SulAmérica

Corporate Governance Practices and Level 2

In 2000, BM&FBovespa introduced three special listing segments for companies that adopt differentiated corporate governance practices. These listing segments, known as Level 1 (Nível 1) and Level 2 (Nível 2) of Differentiated Corporate Governance Practices and New Market (Novo Mercado), were designed for the trading of shares issued by companies voluntarily undertaking to abide by special corporate governance practices and disclosure requirements in addition to those already imposed by Brazilian law.

SulAmérica joined Corporate Governance Practices of BM&FBovespa‘s Level 2 * on September 12, 2007 and obtained its registration as a publicly-held company from the Brazilian Securities and Exchange Commission (CVM) on October 3, 2007. The Company’s units (BM&FBovespa: SULA11) have been traded on BM&FBovespa since October 5, 2007 and are included in the portfolios of the following indices: IGC (Differentiated Corporate Governance Stock Index), ITAG (Differentiated Tag Along Stock Index) and ISE (Corporate Sustainability Index).

Best Corporate Governance Practices

Among the best corporate governance practices associated with Level 2 Rules of Corporate Governance and recommended by the Brazilian Corporate Governance Institute (IBGC), we list below the main practices adopted by SulAmérica:

Encouraging participation in General Meetings. SulAmérica adopts practices to encourage the increasing participation of its shareholders in the Company’s General Meetings with early disclosure of documents and information related to the matters that will be discussed at these meetings and by holding them at times and in places that allow the attendance of the greatest possible number of shareholders, in addition to enabling the exercise of voting rights through power-of-attorney (By-Laws Article 26), going as far as providing attorneys to represent their shareholders at no charge.

Additionally, in line with the best corporate governance practices, in 2009 SulAmérica prepared a manual with guidelines on how to participate in general meetings, with the purpose of improving the transparency and quality of the information provided to its shareholders;

Policy on Material Acts or Facts. The company has a Policy on Disclosure of Material Acts or Facts and on Securities Trading, pursuant to CVM Instruction 358, for which it maintains an extensive adhesion program to prevent insider trading. This Policy governs the procedures to be adopted for disclosing or maintaining the confidentiality of material information, ensuring the disclosure of complete and timely information to the market as well as equal and transparent access thereto.

Furthermore, SulAmérica observes a 15-day blackout period prior to the Public Disclosure of Financial Statements.

Free Float. Aiming to ensure the minimum free float of 25% of the capital stock as provided for in the Listing Rules of Level 2 of Corporate Governance, the Company constantly monitors its free-float shares. Currently, SulAmérica has a free float of over 38% of its capital stock.

Qualified Board of Directors. SulAmérica’s board members have operational and financial knowledge and expertise in the insurance market, as well as previous experience as members of other boards of directors. These requirements help the company compose a Board of Directors that is qualified and appropriate to its operations.

In line with the best corporate governance practices, every year SulAmérica’s board members evaluate their individual performance as well as that of the Board of Directors itself, identifying and proposing actions that may improve performance. Additionally, the Board of Directors has a charter that governs its operations and provides for measures to avoid conflicts of interests.

The company’s Board of Directors also relies on the help of advisory committees composed of the members themselves and other professionals with proven experience in specific areas, allowing a previous analysis of the matters pertaining to each committee; this analysis is subsequently reported to the Board of Directors to support its decision-making.

Independent Board Members. In compliance with the Corporate Governance Level 2 and the company’s By-Laws, a minimum of 20% of the board members must be independent.

Information Disclosure. The company prioritizes the full disclosure of material information by adopting the following practices:

• The terms of the shareholders’ agreement are available to all the shareholders at the Company’s headquarters;
• The annual balance sheet drawn up in accordance with international standards is made available following the disclosure of the financial statements referring to the second fiscal year after the execution of the Level 2 of Differentiated Corporate Governance Practices Agreement;
• The annual calendar with information on scheduled corporate events and other information about the Company is sent to BM&FBovespa and disclosed; and
• Additional information is disclosed in the Quarterly Financial Statements (ITR) and in Reference Form.

Public Tender Offer. In accordance with the Brazilian Corporate Law, Corporate Governance’s Level 2 Listing Rules and the company’s By-Laws, in the event that the company goes private or delists from Level 2 of Corporate Governance, it must conduct a public tender offer to acquire all free-float shares at their economic value.

Tag Along. All SulAmérica shareholders owning common or preferred shares are entitled to the same conditions offered to the controlling shareholders in the event of sale of the company’s control (100% tag along).

Preferred Shares’ Voting Rights. The company’s By-Laws grant voting rights to preferred shares in sensitive matters such as the Company’s transformation, merger, spin-off or consolidation and the approval of agreements between the Company and other companies of the same group.

Adhesion to the Market Arbitration Panel. SulAmérica has adhered by contract to the Market Arbitration Panel Rules for resolution of corporate conflicts and has included in its By-Laws an express provision on the issue. This adhesion, in addition to being one of the requirements of Corporate Governance’s Level 2 Listing Rules, has the added benefits of ensuring faster resolutions to any possible corporate disputes and allowing the company to choose arbitrators specialized in the matters under discussion.

Sul América S.A.’s Governance System. Sul América S.A.’s Corporate Governance system, grounded on the principles of transparency, equality and accountability, is managed by its primary decision-making authorities: the Board of Directors and its advisory committees, comprised of board members and external specialists.

The organization chart below shows the main authorities in the Company’s Corporate Governance system:

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Regulation of the Brazilian Securities Market

The Brazilian capital market is regulated by the Securities Market Law, as well as by the Brazilian Corporation Law and the regulations issued by the Brazilian Securities and Exchange Commission (CVM), the National Monetary Council and the Brazilian Central Bank. These laws and regulations provide for, among other things, disclosure requirements, restrictions on insider trading and price manipulation and protection of minority shareholders.

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

A company registered with the CVM may trade its securities either on BM&FBovespa or on the Brazilian over-the-counter market; however, it may not simultaneously trade on both markets. In addition to the registration with CVM, a company also has to be registered with BM&FBovespa in order to be able to trade its shares on this exchange. The shares of a listed company may also be traded privately, subject to several limitations.

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Disclosure and Use of Information

CVM Instruction 358 provides for the disclosure and use of information related to material facts and acts of publicly held companies, as follows:

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

SulAmérica has a Policy on Material Acts or Facts and on Securities Trading which, in addition to the requirements in CVM Instruction 358, includes additional requirements, such as the adoption of the policy by independent auditors and consultants who have access to material information, the need for employees and related parties to remain bound to the policy for up to five years after severing ties with the company, and the assistance of a Governance and Disclosure Committee.

Blackout Period

To maintain good corporate governance practices, SulAmérica adopts a 15-day blackout period prior to the public disclosure of financial statements, thus ensuring that the communication of this information is equal to all stakeholders. During this period, the company does not disclose inside information about the company’s results, and only the professionals who are involved in the preparation of the statements have access to the information contained therein. In order to not hinder the market’s monitoring of SulAmérica’s activities, the company’s routine information is communicated normally during the blackout period.