CETIP S.A. Mercados Organizados

Transcription

1 (A free translation of the original in Portuguese) CETIP S.A. Mercados Organizados (formerly CETIP S.A. Balcão Organizado de Ativos e Derivativos) Quarterly information at

2 Quarterly information at Contents Comments on performance 3-9 Independent auditors review report Balance sheets 12 Statements of income 13 Statements of comprehensive income 14 Statements of changes in shareholders equity 15 Statements of cash flows 16 Statements of value added 17 Notes to the quarterly information

3 Comments on Performance Dear Shareholders, We submit to your appreciation the Quarterly Information of CETIP S.A. Mercados Organizados for the quarter ended on, together with the review report of the independent auditors regarding to the interim financial statements. All the Company s operating and financial information below, except when otherwise indicated, is presented in million of reais based on the individual financial statements prepared according to the generally accepted accounting principles in Brazil established by the Accounting Pronouncement Committee (CPC) and the consolidated financial statements were also prepared according to the CPCs and the International Financial Reporting Standards (IFRS) established by the International Accounting Standards Board. Additional information regarding the Company s operating and financial performance are available on the internet at ( Highlights of the Period Letra Financeira Continued inventory growth The inventory of Letras Financeiras, which have minimum tenor of 24 months, are exempt from reserve requirements and have a unit face value of R$300 thousand, reached R$114.1 billion at the end of September It should be noted that the first public offering of Letras Financeiras was held in October of A small/mid-sized bank placed the securities on the over-the-counter (OTC) market, according to the SDT - Distribution Module managed and operationalized by Cetip. The first Letra Financeira issues on the market took place in March of 2010 and since April of 2010 this asset has been registered in Cetip's systems. Silag Launch of the first product jointly developed by Cetip s two business units On October 21, 2011, Cetip officially launched the Automatic Lien Settlement System (Silag), a ground-breaking service connecting financial institutions and insurance companies. It is an electronic platform that automates total loss payment to the owners of insured, financed vehicles, making the process faster and more secure. With Silag, payment is made to the claimant twice as fast. Real Estate Receivable Certificate (CRI) Cetip registers a major CRI issue In the last week of October, Cetip registered one of the largest Real Estate Receivables Certificate (CRI - long-term fixed income security pegged to real estate credits) issues in Brazil s financial market. The security is exclusively issued by Real Estate Receivable Securitization Companies. The offer was divided into two tranches, one senior and one subordinate, totaling approximately R$2.0 billion. The operation involved credits from all Brazilian states and the Federal District. The operation was structured in two months, considered extremely fast due to its complexity. 3

4 Early amortization of debentures In a meeting of the Board of Directors held on November 9, the early amortization of a portion of Company-issued debentures in the amount of R$100 million, to be settled at the end of November, was approved. This decision is yet another indication of the Company s good performance and a result of its high cash generation capacity. Approval of the Company s First Stock Buyback Program In a meeting held on November 9, the Board of Directors approved the Company s first share buyback program, as follows: i) Purpose of the program: Maximize shareholders value creation through efficient management of the capital structure; ii) Maximum number of shares to be acquired - Up to 4 million of the Company s issued shares or 1.58% of the shares outstanding in the market; iii) Term for carrying out the transactions Up to 365 days, ending on November 8, Results Analysis Operating Revenue The Company s gross operating revenue reached R$218.6 million in 3Q11 with net revenue at R$191.9 million. The Securities Unit accounted for 58% of gross operating revenue while the Financing Unit accounted for 42%. Revenue from the Securities Unit totaled R$126.7 million in 3Q11, composed of: i) 27% custody revenue; ii) 25% monthly utilization revenue; iii) 21% registration revenue; iv) 15% transaction revenue; and v) 12% other revenues. Revenues from the Financing Unit totaled R$91.9 million in the quarter, derived from: i) 55% SNG Vehicles; ii) 33% GRV Contracts; iii) 11% selling information; and iv) 1% other revenues. Revenue Breakdown of the Securities Unit - 3Q11 Transactions 15% Others 12% Monthly Utilization 25% Registration 21% Custody 27% Revenue Breakdown of the Financing Unit - 3Q11 Selling Information 11% Others 1% R$ mm SNG GRV R$ 91.9 mm Vehicles Contracts (liens) 33% 55% Securities Unit Registration Revenues R$26.6 million, mainly as a result of the increased revenue from registration of fixed income securities, highlighting: i) Interbank Deposits (DI); ii) Certificates of Bank Deposit (CDB); (iii) other fixed income securities, including assets such as Commercial Notes, Bank Credit Notes (CCB), and Export Credit Notes (CCE/NCE), among others; and iv) overthe-counter derivatives, especially Swap operations, which accounted for 55% of all OTC derivative registrations. It should be noted that revenue from other registration services also positively contributed to this segment s revenue. Custody Revenue R$34.7 million, mainly driven by the increase in revenues from: i) debentures; ii) letras financeiras, with outstanding balance exceeding R$114 billion in 4

5 September, 2011; iii) OTC derivatives, especially forward operations; iv) quotas if investment funds. Monthly Utilization Revenue R$32.2 million, chiefly due to the increase in the average number of registered participants in 3Q11, primarily in segments 1 and 2, and the higher average margin per participant. Transaction Revenue - R$18.8 million, driven by the higher volume of transactions processed in relation to assets under custody and the average margin per transaction. Other Revenues R$14.5 million, mainly due to the increase number of electronic funds transfers (EFTs), which accounted contributed to growth in this revenue line with R$7.7 million. The graphs below show some historical performance data of the securities unit's main assets: Financing Unit SNG Vehicles (Liens) Revenue generated by the electronic processing and custody system for liens of financial institutions on vehicles held by totaled R$50.9 million as a reflection of the performance of vehicle financing and subsequent inclusion of liens in the system. 5

6 GRV Contracts Revenues from the platform for information custody related to vehicle financing contracts totaled R$30.7 million, in line with vehicle financing performance in the period and subsequent contract registrations in the system. Information sales - Reached R$9.6 million, accounting for 11% of the Financing Unit's gross revenue. The table below shows some historical performance data for the Financing Unit: (R$ million) Quarter Change (%) SNG Vehicle 3Q11 2Q11 9Q10 3Q11/2Q11 3Q11/3Q10 Number of vehicles sold % 3.5% New % 6.5% Used % 2.1% Number of Vehicles Financed % -0.9% New % -0.3% Used % -1.6% % Vehicles financed / vehicles sold 45% 45% 47% - - GRV Contracts 3Q11 2Q11 9Q10 3Q11/2Q11 3Q11/3Q10 Contracts Additions (Units) % -3.0% % Contracts additions / vehicles financed 68% 68% 69% - - Operating Expenses Operating expenses totaled R$72.1 million in 3Q11, mainly due to: (i) personnel expenses (including expenses with Boarat R$27.5 million or 39% of total operating expenses;; (ii) thirdparty services at R$14.5 million, representing 20% of the total; and (iii) general and administrative expenses at R$6.8 million, representing 9% of total operating expenses. Depreciation and amortization expenses totaled R$16.3 million, primarily due to amortization of intangible assets (contractual relationships) registered due to the acquisition of GRV and R$6.1 million in stock based compensation in the quarter. Share-based remuneration 8% Other 1% Depreciation and amortization 23% Personnel 39% General and administrative 9% Outsourced Services 20% Note: Personnel Expenses include expenses with Board Members remuneration. 6

7 Income Tax and Social Contribution The effective income tax and social contribution rate in 3Q11 was 36%. Tax amortization of goodwill for expected future profitability from the merger of Advent Depository and GRV Solutions represented a cash tax savings of R$17.2 million in the quarter. Net Income and EBITDA The Company s net income reached R$55.5 million in 3Q11 with a net margin at 28.9% due to the Company s good operating performance in the third quarter of The Company s revenue generation positively contributed to the advance of adjusted EBITDA 1, which reached R$142.2 million in 3Q11. Adjusted EBITDA margin was 74.1% over net revenue. CAPEX In 3Q11, Cetip s CAPEX reached R$6.8 million or 3.5% of net revenue. Some of the main investments made in period that contributed to the increase in our CAPEX are: (i) expansion of servers and adjustment of our processing capacity; and (ii) development of new products. Other Financial Highlights Cash flow from operating activities reached R$14.4 million in 3Q11, including the R$140.8 million allocated to financial investments. Investments provided cash flow of R$31.1 million, mainly due to the maturity of securities held to maturity and R$48.8 million was allocated to financing activities, especially payment of interest on debentures and interest on equity. The Company s cash flow is primarily derived from its operating activities. Cash needs are chiefly related to investments in system development, acquisition of fixed assets for technological upgrades and servicing the debt contracted for the GRV acquisition. Share Performance Cetip s shares closed 3Q11 quoted at R$23.50, practically stable over the December 30, 2010 quote, as compared to the 25% depreciation of the Ibovespa Index in the same period. Over the last 12 months ended on, Cetip's shares have appreciated 41%, compared to the Ibovespa's 25% decline in the same period. Cetip closed 9M11 with market capitalization of approximately R$6.0 billion, up 58% over its market cap at the close of 9M10. 1 Amount adjusted by expenses with stock-based compensation without cash disbursement in the amount of R$6.1 million. Unadjusted EBITDA would have been R$136.1 million in 3Q11. Adjusted EBITDA is a non-accounting measure prepared by our Company, reconciled with our financial statements, complying with the provisions of the Oficio Circular CVM no. 01/2007. Adjusted EBITDA is not a measure recognized by Brazilian GAAP. It does not have a standard meaning and may not be comparable to measures with the same nomenclature provided by other companies. Our Company discloses Adjusted EBITDA because it uses the measure to gauge its performance. 7

8 210 Comparative CTIP3 x Ibovespa: 09/30/2010 to 09/30/2011 (Base 100 on 09/30/2010) Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Source: Bloomberg CTIP3 Ibovespa In R$, unless otherwise stated 9M10 9M11 Price at the beginning of the period Maximum Average Minimum Price at the end of the period Average daily volume (R$ million) Number of shares (thousand shares) ¹ 226, ,690 ¹ Number of shares for the end of the period Corporate Governance Cetip is committed to the highest standards of corporate governance. In addition to adhering to the Novo Mercado rules, Cetip maintains solid self-regulation practices according to the provisions of CVM Instruction no. 461, which regulates the functioning of organized securities markets. Companies listed on the Novo Mercado voluntarily agree to comply with stricter rules than those of Brazilian corporate law, such as: (i) maintain only common shares in their capital stock; (ii) maintain a minimum of 25% free float; (iii) detail and include additional quarterly information; and (iv) publish annual financial statements in English based on international accounting standards. Companies join the Novo Mercado through signature of contracts between the company, its management and controlling shareholders and the BM&FBOVESPA, in addition to adaptation of the company s bylaws to the rules contained in the Novo Mercado Listing Rules. 8

9 Adhesion to the Market Arbitration Chamber The Company joined the Market Arbitration Chamber, as per the clause in its Bylaws. This body, created by the Stock Exchange, arbitrates disputes and controversies that may exist between the controlling shareholders of companies listed on the Novo Mercado and shareholders in general, managers, members of Fiscal Council and the Exchange itself. Relationship with Independent Auditors The Company s policy is governed by the principle of independence of auditors and restricts services to be provided by companies contracted for this purpose. In this sense, in the ninemonth period ended, KPMG Auditores Independentes did not provide other services unrelated to auditing to the Company, being guaranteed the provision of these services in an objective and independent manner. Management Statement As per the provisions in CVM Instruction no. 480/09, Management declares that it has discussed, reviewed and agreed with the quarterly information for the quarter ended and with the opinions expressed in the independent auditors review report. The Board Rio de Janeiro, November 9,

10 (A free translation of the original in Portuguese) Independent auditors review report The Board of Directors and Shareholders CETIP S.A. Mercados Organizados Rio de Janeiro - RJ Introduction We have reviewed the individual and consolidated interim financial statements of CETIP S.A. Mercados Organizados for the quarter ended, which comprise the balance sheet as of and the related statements of income and comprehensive income for the three and nine-months periods then ended and changes in shareholders equity and cash flows for the nine-months period then ended, including the summary of the main accounting policy and respective notes to the financial statements. Management is responsible for preparing the individual interim financial statements in accordance with CPC Technical Pronouncement 21 - Interim reporting and the consolidated interim financial statements in accordance with CPC 21 and IAS 34 Interim Financial Reporting, issued by the International Accounting Standards Board - IASB, and for the presentation of these interim financial statements in accordance with the standards issued by the Brazilian Securities and Exchange Commission (CVM). Our responsibility is to express a conclusion on the interim financial statements based on our review. Scope of the review We conducted our review in accordance with Brazilian and International Standard on Review of interim information (NBC TR 2410 and ISRE 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity, respectively). A review of interim information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing, and consequently does enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. 10

11 Conclusion about the individual interim financial statements Based on our review, we are not aware of any fact that causes us to believe that the individual interim financial statements referred to above is not prepared, in all material respects, in accordance with CPC 21, applicable to the preparation of interim financial statements and presented in accordance with the standards issued by the Brazilian Securities and Exchange Commission - CVM. Conclusion about the consolidated interim financial statements Based on our review, we are not aware of any fact that causes us to believe that the consolidated interim financial statements referred to above is not prepared, in all material respects, in accordance with CPC 21 and IAS 34 applicable to the preparation of interim financial statements, presented in accordance with the standards issued by the Brazilian Securities and Exchange Commission - CVM. Other matters Interim statements of value added We have also reviewed the individual and consolidated interim statements of added value (DVA) for the three and nine-months periods ended, prepared under management s responsibility which the presentation is required in accordance with the standards issued by the Brazilian Securities and Exchange Commission and considered supplementary information by the International Financial Reporting Standards (IFRS), which does not require the presentation of the Statement of Value Added. These statements were subject to the same review procedures previously described and based on our review, we are not aware of any fact that would lead us to believe that they have not been fairly stated, in all material respects, in relation to the Company s individual and consolidated interim financial statements taken as a whole. Review of the corresponding values for the third quarter of 2011 The cash flows statement for the three-months period ended, prepared under management s responsibility, which is being presented as supplementary information for the periods of presentation required by IAS 21 and CPC 34, was subject to the same review procedures previously described and based on our review, we are not aware of any fact that would lead us to believe that it has not been fairly stated, in all material respects, in relation to the Company s individual and consolidated interim financial statements taken as a whole. Rio de Janeiro, November 9, 2011 KPMG Auditores Independentes CRC SP /O-6 F-RJ Original version in Portuguese signed by Jubran Pereira Pinto Coelho Accountant CRC MG /O-0 S RJ 11

12 CETIP S.A. - Mercados Organizados (formerly CETIP S.A. - Balcão Organizado de Ativos e Derivativos) Balance sheets In thousands of reais (A free translation of the original in Portuguese) CETIP Consolidated CETIP Consolidated Assets Notes 09/30/11 12/31/10 09/30/11 12/31/10 Liabiliaties and shareholders' equity Notes 09/30/11 12/31/10 09/30/11 12/31/10 Current 500, , , ,598 Current 249, , , ,392 Cash and cash equivalents Suppliers 7,648 12,670 7,659 12,685 Financial investments - available and restricted 5 412, , , ,809 Labor obligations and social charges 13 31,851 28,361 32,058 28,692 Accounts receivable 6 69,674 67,089 72,504 69,895 Taxes payable 14 6,676 13,885 6,790 14,023 Recoverable taxes and contributions 2,793 5,896 2,793 5,896 Income tax and social contribution 5,129 8,397 6,092 9,202 Other receivables 7,550 11,450 7,582 11,517 Dividends and interest on own capital payable - 22,248-22,248 Prepaid expenses 7 4,796 2,625 4,796 2,628 Provision GRV acquisition costs - 35,510-35,510 Non-current assets held for sale 8 1,901-1,901 - Purchase price - deferred payments 9 194, , , ,100 Finance lease obligations 16 3,809 2,846 3,809 2,846 Other liabilities Non-current 2,277,780 2,321,703 2,260,212 2,319,425 Non-current 1,388,213 1,318,597 1,388,213 1,318,597 Long-term receivables 107, , , ,597 Deferred income tax and social contribution 24a 118,247 79, ,247 79,413 Financial investments - available and restricted 5 42,865 58,644 42,865 58,644 Provision for contingencies and legal obligations 15 2,119 2,083 2,119 2,083 Judicial deposits Debentures issued , , , ,683 Prepaid expenses 7 4, , Purchase price - deferred payments 9 371, , , ,828 Deferred income tax and social contribution 24a 59,063 73,360 59,063 73,360 Finance lease obligations 16 2,598 2,590 2,598 2,590 Other receivables Shareholders equity 1,140, ,034 1,140, ,034 Investments 72,748 59,095 5,282 4,633 Capital 17a 276, , , ,549 Investment in associate 10b 4,549 4,100 4,549 4,100 Capital reserves 17b 654, , , ,383 Investment in subsidiary 10a 67,466 54, Carrying value adjustments 85 (200) 85 (200) Other investments Revenue reserves 17c,d 82,302 82,302 82,302 82,302 Retained earnings 127, ,178 - Property and equipment 11 42,210 44,070 42,249 44,112 Intangible assets 12 2,055,263 2,084,941 2,105,122 2,137,083 Total assets 2,778,093 2,569,733 2,779,389 2,571,023 Total liabiliaties and shareholders' equity 2,778,093 2,569,733 2,779,389 2,571,023 The accompanying notes are an integral part of these quarterly information. 12

13 CETIP S.A. - Mercados Organizados (formerly CETIP S.A. - Balcão Organizado de Ativos e Derivativos) Statements of income Quarters and nine-month periods ended September 30 (A free translation of the original in Portuguese) CETIP Consolidated Accumulated Accumulated Accumulated Notes 3Q Q Q Net revenue from services , ,038 72, , , ,836 (Operating expenses)/other operating income (70,970) (207,930) (28,962) (84,122) (72,087) (211,201) Personnel expenses (27,226) (77,589) (14,228) (41,138) (27,543) (78,438) Share-based remuneration with no cash disbursement 26c (6,091) (19,722) (2,053) (6,892) (6,091) (19,722) Depreciation and amortization 11 e 12 (15,538) (46,320) (1,782) (4,896) (16,276) (48,530) Outsourced services 20 (14,498) (40,323) (5,236) (12,002) (14,501) (40,402) General and administrative expenses 21 (6,727) (19,379) (3,789) (8,123) (6,784) (19,510) Equipment and systems rental (198) (741) (269) (800) (198) (741) Board members' compensation (324) (1,018) (357) (1,086) (324) (1,018) Taxes and fees (296) (2,636) (588) (931) (296) (2,636) IPO and restructuring expenses (726) (8,524) - - Other operating expenses (138) (469) - (56) (140) (471) Other operating income Equity in the results of associate 10 5,908 17, Financial result 23 (33,752) (110,211) 6,978 18,275 (33,387) (109,701) Financial income 12,086 26,467 6,988 18,309 12,452 26,985 Financial expenses (45,838) (136,678) (10) (34) (45,839) (136,686) Income before taxation 85, ,606 50, ,899 86, ,386 Income tax and social contribution (30,103) (71,030) (17,845) (44,792) (31,075) (73,810) Current 24c (14,156) (17,916) (15,277) (37,507) (15,128) (20,696) Deferred 24c (15,947) (53,114) (2,568) (7,285) (15,947) (53,114) Net income for the period 55, ,576 32,716 90,107 55, ,576 Net income per share attributable to CETIP's shareholders (expressed in 18 Basic earnings per share Diluted earnings per share The accompanying notes are an integral part of these quarterly information. 13

14 CETIP S.A. - Mercados Organizados (formerly CETIP S.A. - Balcão Organizado de Ativos e Derivativos) Statements of comprehensive income Quarters and nine-month periods ended September 30 In thousands of reais (A free translation of the original in Portuguese) CETIP Consolidated Accumulated Accumulated Accumulated 3Q Q Q Net income for the period 55, ,576 32,716 90,107 55, ,576 Other comprehensive income Fair value adjustment of available for sale financial assets , Deferred taxes on fair value adjustment (145) (146) (208) (430) (145) (146) Total other comprehensive income Total comprehensive income for the period attributable to CETIP's shareholde 55, ,861 33,119 90,937 55, ,861 The accompanying notes are an integral part of these quarterly information. 14

15 CETIP S.A. - Mercados Organizados (formerly CETIP S.A. - Balcão Organizado de Ativos e Derivativos) Statements of changes in shareholders equity Nine-month periods ended September 30 In thousands of reais (A free translation of the original in Portuguese) Carrying Revenue reserves Additional Capital value Legal Statutory Retained dividends Notes Capital reserves adjustments reserve reserve earnings/losses proposed Total At December 31, , ,383 (200) 2,048 80, ,034 Comprehensive income Net income for the period , ,576 Fair value adjustment of available for sale financial assets, net of deferred taxes Total comprehensive income for the period , ,861 Transactions with owners and other movements Capital increase - capitalization of a portion of the goodwill special reserve, subscription rights exercised, remaining shares subscribed and auction of the remaining unsubscribed shares 17f 49,558 (13,372) ,186 Premium on subscription of shares 17f Capital increase - stock option exercises 26c 8, ,090 Appropriation - stock option plans 26c - 19, ,722 Appropriation of net income Interest on own capital 17e (28,398) - (28,398) Total transactions with owners and other movements 57,648 6, (28,398) - 35,676 At 276, , ,048 80, ,178-1,140,571 At December 31, , ,829 (888) 2,048 - (1,447) 47, ,437 Comprehensive income Net income for the period ,107-90,107 Fair value adjustment of available for sale financial assets, net of deferred taxes Total comprehensive income for the period ,107-90,937 Transactions with owners and other movements Approval/payment - additional dividends proposed (47,580) (47,580) Capital increase - capitalization of a portion of the goodwill special reserve, subscription rights exercised, remaining shares subscribed and auction of the remaining unsubscribed shares 17f 5,306 (2,229) ,077 Capital increase - stock option exercises 26c 6, ,230 Appropriation - stock option plans 26c - 6, ,892 Appropriation of net income Interest on own capital 17e (9,237) - (9,237) Total transactions with owners and other movements 11,536 4, (9,237) (47,580) (40,618) At September 30, , ,492 (58) 2,048-79, ,756 The accompanying notes are an integral part of these quarterly information. 15

16 CETIP S.A. - Mercados Organizados (formerly CETIP S.A. - Balcão Organizado de Ativos e Derivativos) Statements of cash flows Quarters and nine-month periods ended September 30 In thousands of reais (A free translation of the original in Portuguese) CETIP Consolidated Accumulated Accumulated Accumulated Notes 3Q Q Q Cash flows from operating activities Income before taxation 85, ,606 50, ,899 86, ,386 Adjustments Depreciation and amortization 15,538 46,320 1,782 4,896 16,276 48,530 (Profit)/loss on disposal of permanent assets Equity in the results of associate (5,908) (17,709) (147) (420) (145) (452) Share-based remuneration with no cash disbursement 6,091 19,722 2,053 6,892 6,091 19,722 Interest on financial investments held to maturity (1,187) (2,977) (890) (2,524) (1,187) (2,977) Interest on debentures and on purchase price deferred payments 45, , , ,032 Interest on finance leases Adjusted income before taxation 146, ,936 53, , , ,183 Changes in assets and liabilities Non restricted financial investments (133,875) (271,216) (30,170) (36,744) (140,773) (286,703) Accounts receivable (698) (2,585) (5,412) (5,410) (405) (2,609) Recoverable taxes and contributions 3,198 6,143-1,636 3,198 5,516 Other receivables 2,320 1, (565) 2,315 1,466 Prepaid expenses (223) (6,158) (472) 122 (220) (6,155) Judicial deposits (12) (12) - 6 (12) (12) Suppliers (1,057) (5,022) (716) 107 (1,057) (5,017) Labor obligations and social charges 8,033 3,490 2,017 6,735 8,077 3,366 Taxes payable (36) (5,703) 143 (336) (56) (5,727) Other liabilities 44 (26) 9 32 (2) (35) Provision GRV acquisition costs (147) (35,510) - - (147) (35,510) Provision for contingencies and legal obligations (94) (94) 36 Cash from operations 23,554 93,804 19, ,985 24,398 99,799 Income tax and social contribution paid (9,027) (24,224) (10,009) (31,789) (9,958) (26,219) Net cash provided by operating activities 14,527 69,580 9,484 78,196 14,440 73,580 Cash flows from investing activities Maturity of held to maturity financial investments 37,758 37, ,758 37,758 Acquisition of property and equipment (3,712) (5,336) (2,693) (7,026) (3,712) (5,336) Acquisition of intangible assets (3,050) (12,127) (3,264) (11,713) (3,050) (12,127) Acquisition of other invesments - (200) (200) Dividends received from subsidiary - 4, Proceeds from sale of property and equipament Net cash used in investing activities 31,117 24,603 (5,957) (18,739) 31,117 20,426 Cash flows from financing activities Payment of interest on debentures (31,473) (89,256) - - (31,473) (89,256) Payment of finance lease obligations (781) (2,357) - - (781) (2,357) Proceeds from finance lease contracts 2,839 2,839 2,839 2,839 Proceeds from subscription rights exercised and remaining shares subscribed , , ,513 Proceeds from the auction of unsubscribed shares Proceeds from shares issued - stock option exercises 7,618 8,090 5,558 6,230 7,618 8,090 Interest on own capital paid (28,398) (38,494) (9,237) (18,183) (28,398) (38,494) Dividends paid - (11,285) - (50,780) - (11,285) Net cash used in financing activities (48,796) (94,201) (3,510) (59,656) (48,796) (94,201) Increase/(decrease) in cash and cash equivalents (3,152) (18) 17 (199) (3,239) (195) Cash and cash equivalents at the beginning of the period 3, , Cash and cash equivalents at the end of the period The accompanying notes are an integral part of these quarterly information. 16

17 CETIP S.A. - Mercados Organizados (formerly CETIP S.A. - Balcão Organizado de Ativos e Derivativos) Statements of value added Quarters and nine-month periods ended September 30 In thousands of reais (A free translation of the original in Portuguese) CETIP Consolidated Accumulated Accumulated Accumulated 3Q Q Q Income 205, ,906 83, , , ,794 Revenue from services 205, ,656 83, , , ,544 Other operating income Goods and services acquired from third parties (21,410) (63,616) (9,762) (28,738) (21,473) (63,836) General and administrative expenses (6,727) (19,379) (3,789) (8,123) (6,784) (19,510) Outsourced services (14,498) (40,323) (5,236) (12,002) (14,501) (40,402) IPO and restructuring expenses - - (726) (8,524) - - Other operating expenses (185) (3,914) (11) (89) (188) (3,924) Gross value added 184, ,290 74, , , ,958 Depreciation and amortization (15,538) (46,320) (1,782) (4,896) (16,276) (48,530) Net value added generated by the company 168, ,970 72, , , ,428 Value added received through transfer 17,994 44,176 7,135 18,729 12,597 27,437 Equity in the results of associate 5,908 17, Financial income 12,086 26,467 6,988 18,309 12,452 26,985 Total value added to be distributed 186, ,146 79, , , ,865 Distribution of value added Personnel 30,399 88,375 14,782 43,489 30,660 89,081 Salaries 11,846 36,272 7,204 21,493 12,046 36,815 Benefits 3,138 8,845 1,728 4,849 3,183 8,966 Profit sharing 7,861 19,429 2,877 7,507 7,861 19,429 Share-based remuneration with no cash disbursement 6,091 19,722 2,053 6,892 6,091 19,722 FGTS 1,139 3, ,662 1,155 3,131 Board members' compensation 324 1, , ,018 Taxes and contributions 54, ,238 31,803 83,279 56, ,251 Municipal 7,037 20,231 4,342 11,811 7,109 20,450 Federal 47, ,936 27,461 71,397 49, ,730 Other Third party capital remuneration 45, , , ,957 Interest on debentures and on purchase price deferred payments 45, , , ,743 Interest on finance leases Equipment and systems rental Own capital remuneration 55, ,576 32,716 90,107 55, ,576 Dividendos Interest on own capital - 28,398-9,237-28,398 Net income retained 55, ,178 32,716 80,870 55, ,178 Value added distributed 186, ,146 79, , , ,865 The accompanying notes are an integral part of these quarterly information. 17

18 (A free translation of the original in Portuguese) CETIP S.A. Mercados Organizados 1 Operations CETIP S.A. Mercados Organizados ("CETIP" or "Company") is a publicly traded corporation with headquarters in Rio de Janeiro, which resulted from the demutualization process of CETIP - Câmara de Custódia e Liquidação ( CETIP Associação ) occurred in CETIP administers organized over-the-counter (OTC) markets, i.e. environments for trading and registration of securities, government and corporate fixed income bonds and OTC derivatives. It is a systemically important settlement and clearinghouse, as defined by the legislation of the SPB Brazilian Payment System (Law 10,214), which performs the scriptural custody of assets and contracts, registers the transactions carried out in the OTC market, processes the financial settlement and offers to the market an electronic platform for conducting various types of online transactions, such as auctions and trading of government bonds, corporate bonds and fixed income securities. The company is Latin America s largest depository of corporate fixed income securities and the largest chamber for private assets of the Brazilian financial market. Its activities give the necessary support to the entire cycle of transactions with fixed income securities, securities and OTC derivatives. On December 29, 2010, the Company acquired the entire voting share capital of GRV Solutions S.A. ("GRV") and of its subsidiary GRV Info Technology S.A. ("GRV Info"). GRV is the leading private provider of information on liens insertions and removals, with an integrated electronic system and nationwide coverage, provider of a critical infrastructure to the vehicle financing market. GRV Acquisition On December 1 st, 2010, CETIP celebrated with the shareholders of GRV a Contract of Purchase and Sale of Shares, Merger and Other Matters ("Contract") subject to conditions precedent, by means of which were laid down the terms and conditions for the acquisition of 100% of the capital of the GRV by CETIP. The completion of the acquisition was subject to the fulfillment by the parties of certain conditions established in the Contract and subject to the approval of the shareholders of CETIP, in accordance with applicable law. The transaction was completed on December 29, 2010, date on which CETIP acquired control over GRV. The transaction involved a total value of R$ 2,000,000 for the acquisition of 100% of GRV s share capital. The transaction was implemented as follows: 18

19 a) Acquisition by CETIP, of shares representing 77.75% of the total and voting capital of GRV, for a total price of R$ 1,555,021, to be paid as follows: (i) R$ 1,000,000 disbursed in cash at the closing date of the transaction; (ii) R$ 555,000 in three equal installments, adjusted by the IGP-M index + 2.0% p.a., maturing on December 2011, December 2012 and May 2013; and b) Subsequent merger of GRV into CETIP with the delivery of: (i) R$ 445,000 represented by 23,485,202 common shares with no par value issued by CETIP, evaluated based on the volume weighted average price of CTIP3 shares over the trading sessions between October 15, 2010 and November 29, CETIP financed R$ 900,000 of the acquisition price disbursed in cash, through a public distribution with placement efforts constrained pursuant to CVM Instruction no. 476/09, of ordinary debentures, not convertible into shares, in two series of the first issuance of CETIP ("Debentures"). The funds obtained with the issuance were used to pay part of the purchase price. At the Extraordinary General Meeting held on December 29, 2010, the merger of GRV s entire shareholders equity into CETIP was approved, among other things, in accordance with terms of Protocol and Justification Instrument of Merger dated December 2, As a result of the merger of GRV into CETIP, GRV shareholders received, on December 29, 2010 (date on which the transaction was completed), 23,485,202 common shares with no par value issued by CETIP, with the share exchange ratio being the result of negotiations between the Company s management and the shareholders of the GRV, after considering the Company's studies and the opinions of its advisers. Additional information about this business combination is included in Note 9. 2 Presentation and preparation of the quarterly information These quarterly information were approved by the Company's Board of Directors November 9, a. Basis of preparation The quarterly information have been prepared under the historical cost convention, as modified by the revaluation of available-for-sale financial assets and financial assets measured at fair value through profit or loss. 19

20 b. Consolidated quarterly information The consolidated quarterly information have been prepared and are being presented in accordance with the accounting practices adopted in Brazil, including the Technical Pronouncement CPC 21 Interim Financial Reporting issued by the Accounting Pronouncement Committee (CPC). The consolidated quarterly information have also been prepared and are being presented in accordance with IAS 34 - Interim Financial Reporting, issued by the International Accounting Standards Board IASB, as well as in accordance with the rules issued by the Brazilian Securities Commission (CVM). The consolidated quarterly information include the balances of CETIP and of its wholly-owned subsidiary, GRV Info, entity acquired in connection with the acquisition of GRV. Considering that the Company did not have any subsidiaries before the acquisition of GRV, no consolidated statements are being presented for the quarter ended September 30, c. Individual quarterly information The individual quarterly information of the parent company were prepared in accordance with the accounting practices adopted in Brazil, including the Technical Pronouncement CPC 21 Interim Financial Reporting and in accordance with the rules issued by the Brazilian Securities Commission. In the individual quarterly information, investments in subsidiaries and associates are accounted for using the equity method of accounting. In the Company s situation, the accounting practices adopted in Brazil differ from the IFRS applicable to separate financial statements only by the measurement of investments in subsidiaries and associates using the equity method of accounting, since that in accordance with IFRS those would be measured at cost or fair value. Nevertheless, there are no differences between the shareholders equity and consolidated net income presented in the consolidated quarterly information and the shareholders equity and net income presented in the individual quarterly information. Therefore, the consolidated quarterly information and the individual quarterly information are being presented in a single set of quarterly information. 20

21 d. Functional and presentation currency The consolidated and individual quarterly information are presented in Brazilian reais, which is the Company s functional currency. e. Segment information Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Executive Board that makes strategic decisions. f. Accounting estimates The preparation of individual and consolidated quarterly information in conformity with IFRS and CPCs requires management to exercise its judgment, to make estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and assumption are constantly revised. Reviews in estimates are recognized in the period in which they are made and in any future periods affected. Information about critical judgments relating to the accounting policies applied and critical estimates and assumptions that could have a significant impact in the amounts reported in the individual and consolidated quarterly information are included in the following notes: (i) Note 9 determination of the fair value of the consideration transferred and the fair value of identifiable assets and liabilities acquired in the business combination; (ii) Notes 11 and 12 determination of the estimated useful life of property and equipment and intangible assets items; (iii) Note 15 determination of provisions for contingent liabilities; (iv) Note 26c determination of the fair value of stock options granted to employees and estimate of the amount of options that will achieve vesting. 21

22 3 Summary of significant accounting policies The main accounting policies described below have been consistently applied to all the periods presented in these individual and consolidated quarterly information. a. Basis of consolidation (i) Business combination The Company measures the goodwill as the fair value of the consideration transferred, deducting the net fair value of identifiable assets and liabilities assumed, all measured at the date of acquisition. Transaction costs other than those associated with the issuance of debt or equity, which the company incurs in relation to a business combination are recognized as expenses as they are incurred. (ii) Investment in subsidiaries Subsidiaries are all entities in which the Company has the power to determine the financial and operating policies, usually accompanied by a participation of more than half of the voting rights (voting capital). The existence and the effect of potential voting rights currently exercisable or convertible are considered when assessing whether the Company controls another entity. The subsidiaries are fully consolidated from the date on which the control is transferred to the Company. Consolidation is interrupted from the date on which control ends. (iii) Investment in associates Associates are those entities in which the Company, directly or indirectly, has significant influence over the financial and operating policies, but not control. The significant influence supposedly occurs when the company, directly or indirectly, holds between 20 and 50 per cent of the voting rights in another entity. Investments in associates are accounted for using the equity method of accounting and are initially recognized at cost. The Company s share of its associates profits or losses is recognized in the income statement, and its share of movements in reserves is recognized in reserves. The cumulative movements are adjusted against the carrying amount of the investment. The accounting policies of associates have been changed where necessary to ensure consistency with the policies adopted by the Company. 22

23 (iv) Transactions eliminated on consolidation Balances and inter-company transactions, and any income or expenses arising from intercompany transactions are eliminated in the consolidated quarterly information. Unrealized gains arising from transactions with companies accounted for using the equity method of accounting are eliminated against the investment in proportion to the Company s interest in the investee. Unrealized losses are eliminated in the same way as unrealized gains, but only to the extent that there is no evidence of an impairment loss. b. Cash and cash equivalents For the purpose of the statement of cash flows, the balance of cash and cash equivalents includes cash, bank deposits and short-term investments (term of up to 3 months), with high liquidity and a negligible risk of change in value. c. Financial instruments i. Classification and measurement of financial assets The Company classifies its financial assets according to the following categories: measured at fair value through profit or loss, loans and receivables, held to maturity and available for sale. The classification depends on the purpose for which the financial assets were acquired and is determined when the asset is first recorded. ii. Financial assets measured at fair value through profit or loss The financial assets measured at fair value through profit or loss are (i) financial assets held for active and frequent trading or (ii) assets designated by the Company, when first recorded, as measurable at fair value through profit or loss. The assets held for trading are classified as current assets irrespective of their contractual maturities. Gains or losses arising from the fair value variations of financial assets measured at fair value through profit or loss are recorded in the statement of income in "financial result" for the period in which they occur. iii. Loans and receivables These comprise loans granted and receivables which are non-derivative financial assets with fixed or determinable payments, not quoted in an active market. The Company's loans and receivables comprise trade accounts receivable, advances and other receivables. Loans and receivables are recorded at amortized cost, based on the effective interest rate method. 23

24 iv. Assets held to maturity These are financial assets quoted in an active market which are acquired with the intention and financial ability to be held in the portfolio up to their maturity. They are recorded at the acquisition cost, plus related earnings which are recognized in the statement of income under "financial result", using the effective interest rate method. v. Available-for-sale financial assets Available-for-sale financial assets are non-derivatives instruments which are classified in this category or not classified in any other. Available-for-sale financial assets are recorded at fair value. Interest on available-for-sale securities, calculated based on the effective interest rate method, is recognized in the statement of income under "financial result". Gains or losses resulting from a change in fair value are recorded net of deferred taxes in shareholders' equity, in the Carrying value adjustments account and are transferred to the statement of income when the asset is sold or becomes impaired. vi. Non-derivative financial liabilities The Company recognizes debt securities issued on the date on which they are originated. All other financial liabilities are initially recognized at the date of negotiation in which the company becomes a part of the contractual provisions of the instrument. The Company derecognizes a financial liability when its contractual obligations are withdrawn, cancelled or expired. The company has the following main non-derivative financial liabilities: borrowings, debentures, suppliers and other accounts payable. Such financial liabilities are initially recognized at fair value plus any attributable transaction costs. After initial recognition, these financial liabilities are measured at amortized cost using the effective interest method. vii. Fair value Fair values of investments with public quotations are based on current market prices. For financial assets without an active market or public quotation, the Company determines fair value through valuation techniques, such as discounted cash flows analysis and option pricing models. viii. Impairment of financial assets The Company evaluates, at the balance sheet date, if there is objective evidence that a financial asset or a group of financial assets is overstated (impaired) in relation to its recoverable value. If 24

25 there is such evidence for available-for-sale financial assets, the cumulative loss is transferred from equity to the statement of income d. Accounts receivable and other receivables Accounts receivable from customers correspond to the receivables from customers for the provision of services in the ordinary course of the Company s business. If the term of the receivable is equivalent to one year or less, the accounts receivable are classified as current assets. Otherwise, are presented as non-current assets. Accounts receivable from customers and other receivables are initially recognized at fair value and subsequently measured at amortized cost using the effective interest rate method minus the provision for impairment, when applicable. In practice, considering the average short-term of these receivables (less than one month), they are usually recognized at the invoiced amount, adjusted by a provision for impairment, if necessary. The impairment provision is recorded when there is objective evidence of loss in the asset s recoverable amount as a result of one or more events that occurred after the initial recognition of the asset. e. Prepaid expenses Represented by contracts between suppliers and the Company, deriving from the provision of various prepaid services. The amounts are expensed in the income statement over the term of each contract and the extent to which services are received. f. Judicial deposits Judicial deposits are stated as a deduction from the corresponding liability recorded when they cannot be redeemed, unless there is a favorable outcome for the Company in the dispute (Note 15). g. Non-current assets held for sale Non-current assets are classified as held for sale when there is an expectation that its amounts will be recovered primarily through a sale transaction rather than through continuous use. Management must be committed to the sale and there should be an expectation that the sale will be concluded within one year after the classification date. Right before being classified as held for sale, assets classified as held for sale are measured in accordance with the Company s accounting policies. After the classification, assets held for sale are measured by the lower between the carrying value and the fair value less costs to sell. 25