the ratio of cumulative gain or loss onthe notes principal amount to cumulative gain or loss on the net investment in a foreign operation over therelevant period. And on testing forward-looking effectiveness, we adopt stress scenarios which we apply to thehedged variable in performing foreign currency sensitivity analysis so as to determine degree of sensitivity tochanges in exchange rates. We have tested the hedge effectiveness retrospectively and prospectively, havingdetermined that there was no realizable ineffectiveness at December 31, 2013.

The table below sets forth data related to our debt service coverage ratio.

Debt service coverage ratioYears ended December 31,

2013 2012 2011(in R$ thousands)

Gross debt service 1,468,322 1,279,121 1,172,225

Cash and cash equivalents, plus short- and long-term

financial investments (*)2,747,846 2,672,429 2,242,351

Net debt service (1,279,524) (1,393,308) (1,070,126)(*) In determining our debt service coverage ratio and in order to better evidence the actual ratio of cash available for debt servicing, wecalculate total cash and cash equivalents plus short- and long-term financial investments (current and noncurrent assets) after eliminating

amounts recognized under the line item collateral for transactions, as well as payouts and rights on securities under custody at our central

securities depository under the current liabilities line item.

(ii) other long-term transactions with financial institutions

In the normal course of our business we transact on an arms length basis with some of the primary financialinstitutions operating in Brazil. These are transactions agreed pursuant to customary market practices. Otherthan as set forth herein, we have no long-term transactions agreed with financial institutions and ournoncurrent liabilities record no other long-term liabilities.

(iii) debt subordination


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In terms of subordination, the liabilities we recognize in the line items under current and noncurrent liabilities inour balance sheet statement rank as follows:

Collateral for transactions pursuant to articles 6 and 7 of Law No. 10,214/01 (clearing and settlementwithin the scope of the Brazilian Payment System) and articles 193 and 194 of Law No. 11,101/05(Bankruptcy and Reorganization Law), the financial assets pledged to our clearing houses as collateral fortransactions rank senior to and have priority over any other guarantee up to the amount of the transactionsthese collaterals secure, and are not affected in any way in the event of bankruptcy or judicialreorganization proceedings.

Tax and payroll liabilitiespursuant to article 83 of Law No. 11,101/05 (Bankruptcy and ReorganizationLaw), government credits for tax liabilities and government or employee credits for social security andpayroll liabilities (recognized in the line items personnel and related charges and income tax andcontributions payable/recoverable) constitute preferred debt and, thus, have priority over other types ofdebt.

Other payment obligations other obligations recognized under current and noncurrent liabilities in ourbalance sheet statement as of December 31, 2013, constitute unsecured debt.

(iv) restrictions related to indebtedness level and new financing, dividend declaration,assets sales, new issues and transfer of control

The indenture governing our issuance of senior unsecured notes includes certain limitations and requirementscustomary in similar transactions found on the international debt markets, which we believe will not restrict ournormal operating and financial activities. Provisions containing such limitations and requirements include mainly thefollowing:

Limitation on liensa provision limiting our and our subsidiaries ability to secure debt by creating liens(other than certain permitted liens, as defined);

Limitation on sale and lease-back transactions; General liens basketaprovision permitting us to undertake additional debt provided the sum of (a) the

aggregate principal amount of all debt obligations secured by liens other than certain permitted liens (asdefined), and (ii) debt attributable to all our and our subsidiarys sale and lease-back transactions (withcertain exceptions), should not exceed 20% of our consolidated net tangible assets (as defined);

Limitation on mergers, consolidations or business combinationsa provision restricting our ability to merge,consolidate or otherwise combine with any other person unless the resulting or surviving company assumesobligation to repay the principal and pay interest on the notes, and meets certain other requirementsdesigned to ensure compliance with the terms and conditions of the indenture.

However, these limitations and requirements include a number of exceptions which are set forth in the indenture.

g. Restrictions on use of the proceeds of financing previously undertaken.Not applicable. Other than the funding transaction discussed under 10.1(f) above, we have taken no loans orfinancing.

h. Significant changes to line items of the financial reports.Our consolidated financial statements as of and for December 31, 2013, and the comparative financial statementsas of and for December 31, 2012 and 2011, have been prepared and are presented in accordance with the

accounting standards generally accepted in Brazil.

Moreover, started from 2011, the results of the financial intermediation operations (custody services and localrepresentation for nonresident investors) of our subsidiary BM&FBOVESPA Settlement Bank were reclassified tothe other revenues line item, with no impact on net income and shareholders equity. Before 2011 we recognizedthese results under thenet interest income (expense) line item.

Selected financial information. The tables below set forth selected financial information from our financialstatements at December 31, 2013, 2012 and 2011. For better comparability and understanding of our performance,the tables below set forth data related only to the main line items of the statement of income and balance sheetstatement, and changes to these line items, as selected by management upon applying the materiality criteria setforth below.

Selected financial information from the consolidated statements of income. Information selected fromresults presents only the revenue line items that accounted for over 3.0% of net revenue for the year

ended December 31, 2013; expense line items that accounted for over 5.0% (by expense module) of netrevenue for the same year, in addition to income line items, and line items related to deductions fromrevenue and taxes.


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Selected financial information from the consolidated balance sheet statements. Information selected fromthe balance sheet presents only the main line items which accounted for over 4.0% of total assets as ofDecember 31, 2013.

Other selected financial information. Other financial information selected by management includes dataunder lines items related to one-off, extraordinary or non-recurring and other events, which are likely toprovide a clearer understanding of our statement of income.

Selected Financial Information(from the Consolidated Statements of Income)

Years ended December 31,

2013 AV% 2012 AV% 2011 AV%Variation Variation

2013/201

2

2012/201

1

(In R$

thousands) (%)(In R$

thousands) (%)(In R$

thousands) (%) (%) (%)

Total revenues 2,370,229 111.2 2,289,023 110.9 2,115,983 111.1 3.5 8.2

Revenues from trading and/or clearing services -BM&F segment 916,530 43.0 865,874 41.9 760,245 39.9 5.9 13.9

Derivatives 897,098 42.1 848,858 41.1 744,018 39.1 5.7 14.1

Revenues from trading and/or clearing services-Bovespa segment 1,023,978 48.0 1,034,007 50.1 964,702 50.6 -1.0 7.2

Trading feestrading systems 192,985 9.1 243,181 11.8 540,391 28.4 -20.6 -55.0

Clearing feesclearing and settlement systems 804,570 37.7 769,221 37.3 396,023 20.8 4.6 94.2

Other revenues 429,721 20.2 389,142 18.8 391,036 20.5 10.4 -0.5

Securities lending 102,186 4.8 77, 063 3.7 74,030 3.9 32.6 4.1

Depository, custodian, back-office services 116,305 5.5 102,763 5.0 91,353 4.8 13.2 12.5

Market data (vendors) 69,236 3.2 67,668 3.3 65,049 3.4 2.3 4.0

Deductions from revenues (238,434) -11.2 (224,273) -10.9 (211,299) -11.1 6.3 6.1

Net revenue 2,131,795 100.0 2,064,750 100.0 1,904,684 100.0 3.2 8.4

Expenses (797,160) -37.4 (763,080) -37.0 (816,664) -42.9 4.5 -6.6

Personnel and related charges (356,120) -16.7 (353,880) -17.1 (351,608) -18.5 0.6 0.6

Data processing (111,797) -5.2 (102,805) -5.0 (104,422) -5.5 8.7 -1.5

Depreciation and amortization (119,661) -5.6 (93,742) -4.5 (75,208) -3.9 27.6 24.6

Marketing and promotion (15,043) -0.7 (19,280) -0.9 (38,609) -2.0 -22.0 -50.1

Operating income 1,334,635 62.6 1,301,670

63.0

% 1,088,020 57.1 2.5 19.6

Equity in results of investees 171,365 8.0 149,270 7.2 219,461 11.5 14.8 -32.0

Interest income, net 181,535 8.5 208,851 10.1 280,729 14.7 -13.1 -25.6

Interest income 300,023 14.1 297,217 14.4 357,720 18.8 0.9 -16.9

Interest expenses (118,488) -5.6 (88,366) -4.3 (76,991) -4.0 34.1 14.8

Income (loss) before taxation on profit 1,687,535 79.2 1,659,791 80.4 1,588,210 83.4 1.7 4.5

Income and social contribution taxes (606,588) -28.5 (585,535) -28.4 (539,681) -28.3 3.6 8.5

Current (60,097) -2.8 (67,314) -3.3 (49,422) -2.6 -10.7 36.2

Deferred (546,491) -25.6 (518,221) -25.1 (490,259) -25.7 5.5 5.7

Net income (loss) for the year 1,080,947 50.7 1,074,256 52.0 1,048,529 55.1 0.6 2.5Net income attributable to BM&FBOVESPAshareholders 1,081,516 50.7 1,074,290 52.0 1,047,999 55.0 0.7 2.5

Selected Financial Information(from the Consolidated Balance Sheet

Statements)

Years ended December 31,

2013 AV% 2012 AV% 2011 AV%Variation Variation

2013/2012

2012/201

1

(In R$ thousands) (%) (In R$ thousands) (%) (In R$ thousands) (%) (%) (%)

ASSETS

Current assets 4,319,483 16.7 3,536,282 14.6 2,401,134 10.2 22.1 47.3

Cash and cash equivalents 1,196,589 4.6 43,642 0.2 64,648 0.3 2,641.8 -32.5

Financial investments 2,853,393 11.0 3,233,361 13.4 2,128,705 9.0 -11.8 51.9

Noncurrent assets 21,577,176 83.3 20, 610,832 85.4 21,188,788 89.8 4.7 -2.7

Long-term receivables 1,135,424 4.4 808,868 3.3 1,767,411 7.5 40.4 -54.2


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Financial investments 820,778 3.2 573,636 2.4 1,589,058 6.7 43.1 -63.9

Investments 3,346,277 12.9 2,928,820 12.1 2,710,086 11.5 14.3 8.1

Investment in associate 3,312,606 12.8 2,893,632 12.0 2,673,386 11.3 14.5 8.2

Intangible assets 16,672,325 64.4 16,512,151 68.4 16,354,127 69.3 1.0 1.0

Goodwill 16,064,309 62.0 16,064,309 66.5 16,064,309 68.1 0.0 0.0

Total assets 25,896,659

100.

0 24,147,114

100.

0 23,589,922

100.

0 7.2 2.4

LIABILITIES AND SHAREHOLDERSEQUITY

Current liabilities 2,710,846 10.5 1,660,609 6.9 1,929,946 8.2 63.2 -14.0

Collaterals for transactions 2,072,989 8.0 1,134,235 4.7 1,501,022 6.4 82.8 -24.4

Noncurrent liabilities 3,886,921 15.0 3,072,623 12.7 2,402,485 10.2 26.5 27.9

Debt issued abroad and loans 1,426,193 5.5 1,242,239 5.1 1,138,659 4.8 14.8 9.1Deferred income tax and social

contribution 2,295,774 8.9 1,739,644 7.2 1,204,582 5.1 32.0 44.4

Shareholders equity 19,298,892 74.5 19,413, 882 80.4 19,257,491 81.6 -0.6 0.8

Capital and reserves attributable toshareholders

Capital stock 2,540,239 9.8 2,540,239 10.5 2,540,239 10.8 0.0 0.0

Capital Reserves 16,056,681 62.0 16,037,369 66.4 16,033,895 68.0 0.1 0.0

Total liabilities and shareholders equity 25,896,659

100.

0 24,147,114

100.

0 23,589,922

100.

0 7.2 2.4

COMPARATIVEANALYSISOFCONSOLIDATEDSTATEMENTSOFINCOME


Total revenuesTotal revenues for the year ended December 31, 2013, amounted to R$2,370,229 thousand, rising 3.5% year-over-year due primarily to increase in revenues from operations in the segment for financial and commodity derivativesas well as other revenues unrelated to trading and clearing activities, which, however, were counterbalanced by theyear-on decrease in revenues earned in the Bovespa segment.

Revenues from trading and clearing fees BM&F segmentThis line item increased 5.9% year-over-year totaling R$916,530 thousand (38.7% of total revenues), whereR$897,098 thousand relates to fees earned on trades in financial and commodity derivatives. This climb is duemainly to a 7.6% year-on climb in average RPC, which, however, was not fully captured due to a 1.8% tumble involumes traded within the segment.

Revenues from trading and clearing fees Bovespa segmentThis line item gave back 1.0% year-on-year totaling R$1,023,978 thousand, and accounted for 43.2% of totalrevenues. This fall is explained by a 4.5% margin drop (to 5.423 basis points from 5.676 basis points one yearago) attributable primarily to changes in pricing policies (including rate cuts for trades in cash equities by foreignand retail investors) coupled with a spike in trading activity by investors that enjoy discounts by volume rangeand a plunge in value traded in single stocks (relative to overall trading value). Nonetheless, the impact of thismargin drop was somewhat evened out by a 2.3% upsurge in average trading value.

Trading Fees trading systems. This revenue line item declined 20.6% year-on-year, to R$192,985 thousand fromR$243,181 thousand one year ago, due primarily to the changes in pricing policies implemented in April 2013 for aprice structure rebalancing (trading and clearing fee rates) which included a cut in trading fees for differentinvestor groups.

Clearing fees clearing and settlements systems. This revenue line went up 4.6% year-over-year, to R$804,570thousand from R$769,221 thousand one year earlier, due in part to a price structure rebalancing across thesegment (trade and post-trade fees rates mainly) which resulted in changes in pricing policies implemented in April2013, including changes in fees charged from local institutional investors and intraday traders.

Other revenuesOther revenues hit R$429.721 thousand, a 10.4% rise from the year-ago, and accounted for 18.1% of totalrevenues, primarily as a result of changes in revenue line items unrelated to trading and clearing operations, asfollows:

Securities lending services. Revenues of R$102,186 thousand (4.3% of total revenues) soared 32.6% year-over-year

due mainly to a 27.5% year-on rise in financial value of open interest positions at year-end, whose average reachedR$40.8 billion.

Depository, custody, back office services. Revenues of R$116,305 thousand (4.9% of total revenues) went up


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13.2% year-on-year explained mainly by a 4.6% climb in average number of custody accounts (assets undercustody at our central securities depository) as well as the higher revenues we derived from operating the TreasuryDirect platform and from registration services for transactions in agribusiness credit bills (locally known as LCAs,

Letras de Crdito do Agronegcio).Market data (vendors). At R$69,236 thousand (2.9% of total revenues) this revenue line item picked up 2.3%year-over-year. This slight climb is attributable mainly to appreciation of the U.S. dollar versus the Brazilian real, aswe derive about half of this revenue line from fees denominated in U.S. dollars which we charge from foreigncustomers.

Deductions from revenueDeductions from revenue totaled R$238,434 thousand, a 6.3% year-on rise (proportionately higher than the climbin revenues) attributable mainly to the lower offsettable amount of credits from PIS and Cofins taxes related torevenue inputs. However, we should note that some of the PIS-Cofins related tax credits generated in 2013 will beoffsettable against 2014 revenues.

Net revenueAs a result of the changes in revenue line items discussed above, the net revenue climbed 3.2% year-over-year, toR$2,131,795 thousand from R$2,064,750 thousand one year ago.

ExpensesExpenses totaling R$797,160 thousand rose 4.5% year-over-year. Set forth below is a discussion of the principalchanges in operating expense line items.

Personnel and related charges. This expense line totaled R$356,120 thousand, up slight 0.6% year-on-year.However, the comparability of these expenses has been somewhat hampered by a R$27,533 thousand provisionrecognized in 2012 in connection with our employees healthcare plan. As adjusted to eliminate the provision, thisline item would have recorded a 9.1% year-on surge in expenses with personnel and related payroll charges,reflecting mainly the annual wage increase prescribed under our collective bargaining agreement and a fall incapitalized personnel expenses related to ongoing projects (capitalized personnel expenses for 2013 came R$9.5million lower than the amount capitalized one year ago).

Data processing. The expenses in this line item totaled R$111.797 thousand, up 8.7% year-on-year due mainly toa rise in expenses with software and hardware services and maintenance related to trading platforms rolled outover the year, including the equities module of our PUMA Trading System in April 2013.

Depreciation and amortization. The expenses in this line item totaled R$119.661 thousand, up 27.6% year-on-yearprimarily due to the start of operations of our new information technology platforms, in particular, the ensuingadditional depreciation of (i) the equities module of our PUMA Trading System; and (ii) the ERP solutionimplemented in 2013.

Marketing and promotion. This expense line hit R$15,043 thousand plummeting 22.0% year-on-year due primarilyto the reprioritization of our marketing campaigns for the year and cuts in advertising expenses.

Sundry. This expense line hit R$55,715 thousand, down 13.7% year-on-year due primarily to R$15 million inproceeds from fines having been transferred to BM&FBOVESPA Market Surveillance (BSM) at end-2012 to fund itsoperations.

Operating incomeAt R$1,334,635 thousand, the operating income (revenues, net of expenses) was up 2.5% from R$1,301,670thousand in the prior year.

Gain (loss) on equity-method investment (equity in the results of subsidiaries and investees)We account for our investment in shares of the CME Group under the equity method of accounting and recognizegains and losses through profit or loss in the statement of income. Our net share of gain from the equity-methodinvestment in CME Group shares went up 14.8% from one year ago, totaling R$171,365 thousand, where R$64,847thousand were provisioned as recoverable tax paid abroad. This rise in equity-method gain reflects not only theimproved results of operations ascertained by the CME Group, but also the effects of the local currencydepreciation vis--vis the U.S. dollar.

Interest income, netNet interest income for the year hit R$181.535 thousand, down 13.1% year-on-year due primarily to a 34.1% jumpin interest expenses, which hit R$118.488 thousand in 2013, due mainly to the local currency depreciation againstthe U.S. dollar, since most our interest expenses correlate with debt under global senior notes issued in a July 2010cross-border offering. In turn, our interest income was up mere 0.9%, virtually keeping a steady line from theprior year to R$300,023 thousand.

Income before taxation on profitIncome before taxation on profit rose by 1.7% year-over-year, to R$1,687,535 thousand from R$1,659,791 thousandone year ago.


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Income tax and social contributionIncome before taxes totaled R$606,588 thousand and include R$60,097 thousand in current income tax and socialcontribution (related mainly to the offset portion of R$64,847 thousand in income tax paid overseas and recognized

under equity in results of investee, with the balance of R$4,750 thousand consisting of temporary tax credits forfuture offsetting). Additionally, at R$546,491 thousand, the line item deferred income tax and social contributionbreaks down as follows: (i) recognition of deferred tax liabilities of R$555,648 thousand related to temporarydifferences attributable mainly to amortization of goodwill for tax purposes, with no impact on cash flow; and (ii)recognition of deferred tax assets amounting to R$9,157 thousand related mainly to temporary differences andreversal of deferred tax liabilities.

Net income for the yearNet income for the year rose 0.6% year-over-year to R$1,080,947 thousand from R$1,074,256 thousand at December31, 2012.

Net income attributable to BM&FBOVESPA shareholdersNet income attributable to BM&FBOVESPA shareholders climbed 0.7% year-over-year to R$1,081,516 thousandfrom R$1,074,290 thousand the year before, primarily due to the higher revenues earned in our BM&F segmentand revenues from services unrelated to trading and clearing operations (volume-unrelated revenues) and gain on

the equity-method investment, which were partially canceled out by higher than anticipated expenses and theretreat in net interest income.


Total revenuesTotal revenues for the year ended December 31, 2012, amounted to R$2,289,023 thousand, rising 8.2% year-over-year due primarily to revenue increases in both the Bovespa and BM&F segments.

Revenues from trading and clearing fees BM&F segmentAt R$865.874 thousand (where R$848,858 thousand relates to fees earned on trades in financial and commodityderivatives), this line item increased 13.9% year-over-year reflecting a 7.3% climb in overall trading volume for thesegment and 7.7% jump in average rate per contract, as previously discussed herein.

Revenues from trading and clearing fees Bovespa segmentAt R$1,034,007 thousand, this line item jumped 7.2% year-over-year due mainly to an 11.7% rise in trading

volume for the segment, which, however, was partially counterbalanced by a 2.2% margin drop (to 5.676 bps from5.793 bps one year earlier) attributable to the higher volumes of high frequency and intraday trading, since wecharge lower fees these types of transactions. In addition, on a year-over-year basis, the 2012 revenues weretoned down by fewer trading sessions than last year (246 trading sessions in 2012 versus 249 in 2011).

Trading Fees trading systems. This revenue line item declined 55.0% year-on-year, to R$243,181 thousand fromR$540,391 thousand one year ago, driven by our pricing policy implemented in September 2011, which rebalancedthe price structure in line with our cost structure, ultimately cutting down the average fee rate for trading, whereaspushing up the average fees for clearing and settlement transactions, such that the cost of trading for investorswould not be impacted.

Clearing fees clearing and settlements systems. The revenue from fees our equities clearing house charges onclearing and settlement transactions (Bovespa segment) went up 94.2% year-over-year, to R$769,221 thousandfrom R$396,023 thousand in 2011, due mainly to the price structure rebalancing previously discussed.

Other revenues

Other revenues of R$389,142 thousand went down slight 0.5% from the year-ago primarily as a result of changesin revenue line items unrelated to trading and clearing operations, as follows:

Securities lending services. This revenue line hit R$77,063 thousand (3.4% of total revenues), a 4.1% year-over-year upsurge due mainly to a 5.9% year-on rise in financial value of the balance of open interest positions at year-end, which amounted to R$32.0 billion.

Depository, custody, back office services. The line for revenues derived from the operations of our centralsecurities depository hit R$102.763 thousand (4.5% of total revenues) rising 12.5% year-over-year mainly due to a2.6% climb in average financial value of assets under custody, not including custody of ADRs and custody servicesprovided to foreign investors. In addition, the revenue from fees related to custody of Brazils government bondstraded in our Treasury Direct (Tesouro Direto)platform soared 30.1% year-on-year.

Market data (vendors). At R$67.668 thousand (3.0% of total revenues) this revenue line item picked up 4.0%year-over-year. While the number of customers for our market data shrank somewhat, this climb is attributablemainly to appreciation of the U.S. dollar versus the Brazilian real, as we derive 40.0% of this revenue line from fees

denominated in U.S. dollars which we charge from foreign customers.Deductions from revenue


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Deductions from revenue totaled R$224,273 thousand, a 6.1% upsurge in line with the increase in total revenues.

Net revenueAs a result of the changes in revenue line items discussed above, the net revenue shot up 8.4% year-over-year, toR$2,064,750 thousand from R$1,904,684 thousand one year ago.

ExpensesExpenses totaling R$763,080 thousand declined 6.6% year-over-year. However, the comparability of this line itemhas been hampered because of certain non-recurring expenses recorded in 2011 and 2012.

Personnel and related charges. This expense line totaled R$353.880 thousand, up slight 0.6% year-over-year, andcorrelate primarily with: (i) the provision for expenses with healthcare plans, which totaled R$27,553 thousand andwas recognized in accordance with accounting standard CPC 33/IAS 19 (Employee Benefits). The provisioncorrelates with the expense accrual related to vested rights of employees that contributed to a (post-retirement)healthcare plan in the period between 2002 and 20095. Pursuant to Law No. 9,656/98 and additional requirementsset forth under Brazilian Healthcare Agency (ANS) Normative Resolution No. 279 dated November 2011, anemployee that contributes to the corporate healthcare plan with any sum of money is entitled to continue on asbeneficiary after the employment termination or retirement, as long as such employee bears the burden of payingfor the plan costs. The potential liabilities thus reserved relate to the difference, over time, between the averagecost of the corporate healthcare plan and the estimated average cost for inactive beneficiaries had they not stayedon as plan beneficiaries (indirect benefit); and (ii) expenses with the stock options plan, which at R$32,306thousand (versus R$53,630 thousand in 2011) fell by 39.8% year-over-year; and (iii) a R$18.290 thousand year-onincrease in capitalized expenses with personnel engaged in certain ongoing technology projects. The effects ofinflation on the line item for personnel and related charges have been balanced out by these factors (see thediscussion under subsection 10.2(c) below).

Data processing. This line item totaled R$102,805 thousand, a 1.5% drop from the prior year.

Depreciation and amortization. The expenses in this line item totaled R$93.742 thousand, up 24.6% year-over-year and in line with the increase in investments implemented in previous years.

Marketing and promotion. This expense line hit R$19.280 thousand, plummeting 50.1% year-over-year dueprimarily to the reprioritization of our marketing campaigns for the year and cuts in advertising expenses.

Operating income

At R$1,301,670 thousand, the operating income (revenues, net of expenses) was up 19.6% from R$1,088,020thousand in the prior year.

Gain (loss) on equity-method investment (equity in the results of subsidiaries and investees)We account for our investment in shares of the CME Group under the equity method of accounting and recognizegains and losses through profit or loss in the statement of income. Our gain from this investment totaledR$149,270 thousand, 32.0% down from one year ago, in line with the yearly results of the CME Group. It is worthnoting this line item includes recognition of R$60,196 thousand worth of tax benefit in the form of income tax tooffset against income tax paid abroad.

Interest income, netNet interest income of R$208,851 thousand plunged 25.6% year-over-year mainly due to a 16.9% year-ondecrease in interest revenues, which totaled R$297,217 thousand. Additionally, the interest revenues werenegatively impacted by an increase in interest expenses, which at R$88,366 thousand climbed 14.8% year-over-year. This increase in interest expenses is explained by the appreciation of the U.S. dollar against the Brazilian

real, since we are required to make U.S. dollar-denominated coupon payments under the global senior notes issuedin our July 2010 cross-border offering.

Income before taxation on profitIncome before taxation on profit rose by 4.5% year-over-year, to R$1,659,791 thousand from R$1,588,210 thousandone year ago.

Income tax and social contributionIncome tax and social contribution for the year totaled R$585,535 thousand. This line item comprises currentincome tax and social contribution amounting to R$67,314 thousand, including R$60,196 thousand which we offsetagainst income tax paid abroad (such as discussed previously under gain (loss) on equity-method investment).Additionally, at R$518,221 thousand, the line item deferred income tax and social contribution comprises (i)recognition of R$539,075 thousand in deferred tax liabilities related to temporary differences attributable mainly toamortization of goodwill for tax purposes, with no impact on cash flow for the year; and (ii) recognition ofR$20,854 thousand in deferred tax assets related mainly to temporary differences and reversal of deferred tax

5Starting from May 2009, the employee healthcare plan is no longer a defined contribution plan, such that only part of our active employees will beentitled to all or some of benefit.


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liabilities.

Net income for the yearNet income for the year rose 2.5% year-over-year to R$1,074,256 thousand at December 31, 2012, fromR$1,048,529 thousand one year ago.

Net income attributable to BM&FBOVESPA shareholdersNet income attributable to BM&FBOVESPA shareholders likewise climbed 2.5% year-over-year to R$1,074,290thousand from R$1,047,999 thousand the year before, primarily due to an increase in revenues earned on a highertrading volume base coupled with a reduction in expenses, which were partially counterbalanced by lower gain onthe equity-method investment and a decline in net interest income.

MAINLINEITEMSOFTHECONSOLIDATEDBALANCESHEETSTATEMENTS


TOTALASSETSTotal assets of R$25.896.659 thousand climbed 7.2% from R$24.147.114 thousand one year ago.

Current assets

Current assets surged 22.1% year-over-year, to R$4,319,483 thousand (16.7% of total assets) from R$3,536,282thousand the year before due mainly to an increase in investments maturing in the near term (less than 12months) and the upcoming maturity of a number of government bonds in our investment portfolio.

Cash and cash equivalents; short-and long-term financial investments. These encompass line items registeredunder both current assets (cash and cash equivalents comprising cash on hand and demand de posits, in additionto short-term financial investments) and noncurrent assets (long-term financial investments). Short- and long-termfinancial investments are liquid investments with prime banks, and investments in financial investment funds,government bonds and other highly liquid financial assets. At December 31, 2013, cash and cash equivalents plusshort- and long-term financial investments totaled R$4,870,760 thousand, a 26.5% year-on-year rise fromR$3,850,639 thousand one year ago due primarily to an upsurge in cash collateral (R$1,154,902 thousand) marketparticipants pledged to our clearing houses in the course of their dealings. Cash collateral received by us isrecorded under current liabilities.

Noncurrent assets

Noncurrent assets of R$21,577,176 thousand (83.3% of total assets) climbed 4.7% year-on-year fromR$20,610,832 thousand one year ago. Set forth below is a brief discussion of main changes to line items undernoncurrent assets not previously discussed.

Investments. This line item rose 14.3% year-on-year to R$3,346,277 thousand from R$2,928,820 thousandpreviously. The investments line consists primarily of investment in associate which we account for under theequity method of accounting, and relates to our ownership interest in shares of the CME Group, which at December31, 2013, were recorded at R$3,312,606 thousand. The year-on-year rise in investment value is attributable mainlyto depreciation of the Brazilian real against theU.S. dollar and our recognition of gain on equity-method investment.

Intangible assets. This line rose by 1.0% year-on-year, to R$16,672,325 thousand from R$16,512,151 thousandpreviously. Intangible assets consist of (i) goodwill, which at R$16,064,309 thousand remained unchanged (andaccounted for 62.0% and 66.5% of total assets at December 31, 2013 and 2012, respectively); and (ii) softwareand projects, which jumped 35.8% year-on-year to R$608,016 thousand from R$447,842 thousand one year ago,due mainly to acquisition, development and implementation of new software applications and systems.

Current liabilitiesCurrent liabilities climbed 63.2% year-on-year to R$2,710,846 thousand from R$1,660,609 thousand the yearbefore. This change is attributable mainly to 82.8% surge in the collateral for transactions line item, as the year-end balance of cash collateral pledged by market participants went up to R$2,072,989 thousand from R$1,134,235thousand one year ago.

Noncurrent liabilitiesNoncurrent liabilities of R$3,886,921 thousand were up 26.5% from R$3,072,632 thousand in the prior year. Setforth below is a brief description of the main changes to line items under noncurrent liabilities.

Debt issued abroad and loans. Loans and financing amounting to R$1,426,193 thousand rose 14.8% fromR$1,242,239 thousand one year earlier primarily on account of depreciation of the Brazilian real (our functionalcurrency) against the U.S. dollar (the transaction currency for our global senior notes issued abroad in a July 2010cross-border bond offering).

Deferred income tax and social contribution. Deferred income tax and social contribution liabilities of R$2,295,774thousand versus R$1,739,644 thousand one year ago, climbed 32.0% year-on-year surge resulting fromrecognition of the temporary differences between the tax base of goodwill and its balance sheet carrying value


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(while goodwill continues to be amortized for tax purposes, from January 1, 2009, it is no longer amortized foraccounting purposes, thus resulting in a goodwill tax base that is lower than its carrying value).

Shareholders equityShareholders equity of R$19,298,892 thousand was virtually unchanged with a scanty 0.6% year-on-year dropfrom R$19,413,882 thousand one year ago.


TOTALASSETSAt R$24.147.114 thousand, total assets climbed 2.4% from R$ 23,589,922 thousand one year ago.

Current assetsCurrent assets surged 47.3% year-on-year, to R$3,536,282 thousand (14.6% of total assets) from R$2,401,134thousand one year ago, due mainly to increase in short term financial investments (less than 12 months) and theupcoming maturity of a number of government bonds in our investment portfolio.

Cash and cash equivalents; short-and long-term financial investments. These comprise line items registered undercurrent assets (cash and cash equivalents comprising cash on hand and demand deposits, in addition to short-term financial investments) as well as under noncurrent assets (long-term financial investments). Short- and long-

term financial investments are liquid investments with prime banks, and in financial investment funds, governmentbonds and other highly liquid financial assets. At December 31, 2012, cash and cash equivalents plus short- andlong-term financial investments totaled R$3,850,639 thousand, a 1.8% year-on-year rise from R$3,782,411thousand one year ago.

Noncurrent assetsNoncurrent assets of R$20,610,832 thousand (85.4% of total assets) fell 2.7% year-on-year from R$21,188,788thousand one year ago. Set forth below is a brief discussion of main changes to line items under noncurrent assetsnot previously discussed.

Investments. This line item increased 8.1% year-on-year to R$2,928,820 thousand from R$2,710,086 thousandpreviously. The investments line consists primarily of investment in associate which we account for under theequity method of accounting, and relates to our ownership interest in shares of the CME Group, which at December31, 2012, was recorded at R$2,893,632 thousand. The year-on-year rise first noted above is attributable mainly todevaluation of the Brazilian real against the U.S. dollar and our recognition of the gain on equity-method

investment.Intangible assets. This line rose by 1.0% year-over-year, to R$16,512,151 thousand from R$16,354,127 thousandpreviously. Intangible assets consist of (i) goodwill, which at R$16,064,309 thousand kept a flat line in each year,and accounted for 66.5% and 68.1% of total assets at December 31, 2012 and 2011, respectively; and (ii)software and projects, which soared 54.5% year-over-year to R$447,842 thousand from R$289,818 thousand oneyear ago due mainly to acquisition, implementation and development of new software applications and systems.

Current liabilitiesCurrent liabilities decreased 14.0% year-over-year to R$1,660,609 thousand from R$1,929,946 thousand the yearbefore. This change is attributable mainly to a 24.4% decrease in the collateral for transactions line item, as theyear-end balance of cash collateral pledged as margin by market participants declined to R$1,134,235 thousandfrom R$1,501,022 thousand one year ago.

Noncurrent liabilitiesNoncurrent liabilities of R$3,072,632 thousand went up 27.9% from R$2,402,485 thousand in the prior year. Set

forth below is a brief description of the main changes to line items under noncurrent liabilities.Debt issued abroad and loans. Loans and financing amounting to R$1,242,239 thousand rose 9.1% fromR$1,138,659 thousand one year earlier primarily on account of the devaluation of the Brazilian real(our functionalcurrency) against the U.S. dollar, which is the transaction currency for our global senior notes issued abroad (in aJuly 2010 cross-border bond offering).

Deferred income tax and social contribution. Deferred income tax and social contribution liabilities amounted toR$1,739,644 thousand versus R$1,204,582 thousand one year ago, a 44.4% year-on-year surge resulting fromrecognition of the temporary difference between the tax base of goodwill and its balance sheet carrying value(while goodwill continues to be amortized for tax purposes, from January 1, 2009, it is no longer amortized foraccounting purposes, thus resulting in a goodwill tax base that is lower than its carrying value).

Shareholders equityShareholders equity of R$19,413,882 thousand was virtually unchanged with a scanty 0.8% year-on-year dropfrom R$19,257,491 thousand one year ago.


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10.2. Managements discussion and analysis of results of operationsa. Material revenue components

Year ended December 31, 2013 compared to year ended December 31, 2012Our consolidated total revenues climbed by 3.5% year-on-year to R$ R$2,370,229 thousand from R$2,289,023thousand one year ago.

Revenues from trading and clearing fees earned within our Bovespa segment. These declined 1.0% from theprior year and amounted to R$1,023,978 thousand, primarily due to a 4.5% margin drop (to 5.423 basispoints from 5.676 basis points one year ago) which was counterbalanced by a 2.3% rise in average valuetraded.

Revenues from trading and clearing fees earned within our BM&F segment. These jumped 5.9% year-on-year, to R$916,530 thousand (38.7% of total revenues), due primarily to a 5.7% year-on-year upsurge inaverage volume traded and a 7.6% rise in average rate per contract (RPC).

Revenues unrelated to trading and clearing operations. These surged 10.4% year-on-year to R$429,721thousand (18.1% of total revenues).

Year ended December 31, 2012 compared to year ended December 31, 2011.

Our consolidated total revenues climbed 8.2% year-on-year R$2,289,023 thousand from R$2,115,983 thousandone year ago.

Revenues from trading and clearing fees charged within our Bovespa segment climbed 7.2% year-on-year toR$1,034,007 thousand, reflecting a combination of 11.7% rise in average trading volume, which however waspartially counterbalanced by fewer trading sessions than the year before (246 in 2012 versus 249 in 2011),and a 2.2% fall in average basis point margin (to 5.676 bps from 5.793 bps in the earlier year). This margindrop is in line with the higher volumes attributable to high frequency and intraday trading, from which wederive fees at lower-than-average margins.

Revenues from trading and clearing fees charged within our BM&F segment jumped 13.9% year-on-year, toR$865,874 thousand, due primarily to a 7.3% year-on-year upsurge in volumes traded and a 7.7% climb inaverage rate per contract (RPC).

Revenues unrelated to trading or clearing activities totaling R$389,142 thousand in 2012 kept a virtuallyunchanged line from R$391,036 thousand one year ago.

b. Factors that materially influence the results of operationsYear ended December 31, 2013 compared to year ended December 31, 2012

The average daily value traded on equities markets hit an all-time record high of R$7.42 billion (versus R$7.25billion one year ago). However, the average margin (trade and post-trade services) fell to 5.423 basis points in2013 from 5.676 basis points one year earlier, which is attributable primarily to changes in pricing policies andheightened trading activity by investors that enjoy discounts by volume range.

In contrast, the average daily volume traded on financial and commodity derivatives markets dropped 1.8%year-on-year, to average 2.85 million contracts traded versus 2.90 million contracts previously, whereas theaverage rate per contract (RPC) went up 7.6% year-on-year to R$1.282 from R$1.191 in the earlier year, inlarge part due to the local currency depreciation against the U.S. dollar, since the fee rates we charge for asignificant number of contract groups are denominated in U.S. dollars.

Year ended December 31, 2012 compared to year ended December 31, 2011

The volume of business in both our Bovespa and BM&F segments ballooned over the course of 2012 to hit newrecord highs. In the Bovespa segment, increased turnover velocity driven by a boost in volume traded by foreigninvestors spurred an 11.7% spike in overall trading volumes. The primary reasons for the foreign investing buildupare twofold: one, the fact that most of the high frequency trading volume originates cross border; two, a shift inmonetary policy which in December 2011 led the Government to remove the 2% IOF tax levied on hot moneyinflows for investments in variable-income securities.

In turn, a 7.3% volume jump in the BM&F segment was pushed mainly by the surge in average volumestraded in Brazilian-interest rate contracts. In addition, the average rate per contract (RPC) climbed 7.7%year-over-year both as a result of the swelling volumes traded in longer-maturity Brazilian-interest ratecontracts and because the RPC for forex contracts was positively influenced by the depreciation of theBrazilian real against the U.S. dollar (since our rates for these contracts are denominated in U.S. dollars). Acombination of factors explains the increase in trading volume and greater concentration on longer-terminterest rate contracts, prime among which are the structural change brought about by drastic cuts in real

interest rate, coupled with increased credit availability and the greater portion of fix interest-bearinggovernment debt relative to total public debt.

Other factors which decisively influenced our 2012 results, as compared to 2011, include:


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a 25.6% decline in interest revenues (to R$208,851 thousand versus R$280,729 thousand one year ago) dueprimarily to a tumble in the interest rates earned on our financial investments, most of them fixed-rateinvestments;

R$27,533 thousand reserved as provision for healthcare plan expenses; R$15,000 thousand contributed to BSM to fund the operations of our market surveillance arm over the course

of 2013.

c. Changes in revenues attributable to fluctuations in market prices, exchange rates,inflation rates, changes in volumes and offerings of new products or services


Changes in revenues attributable to changes in our pricing policies or to fluctuations in exchange rates include:

Revenues from trading and post-trade transactions within Bovespa segment. As discussed elsewhere herein,in April 2013 we implemented a price structure rebalancing across the segment (trade and post-trade feesrates mainly) which resulted in changes in pricing policies that included rate cuts for trades in cash equitiesby foreign and retail investors, in addition to discounts by volume range granted to local institutionalinvestors and intraday traders dealing on the stock and options markets. To a certain extent, these price

changes hampered the comparability of the revenue lines related to trading and clearing fees between 2013and 2012.

Revenues from trading and post-trade transactions within BM&F segment. The fluctuation in exchange ratesbetween the years 2013 and 2012 positively influenced the average RPC for forex contracts (+ 15.0%) andU.S. dollar-denominated interest rate contracts (+ 21.3%), as the fees we charge for each of these contractgroups are denominated in U.S. dollars. Between 2011 and 2012 the average exchange rate for U.S. dollarsappreciated 10.5% against the Brazilian real. 6

Market data (vendors). This revenue line was positively influenced by the appreciation of the U.S. dollaragainst the Brazilian real, as about half of our revenues from sales to financial data vendors originate fromforeign customers from whom we charge fees denominated in U.S. dollars for payment abroad.


Changes in revenues attributable to changes in our pricing policies or to fluctuations in exchange rates include:

Revenues from trading and post-trade transactions within the Bovespa segment. In August 2011, asdiscussed elsewhere herein, we announced a comprehensive revision of our pricing policy for the segment toeliminate cross subsidies embedded in fee rates across our trading and post-trade business lines. While thispolicy revision affected the comparability of the 2012 and 2011 revenue lines as regards fees derived fromtrading activities and post-trade activities, the comparability of total revenues for these two years has notbeen hampered.

Revenues from trading and post-trade transactions within the BM&F segment. The variation in exchangerates between the years 2011 and 2012 positively influenced the average RPC for forex contracts (+ 16.4%)and U.S. dollar-denominated interest rate contracts (+ 7.9%), as the fees we charge for both aredenominated in U.S. dollars. Between 2011 and 2012 the average exchange rate for U.S. dollars appreciated17.6% against the Brazilian real.7

Market data (vendors). This revenue line was positively influenced by the appreciation of the U.S. dollaragainst the Brazilian real, as about 40% of the revenues from market data sales to financial data vendorsoriginate from foreign customers from whom we charge fees denominated in U.S. dollars for payment abroad.

d. Impact on financial condition and results of operations attributable to changes in inflationrates; in market prices for the principal raw materials and other supplies; in exchange andinterest rates.

The level of interest rates (real or otherwise) influences our financial results (net interest income) as itdetermines the basis on which we earn a return on our financial investments. At December 31, 2013 ourfinancial investments amounted to R$3,674,171 thousand versus R$3,806,997 thousand and R$3,717,763thousand December 31, 2012 and 2011, respectively. Thus, a change in average interest rates paid on ourfinancial investments influences our interest revenue, which at December 31, 2013, amounted to R$300,023thousand versus R$297,217 thousand and R$357,720 thousand at December 31, 2012 and 2011, respectively.

In the case of changes in foreign exchange rate, the effects of depreciation of the local currency relative to U.S.

6Year-over-year exchange rate fluctuation is calculated as the average fluctuation of the PTAX exchange rate as at end-December 2011 throughend-November 2013, as these rates provide the basis on which to calculate average RPC for the months of January 2012 through December 2013,

respectively. The PTAX rate is compiled and released at the close of business on a daily basis by the Central Bank.7Year-over-year exchange rate variation is calculated as the average fluctuation of the PTAX exchange rate as at the end of December 2010through end-November 2012, as these rates provide the basis on which to calculate average RPC for the months of January 2011 through December2012, respectively. The PTAX rate is compiled and released at the close of business on a daily basis by the Central Bank.


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dollars are threefold: (i) our interest expenses increase, as nearly all our onerous liabilities (interest-bearingobligations) consist of the U.S.-dollar denominated debt under global senior notes issued by us in a cross-borderbond offering completed on July 16, 2010 (see subsection 10.1(b) above); (ii) our revenues from fees earned on

certain contract groups increase as well, since the average fee rates we charge on trades in forex futures, in U.S.dollar-denominated interest rate futures and in certain commodity futures contracts are denominated in U.S. dollars(see subsection 10.2(b) above) and (iii) our revenues from market date sales to financial data vendors increase asa significant portion of this revenue is denominated in U.S. dollars, such that at December 31, 2013, we registereda 2.3% year-on climb in this revenue line (R$69,236 thousand) due mainly to the depreciation of the local currencyagainst the U.S. dollar.

Additionally, the inflation rate influences our expenses, in particular expenses with personnel and relatedcharges (see subsection 10.1(h) above.). Under our annual collective bargaining agreement, which is renewedevery month of August, the payroll and related charges increase (by wage bracket) relatively in line with theinflation rate for the prior period, as measured by the Extended National Consumer Price Index (ndice Nacionalde Preos ao Consumidor Amplo), known as IPCA, which is compiled and released by the Brazilian Institute ofGeography and Statistics (Instituto Brasileiro de Geografia e Estatstica), or IBGE.

10.3. Managements discussion and analysis of actual or expected material effects on the financialstatements or results of operations from the factors set forth below.

a. Creation or disposition of operating segment.No operating segment was created or sold in the year ended December 31, 2013. Accordingly, no such event hashad or is expected to have any effects on our financial statements, financial condition or results of operations.

b. Company organization; acquisition or disposition of ownership interest.No event entailing the organization of a company has occurred in the prior year, nor any acquisition or dispositionof ownership interest carried out in the year ended December 31, 2013.

c. One-off and extraordinary events or transactions.In the year ended December 31, 2013, there were no events or transactions characterized as one-off orextraordinary events or transactions related to us or our business which materially influenced, or are expected tomaterially influence our financial statements and results of operations.

10.4. Discussion and analysis ofa. Significant changes in accounting practices

There were no significant changes in our accounting practices in the years ended December 31, 2013, 2012 and2011.

Our consolidated financial statements as of and for the year ended December 31, 2010, were the initialconsolidated financial statements prepared and presented under Brazils CPC and IFRS. The consolidatedfinancial statements were prepared and presented in accordance with accounting standards CPC 37 (IFRS 1 First-time Adoption of International Financial Reporting Standards) and CPC 43 (First-time Adoption ofBrazilian Accounting Standards CPC 15 to 41).

b. Significant effects of changes in accounting practicesThere were no significant changes in our accounting practices in the years ended December 31, 2013, 2012 and2011.

c. Qualifications and emphasis of matter paragraphs included in the independent auditorsreport

The independent auditors report on our financial statements as of and for the years ended December 31,2013, 2012 and 2011, include, in each case, an emphasis of matter paragraph to the effect that theunconsolidated financial statements were prepared in accordance with the accounting practices adopted inBrazil. In the case of BM&FBOVESPA S.A. Bolsa de Valores, Mercadorias e Futuros, these practices differfrom IFRS applicable to separate financial statements only in relation to the measurement of investments insubsidiaries and associate entities accounted for under the equity method, since IFRS would require themto be carried at cost or fair value. Our opinion is not qualified with respect to thi s matter.

10.5. Critical accounting policiesa. accounting estimates requiring Management to exercise judgment and make subjective

assumptions about future events and uncertainties which can materially influence thefinancial condition and results of operations. Critical accounting estimates may relate toprovisions, contingencies, recognition of revenues, tax credits, long-term assets, theuseful life of noncurrent assets, pension schemes, adjustments to foreign currency


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translations, environmental recovery costs, impairment testing of assets and financialinstruments.

Impairment of assetsAssets subject to amortization are tested for impairment at any time events or changes in circumstances suggestthe carrying value may not be fully recoverable. An impairment loss is recognized when the carrying value of theasset is found to exceed its recoverable value. Recoverable value for this purpose is the higher of the assets fairvalue less costs of disposal (net selling price) and value in use.

Indefinite-lived assets, as is the case of goodwill, are not subject to amortization and are tested for impairment onan annual basis, with reassessments being made at shorter intervals where there are indications of potentialimpairment.

The goodwill of R$16,064,309 thousand has been attributed to expected future profitability, supported by aneconomic and financial valuation report of the underlying investment. According to the guidelines provided byaccounting standard CPC 01 (IAS 36Impairment of Assets), goodwill is tested for impairment on an annual basis,and indications of potential impairment are reassessed at shorter intervals. Goodwill is stated at cost lessimpairment losses. Additionally, recognized impairment losses on goodwill are not subsequently reversed.

The assumptions we adopted in estimating the future cash flows expected to be derived from the cash-generatingunit consisting of our Bovespa segment have been based on our analysis of the segments performance over thelast few years, and on our analysis and expectations for growth of the exchange industry, in addition to our ownexpectations and strategies.

For assistance in the measurement of the assets value in use (recoverable value) we hire external independentvaluation specialists. The valuation report provided by the specialist valuation firm found no impairment chargeswere required to be recognized, so that no adjustments were made to the carrying value of goodwill as ofDecember 31, 2013.

Based on our expectations for growth of the Bovespa segment, our estimates of future cash flows take into accountcertain projections of future revenues and expenses for the segment over a time horizon extending from December2013 to December 2023, with perpetuity derived by extrapolating the 2023 cash flow projection at a growth rate of7.63% per annum, which is equivalent to the expected rate of growth for the nominal GDP in the longer term.

We understand the ten-year projection horizon to be consistent with perception that the variable income segmentof the domestic capital markets is set to undergo an extended period of growth until it reaches longer termmaturity.

In determining the present value of projected cash flows, we applied average pre-tax discount rate of 16.56% perannum for the period from December 2013 to December 2017. Thereafter, the discount rate kept stable, at15.24% per annum, capturing the expected fluctuation in inflation rates over the period.

The two main variables that influence our calculation of value in use are discount rates and perpetuity growthrates. We ran sensitivity analysis on our projections to determine how changes in these variables impact ourcalculation of value in use. The equivalent pre-tax discount rate for the entire period being 15.45% per annum, anincrease of 1.10 percentage point (110bps) in such rate (from 15.45% to 16.55% per annum) would reduce ourcalculation of value in use by approximately 12%. And a 0.50 percentage point (50bps) decrease in perpetuity growthrate (from 7.63% to 7.13% per annum) would reduce our calculation of value in use by approximately 5%. Forpurposes of our sensitivity analysis, the variations of the two parameters that influence our calculation of value inuse were determined, for the former variable, on the basis of a backward-looking standard deviation of discount

rates using data for the last 5 years, and for the latter variable, on the basis of a backward-looking standarddeviation of the averages for 10-year series of data on Brazils real GDP growth rate variations. In the outcome,value in use shows lower sensitivity to variations in projected net revenues; thus, a decrease in average annualrevenue growth rate on the order of 15% over the 2014 to 2023 horizon would reduce our calculation

annual shareholders' meeting - 03.24.2014 - management proposal

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