- The Market
- Variable income
The Market
1. Where are Petrobras’ shares listed?
2. In which indexes are Petrobras’ shares a component?
3. What is the cost/brokerage fee charged on share buying and selling?
4. Do the commercial banks have brokerage houses? Can I safely trade shares through the intermediary of banks?
5. What is custody? Which is the custodial institution for the shares issued by Petrobras?
 1. Where are Petrobras’ shares listed?
ANSWER:
In Brazil, the shares are listed on the São Paulo Stock Exchange (Bovespa); in the USA, on the New York Stock Exchange (NYSE). In July 2002, Depositary Receipts began trading on the Spanish Latibex market, representing common (XPBR) and preferred (XPBRA) shares issued by Petrobras, following CVM and Central Bank of Brazil approval.
In December 2002, the Board of Directors approved a listing of common and preferred shares on the Buenos Aires Stock Exchange (Merval).
2. In which indexes are Petrobras’ shares a component?
ANSWER:
On the Bovespa, Petrobras’ shares are components of the Bovespa (Ibovespa), Brasil (IBrX) and Brasil 50 (IBrX50) indexes. On the New York Stock Exchange, the Company’s ADRs are part of the NYSE International 100 Index and NYSE World Leaders Index. Petrobras also has a listing on the NYSE Energy Index through Petrobras Energia Participaciones S.A.
3. What is the cost/brokerage fee charged on share buying and selling?
ANSWER:
Normally, a brokerage house charges a percentage of the value of each transaction to cover its services (there is a few brokerage houses that charges fixed values). The brokerage fee varies from institution to institution. It is estimated that under the homebroker scheme, the Bovespa electronic trading system, the brokerage fees are on average 20% less than via the traditional system.
4. Do the commercial banks have brokerage houses? Can I safely trade shares through the intermediary of banks?
ANSWER:
The majority of the large commercial banks have their own brokerage houses authorized to operate in the financial market. However, the regulations require that the broker is jurisdictionally separate from the bank. When “shares are bought and/or sold through the bank” in reality the investor is trading though the bank’s brokerage house. The rules, which apply to these brokers, are the same as apply to the others.
5. What is custody? Which is the custodial institution for the shares issued by Petrobras?
ANSWER:
Custody is the safekeeping (with correlated services) of bonds, securities and financial assets, such as shares for example. The custodial institution registers the shares in the name of the purchaser, guaranteeing the latter’s property rights. There are companies, which specialize in the safekeeping of bonds or shares. In Bovespa’s case, the entity in question is the Brazilian Clearing and Custody Corporation (Companhia Brasileira de Liquidação e Custódia) - CBLC, where Petrobras’s shares are also held. This clearinghouse is responsible for holding shares and updating the relative corporate actions (dividends, stock dividends, subscription rights etc.), for furnishing the shareholders’ monthly statement, as well as providing notice of all movement through the shareholders’ account.
The Banco do Brasil SA is Petrobras’ primary custodian and has the same duties as specialized custodian companies such as the CBLC.
Variable income
1 - In Brazil, where and how are the shares negotiated? (What do I do to buy and sell the company's shares?) What is the code for Petrobras shares?
2 - What is the difference between common and a preferred stock?
3 - What is a "Homebroker"?
4 - What and how is the Petrobras standard-lot? (What is a round lot /odd lot market?)
5 - Is there a minimum or maximum share investment value?
6 - Is there some profitability assurance for my investment in Petrobras shares?
7 - How do I know what my share status is?
8 - How can I change my address for mail about my shares?
9 - What are dividends and interest on equity capital?
10 - What is the Petrobras payout policy?
11 - What are "exempt or immune" shareholders and how much are the dividends received by them?
12 - What should be done to receive dividends/interest? Can I receive the payments direct to my account?
13 - What does "dividend yield" mean?
14 - What is an ADR?
15 - What are an ADR-ratio and a Petrobras ratio?
16 - As a national investor, how can I invest in ADRs?
17 - What are Custodian Agent and Depositary Bank?
18 - How are ADR dividends paid and charged?
19 - Where do I find more information about Petrobras ADRs?
1. In Brazil, where and how are the shares negotiated? (What do I do to buy and sell the company's shares?) What is the code for Petrobras shares?
ANSWER:
In Brazil, Petrobras shares are negotiated on the São Paulo Stock Exchange (Bovespa). It is possible to negotiate shares through banks or brokers that take purchase and selling orders in Bovespa. The investor decides what he or she wants to do and may base his or her decision on analyst recommendations. The private bank segments also advise their account holders which investments are most attractive in the stock market. For information about the banks or brokerage houses registered in Bovespa, please access the home page http://www.bovespa.com.br/Corretoras.shtml. (*)
Petrobras shares are negotiated on Bovespa under PETR3 (common shares) and PETR4 (preferred shares) codes.
2. What is the difference between common and a preferred stock?
ANSWER:
Common stock (Bovespa symbol: PETR3) entitles the shareholder to participate in the company administration since its owners have voting rights. The top administration authority of the company is the Shareholders' Meeting.
The preferred share (Bovespa symbol: PETR4) does not entitle shareholders to participate in company administration since its owners do not having voting rights. On the other hand, these preferred shareholders have preference in receiving dividends and also are entitled to annual minimum dividends.
Preferred shares only have a right to vote on special occasions: when the company does not pay dividends for three years running, until the company again pays dividends, when an amendment to the preferred shareholders' rights is put to the vote and members of the Board of Directors are elected, provided that there is evidence of uninterrupted ownership of the shareholding for at least a three-month period. Preferred shareholders will be consulted when voting on relevant matters, such as in the case of a corporate split or merger.
Preferred shares cannot be converted into common shares or vice-versa. For further details about share classes and rights of each, access Petrobras Company By-Laws.
3. What is a "Homebroker"?
ANSWER:
Many banks or brokers have a page on the Internet where stock can be bought and sold directly, even with a small amount of funds. This is possible through the "Homebroker", a São Paulo Stock Exchange system that permits the investor to operate electronically. This system is fast and easy, permitting the individual to negotiate shares directly on the Bovespa floor through the Internet. It does not have a minimum investment sum and another attraction for the small investor is the brokerage fee: it is estimated that in the home broking system the average charge is 20% less than brokerage in the traditional system, where it is necessary to make a negotiation order through a broker.
For further information, access the page of the Homebroker system (*), where the banks or Bovespa brokerage houses that operate it are listed.
4. What and how is the Petrobras standard-lot? (What is a round lot /odd lot market?)
ANSWER:
A lot is a quantity of securities with identical characteristics. On the round lot market, shares are negotiated according to a standard-lot, in quantities prefixed by the stock exchange. In the odd lot market, negotiations are made involving a smaller quantity than the standard. In the case of Petrobras, the standard-lot is 100 shares.
Normally liquidity (facility to buy or sell shares) is greater in the round lot market and the spread (difference between the highest purchase offer and smallest sale offer) is greater in the odd lot market. This means that a buyer will probably pay more and take longer to do the transaction when placing his order in the odd lot market.
5. Is there a minimum or maximum share investment value?
ANSWER:
There is no minimum value or maximum limit to negotiate shares. However, costs, such as brokers' fees, may make very small investments uninteresting. It should be stressed that shares are normally negotiated in lots. The Petrobras standard lot today is 100 shares. Fractions of a lot must be negotiated on the odd lot market, where there is normally less liquidity (facility to buy or sell stock).
6. Is there some profitability assurance for my investment in Petrobras shares?
ANSWER:
There is generally no guaranteed return in the stock market when investing in shares. It is no different with Petrobras shares. There is, however, according to past data, a tendency to valorize the shares of companies whose foundations are solid and that have continuously good results and increase their long-term assets. It is worth noting that Petrobras shares are considered blue chips, that is, they are easily negotiated because they are in high demand (liquidity), which facilitates buying and selling the shares on the stock exchange.
7. How do I know what my share status is?
ANSWER:
Banco do Brasil S.A., which is the managing agent of the Petrobras share system, sends the share status statement to the shareholder's address, when there are share transactions or dividends are paid and for the purpose of the income tax return. This is why it is fundamental that the shareholder's address information is given to any branch of Banco do Brasil. Moreover, shareholders may at any time appear at any Banco do Brasil branch and ask for a statement of their Petrobras share status.
Shareholders with shares under the custody of CBLC (*) (Brazilian Settlement and Custody Company) should consult their status in that institution with their broker.
8. How can I change my address for mail about my shares?
ANSWER:
Registration data must be updated with Banco do Brasil S.A., the depositary institution of Petrobras book entry shares. To do so just go to any branch of Banco do Brasil with your personal documents.
Shareholders with shares under the custody of CBLC (*)(Brazilian Settlement and Custody Company) should update their data in this institution with their broker.
09. What are dividends and interest on equity capital?
ANSWER:
Dividends are a form of remunerating the capital invested in the company by shareholders. The value is paid in cash to the company shareholders and is a share in the profits of a fiscal year.
Interest on equity capital is another form of paying the shareholder and consists of sharing retained profits from previous years.
There is another difference between dividends and interest on equity capital with regard to income tax: paying interest on equity capital benefits the company and, consequently, its shareholders with regard to paying dividends, because the interest may be deducted from the Income Tax Provision account, increasing the net income.
10. What is the Petrobras payout policy?
ANSWER:
Pursuant to the Company By-Laws, Petrobras has mandatory minimum dividends of 25% of the adjusted clear profit. Preferred shares will have priority in the case of capital reimbursement and receipt of dividends at least of 5% (five percent) calculated on part of the capital represented by this kind of share, or 3% (three percent) of the net worth of the share - the higher always prevailing -, participating equally with the common shares in the increases in capital stock after including provisions and profits.
Preferred shares will participate on a non-cumulative basis under equal conditions with common stock in the distribution of dividends when more than the minimum percentage assured them in the previous paragraph. Moreover, the CVM Securities Commission dictates a dividend payment of 10% higher for PN shares on a preferential basis (calculated on a minimum dividend of 25% of adjusted net profits). What happens in the case of Petrobras is that the priority for receiving 5% of the capital relating to PN shares is generally more than the 10% preferred stock.
For further information access Dividend Policy and Dividends Distribution Record.
Important: In order for Petrobras shareholders to receive their rightful dividends, it is essential that they constantly update their registration data, informing any change of address or bank account for crediting dividends. This update should be made at any branch of the Banco do Brasil S.A. (if custody is by this bank) or requesting the stockbroker should the shares be under the custody of CBLC.
We also recall that, pursuant to the Corporate Act (Law 6404/76, art. 287, amended and with provisions added by Law 10,303/2001) (*), the share, in the case of dividends, lapses in three years after the date when they have been put at the disposal of the shareholder.
11. What are "exempt or immune" shareholders and how much are the dividends received by them?
ANSWER:
As defined by the Internal Revenue Service, immune and exempt shareholders are those whose remuneration does not have Withholding Income Tax discounted from it, such as Municipalities, Foundations, and other philanthropic entities (only legal entities can be exempt).
In 2004, the immune parties received R$4.7679 per share in dividends, while in 2003 this value was R$5.2849 per share.
12. What should be done to receive dividends/interest? Can I receive the payments direct to my account?
ANSWER:
Dividends / interest on equity capital is paid by Banco do Brasil S.A., the depositary institution of Petrobras book entry shares. Dividends will only be paid to shareholders whose registration data is updated or to those who have a current account in any bank registered in Banco do Brasil (institution that manages the Petrobras Book Entry Share System). Therefore, just go to any branch of Banco do Brasil or your securities broker, with your identity documents in hand.
It is possible to receive the sums directly to the account, provided that shareholders have a current account with Banco Brasil S.A and shares under custody of this Bank; or have a current account in another bank registered in their shareholder data. These shareholders have their rights automatically credited in account on the date when payment begins.
Detailed information can be obtained in Dividend Payments.
13. What does "dividend yield" mean?
ANSWER:
It is the ratio between dividends (per share) paid by a company and the current share quotation. The dividend yield measures the gain with dividends in proportion to the market yield.
The 2004 fiscal year dividend represents 4.7% and 4.3% of the ordinary and preferred share market value, respectively. In 2003, the dividend yield was 6.2% for ordinary shares and 6.8% for the preferred ones.
14. What is an ADR?
ANSWER:
An American Depositary Receipt (ADR) is a certificate issued by North American banks and represents shares of a company outside the USA. Many Brazilian companies use this instrument to negotiate their shares on the New York Stock Exchange (NYSE). The company gains visibility on the international market and may find it easier to raise funds abroad through a loan or even by issuing new shares.
In October 1996 the ADR level I American Depositary Receipt Sponsored Program was launched for Petrobras preferred shares. Later, in February 2002, an ADR level II Program substituted it and made it possible to negotiate the preferred stock on the NYSE. In July 2001, an ADR level III Program replaced the previous one, permitting new share issues on the North American market.
The Petrobras common ADR Program was launched in August 2000 already as level III.
Petrobras ADRs are negotiated on the New York Stock Exchange under the codes PBRA (preferred shares) and PBR (common shares).
For further information about ADRs, access the JPMorgan (*) page, which is the custody agent for these Petrobras securities in the USA.
15. What are an ADR-ratio and a Petrobras ratio?
ANSWER:
ADR-ratio is the number of shares represented by a single ADR. In the case of Petrobras ADRs (both common and preferred), this quotient is 1 to 2 (one ADR is represented by two share).
16. As a national investor, how can I invest in ADRs?
ANSWER:
ADRs can only be bought and sold by individual and corporate investors who have a foreign bank account. It is legal for a Brazilian citizen to open an account abroad provided that it is declared and respects the national taxation regulations. Money can only be sent abroad through financial institutions accredited for exchange transactions and if the sum is more than US$ 10,000 the Central Bank of Brazil must be informed.
17. What are Custodian Agent and Depositary Bank?
ANSWER:
A custodian agent is the institution in Brazil that registers shares on behalf of the buyer and assures ownership. In the case of Petrobras, there are two custodian agents: Banco do Brasil S.A. and Companhia Brasileira de Liquidação e Custódia (CBLC), linked to the São Paulo Stock Exchange (Bovespa).
The depositary bank at home and abroad strives for share integrity / restitution (when abroad, shares relating to an ADR Program). The Petrobras depositary in Brazil is Banco do Brasil S.A. and Citibank outside Brazil. As the depositary, JPMorgan (*) also issues the ADR, keeps the registration of the owners, registers the negotiations and the distribut dividends in dollars to the ADR holders.
18. How are ADR dividends paid and charged?
ANSWER:
The dividends are paid in dollars and are charged as share dividends of American companies. Also, fees may be charged by the governments of the country of the company's origin, which, depending on the circumstance, can be debited when paying American charges. In the case of Brazil, income tax is withheld at source, that is, the dividends leave the country already with income tax discounted.
19. Where do I find more information about Petrobras ADRs?
ANSWER:
Besides the Petrobras Investor Relations site, a good source of information is the JPMorgan (*) site about ADRs, which is the depositary bank of the company shares outside Brazil.
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