Novo Mercado

Description of ‘Novo Mercado’ listing segment

Deployed BMF&Bovespa (currently B3), the Novo Mercado , Nível 2, Nível 1, Bovespa Mais Nível 1 and Bovespa Mais Nível 2 are special listing segments developed to provide a trading environment that stimulated at the same time, investor interest and the valuation of companies. Launched in 200, Companies registered in the Novo Mercado take on commitments of corporate governance in addition to those that already exists in current legislation (S.A. law).

These commitments are relate to the provision of information that facilitate the monitoring and supervision of acts of company’s management and controllers, and the adoption of corporate rules that best balance the rights of all shareholders, whether controller or investor.

Novo Mercado: Focus on Minority Shareholders and Transparency in the Communication

The improvement in the quality of information provided by the company and the expansion of corporate rights reduce the uncertainties in the evaluation process and in the investments and consequently the risk. Thus, because of increased confidence, rises the willingness of investors to purchase shares of the company, becoming partners in this.

The risk reduction also leads to better pricing of shares, which encourages new IPOs and new equity issues, strengthening the stock market as an alternative source of financing for companies.

Comparative Listing of Segments

NOVO MERCADO (from 01/02/2018) LEVEL 2 LEVEL 1 BOVESPA MAIS BOVESPA MAIS LEVEL 2 BASIC
Share Capital Only common shares Common and preferred shares (with additional rights) Common and preferred shares (as per legislation) Only common shares Common and preferred shares Common and preferred shares (as per legislation)
Minimum percentage of outstanding shares (free float) 25% or 15%, if the ADTV (Average Daily Trading Volume) is above R$ 25 million 25% 25% until the 7th year of listing There is no specific regulation
Public offering of shares Share dispersion efforts, except for offers pursuant to CVM’s Instruction 476 Share dispersion efforts There is no specific regulation
Prohibition to statutory provisions Voting limitation of less than 5% of the voting capital, qualified quorum and “immutable clauses” There is no specific regulation Qualified quorum and “immutable clauses” There is no specific regulation
Composition of the Board of Directors Minimum of 3 members (pursuant to Brazilian Corporations Law), of which at least 2 or 20% (whichever is greater) must be independent with unified term of up to 2 years Minimum of 5 members, of which at least 20% must be independent with unified term of up to 2 years Minimum of 3 members (according to law), with unified term of up to 2 years Minimum of 3 members (pursuant to Brazilian Corporations Law).
Prohibition of cumulation of positions Chairman of the Board of Directors and Chief Executive Officer or Main Officer by the same person. In case of vacancy that results in cumulation of positions, it is obligatory the disclosure of certain information and the compliance with a deadline to the regularization Chairman of the Board of Directors and Chief Executive Officer or Main Officer by the same person (a grace period of 3 years from accession) There is no specific regulation
Board of Directors’ duties Statement on any public tender offer for the acquisition of shares issued by the company (with minimum requirements, including alternatives to the tender offer available on the market) Statement on any public tender offer for the acquisition of shares issued by the company (with minimum requirements) There is no specific regulation
Financial Statements As per legislation in force Translated into English As per legislation in force
Disclosure in English simultaneously with the disclosure in Portuguese Material Information or Benefit distribution information (Notice to Shareholders or Notice to the market) and results press releases There is no specific regulation besides the financial statements (see item above) There is no specific regulation
Annual public meeting Public meeting (in-person or by any other means that allow remote participation) must be hold until 5 business days after the disclosure of the quarterly and annual financial statements about the information disclosed Mandatory (in-person) Optional
Calendar of corporate events Mandatory Optional
Disclosure of additional information Internal regulations of the Board of Directors, its Advisory Committees and the Fiscal Council (if there is one)
Code of Conduct (with minimum requirements)
The following policies with minimum requirements (except the Compensation Policy): (i) Compensation Policy; (ii) Nomination Policy of the Board of Directors, Advisory Committees and Executive Management Board; (iii) Risk Management Policy; (iv) Related Party Transaction Policy; (v) Securities Trading Policy
Disclosure of: (i) annual report of the statutory audit committee covering the points contained on the Regulation; (ii) quarterly minutes of the Board of Director’s meetings, informing the report by the non-statutory audit committee
Securities negotiation policy and code of conduct Securities trading policy There is no regulation
Tag-along rights 100% for common shares 100% for common and preferred shares 80% for common shares (as per legislation) 100% for common shares 100% for common and preferred shares 80% for common shares (as per legislation)
Delisting from the Segment/Public Tender Offer Compulsory Public Tender Offer, at least for the fair price, with minimum acceptance quorum of 1/3 (or higher, as established in the bylaws) of the free float shareholders. Compulsory Public Tender Offer in case of registration canceling or segment exit Not applicable Compulsory Public Tender Offer, at least for the economic value, in case of registration canceling or segment exit, except if there is migration to Novo Mercado Compulsory Public Tender Offer, at least for the economic value, in case of registration canceling or segment exit, except if there is migration to Novo Mercado or Nível 2 Not applicable
Becoming a Member of the Market Arbitration Chamber Mandatory Optional Mandatory Optional
Audit Committee Mandatory setting up of an audit committee or statutory audit committee in compliance with the requirements set forth in the Regulation Optional
Internal Auditing Mandatory setting up of an auditing department in compliance with the requirements set forth in the Regulation Optional
Compliance Mandatory setting up of a compliance, internal controls and corporate risks department. It is not allowed the accumulation of compliance and operational functions Optional

TIM in the Novo Mercado

On May 5, 2011, was decided in a meeting of the Board of Directors of TIM: (1) the migration of the Company for the Novo Mercado listing segment of the B3, and the consequent admission of the shares of the Company for trading on the Novo Mercado, (2) the proposed conversion of preferred shares into common shares at a ratio of 0.8406 shares newly issued by the Company for each preferred share, percentage which reflects the weighted average market price of common and preferred shares issued by the Company within 60 days prior to and including the trading session, May 4, 2011 based on a study prepared by Santander (Brazil) SA, the Company’s financial advisor hired for that purpose, and (3) authorize the Board of the Company to begin negotiations with the B3, the Securities Commission – CVM, as well as any agencies, authorities or third parties with a view to membership of the Company at the Novo Mercado.

The Extraordinary General Meeting held on June 22, 2011, with the presence of over 80% of the shareholders entitled to vote the Company was approved by more than 99% of those present: (i) the migration of the Company for the segment governance corporate B3 Novo Mercado, (ii) the conversion of all preferred shares into common shares, and (iii) reform of the Company’s bylaws to fit the Listing Rules of the Novo Mercado.

Additionally, it was held on this date the Special Meeting of Preferred Shareholders (“PEA”), with presence over 80% of shareholders which was ratified by more than 99% of those present, the conversion of all preferred shares into common shares issued by company.

Importantly, the parent of the Company followed the choice made by the minority, emphasizing the high level of corporate governance. Another feature of migration to the Novo Mercado that is so, TIM became the sole representative of the telecommunications industry in this segment of corporate governance.

Source: website of the B3 and Company documents

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