NYSE Recommendation

As a Brazilian company listed on the Nível 1 das Práticas Diferenciadas de Governança Corporativa da Bolsa de Valores de São Paulo (Level 1 of the Differentiated Practices of Corporate Governance of the São Paulo Stock Exchange or “Level 1”) we must comply with the corporate governance standards set forth in the Brazilian corporate law, the rules of the CVM and the Regulamento de Práticas Diferenciadas de Governança Corporativa da Bolsa de Valores de São Paulo (the Differentiated Practices of Corporate Governance of the São Paulo Stock Exchange or the “Level One Regulation”), as well as our own By-laws.

On November 4, 2003, the SEC approved the new corporate governance rules established by the NYSE. Pursuant to these rules, foreign private issuers that are listed on the NYSE, such as we are, must disclose any significant ways in which its corporate governance practices differ from those followed by US domestic companies under the listing rules of the NYSE.

The significant differences between our corporate governance practices and the NYSE corporate governance standards are as follows:

Independence of Directors and Independence Tests

The Brazilian corporate law and our By-laws require that our directors be elected by our shareholders at a general shareholders meeting. Currently our board of directors consists of nine members elected by our shareholders, consisting of four representatives of the Casino group, and five external directors.

Neither our board of directors nor our management test the independence of the directors before such elections are made. However, both the Brazilian corporate law and CVM establish rules in relation to certain qualification requirements and restrictions, investiture, compensation, duties and responsibilities of the companies’ executives and directors. Although we believe these rules provide adequate assurances that our directors are independent, we believe such rules would permit us to have directors that would not otherwise pass the independence tests established by the NYSE.

Executive Sessions

According to the Brazilian corporate law, up to 1/3 of the members of the board of directors can be elected into executive positions.

The remaining non-management directors are not expressly empowered to serve as a check on management and there is no requirement that those directors meet regularly without management. Notwithstanding, our board of directors consists of one honorable member and thirteen members elected by our shareholders, all of whom are non-management directors. Therefore we are in compliance with this standard.


We are not required under applicable Brazilian corporate law to have, and accordingly we do not have, a Nominating Committee and a Compensation Committee. However, we currently have a Human Resources and Compensation Committee whose responsibilities are such that it will examine candidates to be elected and appointed to the Company’s Board of Directors, Committees and Executive Board and will also review and discuss management compensation. See “Item 6 – Directors, Senior Management and Employees – Committees”. Pursuant to our Bylaws our directors are elected by our shareholders at the Annual Shareholders’ Meeting. Compensation for our directors and executive officers is established by our shareholders.

Audit Committee and Audit Committee Additional Requirements

Under the Brazilian corporate law and our By-laws, we are not required to, and currently do not, maintain a permanent fiscal council (conselho fiscal). The fiscal council operates independently from our management and from our external auditors. Its main function is to examine the financial statements of each fiscal year and provide a formal report to our shareholders. We do not maintain a permanent fiscal council, however if necessary we should install one upon the vote of 2% of our common shares shareholders or 1% of the holders of our preferred shares, pursuant to CVM Instruction 324, dated as of January 19, 2000. In order to comply with the requirements of the Sarbanes-Oxley Act and the rules and regulations of the NYSE, we finished the implementation of an independent audit committee composed by three independent members, which are members of our board.

Shareholder Approval of Equity Compensation Plans

Our board of directors is responsible for voting on the issuance of new equity in connection with our existing stock option plans, provided that the limit of our authorized capital is respected. However, any issuance of new shares that exceeds such authorized capital is subject to shareholder approval.

Corporate Governance Guidelines

We have not adopted any corporate governance guidelines in addition to the rules imposed upon us by applicable Brazilian corporate law. We believe the corporate governance guidelines applicable to us under Brazilian corporate law are consistent with the guidelines established by the NYSE. We have adopted and observe the Policy of Disclosure of Acts or Relevant Facts and the Preservation of Confidentiality of CBD, which deals with the public disclosure of all relevant information as per CVM’s guidelines. Also, we comply with the CVM rules relating to transactions involving the trading by our management of our securities.

Code of Business Conduct and Ethics

Although the adoption of a code of ethics is not required by Brazilian corporate law, we implemented our Code of Ethics in 2000 to regulate our employee’s conduct with us and our customers, suppliers, competitors and the public at large. In order to comply with the requirements of the Sarbanes-Oxley Act and New York Stock Exchange rules, we later implemented rules applicable to our managers’ conduct in connection with the registration and control of financial and accounting information and their access to privileged and non-public information and data. For more information about our Code of Ethics, see “Item 16B – Code of Ethics”.

In addition to complying with the rules of corporate governance applicable to us under Brazilian law, we intend to gradually comply with substantially all of the new rules established by the NYSE and the SEC applicable to domestic US companies.