ANALYST CERTIFICATION AND REQUIRED DISCLOSURES BEGIN ON PAGE 6 BTG Pactual does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.

Equities Research

Carlos Sequeira, CFA

Analyst

carlos.sequeira@btgpactual.com

+55 21 3262 9223

Antonio Junqueira

Analyst

antonio.junqueira@btgpactual.com

+55 21 3262 9278

Getting to Know Brazil Brazil Equity Strategy Strategy Comment 23 November 2009

#1 – The poison pill myth

Do poison pills imply high standards of corporate governance?

Brazil’s highest level of corporate governance, which requires companies to have only voting shares, with 100% tag-along rights for minorities, is known as the

Novo Mercado. Out of the +100 stocks listed in this group, the bylaws of more

than 50% of them contain rules aiming to prevent a hostile takeover. The so-called “poison pills” require companies buying a specific number of shares in

another company to make a tender offer (at a significant premium to market

prices) for 100% of the issuer’s capital.

Poison pills (i) may not be valid in M&As, (ii) can be removed…

Some investors may think that the implied premium demanded by poison pills

represents a potential benefit for shareholders. What many don’t know is that

these anti-takeover rules, in many cases, can be easily removed. In other cases, poison pills are not even valid in the event of a transaction involving the

company’s controller. Finally, we have recently seen cases in which poison pills

(although valid) were not applied, due to the structure used in the M&A

transaction.

… or (iii) can simply block transactions

If not overruled, poison pills may simply block minority holders from increasing

their stake in companies or prevent any M&A deal from happening.

Poison pills don’t increase a stock’s value

We don’t believe poison pills protect minority shareholders’ investment value. If

the fundamentals don’t justify a premium price, all else equal, the transactions, as a general rule, simply don’t go ahead. If that’s the case, instead of protecting

shareholders by increasing the potential upside of stocks, poison pills may be

reason for a discount.

Getting to Know Brazil 23 November 2009

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Healthy or poisoned?

Back in the 1980s, when stocks and the after-tax cost of debt were cheap, the

US market enjoyed a boom in hostile leveraged buyouts. The math was simple. If the after-tax cost of debt was lower than the company’s earnings yield and the

business was a stable cash flow generator, it was value-accretive to buy the

company.

With a stockholder base much more disperse than the current Brazilian reality, the LBO boom has changed the face of corporate America, and the trend has

posed a threat to many managers’ jobs. The reaction of executives was to

defend, on the political front, changes to local regulations and, on the corporate

front, changes to the companies’ bylaws.

A relevant “agency problem” was created, putting managers and shareholders

on opposite sides. The anti-takeover clauses inserted into companies’ bylaws

helped contain the huge LBO activity, maintaining the status quo for longer. The clauses and the passive stance of shareholders extended the mandates of

inefficient managers across the industry, harming operating efficiency and

returns.

Poison Pills in Brazil

The recent capital market boom in Brazil significantly altered the controlling status of many companies. Brazil, which was previously a country with mostly

family-controlled companies, started to see stronger shareholder base

dispersion. Corporations are still a rare exception, but most of the top 100

companies are now public.

During the IPO season, many of the controllers of the companies that went

public decided to protect themselves from hostile takeovers (even in cases

where they are not yet possible – i.e., when over 50% of the shares are held by

one single shareholder).

Labeled as a ‘capital dispersion protection’ clause, the poison pills were

introduced into company’s bylaws, mainly with the aim of preventing minorities

from surpassing a specific amount of shares. Today, at the Novo Mercado, this

amount ranges from 10% to 35% of the total capital.

Out of the +100 stocks listed in this group, more than 50% contain poison pills in

their bylaws. Considering the list available on the Bovespa’s website and making

some adjustments, 52 Novo Mercado stocks contain a poison pill clause (see Appendix for a complete list of Novo Mercado companies with poison pill

clauses).

Of these 52 poison pill clauses, 25 can be removed by a simple majority if

approved by a General Shareholders Meeting, like BMF Bovespa, B2W, JBS and Redecard. This is, in our view, the ideal structure, since shareholders are

able to vote new rules if conditions change. Cremer has just removed its capital

dispersion protection clause, while GVT has suspended it temporarily.

Getting to Know Brazil 23 November 2009

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At the remaining 27 companies, removing the poison pill clause may appear very

difficult. Amil and Hering, two of the 27, allow the clause to be removed via a General Shareholders Meeting. However, these companies require a

supermajority, which makes things more complicated.

Some clauses are so difficult to be removed that CVM has opposed them

In 25 cases, although the poison pill can be removed, the bylaws contain a

paragraph stating that those voting to remove the clause shall buy the shares of

those voting against (in most cases, at the same premium price defined by the

poison pill). This is the case of DASA, Lojas Renner and Positivo, for example.

However, the CVM (Brazilian SEC) has positioned itself against this article,

stating (via Legal Opinion #36) that the demand on those voting to remove the

poison pill opposes specific articles (115, 121, 122, 129) of Brazilian Corporate Law – the key law governing public companies in the country. The CVM’s

orientation hasn’t yet been analyzed from a legal standpoint, but we think that

the courts would most likely follow the capital markets regulator, which has more knowledge in such matters. If that is the case, then even these bylaws could be

altered in order to remove the poison pill clauses.

M&As

Other issues tone down the importance of poison pills. Sometimes, anti-takeover

clauses are not applicable when the controller sells its shares. In these cases,

the anti-takeover measure is truly treated as a defense against capital concentration. As the controllers’ shares are not considered float, sometimes

M&As are able to bypass the poison pill premium. In other cases, a complex

structure, involving a new holding company, is able to avoid the poison pill.

Poison pills don’t increase (and may even reduce) stocks’ value

We don’t think poison pills add corporate governance value to companies. The fact that the bylaws of 50% of all Novo Mercado listed stocks feature such

measures is not, in our view, a reason to believe the opposite.

As we believe fundamentals are the main reason behind any relevant

investment, if the prices forced by poison pills are not removed, the clauses tend simply to block M&A transactions and minority shareholders from buying more

than a specific stake in a company. The low caps imposed by these clauses

may, at the end of the day, reduce demand for the stocks. If that’s the case, instead of protecting shareholders by increasing the potential upside of the

investment, poison pills may be reason for a discount.

Getting to Know Brazil 23 November 2009

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Appendix

Table 1: Details of anti-takeover clauses (poison pills) – Novo Mercado

Company Poison Pill existence Triggered at Voting for removal implies any obbligation?Açúcar Guarani noAgra yes 20% yes (tender - Art 39 par 11)American Banknote yes 20% yes (tender - Art 43 par 14)Amil yes 15% no, but requires 75% quorum to remove the poison pillB2W yes 20% noBanco do Brasil noBematech yes 25% noBMF Bovespa yes 15% noBR Malls noBrasil Agro yes 20% yes (tender - Art 45 par 11)Brasil Brokers yes 20% noBrasil Ecodiesel yes 30% yes (tender - Art 39 par 10)Brasil Foods yes 20% yes (tender - Art 37 par 13)Brookfield noCCDI noCCR noHering yes 20% no, but requires 2/3 approval of total shareholdersProvidencia noSabesp noCopasa noVisanet noCosan noCPFL Energia noCR2 noCremer removedCSU Cardsystem noCyrela noCCP yes 15% yes (tender - Art 50 par 10)Dasa yes 15% yes (tender Art 41 par 8)Drogasil noDuratex noEnergias do Brasil noEmbraer yes 35% noEquatorial noEstácio noEternit noEven noEztec yes 15% yes (tender Art 41 par 10)Fertilizantes Heringer yes 20% yes (tender Art 41 par 11)Gafisa noGeneral Shopping yes 15% yes (tender Art 43 par 10)GVT removedHelbor yes 20% yes (tender Art 45 par 11)Hypermarcas noIdeiasnet yes 25% noIguatemi noRomi yes 15% yes (tender Art 51 par 8)Inpar yes 20% yes (tender Art 38 par 11)Invest Tur yes 35% no

Source: Companies’ bylaws and BTG Pactual. Novo Mercado list as of October 14th 2009 (Bovespa website). Abyara, Nossa Caixa, Klabin Segall and Tenda removed from the original list.

Getting to Know Brazil 23 November 2009

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Table 2: Details of anti-takeover clauses (poison pills) – Novo Mercado (continuation)

Company Poison Pill existence Triggered at Voting for removal implies any obbligation?Iochpe Maxion yes 15% yes (tender Art 48 par 11)JBS yes 20% noJHSF yes 15% noLight noLLX noLocaliza yes 10% noLog-in yes 35% yes (tender Art 35 par 12)Lojas Renner yes 20% yes (tender Art 43 par 11)Lopes yes 20% yes (tender Art 35 par 12)Lupatech yes 20% noM. Dias Branco yes 10% noMagnesita noMarfrig noMarisa yes 15% noMedial yes 20% noMetalfrio noMinerva yes 20% noMMX noMPX noMRV noNatura yes 25% noOHL Brasil yes 20% noOdontoprev yes 15% yes (tender Art 39 par 8)OGX noPDG noPorto Seguro noPortobello yes 30% noPositivo Informática yes 10% yes (tender Art 32 par 15)Profarma yes 20% yes (tender Art 41 par 11)Redecard yes 26% noRenar Maçãs noLe Lis Blanc noRodobens yes 15% yes (tender Art 43 par 10)Rossi noSão Carlos yes 25% noSão Martinho yes 10% noSLC Agrícola yes 20% noSprings yes 20% noTarpon noTecnisa yes 20% yes (tender Art 38 par 14)Tegma noTempo yes 20% noTivit noTotvs yes 20% yes (tender Art 44 par 14)Triunfo yes 20% yes (tender Art 32 par 8)Tractebel noTrisul yes 15% yes (tender Art 45 par 8)Weg no

Source: Companies’ bylaws and BTG Pactual. Novo Mercado list as of October 14 2009 (Bovespa website). Abyara, Nossa Caixa, Klabin Segall and Tenda removed from the original list

Getting to Know Brazil 23 November 2009

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Required Disclosures This report has been prepared by Banco BTG Pactual S.A. The figures contained in performance charts refer to the past; past performance is not a reliable indicator of future results. Additional information will be made available upon request. BTG Pactual Rating Definition Coverage1 IB Services2

Buy Expected total return 10% above the company’s sector average. 40% 76%

Neutral Expected total return between +10% and -10% the company’s sector average. 51% 60%

Sell Expected total return 10% below the company’s sector average. 9% 29%1: Percentage of companies under coverage globally within the 12-month rating category. 2: Percentage of companies within the 12-month rating category for which investment banking (IB) services were provided within the past 12 months. Absolute return requirements Besides the abovementioned relative return requirements, the listed absolute return requirements must be followed: a) a Buy rated stock must have an expected total return above 15% b) a Neutral rated stock can not have an expected total return below -5% c) a stock with expected total return above 50% must be rated Buy Analyst Certification Each research analyst primarily responsible for the content of this investment research report, in whole or in part, certifies that: - all of the views expressed accurately reflect his or her personal views about those securities or issuers, and such recommendations were elaborated independently, including in relation to Banco BTG Pactual S.A. and/or its affiliates, as the case may be; - no part of his or her compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by that research analyst in the research report. Research analysts contributing to this report who are employed by a non-US Broker dealer are not registered/qualified as research analysts with the NASD and NYSE and therefore are not subject to the restrictions contained in the NASD and NYSE rules on communications with a subject company, public appearances, and trading securities held by a research analyst account. Brazilian Regulation CVM 388 Each research analyst primarily responsible for the content of this investment research report, in whole or in part, certifies that: - all of the views expressed accurately reflect his or her personal views about those securities or issuers, and such recommendations were elaborated independently, including in relation to Banco BTG Pactual S.A., as the case may be; - no relationship is maintained with any person who works for the subject companies which securities are mentioned on this research; - Banco BTG Pactual S.A. and/or its affiliates (including the funds, portfolios and investment clubs in securities managed by them) do not own directly or indirectly 1% or more of the total capital of the subject company(ies) JBS S.A., BM&F Bovespa S.A., B2W Companhia Global do Varejo, Redecard S.A., CREMER S/A, GVT Holding S.A., Amil Participações, LOJAS HERING S/A, Diagnósticos da América S.A., Lojas Renner S.A., Positivo Informatica SA or are involved in the acquisition, alienation or intermediation of such securities in the market; - does not hold, directly or indirectly securities of the subject companies which represent 5% or more of his or her net worth, and is not involved in the acquisition, alienation or intermediation of such securities in the market; - the analyst does not receive compensation for any services rendered or presents any commercial relationships with any of the subject companies or person, entity or any kind of funds which represents the same interest of the subject companies; - no part of any of the research analyst's compensation was, is, or will be directly or indirectly related to the pricing of any of the securities issued by any of the subject companies and/or to the specific recommendations or views expressed by the research analyst in this research although part of the analyst's compensation comes from the profits

Getting to Know Brazil 23 November 2009

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of Banco BTG Pactual S.A. and/or its affiliates and, consequently, revenues arisen from transactions held by Banco BTG Pactual S.A. and/or its affiliates - Banco BTG Pactual S.A. and/or its affiliates receive compensation for any services rendered or presents any commercial relationships with the subject company(ies) JBS S.A., BM&F Bovespa S.A., B2W Companhia Global do Varejo, GVT Holding S.A., Amil Participações, Diagnósticos da América S.A., Positivo Informatica SA or person, entity or any kind of funds which represents the same interest of subject company(ies); - Banco BTG Pactual S.A. and/or its affiliates does not receive compensation for any services rendered or presents any commercial relationships with the subject company(ies) Redecard S.A., CREMER S/A, LOJAS HERING S/A, Lojas Renner S.A. or person, entity or any kind of funds which represents the same interest of subject company(ies)

Risk Statement We believe the key risks are additional competition and regulatory issues. In addition, there are potential risks inherent in investing in emerging market countries. Potential emerging market related risks include, but are not limited to, the volatile nature of the currency, regulatory and sociopolitical risk, and abrupt potential changes in the cost of capital and economic growth outlook. Valuations can also be affected by "contagion" from developments in other emerging markets.

Company Disclosures JBS S.A. 1, 2, 3, 4 BM&F Bovespa S.A. 1, 2, 3, 4 B2W Companhia Global do Varejo 1, 2, 3, 4 GVT Holding S.A. 1, 2, 3, 4 Amil Participações 1, 2, 3, 4 Positivo Informatica SA 1, 2, 3, 4 Diagnósticos da América S.A. 10 1. Within the past 12 months, Banco BTG Pactual S.A., its affiliates or subsidiaries has received compensation for investment banking services from this company/entity. 2. Banco BTG Pactual S.A, its affiliates or subsidiaries expect to receive or intend to seek compensation for investment banking services and/or products and services other than investment services from this company/entity within the next three months. 3. Within the past 12 months, Banco BTG Pactual S.A has received compensation for products and services other than investment banking services from this company/entity. 4. This company/entity is, or within the past 12 months has been, a client of Banco BTG Pactual S.A., and investment banking services are being, or have been, provided. 10. Banco BTG Pactual S.A. makes a market in the securities of this company.

Getting to Know Brazil 23 November 2009

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