TOTVS S.A. Public Company
CNPJ/MF No. 53.113.791/0001-22 NIRE 35.300.153.171
REFERENCE FORM – 2015 (CVM Instruction No. 480, of December 7th, 2009)
(In compliance with IOSCO - International Organization of the Securities Commissions – Shelf Report
guidelines. Equivalent to 20-F SEC Form)
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Summary
1. IDENTIFICATION OF THE INDIVIDUALS RESPONSIBLE FOR THE
FORM CONTENTS ............................................................................................................. 14
1.1. Statement and identification of the individuals responsible ....................................... 14
2. AUDITORS .......................................................................................................................... 15
2.1. / 2.2. Regarding the independent auditors, indicate: ................................................... 15
2.3. Provide other information that the issuer deems relevant ........................................... 16
3. SELECTED FINANCIAL INFORMATION ...................................................................... 17
3.1. Financial information – Consolidated ......................................................................... 17
3.2. Non-accounting measures ........................................................................................... 17
3.3. Subsequent events to the last financial statements ..................................................... 18
3.4. Policy for the profits destination ................................................................................. 19
3.5. Distribution of dividends and retention of net profit .................................................. 20
3.6. Statement of dividends on the retained profits or reserves accounts .......................... 20
3.7. Debt level .................................................................................................................... 20
3.8. Obligations according to the nature and maturity schedule ........................................ 21
3.9. Other relevant information .......................................................................................... 21
4. RISK FACTORS .................................................................................................................. 22
4.1. Risk factors description .............................................................................................. 22
4.2. Comments on expectations of changes in Risk Factors .............................................. 30
4.3. Comments on expectations of changes in Risk Factors .............................................. 31
4.4. Non-confidential legal, administrative or arbitration proceeding whose
adverse party are managers, former managers, controlling shareholders,
former controlling shareholders or investors ................................................................... 36
4.5. Relevant confidential proceedings .............................................................................. 36
4.6. Repetitive or related non-confidential legal, administrative or
arbitration proceeding taken jointly ................................................................................. 36
4.7. Other relevant contingencies ...................................................................................... 36
4.8. Rules of the origin country and of the country in which the securities
are under custody ............................................................................................................. 36
5. MARKET RISK ................................................................................................................... 37
5.1. Description of the main market risks .......................................................................... 37
5.2. Description of the market risks management policy .................................................. 39
5.3. Significant changes in the main market risks ............................................................. 40
5.4. Other relevant information .......................................................................................... 40
6. COMPANY HISTORY ........................................................................................................ 41
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6.1. / 6.2 / 6.4. Constitution, duration and registration date of the Company
at CVM ............................................................................................................................ 41
6.3. Brief history ................................................................................................................ 41
6.5. Main stock holding events in controlled or colligated companies or at
the Company .................................................................................................................... 43
6.6. Information about the bankruptcy request based on a relevant amount
or judicial or extrajudicial recovery................................................................................. 49
6.7. Other relevant information .......................................................................................... 49
7. COMPANY ACTIVITIES ................................................................................................... 50
7.1. Description of the activities of the company and its controlled
companies ........................................................................................................................ 50
7.2. Information on operating segments ............................................................................ 50
7.3. Information on products and services related to operating segments ......................... 59
7.4. Clients accounting for over 10% of total net revenue ................................................ 69
7.5. Relevant effects of state regulation on activities ........................................................ 69
7.6. Relevant revenues from abroad .................................................................................. 70
7.7. Effects of foreign regulations on activities ................................................................. 70
7.8. Relevant long term relationships ................................................................................ 70
7.9. Other relevant information .......................................................................................... 70
8. ECONOMIC GROUP .......................................................................................................... 71
8.1. Description of the economic group ............................................................................. 71
8.2. Economic Group Organization Chart ......................................................................... 72
8.3. Restructuring operations ............................................................................................. 73
8.4. Other relevant information .......................................................................................... 74
9. RELEVANT ASSETS ......................................................................................................... 74
9.1. Relevant noncurrent assets .......................................................................................... 74
9.1.a. Property, plant and equipment .................................................................................... 74
9.1.b. Patents, brands, licenses, concessions, franchises, and technology
transfer contracts .............................................................................................................. 74
9.1.c. Interests in companies ................................................................................................. 76
9.2. Other relevant information .......................................................................................... 80
10. MANAGEMENT’S COMMENTS ................................................................................. 82
10.1. Executive officers’ comments on: .............................................................................. 82
10.2. The executive officers shall comment on: ................................................................ 102
10.3. The executive officers shall comment on any material effects caused
by the events mentioned below or to impact the issuer’s financial
statements and its results: .............................................................................................. 103
10.4. The executive officers shall comment on: ................................................................ 105
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10.5. The executive officers shall indicate and comment on the critical
accounting policies adopted by the issuer, especially, analyzing the
Management’s accounting estimates on uncertain and relevant issues that
will explain the Company’s financial conditions and results that require
subjective or complex judgments, such as: provisions, contingencies,
revenue recognition, tax assets, long-lived assets, non-current assets’
useful life, pension plans, foreign currency translation adjustments,
environmental recovery costs, assets and financial instruments
impairment test .............................................................................................................. 105
10.6. In relation to the internal controls adopted to ensure the preparation of
reliable financial statements, the executive officers shall comment on: ....................... 115
10.7. If the issuer has made a public offering of shares, the executive
officers shall comment on: ............................................................................................ 115
10.8. The executive officers shall explain the relevant items not evidenced
in the issuer’s financial statements, indicating: ............................................................. 115
10.9. In relation to each one of the items not evidenced in the financial
statements indicated in item 10.8, the executive officers shall comment
on: .................................................................................................................................. 116
10.10. The executive officers shall indicate and comment on the main
elements of the issuer’s business plan, specifically exploring the
following topics: ............................................................................................................ 117
10.11. Comment on other factors significantly impacting the operating
performance and not identified or commented in other items of this
section. ........................................................................................................................... 118
11. PROJECTIONS ............................................................................................................. 119
11.1. Disclosed projections and assumptions .................................................................... 119
11.2. Monitoring and amendments to published projections ............................................. 119
12. SHAREHOLDER’S MEETING AND MANAGEMENT ............................................ 121
12.1. Administrative Structure Description ....................................................................... 121
12.2. Rules, policies and practices relating to General Meetings ...................................... 128
12.3. Dates and newspapers to publish the information required by Law No.
6.404/76 ......................................................................................................................... 131
12.4. Rules, policies and practices related to the Management Council ........................... 132
12.5. Description of arbitration clause to settle disputes through arbitration .................... 132
12.6. / 12.8 – Composition and experience of management and fiscal
council ........................................................................................................................... 133
12.7. Composition of the audit, financial and compensation statutory
committees ..................................................................................................................... 139
12.9. Existence of marital relationship, stable union or family relationship
up to 2nd degree regarding Company administrators, controlled and
controlling companies.................................................................................................... 140
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12.10. Subordination relationships, services relationship or control
between the administrators and controlled, controlling and others ............................... 141
12.11. Agreements, including insurance policies, for payment or
reimbursement of expenses borne by the administrators ............................................... 143
12.12. Other relevant information ................................................................................... 144
13. MANAGEMENT COMPENSATION .......................................................................... 146
13.1. Describe the compensation policy or practice of the board of directors,
statutory and non-statutory executive officers, fiscal council, statutory
committees and audit, risk, financial and compensation committees
regarding the following aspects: .................................................................................... 146
13.2. Compensation of the Board of Directors and Executive Board
recognized in the result of the last fiscal year and expected for the current
fiscal year ....................................................................................................................... 150
13.3. Variable Compensation of the Board of Directors and Executive
Board ............................................................................................................................. 152
13.4. Compensation Plan based on shares for the Board of Directors and
Executive Board in the last fiscal year and expected for the current fiscal
year ................................................................................................................................ 154
13.5. Inform the number of shares or directly or indirectly held in Brazil or
offshore and other securities convertible into shares or quotas issued by
the issuer, the direct or indirect controllers, subsidiaries or companies
under common control, members of the board of directors, executive
board or fiscal council, grouped by body, on the close of the last fiscal
year. ............................................................................................................................... 162
13.6. Board of Directors and Executive Board’s share-based compensation
recognized in the result of the last fiscal year and expected for the current
fiscal year. ...................................................................................................................... 163
13.7. Board of Directors and Executive Board’s pending options at the close
of the last fiscal year 2014 ............................................................................................. 167
13.8. Options exercised and shares delivered related to the share-based
compensation of the Board of Directors and Board of Officers in the last
3 fiscal years .................................................................................................................. 168
13.9. Brief description of the information necessary to understand the data
in items 13.6 to 13.8, such as an explanation of the methods used for
stock and option pricing, indicating at least: ................................................................. 169
13.10. Pension plans in effect for members of the Board of Directors and
Board of Officers ........................................................................................................... 170
13.11. Payments in the last fiscal year ............................................................................ 171
13.12. Describe all contractual arrangements, insurance policies or
compensation mechanisms for manager in the case of resignation or
retirement, indicating financial consequences incurred by the payer ............................ 171
13.13. In the last 3 fiscal years, indicate the percentage of total
compensation of each body, as recognized in the result of the issuer,
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related to each member of the Board of Directors, statutory executives or
Fiscal Council that is either a direct or indirect controller, according to
applicable accounting rules ........................................................................................... 172
13.14. In the last 3 fiscal years, indicate the amounts paid to members of
the Board of Directors, statutory executives or Fiscal Council, by body,
for any reason not related to their position (i.e. commissions, consulting
or advising services) as recognized in the payer’s results ............................................. 172
13.15. In the last 3 fiscal years, indicate the amounts recognized in the
results of direct or indirect controllers, corporations under common
control or the issuer’s subsidiaries, of compensation to members of the
Board of Directors, statutory executives, or Fiscal of the issuer, by body,
specifying the type of payment and to whom it was paid ............................................. 172
13.16. Provide any other relevant information ................................................................ 172
14. HUMAN RESOURCES ................................................................................................ 173
14.1. Description of human resources ............................................................................... 173
14.2. Relevant changes – Human Resources ..................................................................... 174
14.3. Description of the employee compensation policy ................................................... 174
14.4. Issuer / Union relations ............................................................................................. 175
15. CONTROL .................................................................................................................... 176
15.1. / 15.2. Shareholder’s Position ................................................................................... 176
15.3. Capital distribution ................................................................................................... 176
15.4. Shareholder organization chart ................................................................................. 177
15.5. Shareholders agreement filed in the Company headquarters or in the
company to which the controller belongs to .................................................................. 177
15.6. Relevant changes in the interests of members in the Company
controlling group and administrators ............................................................................. 177
15.7. Other relevant information. ....................................................................................... 177
16. TRANSACTIONS WITH RELATED PARTIES ......................................................... 178
16.1. Description of rules, policies and practices of the issuer in terms of
transactions with related parties .................................................................................... 178
16.2. Information on transactions with related parties ....................................................... 179
16.3. Identification of measures taken for handling conflicts of interests and
proof of the strictly commutative character of the conditions agreed or
the proper compensation payment ................................................................................. 185
17. CAPITAL STOCK ........................................................................................................ 186
17.1. Information on capital stock ..................................................................................... 186
17.2. Capital stock increases .............................................................................................. 187
17.3. Information on stock splits, grouping or bonuses ..................................................... 194
17.4. Information on capital stock reductions .................................................................... 194
17.5. Other relevant information ........................................................................................ 194
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18. SECURITIES................................................................................................................. 195
18.1. Rights of stocks ......................................................................................................... 195
18.2. Description of eventual legal rules that limit the right to vote of
significant shareholders or that oblige them to make public acquisition
offer ............................................................................................................................... 195
18.3. Describe exceptions and suspension clauses related to equity or
political rights provisioned in the Bylaws ..................................................................... 203
18.4. Traded volume and highest and lowest quotations of the securities
trading values ................................................................................................................. 204
18.5. Description of other securities issued ....................................................................... 205
18.6. Brazilian Markets where securities are accepted for trade ....................................... 205
18.7. Information on class and type of securities accepted for trade in
foreign markets .............................................................................................................. 205
18.8. Public distribution offers made by the Company or third parties,
including associated and controlled companies, related to the Company
securities ........................................................................................................................ 205
18.9. Description of public buyout offers made by the issuer and related to
stocks issued by third parties ......................................................................................... 206
18.10. Other relevant information ................................................................................... 206
19. STOCK BUY-BACK PROGRAM / TREASURE ........................................................ 218
19.1. Information on the stock buy-back plan of Company stocks ................................... 218
19.2. Negotiation of Treasure held securities .................................................................... 219
19.3. Information on securities kept in treasury on the closing date of the
last accounting period .................................................................................................... 220
19.4. Other relevant information ........................................................................................ 222
20. NEGOTIATION POLICY ............................................................................................ 223
20.1. Information on the securities negotiation policy ...................................................... 223
20.2. Other relevant information ........................................................................................ 224
21. DISCLOSURE POLICY ............................................................................................... 225
21.1. Description of internal standards, regulations or procedures related to
the disclosure of information ......................................................................................... 225
21.2. Description of the policy for disclosure of relevant act or fact and
procedures related to the maintenance of secrecy on relevant information
not yet disclosed ............................................................................................................ 225
21.3. Administrators in charge of implementing, maintaining, evaluating
and inspecting the information disclosure policy .......................................................... 226
21.4. Other relevant information ........................................................................................ 226
22. EXTRAORDINARY BUSINESSES ............................................................................ 227
22.1. Acquisition or sale of any relevant asset not considered as normal
operation within the Company business ........................................................................ 227
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22.2. Indicate significant changes in the conduction of Company businesses .................. 227
22.3. Identify relevant agreements signed by the Company and its
controlled companies not directly related to its operational activities .......................... 227
22.4. Other information considered as relevant by the Company ..................................... 227
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GLOSSARY
Adjusted Net Income Net income less the 5% legal reserve. The Brazilian Corporation Law requires publicly held
companies to appropriate 5% of their annual net income to the profit reserve before profits are
distributed, limiting this reserve to up to 20% of the total value of the capital stock.
Advent Advent International Corporation (private equity fund).
ADVPL Advanced Protheus Language, language used in the development of Protheus ERP software,
originated from Microsiga.
Arbitration Rules Arbitration Rules of the Market Arbitration Chamber.
ASP Application Service Provider, hardware rental and software hosting service.
Arbitration Clause Arbitration Clause, whereby Company, its shareholders, management, members of Fiscal
Council and BM&FBOVESPA, resolve through arbitration any dispute or controversy, which may
arise among them, related to or arising, in particular, validity, effectiveness, interpretation,
breach and its effects of the provisions in the Corporations Law, the Bylaws of Company, the
rules issued by the CMN, the Central Bank and CVM, and as other rules concerning the
operation of capital markets in general, beyond those contained in these listing rules, the
Arbitration Rules and the Participation Agreement in the Novo Mercado.
Authorized Reseller Responsible for commercialization of services, working with the franchises.
BI Business Intelligence, group of tools that summarizes analytical data and presents it in a linear
and graphic format.
BNDES National Bank of Social and Economic Development.
BNDESPAR BNDES Participações S.A – BNDESPAR is a business corporation, which has been established as
an integral subsidiary of the BNDES. It carries out capitalization operations of undertakings
controlled by private groups, while abiding by the BNDES’ plans and policies.
Board of Market Arbitration Board responsible for settling disputes or controversies arising in particular, the provisions of
the Novo Mercado Participation Agreement in the Novo Mercado Regulation, Regulation of
Arbitration, on the company’s Bylaws, the shareholders agreements archived at the Company,
the provisions of the Corporations Act by Shares, the rules issued by CMN, BACEN or CVM, in
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BM&FBOVESPA regulations and other rules applicable to the capital markets in general work,
or arising by arbitration, pursuant to its Arbitration Rules.
BSC Balanced Scorecard, management model created by Kaplan and Norton that helps
organizations translate their strategies into quantifiable operational objectives.
BOVESPA / BM&FBOVESPA BM&FBOVESPA S.A. – Bolsa de Valores, Mercadorias e Futuros, São Paulo’s Stock Exchange.
Business Agents Sales representatives that can be individuals or companies.
Buying Shareholder Any person, including, without limitation, any individual or legal, investment fund,
condominium, portfolio of securities, universality of rights or other form of organization,
resident, domiciled, or headquartered in Brasil or abroad, or Group of Shareholders
B2B Business to Business, indicates sales relations among companies.
Call Center Telemarketing, sales over the telephone, customer care, help desk, CTI and Field Service
Management, considered conjunctively.
CMMI Capability Maturity Model Integration, the standardized model of quality control used in
software development processes, with five levels of maturity.
CMN Conselho Monetário Nacional, Brazilian Monetary Council.
CNPJ (National Register of Legal Entities), Brazilian Taxpayers Identification Number.
Company TOTVS S.A.
Contract of Participation in Novo Mercado Contract celebrated among, on one hand, BM&FBOVESPA and on the other, the Company, the
management and the LC-EH, containing obligations to Company’s listing on the Novo Mercado.
Novo Mercado is a listing segment designed for shares issued by companies that voluntarily
undertake to abide by corporate governance practices and transparency requirements in
additional to those already requested by the Brazilian Law and CVM (Brazilian Securities and
Exchange Commission). The admission to Novo Mercado implies the compliance with corporate
rules, known as "good practices of corporate governance", which are more rigid than those
required by the current legislation in Brazil. These rules, consolidated in the Listing Regulation,
increase shareholder's rights and enhance the quality of information commonly disclosed by
companies. Additionally, the Market Arbitration Panel for conflict resolution between investors
and companies offers a safer, faster and specialized alternative to investors.
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Corporate Model In the corporate model, the client acquires the license for unlimited rights of use in his
operating segment, without restriction on the number of simultaneous users, by paying (fully
or in installments) the license amount at the time of contracting the service and additional
annual payments according to a growth metric pertaining to his operating segment.
CVM Brazilian Securities Commission
Diffuse Control The power of control exercised by a shareholder holding less than 50% of the voting capital of
the company, as well as a Group of Shareholders with is not signatory to the voting agreement
and not under common control and not act representing a common interest.
EBITDA Earnings Before Interest, Taxes, Depreciation and Amortization.
ERP Enterprise Resource Planning, a system that integrates all the departments and divisions of a
business into one software.
GAAP Generally Accepted Accounting Principles.
IFRS International Financial Reporting Standards, a set of international accounting standards
published and reviewed by the International Accounting Standards Board (IASB).
IGP-M Índice Geral de Preços ao Mercado, General Price Index, published by FGV – Fundação Getúlio
Vargas, similar to PPI Index – inflation index at producer level.
INSS Instituto Nacional de Seguridade Social, Brazilian Social Security Institute.
Intelligence Tools Software that compile and analyses information derived from operational applications such as
ERP to assist the management of tactical and strategic level of business.
IBGE Instituto Brasileiro de Geografia e Estatística, a body of Brazilian Planning Ministry that
provides, among other, social, demographic and economic statistics.
IPCA Índice Nacional de Preços ao Consumidor Amplo, Brazilian Extended National Consumer Price
Index, published by IBGE, similar to CPI Index – inflation index at consumer level.
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ISO 9001 The ISO 9000 family of standards relate to quality management systems and are designed to
help organizations ensure they meet the needs of customers and other stakeholders. The
standards are published by ISO, the International Organization for Standardization. Third party
certification bodies provide independent confirmation that organizations meet the
requirements of ISO 9001. TOTVS certificate of quality was awarded by Fundação Carlos Alberto
Vanzolini.
Java A kind of programming language.
LC-EH LC-EH Empreendimentos e Participações S.A., one of TOTVS shareholders.
Logocenter Logocenter S.A.
Maintenance Maintenance refers to the delivery of new versions, upgrade of the Company’s software,
containing updates related to technological, functional or legal enhancements, as well as the
provision of help desk.
Makira Makira do Brasil S.A.
MBA Master of Business Administration, master’s degree
Microsiga Microsiga Software S.A., former TOTVS’ name until 2005.
Module A module is a part of integrated business management software, that may be an ERP, CRM, or
other, and is integrable to the other parts of the software.
N/A Not applicable.
Novo Mercado (“New Market”) Special segment of BM&FBOVESPA listing representing companies adherent to highest level of
corporate governance. See also glossary for Contract of Participation in Novo Mercado, above.
Novo Mercado Listing Regulation This regulation establishes the requirements applicable to the trading of securities issued by
publicly traded companies on the special listing segment of the stock market operated by
BM&FBOVESPA S.A. – Bolsa de Valores, Mercadorias e Futuros (“BM&FBOVESPA”), known as
Novo Mercado, which sets forth enhanced corporate governance standards for the listing of
such Companies, as well as rules applicable to their Senior Managers and shareholders,
including the Controlling Shareholders.
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OPA Public Acquisition Offer of securities.
SaaS SaaS - Software as a service is a software licensing and delivery model in which software is
licensed on a subscription basis.
Selic Brazilian interest rate used as a benchmark for monetary policy.
STF Sistema TOTVS de Franquias, TOTVS franchise system.
TJLP Taxa de Juros de Longo Prazo, Long Term Interest Rate, is the basic cost of financing granted by
BNDES, created in 1995 in order to stimulate investments in sectors such as infrastructure,
technological research and consumption.
TOTVS TOTVS S.A. and its subsidiaries, considered together.
Traditional Model The traditional model consists of licensing the rights of use, through payment (fully or in
installments) of a specific amount. The license is grant on a firm and non-exclusive basis. The
license price is defined per user and the client pays the license amount for the number of users
it wishes to acquire. The number of users acquired is the maximum number of personnel that
may simultaneously access the system.
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1. IDENTIFICATION OF THE INDIVIDUALS RESPONSIBLE FOR THE FORM CONTENTS
1.1. Statement and identification of the individuals responsible
Name of the individual responsible for the form contents Rodrigo Kede de Freitas Lima Position President Name of the individual responsible for the form contents Gilsomar Maia Sebastião Position Investor Relations Officer
The directors qualified above state that:
(a) they reviewed this Reference Form;
(b) all the information contained in this Reference Form meet the provisions of CVM Instruction No. 480, especially articles 14 to 19;
(c) the set of information contained therein is a true, accurate and complete picture of the Company’s economic-financial situation, of the risks inherent to its activities and of the securities issued by it.
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2. AUDITORS
2.1. / 2.2. Regarding the independent auditors, indicate:
Has Auditor: Yes
CVM Code: 287-9
Auditor type: National
Name/Corporate name: PriceWaterHouseCoopers Auditores Independetes
CNPJ: 61.562.112/0001-20
Services provisioning period: Since 01/01/2012
Description of the services hired: Professional services regarding the external audit of the Company´s financial statements and the review the quarterly information of the Company (parent company and consolidated)
Total amount of the independent auditors compensation segregated by service:
In 2014: Audit of the financial statements: R$ 797,725.00; Diligences: R$144,134.25; Review of software development environment controls (ISAE): R$121,672.57 TOTAL: R$ 1,063,531.82 In 2013: Audit of the financial statements: R$747,000.00, Review of software development environment controls (ISAE): R$127,300.70, Diligences: R$169,100.00 TOTAL: R$ 1,043,400.70 In 2012: External Audit Services: R$650,000.00; Consulting of intern processes : R$34,046.17 TOTAL: R$ 684,046.17
Replacement justification: N/A
Reason presented by the auditor in the event of disagreement with the issuer's justification:
N/A
Name of the technical responsible:
Marco Aurélio de Castro e Melo
Services provisioning period: 01/01/2012
CPF: 078.020.188-46
Address: Av. Francisco Matarazzo, 1400, Torre Torino, Água Branca, São Paulo, SP, Brasil, CEP: 05001-903 Phone: 55 (11) 3674 3647 Fax: 55 (11) 3674 2000 e-mail: [email protected]
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2.3. Provide other information that the issuer deems relevant
The Company policy regarding the hiring of services not related to external audit with the independent
auditors is based on the principles that preserve their independence. These principles consist of the
following internationally accepted standards: (a) the auditor must not audit his/her own work; (b) the
auditor must not exercise a management role in his/her client; and (c) the auditor must not generate
conflict of interests to his/her clients.
The procedures adopted by the Company, according to item III, art. 2 of CVM Instruction No. 381/03:
Before the hiring of professional services other than those related to the external accounting audit,
the Company and its controlled companies adopt as formal procedure to consult the independent
auditors in order to ensure that the performance of such other services does not affect their
independence and objectiveness necessary to the performance of the independent audit services, as
well as obtain the recommendation from its audit Committee to the Board of Directors. In addition,
formal statements are required from the same auditors regarding their independence in the
performance of the non-audit services.
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3. SELECTED FINANCIAL INFORMATION
3.1. Financial information – Consolidated
2014 2013 2012
Net equity (in R$) 1,118,062,328.05 1,069,838,591.19 913,146,622.80
Total assets (in R$) 2,143,866,948.63 1.848,780,918.69 1.420,621,370.69
Net income (in R$) 1,772,447,553.98 1.611,793,430.37 1.413,976,039.17
Gross income (in R$) 1,173,288,717.25 1.070,498,169.87 957,156,479.75
Net income (in R$) 262,959,582,18 223,100,553.23 207,147,980.02
Number of shares, ex-treasury 162,034,061 163,103,707 161,629,945
Book value of the share (in R$) 6.900169 6.545661 5.614874
Net income per share (in R$) 1.622866 1.367845 1.273714
3.2. Non-accounting measures
The company uses and discloses as non-accounting measures the EBITDA and the EBITDA margin as
showed in the table below:
Consolidated (in thousand R$) 2014 2013 2012
EBITDA 436,587 402,078 378,048
Margin 24.6% 24.9% 26.7%
The conciliation between these non-accounting measures and the financial statements follows below:
Consolidated (in thousand R$) 2014 2013 2012
Net Income 262,798 223,100 207,148
Equity pickup 583 496 -
Income and social contribution taxes 97,460 93,267 81,049
Financial result (13,182) 2,657 8,623
EBIT (1) 347,659 319,520 296,820
Depreciation / Amortization 88,928 82,558 81,228
EBITDA (2) 436,587 402,078 378,048
Net Revenue 1,772,447 1,611,794 1,413,976
EBITDA Margin% (3) 24.6% 24.9% 26.7%
(1) The EBIT is the net profit for the period, plus income taxes financial expenses net of financial income.
(2) EBITDA (Earnings before Interests, Taxes, Depreciation and Amortization) is a non-accounting
measure prepared by the Company, calculated watching CVM Instruction No. 527 of October 4th, 2012
– That consists in the net profit for the period, plus taxes on income, financial expenses, net financial
income and depreciation and amortization.
(3) EBITDA margin consists of the EBITDA divided by the net revenues of the same period.
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The Company understands that the EBITDA and the EBITDA Margin are the measures that most
contribute to TOTVS comparability with other companies of the sector in Brazil and abroad, once the
companies of the sector may present different capital structures and different expense levels with
amortization, especially of intangibles coming from acquisitions.
In general, investments in research and development of the Company are not capitalized, being fully
reflected in the research and development expense line of the income statement, fully impacting the
EBITDA and EBITDA Margin of the Company.
3.3. Subsequent events to the last financial statements
Subsequent events correspond to events occurred during the period corresponding to the end
of fiscal year 2014 or December 31, 2014 and the date of approval of the issuance of financial
statements by the Company´s Board of Directors, which is January 26, 2015.
The Company reported in its financial statements for the year ended December 31, 2014,
available on the CVM website (www.cvm.gov.br) and on its own website, in the investor
relations section (ir.totvs.com):
On January 21, 2015, TOTVS Ventures, the venture capital unit of TOTVS S.A., announced the divestment of its non-controlling interest in ZeroPaper. This investment is booked as a financial asset at fair value through profit or loss in the financial statements of the Company.
It’s important to highlight that no adjustments were made in the consolidated financial
statements on behalf of this subsequent events.
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3.4. Policy for the profits destination
In R$ 2014 2013 2012
Rules for profit retention
The Company has no policy rules establishing additional to those
provided by law retention. According to Law 6,404/76, the Company can
retain five per cent (5%), at least, for the legal reserve, until it reaches
twenty per cent (20%) of the social capital. In the year during which the
legal reserve balance plus the amounts of the capital reserves exceeds
thirty per cent (30%) of the social capital, the destination of part of the
year profit to the legal reserve will not be mandatory. Moreover,
according to Law 6,404/76, the Company may retain the amount related
to the capital budget submitted by the management with the justification
earnings retention, including the sources and uses of capital, fixed or
current, and may last up to five (5) years, except in case of
implementation, for longer term, of investment project. The capital
budget may be approved by the General Meeting to resolve on the
Company´s financial position of the year and may be reviewed annually,
when its longer than one fiscal year.
Legal retention (5%) 13,147,979.11 11,125,638.30 10,357,199.00
Profit retention in the
capital budget
84,148,832.64 55,628,191.52 78,786,415.20
rules for dividends
distribution
The amount corresponding to twenty-five per cent (25%) of the net
adjusted yearly profit, as foreseen by Article 202 of the Corporations Law,
will be destined to the payment of the minimum necessary dividend.
Frequency of dividends
distribution
At the end of each social year. The Bylaws (art. 34) of the Company
contain a provision regarding the possibility to distribute dividends in
shorter periods.
occasional restrictions to
the distribution of
dividends imposed by law
or special regulation
applicable to the issued, as
well as agreements,
judicial, administrative or
arbitral decisions
Currently there are no restrictions regarding the distribution of dividends
imposed by law or special regulation or agreements applicable to the
Company.
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3.5. Distribution of dividends and retention of net profit
Social Year
(Holding – in Reais) 12/31/2014 12/31/2013 12/31/2012
Adjusted net profit 249.811.603,12 211,387,127.70 196,786,781.00
Dividend distributed regarding the adjusted net profit 66,315087 73.684211 59.963563
Return rate regarding the issuer’s net equity 14,816954 14.589339 12.922399
Total dividend distributed 165.662.770,48 155,758,936.18 118,000,365.80
Net profit retained 97.296.800,63 66,753,829.82 89,143,614.20
Retention approval date 03/30/2015 03/14/2014 03/05/2013
Year ended 12/31/2014 Year ended 12/31/13 Year ended 12/31/12
Net profit retained (R$) Amount Payment date Amount Payment date Amount Payment date
Interest on capital
Ordinary shares
21,769,188.5619,525,634.18
08/20/2014 01/14/2015
21,507,778.63 18,337,114.94
08/28/13 01/15/14
40,199,953,40 01/17/13
Mandatory dividend
Ordinary shares 67,958,593.85 04/15/2015 52,846,781.93 04/10/14 49,196,695.25 04/10/13
Other Dividends
Ordinary shares 56,409,353.89 04/15/2015 63,067,260.68 04/10/14 28,603,717.15 04/10/13
3.6. Statement of dividends on the retained profits or reserves accounts
There were no dividends stated on the retained profits or reserves account in the social years of 2014,
2013 and 2012.
3.7. Debt level
(Consolidated - in R$) Social year 12/31/2014
Total amount of the debt of any nature 1,025,804,620.55
Gearing Ratio 0.91748429
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3.8. Obligations according to the nature and maturity schedule
Social year – 12/31/2014 (in R$)
Type of Debt Within 1 year 1 year to 3 years 3 year to 5 years Over 5 years Total
Secured Guarantee 38,535,162.61 62,840,064.49 4,474,156.14 0.00 105,849,383.24
Floating Guarantee 33,834,164.88 62,928,694.30 16,091,000.00 0.00 112,853,859.18
Unsecured Guarantee 315,738,874.85 378,656,083.20 112,706,420.08 0.00 807,101,378.13
Total 388,108,202.34 504,424,841.99 133,271,576.22 0.00 1,025,804,620.55
Notes: i) loans and financing with sureties were classified as unsecured guarantee; ii) the liabilities for
investment acquisitions that are secured by investments in "Marketable Securities" were classified as
Secured Guarantee; iii) the debentures were classified as floating guaranties, and iv) other obligations
reflected in the balance sheet were classified as unsecured guarantee.
The information provided in this item refers to the consolidated financial statements as at 31/12/2014.
3.9. Other relevant information
Net Income per share, referred in the item 3.1, is a result of the division of item "Net Income” by the
item "Number of shares, ex-treasury" presented at the same item.
The adjusted net income for the base payment of dividends presented in the item 3.5 consists of the
net income of the parent company less 5%, with refers to the legal reserve.
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4. RISK FACTORS
4.1. Risk factors description
a) Risks Related to the Company
The revenue depends substantially on the license, implementation and maintenance revenue
generated by enterprise management software products and related services
The revenue depends substantially on the Company´s enterprise management software and related
services, and more specifically, on the fees charged for its license and implementation and
maintenance services, which represented almost all of the revenues. If competition or other market
conditions force the Company to substantially lower its prices, if the demand for enterprise computer
software and related services in Brazil decrease, or if the Company fails to sell new licenses and
services, its revenue might be lower than its expectations which could, as a result, materially and
adversely affect the operating results, cash flows and liquidity.
TOTVS may be unable to compete effectively in the highly competitive software industry
TOTVS competes with a wide range of companies that are active in the global, regional and local
software and professional services market, companies engaged in the development of open source
software, which may provide free of charge, and companies engaged in consulting and outsourcing
activities. Some of its potential or current competitors are involved in a wider range of businesses, and
some of them have larger installed customer bases for their products and services, or have significantly
greater financial, technical, marketing and other resources than TOTVS has, enhancing their ability to
compete with the Company. Also, the Company could lose market share if the companies with whom
it competes introduce or acquire new products that compete with the Company´s or add new
functionalities that do the same. In addition, as the enterprise management software market for large
businesses becomes increasingly saturated, some of its competitors, such as SAP, Oracle and
Microsoft, have indicated their intent to more actively pursue the market for enterprise management
software for small- and medium-sized businesses, which could have a material adverse effect on the
Company´s business, results of operations, financial conditions and cash flows.
The Company´s success depends on its ability to develop new products and services, integrate
acquired products and services and enhance its existing products and services
The enterprise management software market, which represents the main market in terms of revenue
in which the TOTVS competes, is characterized by constant technological advances, evolving standards
in computer hardware, software and communications infrastructure, changing and increasingly
complex customer needs and frequent product improvements and enhancements. If TOTVS fails to
anticipate these developments to enhance and improve its products and services in a timely manner
or to position or price its products and services to meet market demand, the customers may not buy
new software licenses and services from TOTVS, or it may not be able to compete effectively for new
customers. In addition, standards for network protocols, as well as other standards adopted by the
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industry or for the Internet, are rapidly evolving. Therefore, TOTVS cannot guarantee that the
standards on which it has developed its current products or choose to develop new products will allow
the Company to continue competing effectively.
TOTVS growth depends on the continued service of key members of its senior management team
and on its ability to continue to attract and retain qualified individuals
The future success of the Company depends in large part on the continued service of key members of
its senior management team. The loss of any key member of its senior management team could
materially affect TOTVS’s business and operational results. TOTVS also relies on the continued service
of qualified and key employees. There is substantial and continuous competition in the software
industry for highly skilled sales, technical and other personnel, as the Company competes in a global
market for these services. As a result, TOTVS may have to offer higher compensation to attract and
retain qualified employees, which may represent additional costs that may not be offset by improved
productivity or higher prices.
Competitors include vendors of market business applications (such as ERP, CRM and BI),
collaboration products and business intelligence products, and those engaged in open source
software initiatives, in which competitors may provide software and intellectual property free and
companies engaged in consulting and outsourcing activities
The lower entry barriers, the recent trend towards outsourcing activities to external providers,
including new distribution methods (e.g. Software as a Service) and opportunities presented by the
Internet and e- commerce, could result in increased competition for the Company´s products through
the entry of systems integrators, consulting firms, telecommunications firms, computer hardware
vendors and other IT service providers.
In addition, TOTVS believes that competition will increase as a result of consolidations among current
and potential customers of its products, as well as among its competitors, or as a result of strategic
alliances between its competitors and other companies. In response to competition, consolidation
within the industries in which we are active and general adverse economic conditions, TOTVS has been
required in the past, and may be required in the future, to discuss discounts for its products and
services or even modify its billing practices. These developments have affected and may continue to
affect its business and results of operations.
TOTVS may experience significant errors, delays or security flaws in its products and services
Despite testing prior to their release, software products frequently contain errors or security flaws,
especially when first introduced or when new versions are released. Errors in its software products
could affect their ability to work with other hardware or software products, could delay the
development or release of new products or new versions of products and could adversely affect
market acceptance of its products. If the Company experiences errors or delays in releasing new
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products or new versions of products, its financial condition, cash flow and results of operations could
be materially adversely affected. Software product errors and security flaws in its products or services
could expose TOTVS to product liability, performance and/or warranty claims and could harm TOTVS´
reputation, which could affect its future sales of products and services. In addition, addressing
problems and claims associated with actual or alleged errors or security flaws can require significant
time and resources, which could divert resources and the attention of key employees from other
operations, result in unexpected expenses and have a material adverse effect on its business, financial
position and results of operations.
TOTVS may fail to achieve its financial forecasts or make inadequate decisions due to inaccurate
sales forecasts or other factors
The revenue, and particularly the new software license revenue, is difficult to forecast. TOTVS uses a
“pipeline” system, a common industry practice, to forecast sales and trends in its business. It sales
team analyzes the status of all its product and service sales and estimates when a customer is likely to
make a purchase decision and the amount of the sale. These estimates are aggregated periodically to
generate a sales pipeline and may prove to be inaccurate during a particular quarter or over a longer
period, in part because the pipeline “conversion rate” (the conversion of projections into effective
sales) can be difficult to estimate. A variation in the conversion rate of the pipeline itself can make
TOTVS to plan its budget incorrectly thereby adversely affecting its business or results of operations.
In particular, a reduction in demand for information technology or a de-acceleration of the Brazilian or
Latin American economy could reduce the conversion rate in certain periods as purchasing decisions
are delayed, reduced in amount or canceled. The conversion rate can also be affected by the tendency
of some of its customers to wait until the end of each month, quarter and fiscal period in the hope of
obtaining more favorable business terms. Because a substantial portion of its software license revenue
contracts is completed in the latter part of a quarter, and its cost structure is largely fixed in the short
term, revenue shortfalls tend to have a disproportionately negative impact on its profitability. Delays
in even a small number of large software license transactions can cause its quarterly results to fall
significantly short of its predictions.
IT security measures may be breached or compromised and it may sustain unplanned IT system
outages
TOTVS relies on encryption, authentication technology and firewalls to provide security for confidential
information transmitted to and by the Company over the Internet. Anyone who circumvent security
measures of the Company and/or its suppliers could misappropriate proprietary information from the
Company and/or its customers, or cause interruptions in services or operations of the Company and
its customers. The Internet is a public network, and data is sent over this network from many sources.
In the past, computer viruses and software programs that disable or impair computers have spread
rapidly across the Internet. Computer viruses could be introduced into its systems or those of its
customers or suppliers, which could disrupt the Company´s network or make it inaccessible to
customers or suppliers. Security measures may be inadequate to prevent security breaches, and its
business would be harmed if TOTVS does not prevent them. In addition, TOTVS may be required to
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expend significant capital and other resources to protect against the threat of security breaches and
to alleviate problems caused by breaches as well as by any unplanned unavailability of the IT systems
of the Company or its clients, generally for other reasons, which could adversely affect it business or
operational results.
Acquisitions present many risks, and TOTVS may not realize the financial and strategic goals that
were contemplated at the time of any transaction
The acquisition of assets is an important element of the Company´s corporate strategy, and TOTVS
expects to continue to acquire companies, products, services and technologies. Risks we may
encounter due to an acquisition include the following: (i) the acquisition may not contribute to its
business strategy, or we may pay more than its real value; (ii) it may have difficulty assimilating the
acquired technologies or products with its product lines thereby failing to maintain uniform standards,
controls, procedures and policies; (iii) its relationship with current and new employees, clients and
distributors could be impaired; (iv) the due diligence process may fail to identify technical problems,
such as issues with the acquired company’s product quality or product structure; (v) it may face
contingencies related to product liability, intellectual property, financial disclosures and accounting
practices or internal controls; (vi) the acquisition may result in litigation from terminated employees
or third parties; (vii) the acquisition may divert its management’s attention from existing operations;
and (viii) it may be unable to obtain timely authorizations from governmental authorities under
competition and antitrust laws.
Additionally, the process of integrating the acquired operations may not result in expected benefits,
which could adversely affect the Company's business. During this integration process, the Company
may face several risks, including the following:
difficulties of integration, such as (i) higher costs than anticipated to continue the expansion of distribution channels with quality and capillarity to serve the market, (ii) inability to manage more employees, geographically dispersed, and (iii) inability to effectively create and implement standards, controls, procedures and uniform policies;
potential inability to coordinate and integrate sales efforts and development of software to effectively communicate the possibilities of selling combined products, so cross-sell products and successfully manage the combined sales of products as well as the integration of development activities carried out by acquired companies, failing to maximize the expected synergies.
Moreover, there may be other unknown liabilities associated with the acquisition and integration of
acquired companies by the Company.
These factors could have a material adverse effect on the Company´s business, results of operations,
financial position or cash flows, especially in the case of acquisition of larger companies or acquisition
of a bigger number of companies. As the Company issue shares related to future acquisitions, existing
shareholders may have their holdings diluted, and earnings per share may decline.
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TOTVS may be subject to unfavorable results in legal or administrative suits that could adversely
affect its results and financial position
The Company is a party to legal and administrative suits. Unfavorable rulings on these suits may
negatively affect the results and financial position of the Company, if the guarantees contracted and
provisions constituted by the Company are not enough to fully satisfy the total amount that the
Company may be summoned to honor.
The Company is subject to risk-based processes allegations of breach of copyrights of third party
intellectual property
The Company is subject to this kind of risk due, in part, to the recent increase in number of patents
and copyrights registered by tech companies. There may be technological improvements, growth and
development of new solutions new product made by the Company with the objective of meeting
demand market with standards already developed and registered by other companies in the sector
information technology. The Company verifies the picture before development of their solutions in
order to reduce their exposure to lawsuits based on allegations of copyright infringement of
intellectual property.
b) Risks related to the Company control
The Company does not have one controlling shareholder or controlling group holding more than 50%
of voting capital, which could leave TOTVS susceptible to alliances among shareholders, conflicts
between shareholders and other events arising from the absence of a controlling shareholder or
controlling group
The Company does not have a controlling shareholder or group holding an absolute majority of its
voting capital. There is no established practice in Brazil of a public company without a controlling
shareholder.
In the event that a controlling group should emerge, TOTVS could suffer sudden and unexpected
changes in its corporate policies and strategies, including through methods such as the substitution of
its board members or executive officers. Moreover, it is possible that we will become more vulnerable
to hostile takeover attempts, and to disruptions that may be associated with these attempts. It may
also be possible that TOTVS becomes a target of attacks by investors attempting to evade the
provisions of its by-laws that require a shareholder who acquires more than 20% of its shares to
conduct a tender offer for all shares. The absence of a controlling shareholder or group holding more
that 50% of the voting capital could make certain decision-making processes difficult, since the
minimum quorum required by law for certain deliberations may not be achieved. In the event that
TOTVS does not have a controlling shareholder holding an absolute majority of voting capital, the
Company and its minority shareholders may not enjoy the same protection given by the Brazilian
corporation law against abuses by other shareholders, consequently we could have difficulty in
obtaining reparations for damages caused. Any sudden or unexpected change in the management
team, in the company policy or strategic orientation, an attempt at acquisition of control or any dispute
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among shareholders concerning their respective rights may adversely affect the business and results
of operations.
c) Risks related to shareholders
The market value of the securities issued by Brazilian companies is influenced by the perception of
risk in Brazil and other emerging economies, which may have a negative effect on the market price
of shares and may restrict the access to international capital markets
Economic and market conditions in other emerging market countries, especially those in Latin America,
may influence the market for securities issued by Brazilian companies. Although economic conditions
in such countries may differ significantly from economic conditions in Brazil, investors’ reactions to
developments in these other countries may have an adverse effect on the market value of securities
of Brazilian issuers.
Due to economic problems, investors may come to see investments in emerging markets with
heightened caution. There is no certainty that the international capital markets will remain open to
Brazilian companies or that the financing costs of these markets will be advantageous for TOTVS. Crises
in other emerging market countries could cool the enthusiasm of investors for securities of Brazilian
issuers, including TOTVS, which could adversely affect the market price of the Company shares.
d) Risks related to Company’s subsidiaries and affiliates
All risk factors discussed under item 4.1 also apply to subsidiaries and affiliated companies.
e) Risks related to Company’s sales channels
The restructuring of indirect sales channel could affect future operating results
The Company´s indirect sales channel network consists primarily of franchises, authorized resellers
and business agents. Relationships with its indirect sales partners, especially the franchises, represent
an important element of its marketing and sales efforts. The financial results could be adversely
affected if the contracts with indirect sales partners are terminated, if the relationship with these sales
partners were to deteriorate, or if the financial condition of these sales partners were to weaken.
TOTVS cannot provide assurance that it will be successful in maintaining, expanding or developing the
relationship with these sales partners. If TOTVS is not successful, it may lose sales opportunities,
customers and market share.
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f) Risks related to Company’s suppliers
The solutions from the acquired companies depend on technology licensed from third parties to the
Company, and the loss of this technology could delay the launch of products or could force the
Company to pay higher licensing fees
The Company licenses from third parties: language and/or that technology platform for programming
software from acquired companies. The Company can adapt these solutions to its own technology
platform. However, there is no guarantee that the Company will be able to replace the current
language and/or platform used by property/non-property language in a timely manner or at any time.
Moreover, as TOTVS is using language and/or third party platform, there is no guarantee that such
licenses will not be rescinded. In addition, the Company may not be able to renegotiate with third
parties the acceptable license sales conditions to reflect changes in the Company's collection models.
Changes in third party licenses used by the Company could lead to a significant increase in the cost of
licensing, or could make that such software to become inoperable, or that its performance reduces in
a relevant way, resulting in the need for the Company incurring additional research and development
to ensure continuity of its software performance.
g) Risks related to clients
Clients of TOTVS products and services may also be impacted if errors, delays or failures (described in
item a).
If the customers lose confidence in the security of data on the Internet, revenues could be adversely
affected
Maintaining the security of computers and computer networks in the software sector is critical for the
Company´s customers. Attempts by experienced computer programmers, or hackers, to gain
unauthorized access to networks or web sites to misappropriate confidential information are currently
an industry-wide phenomenon that affects computers and networks across all platforms. TOTVS, in
the development of new products and in the improving process of existing products, seeks to create
features designed to optimize the security of its products (or the Internet in general) and could lead
some customers to seek to reduce or delay future purchases or to purchase competitive products
which are not Internet based applications. Customers may also allocate an increasing portion of their
capital expenditures to the protection of their computer networks from security breaches, which could
delay their investment in new technologies.
Any of these actions by customers could adversely affect the business and results of operations.
h) Risks related to Brazil
The Brazilian government has exercised, and continues to exercise, significant influence over the
Brazilian economy. This involvement, as well as Brazilian political and economic conditions, could
adversely affect the Company´s businesses and the market price of its shares
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The Brazilian government frequently intervenes in the Brazilian economy and occasionally makes
drastic changes in policy. The government’s actions to control inflation and implement macroeconomic
policies have often involved wage and price controls, currency devaluations, capital controls, and limits
on imports, among other things. The business, financial condition, revenue, results of operations,
prospects and the market price of the shares may be adversely affected by changes in government
policies or regulations, or other factors such as:
exchange rates;
inflation rates;
monetary policy;
liquidity of domestic capital and lending markets;
tax policies;
the overall demand for enterprise computer software and services;
conditions in the high technology, telecommunications, financial services and manufacturing industry sectors;
political instability; and
other political, diplomatic, social and economic developments in or affecting Brazil.
Inflation and efforts by the Brazilian government to combat inflation may contribute significantly to
economic uncertainty in Brazil
Brazil has in the past experienced extremely high rates of inflation. Inflation and certain government
actions taken to combat inflation have in the past had significant negative effects on the Brazilian
economy. Measures to curb inflation, and speculation about possible future governmental measures,
have contributed to economic uncertainty in Brazil and heightened volatility in the Brazilian securities
markets.
Future measures taken by the Brazilian government, including intervention in the foreign exchange
market and actions to adjust or fix the value of the Real may trigger increases in inflation and
consequently have adverse economic impacts on the business. If Brazil experiences high inflation in
the future, TOTVS may not be able to adjust the fees that it charges its customers to offset the effects
of inflation on its cost structure. Inflationary pressures may also hinder its ability to access foreign
financial markets or lead to government policies to combat inflation that could harm its business or
adversely affect the market price of its shares.
Changes in tax legislation may affect the profitability of the Company´s business
The Brazilian government can promote changes in tax legislation to which the Company is subjected;
this may raise the level of taxation over Company’s operations, both in Brazil and abroad. TOTVS use
of legal mechanisms granting tax incentives for the development of its activities and changes in relation
to these mechanisms may affect the profitability of the Company's business and, consequently, the
price of its shares.
i) risks related to the regulation of the sector in which the Company operates
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TOTVS may not be able to protect its intellectual property, which may reduce the value of its brands
and products
TOTVS relies on a combination of intellectual property protections such as copyright, patent, trade
secrets, trademark laws, confidentiality procedures and contractual commitments to protect its
confidential information. Despite its efforts, there can be no assurance that these protections will be
adequate. In addition, it may be possible for third parties to copy or reverse engineer portions of its
products or otherwise obtain and use its intellectual property, which could adversely affect its
competitive position and reduce the value of its brands and products.
j) risks related to foreign countries where the Company operates
TOTVS might face difficulties regarding the expansion of TOTVS’ products in international markets
Currently, TOTVS has operations in other markets beyond Brazil, and its strategy further expansion in
these markets. It might face the following difficulties, among others, related to the foreign markets
where the Company currently operates or will operate in the future: (i) unexpected regulatory
changes; (ii) inability to attract personnel and to manage foreign operations; (iii) changes in tax laws;
(iv) changes in commercial and investment policies and regulations; (v) difficulties in trademark and
software registration and protection; and (vi) cultural and language barriers. If any or all of these risks
occur and TOTVS is unable to overcome such difficulties, it might not be able to implement our strategy
to continue expanding internationally.
4.2. Comments on expectations of changes in Risk Factors
The Company believes that there is no expectation of significant increase or decrease of its exposure
to the risk factors mentioned in the item 4.1.
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4.3. Comments on expectations of changes in Risk Factors
Provision for obligations relating to legal proceedings
The Company and its subsidiaries, during the regular course of their operations, are parties in several
legal proceedings related to tax, social security, labor and civil matters. Provision for contingencies
have been set up by management, supported by its legal counsel and analysis of pending judicial
proceedings, in an amount considered sufficient to cover probable losses, as shown below:
Tax
The Company is defendant in tax matters that focus on the discussion of the municipality, due to
ISSQN, and social security nature. On December 31, 2014, the provision recorded for these claims
is R$78 thousand (R$645 thousand in 2013).
Civil
The Company is a defendant in actions for damages filed by customers for contract termination,
with additional compensation for damages as well as compensation claims filed by business agents,
related to contract termination with additional billing and insurance claims. On December 31, 2014,
the provision for these claims amounts to R$2,903 thousand (R$1,114 thousand in 2013).
Labor
The Company recorded a provision related to lawsuits filed by former employees and third-party
companies, where alleged reduction of commissions on sales and services, overtime and wages.
The amount provided is R$9,537 thousand on December 31, 2014 (R$5,546 thousand in 2013).
(R$ Thousand) Provision
for Contingencies
Parent Company
12/31/2014 12/31/2013 12/31/2014 12/31/2013
Tax 78 645 78 645
Civil 1,239 992 2,903 1,114
Labor 9,537 5,546 9,537 5,546
10,854 7,183 12,518 10,854
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Other processes in progress (loss classification: "possible")
The Company and its subsidiaries are involved in other actions which risk loss, according to legal
counsels and the Company´s management, and for which no provision has been set up as follows:
Parent Consolidated
Type 12/31/2014 12/31/2013 12/31/2014 12/31/2013
Social security 19,916 18,219 19,916 18,277
Tax 20,623 19,780 32,226 33,658
Civil 147,826 122,054 149,076 124,650
Labor 25,534 20,648 29,289 23,502
213,899 180,701 230,507 200,087
The Company perceives as relevant only lawsuits whose values involved may affect substantially its
assets or its subsidiaries, as it is not involved in such lawsuits that individually could otherwise
influence the investment decision of its shareholders. Following are the lawsuits that the Company
deems relevant:
Social security
Case: 2002.72.01.004009-5
a. Court Court of Tax Foreclosure of Joinville – SC
b. Court Level Trial Court
c. Date filed 04/21/2010
d. Parties to the case Plaintiff: National Social Security Institute (INSS); Defendant: TOTVS S.A.
e. Amounts, assets or rights involved (R$ thousand)
R$9,767 (restated as of Dec/31/2014)
f. Main facts
Tax Foreclosure action filed by the National Social Security Institute (INSS) seeking the payment of social contributions levied on the compensation paid to third-party service providers. The action is currently awaiting a decision by the court.
g. Chance of loss Possible
h. Impact in case of loss of suit In the event of the total loss of the suit, the Company must disburse the amount involved, to be ascertained upon liquidation of the award.
i. Amount provisioned (R$ thousand)
None
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Case: Notices 37.162.967-5 / 37.162.968-3 / 37.162.969-1
a. Court Federal Revenue Service
b. Court Level Lower Administrative Instance
c. Date filed 07/29/2010
d. Parties to the case Plaintiff: Federal Revenue Service; Defendant: TOTVS S.A.
e. Amounts, assets or rights involved (R$ thousand)
R$7,316 (restated as of Dec/31/2014)
f. Main facts
Tax assessments drawn up in replacement of the Tax Delinquency Notice No. 35136711-0. Purpose: a) potential determination of independent contractor and legal entities as insured employees; b) joint liability for services rendered by temporary employment agency; and c) Employees' Meal Program (Programa de Alimentação do Trabalhador – PAT). Pending judgment of the defense already submitted by the Company.
g. Chance of loss Possible
h. Impact in case of loss of suit In the event of the total loss of the suit, the Company must disburse the amount.
i. Amount provisioned (R$ thousand)
None
Taxes:
Processo: 16561.000112/2008-19
a. Court Federal Revenue Service - São Paulo
b. Court Level Lower Administrative Instance
c. Date filed 10/31/2008
d. Parties to the case Plaintiff: Federal Revenue Service; Defendant: TOTVS S.A.
e. Amounts, assets or rights involved (R$ thousand)
R$5,124 (restated as of Dec/31/2014)
f. Main facts Infraction notice issued due to the non-inclusion of part of the profits obtained abroad as taxable net income. Awaiting defense judgment.
g. Chance of loss Possible
h. Impact in case of loss of suit In the event of the total loss, the Company must disburse the amount.
i. Amount provisioned (R$ thousand)
None
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Processo: 756/2005
a. Court Municipal Treasury of São Paulo – SP (Fazenda Pública Municipal de São Paulo – SP)
b. Court Level Lower Administrative Instance
c. Date filed 04/17/2009
d. Parties to the case Plaintiff: City Hall of São Paulo; Defendant: Logocenter S.A. (merged with TOTVS S.A.)
e. Amounts, assets or rights involved (R$ thousand)
R$6,336 (restated as of Dec/31/2014)
f. Main facts
Tax foreclosure related to the Debt Certificate No. 500176-5 / 06.05, arising from the collection of Services Tax - ISS. Foreclosure secured through a letter of guarantee. Pending judgment of the stay of execution.
g. Chance of loss Possible
h. Impact in case of loss of suit In the event of the total loss, TOTVS must disburse the amount. i. Amount provisioned (R$ thousand)
None
Processo: 4.01.09.011986-32
a. Court Federal Revenue Service
b. Court Level Lower Administrative Instance
c. Date filed 05/27/2013
d. Parties to the case Plaintiff: CAT Goiás; Defendant: PC Sistemas, as contesting 3rd interested
e. Amounts, assets or rights involved (R$ thousand)
R$11,583 (restated as of Dec/31/2014)
f. Main facts
Defense submitted by PC Sistemas, a company acquired by TOTVS on 01/24/2013, since the Tax Authority of the State of Goiás held it jointly liable for collection of unpaid Value-Added Tax on Sales and Services - ICMS.
g. Chance of loss Possible
h. Impact in case of loss of suit In the event of the total loss, TOTVS must disburse the amount.
i. Amount provisioned (R$ thousand)
None
Case: Notices 4.01.09003862.65
a. Court Federal Revenue Service - São Paulo
b. Court Level Lower Administrative Instance
c. Date filed 05/27/2013
d. Parties to the case Plaintiff: CAT Goiás; Defendant: PC Sistemas, as contesting 3rd interested
e. Amounts, assets or rights involved (R$ thousand)
R$2,671 (restated as of Dec/31/2014)
f. Main facts
Refutation presented by PC Sistemas, a company acquired by TOTVS 01/24/2013, according to the Department of Revenue to have the State of Goiás you alleged several liability ICMS tax not collected
g. Chance of loss Possible
h. Impact in case of loss of suit In the event of the total loss, TOTVS must disburse the amount. i. Amount provisioned (R$ thousand)
None
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Case: Notices 4.01.12.026919.15
a. Court Federal Revenue Service
b. Court Level Administrative Instance
c. Date filed 05/27/2013
d. Parties to the case Plaintiff: CAT Goiás; Defendant: PC Sistemas, as contesting 3rd interested
e. Amounts, assets or rights involved (R$ thousand)
R$3,340 (restated as of Dec/31/2014)
f. Main facts
Refutation presented by PC Systems, a company acquired by TOTVS 01/24/2013, according to the Department of Revenue to have the State of Goiás you alleged several liability ICMS tax not collected
g. Chance of loss Remote
h. Impact in case of loss of suit In the event of the total loss, TOTVS must disburse the amount. i. Amount provisioned (R$ thousand)
None
Case: Notices 0002506-96.2012.5.03.0008
a. Court Labor Court
b. Court Level Judicial Body
c. Date filed 12/19/2012
d. Parties to the case Plaintiff: SINDADOS - MG; Defendant: TOTVS S.A.
e. Amounts, assets or rights involved (R$ thousand)
R$3,384 (restated as of Dec/31/2014)
f. Main facts
Claim filed by the Union questioning labor routines. Agreement between TOTVS and the Union under negotiation, with payment estimated for April 2015.
g. Chance of loss Possible
h. Impact in case of loss of suit In the event of the total loss, TOTVS must disburse the amount.
i. Amount provisioned (R$ thousand)
R$3,384
Civil
The civil lawsuits classified as possible losses mainly relate to actions filed by customers alleging
certain problems in the provision of services to customers, application default increment, grace
period to canceled contracts and mischarges. The value of these shares amounted to R$149,075
thousand on December 31, 2014 (R$124,650 thousand on December 31, 2013), with no individually
material lawsuit.
Labor
The labor lawsuits classified as possible losses mainly relate to actions filed by former employees
and third party service providers, claiming for employment ties and other labor credits. The value
of these shares was R$29,289 thousand ON December 31, 2014 (R$23,502 thousand on 2013), with
no individually material lawsuit.
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4.4. Non-confidential legal, administrative or arbitration proceeding whose adverse party are managers, former managers, controlling shareholders, former controlling shareholders or investors
The Company is not involved in non-confidential judicial, administrative or arbitral proceedings in
which parties are managers, former managers, former controlling shareholders or investors.
4.5. Relevant confidential proceedings
The Company is not involved in processes that are relevant and confidential.
4.6. Repetitive or related non-confidential legal, administrative or arbitration proceeding taken jointly
Not applicable, since the Company and its controlling companies are not involved in judicial,
administrative or arbitral correlated proceedings based on similar facts and legal causes that are
relevant together.
4.7. Other relevant contingencies
There are no other relevant contingencies to the best knowledge of the Company that have not been
covered in the prior items of this form.
4.8. Rules of the origin country and of the country in which the securities are under custody
Not applicable, as the Company is Brazilian.
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5. MARKET RISK
5.1. Description of the main market risks
The main market risks to which the Company is exposed are associated to inflation, to interest rate and exchange rate observed in the macroeconomic scenario. Inflation The main costs and expenses of the Company are regularly adjusted. An example of expenditures adjusted based on inflation rates previously set are rent and communications expenses. The personnel expenses (salaries, duties and benefits), which represented approximately 46,3% of the total operational costs and expenses in the year of 2014, are part of regional collective bargaining, which take the inflation rate as a reference. In the other hand, the agreements regarding the recurrent maintenance revenues, which represented 50.1% of 2014 total net revenues (which covered approximately 62,3% of operational costs and expenses), are also annually updated taking the inflation rate as a reference. Historically, the Company updates its price list of software license fees and hourly rates based on inflation rates, however these are non-recurring revenues and there is no guarantee that the Company will continue to pass on the inflationary impacts on these revenue lines in the future. The Company estimates that inflation in the short term can cause significant effects on its operations. However, these effects are mitigated in the medium / long term, since the adjustment of its costs and operating expenses are materially attenuated by adjustments on its recurring and non-recurring revenues. Interest rate
The variation of the interest rates may influence the results of the Company to the extent in which an occasional increase in this price may generate a retraction of the investments performed by the market. However, historically, in the periods of high SELIC rate (basic interest rate used as reference by the monetary policy), the Company did register a growth in sales.
The financial investments follow the investment policies of the Company, which determine that the investments concentrate in securities substantially remunerated base on variation percentages of the Interbank Deposit Certificate (IDC). With the purpose of checking the sensitivity of the index in the financial investments to which the Company was exposed on the base date of December 31, 2014, 3 different scenarios were defined. Based on the projections disclosed by financial institutions, the Interest rate projection was obtained for 2015, which average defined as the probable scenario and, from this, other scenarios were simulated adding variations of 25% and 50%. For each scenario, the “gross financial revenue” was calculated, not taking into account the incidence of duties in the investments income. The base date used of the portfolio was December 31, 2014, projecting one year and verifying the sensitivity of the IDC with each scenario, as follows:
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Operation Risk Probable
scenario (I) Scenario II Scenario III
Financial investments (R$
thousand)
Interbank Deposit
Certificate (CDI) 12.50% 9.38% 6.25%
Position on 12.31.2014 79,542 59,688 39,771
R$636,337* (thousand) * Balances as of December 31, 2014
The financings taken by the Company mainly arise from BNDES financing lines and Debentures adjusted by TJLP. With the purpose of checking the sensitivity of the index in the financial investments to which the Company was exposed on the base date of December 31, 2014, 3 different scenarios were defined. Based on the TJLP and IPCA values in effect on December 31, 2014, the probable scenario was defined for the year of 2015 and from this, variations of 25% and 50% were estimated. For each scenario, the gross financial expense was calculated not taking into account the incidence of duties and the maturities flow of each agreement. The base date used for the financings and debentures was December 31, 2014 projecting the rates for one year and checking their sensitivity in each scenario, as follows:
Operation Risk Probable
scenario (I) Scenario II Scenario III Financial investments - BNDES (R$ thousand) 26,537 30,156 36,187
Rate subject to variation TJLP 5.50% 6.88% 8,25% R$482,490* (thousand) Debentures (R$ thousand) 10,498 11,602 12,698
Rate/index subject to variations R$112,854* (thousand)
IPCA 6.59% 8.24% 9.89% TJLP 5.50% 6.88% 8,25%
* Balances as of December 31t, 2014
Exchange rate
The Company has operations in Brazil and abroad, being therefore, exposed to the exchange variation. In addition, a share of TOTVS’ costs and expenses, even if incurred in Brazil, is influenced by the exchange rate (examples: international travels and, to a lower extent, national).
The exchange exposure associated to the operations abroad is low, once the international operations represent, all together, approximately 1.9% of the total income of the Company in the year of 2014. The Company evaluates that the exchange variation does not produce relevant effects on its operations, once its costs structure does not contain significantly, elements that prices depend on the foreign currencies rates.
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5.2. Description of the market risks management policy
a) risks against which protection is sought The operational result of the Company may be affected by the local economic changes, mainly regarding the short and long-term interest rates, government policies to the sector, inflation rate and exchange policy, as discussed in item 5.1.
b) equity protection strategy (hedge) Historically, the risks presented previously (item 5.2a) have their effect attenuated for the Company because it has a disseminated clients base, both in terms of income, as in sectors of activities in which these clients act. As mentioned in item 5.1, the Company understands that the inflation impact over its result is reduced by the annual readjustment of the maintenance agreements and by the periodical readjustments of the licensing and implementation services fees. Regarding the interest rate, the Company tries to monitor the net indebtedness through the comparison of the operational cash generation and the total debt, as showed in item 3.7 of this form. The Company seeks, in its international operations, to size the structures and costs compatible with the respective income generations, in order to avoid the increase in the Company’s exposure to variations on the exchange rates.
c) instruments used for equity protection (hedge) As no relevant exposure to the market risks listed in item 5.2a has been identified, the Company does not use, at the moment, any active hedge instrument, in addition to the "natural" hedges that consist of: incomes readjustment based on the prices index (protection against inflation); monitoring of the net indebtedness (protection against interest rate) and cash flow of the individual and consolidated operations; and international operations with income and costs especially incurred in the same currencies (protection against exchange rates).
d) parameters used to manage these risks The main parameters are the representatively of the maintenance incomes regarding the total income, the behavior of the recurring revenue, the client satisfaction level, the monitoring of the net debt level (item 3.7), debt maturity schedule (item 3.8) and the net equity denominated in foreign currency regarding the total net equity of the Company.
e) financial instruments with miscellaneous purposes for equity protection (hedge) In the period comprised by this Reference Form, the Company did not conduct operations of this nature.
f) organizational structure for risks control and management The Board of Directors, advised by the Audit Committee, as shown in item 12.1, monitors the quality and effectiveness of the risk management system.
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It is important to mention that there is an Audit, Risk, Compliance and Internal Controls board, which monitors the process of strategic risk management within the Company, reporting about this activity to the Audit Committee.
g) adjustment of the operational structure and internal controls to check the effectiveness of the
policy adopted The Company understands that its current structure is appropriate, in view of the reduced exposure that is subject to the risks listed in item 5.1.
5.3. Significant changes in the main market risks
Until the delivery of this form, the Company did not identify significant changes in the main market
risks listed in item 5.1.
5.4. Other relevant information
The Company did not identify other relevant information regarding this item.
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6. COMPANY HISTORY
6.1. / 6.2 / 6.4. Constitution, duration and registration date of the Company at CVM
Issuer’s constitution date 12/13/1983
Issuer’s constitution form Public Company
Constitution country Brazil
Duration Undetermined
CVM Registration date 03/07/2006
6.3. Brief history
TOTVS had its origin from a services bureau, created in 1969 by Mr. Ernesto Mário Haberkorn, called
SIGA - Sistemas Integrados de Gerência Automática Ltda. The bureau provided general services in the
computers area and developed a system that allowed the centralized corporate management, which
main purpose was the automation of administrative processes. In 1983, with the appearance of the
microcomputers, the Company was founded, under the legal name of Microsiga Software S.A., joining
the partners Mr. Haberkorn and Laércio Cosentino, the current CEO of TOTVS. The Company had the
purpose of elaborating software for these personal computers and, later, started to act in the
integrated corporate management software market, accessible to medium and small size companies.
From the 90’s, several strategic decisions were taken to structure TOTVS to the sustained growth, with
the creation of the environment necessary to undertake the market leadership that the Company
would accomplish at the end of the decade. A few decisions and events that deserve highlight are:
• 1990: opening of the first franchise;
• 1996: certification of Microsiga Software S.A. in the ISO 9001 standards, being the first Brazilian
software company to obtain such certification;
• 1997: opening of the first unit abroad, Microsiga Argentina;
• 1999: launching of the ADVPL (Advanced Protheus Language) language developed by the Company
throughout the seven previous years and the entrance of a foreign partner, Advent International
Corporation, which started to hold 25% of the company’s capital;
• 2002: Company's business purpose changed to "specialized retailing of computer equipment and
supplies, retail sales of apparel and accessories, other activities related to providing information
services not specified before”, according to the Extraordinary General Shareholders´ Meeting of
08/28/2002.
• 2003: acquisition of assets of the company Sipros, in Mexico, and opening of Microsiga Mexico;
• 2005: acquisition of Logocenter; repurchase of the Advent’s participation in the Company; admission of BNDESPAR as partner of the Company; and constitution of TOTVS-BMI, in the Extended Business Model;
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• 2006: IPO at the São Paulo Stock Exchange (BM&FBOVESPA), in the Novo Mercado (highest level of
Corporate Governance); and acquisition of RM Sistemas S.A.;
• 2008: amendment to the Company's business purpose, according to the Extraordinary Shareholders´
Meeting of 04/30/2008, for “the provision of consultancy services, advisory and development of
computer systems (software), the operation of computerized systems use rights, own or third parties,
the provision of data processing services, training and the purchase and sale of computers, accessories,
peripherals and supplies, being allowed to import goods and services related to its main activity,
retailing of wearing apparel and the like and their complements, research and technological innovation
activities, technical support activity in information technology including installation, configuration and
maintenance of computer and database programs, provision of management consulting service, data
processing activities, hosting, portals, providers and information services on the Internet, as well as
participate in other companies as a partner or shareholder”; merger of Datasul SA ("Datasul"); 1st
position of the Brazilian ERP market and 9th in the world ranking of ERP providers, released by Gartner;
launch of the web service and customer relationship platform, which allows remote deployment of
the Company's software solutions; consolidation of Microsiga and RM distribution channels in TOTVS
Franchises, channels to sell and implement the full TOTVS solutions portfolio.
• 2009: amendment to the Company’s corporate purpose to include the activity of "franchising
concession", according to the Extraordinary Shareholders´ Meeting of 16/04/2009; creation of “Full
TOTVS” franchises involving the TOTVS and Datasul franchises; and creation of segmented software
offers, both by size of client (series T, 3 and 1), and by activity sector, combining components of
horizontal and vertical solutions of the companies incorporated by TOTVS;
• 2011: amendment to the Company’s corporate purpose to include the activity of "software and
hardware rental”, according to the Extraordinary Shareholders´ Meeting of 03/21/2011.
• 2012: Participation of the Company in the “Brasil Maior Plan”, which led to the reduction of the tax
rate for calculation of the social security contribution (INSS) from 20% of the payroll to 2.5%, between
April and August 2012, and 2.0% of gross revenue, excluding cancellations and discounts, since August
2012. The Brasil Maior Plan was established by law 12,546 (resulting from the Provisional Measure
540/11 of the National Congress), which aims to relief the payroll tax in several different Brazilian
industries, and information technology is among them.
• 2013: increased investments in the specialization of solutions for each type of market industry, both
organic, with investments in research and development and restructuring of sales teams, as through
mergers and acquisitions, with acquisition of PC Sistemas, PRX, RMS and Seventeen; investments in
new technology, such as the acquisition of minority interest in GoodData and uMov.me; and launch of
an agnostic cloud platform for process, identity and content management named fluig; amendment to
the Company's business purpose to indicate the preponderance of the business purposes activities and
to specify that the provision of consultancy in management services, under the Company's business
purpose, is classified as business management, according to the Extraordinary Shareholders´ Meeting
of 03/01/2013.
• 2014 – until now: maintenance of investments in specialization of solutions by industry sector, both
organic, with investments in research and development, and through mergers and acquisitions, with
the acquisition of Virtual Age Technology Solutions Ltda. ("Virtual Age") and Neolog Consultoria e
Sistemas S.A. ("Neolog"); the transition promoted by the Company in its commercial models, aimed at
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the expansion of subscription sales as Software as Service (SaaS), and the consequent increase in the
level of recurrence of the Company's net revenue; and the commercial partnership agreement with
REDECARD S.A. ("Rede"), whereby the Company and Rede will offer micro and small entrepreneurs the
product "Fly01 by TOTVS" with the payment means of Rede, a complete management solution that
will integrate the e-commerce transactions to physical stores.
6.5. Main stock holding events in controlled or colligated companies or at the Company
Principal corporate events occurring between 2012 and the latest version of the reference form.
Event: Merger of Inteligência Organizacional Serviços, Sistemas e Tecnologia em Software Ltda. and
Mafipa Serviços de Informática Ltda.
Main conditions: On March 21, 2012, the Extraordinary Shareholders´ Meeting approved the merger
of of Inteligência Organizacional Serviços, Sistemas e Tecnologia em Software Ltda. and Mafipa
Serviços de Informática Ltda.
Companies involved: TOTVS S.A. and Inteligência Organizacional Serviços, Sistemas e Tecnologia em
Software Ltda. and Mafipa Serviços de Informática Ltda.
Effects in TOTVS shareholding panel: There were no effects resulting from the operation in the
Company’s shareholding panel.
Changes in the shareholding panel: There were no effects in the Company’s shareholding panel.
Event: Merger of Gens Tecnologia e Informática Ltda., TOTVS Serviços em Informática e Consultoria
Ltda., Midbyte Informática Ltda., BCS Comércio e Serviços de Informática Ltda., and TotalBanco
Participações S.A. by TOTVS.
Main conditions: On May 17, 2012, the Extraordinary Shareholders´ Meeting approved the merger of
Gens Tecnologia e Informática Ltda., TOTVS Serviços em Informática e Consultoria Ltda., Midbyte
Informática Ltda., BCS Comércio e Serviços de Informática Ltda., and TotalBanco Participações S.A. by
TOTVS.
Companies involved: TOTVS S.A. and Gens Tecnologia e Informática Ltda., TOTVS Serviços em
Informática e Consultoria Ltda., Midbyte Informática Ltda., BCS Comércio e Serviços de Informática
Ltda., and TotalBanco Participações S.A.
Effects in TOTVS shareholding panel: There were no effects resulting from the operation in the
Company’s shareholding panel.
Changes in the shareholding panel: There were no effects in the Company’s shareholding panel.
Event: Merger of Gens Tecnologia da Informação Ltda., YMF Arquitetura Financeira de Negócios
Ltda., TOOLS Arquitetura Financeira de Negócios Ltda., Hery Participações Ltda., and TotalBanco
Consultoria e Sistemas Ltda.
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Main conditions: On November 29, 2012, the Extraordinary Shareholders´ Meeting approved the
merger of Gens Tecnologia da Informação Ltda., YMF Arquitetura Financeira de negócios Ltda., TOOLS
Arquitetura Financeira de Negócios Ltda., Hery Participações Ltda., and TotalBanco Consultoria e
Sistemas Ltda.
Companies involved: TOTVS S.A. and Gens Tecnologia da Informação Ltda., YMF Arquitetura Financeira
de Negócios Ltda., TOOLS Arquitetura Financeira de Negócios Ltda., Hery Participações Ltda., and
TotalBanco Consultoria e Sistemas Ltda.
Effects in TOTVS shareholding panel: There were no effects resulting from the operation in the
Company’s shareholding panel.
Changes in the shareholding panel: There were no effects in the Company’s shareholding panel.
Event: Acquisition of 100% of capital of W&D Participações S.A. Main conditions: On January 24, 2013, the Company acquired, for R$80.000 million in cash, with earn-out of up to R$15.000 million linked to the achievement of certain goals by PC Sistemas for 2013, 100% of the shares of W&D Participações S.A., which owns all the shares of PC Sistemas S.A. and PC Informática S.A. (collectively "PC Sistemas"). The acquisition has no precedent conditions and was ratified at the General Shareholders´ Meeting of March 2014, pursuant to Article 256 of Law 6,404. PC Sistemas is a software development for the Distribution, Retail and Wholesale in Brazil. The earn-out of R$15.000 million was paid in March 2014. Companies involved: TOTVS Brasilia Software Ltda. and W&D Participações S.A.
Effects in TOTVS shareholding panel: There were no effects resulting from the operation in the
Company’s shareholding panel.
Changes in the shareholding panel: Acquired company before - Wagner Ananias De Lima Cruz (98%); Denise Bastos Silveira Patrus (2%). Acquired company after - TOTVS Brasilia Software Ltda. (100%). Event: Acquisition of 60% of the capital of PRX Soluções em Gestão Agroindustrial Ltda. and P2RX Soluções em Software Ltda. Main conditions: On July 31, 2013, the Company acquired, for R$11.000 million in cash, 60% of the capital stock of PRX Soluções em Gestão Agroindustrial Ltda. and P2RX Soluções em Software Ltda. (“PRX”). The acquisition has not outstanding precedent conditions and was ratified at the General Shareholders´ Meeting of March 14, 2014, pursuant to Article 256 of the Law 6,404. PRX develops TOTVS management solutions and provides IT services to the Agribusiness segment in Brazil and Latin America. Companies involved: TOTVS S.A., PRX Soluções em Gestão Agroindustrial Ltda. and P2RX Soluções em Software Ltda. Effects in TOTVS shareholding panel: There were no effects resulting from the operation in the
Company’s shareholding panel.
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Changes in the shareholding panel: Acquired companies before - Gilberto Girardi (24.0%), Fabio Girardi (21.6%), Adilson Zem (13.0%), Richardson André De Moraes (13%), Sergio Asato (6.7%), Sumara Regina Cavaca Philipp (6.7%), Divaldo Reckia (4.0%), Adenilson Ali Marques (1.25%), Alexandre Orti (1.25%), Edélcio Louis Iha (1.25%), José Alves Gleison (1.25%), José Roberto De Souza (1.25%), Sergio Alves Ferreira (1.25 %), Sergio Muñoz Junior (1.25%), Roberval Antônio Zambello (1.25%) and Mauro Tadashi Kirihata (0.8%). Acquired companies after - TOTVS SA (60%), Gilberto Girardi (12.82%), Fábio Girardi (11.85%), Richardson André De Moraes (8.37%) Sérgio Asato (2.68%), Regina Sumara Cavaca Philipp (2.68%), Divaldo Reckia (1.6%). Event: Acquisition of 100% of the capital of RMS Software S.A and Webstrategie Software Ltda. Main conditions: On August 28, 2013, the Company acquired, for R$37.400 million in cash, with the possibility of additional payment of R$5.000 million if the acquired company achieves certain goals during the first 12 months after the acquisition, the shares representing 100% of the capital stock of RMS Software S.A. and Webstrategie Software Ltda. ("RMS"). RMS develops software management solutions and provides Information Technology services to the Retail and Supermarkets sectors in Brazil. The acquisition has no outstanding precedent conditions. Companies involved: TOTVS Nordeste Software Ltda., RMS Software S.A. and Webstrategie Software
Ltda.
Effects in TOTVS shareholding panel: There were no effects resulting from the operation in the
Company’s shareholding panel.
Changes in the shareholding panel:
RMS Software S.A.: Before - Paulo Alberto Sahd Soares (80%) Paulo Ricardo Sahd Soares (10%), Marcos
David Biazi (10%). After - TOTVS Nordeste Software Ltda. (100%).
Webstrategie Software Ltda.: Before - TOTVS Nordeste Software Ltda. (0%), RMS Software S.A. (99%),
Paulo Alberto Sahd Soares (1%). After - TOTVS Nordeste Software Ltda. (100%).
Event: Acquisition of 20% of capital of Umov.me Tecnologia S.A.
Main conditions: On April 2, 2013, the Company invested R$3.200 million in cash in exchange for a minority shareholding of 20% in the capital stock of uMov.me Tecnologia S.A. ("uMov.me"). uMov.me is a cloud enterprise mobility technology platform provider, in the software as a service segment, which allows solutions for companies of different sizes and segments, supporting multiple platforms for smartphones and tablets, facilitating the automation of the field processes and their integration with management systems. The acquisition was approved by the Brazilian antitrust authority (CADE), pursuant to Law No. 12.529/11, and has no outstanding conditions precedent. Companies involved: TOTVS Ventures Ltda. and Umov.me Tecnologia S.A.
Effects in TOTVS shareholding panel: There were no effects resulting from the operation in the
Company’s shareholding panel.
Changes in the shareholding panel: Acquired company before - Alexandre Rubin Trevisan (53.28%)
Daniel De Freitas Wildt (5.0%), Eduardo Henrique Pereira De Arruda (10.0%), Rogério Carlos Pedroso
Fluzer (25.0%), and Vinicius Jardim Vasconcelos (6.73%). Acquired company after - TOTVS Ventures
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Ltda. (20%), Alexandre Rubin Trevisan (42.62%), Daniel De Freitas Wildt (4.0%), Eduardo Henrique
Pereira De Arruda (8.0%), Rogério Carlos Pedroso Fluzer (20.0%) and Vinicius Jardim Vasconcelos
(5.38%).
Event: Acquisition of 100% of capital of Seventeen Tecnologia da Informação em Informática Ltda.
Main conditions: On November 25, 2013, the Company acquired, for R$12.450 million in cash, shares representing 100% of the capital stock of Seventeen Tecnologia da Informação em Informática Ltda. ("Seventeen"). With over 8 years of experience in TOTVS management solutions development, that are used by customers of all sizes in the health sector, especially large health plan operators in Brazil, Seventeen works under a TOTVS development franchise contract, having more than 130 employees. Companies involved: TOTVS Brasil Sales Ltda. and Seventeen Tecnologia da Informação em Informática
Ltda.
Effects in TOTVS shareholding panel: There were no effects resulting from the operation in the
Company’s shareholding panel.
Changes in the shareholding panel: Acquired company before - Joel Christovam Machado Júnior
(25.02%), José Luiz Bertanha (14.73%), Jaqueline Formigheri (14.15%), Arielson Pimmel (12.23%),
Luciane Cristina Da Silva (6.75%), Flávio Zuanazzi (5.70%), Rodrigo Da Cunha Freitas Silva (5.21%),
Claodemir Antonio Giazzon (5.16%), Denise Fátima Bello (4.38%), Paula Ferreira Da Fonseca Motta
Taraboreli (2.93%), Sandro Luciano Giacomozzi (1.87%) and Alex Antonio Hanauer Boeira (1.87%).
Acquired company after - TOTVS Brasil Sales Ltda. (100%).
Event: Acquisition of 70% of capital of Ciashop – Soluções para Comércio Eletrônico S.A.
Main conditions: On December 2, 2013, a fully owned subsidiary of TOTVS, TOTVS Brasil Sales Ltda. (“TOTVS Sales”), entered into a Share and Quota Purchase Agreement ("Agreement") to acquire up to 72% of the share capital of Ciashop – Soluções para Comercio Eletrônico S.A. ("Ciashop"). On February 5, 2014, after the approval of Brazil's Council for Economic Defense (CADE) pursuant to Law No. 12.529/11, the Company acquired 70% of the capital of Ciashop. The acquisition was made through the payment of R$ 16.400 million in cash, representing 68% of the share capital of Ciashop, and the subsequent injection of additional cash of R$ 1.200 million, bringing the participation of TOTVS to 70% of the share capital of Ciashop. Companies involved: TOTVS Brasil Sales Ltda. and Ciashop – Soluções para Comercio Eletrônico S.A.
Effects in TOTVS shareholding panel: There were no effects resulting from the operation in the
Company’s shareholding panel.
Changes in the shareholding panel: Acquired company before - Ideiasnet Fip I (50%); Mauricio José
Trezub (41%) and Kleber Martins Albertini (9%). Acquired company after - TOTVS Brasil Sales Ltda.
(70%), Mauricio José Trezub (24.6%) and Kleber Martins Albertini (5.4%).
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Event: Acquisition of 100% of capital of Virtual Age Soluções em Tecnologia Ltda.
Main conditions: On May 21, 2014, TOTVS entered into a Share and Quota Purchase Agreement to acquire 100% of the share capital of Virtual Age Soluções em Tecnologia Ltda. ("Virtual Age"). The Agreement also establishes the payment of a variable amount that can reach up to R$25.000 million, which shall be paid in accordance to metrics defined in the Agreement until the last day of December 2016. Focused on the development of software solutions in the cloud for the Fashion and Apparel Value Chain, Virtual Age has more than 27 years of experience serving technology to Retail, Wholesale, Franchising and Manufacturing companies in this sector, having a portfolio with more than 500 clients, including the major manufacturers of shirts, trousers, denim jeans and suits in Brazil. Virtual Age sells its solutions in SaaS (“Software as a Service”) model, having 81% of its revenue as recurring revenue. The acquisition does not have outstanding precedent conditions and was ratified by the shareholders at the General Shareholders´ Meeting of March 30, 2015, pursuant to Article 256 of Law 6,404. Companies involved: TOTVS S.A. and Virtual Age Soluções em Tecnologia Ltda.
Effects in TOTVS shareholding panel: There were no effects resulting from the operation in the
Company’s shareholding panel.
Changes in the shareholding panel: Acquired company before - José Marcos Nabhan (100%). Acquired
company after - TOTVS S.A. (100%).
Event: Merger of TOTVS Brasil Sales Ltda.
Main conditions: On October 22, 2014, the Extraordinary Shareholders´ Meeting approved the merger
of TOTVS Brasil Sales Ltda. In order to simplify the Company´s operations.
Companies involved: TOTVS S.A. and TOTVS Brasil Sales Ltda.
Effects in TOTVS shareholding panel: There were no effects resulting from the operation in the
Company’s shareholding panel.
Changes in the shareholding panel: There were no effects in the Company’s shareholding panel.
Event: Acquisition of 60% of capital of Neolog Consultoria e Sistemas S.A.
Main conditions: On February 11, 2015, TOTVS S.A. entered into a Share and Quota Purchase Agreement to acquire 60% of the share capital of Neolog Consultoria e Sistemas S.A. (“Neolog”) for R$15.547 million. The Agreement also establishes the payment of a variable amount, which shall be paid in accordance to metrics defined until June 30, 2016.
Focused on developing software solutions in the SaaS model for the Logistics and Supply Chain
markets, Neolog has been operating for over 10 years providing logistics optimization solutions
designed to reduce costs and to better match logistics resources for its customers. The acquisition has
no outstanding precedent conditions.
Companies involved: TOTVS S.A. and Neolog Consultoria e Sistemas S.A.
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Effects in TOTVS shareholding panel: There were no effects resulting from the operation in the
Company’s shareholding panel.
Changes in the shareholding panel: Acquired company before – Danilo da Silva Campos (99%) and
Camila Capellari Campos (1%). Acquired company after - TOTVS S.A. (60%) and Danilo da Silva Campos
(40%).
Event: Sale of the minority participation of Umov.me Tecnologia S.A.
Main conditions: On April 2, 2015, TOTVS Ventures (a TOTVS subsidiary) sold its 20% minority interest in uMov.me Tecnologia S.A. (“uMov.me”) to the founding shareholders of uMov.me for R$1.6 million, rescinding all the future investment commitments of TOTVS Ventures established at the time of acquisition of said interest in uMov.me. Companies involved: TOTVS Ventures Ltda. and uMov.me Tecnologia S.A.
Effects in TOTVS shareholding panel: There were no effects resulting from the operation in the
Company’s shareholding panel.
Changes in the shareholding panel: TOTVS sold the totality of the minority interest that TOTVS
Ventures had in uMov.me Tecnologia S.A. to the founder shareholders of Umov.me.
Event: Acquisition of the remaining capital of TOTVS Soluções em Agroindústria S.A. (former PRX Soluções em Gestão Agroindustrial Ltda.) and P2RX Soluções em Software S.A. (“P2RX”) Main conditions: On May 11, 2015, the Company acquired 40% of the capital stock of TOTVS Soluções em Agroindústria S.A. (former PRX Soluções em Gestão Agroindustrial Ltda.) and 40% of the capital stock of P2RX Soluções em Software S.A. for R$8,833,736.05, in accordance with the Share Purchase and Sale Agreement and Other Covenants, executed in April 18, 2013. Companies involved: TOTVS S.A., TOTVS Soluções em Agroindústria S.A. and P2RX Soluções em Software Ltda. Effects in TOTVS shareholding panel: There were no effects resulting from the operation in the
Company’s shareholding panel.
Changes in the shareholding panel: Acquired companies before - TOTVS SA (60%), Gilberto Girardi (12.82%), Fábio Girardi (11.85%), Richardson André De Moraes (8.37%) Sérgio Asato (2.68%), Regina Sumara Cavaca Philipp (2.68%), Divaldo Reckia (1.6%). Acquired companies after - TOTVS SA (100%)
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6.6. Information about the bankruptcy request based on a relevant amount or judicial or extrajudicial recovery
Not applicable. There was no such request.
6.7. Other relevant information
The Company did not identify other relevant information related to its history.
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7. COMPANY ACTIVITIES
7.1. Description of the activities of the company and its controlled companies
The purpose of the company is to develop computing systems (software), provide consulting and
counsel services, exploit rights of use of computing systems, both our own and third party, inclusively
by lease of software and hardware, provide data processing and training services, buy and sell
computers, their accessories, peripherals and supplies – it may import products and services
concerning its main activity – grant franchising, retail clothing and accessories, engage in activities of
technological research and innovation, computer technical support, including installation, setup and
maintenance of computer programs and databases, provide management consulting services,
engage in activities of data handling, hosting, portals, information providers and services on the
Internet, and outsourcing, as well as participate in other corporations as partner, stockholder or
quota holder.
In short, the Company provides the market with integrated corporate management software
solutions, with value-added technology and services, such as follows: consulting, infrastructure
(hardware, operating systems, databases, and data centers), outsourcing, and enterprise instruction.
TOTVS is the leader of integrated management software (ERP suite) in Latin America and Brazil,
according to study disclosed by Gartner Institute entitled “All Enterprise Software Market Share,
Worldwide, 2012-2014”
TOTVS has over 7,000 direct employees and operates in 39 countries, with its own units in Brazil,
Argentina, Mexico and USA.
7.2. Information on operating segments
a) Traded products and services:
Software Solutions
TOTVS believes technology is worth more when it enables clients to connect, to think and to work
together. Hence, it works with and for its CLIENTS. At this time, the opportunity is to match the present
with the future, evolving its offerings by implementing the 3 TOTVS concepts:
Fluid Technology: easy to use and to be implemented, simple and mobile, it promotes productivity, sharing and collaboration, thereby impacting a larger number of individuals and companies;
Essentiality: specific offerings focused on the core business of each segment, with complete adherence;
Agile ERP: Enterprise Application Software by vertical that progressively become lighter and more focused on its "CORE", in the "CLOUD" and "MOBILE", promoting a natural user interface;
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The integrated management software offerings are designed per size and area of operations of
companies.
The structuring of offerings by segment is aimed at consolidating business solutions and processes by
economic segment, thereby optimizing the development and upgrade of solutions, and driving
innovation. This enables the solutions offered by the Company to meet needs that range from basic back
office operations, such as accounts payable, accounts receivable, taxes and human resources, to the core
business of companies, such as control of student records in a university, inventory control in a
manufacturing industry and construction management in a building company.
The structuring of offerings according to company size is aimed at providing solutions with the
appropriate level of complexity and robustness, taking into account the needs of micro, small, medium
and large companies. Thus, TOTVS divided its solutions into Series 1 and solutions in 10 segments. In
general terms, Series 1 products meet the needs of small businesses and micro companies with simple
and objective processes. This segmentation also meets the needs of the midmarket segment, which
includes companies with medium-complexity processes. The products also have broad functional range,
enabling the management of larger companies with more complex processes.
TOTVS Series 1 – Segmented software solutions for micro and small companies requiring quick
implementation, objective solutions for controlling critical processes, designed to control operations of
this type of companies. Series 1 serves the following segments:
TOTVS Series 1 Manufacturing – Integrates the main areas of the company, speeding up the flow of information and enabling quick access to the data required for management. TOTVS Series 1 Retail – TOTVS offering for companies that have an ECF (Emissor de Cupom Fiscal - tax receipt issuer), which integrates the main areas of the company, speeding up flow of information and enabling quick access to the data for management. TOTVS Series 1 Health – TOTVS solution for medical offices and clinics, which provides quick and effective clinical and financial management. TOTVS Series 1 Legal – Solution for law firms for managing processes and deadlines with WEB mobility, which enables access to online information with high availability, effective control over the legal liabilities of their clients and data security ensured by the TOTVS Data Center framework. TOTVS Series 1 Services – Solution that enables control of cash flow, taking into consideration purchase and sale orders, control of service orders, with allocation of resources and products, control of inputs and outputs per cost center and profit center, and expenses and revenues by financial category. TOTVS Series 1 Beauty and Aesthetics - TOTVS solution for salons, spas and beauty clinics, with zero spending on technology and infrastructure as it is 100% cloud-based. This allows clients and employees to access information, such as schedules and service and product consumption, from anywhere. The system also provides simple management information on billing and employee productivity. TOTVS Series 1 Petshop – TOTVS solution for pet shops, as well as veterinary clinics and hospitals. 100% cloud-based system that is simple, easy, complete and ready to use. It permits full control over the business and close monitoring of the evolution of patients.
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TOTVS Series 1 Supermarkets – TOTVS solution for small supermarkets, which performs financial, commercial, operations and tax management, covering the entire sales process, from pre-sales to checkout.
TOTVS solutions for segments: Our segmented software solutions for small, medium and large companies,
with full and broad functional range of business processes. The segments served are:
Manufacturing – It is one of the key operating segments of TOTVS, in which best market concepts and practices are applied to solutions and technologies offered in each of the following eight sub-segments: Extraction and Processing; Pulp and Paper; Chemicals and Recycling; Metallurgy and Plastics; Capital Goods; Durable Goods; Consumer Goods; Textile and Apparel.
Ruled by the principles of lightness, sustainability and automation, this segment is served by the Fluig platform that integrates business areas and supports each business process, from the birth of a new product to its dispatch, after-sales, support and warranty. Back office processes are also fully covered, including full compliance with legislation. Agribusiness - Solution that brings together software components from TOTVS portfolio for serving multicrop (grains, fruits and forests) producing companies and those in the sugar and ethanol sub-segment, from the planting-cultivation-harvest cycle to processing that results in sugar, ethanol or electricity, aimed at a competitive, integrated, sustainable agribusiness. Solutions for Agribusiness are also available for specialized processes such as Grain Origination, Processing, Field Automation and Fleet Maintenance. Retail – A comprehensive management solution for retailers, which includes automation of administrative processes to the close of the sale at the point-of-sale (checkout), including store management, credit management, mobility, e-commerce, inventory management, pricing, RFID, grid management and mix, with information security and integrated solutions. Specialized software offerings are available for Retail sub-segments, such as Management of Car Dealers, Franchise Networks, Drugstores, Supermarkets, Stores and Department Stores, and Construction Materials. Distribution and Logistics – Solution that provides integration, automation and management support for logistics processes, according to current expectations and technologies. This portfolio includes tools for SCM (Supply Chain Management), TMS (Transportation Management System), WMS (Warehouse Management System), Shipment and Delivery Routing, Fleet Maintenance, Freight Forwarder and Control of Ports and Customs Precincts processes.
Health – Solution for the management of Health Plans, Hospitals, Emergency Care and Medical Clinics, covering management of accredited networks, authorization for medical procedures, auditing of medical bills, acquisition of new plan members, and CRM (Customer Relationship Management) for Health Plan Operators or Medical Cooperatives. To create an integrated chain, optimize processes and ensure the sustainability of management, this solution also includes the following procedures: reception, hospitalization, medical records, scheduling, clinic, diagnostic units, operating rooms, dispensary, pharmacy, electronic medical records, infection control, hospital costs, billing, transfers and disallowances in hospitals and medical clinics. Education – Complete, integrated and flexible solution for management of Educational Institutions, which optimizes processes, reduces operating costs and allows monitoring of performance indicators, generating constant improvement of results. It serves the following sub-segments: Elementary Education, Higher Education and Continued Education, with the core processes of Academic and Financial Management, Selection Process and Entrance Exam Management, Libraries, Virtual Learning
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Environments, as well as Management and Planning of Class Schedules, in addition to ensuring that the academic community remains connected through academic portals and mobile solutions for students, family, professors and coordinators. Construction and Projects – Solution that provides projects management, designed for project planning, budgeting and monitoring, it supports the management and control of construction works (Engineering Projects) to achieve optimum budgets through integrated processes, thus making projects and constructions sustainable. This portfolio includes software for management of construction and projects, with state-of-the-art management through tools such as ETO (Engineering to Order), EVA (Earned Value Analysis) and Mobility to capture field data. Management of real estate development, including the management of receivables portfolio and sales management through a responsive portal (Web and Mobile), feasibility analysis tool and equipment maintenance management. Legal – Comprehensive, accessible, definitive solution that meets the requirements of those dealing with law, especially law firms and legal departments, and includes the control and monitoring of lawsuits, lawyers’ calendars, timesheets, as well as contract, customer and team performance management.
Financial Services – Specialized solutions for investments, credit, cards and core banking areas, covering everything from business environment to accounting and operations areas, including management controls and compliance. A comprehensive software portfolio that offers operational efficiency and reliable results. Services – Solutions that control operations, reducing costs and bringing the clients closer to their needs, aiming to control operations, budgets, agreements, SLAs (Service Level Agreements), CRM, allocation of resources, equipment leasing, facilities and monitoring of operational performance.
TOTVS implementation methodology sets the guidelines, methods, standards and stages to be
followed from the start of service to post-implementation quality controls. Guided by this methodology,
TOTVS teams follow in all sites the same techniques and tools to carry out tasks related to the
implementation of TOTVS software solutions.
TOTVS solutions based on Partners:
TOTVS offers the following partner solutions integrated to its management software:
TOTVS BA Business Analytics powered by IBM Cognos - Solution for Business Intelligence and Decision
Making Support, backed by ETL (Extraction and Transformation) resources, data warehouse, analysis
view, report and dashboard studio integrated with TOTVS ERPs.
TOTVS GeoSales powered by SoftSite - Mobility Solution for Territorial Business Management and Sales
Force Automation integrated with TOTVS ERPs.
TOTVS Marketplace powered by Paradigm - Solution for automation of sourcing and e-procurement
integrated to TOTVS ERPs.
TOTVS Colaboração powered by NeoGrid - Solution for integration of value chain with the exchange of
electronic documents, adding Retail Intelligence and Distribution Intelligence, integrated with TOTVS
ERPs.
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TOTVS Smart Analytics powered by GoodData - Solution focused on usability and user experience, which
brings benefits such as rapid installation of management dashboards at a highly competitive price, in a
100% SaaS (Software as a Service) model, integrated with TOTVS ERPs.
TOTVS “Gestão e Planejamento de Quadro de Horários” by Scientia - Set of highly specialized solutions
for planning class schedules at educational institutions, in addition to resolving and providing effective
solutions for use by human resources, class and student requirements and infrastructure so that
educational institutions can optimally allocate their resources to the desired costs in a balanced manner.
TOTVS GRC powered by Resolver - Strategic tool for companies, which enables them to store all the
procedures for compliance with laws and certifications, such as Sarbanes-Oxley, among others. The
system also enables control over the execution of each step involved in these procedures. The tool is
easy to use and quick to install.
TOTVS AMS powered by AMS - a customized solution for Assets (Asset administrators) and Managers
that must focus on management, and have a clear and well-defined operational processes, with
segregation of functions (desk, middle). This solution facilitates due diligence, provides operational
efficiency (minimizing the need for specialized personnel, double entry and double portfolio control)
and is scalable.
TOTVS FATCA powered by Dion Global - complete solution that meets all legal requirements without
requiring extensive changes to the bank’s existing systems. Provide a platform that meets the
requirements of treaties such as FATCA that arise in the future, thereby reducing operating and
maintenance costs associated with changes to legislation.
TOTVS “Inteligência na Gestão de Portifólios” powered by Techrules - Customized solution for Portfolio
Managers that need to execute their processes in a centralized and highly sophisticated manner. This
solution provides investment portfolio management companies with speed in decision-making and in
applying changes to investment strategies, enabling personalized service with transparent information.
Technology Solutions
fluig - An agnostic enterprise platform for identity management (IDM), processes and content (ECM -
Enterprise Content Management) that increases productivity and collaboration among users. The Fluig
platform provides users with a secure cloud-based environment that combines a natural, intuitive and
collaborative user interface, accessible through diverse mobile devices, that accesses information and
performs routines of the integrated management systems from TOTVS or other providers, regardless of
where they are installed, that is, on the companies’ premises or in private and/or public clouds.
TOTVS ECM - Server that provides management of electronic content (ECM – Enterprise Content
Management) and of integrated business processes, which enables transformation of your company’s
hardcopy documents and processes into information assets that reduce operating costs more efficiently
in business processes and add intelligence to strategic information. TOTVS ECM is also included in the
Fluig platform.
TOTVS ECM’s features include: control of document versions and revisions, control of document and
process approval cycles, access control, sharing of documents in folders and for work groups, search and
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indexing mechanisms for documents in standardized and special formats. In addition to these features,
TOTVS ECM offers facilities for process management, making it possible to attach one or more
documents to the process, inclusion of flexible performance routes, follow-up of evolution of processes
and even logging of hours for apportionment of process costs.
TOTVS ESB - Solution for integration between different integration points of TOTVS software and other
software in the market. It adopts the Enterprise Service Bus (ESB) standard, which enables control of
integration between two or more points, with a low level of coupling (which facilitates maintenance and
evolution of integrated interfaces), conversion of communication protocols, routing of messages based
on their content, queuing of messages to ensure delivery, conversion of data formats, among other
features. By adopting TOTVS ESB, companies incorporate mechanisms for monitoring their integrations,
facilities for handling diverse data formats and even dealing with temporary unavailability of an
integrated system with low (even or no) loss of integration. TOTVS ESB is also included in the Fluig
platform.
by You - A corporate social networking solution that enables collaboration and engagement of people
and companies in a secure environment, allowing personal and business relationships and business
generation. This corporate social network is also included in included in the Fluig platform.
TOTVS Studio – It is the basis of TOTVS’ technology offering. It comprises the following:
Application server: runs TOTVS software applications developed on the TOTVS platform and provides elements that ensure scalability and availability of applications, as well as portability of code developed for execution on multiple platforms.
DbAccess: Ensures unique access of data access with support for multiple databases.
SmartClient: Presentation layer, user interface, optimized for remote access to TOTVS applications. Available in the versions: RichClient with support for multiple platforms and HTML.
TOTVS Developer Studio - Development and management environment of the TOTVS platform. Based
on the Eclipse platform, it offers a set of tools that simplifies the development of products on the TOTVS
platform (AdvPL and 4GL languages) and increases productivity in all phases of the development cycle.
It has tools for code analysis and quality, and management of the development lifecycle (ALM –
Application Lifecycle Management). Also integrated are the environments for the development of
mediations of integration and mapping of TOTVS ESB formats, as well as the environment for creation
of business process flows in TOTVS ECM. It also has an integrated environment for server management
based on TOTVS Developer Studio technology.
AstroTV - middleware compatible with the specification of the Ginga standard of SBTVD (Sistema
Brasileiro de Televisão Digital), which runs interactive applications developed in Java, NCL and LUA.
Applications may be resident (inserted by the manufacturer or user directly into the memory of the set-
top box, mobile receivers, portable sets or digital TV sets) or transmitted via digital signal through TV
networks. AstroTV offers the following possibilities:
Full interactivity, allowing viewers to communicate with the broadcasters through the return channel, in scenarios such as elections, polls, games, and advertising;
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Extended program capabilities in the areas of entertainment and information, permitting the entry of extra inputs news related to the program, such as games, news, advertising, content enrichment, sports statistics, etc.;
Interactive e-government applications to drive digital inclusion, such as declarations, polls, charts, bulletins, schedules and public service announcements; and
Use of interactivity in mobile phones, PDAs and other portable devices enabling new scenarios with the use of technologies such as localization, presence, voice, etc.
Solutions in Services
Software implementation:
TOTVS’ implementation team deploys only solutions sold by the Company using the TOTVS
implementation methodology, which defines the guidelines, methods, standards and stages that must be
followed from the start of services to post-implementation quality controls.
TOTVS’ own units and franchises follow the TOTVS implementation methodology at all sites, using the
same techniques for executing tasks and the same tools to implement TOTVS software solutions.
Consulting
TOTVS Consulting is a strategic business management and information technology consulting team, based
in São Paulo, Rio de Janeiro and Belo Horizonte, and operating throughout Brazil and abroad.
Business management consulting services are grouped as follows:
Management - Organizational Restructuring; Shared Services Center (CSC); and Project Office (PMO).
Strategy - Strategic Planning; Management by Guidelines; Business Case; and Budget Planning.
Processes - Modeling and Process Improvement (MMP); Integrated Process Management (GIP); and Operating Excellence.
Personnel - HR Structuring; Management by Competencies; Performance Management; Career and Remuneration; and Change Management.
IT consulting services offerings are grouped as follows:
Strategy - IT Master Plan (PDTI); Governance (ITIL, COBIT); and Software Selection.
ERP Deployment with Focus on Management, Business, and Integration layers - PMO (Project Management); Process Modeling (Blueprint); Communication and Training (Change Management); Integrated Tests (Management); Data Development and Migration (Management); and AMS (Application Management and Support).
Infrastructure
Infrastructure services offerings are divided into two groups:
Cloud Computing – Offering of TOTVS hosting solutions in its own or third party data center, including a comprehensive range of added services, such as environment preparation, provision of infrastructure, hardware (servers), operating system, database, on-demand productivity tool, email servers, website hosting services, applications, technological environment management, backup management and monitoring, fine-tuning of databases; monitoring of links and servers.
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Hardware - equipment sales, installation of local infrastructure and help desk.
Since the infrastructure team works with TOTVS proprietary software, it has knowledge of the solutions,
which allows the company to offer a Service Level Agreement (SLA) regarding availability of the
application.
Consulting for corporate training in social environment interactions - strategic consulting team for
communication, change management and knowledge management, which operates throughout Brazil
and certain international locations, out of bases in São Paulo, Rio de Janeiro and Belo Horizonte. This
offering involves a strategic project of transformation of corporate culture utilizing Fluig as a social
interaction platform, based on strategic alignment, diagnosis, implementation, activation and support.
Outsourcing
TOTVS provides outsourcing services for human resources, legal and investment management
departments through its BPO operation.
Human Resources – outsourcing solutions in human resources are offered at three service levels:
ASP - Operation and execution of client’s payroll, using infrastructure services (cloud computing), technology and operational support in payroll processing.
BSP – Client’s payroll processing is carried out at our premises. The client is responsible for the other payroll activities, such as admission and ratification of termination, among other activities.
BPO – Operation and complete execution of all payroll processes of the company.
Legal Departments - Information maintenance services and specific reports on portfolios of the lawsuits
of clients so that they can manage information about lawsuits. These services include registration of
lawsuits/preliminary injunctions, addition and revision of lawsuit information according to the current
phase of demands, management of court deposit payments, convictions, agreements, charges, costs and
income tax, segregation of the basis of lawsuits by law discipline, registration of requests, contingency per
request and parties involved, probability of failure or success, contingency management at TOTVS Legal,
document management and screening, termination of lawsuits, analyzing all pending issues, preparation
of reports and presentations with general and specific overview of the portfolio of lawsuits, among others
features.
Corporate Education
Solutions that provide software, content and infrastructure for knowledge management and professional
qualification, both on-site and distance. Designed for clients and institutions that require intensive
processes for knowledge diffusion and certification that are centralized or geographically distributed.
These offerings include:
Official training on TOTVS software and business processes: can be provided on-site or virtually (e-learning), in synchronous and asynchronous format.
Virtual training (e-learning) tailored to client’s needs: development of courses with proprietary content, design and methodology or mutually defined to meet the standards set by the client.
Certifications: Development and application of exams for technical or functional certification, using TOTVS software and technological solutions, virtually or on-site at our authorized network.
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b) revenue from the segment and its share in the issuer net revenue: Since its activities are concentrated in the development and sale of licenses of IT systems, provision of
deployment services, as well as systems consulting, advisory and maintenance services, the company is
organized in a single business unit. Though the Company’s software solutions are designed for diverse
business segments of the economy (agribusiness, infrastructure, construction and projects, health,
logistics and distribution, transport, education, financial services, legal, retail, and services), they are not
controlled and managed by management as standalone segments, and the company’s results are
monitored and assessed in an integrated manner.
Between 2012 and 2014, the three revenue lines of the Company (License Fees, Services and
Maintenance) accounted for the following percentages of total net revenues:
2014 2013 2012
Licensing fees 20.4% 21.6% 23.3% Services 29.6% 29.8% 29.3% Maintenance 50.1% 48.6% 47.4%
TOTVS provides differentiated licensing systems for use of its solutions in order to meet availability
and financial planning requirements of clients. Clients can change modality, a new price is calculated when
the change occurs. The company sets three payment forms for licensing the use of its software by clients
namely (i) traditional, (ii) corporate, and (iii) lease.
Traditional – The traditional form consists of licensing of use rights by payment of an exact amount.
Payment can be in installments and licensing is definitive and nonexclusive. The price of right licensing
is set per user and the client pays the licensing value for the number of users acquired. The number of
users acquired is the maximum number of persons that can access the system simultaneously.
Corporate – In the corporate model, the client acquires the license for the right to use the system
unlimitedly in its market industry, without restrictions to the number of simultaneous users, through
payment (in cash or in installments) upon contracting and additional annual payments according to an
increase metric to his segment. The purpose of this modality is to increase recurrence and ensure client
loyalty.
Lease – The lease modality is the payment of monthly installments for use of software.
Currently, license sales are concentrated in the traditional and corporate models.
In addition to software licensing, TOTVS clients make maintenance contracts, the payments of which
are mostly monthly, ensuring the right to use the help-desk service, receive new versions of the system
and use services of TOTVS technicians, as well as exemptions for prices differentiated from those applied
by TOTVS at contracting time.
TOTVS uses standard contracts to legally formalize its business with clients. The purpose of such
standard contracts is to provide: (i) rights to license of software use; (ii) rights to adjustments and updates
of software versions; (iii) deployment and training services; (iv) help desk services.
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Where applicable, TOTVS clients also make contracts that set services to be provided by TOTVS for
customization of software according to the client’s specific requirements.
c) profit or loss in the segment and its share in the issuer net profit: The revenue concentration level observed in Item 7.2b is also observed in the company’s net profit.
7.3. Information on products and services related to operating segments
a) characteristics of the production process: Components used in the preparation of integrated management software offerings
The integrated management software solutions described in item 7.2a are based on integration of
components from the horizontal and vertical product lines that determine the technological platform and
the origin of their development, as follows:
Protheus Line
The Protheus line comprises a set of applications divided into modules with the purpose of helping
companies in their management processes. These applications are organized into ERP, CRM, Verticals and
Intelligence Tools, which are software solutions designed to support the management of companies at
the operating, tactical and strategic levels.
Protheus modules bring together the functionalities of the entire operational process and control of a
company:
• Controllership/Finance - Project management (PMS), budget planning and control (PCO), tax, financial, assets, and tax and management accounting.
• Materials and Manufacturing - Product Development, Procurement, Imports, Inventory and Costs, Production Planning and Control (PCP), Shop Floor.
• Sales and Billing - Billing/sales, exports and drawback.
Human Resources - Provides greater efficiency in a company's Personnel Management and Organizational Development processes, covering all of their sub-systems: Payroll, Electronic Timecards, Access Control, Occupational Health and Safety, Portals for Decentralization of Operations, Positions and Salaries, Recruitment and Selection, Training and Development, and Performance Evaluation.
• Quality - Control of noncompliance, document control, entry inspection, process inspection, audit, metrology, Advanced Product Quality Planning (APQP), Production Part Approval Process (PPAP), and risk management.
• CRM - Manages the client relationship in sales, campaigns, schedules, service, collections, technical assistance or client support. CRM ensures that client information used in the company’s operations is centralized in a unified and cohesive manner. Protheus CRM is also divided into the call center, technical assistance, and mobile solutions modules.
Vertical and complementary solutions offered under the Protheus line are applications that serve
markets with specific management characteristics that are not met by ERP applications or generic
processes that can be used by any type of industry. The verticals for specific processes are:
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Point of Sales - Commercial Automation – Automation of commercial routines in chain stores, with the focus on retail, from customer service to the company’s internal procedures.
Distribution and Logistics - Service to all supply chain processes through three management environments: Order Management System (OMS), Transportation Management System (TMS), Shipper Management System (Gestão de Frete Embarcador - GFE), Warehouse Management System.
Vehicle Dealerships - Management of workshops, vehicle dealerships and automotive part dealerships. Includes the purchase, sale, assessment, financing, insurance and documentation processes.
Heath Plan Management - Manages operational, documentary, administrative and financial functions carried out by group health care and self-management companies.
Environmental Management - Comprehensive management of possible impacts on the environment caused by operations, products and services of the company.
Foreign Trade - Comprises operational, documentary, management and financial functions related to the control and monitoring of import and export processes. Its controls cover a number of import and export processes.
Legal Departments - Provides broad organization and management of all information related to the area and the company’s business.
TSS - TOTVS middleware developed to permit electronic information exchange between TOTVS BackOffice and SEFAZ for generation and issue of electronic invoices (NFe).
Protheus intelligence tools are software applications designed to support the management of tactical
and strategic levels of companies and the compilation and analysis of information from operational
applications, such as ERP. For the tactical level, the software applications have the following purposes: (i)
to increase productivity in the performance of routine and operational activities, simplifying tasks such as
checking the day's latest news, accessing the planner, e-mails and task list, and allow management queries
for information in ERP software; and (iii) to enable users to make use of information generated by
operating systems in a simple way, facilitating the necessary analyses and compilations. For the strategic
level, the software applications have the following purpose: (a) to help organizations translate their
strategy into operational goals, directing behavior and performance, in order to establish an efficient
strategic measurement framework; and (b) to enable control and monitoring of actions established in the
plan for the achievement of the objectives set at the strategic level. The intelligence tools suite comprises
the following software:
Indicator Management System (SGI) - Controls performance indicators based on goals, action plans and the results obtained.
Balanced Scorecard (BSC) - Similar to the Indicator Management System, it uses the BSC methodology in accordance with the methodology of Kaplan and Norton.
Logix Line
The Logix line is a set of applications divided into modules, designed to help companies in their
management processes. These applications are organized into ERP, CRM and Verticals.
The ERP Logix is an application divided into the following modules that bring together the
functionalities of the entire operational process and control of a company:
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Production Management - Manufacturing. Engineering, master plan, operational plan, shop floor, industrial maintenance, supplier evaluation, quality, testing, analysis, textile manufacturing, and grid manufacturing.
Supplies - Service agreements, planning of materials, stocks, costs, grid costs, dimensional control, outsourcing, consignment of materials, procurement, receipt of materials, inventories, electronic approval of supplies, evaluation of procurement, communication with suppliers and imports.
Sales and Logistics - Orders, distribution logistics, billing, technical assistance, sales plan, sales management and Customer Service (SAC), Warehouse Management System (WMS), cargo handling, fleet control, freight, and integrated port system.
Controllership - Assets, accounting as per international standards, profitability analysis, operating budget, budget management and approval, consumption analysis, and accounting in constant currency.
Financial - Accounts receivable, credit and register, check control, accounts payable, taxes/duties, cashless payments, electronic approval of payments, control of travel expenses, bank transactions, cash flow, vendor, financial agreements, lease agreements, and control of cash transactions.
Tax Obligations - Tax liabilities, normative instructions 68/95, 86/01, 89/03, ordinance 58 (MANAD), and control of ICMS credit on permanent assets.
Human Resources - Enables greater efficiency in a company's Personnel Management and Organizational Development processes, covering all the sub-systems: Payroll, Electronic Timecards, Access Control, Occupational Health and Safety, Portals for Decentralization of Operations, Positions and Salaries, Recruitment and Selection, Training and Development and Performance Evaluation.
Logix CRM is an application designed to support management of all client relationship processes in
sales, collections, technical assistance or client support. Logix CRM is integrated with Logix ERP, thereby
unifying all client information used in the company’s operations. Logix CRM operates mainly in the
automation of marketing, telemarketing, telesales, customer service, help desk, and technical assistance
processes.
The verticals available in Logix for specific processes are:
WMS (Warehouse Management System) – Management of yard, logistics, stock, inventory, and radiofrequency.
Textile Manufacturing – tracking of dyed yarn, control of threads, machine system, tag request, grid manufacturing and grid costs. Includes records and controls for the entire clothing and footwear industry, in which the same product is available in various colors and sizes.
Logistics, Ports and Airports - Part of the logistics solution for foreign trade and international business, offering the infrastructure required for the company to apply its knowledge in the provision of services and management of loading, unloading, advisory, and import and export shipments by both air and sea.
Cargo Transportation Management - Cargo handling and fleet control operation.
Point-to-Point Sales - Controls the sales of products traded by autonomous sellers. Developed to enable full tracking of this sales process, enabling control from the time the order is placed and the shipment invoice is issued to the return with the rendering of accounts.
BI - Modules to create and display queries and management indicators.
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Import - Monitors the entire procurement process in the export market. Permits effective control of the entire process, from the recording of purchase orders to control of expenses and events, tax calculation, payment of foreign exchange contracts and insurances, and receipt of imports.
Exports - Simplifies and integrates the complex environment of export management, helping companies to reduce costs, have greater predictability and comply with applicable laws.
RM Line
The RM line is a software solution consisting of the following modules designed for construction and
projects, as well as education and human resources areas, which combine the main functionalities of the
entire operating process and control of a company:
The vertical solutions that comprise this line and cover the entire TOTVS portfolio are:
Education – Academic and Financial Management, for Elementary and Higher Education and Free Courses. Mobile access for Students and Faculty, including financial monitoring and online payments through credit cards, Selection and Entrance Exam Processes, complete Financial Management, integrating academic management with back office operations (Controllership, Accounting, Sourcing and Assets), CRM and Educational Workflow, Archive and Library Management, Payroll and People Management. The solution also includes a portfolio of tools for extracting and presenting results, such as Cubes, Dashboards and BSC, as well as a proprietary report generator.
Works and Projects – Project / work management:
Integrated management view. Physical, financial and economic.
Mobility, with measurement of physical progress, record keeping of labor and equipment, and control of transportation cycles.
Human resource management, output/report, supplies, real estate management, and maintenance management.
Development – Management of Receivables Portfolio:
Contract management, market financing plans (PRICE, SAC, SACRE and customized plans)
Enables feasibility analysis
Sales management through the real estate sales portal, with control of queues, proposals through a responsive web interface (web and mobile).
Portfolio management and monitoring of delinquency levels.
Human Resources – Enables greater efficiency in a company's Personnel Management and Organizational Development processes, covering all sub-systems: Payroll, Electronic Timecards, Access Control, Occupational Health and Safety, Portals for Decentralization of Operations, Positions and Salaries, Recruitment and Selection, Training and Development, and Performance Evaluation.
Controllership – Batch processing, which allows checking of transactions before adding them to the official batch, usual and flexible financial statements tool to create any financial statement, compliance with legal routines (SPED Contábil, SPED FCONT, ECF – accounting part), assessment of results by branch office, which enables the system to be used by unincorporated joint ventures (Sociedade em conta de participação – SCP), grouping of accounting entries originated from other applications, apportionment map that allows management redistribution for management analyses, control of fixed assets with the possibility of accounting/management analyses using scenario tools, control of tax depreciation of assets for addition/deletion of LALUT, compliance with Law 11,638 and international financial reporting standards (IFRS), such as tests of impairment and revision of useful
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life of assets, integration with the procurement module in the purchase/write-off and transfer routines, possibility of internal and external allocation of assets, management control of assets through transfer of control, possibility of controlling asset inventories and insurance policies, physical control of goods using bar codes, tax assessment, bookkeeping in accordance with law.
Financial – Control of accounts payable and receivable, control of credit limits and clients in arrears, Control of authority per user, control of returned checks, payment list with approval via Workflow, control of advances to clients and suppliers, write-offs for financial losses, grouping of financial entries by bank slips, dispatch and return of bank payments and receipts files, reconciliation of bank statements, reconciliation of authorized direct debit (DDA), control of financial investments integrated to the accounting module, cash module to aid treasury, cash flow with monitoring of budgeted and actual cash flow per cost center (apportionment), accounting for adjustment to present value.
Billing/Purchases/Stocks and Contracts - Sales order, sales invoice, control of commissions, purchases, material request, quotation, approval, purchase order, receipt, inventory, control, resupply and contracts.
Business Intelligence (BI) - Decision support tool that provides access to contextual information.
The verticals for specific processes are:
Health - Comprehensive solution for hospitals, covering the following procedures: reception, hospitalization, medical records, scheduling, clinic, medical office, diagnostic units, operating rooms, dispensary, pharmacy, electronic medical records, infection control, purchases and inventories, billing, transfers and disallowances.
Education - Academic control, educational portal, finance, educational CRM, library management, human resources/payroll, report generator, strategic management (BI).
Works and Projects – Project / work management:
Integrated management view. Physical, financial and economic.
Mobility, with measurement of physical progress, record keeping of labor and equipment, and control of transportation cycles.
Human resource management, output/report, supplies, real estate management, and maintenance management.
Datasul Line
Software for medium and large companies, mainly in the industrial sector, whose biggest need is the
revision or improvement of their critical business processes and adaptation of internal systems to their
needs. Their functionalities range from production control to controllership and finance, sales and
materials. In addition to control, the software is capable of increasing client productivity. The software
includes the following processes:
Production - module for control and execution of production;
Human Resources – Enables greater efficiency in a company's Personnel Management and Organizational Development processes, covering all sub-systems: Payroll, Electronic Timecards, Access Control, Occupational Health and Safety, Portals for Decentralization of Operations, Positions and Salaries, Recruitment and Selection, Training and Development, and Performance Evaluation.
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Materials - Module for controlling basic operations of inbound logistics, procurement, receipts, quality control and inventory control;
Commercial Management – Software for sales management, supporting the commercial area in negotiations, making operational control more flexible and enabling management analysis of the sales order portfolio, in accordance with the company's policies and goals;
Sales - Module for supporting the sales process, offering support to the commercial area in negotiations, making operational control more flexible and enabling management analysis of the sales order portfolio;
Controllership and Finance - Software for comprehensive management of all processes and activities of the controllership and finance areas, supporting managers in the decision-making process.
Configurator and Product Developer - Software that meets the requirements of companies with a wide variety of final products and which need to configure and/or develop offerings according to their clients’ needs;
Planning - Software that increases productivity in companies. It automates the material planning and industrial processes;
SRM - Software for managing relations with suppliers, transforming them into strategic alliances;
Distribution – Cargo transport management software for shippers in the industrial and commercial segments;
Maintenance - Software for carrying out processes related to industrial maintenance. Helps in asset management and adoption of the best techniques for equipment use;
Automation - Software that helps increase productivity of industrial processes integrated with ERP and warehouse management processes through automated data collection.
Foreign Trade - Software that provides efficiency and accuracy in the management of export, import, drawback and foreign exchange processes;
WMS (Warehouse Management System) - Software to provide agility and reliability in warehouse management functions, from receipt to shipment of goods.
Vertical solutions originating from the Datasul line:
APS (Advanced Planning & Scheduling) - Software that uses lean manufacturing and TOC (Theory of Constraints) concepts and integrates with other TOTVS solutions. It is targeted at industrial clients and enables ample use of existing resources in textile plants for maximum development of the system by controlling demand and available capacity, identifying bottlenecks and high inventories, and by facilitating plant scheduling and guaranteeing service levels;
Freight Shipper - Solution for the supply, distribution, transportation and promotion areas that adapts to changes in demand while reducing integration costs in the logistic operation.
Multicrop - Management of agricultural processes, from planting to the first industrial processes after harvest.
Grains - Solution for reducing the costs of allocation of machinery and inputs, for increasing productivity through directed varietal management, compliance with tax, environmental, and phytosanitary requirements, increased visibility of the company’s operations and results, and greater traceability of the production processes.
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Health Plan Management - Solution that improves the control of health costs for operators and the management of health plans, beneficiaries, coverage and authorization of medical procedures. With quickly available information and indicators that facilitate decision-making, the solution also supports auditing of medical bills.
DL (Distance Learning) - Solution to support the learning process based on e-learning, for both the business and education segments. It controls the training path, participation and assessment of knowledge absorbed through pre/post-testing and certification strategies.
CRM - Software for managing relations with clients through marketing management, commercial management and management of clients’ services/products.
Financial Services Line
The Financial Services line brings together specialized software in:
Credit: It meets the operational, legal and management demands of the main credit products in the market. Sub-segments served: Development Agencies, Banks and Financial Institutions, Credit Cooperatives.
Cards: It manages the credit analysis process of applications for Private Label, Open Private and Branded cards. Integrated to a Credit Engine, it enables the implementation of a credit limit policy in conjunction with Credit Score, SPC, SERASA and Internal Risk. Sub-segments served: Card management companies.
Investment Management – It serves the entire operation of investment fund and portfolio managers and trustees. Sub-segments served: Investment Fund Management and Securities Dealers, Brokers, Custody and Controllership, Private Pension Entities, Family Office, Investment Management, Non-Resident Investors, Insurance Companies;
Core Banking – It manages cash-related operations (checking accounts and similar). Sub-segments served: Development Agencies, Banks and Financial Institutions, Credit Cooperatives.
Technological platforms used
TOTVS Platform is the company's technological platform that supports the development of TOTVS
software solutions, as well as management, business and collaboration solutions.
Historically, TOTVS has been developing the TOTVS Platform to ensure its technological independence,
offering proprietary development languages and execution environments, which provide support to
current software developers and offer new functionalities and features for software solutions. This
includes hardware platforms and operating system options, as well as the choice of databases and
processing and load distribution models among execution environments. This strategy enabled TOTVS to
become one of the few software companies around the world to own this type of technology.
TOTVS currently meets the various infrastructure requirements for applications in both the on-
premises and the cloud models. The TOTVS Platform is the company's response to the need for a Platform
as a Service (PaaS) and serves as the foundation for the Software as a Service (SaaS) offering, and is
complemented by value-added offerings for Infrastructure as a Service (IaaS) needs.
Languages and technological platforms are the foundation of software development.
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AdvPL is currently used in the Protheus product line, while 4GL is used in the Logix line. The TOTVS
Platform infrastructure is responsible for compatibility and adaptability of TOTVS solutions to diverse
operating systems, databases, architectures and network topologies.
TOTVS is the only company in Latin America to have developed a middleware solution, called TOTVS
Platform. This middleware solution is also used by associated companies. The middleware used by the
company ensures its independence of (i) interface; (ii) technological platform; (iii) topology (physical
installation of and communication between the computers used by the company); (iv) connection
(communication between computers); and (v) database, protecting clients against any conflict with their
operating platforms. In addition, the middleware domain enables the company and its clients to build a
suite of hardware, operating system, network system and database system that is best suited to their
preferences, technical needs and investment capacity.
Components of the RM line are developed using Microsoft and Borland technology, while the
development platform adopted is Microsoft .NET This platform provides us with greater exposure to the
technologies available in the market.
Components of the Datasul line, both language and platform, are developed using Progress, Java (J2EE)
and TOTVS Platform technologies.
Components of the Financial Services line adopt the PowerBuilder and J2EE/Java development
platforms and languages.
Components of the Fluig platform are developed using Java technology.
The Company also developed a component, called TOTVS DBAccess, which enables communication
between its products and third-party database software. It thus avoids the creation of numerous versions
of its applications.
Research and Development
TOTVS seeks to meet the market demand for software and services, which is reflected in the
continuous efforts of its research and development department to develop state-of-the-art software and
services.
The core objectives of the Technology and Development areas are:
Improvement of the technical fundamentals of its software, enabling more efficient development of solutions;
Adoption of new technologies and assessment of their impact;
Implementation of technological alternatives that keep the operation of its products protected;
Constant improvement of concepts, functionality and usability of software products.
Development of special products for clients;
Constant pursuit of new development methodologies to seek software agility and quality;
Integration of third-party tools; and
Constant evaluation of new organizational models and their applicability.
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Development teams are located mainly in Brazil. However, it is important to mention that TOTVS has
development teams in Mexico, focused on localizing TOTVS solutions for Latin America, and in the United
States, focused on developing new and innovative solutions and on analyzing key trends in the software
market.
Over the years, TOTVS has consolidated its leadership of the ERP market in the medium and small
enterprise segments. Investments in research and development, which totaled R$831.6 million over the
last 5 years, were essential for TOTVS standing out from competition by bringing innovative solutions
power by proprietary technology and by providing value-added services.
New Products
The Company invests in the development of new products to access new markets. To identify which
products should be developed, TOTVS constantly carries out market surveys to identify business segments
that require tailored solutions and then develops solutions for such segments. The surveys are also used
to analyze, in conjunction with sales channels, potential segments that could help increase business
volume.
b) characteristics of the distribution process
TOTVS licenses its software through a combination of sales through direct (own units, subsidiaries or
branches) and indirect (franchises, representatives, authorized dealers and business agents) channels. The
franchise is the main indirect channel. Relationship with indirect sales channels increases TOTVS' market
penetration in both the domestic and foreign markets.
Franchises are exclusive distribution channels and based on the TOTVS franchise system (Sistema
TOTVS de Franquia - STF). STF defines the geographic regions of operation for each franchise, in which
exclusivity is granted by economic sector (segment). In the regions where they operate, franchises
prospect clients, carry out demonstration of solutions (pre-sale, sale and post-sale), negotiate terms of
sale (within the limits predefined by TOTVS), and provide training, deployment and customization of
solutions to client’s needs, given their local presence and proximity to clients.
Complementing the franchises’ initiatives, TOTVS employs business representatives for sales
prospecting, without exclusivity, for its solutions and/or services. These representatives foster and
manage commercial processes in specific regions, with no kind of territorial exclusivity.
Franchises and representatives receive a percentage of commission on license revenues. Franchises
also receive commission on maintenance revenue generated by clients based in territories where they
operate, besides directly charging for the service carried out.
TOTVS’ own branches serve as the reference for the operating, commercial and technical activities of
franchises. TOTVS has a department to control, monitor and coordinate franchises, which provides
advisory services and monitors their operations, as well as commercial, administrative and marketing
strategies. The activities of franchises are also controlled by satisfaction surveys conducted with clients
served by all TOTVS commercial agents.
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TOTVS also has its own service and relationship unit, TOTVS Private, whose mission is to prospect and
retain large clients.
Own units: TOTVS has 5 own units in Brazil, 2 in Mexico and 1 in Argentina.
Franchises: TOTVS has 50 franchises in Brazil and 16 across Latin America.
Distributors: TOTVS has over 200 distributors in Brazil.
Marketing
Investments in marketing in 2013 corresponded to 2.8% of net revenue. Investments were focused on
generating leads and on branding. In 2014, marketing efforts should continue focused on the brand
branding process started in 2009, with the main goal of informing the market that TOTVS has innovative
solutions for each of its 10 operating segments, which represent the key sectors of the economy.
c) characteristics of the markets of operation, particularly:
i. share in each market
TOTVS essentially operates in the development and sale of integrated management software and,
according to the Gartner group study entitled “All Enterprise Software Market Share, Worldwide,
2012-2014,” TOTVS is the largest company in Latin America in the ERP market, with 32.8% of the
Latin American market and 50.6% of the Brazilian market.
ii. competitive conditions in the markets
The Company's competitors include providers of commercial market applications (such as ERP, CRM
and BI), collaboration products and business intelligence products, as well as companies dedicated
to initiatives in open source software, in which competitors can provide software and intellectual
property without payment of license, and companies that provide consulting and outsourcing
services. Note that the software market in Brazil does not impose barriers or restrictions on the
entry of foreign competitors.
d) possible seasonality effects
The information technology industry, including the software industry, has no pronounced seasonality.
However, the second half of the year has historically recorded higher sales volume.
e) key inputs and raw materials, informing:
i. description of relations with suppliers – whether they are subject to government
control or regulation – identifying the agencies and applicable laws:
TOTVS development activities are concentrated in its own team of professionals. However, the
Company has suppliers and partners for developing some of its software solutions, as well as
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suppliers of databases that are resold to clients, and has providers of technological platforms. There
is no government control or regulation on these relations.
ii. possible dependence on few suppliers:
TOTVS uses third-party technology to develop a part of its software and technology components,
especially those in the RM and EMS Datasul product lines, which are based on the Microsoft .Net
and Progress platforms, respectively. For more information, see item 7.3.a, "Technical platforms
used," and item 7.2.a., "TOTVS solutions based on partners."
iii. possible price volatility:
Historically, the prices of TOTVS software and services have not shown significant volatility.
7.4. Clients accounting for over 10% of total net revenue
a) total amount of revenues from client
There are no clients who, individually, account for more than 10% of the Company’s net revenue.
b) operating segments affected by revenues from client
There are no clients who, individually, account for more than 10% of the Company’s net revenue.
7.5. Relevant effects of state regulation on activities
a) governmental authorizations required for carrying out activities and history concerning public administration for obtaining such authorizations
Currently, the Company’s activities are not subject to control or regulation from government.
b) issuer’s environmental policy and costs incurred for compliance with environmental regulations and, if applicable, other environmental practices, including compliance with international environment protection standards
Given the activity performed, the Company is not subject to any environmental regulation nowadays
and has no environmental policy. In May 2014, TOTVS joined the United Nations (UN) Global Compact, a
planned initiative for businesses committed to aligning their operations and strategies with ten universally
accepted principles in the areas of human rights, labor, environment and anti-corruption.
c) dependence on patents, brands, licenses, concessions, franchises, and royalties contracts relevant to activities
TOTVS uses third-party technology in the development of certain components, as mentioned in item
7.3.e.ii.
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7.6. Relevant revenues from abroad
a) revenue from clients in the issuer’s country of origin and its weight in the issuer’s total net revenue
Not applicable. The total income earned outside Brazil represents less than 2.0% of total revenue of
the Company (parent company and consolidated).
b) revenue from clients in each of the other countries and its weight in the issuer’s total net revenue
Not applicable.
c) Total revenue from other countries and its weight in the issuer’s total net revenue
Not applicable.
7.7. Effects of foreign regulations on activities
Since the revenues earned from outside of Brazil are not relevant, as mentioned in item 7.6, the
Company believes that there are no significant effects on their activities due to foreign regulation.
7.8. Relevant long term relationships
Sustainability Report
TOTVS did not publish Sustainability or Integrated Report (“Relatório Integrado”) in recent fiscal years
for not having a team dedicated to raising such information. Understanding the importance of this
issue, TOTVS put together a team in the beginning of 2015 that is responsible for raising social and
operational information for publication of the Integrated Report for the current fiscal year.
7.9. Other relevant information
The Company has not identified further relevant information related to this item other than those
disclosed.
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8. ECONOMIC GROUP
8.1. Description of the economic group
a) Direct and indirect controlling companies
There is no controlling shareholder or group of shareholders. Thus, the concept of controlling
shareholder of the Company is that set by the Novo Mercado Regulation.
b) Controlled and associated/ c) Interests of the Company in companies of the group
All companies of the group are controlled by the Company, as indicated below:
Controlled Companies Direct Indirect
TOTVS Rio Software Ltda. 100% -
TOTVS Nordeste Software Ltda. 100% - TOTVS Brasília Software Ltda. 100% - TQTVD Software Ltda. 100% - TOTVS Ventures Participações Ltda. 100% - TOTVS Soluções em Agroindústria S.A. 100% - P2RX Soluções em Software S.A. 100% - TOTVS Argentina S.A. 100% - Datasul Argentina S.A. 100% - TOTVS México S.A. 100% - Datasul S.A. de CV. 100% - TOTVS Corporation 100% - Eurototvs Lda. 100% - TOTVS Incorporation 100% - Virtual Age Soluções em Tecnologia Ltda. 100% - Ciashop – Soluções para Comércio Eletrônico S.A. 70% - TOTVS Resultados em Outsourcing Ltda. 100% - DTS Consulting Partner, SA de CV - 100%
W&D Participações S.A. - 100%
PC Informática S.A. - 100%
RMS Software S.A. - 100%
Webstrategie Software Ltda. - 100%
d) Interests of group companies in the Company
There is no interest of group companies in the Company.
e) Common controlled companies
There are no common controlled companies.
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8.2. Economic Group Organization Chart
Interests of other shareholders in Ciashop – Soluções em Comércio Eletrônico S.A. and Neolog
Consultoria e Sistemas S.A. are detailed in item 6.5 of this form.
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8.3. Restructuring operations
Operation date Corporate event Description of the operation
March 21, 2012 Merger Merger of wholly owned subsidiareis: Inteligência
Organizacional Serviços, Sistemas e Tecnologia em
Software Ltda. and Mafipa Serviços de Informática
Ltda., as per item 6.5
May 17, 2012 Merger Merger of wholly owned subsidiaries: Gens
Tecnologia e Informática Ltda., TOTVS Serviços em
Informática e Consultoria Ltda., Midbyte Informática
Ltda., BCS Comércio e Serviços de Informática Ltda.,
and TotalBanco Participações S.A, as per item 6.5
November 29, 2012 Merger Merger of wholly owned subsidiaries: Gens
Tecnologia da Informação Ltda.; YMF Arquitetura
Financeira de Negócios Ltda.; Tools Arquitetura
Financeira de Negócios Ltda.; Hery Participações
Ltda.; and TOTALBANCO Consultoria e Sistemas Ltda. ,
as per item 6.5.
January, 24, 2013 Sale and acquisition of
corporate control
Indirect acquisition of 100% of the capital stock of
W&D Participações S.A., as per item 6.5.
April, 02, 2013 Other Indirect acquisition of 20% of the capital stock of
Umov.me Tecnologia S.A., as per item 6.5.
July, 31, 2013 Sale and acquisition of
corporate control
Acquisition of 60% of the capital stock of PRX Soluções em Gestão Agroindustrial Ltda. and P2RX Soluções em Software Ltda., as per item 6.5.
August, 28, 2013 Sale and acquisition of
corporate control
Indirect acquisition of 100% of the capital stock of RMS Software S.A. e Webstrategie Software Ltda., as per item 6.5.
November, 25, 2013 Sale and acquisition of
corporate control
Indirect acquisition of 100% of the capital stock of Seventeen Tecnologia da Informação em Informática Ltda., as per item 6.5.
December 02, 2013 Sale and acquisition of
corporate control
Indirect acquisition of 70% of the capital stock of Ciashop - Soluções Para Comércio Eletrônico S.A., as per item 6.5.
May 21, 2014 Sale and acquisition of
corporate control
Acquisition of 100% of the capital stock of Virtual Age Soluções em Tecnologia Ltda., as per item 6.5.
October 10, 2014 Merger Merger of wholly owned subsidiary: TOTVS Brasil Sales Ltda, as per item 6.5.
February 11, 2015 Sale and acquisition of
corporate control
Acquisition of 60% of the capital stock of Neolog Consultoria e Sistemas S.A. (“Neolog”), as per item 6.5.
April 2, 2015 Other Indirect alienation of the ninority interest of Umov.me Tecnologia S.A., as per item 6.5.
May 5, 2015 Other Acquisition of 40% of the capital stock of TOTVS Soluções em Agroindústria S.A. (PRX Soluções em Gestão Agroindustrial Ltda before) and P2RX Soluções em Software Ltda., as per item 6.5.
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8.4. Other relevant information
The Company has not identified further relevant information related to this item other than that
divulged.
9. RELEVANT ASSETS
9.1. Relevant noncurrent assets
The Company has no other relevant non-current assets for the development of its activities.
9.1.a. Property, plant and equipment
The Company has no relevant property, plant and equipment for the development of its activities.
9.1.b. Patents, brands, licenses, concessions, franchises, and technology transfer contracts
Asset Asset Description Territory Duration Events that may result in loss of rights
Consequence of loss of rights
Brand TOTVS Brazil 10/16/2017 As per item 9.2. As per item 9.2.
Brand TOTVS Bolivia 12/03/2020 As per item 9.2. As per item 9.2.
Brand TOTVS Colombia 08/31/2020 As per item 9.2. As per item 9.2.
Brand TOTVS Costa Rica 08/03/2020 As per item 9.2. As per item 9.2.
Brand TOTVS Mexico 02/05/2014 As per item 9.2. As per item 9.2.
Brand TOTVS Mozambique 02/25/2020 As per item 9.2. As per item 9.2.
Brand TOTVS Paraguay 10/21/2018 As per item 9.2. As per item 9.2.
Brand TOTVS Argentina 01/08/2025 As per item 9.2. As per item 9.2.
Brand BY YOU Brazil 08/24/2020 As per item 9.2. As per item 9.2.
Brand Datasul Uruguay 10/15/2019 As per item 9.2. As per item 9.2.
Brand Datasul Brazil 07/17/2017 As per item 9.2. As per item 9.2.
Brand Datasul Chile 06/24/2019 As per item 9.2. As per item 9.2.
Brand Microsiga Brazil 01/07/2017 As per item 9.2. As per item 9.2.
Brand Microsiga Chile 01/09/2016 As per item 9.2. As per item 9.2.
Brand Microsiga Mexico 02/10/2014 As per item 9.2. As per item 9.2.
Brand Microsiga Paraguay 10/13/2015 As per item 9.2. As per item 9.2.
Brand Microsiga Uruguay 02/26/2017 As per item 9.2. As per item 9.2.
Brand RM Brazil 09/08/2019 As per item 9.2. As per item 9.2.
Brand YMF Brazil 04/30/2022 As per item 9.2. As per item 9.2.
Patent
PROCESSO E SISTEMA DE VENDAS E PROCESSO E SISTEMA DE IMPLEMENTAÇÃO DE UM SOFTWARE Brazil N/I As per item 9.2. As per item 9.2.
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Patent
MÉTODO PARA ELEVAR A EFICIÊNCIA ECONÔMICA DA CADEIA DE ATENDIMENTO DO SISTEMA DE SAÚDE E EFICÁCIA DO ATENDIMENTO MÉDICO Brazil N/I As per item 9.2. As per item 9.2.
Brand TOTVS USA 03/20/2022 As per item 9.2. As per item 9.2.
Brand TOTVS Europe 06/16/2018 As per item 9.2. As per item 9.2.
Brand TOTVS Hong Kong 10/21/2020 As per item 9.2. As per item 9.2.
Brand TOTVS Singapore 12/02/2020 As per item 9.2. As per item 9.2.
Brand TOTVS Japan 06/24/2021 As per item 9.2. As per item 9.2.
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9.1.c. Interests in companies
In 2014
Corporate name: Ciashop – Soluções para Comércio Eletrônico S.A. CNPJ: 04.364.470/0001-95
Country of origin: Brazil UF of origin: PR Municipality of origin: Curitiba
Description of activities developed:
Development and licensing customizable computer software and consulting in information technology.
Issuer interest: 70.00% Type of company: Controlled CVM register: No
Reasons for acquiring and maintaining such interest:
Expertise in the development and commercialization of cloud solutions for e-commerce.
Date: 12/31/2014 Market value: N/A Book value: R$ - 267,966.53
Market value var. (%): N/A Date: 12/31/2014 N/A 12/31/2013 N/A 12/31/2012 N/A
Book value var. (%): N/A Date: 12/31/2014 -1725,726390 12/31/2013 1494,100000 12/31/2012 264,084507
Dividends: N/A Date: 12/31/2014 - 12/31/2013 - 12/31/2012 -
Corporate name: Datasul Argentina S.A. CNPJ: N/A
Country of origin: Argentina UF of origin: N/A Municipality of origin: N/A
Description of activities developed:
Development and commercial exploitation of own or third party computer programs and technological solutions; technical counsel, consulting and training for areas related to computing systems; trade of assets and products related to technology.
Issuer interest: 100.00% Type of company: Controlled CVM register: No
Reasons for acquiring and maintaining such interest:
Selective takeover of competitors having synergy with TOTVS, with the purpose of consolidating the market and increasing market share.
Date: 12/31/2014 Market value: N/A Book value: R$ 338,186.71
Market value var. (%): N/A Date: 12/31/2014 N/A 12/31/2013 N/A 12/31/2012 N/A
Book value var. (%): N/A Date: 12/31/2014 -33.444758 12/31/2013 -58.185594 12/31/2012 -8.687939
Dividends: Date: 12/31/2014 - 12/31/2013 - 12/31/2012 -
Corporate name: Datasul S.A. de CV CNPJ: N/A
Country of origin: Mexico UF of origin: N/A Municipality of origin: N/A
Description of activities developed:
Development and commercial exploitation of own or third party computer programs and technological solutions; technical counsel, consulting and training for areas related to computing systems; trade of assets and products related to technology.
Issuer interest: 100.00% Type of company: Controlled CVM register: No
Reasons for acquiring and maintaining such interest:
Selective takeover of competitors having synergy with TOTVS, with the purpose of consolidating the market and increasing market share.
Date: 12/31/2014 Market value: N/A Book value: R$ 0,00
Market value var. (%): N/A Date: 12/31/2014 N/A 12/31/2013 N/A 12/31/2012 N/A
Book value var. (%): N/A Date: 12/31/2014 0,00 12/31/2013 0,00 12/31/2012 0,00
Dividends: Date: 12/31/2014 - 12/31/2013 - 12/31/2012 -
Corporate name: Eurototvs Ltda. CNPJ: N/A
Country of origin: Portugal UF of origin: N/A Municipality of origin: N/A
Description of activities developed:
Development of computing applications for corporate management technologies, their implementation and parameterization, trade of respective licenses, for own or represented products, project consulting and management, import, export, representation, purchase, sales, resale, leasing, distribution and trade in general of computing equipment; information system services, namely installation, technical assistance for repair and maintenance, counsel, and instruction.
Issuer interest: 100.00% Type of company: Controlled CVM register: No
Reasons for acquiring and maintaining such interest:
Maintaining a distribution channel in the region is part of TOTVS strategy for consolidating channels and presence in territories deemed strategic for the company.
Date: 12/31/2014 Market value: N/A Book value: R$ 316,444.56
Market value var. (%): N/A Date: 12/31/2014 N/A 12/31/2013 N/A 12/31/2012 N/A
Book value var. (%): N/A Date: 12/31/2014 -9,119344 12/31/2013 34,679100 12/31/2012 -352.841026
Dividends: Date: 12/31/2014 - 12/31/2013 - 12/31/2012 -
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Corporate name: Totvs Brasília Software Ltda. CNPJ: 07.577.599/0001-70
Country of origin: Brazil UF of origin: DF Municipality of origin: Brasília
Description of activities developed:
Consulting, counsel and development services for computing systems (software); exploitation of rights to use own or third party computing systems and data processing services, management of business and sub-licensing of TOTVS brand - may import and export assets and services related to its activities.
Issuer interest: 100.00% Type of company: Controlled CVM register: No
Reasons for acquiring and maintaining such interest:
Maintaining a distribution channel in the region is part of TOTVS strategy for consolidating channels and presence in territories deemed strategic for the company.
Date: 12/31/2014 Market value: N/A Book value: R$ 111,341,200.03
Market value var. (%): N/A Date: 12/31/2014 N/A 12/31/2013 N/A 12/31/2011 N/A
Book value var. (%): N/A Date: 12/31/2014 20,853184 12/31/2013 1768,435986 12/31/2011 72,793858
Dividends: Date: 12/31/2014 - 12/31/2013 - 12/31/2012 -
Corporate name: TOTVS Corporation CNPJ: N/A
Country of origin: British Virgin Islands UF of origin: N/A Municipality of origin: N/A
Description of activities developed:
Information technology consulting; technical support, maintenance and other information technology services.
Issuer interest: 100.00% Type of company: Controlled CVM register: No
Reasons for acquiring and maintaining such interest:
Maintaining a distribution channel in the region is part of TOTVS strategy for consolidating channels and presence in territories deemed strategic for the company.
Date: 12/31/2014 Market value: N/A Book value: R$ 0,00
Market value var. (%): N/A Date: 12/31/2014 N/A 12/31/2013 N/A 12/31/2012 N/A
Book value var. (%): N/A Date: 12/31/2014 N/A 12/31/2013 N/A 12/31/2012 N/A
Dividends: Date: 12/31/2014 - 12/31/2013 - 12/31/2012 -
Corporate name: P2RX Soluções em Softwares S/S Ltda. CNPJ: N/A
Country of origin: Sao Paulo UF of origin: N/A Municipality of origin: N/A
Description of activities developed:
Development and licensing of customizing computer software, Consulting in IT and Development Program customization.
Issuer interest: 60.0% Type of company: Controlled CVM register: No
Reasons for acquiring and maintaining such interest:
Expertise in the development and commercialization of software solutions and consulting in information technology for the agribusiness segment.
Date: 12/31/2014 Market value: N/A Book value: R$ 684,434.93
Market value var. (%): N/A Date: 12/31/2014 N/A 12/31/2013 N/A 12/31/2012 N/A
Book value var. (%): N/A Date: 12/31/2014 63,824003 12/31/2013 17,513875 12/31/2012 645,049662
Dividends: Date: 12/31/2014 - 12/31/2013 - 12/31/2012 -
Corporate name: TOTVS Argentina S.A. CNPJ: N/A
Country of origin: Argentina UF of origin: N/A Municipality of origin: N/A
Description of activities developed:
Information technology consulting; technical support, maintenance and other information technology services.
Issuer interest: 100.0% Type of company: Controlled CVM register: No
Reasons for acquiring and maintaining such interest:
Maintaining a distribution channel in the region is part of TOTVS strategy for consolidating channels and presence in territories deemed strategic for the company.
Date: 12/31/2014 Market value: N/A Book value: R$ 8,631,510.82
Market value var. (%): N/A Date: 12/31/2014 N/A 12/31/2013 N/A 12/31/2012 N/A
Book value var. (%): N/A Date: 12/31/2014 21,564070 12/31/2013 47,435475 12/31/2012 18,524159
Dividends: Date: 12/31/2014 - 12/31/2013 - 12/31/2012 -
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Corporate name: TOTVS Incorporation CNPJ: N/A
Country of origin: USA UF of origin: N/A Municipality of origin: N/A
Description of activities developed:
Information technology consulting; technical support, maintenance and other information technology services.
Issuer interest: 100.00% Type of company: Controlled CVM register: No
Reasons for acquiring and maintaining such interest:
Selective takeover of competitors having synergy with TOTVS, with the purpose of consolidating the market and increasing market share.
Date: 12/31/2014 Market value: N/A Book value: R$ 57,360,718.83
Market value var. (%): N/A Date: 12/31/2014 N/A 12/31/2013 N/A 12/31/2012 N/A
Book value var. (%): N/A Date: 12/31/2014 36,659146 12/31/2013 1212,01113 12/31/2012 196,450134
Dividends: Date: 12/31/2014 - 12/31/2013 - 12/31/2012 -
Corporate name: TOTVS México S.A. CNPJ: N/A
Country of origin: Mexico UF of origin: N/A Municipality of origin: N/A
Description of activities developed:
Innovation, creation, development and updating of programs; software and hardware trade – may import own and third party assets and services related to computing activities; general services related to consulting for management of processes and models; granting to third parties of rights to use, trade and sell services.
Issuer interest: 99.,99% Type of company: Controlled CVM register: No
Reasons for acquiring and maintaining such interest:
Maintaining a distribution channel in the region is part of TOTVS strategy for consolidating channels and presence in territories deemed strategic for the company.
Date: 12/31/2014 Market value: N/A Book value: R$ - 106,472.20
Market value var. (%): N/A Date: 12/31/2014 N/A 12/31/2013 N/A 12/31/2012 N/A
Book value var. (%): N/A Date: 12/31/2014 -110,79049 12/31/2013 -172,285565 12/31/2012 -26,05951
Dividends: Date: 12/31/2013 - 12/31/2013 - 12/31/2012 -
Corporate name: TOTVS Nordeste Software Ltda. CNPJ: 07.363.764/0001-90
Country of origin: Brazil UF of origin: PE Municipality of origin: Recife
Description of activities developed:
Consulting, counsel and development services for computing systems (software); exploitation of rights to use own or third party computing systems and data processing services, management of business and sub-licensing of TOTVS brand - may import and export assets and services related to its activities.
Issuer interest: 100.00% Type of company: Controlled CVM register: No
Reasons for acquiring and maintaining such interest:
Maintaining a distribution channel in the region is part of TOTVS strategy for consolidating channels and presence in territories deemed strategic for the company.
Date: 12/31/2014 Market value: N/A Book value: R$ 68,091,886.08
Market value var. (%): N/A Date: 12/31/2014 N/A 12/31/2013 N/A 12/31/2012 N/A
Book value var. (%): N/A Date: 12/31/2014 1,564840 12/31/2013 719,289602 12/31/2012 -8.351652
Dividends: Date: 12/31/2014 - 12/31/2013 - 12/31/2012 -
Corporate name: TOTVS Resultados em Outsourcing Ltda. CNPJ: 09.106.380/0001-18
Country of origin: Brazil UF of origin: SP Municipality of origin: Assis
Description of activities developed:
Development of custom computer programs.
Issuer interest: 100.00% Type of company: Controlled CVM register: No
Reasons for acquiring and maintaining such interest:
Selective takeover of competitors having synergy with TOTVS, with the purpose of consolidating the market and increasing market share.
Date: 12/31/2014 Market value: N/A Book value: R$0,00
Market value var. (%): N/A Date: 12/31/2014 N/A 12/31/2013 N/A 12/31/2012 N/A
Book value var. (%): N/A Date: 12/31/2014 0,00 12/31/2013 0,00 12/31/2012 0,00
Dividends: Date: 12/31/2014 - 12/31/2013 - 12/31/2012 -
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Corporate name: TOTVS Rio Software Ltda. CNPJ: 02.497.398/0001-49
Country of origin: Brazil UF of origin: RJ Municipality of origin: Rio de Janeiro
Description of activities developed:
The company’s purpose is to provide Consulting, counsel and development services for computing systems (software); exploitation of rights to use own or third party computing systems and data processing services, management of business and sub-licensing of TOTVS brand - may import and export assets and services related to its activities.
Issuer interest: 100.00% Type of company: Controlled CVM register: No
Reasons for acquiring and maintaining such interest:
Maintaining a distribution channel in the region is part of TOTVS strategy for consolidating channels and presence in territories deemed strategic for the company.
Date: 12/31/2014 Market value: N/A Book value: R$ 24,933,941.44
Market value var. (%): N/A Date: 12/31/2014 N/A 12/31/2013 N/A 12/31/2012 N/A
Book value var. (%): N/A Date: 12/31/2014 58,495788 12/31/2013 -32.688271 12/31/2012 33,067742
Dividends: Date: 12/31/2014 - 12/31/2013 - 12/31/2012 -
Corporate name: TOTVS Soluções em Agroindústria S.A. CNPJ: 09.106.380/0001-18
Country of origin: Brazil UF of origin: SP Municipality of origin: Assis
Description of activities developed:
Development of custom computer programs.
Issuer interest: 60.00% Type of company: Controlled CVM register: No
Reasons for acquiring and maintaining such interest:
Expertise in the development and commercialization of software solutions and consulting in information technology for the agribusiness segment.
Date: 12/31/2014 Market value: N/A Book value: R$ 3,735,564.16
Market value var. (%): N/A Date: 12/31/2014 N/A 12/31/2013 N/A 12/31/2012 N/A
Book value var. (%): N/A Date: 12/31/2014 -27,107025 12/31/2013 -25,716844 12/31/2012 14,975943
Dividends: Date: 12/31/2014 - 12/31/2013 - 12/31/2012 -
Corporate name: TOTVS Ventures Participações Ltda. CNPJ: 15.760.400/0001-72
Country of origin: Brazil UF of origin: SP Municipality of origin: Sao Paulo
Description of activities developed:
Participation in other society shareholder, member or in any other legally.
Issuer interest: 100.00% Type of company: Controlled CVM register: No
Reasons for acquiring and maintaining such interest:
Maintaining a distribution channel in the region is part of TOTVS strategy for consolidating channels and presence in territories deemed strategic for the company.
Date: 12/31/2014 Market value: N/A Book value: R$6,119,806.92
Market value var. (%): Date: 12/31/2014 N/A 12/31/2013 N/A 12/31/2012 N/A
Book value var. (%): Date: 12/31/2014 -18,445007 12/31/2013 N/A 12/31/2012 N/A
Dividends: Date: 12/31/2014 - 12/31/2013 - 12/31/2012 -
Corporate name: TQTVD Software Ltda. CNPJ: 09.131.273/0001-40
Country of origin: Brazil UF of origin: RJ Municipality of origin: Rio de Janeiro
Description of activities developed:
Development and trade of software products and solutions for digital television, regardless of the transmission medium, for both those designed to be installed on receiver devices and those designed for transmission, including software solutions for content producers and transmitters of digital television signals – may exploit the right to use own or third party systems and provide services for maintenance, updating and customization of system rights, as well as have interest in other companies as partner, stockholder or quotaholder.
Issuer interest: 100.00% Type of company: Controlled CVM register: No
Reasons for acquiring and maintaining such interest:
Develop an intermediary software layer making it possible to develop interactive applications for digital TV independently from the hardware platform. The TQTVD interactivity components will enable CRM and e-commerce software, distance learning platforms and mobile systems produced by TOTVS to be integrated with digital TV services. In addition, part of this technology has been used in the development of TOTVS ERP.
Date: 12/31/2014 Market value: N/A Book value: R$ 14,822,694.31
Market value var. (%): N/A Date: 12/31/2014 N/A 12/31/2013 N/A 12/31/2012 N/A
Book value var. (%): N/A Date: 12/31/2014 -29,207697 12/31/2013 10,735875 12/31/2012 6,308140
Dividends: Date: 12/31/2014 - 12/31/2013 - 12/31/2012 -
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Corporate name: Virtual Age Soluções em Tecnologia Ltda CNPJ: 15.760.400/0001-72
Country of origin: Brazil UF of origin: PR Municipality of origin: Cianorte
Description of activities developed:
Development and licensing of non-customizing computer programs and rental of machinery and office equipment.
Issuer interest: 100.00% Type of company: Controlled CVM register: No
Reasons for acquiring and maintaining such interest:
Expertise in development and commercialization of cloud software for the entire textile and clothing fashion chain.
Date: 12/31/2014 Market value: N/A Book value: R$ 9,022,781.65
Market value var. (%): N/A Date: 12/31/2014 N/A 12/31/2013 N/A 12/31/2012 N/A
Book value var. (%): N/A Date: 12/31/2014 746,566890 12/31/2013 N/A 12/31/2012 N/A
Dividends: Date: 12/31/2014 - 12/31/2013 - 12/31/2012 -
9.2. Other relevant information
Information complementary to item 9.1.b:
The Company has more than 350 trademarks in various classes, between (i) registered and (ii)
deposited but not registered, in Brazil and abroad.
In addition, the Company has approximately 80 trademark applications in the Instituto Nacional de
Propriedade Intelectual - INPI (National Intellectual Property Institute).
Among the applications for registration, it is important to highlight the one related to the “fluig” brand,
referred to the agnostic cloud platform for processes, identity and content management, launched in
2013.
BRANDS
Events that may cause loss of brands´ rights
According to article 142 of Law No. 9,279, 1996 , other events may cause the loss of brand rights,
among them, the expiration of the term, without being made an application for renewal in due time
(1 year before the respective registration); by waiving, total or partially, by the holder; and the
expiration, at the request of any person with a legitimate interest, if after five years of the grant of the
registration, if the use of the brand has not been initiated in Brazil, or if the use has been interrupted
for more than five years. In addition, the registration may be declared invalid by the INPI, ex officio or
upon third-party proposition, if the registration is granted in violation of applicable law. Finally, it is
impossible to lose the rights to the brand in the judicial sphere.
Consequence of the loss of the brands´ rights
The loss of rights over the brands causes the impossibility of preventing third parties from using
identical or similar brands to indicate competing services or products, since the holder ceases to retain
the right to exclusive use of the brand, which would harm the communication between the Company
and its target audience. There is also the possibility of the holder to be sued in criminal or civil court
for improper use in the event of infringement of third party rights.
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Events that may cause the loss of rights of deposited but not registered brands
The main event that may cause loss of rights of the deposited, but still not registered brands, is the
rejection of registration by INPI. INPI is responsible for deciding on the brands in Brazil. It can reject a
brand registration request by third party proceedings, if it intends founded.
Consequence of loss of rights of deposited but not registered brands
If the INPI rejects the registration of such brands, the Company may be sued in criminal or civil court
for improper use in the event of infringement of third party rights.
PATENTS
Events that may cause loss of rights
The main event that may cause loss of rights of the deposited but still not registered patents is the
rejection of registration by INPI. INPI is responsible to decide on the registration of patents in Brazil.
They can reject a patent registration request or by third party proceedings, if it intends founded.
Consequence of loss of rights
If the INPI rejects the registration of such patents, the Company may be sued in criminal and civil court
for improper use of a patent and violation of third party rights, and incur costs to pay royalties to such
third parties.
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10. MANAGEMENT’S COMMENTS
10.1. Executive officers’ comments on:
a) overall financial position
2014: The Company maintained its historical growth of revenues and net income, growing 10.0% in net revenues and 17.8% in net income. Due to the strong operating cash generation and the inflow of the second installment, in the amount of R$227.647 million, of to the credit line approved by the Banco Nacional de Desenvolvimento Econômico e Social (BNDES) in 2013, TOTVS ended the year with R$697.901 million in cash, increasing its cash and cash equivalents in R$164.838 million.
The Company ended 2014 with a net cash position of R$67.924 million, compared to
R$87.467 million in 2013. The variation in this indicator is mainly explained by the increase of 2013´s dividends payout, paid in 2014, and the execution of the totallity of the Share Buyback Program approved by the Board of Directos in July, 2014.
Information regarding the Company's liquidity in 2014 can be found in the item 10.1.c. 2013: The Company grew its revenues and net income, growing 14.0% in net revenues and
7.7% in net income. Due to the strong cash generation and the inflow of the first installment, in the amount of R$250.000 million, of to the credit line approved by the Banco Nacional de Desenvolvimento Econômico e Social (BNDES), TOTVS ended the year with R$533.063 million in cash, increasing its cash and cash equivalents in R$120.655 million.
The Company ended 2013 with a net cash position of R$87.468 million, compared to
R$162,691 million in 2012. The variation in this indicator is mainly explained by the increase of acquisitions in 2013.
Information regarding the Company's liquidity in 2013 can be found in the item 10.1.c. 2012: The Company maintained its growth trajectory in revenue and profitability, showing
double-digit growth (+10.5%) in net revenue and again surpassing the record of net income, which reached R$207.148 million. This year, the Company increased its cash and cash equivalents in R$125.329 million, ending the year at R$412.408 million. Furthermore, the Company ended the year with net cash of R$162.691 million, compared to R$52.942 million of net debt of 2011. This variation is explained by the amortization of the financing lines from loans and debentures hired in 2008 and the strong operating cash flow of the year.
Information regarding the Company's liquidity in 2013 can be found in the item 10.1.c.
b) capital structure and possibility of share or quota redemption, indicating:
The Company finances its operations through equity and financing lines. In 2014, the ratio of gross debt and net equity was 56%, compared to 42% in 2013. This variation is mainly due to (i) the increase in the long-term debt of the Company, mainly due to the inflow of the second installment, in the amount of R$227.647 million, of the credit line hired from BNDES in 2013. In 2012, the ratio of gross debt and equity was 27%. The variation between 2012 and 2013 was mainly caused by (i) the increase in loans and long-term financing lines, due to the the first installment, in the amount of R$250.000 million, of the credit line approved by BNDES in 2013
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and by (ii) the increase in the Liabilities for acquisition of investments, reflecting the acquisitions made in 2013, which did not consider shares as a funding source.
i. redemption assumptions
The Company does not consider redeeming its shares.
ii. Formula to calculate the redemption amount Not applicable.
c) payment capacity in relation to the financial commitments
The Company has been fully capable to its financial commitments, since its operations are strong cash generating units and loans are basically granted to clients on a short-term basis.
Part of liabilities and receivables derives from the services to implement software and other,
which are rendered in the country where these products are sold. Therefore, there is natural hedge against currency devaluation and exchange parity effects.
The Company keeps a conservative investment profile and it does not operate in the risk
and/or derivative markets. 2014: The Company did not hire relevant financing lines in 2014. In the fourth quarter, there
was the inflow of R$227.647 million, corresponding to the second installment of the credit line approved by Banco Nacional de Desenvolvimento Econômico e Social (BNDES) in 2013. The Company ended the year with a net cash position of 0.16x LTM EBITDA (EBITDA - Earnings before interest, taxes, depreciation and amortization) and with current liquidity ratio of 3.0, versus 2.6 of the previous year, which reinforces the maintenance of the good financial health to honor its short-term obligations. When analyzed the overall liquidity index of 1.4 in 2014, it is possible to verify the ability to pay the long-term obligations of the Company.
2013: The Company hired a credit line from the Banco Nacional de Desenvolvimento
Econômico e Social (BNDES), in the amount of R$658.601 million, in order to finance its investments in innovation, industry-specialization of its solutions and social projects. The first installment of this credit line, in the amount of R$250.000 million, was granted to TOTVS in the fourth quarter. The Company ended the year with a net cash position at the rate of 0.22xLTM EBITDA and with current liquidity ratio of 2.6, a growth of 14.8% over the previous year, which reinforces the maintenance of the good financial health to honor its short-term obligations. When analyzed the overall liquidity ratio of 1.5 in 2013, it is possible to verify the ability to pay the long-term obligations of the Company.
2012: The Company did not acquire major financings in 2012. In the year ended, the
Company turned its net debt into a net cash position of 0.42xLTM EBITDA, and with current liquidity ratio of 2.2, an increase of 13.3% over the previous year, reflecting the good financial health of the business in order to honor its short term obligations. When analyzed the overall liquidity index of 1.7, a growth of 37.0% over the previous year, it is possible to verify the ability to pay the long-term obligations of the Company.
d) financing sources for working capital and investments in non-current assets
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2012 to 2014: the working capital and investments in non-current assets were basically financed by own funds’ from the Company’s operating cash generation. The Company did not hire relevant financing lines to finance its working capital or investments in fixed assets.
e) financing sources for working capital and investments in non-current assets to cover
liquidity deficiencies
The Company does not have liquidity deficiencies and does not needed to seek financing sources for working capital or investments in non-current assets, since it believes it does not have liquidity deficiencies.
f) indebtedness levels and characteristics of these debts, also outlining:
i. relevant loan and financing agreements The Company’s loans and financing, as well as the balance of each one at the end of each period, are demonstrated in the table below:
(In R$ thousands)
Parent Company Consolidated
2014 2013 2012 2014 2013 2012
BNDES 481,974 305,095 104,495 481,974 305,095 104,495 FINEP - 32 424 - 32 424 Secured accounts and other - - - 516 1,316 548
Loans and financing lines 481,974 305,127 104,919 482,490 306,443 105,467 Debentures 112,854 104,205 142,677 112,854 104,205 142,677
Total 594,828 409,332 247,596 595,344 410,648 248,144 Current 58,632 56,932 96,781 59,148 58,248 97,329 Non-current 536,196 352,400 150,815 536,196 352,400 150,815
The amounts recorded in non-current liabilities at the end of each period have
the following maturity schedule:
(In R$ thousands)
Parent Company Consolidated
2014 2013 2012 2014 2013 2012
2014 - - 51,068 - - 51,068 2015 - 40,129 32,002 - 40,129 32,002 2016 167,414 110,502 48,002 167,414 110,502 48,002 2017 134,339 77,427 19,743 134,339 77,427 19,743 2018 135,503 72,259 - 135,503 72,259 - 2019 98,490 52,083 - 98,490 52,083 -
536,196 352,400 150,815 536,196 352,400 150,815
BNDES: On August 19, 2008, the Board of Directors approved the loan from the National Bank for Economic and Social Development (BNDES), in the amount of R$204,500, within the scope of the Program for the Development of the Software National Industry and Information Technology Services – PROSOFT. The Company provided with the amount of R$160,000 in September 2008, and R$44,500 in April 2009. This amount is secured by a letter of bank guarantee from Santander.
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This loan has the purpose of financing software innovation research, brand repositioning and restructuring of sale channels, and bear Long-Term Interest Rate – TJLP plus 1.5% interest p.a., maturing every six months. TOTVS settled this loan in September, 2014.
On September 13, 2013, the Board of Directors approved the loan from of R$658.501 million, which has an amortization period of 72 months, including 24 months of grace period for the principal amount, to be released as proof of completion of investments, and divided into three sub-credits, as described below:
Sub credit "A" the amount of R$596.835 million, which bears interest of 1.5% per year above the TJLP, to be invested between 2013 and 2015 on the development of the qualitative solutions offered by TOTVS, in the range of the BNDES - PROSOFT;
Sub credit "B" the amount of R$58.466 million, which bears interest of 3.5% per year, to be invested in the development of its platform named "fluig", in the range of the BNDES Program of Investment Supporting, Subprogram Innovation and Machinery and Efficient Equipment;
Sub credit "C" the amount of R$3.300 million, which bears TJLP, to be invested in corporate social responsibility projects to be performed by TOTVS.
In October, 2013, the first installment, in the amount of R$250.000 million, was made available to the Company. In November, 2014, the second installment, in the amount of R$227.647 million, was also made available.
Software Development – FINEP: This loan – taken out by the subsidiary Datasul – bears Long-Term Interest Rate, plus 5% interest p.a. and is secured by bank letters of guarantee. TOTVS settled this loan in December, 2014.
Debentures: On August 19, 2008, shareholders approved raising R$200,000 through the issue of up to 100,000 Units, represented by Brazilian Depositary Receipts, with each Unit comprising two non-detachable debentures, one of which is 1st series convertible and the other is 2nd series convertible.
On August 26, 2009, in order to break down the mode of calculation of the: (a) remuneration of debentures convertible into shares of both series of the 1 private issue of the Company (“Debentures”); (b) premium due to non-conversion of Debentures; (c) conversion percentage; (d) premium over price in the event of mandatory conversion of Debentures, the Company executed the 2nd amendment to the private deed of the 1st issue of debentures.
1st series debentures will be paid based on the IPCA (Brazil's Extended Consumer Price Index) price increased by 3.5% interest p.a., limited to TJLP increased by 1.5% p.a., annually payable on August 19. 2nd series debentures will be paid based on the TJLP increased by 1.5% p.a., half-yearly payable on February 19 and August 19.
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The Company will pay pro rata temporis remuneration owed up to the effective payment day, under the circumstances: (i) possible debenture conversions; (ii) scheduled amortizations; (iii) early maturity; and (iv) final maturity or settlement of debentures.
The Units could be compulsorily converted into common shares of the Company, if from the date of its issuance on, the weighted 360 days of the Company's shares average price, calculated on the trading floors on the Stock Exchange of São Paulo and calculated on the date of the Units, in each period, was greater than the volume-weighted average of the Company's share price, also calculated at the Bovespa trading sessions, the period from June 6 to August 31, 2008 ("base period"), plus a premium of 50% of the weighted value of the shares of the said period, during the first three anniversaries of the debenture, dropping to 46%, 42% and 40% in subsequent years. For purposes of calculating the weighted value of shares of the base period, the historical values were updated based on indexes defined in the bookkeeping of debentures and updated based on the geometric mean between IPCA + 12% and + 9% TJLP for the number of days accrued between the date of determination and the date of issue.
If the valuation reached the conditions described above, debenture holders would be required to convert the debentures, and the mandatory conversion could only occur after 2 years from the date of issue, i.e., August 19, 2010, up to 15% of the debentures issued up to 30% in 2011 up to 45% in 2012 and by 60% in 2013. Once the described conditions were met, the Company mandatorily converted 60% of the debentures into shares.
Thus, the Board of Directors approved, within the authorized capital of TOTVS, the issuance of common shares, nominative and with no par value share, and consequently increased the share capital of TOTVS as follows:
Year Shares Price per share Capital Increase (R$ million)
2010* 1,534,356 R$ 19.54593 R$ 29,996
2011 1,389,191 R$ 21.59671 R$ 30,002
2012 1,267,849 R$ 23.66052 R$ 29,998
2013 1,141,532 R$ 26.28040 R$ 30,000
* Number of shares and price per share of 2010 were adjusted taking into account the stock split occurred on 02/03/2011. In 2010, the number of shares issued, excluding the split, was 306,871 and the price per share was R$97.74767.
The conversion price was also the volume-weighted average price of the Company shares, calculated on the Bovespa exchange in the base period, plus a premium over the weighted value of shares of that period. For purposes of calculating the weighted value of shares of the base period, the historical values were updated based on indexes defined in the bookkeeping of debentures.
Notwithstanding these maximum conversion percentage mentioned, debenture holders could convert 100% of the debentures if: i) a third party acquires more than 20% of the shares of the Company, or ii) if the proportion of independent directors on the Board of Directors of the Company be less than 50%. The
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conversion price will be adjusted proportionately and simultaneously to the capital increase.
The debentures not converted will be entitled to a non-conversion premium, and for debentures of the 1 series equivalent to the difference between the IPC-A plus 8% per annum and pay mentioned above, and for debentures of the 2nd equivalent series interest of 3.5% per annum. The non-conversion premium of debentures of the 1 series will be corrected by the IPC-A plus 8% p.a. and the 2nd series will be adjusted by TJLP plus 5% per annum. The non-conversion premium will be paid for a maximum of 6 installments within 3 years from the date of payment of the last installment of principal and interest (February 19, 2017).
The debentures have early maturity clauses to the case of non-compliance with certain financial and non-financial conditions, and other ancillary obligations. On December 31, 2014, 2013 and 2012, the Company was in full compliance with all conditions stipulated.
The issue was not filed with the Brazilian Securities and Exchange Commission, as the debentures issued by the Company was privately issued exclusively to the Company’s shareholders on the placement date, with no general marketing sales efforts. ii. other long-term relationships with financial institutions Company does not maintain other relevant long-term relationships with financial institutions, besides those outlined in item 10.f.i. iii. level of subordination between debts Not applicable. iv. eventual restrictions imposed to the issuer, especially, in relation to the indebtedness limits and contracting of new debts, distribution of dividends, disposal of assets, issue of new securities and sale of share control BNDES: The loan from BNDES hired in 2013 states that it is the Company´s obligation to maintain, during the term of this Contract, the following financial ratios whose calculation will be based on the consolidated financial statements, subject to special review in the first semester, and audited at the end of the year, by external independent auditors registered in Brazilian Securities Commission – CVM.
1. Equity/Total Assets: equal or greater than 40%; and 2. Net debt/EBITDA: equal or less than 1.5;
In the event of non-achievement of the indicators listed in section XI, the Company shall constitute collateral, accepted by BNDES, corresponding to at least 130% of the outstanding balance on loans contracted with BNDES which exceed 20% of Total Assets of the Company at the time, or submit a letter of bank guarantee be provided by a financial institution with direct exposure, which exceed 20% of the Total Assets of the Company at the time.
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If the Net Debt/EBITDA ratio exceeds 2.0, the Company shall constitute collateral, accepted by BNDES, corresponding to at least 130% of the financing or debt value arising therefrom, or present bank guarantee in the amount of the debt.
Moreover, the financing contract with BNDES may still have their early maturity if:
- the cases stipulated in articles 39 and 40 of the "PROVISIONS APPLICABLE TO BNDES CONTRACTS" are not respected. According to these articles, BNDES may declare the early maturity of the contract if (i) a breach of any obligation incurred by TOTVS with BNDES and its subsidiaries occurs, (ii) the controllership of TOTVS changes after contracting the funding, without prior authorization of BNDES, (iii) any judicial procedure or event that may affect the collateral in favor of BNDES occurs.
- occurs a reduction in the Company´s staff, according to the project submitted to BNDES for obtaining the financing, without compliance with the provisions in paragraph IV of Article X of the financing agreement, which states for the provision of focused training program for work opportunities in the region and/or relocation program of workers at other companies.
- there are condemnatory existences of final judgment due to the practice of child labor, slave labor or crimes against the environment;
- there is an inclusion in the Company´s corporate agreement, bylaws or articles, or companies that may control TOTVS, of conditions leading to restrictions or loss of ability to pay financial obligations resulting from this operation.
Debentures: The deed of 1st private issue of debentures convertible into the Company shares establishes that the Company shall maintain, during the existence of Units until their final maturity, at least, two of the following Company’s financial ratios annually verified in the financial statements audited by external auditors registered at the Brazilian Securities and Exchange Commission:
1. Net Debt/EBITDA ratio: equal or less than 4.0; 2. EBITDA/Net Revenues ratio: equal or less than 10%; 3. EBITDA/Debt Service: equal or higher than 1.0;
The Units may also early mature if certain events provided for in Clause IV of the private deed of 1st issue of debentures occur. The main events are: (i) Protest of bills against the Company in an individual amounts exceeding R$10.0 million or aggregate amount in a period of consecutive 12 months exceeding R$50.0 million; (ii) In-court or out-of-court reorganization proceeding filed by the Company;
(iii) Dissolution and liquidation of the Company;
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(iv) The inclusion in shareholders’ agreement or Bylaws of the Company, as of the issue date of a provision requiring a special quorum for resolution or approval of matters restricting or curtailing the Company’s control by respective controlling shareholders, as provided for in the Brazilian Corporation Law, or also, the inclusion of a provision in these documents that implies: (i) restrictions to the Company’s growth capacity or its technological development; (ii) restrictions to the Company’s access to new markets; or (iii) failure to pay the financial liabilities deriving from this operation. (v) Change of the Company’s purposes, unless if previously approved by the holders of Units representing the majority of outstanding Units, except for the inclusion of other activities in the Company’s purposes, as long as these are related to its main activity; (vi) Approval of the Company’s capital stock decrease due to refund of a part of shares to shareholders or due to their decreasing value, when not fully paid to the amount of receipts, without the previous and express consent of Units holders representing the majority of outstanding Units; (vii) Creation of redeemable shares by the Company without the previous and express approval of Units holders representing the majority of outstanding Units; (viii) Sale of effective, direct or indirect share control of the Company, by any means, unless if previously approved by Units holders representing the majority of outstanding Units; (ix) The Company acquires share control or shareholding in other entities, joint ventures or partnerships whose purposes are not related to information technology or provision of services, characterizing deviation of the Company’s purposes, unless if previously approved by Units holders representing the majority of outstanding Units; (x) Company’s delisting from the “Novo Mercado” (New Market) of São Paulo Stock Exchange — BOVESPA, without the previous and express approval of Units holders representing the majority of outstanding Units.
g) Limits of utilization of financing already contracted
The financing lines hired by the Company do not have limits for use. The Company has already used 100% of the proceeds of loans hired in 2008 (BNDES Prosoft and Debentures) and 100% of resources related to the two fisrt tranches of the credit line hired from BNDES in 2013.
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h) Significant changes in each item of the financial statements
CONSOLIDATED BALANCE SHEET (in R$ thousands)
2014 2013 2012
Current Assets
Cash and cash equivalents 697,901 533,063 412,408
Marketable securities 35,169 13,277 10,168
Trade accounts receivable 448,360 404,985 333,609
Allowance for doubtful accounts (58,864) (39,765) (44,014)
Taxes recoverable 6,336 7,634 19,506
Other assets 27,258 22,554 13,303
Total Current Assets
1,156,160 941,748 744,980
Non-Current Assets Long-Term Assets
Marketable securities 70,680 61,322 13,123
Financial assets at fair value 46,934 36,332 -
Trade accounts receivable 40,828 24,126 39,583
Deferred income and social contribution taxes 57,525 48,707 58,001
Judicial deposit 22,420 14,616 7,831
Other assets 18,112 19,348 11,458
Total Long-Term Assets 256,499 204,451 116,956
Permanent Assets
Property, plan and equipment 79,121 70,674 58,089
Intangible assets 652,086 631,907 487,556
Total Permanent Assets 731,207 702,581 545,645
Total Assets 2,143,866 1,848,780 1,420,621
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CONSOLIDATED BALANCE SHEET (in R$ thousands)
2014 2013 2012
Current Liabilities
Payroll and labor obligations 111,397 99,552 95,072
Trade accounts payable 35,479 33,149 30,281
Taxes payable 13,739 13,836 3,518
Loans and financing 25,314 56,443 54,399
Debentures 33,834 1,805 42,930
Commissions payable 58,571 57,584 45,382
Dividends payable 47,071 32,067 49,681
Liabilities from acquisition of investments 51,499 63,717 11,399
Other liabilities 2,707 9,500 1,354
Total Current Liabilities 379,611 367,653 334,016
Non-Current Liabilities
Loans and financing 457,176 250,000 51,068
Debentures 79,020 102,400 99,747
Provision for losses on investments 938 355 -
Provision for legal obligations related to legal proceedings
12,518 1,064 -
Liabilities from acquisition of investments 88,983 45,830 13,465
Other liabilities 7,558 5,399 -
Total Non-Current Liabilities 646,193 411,289 173,459
Equity
Capital 526,592 526,592 480,598
Treasury shares (52,212) (12,960) -
Capital reserve 92,493 98,327 78,241
Other comprehensive income results 29 (1,720) (2,213)
Retained profit reserve 451,768 354,470 287,717
Proposed additional dividend 97,704 102,912 68,803
Non- controlling interests 1,688 2,217 -
Total Equity 1,118,062 1,069,838 913,146
Total Liabilities and Equity 2,143,866 1,848,780 1,420,621
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Consolidated Income Statements (in R$ thousands)
2014 2013 2012
License fees 360,780 347,808 329,424 Services 524,363 480,655 414,871 Maintenance
887,304 783,331 669,681
Net Revenues 1,772,447 1,611,794 1,413,976
Cost of license fees (83,123) (74,569) (55,969)
Costs of services and maintenance (516,036) (466,727) (400,851)
Gross profit 1,173,288 1,070,498 957,156
Operating income (expenses) Research and development (240,390) (213,602) (174,332)
Advertising expenses (41,439) (44,650) (33,942)
Selling expenses (131,741) (107,432) (88,058)
Commissions (154,986) (154,144) (141,014)
General and administrative expenses (114,376) (95,809) (82,875)
Management fees (26,049) (28,734) (35,046)
Depreciation and amortization (88,928) (82,558) (81,228)
Allowance for doubtful accounts (27,565) (23,652) (23,234)
Other net operating income (expenses) (155) (397) (607)
Income before financial effects and equity pickup 347,659 319,520 296,820
Financial income 71,008 40,459 45,415
Financial expenses (57,826) (43,116) (54,038)
Equity pick-up (583) (496) -
Income before tax and social contribution 360,258 316,367 288,197
Income tax and social contribution (97,460) (93,267) (81,049)
Net income for the year 262,798 223,100 207,148
Basic earnings per thousand shares (in R$) 1.61 1.37 1.29
Comments on the Company's 2014 and 2013 consolidated balance sheet: Current Assets: Current Assets totaled R$1,156.160 million in 2014, an increase of 23%
compared to R$941.748 million of 2013. This increase was mainly due to the growth in Cash and cash equivalents, which increased from R$533.063 million in 2013 to R$697.901 million in 2014, Accounts receivable, which grew 11% in 2014, totaling R$448.360 million, and Allowence for doubtful accounts, which totaled R$58.864 million.
The growth in Cash and cash equivalents is mainly a consequence of the inflow of R$277.647
million in the Company's cash, regarding the second installment of the credit line hired from BNDES in 2013; the increase of M&A investments made by the Company; the generation of net operating cash flow in the period in the amount of R$332.045 million; and the execution of the totallity of the Share Buyback Program approved by the Board of Directors in July 2014.
The increase of 10.7% in Accounts receivable is mainly the result of the sales increase in 2014.
In Allowence for doubtful accounts, the growth in the period is mainly a due to the amount of R$8.466 million that was written off from the provision in 2014, compared to R$27.901 million
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written off in 2013. Current Assets represented 54% of total assets in 2014, compared to 51% in 2013.
Long Term Assets: The Long-Term Assets totaled R$256.499 million in 2014, an increase of
25% when compared to 2013. This growth was mainly influenced by the increase of 69% in Accounts receivable, which totaled R$40.828 million, reflecting the growth in long-term sales in 2014.
Judicial Deposits and Financial assets at fair value also contributed to the variation of the
Long Term Assets. Judicial deposits increased 53.4% in 2014, totaling R$22.420 million. This variation mainly reflects the increase in judicial deposits related to civil and labor lawsuits. The growth in Financial assets at fair value, which refers mainly to the investment in GoodData in 2013, was 29% in the year, a result of the exchange rate effect of this investment and the addicional investment of R$3.194 million on the third quarter.
Permanent Assets: In 2014, Permanent Assets represented 34% of total assets, versus 38% in
2013. In 2014, the fixed assets totaled R$731.207 million, an increase of 4.1% on 2013. This increase was primarily the consequence of the intangible assets arising from acquisitions made in 2014, and also the depreciation and amortization.
Current Liabilities: Current Liabilities in 2014 totaled R$379.611 million, an increase of 3.3%
compared to R$367.653 million in 2013. This growth was mainly due to the increase in Debentures, from R$1.805 million in 2013 to R$33.834 million in 2014, reflecting the amortization of 40% of the principal value in the amount of R$32.000 million, to occur in August 2015, which was accounted in Long Term Liabilities and the amortization of the loan hired from BNDES in 2008.
In addition, Dividend payable increased 47% in the period, resulting mainly from the net
income growth of the year. The Current Liabilities represented 18% of the Company's total liabilities, compared to 20% in 2013.
Long Term Liabilities: Long-Term Liabilities totaled R$646.193 million in 2014, compared to
R$411.289 million in 2013. This increase in long-term liabilities primarily resulted from the increase in Loans and financing due to the inflow of R$227.647 million related to the seccond installment of the credit line hired from BNDES in 2013, and the increase of R$43.153 million in Liabilities from acquisition of investments, which totaled R$88.983 million in 2014, reflecting the acquisitions made in the year, and from the increase of R$5.213 million in Provision for contingences.
Shareholder´s Equity: The Company ended 2014 with an equity of R$1,118.062 million, an
increase of 5% over 2013. The equity increased primarily due to the increase of Retained earnings, reflecting the Company's growth of net income, and the increase of R$39.252 million of Treasury shares in the period, mainly resulting from the execution of the totality of the Buyback Program approved by the Board of Directors in July 2014.
The Shareholder´s Equity in 2014 represented 52% of total liabilities, compared to 58% in
2013, representing a decrease of 5 percentage points, mainly due to the the increase in Liabilities from acquisition of investments and Loans and financing.
Comments on the Company's 2013 and 2012 consolidated balance sheet:
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Current Assets: Current Assets totaled R$941.748 million in 2013, an increase of 26%
compared to R$744.980 million of 2012. This increase was mainly due to the growth in Cash and cash equivalents, which increased from R$412.408 million in 2012 to R$533.063 million in 2013, and Accounts receivable, which grew 21% in 2013, totaling R$404.985 million. Growth in Cash and cash equivalents is mainly a result of the inflow of R$250.000 million in the Company's cash, regarding the first installment of the credit line from BNDES, and the increase of M&A investments made in 2013. The increase in accounts receivable is the result of the increase in sales and consolidation of the balance sheets of the companies acquired in 2013. Current Assets represented 51% of total assets in 2013, compared to 52% in 2012.
Long Term Assets: The Long-Term Assets totaled R$204.451 million in 2013, an increase of
57% when compared to 2012. This increase was mainly related to the growth in the Marketable securities, due to the increase in the balances of escrow accounts for the acquisition of intangible assets in 2013, and the balance of R$36.332 as Financial assets at fair value, which refers to the investment in GoodData and uMove.me in 2013. It is important to mention that the Accounts receivable decreased 39%, reflecting the reduction in the sales volume with more than 12-month term.
Permanent assets: As in 2012, in 2013 the Permanent assets represented 38% of total assets.
In 2013, the fixed assets totaled R$701.568 million, an increase of 28.6% on 2012. This increase was primarily the consequence of the intangible assets arising from acquisitions made in 2013. It is important to mention that investments in Research and development TOTVS are not capitalized, so all of these investments are fully reflected in the research and development expenses presented in the income statement, not impacting the fixed assets of the Company.
Current Liabilities: Current liabilities in 2013 totaled R$367.653 million, an increase of 10%
compared to R$334.016 of 2012. This growth was mainly due to the increase in Liabilities from acquisition of investments, from R$11.399 million in 2012 to R$63.717 million in 2013, reflecting the acquisitions made during the year. The Current liabilities represented 20% of the Company's total liabilities, compared to 24% in 2012.
Long Term Liabilities: The long-term liabilities totaled R$411.289 million in 2013, compared
to R$173.459 million in 2012. This increase in long-term liabilities primarily resulted from (i) the increase in Loans and financing due to the inflow of R$250,000 million related to the first installment of the credit line hired from BNDES and (ii) an increase in R$32.365 million from Liabilities from acquisition of investments, which totaled R$45.830 million in 2013, reflecting the acquisitions made in the year.
Shareholder´s Equity: The Company ended 2013 with equity of R$1,069,838 million, an
increase of 17% over 2012. The equity increased primarily due to the increase of Retained Earnings, reflecting the Company's growth of net income, and the increase in capital due to the issuance of shares for debentures conversion. The Shareholder´s Equity in 2013 represented 58% of total liabilities, compared to 64% in 2012, representing a decrease of 7 percentage points, mainly due to the increase in Liabilities from acquisition of investments and Loans and financing.
Comments on the Company's 2012 and 2011 consolidated balance sheet:
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Current Assets: Current Assets reached R$744.980 million in 2012, an increase of 20% from
the R$621.340 million recorded in 2011. This increase was mainly due to the increase in Cash and Cash Equivalents, up from R$287.079 million in 2011 to R$412.408 million in 2012; and in Accounts receivable, up from R$295.094 million in 2011 to R$333.609 million in 2012. Both increases derive from the growth in the Company's sales and operating cash generation. Current Assets represented 52% of total assets in 2011, versus 46% in 2011, increasing the company short-term liquidity, mainly by the accumulation of cash generated by operations in the period.
Long-Term Assets: Long-Term Assets reached R$129.996 million in 2012, an increase of 11%
versus 2011. This increase was mainly due to the influence of Accounts receivable because of the increase in sales, mainly regarding implementation services by the Company, and Judicial deposits, influenced by an increase in labor lawsuits in the year.
Fixed Assets: In 2012, Fixed Assets accounted for 38% of the Company total assets, comparing
to 45% in 2011. In 2012, Fixed Assets totaled R$545.645 million, down 9% comparing to 2011. This reduction is chiefly due to the amortization of intangible assets from acquisitions.
Current Liabilities: Current Liabilities in 2012 reached R$334.016 million, an increase of 6%
over the R$313.531 million recorded in 2011. This increase was mainly due to the increment on the following accounts; (i) Suppliers, which rose from R$ 19.535 million in 2011 to R$30.281 million in 2012, mainly due to higher presence of partner solutions in new sales, and (ii) Social and labor obligations, which increased from R$72.985 million in 2011 to R$ 95.072 million in 2012, chiefly due to the headcount increase, wage readjustments and the bonus provisions. Current Liabilities remained stable, representing 24% of the total liabilities in both 2012 and 2011.
Long-Term Liability: Long-Term Liability reached R$173.459 million in 2011, a decrease of
36% versus 2011. This reduction is due to the significant decrease in Loans and Financing derived from the partial amortization of the principal, and in Debentures, which decreased from R$131.203 million in 2011 to R$99.747 million in 2012 due to the conversion of 15% of the debentures in August. Long-term Liabilities represented 12% of total liabilities in 2012, compared to 20% in 2011, mainly due to the maturity of the debentures and financing lines contracted, and the absence of new debt, given the Company´s strong operating cash generation adequate to support the growth of its operations.
Shareholders' Equity: The Company ended 2012 with Shareholders' Equity of R$913.146
million, an increase of 22% versus 2011. This growth was due to the increase in the Retained profit reserve, up from R$173.052 million in 2011 to R$262.199 million in 2012, reflecting the increase in net income; and the increase in the Capital Stock following the issuance of shares for the debentures conversion. Shareholders' Equity represented 64% of total Liabilities for the year, an increase of 8 percentage points versus the 56% of 2011.
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Comments on the Company's 2014 and 2013 consolidated financial and operating performance:
The Company ended 2014 with net income of R$262.798 million, 17.8% up 2013. The
Company's net income margin was 14.8% in 2014, compared to 13.8% in 2013, the highest net income margin ever achieved since the Company’s IPO in 2006.
TOTVS achieved EBITDA* (EBITDA - earnings before interest, taxes, depreciation and
amortization) of R$436.587 million in 2014. The Company maintained its steady growth in all revenue lines despite the Brazilian economic scenario in 2014.
In 2014, the Company net revenue totaled R$1,772.447 million, an increase of 10.0% over
the previous year. This growth is due to (i) the Company's initiatives to capture the growth of the software market, including the specialization by industry sector in the development and sales teams, (ii) the increase in recurrent revenue, (iii) the launch of Fluig productivity and collaboration platform, and (iv) the acquisitions made in 2014.
License fees increased by 3.7% between 2013 and 2014, totaling R$360.780 million. In 2014,
the growth in license fees was concentrated in sales to new clients, which grew 11.5% over 2013, mainly due to the growth of 20.0% in the average ticket of sales made.
Even with the decrease in working days, mainly due to the soccer world cup, the net services
revenue grew 9.1%, totaling R$524.363 million. This growth, higher than the growth of license fees, is mainly explained by the variation in the license sales mix between franchises and own channels and by the constant efforts to increase the service team performance.
Net revenues from maintenance totaled R$887.304 million in 2014, an increase of 13.3% over
2013. The growth in maintenance revenue primarily resulted from license sales from the previous quarters, the retention of maintenance contracts, which are subject to annual adjustment based on pre-defined levels of inflation, mostly IGP-M, and the results from acquired companies in 2014.
The operating costs and expenses, excluding depreciation and amortization, increased by
10.4% between 2013 and 2014, 0.4 percentage points higher than the growth in net revenues. This growth is mainly due to: (i) the maintenance of investments in innovation and specialization of sales teams and products; (ii) the salary increases due to the collective bargaining agreements settled above the inflation readjustments over revenues.
The cost of license fees amounted R$83.123 million, an increase of 11.5% compared to 2013.
This growth was mainly influenced by the increase in solutions developed by partners that are integrated within TOTVS solutions.
Cost of services and sales increased by 10.6% in 2014, higher than the 9.1% of services
revenue growth in the period. This growth is mainly due to the collective bargaining agreements settled in 2014 and operational efficiency decrease of the service teams in the second half of 2014, affected by the soccer world cup.
Research and development expenses amounted to R$240,390 million in 2014, a growth of
12.5% over 2013. This growth is the consequence of the intensive investments mainly related to product specialization by market industry, as well as the R&D investments from the companies acquired during 2013 and 2014, and the wage increases in the period.
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Advertising expenses decreased 7.2% in 2014. The level of investments is in line with the
Company's history from the last two years and reflects the communication plan, which addressed the efforts to increase TOTVS´s brand recognition, the 22th most valuable brand in Brazil.
Selling expenses totaled R$131.741 million in the year, an increase of 22.6%. Commission
expenses increased by 0.5% in 2014, totaling R$154.986 million. Together this group of expenses maintained its relevance as percentage of net revenues. These expenses are tied to the sales mix between branches and franchises channels, due to the different levels of commissions among the revenue lines.
General and administrative expenses grew 19.4% in 2014, totaling R$114.376 million. This
growth, higher than the growth in net revenues, is mainly due to the absorption of the administrative teams from the acquired companies between 2013 and 2014, wage increases, higher infrastructure expenses, and merger and acquisition processes related expenses.
Management fees decreased 9.3% between 2013 and 2014. This reduction was mainly
influenced by the changes in the executive board, and the fluctuations in the management variable compensation, based on the achievement of financial and non-financial goals in the period.
The allowance for doubtful accounts totaled R$27.565 million in 2014, an increase of 16.5%
over 2013. Mainly due to higher level of delinquency in large accounts recorded in the first half of the year.
Depreciation and amortization totaled R$88.928 million in 2014, compared to R$82.558
million in 2013, representing a growth of 7.7%. This line includes mainly the amortization of intangible assets resulting from acquisitions, affected by the acquisitions made in 2013 and 2014.
Financial result (financial revenues net of financial expenses) reached a positive result of
R$13.182 million, compared to a negative result of R$2.657 million in 2013. This increase is mainly due to the raise in financial revenues, from a higher investment position held during 2014 and the reduction of financial expenses related to mark to market of convertible debentures, occurred in august 2013.
Income tax and social contribution grew 4.5% in 2014, totaling R$97.460 million. This growth,
lower than the 13.9% of earnings before tax and social contribution, is due to the lower effective tax rate, mainly affected by the increase in the “Lei do Bem” benefit on R&D investments in innovation, and by the decrease of non-deductible financial expenses from the convertible debentures.
Comments on the Company's 2013 and 2012 consolidated financial and operating
performance: The Company ended 2013 with net income of R$223.100 million, breaking once again the
record set in the previous year, increasing 7.7%. TOTVS achieved EBITDA* (earnings before interest, taxes, depreciation and amortization) of R$402.078 million in 2013, the highest in its history. The Company maintained its steady growth in all revenue lines despite the unfavorable
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economic moment, which influenced in a more relevant way certain sectors more industry-oriented and larger companies.
In 2013, the Company net revenue totaled R$1,611.794 million, an increase of 14% over
2012. This growth is due to (i) the growth of the software market, (ii) the Company's initiatives to capture the growth of the software market, including the specialization by industry sector in the development and sales teams, which are still in progress, and (iii) the acquisitions made in 2013.
License fees increased by 5.6% between 2012 and 2013. In 2013, the growth in license fees
was concentrated in sales to existing clients, which grew 12.3% over 2012, mainly due to the growth of 13.6% in the number of sales to existing clients. The decrease in sales to new clients is mainly due to the 13.1% reduction in the average value of sales, a consequence of the decrease in sales to larger clients and the performance below the historical average of sales to industry sectors that are currently facing economic difficulties.
Such increase, below the Company´s expectations for 2013, resulted in a lower growth of this
revenue line when compared to others. Thus, the share of net revenue from license fees on the total net revenue decreased from 23.3% in 2012 to 21.6% in 2013.
Services increased 15.9% in 2013, totaling R$480.655 million. This growth, higher than the
growth of license fees, is mainly explained by the variation in the license sales mix between franchises and own channels and by the constant efforts to increase the service team performance, especially those related to software implementation. Net service revenues represented 29.8% of total net revenues, against 29.3% in 2012.
Net revenues from maintenance totaled R$783.331 million in 2013, an increase of 17% over
2012. The growth in maintenance revenue primarily resulted from sales of licenses from previous quarters and the retention of maintenance contracts, which are subject to annual adjustment based on pre-defined levels of inflation, mostly IGP-M. This strong growth has resulted in an increase of 1.2 percentage points in the share of net revenue from maintenance, reaching 48.6% of share.
The operating costs and expenses excluding depreciation and amortization increased by
16.8% between 2012 and 2013, higher than the 14.0% growth in net revenues, reflecting the investments made by the Company in 2013, mainly targeting innovation and the industry specialization of the development and sales teams.
The cost of license fees amounted R$74.569 million, an increase of 33.2% compared to 2012,
increasing its participation on net revenues in 0.6 percentage points, to 4.6%. This growth was mainly influenced by the increase in solutions developed by partners that are integrated within TOTVS solutions.
Cost of services and sales increased by 16.4% in 2013, higher than the 15.9% of services
revenue growth in the period, and now represents 29.0% of net revenue, compared to 28.3% in 2012. This growth is mainly the consequence of the operational efficiency decrease of the service teams in the first half of 2013.
Research and development expenses amounted to R$213,602 million in 2013, a growth of
22.5% over 2012 and now represents 13.3% of net revenues, compared to 12.3% in 2012. This
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growth is the consequence of the intensive investments mainly related to the specialization of the solutions segment.
Advertising expenses increased by 31.5% in 2013, representing 2.8% of net revenues,
compared to 2.4% in the previous period. This level of 2.8% is in line with the Company's history and reflects the communication plan for the year, which addressed the efforts to increase TOTVS´s brand recognition, the 22th most valuable brand in Brazil.
Selling expenses totaled R$107.432 million in the year, an increase of 22%, increasing its
participation on net revenues by 0.5 percentage points. This growth reflects mainly the investments in vertical and horizontal segmentation of the sales teams, both in training the sales team and the back office structure.
Commission expenses increased by 9.3% in 2013, totaling R$154.144 million. This growth,
lower than the net revenue growth, was influenced by the sales mix during the year. General and administrative expenses (G&A) grew 15.6% in 2013, totaling R$95.809 million.
This growth, higher than the growth in net revenues, is mainly due to wage increases, the hiring over the period and the infrastructure spending annual adjustments.
Management fees decreased 18.0% between 2012 and 2013, from 2.5% of net revenues in
2012, to 1.8% in 2013. This reduction was mainly influenced by the changes in the executive board in 2013.
The allowance for doubtful accounts totaled R$23.652 million in 2013, an increase of 1.8%
over 2012. This line of spending represented 1.5% of net revenues in 2013, compared to 1.6% in 2012, still higher than historical levels for this line.
Depreciation and amortization totaled R$82.558 million in 2013, compared to R$81,228
million in 2012, representing a growth of 1.6%. This line includes mainly the amortization of intangible assets resulting from acquisitions.
Financial expenses, net from financial revenues, reached R$2.657 million, a decrease of
69.2% compared to R$8.623 million in 2012. This decrease is mainly due to the reduction of expenditure on mark to market of convertible debentures, since the portion of convertible debentures reached the maximum conversion of 60% in 2013.
Income tax and social contribution grew 15.1% in 2013, 5.3 percentage points higher than
the growth of Earnings Before Taxes, totaling R$93.267 million. This growth was mainly impacted by the decrease in the “Lei do Bem” benefit on investments in innovation and by the decrease in the tax benefit from interest on equity.
Net income reached R$223.100 million in 2013, an increase of 7.7% when compared to 2012.
The Company's net income margin was 13.8% in 2013, compared to 14.7% in 2012. The reduction in net margin is due to the 6.4% growth in EBITDA, lower than the 14% of growth in net revenues, the reduction of financial expenses in the period and the increase in the effective tax rate.
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Comments on the Company's 2012 and 2011 consolidated financial and operating performance:
The Company ended 2012 with net income of R$207.148 million once again breaking the
record set the previous year, up 22% from 2011. TOTVS achieved EBITDA* (earnings before interest, taxes, depreciation and amortization) of R$378.048 million in 2012, the highest in its history. The Company maintained its steady growth in all revenue lines despite the unfavorable economic moment.
In 2012 the Company's results were affected by the inclusion of the Information Technology
sector in the "Brasil Maior" Plan, which changed the social contribution tax from a contribution of 20% over wages into a tax over the Company gross revenue deducting its cancellations. This contribution was 2.5% from April to June, then it was reduced to 2.0%, therefore this change should be accounted when comparing 2012 with the previous year.
In 2012, considering the impact of the new social contribution tax, the Company net revenue
totaled R$1,413.976 million, an increase of 10.5% over 2011. The low penetration of software market significantly contributed to this performance.
License fees increased by 7.3% between 2011 and 2012. In 2012, the growth in license fees
was concentrated in sales to new customers, which grew by 31.3% over 2011, this increase in sales was primarily due to the growth in the average ticket of new customers by 30.3%. It is noteworthy that this increase in the average ticket in 2012 does not represent a change in the Company's target market, since it is mainly due to a lower frequency of license sales to larger sized new customers in 2011.
Services increased 13.6% in comparison to 2011, totaling R$414.871 million. Growth driven
primarily by the increased contribution of services not directly related to software implementation, which grew by 18.3% yoy, representing 30.1% of total revenue from services in 2012, compared to 29.3% in 2011.
Maintenance fee totaled R$669.681 million in 2012, 10.3% higher than the previous year.
The growth in maintenance fee revenue is mainly due to license sales in previous quarters and the retention of maintenance agreements, which are subjected to annual adjusted based on the average accumulated inflation index, mostly IGP-M.
The operating costs and expenses excluding depreciation and amortization increased by 6.7%
between 2012 and 2011, lower than the 10.5% growth in net revenue, reflecting the gain in operational efficiency generated by the constant process improvement in several areas of the Company, as well as the contribution of the tax relief in payroll plan originated by the “Brasil Maior” plan.
The cost of license fees amounted R$55.969 million, an increase of 23.0% compared to 2011.
This line is mainly influenced by the composition of sales for the period, presenting higher growth when there is a greater participation of third party solutions over the license sales in the period.
Cost of services and sales increased by 6.3% then compared to 2011, which is lower than the
13.6% growth in service revenue during the period. This lower growth compared to the revenue shows the gain in gross margin in the Company service operations and is mainly explained by:
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(i) efficiency gain of teams implementing solutions marketed by the Company, (ii) the payroll tax relief by the "Brasil Maior" plan, (iii) the higher participation of value-added services in the revenue.
Research and Development expenses amounted R$174.332 million in 2012, a decrease of
0.5% compared to 2011. This decrease is mainly related to the unburdening in payroll and does not represent a deceleration of investments in innovation for the solutions developed by the Company.
Advertising expenses increased 20.0% in 2012. This growth is related to the reacceleration in
the marketing investments after the communication plan revision announced in 2011, maintaining the historical values as percentage of the Company’s net revenues.
Selling expenses amounted R$88.058 million, 1.5% over 2011. This growth, is lower than the
Company’s sales growth is chiefly due to the efficiency gains over the sales internal teams, as well as the impact of the “Brasil Maior” plan.
The commission expenses 10.4% compared to 2011, in line with the growth net revenues
growth. This line consists of the commissions on sales from TOTVS distribution channels, consisted of proprietaries channels and franchises.
General and administrative expenses (G&A) grew 6.0% over 2011, less than the growth in net
revenues. Such growth in G&A is mainly a consequence of wage adjustments, increase of headcount and the impact of the “Brasil Maior” plan.
Between 2011 and 2012, management fees increased 2.4%, mainly due to the adjustments
in the executive structure and the additional provision of bonuses for goal achievements in the period.
The allowance for doubtful accounts totaled R$23.234 million in 2012, an increase of 43.9%
when compared to 2011. This increase is mainly related to delayed payments of implementation and consultancy services provided to larger clients, although the delinquency with customers of medium and small size also rose over the year. It is important to mention that the increase in provisions for doubtful accounts, differently from the previous years, is primarily related to operations in the domestic market.
Depreciation and amortization in 2012 totaled R$81.228 million, compared to R$82.484
million in 2011, a decrease of 1.5%. This decrease in the level of is chiefly due to smaller amortization of intangible assets resulting from acquisitions given the completion of the amortization cycle of some of this assets.
The net financial expenses reached R$8.623 million, a decrease of 51.4% compared to the
amount of R$17.747 million in 2011. This decrease is mainly due to the reduction of the Company´s debt, both in balance of loans/financing and debentures.
TOTVS’ cash balance on December 31, 2012 was R$412.408 million, 43.7% more than the
R$287.079 million on December 31, 2011. The Company reiterates that it has a conservative financial management policy for its debit and credit operations and that it did not carry out any speculative operations in the financial market, the Company’s strong operational cash flow generation is the main reason for this increase.
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Net income reached a record of R$207.148 million in 2012, an increase of 22.6% compared to 2011. The growth in net income mainly reflected the increase in EBITDA* and the reduction of financing expenses in the period as a result of the decrease in the Company's debt.
10.2. The executive officers shall comment on:
a) the results of issuer’s operations, especially:
i. description of any relevant component of revenues Company´s main revenues derive from: (i) license fees, which include software right-to-use licensing and sale of third parties software; (ii) hours-of service revenues related to the implementation of software, training and infrastructure services, outsourced processes and consulting; and (iii) maintenance related to the supply of new versions and upgrade of software launched by the Company, containing the adjustments referring to the entire technological, functional or legal development and help desk.
Software license fee revenues are registered cumulatively when: the end consumer has access to the software usage; business is formalized between the parties, by means of agreement; the price is defined and the due amount is realizable.
Services revenues are billed separately and recognized as services are provided. The recording of maintenance revenues, referring to the availability of technological developments and help desk, occurs monthly during the effectiveness of agreements with clients.
ii. factors that materially affect the operating results There were not factors that could materially affect operating results in the period.
b) Variations of revenues attributable to changes in prices, exchange rates, inflation,
changes in volumes and launching of new products and services
Maintenance revenues, which account for approximately 50.1% of the Company’s total revenues in 2014, are indexed by IGP-M (General Market Price Index) and IPC¬A, and adjusted according to the "anniversary" of each maintenance service and help desk agreement executed with clients.
c) Impact of inflation, variation of prices of main inputs and products, exchange and interest rates on operating and financial results of the issuer
The Company’s operating results may be affected by Brazil’s economic changes, mainly concerning short and long-term interest rates, governmental policies for the sector, inflation index and forex policy. But, historically, the effects of these changes are softened for the Company, since it has a numerous, varied and well distributed client base. The Company’s software active client base covers companies of practically all representative sectors of the economy.
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The impact of inflation indexes variation on the Company’s costs and expenses is evident since IGP-M and IPC-A are the basis of adjustment of several services used by the Company, among them personnel expenses (payroll, charges and benefits), travel expenses, communication and rental, that may increase according to the negotiations linked to these indexes. Nevertheless, this impact is minimized to the extent that maintenance and help desk-related recurring revenues, which account for approximately 50,1% of total sales in 2014, are indexed in general by same indexes, allowing them to be transferred to prices, as it has been occurring historically. Brazil’s interest rate variation may impact the Company’s results to the extent that an eventual increase of this index may cause a slowdown of investments made by the market. Nevertheless, historically, during periods of high SELIC (Central Bank’s overnight rate), the Company continued recording sales growth. In addition, the financing lines hired by the Company basically derives from financing lines from BNDES and Debentures indexed to long-term interest rates (TJLP), which usually show low volatility, even during SELIC increases.
10.3. The executive officers shall comment on any material effects caused by the events mentioned below or to impact the issuer’s financial statements and its results:
a) introduction or sale of operating segment
Material effects on the issuer’s financial statements or results did not occur and are not expected to occur, in view of the introduction or sale of operating segment.
b) constitution, acquisition or sale of equity interests
Below, in chronological order, the main mergers and acquisitions of the Company occurred over the past 3 years:
Virtual Age: On May 21, 2014, the Company executed the Share and Quota Purchase Agreement for the acquisition of Virtual Age Soluções em Tecnologia Ltda (“Virtual Age”), by which it will pay R$50.105 million for the acquisition of 100% (one hundred percent) of the shares. The Agreement also establishes the payment of a variable amount that can reach R$25.000 million, which shall be paid in accordance with Virtual Age goals for up to December 2016. Focused on the development of software solutions in the cloud for the Fashion and Apparel Value Chain, Virtual Age has more than 27 years of experience serving technology to Retail, Wholesale, Franchising and Manufacturing companies in this sector, having a portfolio with more than 500 clients. Virtual Age sells its solutions in SaaS (“Software as a Service”) model, having 81% of its revenue as recurring revenue.
Ciashop: On December 2, 2013, the Company, through its subsidiary TOTVS Brasil Sales Ltda.
(“TOTVS Sales”), executed the Share and Quota Purchase Agreement for the acquisition of 68.5% of the shares of Ciashop – Soluções Para Comércio Eletrônico S.A., (“Ciashop”). On February 5, 2014, ocurred the closing of the acquisition by the total amount of R$17.640 million, which included, in addition to the 68.5% of the share capital, the subscription of new shares of the Ciashop, increasing TOTVS Sales participation in Ciashop´s capital in 1.5%, to 70%. TOTVS Sales can bring its total participation in Ciashop´s capital up to 72%. This Agreement also contemplates
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a variable payment of up to R$2.000 million based on the achievement of certain parameters established for Ciashop over 30 months after the closing of this transaction. Ciashop is a pioneer in e-commerce in Brazil, offering a cloud platform that delivers it solutions as a Software as a Service (SaaS).
Seventeen: On November, 25, the Company executed the Share and Quota Purchase
Agreement (“Agreement”) by which it will pay R$12.450 million for the acquisition of 100% (one hundred percent) of the shares of Seventeen Tecnologia da Informação em Informática Ltda. (“Seventeen”). The Agreement also establishes the payment of a variable amount that can reach R$5.700 million, which shall be paid in accordance with metrics defined in the Agreement until the last day of December, 2017. Seventeen develops management solutions that are used by TOTVS clients of all sizes in the health sector.
RMS: On July 16, 2013, the Company, through its subsidiary TOTVS NORDESTE SOFTWARE
LTDA., executed the Share and Quota Purchase Agreement by which it will pay R$37.400 million for the acquisition of 100% of the shares of RMS Software S.A. and Webstrategie Software Ltda. (jointly “RMS”). The Agreement also establishes the payment of a variable of R$5.000 million, which shall be paid based on the performance of RMS during a twelve-month period following the transaction closing. RMS is focused on the development of enterprise management software for retail and supermarket sectors in Brazil.
GoodData: On June 12, 2013, the Company, through its U.S. subsidiary TOTVS Inc., executed
a Stock Purchase Agreement by which it shall acquire a minority interest in the capital stock of GoodData Corp. (“GoodData”), through Series D preferred shares. TOTVS led this round by investing US$16.000 million. GoodData is a provider of cloud business intelligence solutions offered as a software as a service based on Big Data technologies.
PRX: On April 19, 2013, the Company executed Share Purchase and Sale Agreement and
Other Covenants whereby it will pay R$11.000 million, for the acquisition of 60% participation in the capital of PRX SOLUÇÕES EM GESTÃO AGROINDUSTRIAL LTDA. and P2RX SOLUÇÕES EM SOFTWARE S/S LTDA. (jointly “PRX”). The Agreement also establishes conditions for the future acquisition of the remaining equity stake for a variable amount, to be fixed in accordance with metrics defined in the Agreement based on the performance of PRX until the last day of February, 2015. PRX is focused on the development of management solutions for TOTVS and in the rendering of IT services for the agribusiness sector in Brazil and Latin America.
uMov.me: On January 28, 2013, the Company, by means of its subsidiary TOTVS Ventures
Participations Ltda. ("TOTVS Ventures"), holding company for investments in start-ups, entered into an Agreement of Purchase and Sale, Investment and Other Covenants whereby TOTVS Ventures will invest up to R$3,200 million in exchange for a minority shareholding of 20% in the share capital of uMov.me S.A. ("uMov.me”), undertaking a commitment for future investments in exchange for further participation in the uMov.me’s share capital until 2017, based on its future performance. uMov.me is a cloud enterprise mobility technology platform provider, in the software as a service segment.
PC Sistemas: On January 24, 2013, the Company acquired, through its wholly-owned
subsidiary TOTVS Brasília Software Ltda., 100% of the capital stock of W&D PARTICIPAÇÕES S.A., owner of the companies PC SISTEMAS S.A. and PC INFORMÁTICA S.A. (jointly “PC Sistemas”), focused on the development of software to the Distribution, Wholesale and Retail segments in Brazil. The total payment may come to a maximum of R$95.0 million.
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c) unusual events or operations
Not applicable.
10.4. The executive officers shall comment on:
a) significant changes in accounting practices
There are no significant changes in accounting practices between 2011 and 2013.
b) significant effects from changes in accounting practices
The financial statements for the years ended December 31, 2014, 2013 and 2012, reflected in this document does not contain significant effects of changes in accounting practices in this period.
c) independent auditor’s qualified opinion
The Company does not have a track record of qualified opinions issued by its independent auditors.
10.5. The executive officers shall indicate and comment on the critical accounting policies adopted by the issuer, especially, analyzing the Management’s accounting estimates on uncertain and relevant issues that will explain the Company’s financial conditions and results that require subjective or complex judgments, such as: provisions, contingencies, revenue recognition, tax assets, long-lived assets, non-current assets’ useful life, pension plans, foreign currency translation adjustments, environmental recovery costs, assets and financial instruments impairment test
The Company and Consolidated financial statements were prepared in accordance with
accounting practices adopted in Brazil, which include: Brazilian Corporation Law, Brazilian Securities and Exchange Commission (CVM) standards, and pronouncements, interpretations and guidance issued by Brazilian Financial Accounting Standards Board (CPC); the consolidated financial statements were prepared in accordance with the International Financial Reporting Standards (IFRS) issue by the International Accounting Standards Board (IASB).
The financial statements were prepared based on historical cost, except for the valuation of
certain assets and liabilities, as those from business combinations and financial instruments, which are measured at fair value.
The Company and the Consolidated financial statements were prepared based on different
assessment bases used to prepare accounting estimates. The accounting estimates involved in the preparation of the financial statements were based on both objective and subjective factors, and in line with management's judgment for the determination of the appropriate amounts to be recorded in the financial statements. Significant items subject to these estimates and assumptions include the selection of useful life of fixed assets and their recoverability in
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operations, the evaluation of financial assets both at fair value and adjustment to present value, analysis of the credit risk to determine an allowance for doubtful accounts, as well as the analysis of other risks to determine other provisions, including the provision for contingencies.
The results of acquired/merged subsidiaries are included in the statements of income as of
the date of their acquisition/combination. Therefore, for comparison purposes of the consolidated and the Company’s results, we must consider the dates of acquisition and incorporation of each subsidiary’s results.
Financial statements of subsidiaries included in the consolidation are consistent with that of
the parent company and the accounting practices and policies were consistently applied over consolidated companies and in conformity with those applied in the previous year. All intercompany balances and transactions have been eliminated in the consolidation. Transactions between the Parent Company and its subsidiaries are conducted under conditions and prices established between the parties.
Revenues and Expenses The Company and its subsidiaries measure software license revenue, comprising the
licensing fees, revenue from services, including consulting fees, revenue from supporting and maintenance services for the product’s technological upgrade and revenue from client service (help desk).
Revenues related to licenses of use are recognized upon: (i) execution of the agreement and software delivery to the customer; (ii) their value can be reliably measured (pursuant to the terms of the agreement); (iii) all risks and rewards inherent to the license are transferred to buyer; (iv) the Company no longer holds effective control over the license; and (v) it is probable that economic benefits will be generated to the benefit of the Company. Revenues from use license resulting from subscription are recognized on a monthly basis,
for a term set forth in contract. Revenues from services are billed separately and recognized as services are rendered.
Revenues related to technological upgrade and help desk services are billed and recognized on a monthly basis, during the term of the agreement with customers. Booked revenues which do not meet the mentioned recognition criteria are reversed from the corresponding revenues account and recorded as a reducing account in their respective accounts receivable group. Revenues are computed in net income for the year at their net value, i.e., they exclude taxes levied thereon.
The cost related to the revenue from licensing fees includes costs of acquisition of data base,
costs of media in which the product is delivered, and price of licenses paid to third parties, in case of resold software. The cost related to the revenue from maintenance and services consists mainly in the salary of consulting and supporting personnel and other costs related to those areas.
Expenses from research and development incurred by the development (software
programming and manufacturing) area, linked to new software versions and upgrade of existing software, are registered as expenses for the year in which they incurred and are stated separately from selling costs, in operating expenses.
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Convertion of foreign currency-denominated balances The functional currency of the Company and its subsidiaries based in Brazil is the Brazilian
Real, the same currency used in the preparation and presentation of the Company and consolidated financial statements. The financial statements of each subsidiary included in the Company’s consolidation and those evaluated according to the equity accounting method in the Company’s financial statements are prepared based on the functional currency of each entity.
Assets and liabilities of subsidiaries located abroad, which, according to management
conclusion, have administrative, financial and operational independence, are translated into Reais at the exchange rate as of the balance sheet closing dates and P&L are translated into Reais at the monthly average rates of the periods. Restatement of investment accounts deriving from exchange variation is recognized as cumulative translation adjustment in equity of the parent company.
Cash and cash equivalents These include cash, cash account balances and financial investments redeemable within 90
days of the transactions dates and with insignificant risk of change in its market value. The financial investments included in cash and cash equivalents are mostly classified as “financial assets at fair value through income.”
Trade accounts receivable These are shown at realizable values, and accounts receivable from customers in the foreign
market are restated at the exchange rates effective as of the financial statements date. An allowance was recorded in an amount considered sufficient by management for doubtful accounts, based on the individual analysis of each customer with overdue installments.
Investments in subsidiaries The Company’s investments in its subsidiaries are valued based on the equity accounting
method, in accordance with CPC 18 (IAS 28), for purposes of the Company financial statements. Based on the equity method, investments in subsidiaries are recorded in the parent
company’s balance sheet at cost, plus the changes occurred after the acquisition of interest in the affiliate company. Goodwill referring to the affiliate company is included in the investment book value and is not subject to amortization. As goodwill grounded on future profitability is included in the book value of the investment in the affiliate company (not recognized separately), it is subject to impairment test at the cash generating unit to which it belongs.
Interest in the subsidiary is presented in the parent Company’s income statement as equity
pickup, and represents net income attributable to the affiliate company’s shareholders. The financial statements of subsidiaries are prepared for the same reporting period as the
Company’s. Whenever necessary, adjustments are made so that the accounting policies are in
accordance with those adopted by the Company. After applying the equity accounting method for purposes of the Company’s financial
statements, the Company determines whether or not it is necessary to recognize additional impairment on the Company’s investment in its associated company. On every balance sheet closing date, the Company establishes whether there is objective evidence that investments in
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subsidiaries have suffered impairment. If this is the case, the Company calculates the impairment amount as the difference between the Company’s recoverable amount and its book value and recognizes this amount in the Company’s income statement.
Property, plant and equipment This is recorded at acquisition cost. The depreciation of assets is calculated by the straight-
line method and takes into account the estimated economic-useful life of assets. A property, plant and equipment item is written off when it is sold or when no future
economic benefit is expected to arise from its use or sale. Any gains or losses resulting from the asset write-off (calculated as the difference between the net sales value and the asset’s book value) are included in the income statement for the year when the asset is written off.
The residual value and useful life of assets and the depreciation methods are reviewed at
the closing of each year and adjusted prospectively whenever necessary. After calculating the residual value of PP&E, for the purpose of the financial statements of
the Company and its subsidiaries, the Company determines whether recognizing an additional value for the PP&E item and for other assets such as investments and intangibles in cash generating units is necessary.
The Company opted for not evaluating its property, plant and equipment at fair value as
attributed cost, considering that: (i) the cost method, minus allowances for losses, is the best method for evaluating the Company's property, plant and equipment; (ii) the Company’s property, plant and equipment is broken down into well-defined classes, related to its only operating activity, which is the provision of software development and maintenance services; (iii) the infrastructure used in the industry in which the Company operates is significantly affected by the technological development, new products with increased capacity at lower prices are made available, requiring frequent updates of operational equipment and review of the recoverable values and useful life estimates of property, plant and equipment assets, which the Company has been doing over the years; and (iv) the Company has effective controls over property, plant and equipment assets that allow it to identify impairment losses and changes in useful life estimates. (v) The depreciation rates used adequately represent the useful life of equipment, which leads to the conclusion that the value of property, plant and equipment is close to its fair value.
Leasing Finance leases that transfer to the Company basically all the risks and benefits associated
with the ownership of the leased asset are capitalized in the beginning of the lease at the fair value of the leased asset or at the present value of the minimum lease payments, whichever is lower. The initial direct costs incurred in the transaction are added to costs, when applicable. Financial lease payments are allocated to financial charges and reduction of the financial lease liability so as to obtain constant interest rates over the liability’s outstanding balance. Financial charges are recognized in the income statement.
Leased assets are depreciated over their useful lives. However, when there isn’t a reasonable
amount of certainty that the group will obtain the ownership at the end of the leasing term, the asset is depreciated either over its estimated useful life or within the leasing term, whichever is shorter.
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Operating lease payments are recognized as expense in the income statement according to the straight-line method over the leasing term.
Intangible assets Intangible assets acquired separately are measured at cost at the time of their initial
recognition. The cost of intangible assets acquired in a business combination corresponds to the fair value on the acquisition date. After the initial recognition, intangible assets are presented at cost, minus the accrued amortization and impairment losses. Intangible assets generated internally, excluding capitalized development costs, are not capitalized and the expense is reflected in the income statement for the fiscal year when they are incurred.
Intangible assets are substantially represented by: software, trademark and patents, client
portfolio and goodwill generated in view of the expectation of profitability and incremental revenues expected in the future, connected with business combinations of the Company and subsidiaries, disbursements related to acquisition of exploration rights of areas and acquisition of new products developed by third parties.
Intangible assets with defined useful lives are amortized over their useful economic life and
tested for impairment whenever there is an indication that the asset’s economic value has been impaired. The period and the amortization method for a limited-life intangible asset are reviewed at least at the end of each fiscal year. Changes in the estimated useful life or in the expected use of these assets’ future economic benefits are accounted for by means of changes in the amortization period or method, depending on the case, and are treated as changes in accounting estimates. The amortization of limited-life intangible assets is recognized in the income statement under the expense category consistent with the use of the intangible asset.
Intangible assets with indefinite useful lives are not amortized but are tested annually for
impairment, either individually or at the level of the cash-generating unit. The evaluation of the indefinite useful life is reviewed annually to determine if this evaluation remains justified. In case there is evidence to the contrary, the change in useful life from indefinite to limited is made prospectively.
Gains and losses resulting from the write-off of an intangible asset are measured as the
difference between the net sales value and the asset’s book value and are recognized in the income statement upon asset write-off.
Provision for asset impairment The Management annually reviews the net book value of assets with a view to evaluating
events or changes in economic, operational or technological circumstances that may indicate deterioration or impairment. In case this evidence is identified and the net book value exceeds the recoverable value, a provision is established for the impairment, adjusting the net book value to the recoverable value.
The recoverable value of an asset or a certain cash-generating unit is defined as being the
greater between the value in use and the net sales value. When estimating the asset’s value in use, the estimated future cash flows are discounted to
their present value by using a discount rate before taxes that reflects the weighted average cost of capital for the industry where the cash-generating unit operates. The net sales value is determined, whenever possible, based on a commutative sales contract between knowing and interested parties adjusted by expenses attributable to the asset sale, or, when there is no sales
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contract, based on the market price of an active market or also on the price of the most recent transaction conducted with similar assets.
The following criterion is also applied to evaluate impairment losses: a) Goodwill paid for expected future profitability This goodwill is tested for impairment on an annual basis or when circumstances indicate
loss due to depreciation of its book value. b) Intangible assets Indefinite-life intangible assets are tested annually for impairment, either individually or at
the level of the cash-generating unit, depending on the case, or when circumstances indicate loss due to depreciation of their book value.
When this evidence is identified and the net book value exceeds the recoverable value, a
provision is established for impairment, adjusting the net book value to the recoverable value, when applicable.
Other assets and liabilities An asset is recognized in the balance sheet when it is a resource controlled by the Company
resulting from past events and expected to produce future economic benefits. A liability is recognized in the balance sheet when the Company has a legal obligation or
obligation resulting from a past event, and will probably require an economic resource to settle it.
Taxation Taxes on sales Revenues from sales and services are subject to the following taxes and contributions, by
the following basic rates: • Social Integration Program (PIS) 0.65% and 1.65%; • Social Security Financing (COFINS) 3.0% and 7.6%; • Services Tax (ISS) between 2% and 5%; • Instituto Nacional de Seguridade Social (INSS) 2,0% and 2,5%. These charges are stated as sales deductions in the statement of income. Income and social contribution taxes - current The taxation on income includes income and social contribution taxes. The income tax is
calculated on the taxable income at the rate of 15%, accruing a surcharge of 10% for profits exceeding R$240 in the 12-month period, while the social contribution tax is calculated at 9% on taxable income, recognized by the accrual basis of accounting; therefore, inclusions to the book profit of expenses, temporarily not deductible, or revenue exclusions, temporarily not taxable, considered in the calculation of current taxable income generate deferred tax credits or debits. Advances or amounts subject to offset are stated in current or non-current assets, according to the estimate of their realization.
Deferred taxes Deferred taxes are generated by temporary differences on the balance sheet date between
the tax bases of assets and liabilities and their book values. Deferred tax liabilities are recognized for all temporary tax differences, except:
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• when the deferred tax liability arises from the initial recognition of goodwill or an asset
or liability in a transaction other than a business combination, and, on the transaction date, it affects neither the book profit nor the tax profit or loss;
• over deductible temporary tax differences associated with investments in subsidiaries, in
which the reversion of temporary differences may be controlled and it is likely that the temporary differences will not be reversed in the near future.
Deferred tax assets are recognized for all deductible temporary differences, unused tax credit and losses, to the extent that it is likely that the taxable income is available so that the deductible temporary differences may be realized and unused tax credits and losses may be used, except:
• when the deferred tax asset associated with the deductible temporary difference is
generated at the initial recognition of the asset or liability in a transaction other than a business combination, and, on the transaction date, it affects neither the book profit nor the tax profit or loss; and
• over deductible tax temporary differences associated with investments in subsidiaries,
deferred tax assets are recognized only to the extent that it is likely that temporary differences are reversed in the near future and the taxable income is available so that the temporary differences may be used.
The book value of deferred tax assets is reviewed on each balance sheet date and written
off to the extent that it is no longer likely that taxable income will be available to allow all or part of the deferred tax asset to be used. Written off deferred tax assets are reviewed on each balance sheet date and recognized to the extent that it becomes likely that future taxable income will allow deferred tax assets to be recovered.
Deferred tax assets and liabilities are measured at the tax rate expected to be applicable in
the year when the asset will be realized or the liability will be settled, based on the tax rate (and tax law) that are in effect on the balance sheet date.
Deferred taxes associated with items recognized directly in shareholders’ equity are also
recognized in shareholders’ equity and not in the income statement. Deferred tax items are recognized according to the transaction that originated the deferred tax, either in other comprehensive income or directly in shareholders’ equity.
Deferred tax assets and liabilities will be stated net if there is a legal or contractual right to
offset the tax asset against the tax liability, and deferred taxes are associated with the same tax entity and subject to the same tax authority.
Share-based payment In the past periods, the Company granted share-based compensation to its main executives
and managers. The Company measures the cost of share-settled transactions involving employees based on the fair value of equity instruments on the granting date. Estimating the fair value of share-based payments requires determining the most appropriate evaluation model for concession of equity instruments, which depends on the concession’s terms and conditions. This also required determining the most appropriate data for the evaluation model, including the option’s expected life, the volatility and return of dividends and the corresponding
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assumptions. Expenses related to these transactions are recognized in income during the period in which services are rendered in a contra account of capital reserve.
Other employee benefits Benefits granted to the Company’s employees and managers include, in addition to fixed
compensation (payroll and social security contributions (INSS), vacation, 13th month pay – Christmas bonus), variable compensation, such as profit sharing, bonuses private pension plans with defined contributions managed by an insurance company, and share-based compensation. These benefits are recorded in net income for the year when the Company has an obligation on an accrual basis, as they are incurred.
Earnings per share The Company calculates earnings per hundred shares using the weighted average number
of total shares outstanding during the period corresponding to the result according to the technical pronouncement CPC 41 (IAS 33).
Adjustment at present value of assets and liabilities Long-term and short-term monetary assets and liabilities, when the effect is considered
relevant in relation to the financial statements taken as a whole, are adjusted by their present value.
The adjustment at present value is calculated taking into account contractual cash flows and
explicit interest rates and in certain cases implicit interest rates of respective assets and liabilities. Therefore, interest rates accrued on revenues, expenses and costs associated with these assets and liabilities are discounted with a view to recognizing them in conformity with the accrual basis of years. Subsequently, this interest is reallocated to financial income and expenses in results by using the effective interest rate method in relation to the contractual cash flows.
Implicit interest rates were determined based on assumptions and accounting estimates are
considered. Judgments, estimates and significant accounting assumptions Judgments The preparation of the Company and consolidated financial statements requires that the
management make judgments and estimates and adopt assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, as well as disclosures of contingent liabilities, on the financial statement database. However, the uncertainty associated with these assumptions and estimates could lead to results that require a significant adjustment to the book value of the affected asset or liability in future periods.
Financial Leasing agreements The Company has financial leasing agreements of computers and facilities (equipments)
designated to use in its operations. The company assessed the terms and conditions of the agreements and assumed all significant risks and benefits of this equipment. Based on the assessment performed by Company, these agreements are recorded as financial leasing.
Estimates and Assumptions The key assumptions regarding the sources of uncertainty for future estimates and other
important sources of uncertainty for estimates on the balance sheet date, involving significant
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risk of causing a major adjustment to the book value of assets and liabilities in the following reporting period, are discussed below.
(i)Impairment of non-Financial Assets There is impairment when the book value of an asset or cash-generating unit exceeds its
recoverable value, which is the highest of fair value less selling costs and value in use. The calculation of fair value less selling costs is based on the available information on sale transactions for similar assets or market prices less additional costs to dispose of such asset. The calculation of the value in use is based on the discounted cash flow model. Cash flows derive from the budget for the next five years and do not include reorganization activities the Company has not committed with yet, or significant future investments that will improve the asset base of the cash-generating unit being tested for impairment. The recoverable value is sensitive to the discount rate used in the discounted cash flow methodology, as well as to expected future cash to be received, and to the growth rate used for extrapolation purposes.
(ii)Share-based Payment Transactions The Group measures the cost of stock-settled transactions with employees based on the fair
value of the equity instruments on the date they are granted. The estimate of the fair value of stock-based payments requires that the most suitable appraisal model be determined for the granting of equity instruments, which depends on the terms and conditions of the grant. This also requires that the most appropriate data be determined for the appraisal model, including the expected life of the option, volatility and dividend yield, and the corresponding assumptions.
(iii)Taxes There are uncertainties regarding the interpretation of complex tax regulations and the
value and timing of future taxable results. Given the comprehensive aspect of international business relationships, and the long-term nature and the complexity of existing contracts, differences between the actual results and the adopted assumptions or future changes in such assumptions could require future adjustments to the tax income and expense already recorded. The Company forms provisions, based on applicable estimates, for possible consequences of auditing by tax authorities of the respective jurisdictions where it operates. The amount of such provisions is based on several factors, like prior experiences with fiscal audits and different interpretations of the tax regulations by the taxable entity and by the tax authority in question. Such differences in interpretation may arise for the most diverse matters, depending on the conditions in force in the respective domicile of the company.
Significant management judgment is required in determining the amount of the deferred tax
asset that can be recognized based on the probable deadline and future taxable income levels, as well as future fiscal planning strategies.
(iv)Fair Value of Financial Instruments Whenever the fair value of financial assets and liabilities reported in the balance sheet
cannot be obtained from active markets, it is determined through appraisal techniques, including the discounted cash flow methodology. Data used in such methodologies are based on market practices whenever possible; however, when it is not feasible, a certain level of judgment is required to determine the fair value. Judgment includes considerations on used data, such as, for example, liquidity risk, credit risk and volatility. Changes in assumptions on such factors could affect the reported fair value of the financial instruments.
(v)Provisions for Tax, Civil and Labor Risks
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The Company recognizes a provision for civil and labor lawsuits. The assessment on the probability of loss includes the analysis of available evidence, the hierarchy of laws, the available jurisprudence, the latest decisions of courts of law and their relevance in the legal system, as well as the opinion of external legal advisers. The provisions are revised and adjusted to take into account changes in circumstances, such as the applicable expiration deadline, conclusions of fiscal inspections, or additional exposures that may be identified based on new matters or court decisions.
The settlement of transactions involving these estimates may result in amounts significantly
different from those recorded in financial statements due to inaccuracies inherent to the process of their determination. The Company reviews its estimates and assumptions, at least, quarterly.
Financial instruments
a) First-time recognition and measurement The Company’s financial instruments are represented by cash equivalents, accounts
receivable, accounts payable, debentures, loans and financing and derivatives. The instruments are recorded for the first time at their fair value plus costs directly attributable to their acquisition or issue, except for financial instruments at fair value through profit or loss, whose costs are recorded in the profit or loss for the year.
Main financial assets recognized by the Company are: cash and cash equivalents and trade
accounts receivable. The main financial liabilities recorded by the Company are: accounts payable to suppliers,
loans and financing and debentures.
b) Subsequent measurement The measurement of financial assets and liabilities depends on their classification, which
may be one of the following: Financial assets at fair value through profit or loss: Financial assets at fair value through
profit or loss include financial assets held for trading and financial assets recorded at fair value through profit or loss upon their first-time recognition. Financial assets held for trading are those acquired with the purpose of being sold in the short term.
The Company has assessed its financial assets at fair value through profit or loss because it
intends to trade them in the short term. If the Company has no conditions to trade such financial assets due to market inactivity, and if the management's intention of selling such financial assets significantly changes in the near future, the Company may choose to reclassify these financial assets under certain circumstances. Reclassification to loans and accounts receivable, available for sale or held to maturity depends on the nature of the asset. This does not affect any financial asset recorded at fair value through profit or loss using the fair value choice upon reporting.
Financial liabilities at fair value through profit or loss: these liabilities include financial
liabilities for trading and financial liabilities designated upon recognition at fair value through profit or loss.
Financial liabilities are classified as held for trading when they are acquired with the purpose
of being sold in the short term. This category includes derivative financial instruments
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contracted by the Company and that do not meet the hedge accounting criteria established by CPC 38 (IAS 39). Derivatives, including embedded derivatives that are not related to the main agreement and that must be separated are also classified as held for trading, unless they are designated as effective hedge instruments.
Gains and losses in liabilities held for trading are recognized in the income statement. The Company did not present any financial liabilities at fair value through profit or loss. Loans and financing: Following the initial recognition, loans and financing subject to interest
are measured at the amortized cost using the effective interest rate method. Gains and losses are recognized in the income statement at the time when the liabilities are written off, as well as during the amortization process according to the effective interest rate method.
10.6. In relation to the internal controls adopted to ensure the preparation of reliable financial statements, the executive officers shall comment on:
a) the level of efficiency level of these controls, indicating eventual inadequacies and measures adopted to correct them.
The Company has internal controls with sufficient efficiency level to ensure the adequacy and reliability of its financial statements. The Company continuously seeks to improve its internal controls, by reviewing internal processes.
b) Deficiencies and recommendations on internal controls included in the independent
auditor’s report.
The independent auditors did not identify any significant deficiencies related to the Company's internal controls.
10.7. If the issuer has made a public offering of shares, the executive officers shall comment on:
a) how funds resulting from the offering were used b) if any relevant bias occurred between the effective use of funds and the funding
proposals disclosed in the respective offering memorandum c) in case of bias, explain its reasons
Not applicable.
10.8. The executive officers shall explain the relevant items not evidenced in the issuer’s financial statements, indicating:
a) the assets and liabilities held by the issuer, directly or indirectly, not included in the balance sheet (off-balance sheet items), such as:
i. operating leases, assets and liabilities ii. receivables portfolios written off over which the entity maintains risks and responsibilities, indicating the respective liabilities
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iii. future contracts for the purchase and sale of products or services iv. unexpired construction agreements v. receivables financing agreements According to the note to financial statement nº 9.2 of the Financial Statements related to the fiscal year ended on December 31, 2014, the Company signed an agreement with VIP VII – Empreendimentos e Participações Ltda. in 2013 to build and lease a new head office, with the purpose of integrating the Company’s facilities in the city of São Paulo, for at least 10 years from the date of delivery, which is expected to be in 2017. The agreement was entered into at usual market conditions. More information regarding this contract can be found on the item 16.2 of this Reference Form.
b) other items not evidenced in the financial statements
The Company does not have other relevant items not evidenced in the financial statements (off-balance sheet items).
10.9. In relation to each one of the items not evidenced in the financial statements indicated in item 10.8, the executive officers shall comment on:
a) how these items change or may change revenues, expenses, results of operations, financial expenses or other items of the issuer’s financial statements
The rental agreement mentioned in the item 10.8 of this Reference Form impacts specifically operating expenses with rentals in the amount corresponding to the difference between: (i) the value of the contract, detailed in item 16.2 of this form; and (ii) the sum of the rentals of the operations located in São Paulo, immediately prior to the effective change to the new head office.
The Management expects that the concentration of operations will enable the Company to
increase the productivity of its teams, besides making infrastructure management more efficient, especially when alternatives in other regions of São Paulo are analyzed.
b) nature and purpose of the operation
To arrange a “built to suit” office to accommodate TOTVS’ operations in São Paulo for a period of at least ten (10) years starting from 2017.
c) nature and amount of obligations assumed rights generated on behalf of issuer as a
result of the operation
As per item 16.2 of this Reference Form.
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10.10. The executive officers shall indicate and comment on the main elements of the issuer’s business plan, specifically exploring the following topics:
a) investments, including:
i. a quantitative and qualitative description of investments in progress and estimated investments. The Company continues with its inorganic growth strategy by means of merger and acquisition operations, management software developers or companies able to expand the Company’s added value services in the domestic and/or international markets.
Research and Development (R&D) is another relevant item in the investment plan, given its strategic relevance for the economy sector in which the Company operates. These investments allow offering solutions even more adherent to clients’ needs and adding technological innovations that provide a higher productivity of solutions users. Historically, R&D expenses have accounted for 11% to 14% of the Company’s net revenues.
ii. sources of investment finance. The sources of R&D investments are the funds raised in the Company’s operating activities and funds deriving from PROSOFT (see item 10.1.f). In addition to the funds generated in the operating activities, merger and acquisition operations may also be feasible by means of structured operations involving both own funds or third party’s funds, according to the magnitude of the operation. iii. relevant divestments in progress and estimated divestments. Currently, the Company does not have divestments in progress and/or estimated.
b) Indicate the acquisition of plants, equipment, patents or other assets to significantly
impact the issuer’s productive capacity, as long as this is already disclosed
Not applicable.
c) new products and services, indicating:
i. description of researches in progress already disclosed Not applicable. ii. total amounts spent by the issuer in researches for the development of new products or services Not applicable. iii. projects under development already disclosed Not applicable. iv. total amounts spent by the issuer in the development of new products or services
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R&D investments account for 11% to 14% of the Company’s net revenues.
10.11. Comment on other factors significantly impacting the operating performance and not identified or commented in other items of this section.
Other factors not mentioned in this section that may significantly impact the Company’s operating performance were not identified.
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11. PROJECTIONS
11.1. Disclosed projections and assumptions
On October 29, 2014, the Company announced by means of a Material Fact the removal of the following financial projections, as indicated in the item 11.2.c:
EBITDA margin (Earnings Before Interest, Taxes, Depreciation and Amortization, divided by net revenues) between 27% and 30% for the fiscal years ended between 2013 and 2016;
Research and Development expenses at the level of 12% of the consolidated net revenues at the end of the fiscal year 2016;
Net revenues from international operations representing between 3% and 5% of the consolidated net revenues in 2016; and
Break-even point of its international operations, corresponding to EBITDA equals to zero, in the second half of 2014. These projections were based on the assumption of costs and expenses dilution as a result of the revenue growth that is being affected by the transition process promoted by the Company in its commercial models, aiming to increase the Software as a Service (“SaaS”) subscription sales and, as a consequence, to grow the recurring level of the Company net revenues. In the short term, this transition to subscription negatively affects the growth in net revenues and, consequently, in the EBITDA, due to the deferral of the revenue recognition. In the long term, however, the higher level of recurring revenues tends to affect positively and more relevantly the sustainable growth, the predictability of operating results and the scalability of the TOTVS business model. The Company emphasizes that the removal of these projections does not exclude from its
agenda the constant search for growth, operational efficiency gains and EBITDA margin
expansion.
11.2. Monitoring and amendments to published projections
a) state which are being replaced by new projections included in form and which are repeated in the form
The projections of (i) EBITDA (years ended 2013-2016 ), (ii) R&D expenditures research and development for 2016, (iii) net income from international operations 2016 and (iv) breakeven EBITDA of international operations for the second half of 2014 were removed, as indicated on item 11.2.c.
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b) as for the projections related to the periods already elapsed, compare the projected data with the actual indicators performance, indicating clearly the reasons which led to the deviations in the projections
2013 2012
EBITDA Margin Projection Actual Projection Actual
27% to 30% 24,9% - 26,7%
The Company did not disclose any projections for the year 2012. The deviation in projected EBITDA margin from 2013 was mainly influenced by: (i) the
increase of net revenues lower than estimated by the Company for the financial year 2013, and (ii) the continued investment in research and development, which are not capitalized, and correspond mainly to the constant innovation platforms TOTVS technological expertise and the development of management solutions for segment of the economy.
c) as for the projections related to still ongoing periods, inform if the projections remain valid on the date of the forms’ delivery and, where appropriate, explain why they were abandoned or replaced
On October 29, 2014, the Company announced by means of a Material Fact the removal of the following financial projections:
EBITDA margin (Earnings Before Interest, Taxes, Depreciation and Amortization, divided by net revenues) between 27% and 30% for the fiscal years ended between 2013 and 2016;
Research and Development expenses at the level of 12% of the consolidated net revenues at the end of the fiscal year 2016.
Net revenues from international operations representing between 3% and 5% of the consolidated net revenues in 2016; and
Break-even point of its international operations, corresponding to EBITDA equals to zero, in the second half of 2014.
These projections were based on the assumption of costs and expenses dilution as a result of the revenue growth that is being affected by the transition process promoted by the Company in its commercial models, aiming to increase the Software as a Service (“SaaS”) subscription sales and, as a consequence, to grow the recurring level of the Company net revenues. In the short term, this transition to subscription negatively affects the growth in net revenues and, consequently, in the EBITDA, due to the deferral of the revenue recognition. In the long term, however, the higher level of recurring revenues tends to affect positively and more relevantly the sustainable growth, the predictability of operating results and the scalability of the TOTVS business model. The Company emphasizes that the removal of these projections does not exclude from its
agenda the constant search for growth, operational efficiency gains and EBITDA margin
expansion.
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12. SHAREHOLDER’S MEETING AND MANAGEMENT
12.1. Administrative Structure Description
a) responsibilities of each agency and committee
Board of Directors
(i) establishing the overall guidance for the Company’s business;
(ii) electing and dismissing the Company’s executive officers and establishing their duties;
(iii) calling the General Meeting, when deemed applicable, or pursuant to Article 132 of the
Brazilian Corporation Law;
(iv) inspecting the Executive Officers’ management, reviewing, at any time, the Company’s
books and papers and requesting information on any agreements entered into or to be
entered into and any other acts;
(v) choosing and dismissing the Company’s independent auditors;
(vi) providing a prior opinion on the Management Report and the accounts of the Executive
Officers and resolving on their submission to the General Meeting;
(vii) approving the annual and multiannual budgets of the Company, its controlled and
affiliated companies, the strategic plans, the expansion projects and investment programs of
the Company, as well as following its performance;
(viii) resolving on the opening, closing and modification of branches of the Company,
domestically and abroad;
(ix) authorizing the issuance of Company’s shares and subscription bonuses, within the
Company’s authorized capital limit;
(x) resolving on the Company’s purchase of its own shares to be held in treasury and/or for
later cancellation or sale;
(xi) resolving on the granting of stock options or share subscription to its Managers and
Employees, as well as to the managers and employees of other companies directly or
indirectly controlled by the Company, without preemptive rights for any shareholders
pursuant to the plans approved at General Meetings, after taking into account the Personnel
and Compensation Committee Report;
(xii) submitting to the Annual General Meeting a proposal for allocation of the fiscal years’
net profit;
(xiii) distributing among the Executive Officers, individually, the portion of the overall annual
compensation of the Managers established by the General Meeting, after considering the
Personnel and Compensation Committee Report;
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(xiv) resolving on any deals or agreements between (a) the Company and its controlled
companies (except for wholly-owned controlled companies) and (b) between the Company
or its controlled companies (whether wholly owned or not) and any of their Managers and/or
shareholders (including companies directly or indirectly controlled by said managers and/or
shareholders, or by any third parties related to them);
(xv) resolving, as delegated by the General Meeting, when debentures are issued by the
Company, on the period and conditions for maturity, amortization or redemption, on the
period and conditions for payment of interest, profit sharing and repayment premiums, if
any, and on the subscription and placement methods, as well as the types of debentures;
(xvi) resolving on the subscription, purchase, sale or encumbrance by the Company of any
shares or securities issued by any of the Company’s controlled or affiliated companies, except
in connection with operations involving exclusively the Company and wholly owned entities;
(xvii) resolving on the Company’s participation in other entities, as well as any involvement
in other endeavors, including as a member of a consortium or a party to a silent partnership.
(xviii) deciding on the payment or credit of interest on equity to shareholders, according to
applicable laws;
(xix) resolving on the distribution of interim dividends, including at the expense of
accumulated profits or profit reserves from the latest annual or interim balance sheet;
(xx) resolving on the assignment or transfer to a third party, by any means, of intellectual or
industrial rights of the Company and/or of a company directly or indirectly controlled by it,
except for a remunerated licensing made by the Company in the ordinary course of business;
(xxi) authorizing the following acts in amounts exceeding five (5) percent of the subscribed
corporate capital, such amount to be taken in consideration of isolated transactions or sets
of related transactions: (a) purchase by the Company, by any means, of assets in other
companies, including its controlled or affiliated companies; (b) divesture of assets from
permanent assets, (c) provision of warranties of any nature by the Company; (d) granting of
loans in favor of any third parties; (e) investing in expansion and improvement projects; (f)
entering into long- or short-term debt operations; and (g) entering into any long-term
agreements (with a duration in excess of one year);
(xxii) manifesting favorable or otherwise regarding any public offer of shares that has as
object the shares of the Company, through prior informed opinion, issued within fifteen (15)
days of publication of the notice of public offering acquisition of shares, which should address
at least (a) the convenience and opportunity of the public offer for acquisition of shares and
the interest of all shareholders in relation to the liquidity of the securities it owns, (b) the
impact of supply public acquisition of shares over the interests of the company, (c) strategic
plans disclosed by the issuer in relation to the Company, (d) other items which the Board
deems appropriate, as well as information required by applicable rules established by the
CVM.
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Fiscal Council
The Fiscal Council shall operate on a non-permanent basis, with the powers and duties
assigned by law and shall only be convened upon General Meeting resolution, or at
shareholders’ request, in the cases provided by law.
Audit Committee
It is incumbent to the Audit Committee, reporting and recommending to the Board of
Directors:
(i) Direct the Board in determining the parameters of the TOTVS risk management model and
periodically evaluate the risk management policies, its resources and maximum tolerance for
risk, and may also require detailed information policies and procedures relating to:
- Management compensation;
- The use of company assets; and
- Expenditure incurred on behalf of the Company;
(ii) Expressing an opinion on the changes in capital issues, debentures issuing, profit
distribution, tax and financial matters;
(iii) Discussing, together with TOTVS attorneys, legal matters and liabilities which may cause
material impact on the Financial Statements;
(iv) Periodically overseeing the adequacy of management financial reports to accounting
policies, financial results and risk management and disclosure process, in relation to their
integrity, form, content and distribution (access to information);
(v) Evaluate the adequacy of human and financial resources allocated to risk management
organization.
(vi) Evaluate the activities, organization chart and expertise of the internal audit and risk
management;
(vii) Approving the Audit Plan, taking into account its risk coverage;
(viii) Recommend to the Board of Directors with regard to hiring, performance and
independence of the external auditors; analyze the scope and approach proposed by the
external auditors and evaluate their fees and services.
(ix) Previously analyze the hiring of any consulting service to be performed by the external
auditors as requested by CVM instruction 381 (CVM - Comissão de Valores Mobiliários);
(x) Review press releases, annual and quarterly financial statements, annual management
reports and the Reference Form previously to their disclosure to CVM;
(xi) Examine, previously, NDAs ("Non-Disclosure Agreements"), MOUs (Memorandum of
Understanding), non-binding offers in the process of acquisitions, mergers and spin-offs, as
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well as the hiring of Due Diligence services, analyzing the results of due diligence processes
posteriorly.
(xii) Meet with the external auditors to address changes on accounting policies and
principles; use of reserves and provisions; relevant estimates and judgments used in the
financial statements; risk assessment methods and the results of these evaluations; changes
in the audit scope; high-risk areas; material weaknesses and significant flaws in internal
controls; knowledge of illegal acts; and effects of external factors (economic, regulatory and
industry) over financial reporting and the audit process.
(xiii) Evaluate the adequacy of controls adopted for the compliance verification of standards
contained in the Stock Trade Policy of TOTVS, as well as monitor its implementation.
(xiv) Monitoring the internal and external audit recommendations;
(xv) Assessing any conflict of interest involving shareholders, Board members, officers,
managers, auditors or other TOTVS stakeholders;
(xvi) Overseeing regulatory compliance of TOTVS Code of Ethics and advise the Board on
cases of fraud detection, suggesting measures.
Personnel and Compensation Committee
(i) submitting to the Board of Directors a proposal for distribution of the overall annual
compensation to the Executive Officers and Board Members, based on the information
technology market standards and following up on the payment of compensation and, if the
compensation is not in line with the information technology market standards, informing said
fact to the Board of Directors;
(ii) expressing an opinion on the grant of stock options or share subscriptions to the
Company’s Managers and Employees; and
(iii) expressing an opinion on the profit sharing of the Company’s Executive Officers and
Employees.
Executive Officers
It will be presented in item 12.1d.
b) implementation date of the fiscal council, if it is no permanent and of committee’s creation
The Fiscal Council hasn´t been created. Both the Personnel and Compensation Committee
and the Audit Committee were created on August 9, 2006.
c) performance evaluation mechanisms of each agency or committee This issue will be presented in item 12.1e.
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d) in relation to the executive officers members, their responsibilities and individual powers
According meeting of the Board of Directors Meeting held on May 4th, 2015, the executive
officers shall have the following duties:
The Chief Executive Officer shall: implement, and cause to be implemented, the resolutions
of the General Meetings; represent, preferably, the Company in the Shareholders’ Meetings
or other corporate acts of companies in which the Company takes part in, in accordance with
Paragraph 1st, item (iii) of Article 26 of the Company’s Bylaws; propose, without exclusivity
of initiative, the assignment of duties to each Vice President and officer at the time of their
respective election; respond before the Board of Directors for all the activities of the
organization and perform other attributions assigned to him/her by the Board of Directors;
establish plans, strategies and long term policies;
The President shall: coordinate the activities of the Vice Presidents; call and preside over the
Officers’ meetings; propose to the Officers the substitute of any officer in case of his/her
temporary absence or impediment; suggest to the Board of Directors, the substitute of any
executive officer if there is a vacant position; respond for the growth strategy, management
of people and profitability of the organization; direct the organization in executing the
corporate strategy defined for the Company;
The Administrative and Financial Vice-President shall: plan, organize and manage the
activities involving the support to the business of the organization comprised by the areas of
Human Resources, Information Technology, Shared Services Center of the company,
Supplies, Facilities, Planning and Controller Department, Legal, Audit, Ensured Quality and
Process; analyze accounting records of the transactions in which the Company is a party to;
control the compliance with financial commitments in respect to legal, administrative,
budgetary, tax and contractual requirements of the operations; represent the Company in
the Audit Committee; manage the activities related to the Company’s funds and assets
management, applying financial resources;
The Business Vice-President shall: plan, organize and manage the activities of the business
under his/her responsibility, complementing the traditional solutions of management
systems, proposing strategies and guaranteeing that these are maintained; and negotiate
and manage the results to be obtained, as well as the values to be invested per project and/or
business;
The Technology Vice-President shall: plan, establish and manage the Company’s strategy for
procedures concerning research and development, innovation and improvement of
technologies used by the Company, so as to ensure competitiveness of the new products and
solutions;
The Services and Relationship Vice-President shall: plan, organize and manage the activities
involving the commercial relationship of the Company’s distribution network; coordinate the
performance of the Services and Relationship Officers; establish and define the Company’s
sales guidelines and policies; promote client management; coordinate and oversee the sales
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and client support services areas, in accordance with set targets; manage resources for
marketing and sale and delivery guarantee of products and services; decide on guidelines
over price policies for the products; recommend launching of new products; operationalize,
implement and follow up on the process of services rendered to the Company’s clients;
The Systems and Segments Vice President shall: assist the Technology Committee in their
strategic decisions involving technological and segment matters; coordinate the
performance of the Segments Officers; respond for all segments with strategies for the offer
of software and improvement of software; design and develop solutions for external clients;
suggest and accompany new systems of the Company; plan, organize and manage the
activities of production units of the organization; plan, organize and manage the rendering
of support and assistance services, technical or not, rendered to clients;
The Marketing, Alliances and Business Models Vice President shall: respond for the
Institutional Marketing and Alliances; recommend strategic alliances for the development
and operation, modules and process; plan, establish and manage all Marketing activities, as
well as develop policies, programs and budgets; respond for the creation of opportunities,
businesses, and for the sales strategy; propose and follow up on the development of new
business fronts and/or products of the Company;
The Investor Relations Officer shall: plan, organize and manage the investor relations
activities; perform the acts appropriate to the Investor Relations Officer and promote the
disclosure of information to the capital market, in accordance with the regulations issued by
the Brazilian Securities Commission (CVM); maintain and improve the relationship and
communication between the organization and the investing public, shareholders and
professionals of the financial area; plan the communication of the Company’s relationship
with capital markets, domestic and/or international, monitor investment changes and
tendencies in the market and determine the appropriate operating strategies; prepare
financial reports to be disclosed to the shareholders, and to the professionals of the financial
area; liaise with the banking and investment communities as well as to establish relationship
with investors;
The Legal Officer shall: preferably represent the Company before legal and administrative
bodies; act to protect and defend Company’s assets and rights; identify legal risks and devise
preventive measures seeking the Company’s defense; provide solutions to technical or
business matters through identification of legal solutions and recommend a course of action;
offer support for the compliance of corporate governance rules; coordinate Company’s
operation in all legal aspects in a preventive manner and in the litigation sphere, as well as
to follow up on and inspect the operation of law firms; coordinate and oversee the
performance and results of the Company’s legal area; optimize and manage Company’s legal
information and documents;
The Segment Officers shall: respond for a certain market segment of the Company; establish
the connection between the development of product and the client’s needs; implement the
strategy for the offer of software and pertinent go-to-market for the segment of his/her
responsability; assess the implementation of improvement suggestions for the development
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of products; plan and coordinate the activities of the production unit of his/her responsibility;
establish, maintain and make continuous improvements to the development of software
processes for which he/she is responsible; apply the best practices and most advanced
methodologies to deal with a change in development, technology and client environments;
The Services and Relationship Officers shall: plan, define and coordinate the activities of the
sales area and the services area for the implementation of systems, referring to current and
future potential client accounts; coordinate and supervise the area of sales in reference to
the generation of business, according to the goals established by the management; plan,
organize and manage the activities involving the Company’s service and relationship with
clients; follow up and manage the indicators of services provided; participate in the definition
of products prices and new launchings; guide the sales force to achieve the goals of software
production and development, including long-term plans, objectives and strategies; and
The Business Officers shall: plan, organize, establish and coordinate all the activities of the
business under their responsibility that demand specific strategies for their achievement,
proposing guidelines and ensuring that they are kept, always considering the business costs
and the scope of the expected results; adjust the strategies according to market conditions
and competition strategies; negotiate and manage the results to be obtained, as well as the
values to be invested per project and/or business.
The Board of Executive Officer holds all the powers to carry out the acts required for the
Company’s normal operation and for fulfilling its business purpose, however special they may
be, including waiver of rights, negotiation and agreement, subject to any applicable legal or
statutory provisions. It shall be responsible for managing the Company’s business,
particularly:
(i) complying with and causing the compliance with these Bylaws and the resolutions of the Board of Directors and the Annual Meeting;
(ii) (ii) annually submitting, to the appreciation of the Board of Directors, the Management Report and the accounts of the Board of Executive Officers, supported by the independent auditors’ report, as well as the proposal for allocation of income determined in the prior year;
(iii) (iii) proposing to the Board of Directors the annual and multiannual budgets of the Company, its controlled and affiliated companies, as well as the Company’s strategic plans, expansion projects and investment projects; and
(iv) (iv) deciding on any matter that is not of exclusive responsibility of the General Meeting or the Board of Directors.
e) performance evaluation mechanisms of the members of the management council, committee and executive officers
Board of Directors
The members conduct the annual evaluation of the Board, also following the proposed action
plan on the issues identified in this process, with the Board Secretary 's support.
Audit Committee
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The audit committee members perform self-assessments based on a questionnaire divided
into 6 chapters:
1. Composition, Structure and Activities
2. Business Knowledge
3. Processes and Procedures
4. Communication and Information
5. Financial Reporting / Internal Controls
6. Audit Functions Supervision
Executive Officers
The officers are evaluated on two occasions during the year. In the first two months, are
evaluated their performances regarding the previous year´s results, based on individually
assigned indicators defined in the targets plan. In the second half, each member is evaluated on
the potential matrix (9BOX) composed of:
1) “delivery and quality of deliveries axis”, in addition to measurement of behavioral skills in
relation to the adherence of the Company Way of Being (X); and
2) “potential axis”, defined on the basis of descent readiness, leadership maturity and career
stage.
The leaders of these executive officers validate this matrix on committees. It is stated at the
same time the possible successor of each member, validated in the performance calibration
committee. From there, it is defined the succession plan. Succession indicators are reported
quarterly to the Audit Committee and to the Board of Directors.
12.2. Rules, policies and practices relating to General Meetings
a) Calling up deadlines The Company General Meeting will be called up within the legal deadline with the availability
of documents that deals with CVM Instruction No. 481/09. In addition, the Company’s General
Meeting resolving on the registration cancellation, except in case of Article 45 (ii) of Articles of
Incorporation or its exit from Novo Mercado, and shall be called up with at least thirty (30) days
in advance.
b) competences
i. electing and dismissing any Board of Directors’ members;
ii. establishing the overall annual compensation of the members of the Board of Directors
and of the Board of Executive Officers, as well of the Fiscal Council, if convened;
iii. changing the Bylaws;
iv. resolving on the dissolution, winding-up, merger, spin-off, amalgamation of the
Company or of any company into the Company;
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v. assigning share bonuses and deciding on possible splits or reverse splits of shares;
vi. approving plans for granting of stock options or share subscription to its Managers and
Employees, as well to the managers and employees of other companies directly or
indirectly controlled by the Company;
vii. resolving, in accordance with proposal submitted by management, on the allocation of
profit for the year and dividend distribution;
viii. electing the liquidator, as well as the Fiscal Council which shall operate during the
winding-up period;
ix. resolving on the delisting from the Novo Mercado of BM&FBOVESPA;
x. resolving on the Company’s deregistration as a publicly-held company with the CVM,
except for the provisions of Article 49 (ii) of these Bylaws;
xi. choosing a specialized company, out of the companies nominated by the Board of
Directors, which shall be responsible for preparing an appraisal report on the Company’s
shares in the event of its deregistration as a publicly-held company or delisting from the
Novo Mercado, as set forth in Chapter VII of these Bylaws; and
xii. resolving on any matters submitted by the Board of Directors.
c) addresses (physical or electronic) in which the documents relating to the general meeting will be at the shareholders’ disposal for analysis
The Company makes available the documents relating to the general meeting in the following
websites:
- TOTVS’s Investors Relations website (ir.totvs.com)
- CVM website (www.cvm.gov.br)
- Assembleias Online (www.assembleiasonline.com.br)
Physical address
Avenida Braz Leme, 1631 - 2º andar – São Paulo - SP – Brazil
d) identification and management of interest conflicts The Company does not adopt any differentiated practice in relation to those of the Brazilian
Corporate Law and/or CVM regulations.
e) powers of attorney’s request by the management for the exercise of the voting right
The Company’s management orders a public power of attorney´s request, according to CVM
481/09 instruction.
f) the necessary procedures for the acceptance of instruments of power of attorney granted by shareholders, indicating if the issuer accepts power of attorney granted by shareholders electronically
the Shareholders shall submit the following documentation, with at least 48 (forty eight)
hours in advance of the Meeting, in addition to the identity card and/or applicable corporate
documents evidencing legal authority, as the case may be: (i) certificate issued by the depositary
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institution within 5 (five) days before the date of the Meeting; (ii) proxy with the grantor’s
notarized signature; and/or (iii) in the case of Shareholders whose shares are held in fungible
custody, a statement containing the relevant shareholder ownership interest, issued by the
competent body.
Shareholders may, alternatively, vote by means of Assembleias Online® platform, at
www.assembleiasonline.com.br. In order to access the electronic platform, the shareholders
shall proceed with their registration in such platform.
g) maintenance of forums and pages on the World Wide Web intended to receive and share feedback from shareholders on the agendas of meetings.
The Company has no such practice, given the costs involved.
h) live streaming of video and / or audio of meetings The Company has no such practice, given the costs involved.
i) mechanisms intended to allow the inclusion, in the agenda, of the proposals made by shareholders.
The Company has no mechanisms to allow inclusion in the agenda, the proposals made by
shareholders. The General Meeting deliberates on the matters the agenda, constants of the
respective notice of meeting, save for the exceptions provided for in the Corporations Law.
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12.3. Dates and newspapers to publish the information required by Law No. 6.404/76
Fiscal Year Publication Journal – UF Dates
31/12/2014 Financial Statements
Diário Oficial do Estado de São Paulo – SP 01/29/2015
Valor Econômico – SP 01/29/2015
Calling up Ordinary Shareholders’ General Meeting which approved the financial statements
Diário Oficial do Estado de São Paulo – SP
02/28/2015
03/03/2015
03/04/2015
Valor Econômico – SP 02/28/2015
03/03/2015
03/04/2015
Ordinary Stockholders’ General Meeting Minutes which reviewed the financial statements
Diário Oficial do Estado de São Paulo – SP 03/31/2015
Valor Econômico – SP 03/31/2015
31/12/2013 Financial Statements
Diário Oficial do Estado de São Paulo – SP 01/30/2014
Valor Econômico – SP 01/30/2014
Calling up Ordinary Shareholders’ General Meeting which approved the financial statements
Diário Oficial do Estado de São Paulo – SP
02/13/2014
02/14/2014
02/15/2014
Valor Econômico – SP 02/13/2014
02/14/2014
02/17/2014
Ordinary Stockholders’ General Meeting Minutes which reviewed the financial statements
Diário Oficial do Estado de São Paulo – SP 04/03/2014
Valor Econômico – SP 04/03/2014
31/12/2012 Financial Statements
Diário Oficial do Estado de São Paulo – SP 01/30/2013
Valor Econômico – SP 01/30/2013
Calling up Ordinary Shareholders’ General Meeting which approved the financial statements
Diário Oficial do Estado de São Paulo – SP
01/31/2013
02/01/2013
02/02/2013
Valor Econômico – SP 01/31/2013
02/01/2013
04/02/2013
Ordinary Stockholders’ General Meeting Minutes which reviewed the financial statements
Diário Oficial do Estado de São Paulo – SP 06/12/2013
Valor Econômico – SP 06/12/2013
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12.4. Rules, policies and practices related to the Management Council
a) frequency of meetings The Board typically meets four (4) times a year and extraordinarily whenever called by the
President or the majority of its members, having a frequency of approximately 11 annual
meetings. The Board meetings may be held by conference call, video conference or any other
communication medium that allows the identification of the member and simultaneous
communication with all other persons attending the meeting.
b) if available, the provisions of shareholders agreement which establish restriction or linking to the voting rights exercise of the members of the council
There is no shareholders agreement.
c) identification and management rules of conflicts of interests Upon discussion by the Board, the parties subject to possible conflict of interest and that
are Board members, abstain from voting on that matter in particular.
12.5. Description of arbitration clause to settle disputes through arbitration
The Company, its shareholders, directors and members of the Fiscal Council undertake to
resolve, through arbitration, any dispute or controversy that may arise between them, related
to or originated, in particular, from application, validity, effectiveness, interpretation, violation
and its effects, the provisions of the Participation Agreement in the Novo Mercado, in the Listing
Rules of the Novo Mercado, in the Rules of Arbitration of the Market Arbitration Chamber
established by BM&FBOVESPA, in the Articles of Incorporation, in the shareholders’ agreements
filed at the Company, in the provisions of the Corporate Law, in the rules issued by the National
Monetary Council, Brazilian Central Bank or CVM, in the rules of BM&FBOVESPA in the other
rules applicable to the functioning of capital markets in general, before the Market Arbitration
Chamber, pursuant to its Arbitration Rules.
Without prejudice to the validity of the arbitration clause, either party of the arbitration
proceeding shall be entitled to appeal to the Judicial Branch with the objective of, if and when
necessary, requesting provisional remedy of protection of rights, either in arbitration
proceedings already or not yet established, being that, as soon as any such measure is granted,
the competence for the merit decision will be immediately returned to the arbitration tribunal
established or to be established.
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12.6. / 12.8 – Composition and experience of management and fiscal council
Name: Laércio José de Lucena Cosentino Elective position occupied:
Other Board Members / Directors President
CPF: 032.737.678-39 Age: 54 Profession: Electric Engineer Administrative Body: Board of Directors and Board of Executive
Officers Term of officer: OSM* 2016
Description of other position:
Efective Board Member and CEO.
Election date: 03/14/2014 Inauguration date:
03/14/2014 Elected by the controller:
No
Other positions and functions performed in the issuer: CEO (election: 05/04/2015 / Inauguration date: 05/04/2015 / Term of officer: OSM 2017) and Personnel and Compensation Committee Member
Professional Experience / Statement of any convictions: In the last 5 years, Mr. Cosentino acted as the TOTVS Board President and TOTVS CEO. He was director of SIGA between 1978 and 1983 and founded the company in 1983, acting as partner manager. Mr. Cosentino is the author of “Dbase II and III”, “Windows”, “Brazil is not Risk, it is Opportunity” and “Genoma Enterprise” and is currently an independent member of Redecard S/A Board of Directors and President of Endeavor Board of Directors. He is graduated in Electric Engineering by the Universidade Politécnica de Engenharia de São Paulo.
Name: Pedro Luiz Barreiros Passos Elective position occupied: Chairman CPF: 672.924.618-91 Age: 63 Profession: Production Engineer Administrative Body: Board of Directors Term of officer: OSM 2016 Election date: 03/14/2014 Inauguration date: 03/14/2014 Elected by the controller: No Other positions and functions performed in the issuer: - Professional Experience / Statement of any convictions: In the last 5 years, Mr. Passos acted as Chairman of the Trustee Council of IEDI (Instituto de Estudos para o Desenvolvimento Industrial), Vice-President of the Trustee Council of FNQ (Fundação Nacional da Qualidade) and acted as member of the Board of of IPT (Instituto de Pesquisas Tecnológicas), Fundação SOS Mata Atlântica, Instituto Empreender Endeavor, Fundação Dom Cabral and at TOTVS S/A. He has a long career in Natura, a cosmetic company that he joined in 1983 as a general manager of one of the companies of the group. Mr. Passos holds a B.A. in Production Engineering by Escola Politécnica de Engenharia da Universidade de São Paulo and in Business Administration by Fundação Getúlio Vargas.
Name: Pedro Moreira Salles Elective position occupied: Independent Board Member CPF: 551.222.567-72 Age: 55 Profession: Economist Administrative Body: Board of Directors Term of officer: OSM 2016 Election date: 03/14/2014 Inauguration date: 03/14/2014 Elected by the controller: No Other positions and functions performed in the issuer: President of the Personnel and Compensation
Committee Professional Experience / Statement of any convictions: In the last 5 years, Mr. Salles acted as vice president of Itaú Unibanco Holding and currently he is the Board President of Itaú Unibanco Holding S.A., general director of Brasil Warrant S.A., a holding of Grupo Moreira Salles, and president of Cabuhy Investimentos. He began working at Unibanco in 1988 as a member of the Board of Directors and became President in 1997. In April 2004, he was elected Unibanco CEO, serving until 2008. Mr. Salles holds a B.A. magna cum laude in economy and history by University of California. He took the Master program in International Relations from Yale University, USA, and Owners & Presidents Management Program at Harvard University.
Name: Sérgio Földes Guimarães Elective position occupied: Independent Board Member CPF: 014.873.977-63 Age: 43 Profession: Systems Analyst Administrative Body: Board of Directors Term of officer: OSM 2016 Election date: 03/14/2014 Inauguration date: 03/14/2014 Elected by the controller: No Other positions and functions performed in the issuer: -
Professional Experience / Statement of any convictions: In the last 5 years, Mr. Guimarães acted as Superintendent of the BNDES International area, where he joined by public tender in 1993. He acted in several activities in the industrial, financial and capital market areas at BNDES. He holds a
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B.A. in Computers by URFJ (1992) and a Master Degree in Business Administration - Major in Finance - by PUC RIO (2001). He also concluded the IMPM - International Masters in Practicing Management from McGill University in 2013.
Name: Germán Pasquale Quiroga Vilardo
Elective position occupied: Vice-Chairman
CPF: 009.943.227-71 Age: 47 Profession: Electronic Engineer Administrative Body: Board of Directors Term of officer: OSM 2016 Election date: 03/14/2014 Inauguration date: 03/14/2014 Elected by the controller: No Other positions and functions performed in the issuer: -
Professional Experience / Statement of any convictions: In the last 5 years, Mr. Quiroga acted as CEO of Nova Pontocom, member of the Board of Directors of Sequóia Desenvolvimento Imobiliário S.A., E-Plataforma and E-Hub. He also acted as CIO and CMO at Cyrela Brazil, founded Pontofrio.com (now Globex Utilidades S.A.), where he acted as CEO and member of the board of directors between 2008 and 2011. Mr. Quiroga founded TV1.com, where he was CEO from 1994 to 1999, founded Americanas.com, where he served as CIO and CMO from 1999 to 2004. He is graduated in electronic engineering from IME - Instituto Militar de Engenharia (1991) and is master in digital system from Escola Politécnica da Universidade de São Paulo (1994).
Name: Maria Helena dos Santos Fernandes de Santana
Elective position occupied: Independent Board Member
CPF: 036.221.618-50 Age: 55 Profession: Economist Administrative Body: Board of Directors Term of officer: OSM 2016 Election date: 03/14/2014 Inauguration date: 03/14/2014 Elected by the controller: No Other positions and functions performed in the issuer: President of the Audit Committee
Professional Experience / Statement of any convictions: Mrs. Maria Helena dos Santos Fernandes de Santana holds a degree in economics by the Universidade de São Paulo – USP (1990). She is Board member and President of the Corporate Governance Committee the Companhia Brasileira de Distribuição (CBD), and member of the Board the CPFL Energia S.A. In the past 5 years, she was President of the Brazilian Securities Commission, from 2007 to 2012, having acted as director at the same institution from 2006 to 2007. Mrs. Santana also was president of the Executive Committee of the International Organization of Securities Commissions – IOSCO. From 1994 to 2006, served as Superintendent of Corporate Relations and Special Projects Manager at São Paulo Stock Exchange.
Name: Rodrigo Kede de Freitas Lima Elective position occupied: President Director CPF: 013.620.537-24 Age: 43 Profession: Mechanical and Industrial Engineer Administrative Body: Board of Executive Officers Term of officer: OSM 2017 Election date: 15/06/2015 Inauguration date: 15/06/2015 Elected by the controller: No Other positions and functions performed in the issuer: -
Professional Experience / Statement of any convictions: Mr. Rodrigo Kede Lima holds a degree in mechanical and industrial engineering by the pela Pontifícia Universidade Católica do Rio de Janeiro - PUC/RJ (1995) and MBA in Finance by the Instituto de Ensino e Pesquisa – Insper (1999). Mr. Kede is responsible for conducting the growth strategy, operations, people and leading the Company's vice-presidencies. He served as Chief Executive Officer (CEO) of IBM Brazil until May 2015, where he previously was Technology Services Vice President from 2011 to 2012, Chief Financial Officer for Latin America (CFO Latam) from 2009 to 2011, and Brazil Chief Finance Officer (CFO Brazil) from 2006 to 2009.
Name: Romero Venancio Rodrigues Filho Elective position occupied: Independent Board Member CPF: 013.620.537-24 Age: 37 Profession: Mechanical and Industrial Engineer Administrative Body: Board of Directors Term of officer: OSM 2016 Election date: 10/22/2014 Inauguration date: 10/22/2014 Elected by the controller: No Other positions and functions performed in the issuer: -
Professional Experience / Statement of any convictions: Mr. Romero Venancio Rodrigues Filho holds a degree in mechanical engineering and computer science by the Universidade de São Paulo – USP (2002), and also attended the executive education program in electronic commerce from Harvard Business School. He is currently the worldwide Chief Executive Officer for price comparison platforms in Naspers, and Board of Directors Member of Wayfair, PayU Global, Neogrid Informática, Endeavor Brazil and Movile. In 1998 founded the Buscapé (www.buscape.com.br), where he served as Chief Executive Officer (CEO) until 2013.
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Name: Danilo Ferreira da Silva Elective position occupied: Independent Board Member CPF: 294.854.338-08 Age: 32 Profession: Lawyer Administrative Body: Board of Directors Term of officer: OSM 2016 Election date: 06/10/2015 Inauguration date: 06/10/2015 Elected by the controller: No Other positions and functions performed in the issuer: -
Professional Experience / Statement of any convictions: Mr. Danilo Ferreira da Silva has a degree in Social and Legal Sciences from PUC-Campinas, a specialization in economics from Unicamp, a specialization in Capital Markets from FGV and an MBA in Management from FGV/Ohio University. Over the past five years, he served as deliberative counselor, adviser to the president and is currently the administrative and financial officer of Petros and member of the board of Fras-le SA
Name: Marilia Artimonte Rocca Elective position occupied: Business Vice-President CPF: 252.935.048-51 Age: 41 Profession: Business Administrator Administrative Body: Board of Executive Officers Term of officer: OSM 2017 Election date: 05/04/2015 Inauguration date: 05/04/2015 Elected by the controller: No Other positions and functions performed in the issuer: -
Professional Experience / Statement of any convictions: In the last 5 years, Mrs. Rocca acted as partner at Mãe Terra Produtos Naturais, since 2008, as partner manager of Solocorp Inc, holding participation in emerging companies, since 2007, as member of the Board of Directors of Instituto Endeavor, TOTVS S/A and at Insper. For nearly 10 years, she has started and managed third sector organizations. She acted as General Director of Fundação Brava, organization focused on managing the public sector and third sector and as co-founder and general director of Endeavor Brasil the main NGO to support innovative entrepreneurs. Mrs. Rocca holds a B.A. in business administration by EAESP-FGV, São Paulo, and also an MBA from Columbia Business School in NY, USA. She was selected for Henry Crown Fellowship of Aspen Institute, which she is part of since 2006.
Name: Weber George Canova Elective position occupied: Technology Vice-President CPF: 083.844.858-52 Age: 52 Profession: Engineer Administrative Body: Board of Executive Officers Term of officer: OSM 2017 Election date: 05/04/2015 Inauguration date: 05/04/2015 Elected by the controller: No Other positions and functions performed in the issuer: -
Professional Experience / Statement of any convictions: Mr. Canova, in the last 5 years, served as Vice-President of Technology and Vice-President of Innovation and Technology, having joined the Company in 1995. He holds a B.A. in Electronic Engineering by Mauá Engineering School and started his career in 1984 as programming developer, having worked in IT projects in various sectors and large companies such as banks and insurers, among them, AGF Seguros and Banco Nacional, currently Itaú-Unibanco.
Name: Alexandre Mafra Guimarães Elective position occupied: Administrative and Financial Vice-President
CPF: 681.592.776-87 Age: 43 Profession: Electric Engineer Administrative Body: Board of Executive Officers Term of officer: OSM 2017 Election date: 05/04/2015 Inauguration date: 05/04/2015 Elected by the controller: No Other positions and 4unctions performed in the issuer: Personnel and Remuneration Committee ember
Professional Experience / Statement of any convictions: In the last 5 years, Mr. Guimarães served as Administrative and Financial Vice-President, Infrastructure and HR Vice-President and Human Resources and Shared Services Manager. Previously, he was the Financial Director of TOTVS, having joined the Company in March, 2007, as Planning Director. Prior to joining the Company, he worked for AmBev for 12 years, where he started as trainee and served in several units and at the Central Management as Finance Administrative Manager, Plant General Manager, National Manager of Financial Services and Planning and Performance Management Director. He holds a B.A. in Electric Engineering in 1994 by Universidade Federal de Minas Gerais and completed in 1997 his graduation in Corporate Finance by Fundação Getúlio Vargas.
Name: André Bretas Nunes de Lima Elective position occupied: Business Officer CPF: 023.700.836-03 Age: 40 Profession: Systems Analyst Administrative Body: Board of Executive Officers Term of officer: OSM 2017 Election date: 05/04/2015 Inauguration date: 05/04/2015 Elected by the controller: No Other positions and functions performed in the issuer: -
Professional Experience / Statement of any convictions:
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In the past 5 years, Mr. Bretas acted as TOTVS Development Director, joining the Company as of the incorporation of RM Sistemas, where he started his career in 1995. He served as team leader of software development and customization in Minas Gerais and of the service team in São Paulo, having also acted as facilitator in the technological innovation project of management software and in the development of RM brand implementation methodology. In 2011, he served as professor at IBMEC. He also served as a consultant in architecture and software development in some companies. He holds a B.A. in Computer Science by Pontifícia Universidade Católica de Minas Gerais, having graduated in 199, and completed in 2001 a specialization in business management and IT by FGV.
Name: Denis Del Bianco Elective position occupied: Business Officer CPF: 071.651.947-03 Age: 39 Profession: Systems Analyst Administrative Body: Board of Executive Officers Term of officer: OSM 2017 Election date: 05/04/2015 Inauguration date: 05/04/2015 Elected by the controller: No Other positions and functions performed in the issuer: -
Professional Experience / Statement of any convictions: In the last 5 years, Mr. Del Bianco served as TOTVS Business Director, being responsible for TOTVS Consulting, with emphasis on the development and implementation of offerings to various segments. Before, he acts as a independent consult from TOTVS Consulting, since 2007. Prior to joining the Company, he acted for 9 years in the consulting division of Accenture do Brasil with the last 14 months as Senior Manager for the Energy segment, responsible for sales and development of Technology and Restructuring projects. Mr. Del Bianco holds a B.A. in Computers by Universidade Federal do Rio de Janeiro (1998) and postgraduate in Business Management by IBMEC, Rio de Janeiro (2003).
Name: Flávio Balestrin de Paiva Elective position occupied: Marketing, Alliances and Business Models Vice-President
CPF: 184.410.978-01 Age: 43 Profession: Business Administrator Administrative Body: Board of Executive Officers Term of officer: OSM 2017 Election date: 05/04/2015 Inauguration date: 05/04/2015 Elected by the controller: No Other positions and functions performed in the issuer: -
Professional Experience / Statement of any convictions: In the last 5 years, Mr. Balestrin acted at TOTVS as Market Strategy and Channels Director, having previously served as Human Relations Director between 2002 and 2007. He graduated in Business Management from Fundação Getúlio Vargas in 1993, took several executive training in Human Resources and marketing in FGV, IBMEC and FDC-Fundação Dom Cabral. Mr. Balestrin is responsible for the Alliances, Channel´s Management and Marketing areas.
Name: Gilsinei Valcir Hansen Elective position occupied: Systems and Segments Vice-President
CPF: 851.310.329-20 Age: 41 Profession: Business Administrator Administrative Body: Board of Executive Officers Term of officer: OSM 2017 Election date: 05/04/2015 Inauguration date: 05/04/2015 Elected by the controller: No Other positions and functions performed in the issuer: -
Professional Experience / Statement of any convictions: In the last 5 years, Mr. Hansen acted as Vice-President of Systems and Segments and Business Director at TOTVS (segments management). Before, he was the Business Development Manager responsible for the execution of the M&A projects in Datasul. Before joining the Company, he was partner-director of Sales and Marketing at Tech Solutions Tecnologia da Informação Ltda. He is graduated in Business Management from Universidade da Região de Joinville in 1995 (also post-graduated in Marketing, Communication and Business from the same institution) and Production Engineering from Universidade do Estado de Santa Catarina. Mr. Hansen was also professor of the marketing and entrepreneurship at the higher education institutions: Associação Catarinense de Ensino and Faculdade Cenecista de Joinville, between 1998 and 2006.
Name: Gilsomar Maia Sebastião Elective position occupied: Investor Relations Officer CPF: 174.189.288-07 Age: 39 Profession: Bachelor in Accounting Sciences Administrative Body: Board of Executive Officers Term of officer: OSM 2017 Election date: 05/04/2015 Inauguration date: 05/04/2015 Elected by the controller: No Other positions and functions performed in the issuer: -
Professional Experience / Statement of any convictions: In the last 5 years, Mr. Gilsomar Maia Sebastião acts as Planning, Corporate Finance, IR and M&A officer at TOTVS. Between 2006 and 2007, he was the process and risk manager of TOTVS. Mr. Sebastião made his career at Ernst & Young Auditores Independentes, acting in audit assurance projects between 1996 and 2004. He graduated in
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Accounting Sciences from Universidade Mackenzie in 2000, and attended Post-Graduation in Capitals Market from FEA-USP in 2006.
Name: Gustavo Dutra Bastos Elective position occupied: Segment Officer CPF: 026.942.416-46 Age: 39 Profession: Business Administrator Administrative Body: Board of Executive Officers Term of officer: OSM 2017 Election date: 05/04/2015 Inauguration date: 05/04/2015 Elected by the controller: No Other positions and functions performed in the issuer: -
Professional Experience / Statement of any convictions: In the last 5 years, Mr. Bastos acted as Service and Relationship Director at TOTVS, and Executive Director of Datasul Serviços (responsible for the hosting, education and tax solutions and service desk offerings). He has technical education in Industrial Computers from Centro Federal de Educação Tecnológica de Minas Gerais and graduated in Business Management from UFMG – Universidade Federal de Minas Gerais, in 2000.
Name: Lélio de Souza Júnior Elective position occupied: Service and Relationship Officer CPF: 988.963.346-91 Age: 41 Profession: Mechanical Engineer Administrative Body: Board of Executive Officers Term of officer: OSM 2017 Election date: 05/04/2015 Inauguration date: 05/04/2015 Elected by the controller: No Other positions and functions performed in the issuer: -
Professional Experience / Statement of any convictions: In the last 5 years, Mr. Lélio acted as Business Director at TOTVS, with focus on strcturing the Consulting, Value-Added Services areas and Private Operations. Before joining the Company, he acted for 3 years at COONEP (Cooperativa Nacional de Engenharia e Projetos) and consulting projects for the energy segment for 8 years at Accenture do Brasil, where he reached the position of Senior Manager working intensely in technology projects aimed at the oil and gas segment inside and out of Brazil. He is graduated in Mechanical Engineering from Universidade Federal de Minas Gerais (UFMG) in 1997, post-graduated in Production Engineering, and certified in APICS/CPIM (Certified in Production and Inventory Management).
Name: Mauricio Dias Couto Elective position occupied: Services and Relationship
Officer CPF: 262.892.795-58 Age: 41 Profession: Business Administrator Administrative Body: Board of Executive Officers Term of officer: OSM 2017 Election date: 05/04/2015 Inauguration date: 05/04/2015 Elected by the controller: No Other positions and functions performed in the issuer: -
Professional Experience / Statement of any convictions: In the last 5 years, he acted as Relationship & Services Officer at TOTVS, being responsible to deliver projects and demands to large accounts, as well as being responsible for the application outsourcing offering. Acted in TOTVS Consulting Services franchise as large account services officer. Mauricio was CIO of Time for Fun and Consultant at Accenture, acting in large (ERP) management system implementation projects in Brazil and Europe. Mr. Couto have 18 years of experience in Information Technology and Consulting Services, and is graduated as Business Administrator by FASP, and post-graduated in Marketing by ESPM.
Name: Deborah Kirschbaum Elective position occupied: Legal Officer CPF: 261.782.928-64 Age: 38 Profession: Lawyer Administrative Body: Board of Executive Officers Term of officer: OSM 2017 Election date: 05/04/2015 Inauguration date: 05/04/2015 Elected by the controller: No Other positions and functions performed in the issuer: -
Professional Experience / Statement of any convictions: In the past 5 years, Ms. Kirschbaum acted as Legal Manager of Suzano Papel e Celulose S/A, Legal Manager of
Companhia de Bebidas das Americas - AmBev and as assessor to the president of Banco Nacional do Desenvolvimento
Econômico e Social - BNDES. Actually Ms. Kirschbaum hols a Bachelor degree and a PhD in Law from the University
of São Paulo - USP, a Masters Degree from the University of Chicago Law School and was a visiting scholar at Harvard
University Law School.
Name: Marcelo Eduardo Sant'anna Cosentino Elective position occupied: Business Officer CPF: 306.743.308-46 Age: 32 Profession: Business Administrator Administrative Body: Board of Executive Officers Term of officer: OSM 2017 Election date: 05/04/2015 Inauguration date: 05/04/2015 Elected by the controller: No
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Other positions and functions performed in the issuer: -
Professional Experience / Statement of any convictions: In the last 5 years Mr. Cosentino acted as Financial Planning, M&A and International Markets Officer. He was also responsible for the IT anrea until 2009. Nowadays, he acts as International Operations, Ventures and M&A Director. He graduated in business management from Pontifícia Universidade Católica (PUC-SP) in 2005.
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12.7. Composition of the audit, financial and compensation statutory committees
Type of Committee
Position held Name Profession Date – election Term of officer CPF Age Date –
inauguration Other positions at the company
Audit Committee
Member of the committee (effective)
Charles Barnsley Holland Bachelor in Accounting Sciences
01/27/2014 2 automatically renewable years
379.343.258-00
72
01/27/2014
-
Independent member since May 2007. Mr. Holland has an accounting degree from the Federal University of Rio de Janeiro and an MBA from Wharton, USA. He is a member of the Institute of Corporate Governance (IBGC) and director of ANEFAC, the association of finance executives. He serves on the fiscal council of publicly- and private held companies, 2 NGOs and independent Board member in private companies. He was partner at Ernst & Young and has authored more than 200 articles on accounting, audit, business, ethics, taxation and economics and is panelist of several of the aforementioned subjects.
Member of the committee (effective)
Gilberto Mifano Business Administrator
01/27/2014 2 automatically renewable years 566.164.738-72
65
01/27/2014
-
Member of the TOTVS Audit Committee, he is also a partner at Pragma Gestão de Patrimônio and independent board member of Cielo SA, Ambar S/A, member of the Governance and Sustainability Council of Santander and consultant to the Audit, Risk and Finance Committee of Natura S.A. From 1994 to 2009, he acted as CEO of Bovespa - Stock exange of Sao Paulo and CBLC - Brazilian Clearing and Depository Corporation. Subsequently, from 2008 to 2009, he was Chairman of the Board of BM&F S.A., being responsible for the creation of CBLC and “Novo Mercado”, performing the IPO of Bovespa in 2007 and the merger between Bovespa and BM&F in 2008. From 2005 to 2012 he was chairman, vice-president and president of the IBGC - Brazilian Institute of Corporate Governance. Previously, he was executive officer at banks and financial companies in Brazil. He holds a degree in Business Administration from the School of Business Administration of Sao Paulo‘s “Fundação Getulio Vargas.
President of the committee
Maria Helena dos Santos Fernandes de Santana 036.221.618-50 -
Economist 55
01/27/2014 01/27/2014
2 automatically renewable years
Mrs. Maria Helena dos Santos Fernandes de Santana holds a degree in economics by the Universidade de São Paulo – USP (1990). She is Board member and President of the Corporate Governance Committee the Companhia Brasileira de Distribuição (CBD), and member of the Board the CPFL Energia S.A. In the past 5 years, she was President of the Brazilian Securities Commission, from 2007 to 2012, having acted as director at the same institution from 2006 to 2007. Mrs. Santana also was president of the Executive Committee of the International Organization of Securities Commissions – IOSCO. From 1994 to 2006, served as Superintendent of Corporate Relations and Special Projects Manager at São Paulo Stock Exchange.
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Compensation committee
Member of the committee (Effective)
Laércio José de Lucena Cosentino
Electric Engineer
01/27/2014 2 years
032.737.678-39
54 01/27/2014
Board Member and CEO Member of the committee (Effective)
Alexandre Mafra Guimarães Electric Engineer
01/27/2014 2 years
681.592.776-87
43 01/27/2014
Administrative and Financial Vice-President
Member of the committee (Effective)
Paulo Eduardo Saliby 272.400.048-05 -
Business Administrator 38
01/27/2014 01/27/2014
2 years
President of the committee
Pedro Moreira Salles Economist 01/27/2014
2 years
551.222.567-72
55 01/27/2014
Member of the Management Board
12.9. Existence of marital relationship, stable union or family relationship up to 2nd degree regarding Company administrators, controlled and controlling companies
Name CPF Company CNPJ Type of relationship with the administrator of the Company or controlled company
Position
Laércio José de Lucena Cosentino 032.737.678-39 TOTVS S.A. 53.113.791/0001-22
Son (1st degree of blood relationship)
Board Member and CEO Marcelo Eduardo Sant'anna Cosentino 306.743.308-46 TOTVS S.A. 53.113.791/0001-22
Business Officer
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12.10. Subordination relationships, services relationship or control between the administrators and controlled, controlling and others
Fiscal year: 2014
Identification CPF/CNPJ Type of relationship of the Administrator with the related person
Type of related person
Position/Job Company administrator Laércio José de Lucena Cosentino 032.737.678-39 Control Supplier Board Member, CEO and Member of the Compensation Council Related person VIP Empreendimentos e Participações Ltda.
03.936.026/0001-34
Partner Note Lease agreement between TOTVS and the related person
Company administrator Laércio José de Lucena Cosentino 032.737.678-39 Control Supplier Board Member, CEO and Member of the Compensation Council Related person VIP III Empreendimentos e Participações Ltda.
05.998.065/0001-91
Partner Note
Lease agreement between TOTVS and the related person
Company administrator Laércio José de Lucena Cosentino 032.737.678-39 Control Supplier Board Member, CEO and Member of the Compensation Council Related person VIP IV Empreendimentos e Participações Ltda.
07.951.381/0001-33
Partner Note
Lease agreement between TOTVS and the related person
Company administrator Marcelo Eduardo Sant'anna Cosentino 306.743.308-46 Control Supplier Business Officer Related person VIP Empreendimentos e Participações Ltda.
03.936.026/0001-34
Partner Note
Lease agreement between TOTVS and the related person
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Company administrator Pedro Moreira Salles 551.222.567-72 Control Supplier Independent Member of the Board of Directors Related person ITAÚ CORRETORA DE VALORES S.A. 61.194.353/0001-64
Indirect Controller through E. Johnston Representação e Participações S.A. Note
Stock Bookkeeping and Stock option plan management services. Company administrator Pedro Moreira Salles 551.222.567-72 Control Supplier Independent Member of the Board of Directors Related person Banco Itaú BBA S.A. 17.298.092/0001-30
Indirect Controller through E. Johnston Representação e Participações S.A. Note
Financial applications, collection services and bank guarantee
Company administrator Pedro Moreira Salles 551.222.567-72 Control Client Independent Member of the Board of Directors Related person Itaú Unibanco S.A. 17.298.092/0001-30
Indirect Controller through E. Johnston Representação e Participações S.A. Note
Software and IT services client. Company administrator Pedro Moreira Salles 551.222.567-72 Control Supplier Independent Member of the Board of Directors Related person Itaú Vida e Previdência S.A. 92.661.388/0001-90
Indirect Controller through E. Johnston Representação e Participações S.A. Note
Services of Private pension plan management. Company administrator Sérgio Földes Guimarães 014.873.977-63 Subordination Creditor Independent Member of the Board of Directors Related person Banco Nacional do Desenvolvimento Econômico e Social (BNDES)
33.657.248/0001-89
Administrator Note
PROSOFT Financing line, PSI and Social Investments.
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The table above comprehends the year of 2014, 2013 and 2012.
12.11. Agreements, including insurance policies, for payment or reimbursement of expenses borne by the administrators
In line with the Company’s insurance hiring policy, civil responsibility insurance was hired to Administrators and Directors, aiming at ensuring to the Company´s administrators the reimbursement of the amounts paid as indemnification arising from damages caused to third parties or to the Company, during the regular exercise of their activities. The current policy number 1104002069-0 (Insurance plan recorded at SUSEP under No. 15414.00712/2005-57), celebrated between Itaú Seguros S.A., is in effect until June 1, 2015 and has a maximum indemnification limit of R$40.00 million.
Company administrator Sérgio Földes Guimarães 014.873.977-63 Subordination Creditor Independent Member of the Board of Directors Related person BNDES Participações S.A. 00.383.281/0001-09
Administrator Note
Debentures
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12.12. Other relevant information
Following Novo Mercado Rules, the Company discloses the positions held in other companies
by Board Member:
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The Company discloses the meetings held in the last three (3) years: (i) the date of completion;
(ii) case of installation on second call; and (iii) the exact quorum to each meeting, in the table
below:
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13. MANAGEMENT COMPENSATION
13.1. Describe the compensation policy or practice of the board of directors, statutory and non-statutory executive officers, fiscal council, statutory committees and audit, risk, financial and compensation committees regarding the following aspects:
a) objectives of the compensation policy or practice
To ensure competitive compensation models aligned with market practices and which help to attract and retain professionals.
b) breakdown of the compensation, indicating:
i. the description of the elements of compensation and the purposes of each
one of them
Board of Executive Officers
Fixed Compensation: it is the amount received monthly by the professional to
compensate him/her for the duties and responsibilities related to their position.
Variable Compensation:
- Monthly Variable (short-term): it is the variable amount received by the
professional, rewarding him/her for the Company’s overall results.
- Annual Bonus (medium-term): it is the variable amount received annually by
the professional, rewarding him/her for the Company’s overall results. It is
linked to financial aspects and individual performance, which consists in
complying with the established targets.
- Stock Options (long term): option granted annually to acquire TOTVS stock,
distributed to the executive officers to promote their long-term commitment to
the Company. It is linked to the results of the following years.
- Benefits: it is the package of benefits granted to the professional, including
health plan, meal voucher, private pension plan, life insurance, among others.
All professionals receive the same benefits, although there might be differences
in the amounts granted due to the region where the employee works.
Board of Directors
All the Board members receive a fixed compensation monthly, whose purpose
is to compensate them according to market practices.
Audit and Compensation/People Committee
The administrators (executive officers and Board members) who also take part
in a few committees are not entitled to receive additional compensation for
their participation in said committees.
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The independent members of the committees work under a service agreement
which sets forth the annual total amount to be received and the number of
meetings per year. The services rendered are paid for monthly.
ii. what is the percentage of each element in the total compensation
Board of Executive Officers
With regard to monthly compensation, the target fixed compensation accounts
for 80% and variable compensation for 20%. With regard to annual
compensation, the percentage is approximately 60% fixed, 11% variable and
29% bonus.
Board of Directors
The compensation of the Board members is 100% fixed.
Audit and Compensation/People Committee
The compensation of the independent members of the committee is 100% fixed
and is determined by the service agreement.
iii. methodology for calculation and adjustment of each component of the
compensation
The methodology for calculating each element of management compensation is
detailed below:
Board of Executive Officers
Monthly variable: The monthly variable portion is calculated using as base
TOTVS’ year-to-date EBITDA, that is, from January to the prior month of the
current month. The payment is subject to the percentage of achievement of the
established YTD EBITDA target. A target is set for each executive officer, with the
variable monthly target calculated in compliance with the percentage of
achievement of the YTD EBITDA applied on the base value to which each
executive officer in entitled to, which is a percentage of the fixed compensation.
The calculation formula is:
Monthly payment = [(Base value) x (% YTD EBITDA Achievement) x (No. of
months)} – (Previous Payments)
Annual bonus: it varies according to (i) the achievement of individual targets and
individual performance appraisal; and (ii) the financial aspect (Company’s
overall performance). The calculation considers the percentage of achievement
of the individual targets multiplied by an acceleration / deflation table of the
bonus pool according to the EBITDA generated and multiplied by the number of
target salary multiples.
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The individual targets are defined by the area in which the executive officer
works, numbering 4 targets per year. Target adjustments might be made during
the year due to extraordinary reasons (change of function, among others);
however, adjustments should be made and approved by the responsible bodies
(Board of Directors and Compensation/People Committee, as applicable).
Stock Options: based on the advice of the Compensation/People Committee,
the Board of Directors grants stock options to the executive officers and other
key employees. The calculation of the amount allocated to each beneficiary is
based on: (i) the hierarchical level; and (ii) the beneficiary’s potential in
assuming management positions in the future. For further information on the
stock option plan, see item 13.4.
Adjustments: the components of the (monthly fixed and variable) compensation
can be adjusted annually according to the following metrics: inflation rate,
collective bargaining, comparison with the market and/or individual
performance.
Board of Directors
The fixed compensation adjustment is made annually and takes into account
market practices.
Audit and Compensation/People Committee
The fixed compensation adjustment is made annually and takes into account
market practices.
iv. reasons that justify compensation breakdown
The compensation components aim to ensure equity with market practices, and
should be strategically competitive while attracting and retaining qualified
professionals through a balanced compensation based on the short-, medium-
and long-term variables. In the last two cases, the strategy of granting variable
compensation is linked to the Company’s results in order to ensure greater
commitment and sense of ownership in the executives.
c) key performance indicators that are taken into account when determining each compensation element
The key performance indicators used when determining each compensation element are: (i) the Company’s results; (ii) the result of the executive officer’s area; and (iii) the individual performance of the executive officer. Also taken into account is the benchmark market value for the position. See also item 13.1(b)(iii).
d) how is the compensation structured to reflect the growth of the performance indicators
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The first three indicators mentioned in item 13.1(c) are used to define the strategy and the breakdown of the variable compensation models. The market benchmark for the position is the basis for calculating the fixed compensation.
e) how is the compensation policy or practice aligned with the short, medium and long term interests of the issuer
The compensation policy components are designed to retain professionals and create in them a sense of commitment and ownership toward the Company’s results, with a balance among the short, medium and long-term metrics.
f) existence of compensation supported by subsidiaries or direct or indirect controlling companies
No compensation is supported by subsidiaries and indirect or direct controlling companies.
g) existence of any compensation or benefit related to the occurrence of corporate events, such as sale of the issuer’s controlling interest
See item 13.12.
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13.2. Compensation of the Board of Directors and Executive Board recognized in the result of the last fiscal year and expected for the current fiscal year
2012
Body1
Number
of
Members2
fixed annual compensation variable compensation
Post- employment
benefits
Social security charges
Terminal Benefits
Total Salary or pro-
labore
Direct and
indirect benefits
Compensation for
participation in committees
Others bonus Profit Sharing
Compensation for
participation in meetings
commissions Others
Board of Directors 6.75 1,026,000.00 - - 92,457.00 - - - - - - - - 1,118,457.00
Executive Board 24.58 15,632,978.63 - - 1,274,968.96 6,776,706.18 - - - - 440,261.08 - 9,004,002.15 33,128,917.00
Total 31,33 16,658,978.63 - - 1,367,425.96 6,776,706.18 - - - - 440,261.08 - 9,004,002.15 34,247,374.00
2013
Body1
Number
of
Members2
fixed annual compensation variable compensation
Post- employment
benefits
Social security charges
Terminal Benefits
Total Salary or pro-
labore
Direct and
indirect benefits
Compensation for
participation in committees
Others bonus Profit Sharing
Compensation for
participation in meetings
commissions Others
Board of Directors 6.92 1,062,000.00 - - 2.734,02 - - - - - - - - 1,064,734.02
Executive Board 24.14 14,972,834.77 - - 164.609,84 1.198.968,14 - - - - 465,237.73 - 5,420,065.85 24,699,971.50
Total 31.09 16,034,834.77 - - 167.343,86 1.198.968,14 - - - - 465,237.73 - 5,420,065.85 25,764,705.52
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2014
Body1
Number
of
Members2
fixed annual compensation variable compensation
Post- employment
benefits
Social security charges
Terminal Benefits
Total Salary or pro-
labore
Direct and
indirect benefits
Compensation for
participation in committees
Others bonus Profit Sharing
Compensation for
participation in meetings
commissions Others
Board of Directors 7.33 1,221,088.80 - - - - - - - - - - - 1,221,008.80
Executive Board 16.92 12,357,210.47 - - - 224,195.46 - - - - 416,543.02 - 5,420,065.85 18,418,014.80
Total 24.25 13,578,299.27 - - - 224,195.46 - - - - 416,543.02 - 5,420,065.85 19,639,103.60
Proposal for 2015
Body
Number
of
Members
1
fixed annual compensation variable compensation
Post- employment
benefits
Social security charges
Terminal Benefits
Total
Salary or pro-labore
Direct and
indirect benefits
Compensation for
participation in committees
Others 3 bonus Profit Sharing
Compensation for
participation in meetings
commissions Others
Board of Directors 9 1,826,872.08 - - - - - - - - - - - 1,826,872.08
Executive Board 16 12,333,093.85 - - - 8,352,630.00 - - - - 489,178.20 - 7,299,483.50 28,474,385.55
Total 25.00 14,159,965.93 - - - 8,352,630.00 - - - - 489,178.20 - 7,299,483.50 30,301,257.63
1 The Company does not have a Fiscal Council installed
2 TOTVS’ Board of Directors has 9 members, but Laércio José de Lucena Cosentino and Sergio Földes Guimarães do not receive compensation. This number of members represents the
weighted average by months worked in the year
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13.3. Variable Compensation of the Board of Directors and Executive Board
Proposal for 2015
Board of
Directors
Executive
Board Fiscal
Council Total
Number of members 9.00 16.00 0 25.00
Bonus
Minimum amount set forth in the compensation plan
- - - 0.00
Maximum amount set forth in the compensation plan
- 12,528,945.00 - 12,528,945.00
Amount set forth in the compensation plan, in case the targets were achieved
- 8,352,630.00 - 8,352,630.00
Amount recognized in the result - N/A - 0.00
Profit Sharing
Minimum amount set forth in the compensation plan
- - - 0.00
Maximum amount set forth in the compensation plan
- - - 0.00
Amount set forth in the compensation plan, in case the targets were achieved
- - - 0.00
Amount recognized in the result - - - 0.00
2014
Board of
Directors
Executive
Board Fiscal
Council Total
Number of members 7.33 16.92 0 24.25
Bonus
Minimum amount set forth in the compensation plan
- - - 0.00
Maximum amount set forth in the compensation plan
- 8,712,396.00 - 8,712,396.00
Amount set forth in the compensation plan, in case the targets were achieved
- 5,808,264.00 - 5,808,264.00
Amount recognized in the result - 224,195.46 - 224,195.46
Profit Sharing
Minimum amount set forth in the compensation plan
- - - 0.00
Maximum amount set forth in the compensation plan
- - - 0.00
Amount set forth in the compensation plan, in case the targets were achieved
- - - 0.00
Amount recognized in the result - - - 0.00
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2013
Board of
Directors
Executive
Board Fiscal
Council Total
Number of members 7.33 16.92 0 24.25
Bonus
Minimum amount set forth in the compensation plan - - - 0.00
Maximum amount set forth in the compensation plan
- 10,477,677.28 - 10,477,677.28
Amount set forth in the compensation plan, in case the targets were achieved
- 6,985,118.46 - 6,985,118.46
Amount recognized in the result - 1,198,968.14 - 1,198,968.14
Profit Sharing
Minimum amount set forth in the compensation plan - - - 0.00
Maximum amount set forth in the compensation plan - - - 0.00
Amount set forth in the compensation plan, in case the targets were achieved - - - 0.00
Amount recognized in the result - - - 0.00
2012
Board of
Directors
Executive
Board Fiscal
Council Total
Number of members 6.75 24.58 0 31.33
Bonus
Minimum amount set forth in the compensation plan
- - - 0.00
Maximum amount set forth in the compensation plan
- 9,374,800.50 - 9,374,800.50
Amount set forth in the compensation plan, in case the targets were achieved
- 6,249,867.00 - 6,249,867.00
Amount recognized in the result - 6,776,706.18 - 6,776,706.18
Profit Sharing
Minimum amount set forth in the compensation plan
- - - 0.00
Maximum amount set forth in the compensation plan
- - - 0.00
Amount set forth in the compensation plan, in case the targets were achieved
- - - 0.00
Amount recognized in the result - - - 0.00
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13.4. Compensation Plan based on shares for the Board of Directors and Executive Board in the last fiscal year and expected for the current fiscal year
The Company has two stock option plans, “Plan 1” approved in the Extraordinary General
Shareholders´ Meeting of December 26, 2007 and the “Plan2” approved in the Extraordinary
General Shareholders´ Meeting of November 29, 2012.
Description of Plan 1
a) general terms and conditions
TOTVS’ Stock Option Plan (“Plan 1”) is managed by the Board of Directors, which has exclusive powers to:
i. select individuals who are entitled to receive stock options;
ii. define the number and price for the exercise of stock options and the form of
distribution to qualified beneficiaries;
iii. define the restrictions for selling the shares acquired or subscribed;
iv. extend the period for exercising the stock options;
v. modify the terms in the event of legal amendments;
vi. propose adjustments to the plan, approved by the Extraordinary Shareholders’
Meeting;
vii. authorize the Executive Board to sign stock option agreements with the
participants;
viii. decide on other cases not covered here.
The plan is valid for 60 months as of November 26, 2007, when it was approved by the General Shareholders' Meeting. The plan is valid until the end of the term of the exercise of the outstanding options.
The main characteristics of Plan 1 are as follows:
Participants: officers and employees of the Company that either occupy
statutory functions or are deemed to be “key-employees”;
“Vesting Period”: the stock options will be vested after 3 years of
granting;
The Stock Options may be exercised within 2 years after vesting period,
that is, after 5 years from granting;
Lock-up period of Plan 1: the shares purchased through the exercise of
the Stock Options under Plan 1 are not subject to the lock-up rule.
b) key objectives of the plan
The objective of the plan is to promote in its beneficiaries a sense of ownership and personal commitment to the Company's financial success, encouraging them to devote their best efforts to the business, thus contributing to the interest of the Company and its shareholders.
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c) how the plan contributes to these objectives
The plan contributes to these objectives by creating a link between the compensation of the qualified beneficiaries and the performance of the Company’s shares: the better the performance of the Company and its influence on the appreciation of the Company's share, the higher the benefit.
The qualified beneficiaries tend to become more motivated about the possibility of having
their compensations increased on the long-term and of working in alignment with market and shareholders’ expectations, making decisions that benefit not only themselves, but also the organization as a whole.
d) how the plan is included in the compensation policy of the issuer
The plan is complementary to the compensation of the qualified beneficiaries, since it is the long-term element of the compensation [for further information see item 13.1(b)]. The plan is also intended to retain talented professionals in an increasingly competitive market and to encourage higher motivation among the beneficiaries.
e) how the plan aligns the management’s and the issuer’s interests in the short, medium and long terms
This plan is part of the management compensation strategy, adding a long-term element in the vesting period which, in this specific case, determines that all the options may only be exercised after the end of 36 months (1st, 2nd and 3rd grants) after the date the options were granted (period after which the shares are vested) and for a maximum of 60 months (1st, 2nd and 3rd grants) after the granting date (period after which the options will be extinguished). For the 4th and 5th grants of the stock option plan of Company’s shares, there are 3 grace periods for the exercise of shares, which are: (i) part of options may be exercised as of January 30, 2014; (ii) part of options may be exercised as of January 30, 2015; and (iii) part of options may be exercised as of October 18, 2015, as described in item 13.6.
Another important element is best described in item 13.4(n), since the dismissal of the
employee with cause or resignation will extinguish the options that have not yet been exercised
by the date of termination. Thus, both the vesting period and employee termination require, in
different ways, that the elected beneficiaries do not in an opportunistic manner but focus on
longer terms. This is because the short-term compensations will not include the variable stock
option element and, in the medium term, the low performance of the employee may result in
employment termination or reduction of the Company's share price.
f) maximum number of shares
The maximum number of common registered shares that will be issued as a result of the plan
corresponds to 1,038,156 shares to be issued as options are exercised, in view of terms and
described in item 13.4(e).
On March 21, 2011, with the 1:5 split, the maximum number of shares became 5,190,780.
g) maximum number of options to be granted
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The maximum number of options to be granted, with each option corresponding to one
common registered share issued by the Company, corresponds to 3.3% of the Company’s capital
stock amounting to 5,190,780 share options that comprise the Plan.
h) conditions for acquisition of shares
The exercise price must be paid by the beneficiary according to the payment methods and
terms determined by the Board of Directors. Till the exercise price is not paid fully, the shares
acquired through the exercise of options can only be sold to third-parties based on the
authorization of the Board of Directors, in which case the proceeds of the sale will be primarily
used to settle the beneficiary’s debt with the Company.
i) criteria to fix the acquisition or exercise price
The exercise price is fixed based on the unit value of TOTVS’s shares and corresponds to the
arithmetic mean of the prices in the last 5 trading sessions before the date of granting of the
options.
j) criteria for setting the vesting period
The options should be exercised by the beneficiaries between the end of 36 months from the
date of grant of the options (after which the shares are vested) and a maximum of 60 months
after the granting period (period after which the option will be extinguished), except for the 4th
and 5th grants that are specifically dated as mentioned in item 13.4(e).
k) forms of settlement
The exercise price must be paid immediately after subscription or acquisition of shares. The
company intends to use the shares held in treasury to satisfy the exercise of the Stock Options.
l) restrictions to the transfer of shares
As mentioned above, the shares acquired by means of the Stock Options exercise under Plan
1 are not subject to the Lock Up rule.
m) criteria and events that will cause suspension, alteration or cancellation of the plan
In case of dissolution, winding-up or bankruptcy of the Company, the options will be canceled
automatically and all their effects will cease by force of law, without prejudice to any contrary
provisions set forth in the plan.
n) effects of the exit of the administrator from the issuer’s bodies on his rights provided for in the compensation plan based on shares
If the beneficiary’s termination is caused by Company for any reason except for just cause,
he/she can exercise the vested options that have not been exercised until the date of
termination up to a maximum of 30 days after termination, in compliance with the vesting rights.
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In case of termination for just case, all the options granted, that are not mature, will
automatically be cancelled by law, regardless of prior notice or indemnification.
In the event of the beneficiary’s death, all vested options that have not yet been exercised
according to the vesting rules may be exercised by the heirs or successors of the holder of the
options as duly defined in the probate proceeding, or by any other means provided for in law
and that clearly identifies the heirs and/or successors. The options should be exercised in up to
12 months as of the death of the beneficiary and the Board of Directors, at its sole discretion,
may extend this term until the termination of the probate proceeding, always within the
maximum term for the exercise of options.
In the event of permanent incapacity of the beneficiary, duly recognized and in compliance
with the applicable pension legislation, he/she will continue to be part of the program, within
the maximum term for the exercise of options.
If the beneficiary retires, all vested options that have not yet been exercised according to the
vesting rules may be exercised in up to 12 months after the retirement is notified.
Description of Plan 2
a) general terms and conditions
TOTVS’ Stock Option Plan (“Plan 2”) is administered by the Board of Directors, which has
exclusive powers to:
(i) select individuals who are entitled to receive stock options;
(ii) define the number and price for the exercise of stock options and the form of
distribution to qualified beneficiaries;
(iii) define the restrictions for selling the shares acquired or subscribed;
(iv) extend the period for exercising the stock options;
(v) modify the terms in the event of legal amendments;
(vi) propose adjustments to the plan, approved by the Extraordinary Shareholders’
Meeting;
(ii) authorize the Executive Board to sign stock option agreements with the
participants;
(iii) decide on other cases not covered here.
The plan is valid for 60 months as of after its approval by the Shareholders' Meeting. The plan
is valid until the end of the term of the exercise of the outstanding options.
The main characteristics of Plan 2 are as follows:
Participants: officers and employees of the Company or its affiliates that are
either officers or executive managers;
Granting of matching Regular Stock Options: Regular Stock Options are granted
to those beneficiaries who purchase Company Stock from the amount received
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as yearly cash bonus, and commit to hold the acquired stock for a lock-up
period;
Vesting period: the Sctock Optins vest in 3 years from granting;
Exercise period: the Stock Options may be exercised within 2 years past vesting
period, that is, until 5 years from granting;
Lock-up over Stock for matching Regular Options: the stock acquired in
connection with matching Regular Options are subject to a 2-year lock-up
period. However, the shares acquired as a result from the exercise of Stock
Option are not subject to lock-up rule;
Granting of matching Restricted Stock Options: Restricted Stock Options are
granted to those beneficiaries who apply 100% of the amount received as yearly
cash bonus in purchasing Company Stock, and commit to hold the acquired
stock for a lock-up period. Approximately 20% of the beneficiaries of Regular
Options are eligible to receiving Restricted Stock Options, and integrate the
“Partner Program”;
Exercise of Restricted Stock Options: Restricted Stock Options may only be
exercised upon exercise of Regular Stock Options;
Lock-up over Stock resulting from exercise of Restricted Stock Options: the
shares acquired through the exercise of Restricted Stock Options are subject to
a lock-up period of 1 year from exercise of the Restricted Stock Option;
b) key objectives of the plan
The objective of the plan is to promote in its beneficiaries a sense of ownership and personal
commitment to the Company's financial success, encouraging them to devote their best efforts
to the business, thus contributing to the interest of the Company and its shareholders.
c) how the plan contributes to these objectives
The plan contributes to these objectives by creating a link between the compensation of the
qualified beneficiaries and the performance of the Company’s shares: the better the
performance of the Company and its influence on the appreciation of the Company's share, the
higher the benefit.
The qualified beneficiaries tend to become more motivated about the possibility of having
their compensations increased on the long-term and of working in alignment with market and
shareholders’ expectations, making decisions that benefit not only themselves, but also the
organization as a whole.
d) how the plan is included in the compensation policy of the issuer
The plan is complementary to the compensation of the qualified beneficiaries, since it is the
long-term element of the compensation [for further information see item 13.1(b)]. For that, the
Beneficiary must acquire the Company’s Shares with funds corresponding to 50% or 100% of the
amount received annually in respect of Profit Sharing and/or bonuses, net of income tax. For
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the Partners’ Program, they must invest 100% of the Profit Sharing and/or bonuses amount
received for the year, net of income tax, in acquiring Company Shares, and they shall be granted
Restricted Options.
The plan is also intended to retain talented professionals in an increasingly competitive
market and to encourage higher motivation among the beneficiaries.
e) how the plan aligns the management’s and the issuer’s interests in the short, medium and long terms
Plan 2 comprehends the directors' remuneration strategy by adding an element of long-term
of which the beneficiary who may wish to exercise their shares is able to do it in a period of two
years, which shall begin on the day following the end of the Grant Period, whereas the exercise
price of the options will be the price at which Shares will be acquired by the Company.
The options are valid for a period of five years from its issuance, after which it will be
extinguished.
Another important element that is best described in the item 13.4 (n), once the shutdown of
the eligible beneficiary for just cause extinguishes the options granted which have not been
exercised as of the date of termination, exceptions made by specific approval of the Board. Thus,
both the reservation of law as requiring the termination of the employee, in different ways, that
the professional behavior of people is not eligible to be opportunistic and facing longer periods
of time. This is because, in the short term, their compensation will not be increased of the
variable part with stock options and, in the medium term, the low level of employee
performance can result in termination or reduction of the share price of the Company.
f) maximum number of shares
The total number of Shares intended for the Plan may not exceed two and a half percent
(2.5%) of the capital stock of the Company over a period of four years (from the date of approval
of this Plan by the Company in General Shareholders´ Meeting).
This limit shall apply to all the Options granted on the basis of this Plan, as well as the Shares
previously acquired or subscribed by the respective Beneficiaries under the Plan, whether or not
the Shares are in their possession.
In order to satisfy the exercise of the Options granted under the Plan, the Company may issue
new shares within the limit of its authorized capital, excluding the right of preference of the
current shareholders of the Company, as permitted by article 171, paragraph 3 of Law No. 6.404
of December 15, 1976, as amended.
g) maximum number of options to be granted
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The total number of Shares intended for the Plan may not exceed two and a half percent
(2.5%) of the capital stock of the Company over a period of four years (from the date of approval
of this Plan by the Company in General Shareholders´ Meeting).
h) conditions for acquisition of shares
For Regular Options will be the market price of the Share at the time of the Option grant,
then determined based on the average of the closing prices of the last five trading days
preceding the Date of Grant.
For the Restricted Options, the exercise price will be the fulfill consists in the acquisition of
shares issued by the Company with an investment of 100% of the amount received by the
beneficiary in the previous year as Profit Sharing and/or bonuses, net of income tax, with the
maintaining ownership of such Shares unchanged at Lock-up Period.
i) criteria to fix the acquisition or exercise price
The exercise price is fixed based on the unit value of TOTVS’s shares and corresponds to the
arithmetic mean of the prices in the last 5 trading sessions before the date of granting of the
options.
j) criteria for setting the vesting period
The Stock Options may be exercised for up to 24 months from the date of grant of the
options, established in 36 months, and the Restricted Options may only be exercised after the
Vesting Period and upon proof of the exercise of Options Regulars.
Only complete lots of options may only be exercised, not being allowed to carry only a
fractional part of a concession.
k) forms of settlement
The exercise price must be paid immediately after subscription or acquisition of shares. The
Company intends to use the stock held in treasury to satisfy the exercise of the Stock Options.
l) restrictions to the transfer of shares
The shares acquired in order to enable the beneficiary to receive matching Regular Stock
Options are subject to a 2-year lock-up rule. However, the shares acquired as a result of the
exercise of the Regular Stock Options are not subject to a lock-up rule. Moreover, the shares
acquired through exercise of Restricted Stock Options are subject to a 1 year lock-up rule.
m) criteria and events that will cause suspension, alteration or cancellation of the plan
The General Shareholders´ Meeting may modify, suspend or terminate the Plan for any
reason, among which, upon occurrence of factors that may impact the economic scenario or the
financial situation of the Company.
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The granting of the Stock Options under the Plan does not affect the capacity of the
Company to participate in any corporate transaction, either a transfer of control,
reorganization, merger, acquisition, or spin-off.
n) effects of the exit of the administrator from the issuer’s bodies on his rights provided for in the compensation plan based on shares
In the case of Termination, whether on the initiative of the Beneficiary or of the Company,
with or without cause, the following rules shall be applied: (a) the Lock-up Period applicable to
Shares acquired directly by investment of the Beneficiary’s Profit Sharing shall cease to exist,
and the Shares shall be immediately released for sale; (b) the Lock-up Period of Shares Acquired
under Restricted Options shall continue to run normally; (c) Mature Options may be exercised
for a period of three months from the Termination date, after which they shall expire; (d)
Options still in the Grace Period shall be extinguished. Any exceptions to this rule must be
approved by the Company’s Personnel and Remuneration Committee.
In case of termination for just case or resignation, all the options granted, that are not
mature, will automatically be cancelled by law, regardless of prior notice or indemnification.
In case of death, permanent disability or retirement, the following rules shall be applied: (a)
the Lock-up Period applicable to Shares acquired directly by investment of the Beneficiary’s
Profit Sharing shall cease to exist, and the Shares shall be immediately released for sale; (b) the
Lock-up Period of the Shares Acquired under Restricted Options shall cease to exist; (c) the Grace
Period shall be eliminated, and the Options may be exercised immediately, during the Option
Exercise Period or the Period of Validity of the Options.
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13.5. Inform the number of shares or directly or indirectly held in Brazil or offshore and other securities convertible into shares or quotas issued by the issuer, the direct or indirect controllers, subsidiaries or companies under common control, members of the board of directors, executive board or fiscal council, grouped by body, on the close of the last fiscal year.
On December 31, 2014 Common Shares Convertible debentures Stock Options
Group1 No. of shares %
No. of units
Grupo1 No. of shares %
Controlling shareholder - 0.00% - 0.00% - 0.00%
Executive Officers 88,358 0.05% - 0.00% 1,079,937 69.02%
Board of Directors 2,005,457 1.17% - 0.00% - 0.00%
Related individuals/companies 26,804,890 16.40% - 0.00% - 0.00%
Other 134,568,366 82.38% - 0.00% 625,581 30.98%
Total 163,467,071 100.00% - 0.00% 1,732,518 100.00%
1 The Company does not have a Fiscal Council installed 2 Net amount of options cancelled due to the exit of administrators
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13.6. Board of Directors and Executive Board’s share-based compensation recognized in the result of the last fiscal year and expected for the current fiscal year.
Estimated for 2014
Board of Directors Board of Officers Non-management
Number of Members - 13 110
Weighted average price for the exercise of options: (a) pending at the beginning of the fiscal year - 34.46 30.61
(b) Lost during the fiscal year - 29.48 37.04 (c) Exercised during the fiscal year - 25.29 28.78
(d) Expired during the fiscal year - - - Potential dilution if all the options granted are exercised
- 0.14% 0.03%
Estimated for 2015
Board of Directors Board of Officers Non-management
Number of Members - 14 101
Weighted average price for the exercise of options: (a) pending at the beginning of the fiscal year - 27.94 35.17
(b) Lost during the fiscal year - 41.71 42.63 (c) Exercised during the fiscal year - 30 30
(d) Expired during the fiscal year - - - Potential dilution if all the options granted are exercised
- 0.07% 0.08%
Information regarding the past 3 fiscal years, per grant
2010
Board of Directors Board of Officers Non-management
Grant (3) of options to purchase shares
Date of grant - 01/22/2010 01/22/2010
Number of options granted - 1,627,845 48,730
Vesting period - 3 years 3 years
Maximum term for the exercise of options - 5 years 5 years
Term of restrictions to the transfer of shares - N/A N/A
Fair value of the options on the date of granting - 7.96 7.96
2010
Board of Directors Board of Officers Non-management
Grant (4A) of options to purchase shares
Date of grant - 11/19/2010 11/19/2010
Number of options granted - 811,130 116,055
Vesting period - 3 years 3 years
Maximum term for the exercise of options - 5 years 5 years
Term of restrictions to the transfer of shares - N/A N/A
Fair value of the options on the date of granting - 13.29 13.29
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2010
Board of Directors Board of Officers Non-management
Grant (4B) of options to purchase shares
Date of grant - 11/19/2010 11/19/2010
Number of options granted - 811,070 115,955
Vesting period - 4 years 4 years
Maximum term for the exercise of options - 5 years 5 years
Term of restrictions to the transfer of shares - N/A N/A
Fair value of the options on the date of granting - 14.85 14.85
2011
Board of Directors Board of Officers Non-management
Grant (5A) of options to purchase shares
Date of grant - 08/12/2011 -
Number of options granted - 90,000 -
Vesting period - 2 years and 5
months -
Maximum term for the exercise of options - 2 years and 5
months -
Term of restrictions to the transfer of shares - N/A -
Fair value of the options on the date of granting - 7.41 -
2011
Board of Directors Board of Officers Non-management
Grant (5B) of options to purchase shares
Date of grant - 08/12/2011 -
Number of options granted - 100,000 -
Vesting period - 2 years and 5
months -
Maximum term for the exercise of options - 4 years and 5
months -
Term of restrictions to the transfer of shares - N/A -
Fair value of the options on the date of granting - 8.98 -
2012
Board of Directors Board of Officers Non-management
Grant (6) of options to purchase shares
Date of grant - 02/13/2012 -
Number of options granted - 50,000 -
Vesting period - 3 years -
Maximum term for the exercise of options - 4 years -
Term of restrictions to the transfer of shares - N/A -
Fair value of the options on the date of granting - 10.83 -
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2013
Board of Directors Board of Officers Non-management
Grant (7) of options to purchase shares
Date of grant - - 06/01/2012
Number of options granted - - 40,000
Vesting period - - 3 years
Maximum term for the exercise of options - - 4 years
Term of restrictions to the transfer of shares - - N/A
Fair value of the options on the date of granting - - 12.00
2013
Board of Directors Board of Officers Non-management
Grant (8) of options to purchase shares
Date of grant - 02/20/2013 02/20/2013
Number of options granted - 453,113 230,310
Vesting period - 3 years 3 years
Maximum term for the exercise of options - 5 years 5 years
Term of restrictions to the transfer of shares - N/A N/A
Fair value of the options on the date of granting - 11.97 11.97
2013
Board of Directors Board of Officers Non-management
Grant (9) of options to purchase shares
Date of grant - 02/20/2013 02/20/2013
Number of options granted - 90,878 5,913
Vesting period - 3 years 3 years
Maximum term for the exercise of options - 5 years 5 years
Term of restrictions to the transfer of shares - N/A N/A
Fair value of the options on the date of granting - 41.6 41.6
2014
Board of Directors Board of Officers Non-management
Grant (10) of options to purchase shares
Date of grant - 02/20/2014 02/20/2014
Number of options granted - 115,887 160,609
Vesting period - 3 years 3 years
Maximum term for the exercise of options - 5 years 5 years
Term of restrictions to the transfer of shares - N/A N/A
Fair value of the options on the date of granting - 8.93 8.93
2014
Board of Directors Board of Officers Non-management
Grant (11) of options to purchase shares
Date of grant - 02/20/2014 -
Number of options granted - 29,633 -
Vesting period - 3 years -
Maximum term for the exercise of options - 5 years -
Term of restrictions to the transfer of shares - N/A -
Fair value of the options on the date of granting - 29.93 -
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Grants that will impact the 2015´s results
2015
Board of Directors Board of Officers Non-management
Grant (12) of options to purchase shares
Date of grant - 02/21/2015 02/22/2015
Number of options granted - 90,740 134,685
Vesting period - 3 years 3 years
Maximum term for the exercise of options - 5 years 5 years
Term of restrictions to the transfer of shares - N/A N/A
Fair value of the options on the date of granting - 11.36 11.36
2015
Board of Directors Board of Officers Non-management
Grant (13) of options to purchase shares
Date of grant - 02/21/2015 02/22/2015
Number of options granted - 23,432 2,713
Vesting period - 3 years 3 years
Maximum term for the exercise of options - 5 years 5 years
Term of restrictions to the transfer of shares - N/A N/A
Fair value of the options on the date of granting - 33.34 33.34
2015
Board of Directors Board of Officers Non-management
Grant (14) of options to purchase shares
Date of grant - 04/02/2015 -
Number of options granted - 33,751 -
Vesting period - 3 years -
Maximum term for the exercise of options - 5 years -
Term of restrictions to the transfer of shares - N/A -
Fair value of the options on the date of granting - 12.12 -
2015
Board of Directors Board of Officers Non-management
Grant (15) of options to purchase shares
Date of grant - 04/02/2015 -
Number of options granted - 9,468 -
Vesting period - 3 years -
Maximum term for the exercise of options - 5 years -
Term of restrictions to the transfer of shares - N/A -
Fair value of the options on the date of granting - 34.06 -
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13.7. Board of Directors and Executive Board’s pending options at the close of the last fiscal year 2014
Board of Directors
Board of Officers Grant 4B Grant 7 Grant 8 Grant 9 Grant 10 Grant 11
Number of Members1 N/A 16.92 12 0 12 8 13 10
Options not yet exercisable
Number of options N/A 1,392,169 503,680 20,000 509,117 81,301 248,638 29,633
Date options will become exercisable N/A N/A 01/31/2015 06/01/2015 02/20/2016 02/20/2017 02/20/2017 02/20/2018
Maximum term for the exercise of options N/A 0 to 4 years 2 years 2 years 2 years 2 years 2 years 2 years Term for restrictions to the transfer of shares N/A N/A N/A N/A N/A N/A N/A N/A
Weighted average price for the exercise of options N/A N/A N/A N/A N/A N/A N/A N/A
Fair value of options on the last day of the fiscal year N/A 19,416,266.21 7,479,648.00 240,000.00 6,094,129.34 3,382,121.60 2,220,337.34 29.93
Options exercisable Grant 3 Grant 4A Grant 5C
Number of options N/A 340,149 4,874 81,805 253,470
Maximum term for the exercise of options N/A 0 to 1 year from 0 to 1 year from 0 to 1 year from 0 to 1 year
Term for restrictions to the transfer of shares N/A N/A
Weighted average price for the exercise of options N/A 28.73 23.36 30.38 28.3
Fair value of options on the last day of the fiscal year N/A 3,717,828.57 38,797.04 1,087,188.45 2,592,998.10
Fair value of total options on the last day of the fiscal year N/A 23,134,094.78
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13.8. Options exercised and shares delivered related to the share-based compensation of the Board of Directors and Board of Officers in the last 3 fiscal years
2014
Board of Directors Board of Officers
Number of members - 16.92
Options exercisable - 1,055,056
Number of options - 1,055,056
Weighted average price for the exercise of options - 25.71
Difference between the exercise price and the market value of shares related to options exercised - 10.77
Options distributed - 0
Number of options - 0
Weighted average price of acquisition - 0
Difference between the acquisition value and the market value of the shares acquired - 0
2013
Board of Directors Board of Officers
Number of members - 24.17
Options exercisable - 718,030
Number of options - 718,030
Weighted average price for the exercise of options - 22.92
Difference between the exercise price and the market value of shares related to options exercised - 15.10
Options distributed - 0
Number of options - 0
Weighted average price of acquisition - 0
Difference between the acquisition value and the market value of the shares acquired - 0
2012
Board of Directors Board of Officers
Number of members - 27
Options exercisable - 882,020
Number of options - 882,020
Weighted average price for the exercise of options - 7.54
Difference between the exercise price and the market value of shares related to options exercised - 29,33
Options distributed - 0
Number of options - 0
Weighted average price of acquisition - 0
Difference between the acquisition value and the market value of the shares acquired
- 0
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13.9. Brief description of the information necessary to understand the data in items 13.6 to 13.8, such as an explanation of the methods used for stock and option pricing, indicating at least:
a) pricing models
The price of options is determined using the Black & Scholes method, which establishes a fair
price considering expected dividends, volatility, risk-free interest rates and the maturity.
b) data and assumptions used in the pricing model, which should include the weighted average price of stocks, price for the fiscal year, expected volatility, term of the option, expected dividends and risk-free interest
Data and assumptions used in the pricing model are shown in the table below: 3rd grant 4th grant A 4th grant B 5th grant A 5th grant B 5th grant C 6th grant 7th grant
Date 01/22/2010 11/19/2010 11/19/2010 08/12/2011 08/12/2011 10/18/2011 02/13/2012 06/01/2012
Grant Price R$ 23.36 R$ 30.38 R$ 30.38 R$ 25.67 R$ 25.67 R$ 28.30 R$ 30.47 R$ 35.00
Expected dividends 1.97% 2.00% 2.00% 2.00% 2.00% 2.00% 1.92% 1.92%
Expected volatility 37.37% 37.37% 37.37% 34.60% 34.60% 34.60% 32.82% 32.82%
Risk-free int. rate 10.75% 10.75% 10.75% 10.75% 10.75% 10.75% 10% 10%
Maturity 3 years 3 years 4 years 2 years and 5
months
2 years and 5
months 3 years 3 years 3 years
Fair value R$ 7.96 R$ 13.29 R$ 14.85 R$ 7.41 R$ 8.98 R$ 10.23 R$ 10.83 R$ 12.00
8th grant 9th grant 10th grant 11th grant 12th grant 13th grant 14th grant 15th grant
Date 02/20/2013 02/20/2013 02/20/2014 02/20/2014 02/20/2015 02/20/2015 04/02/2015 04/02/2015
Grant Price R$ 42.63 R$ 0.01 33.05 0.01 35.6 0.01 35.6 0.01
Expected dividends 1.70% 1.70% 2.20% 2.20% 2.57% 2.57% 2.57% 2.57%
Expected volatility 30.09% 30.09% 29.51% 29.51% 29.61% 29.61% 29.61% 29.61%
Risk-free int. rate 7.25% 7.25% 10.75% 10.75% 12.75% 12.75% 13.00% 13.00%
Maturity 3 years 3 years 3 years 3 years 3 years 3 years 3 years 3 years
Fair value R$ 11.97 R$ 41.60 R$ 8.93 R$ 29.93 R$ 11.36 R$ 33.34 R$ 12.12 R$ 34.06
c) method used and assumptions made to incorporate the expected effects of the coming fiscal year
The granted options have a vesting period of 3 years starting from the grant date, which
means that the option can only be exercised 3 to 5 years after being granted. In this manner,
the effects expected in the coming fiscal years were incorporated by recognizing the options in
the result over a period of 3 years.
d) manner in which expected volatility was determined
The annual volatility was determined through the standard deviation of weekly price
variation of TOTVS’ stock traded on the Bovespa, adjusted for the distribution of dividends, from
March 3, 2006 until the granting date.
e) if any other optional characteristic was incorporated in the calculation of fair value
No other elements, aside from those described in item 13.9 (a), were considered.
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13.10. Pension plans in effect for members of the Board of Directors and Board of Officers
Aside from contributing to social security (INSS), the executive officers can opt to join the
company’s private pension plan. The basic contribution consists of up monthly contributions
fixed at between 2 and 5% of the base salary made by the member and then matched by the
company. Additionally, the members are allowed to make voluntary monthly (or sporadic)
contributions that are not matched by the Company. To receive the amount deposited by the
Company in the pension fund, the director must contribute to the program for at least 3
years, and amounts available for withdrawal vary in accordance to the table below:
Time of contribution to the program Percentage of company deposits
Up to 2 years and 11 months -
From 3 years to 3 years and 11 months 30%
From 4 years to 4 years and 11 months 40%
From 5 years to 5 years and 11 months 50%
From 6 years to 6 years and 11 months 60%
From 7 years to 7 years and 11 months 70%
From 8 years to 8 years and 11 months 80%
From 9 years to 9 years and 11 months 90%
10 years or more 100%
(R$ thousands)
Board of
Directors Board of Officers
Number of members - 16,92
Plan’s name - Itaú Unibanco
Number of managers able to retire - 0
Conditions of early retirement - Early retirement is not allowed
Restated accumulated amount of contributions accumulated
up to the closure of the last fiscal year, discounted the
portion related to contributions made directly by managers
- 2,656,735.03
Total accumulated amount of contributions made during the
last fiscal year, discounted the portion related to
contributions made directly by managers
- 416,543.02
Possibility of early redemption and conditions -
The executive has the right to
redeem private pension plan
contributions, however, with the
cancellation of the plan with no
possibility of returning. One shall
be electable to the company’s
contribution, as per contribution
time table
This private pension plan does not apply to members of the Board of Directors.
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13.11. Payments in the last fiscal year
2014
Body1 Number of Members2
largest individual payment
smallest individual payment
average individual payment
Board of Directors 7.33 237,254.40 237,254.40 228,954.15
Board of Officers 16.92 2,109,275.09 78,316.55 1,088,749.64
2013
Body1 Number of Members2
largest individual payment
smallest individual payment
average individual payment
Board of Directors 6.92 216,409.35 216,409.35 216,556.07
Board of Officers 24.17 1,889,642.22 386,849.48 1,022,067.78
2012
Body1 Number of Members2
largest individual payment
smallest individual payment
average individual payment
Board of Directors 6.75 236,679.97 236,679.97 235,464.63
Board of Officers 24.58 3,869,969.17 63,478.21 1,347,799.72
1 The company does not have a Fiscal Council installed 2 TOTVS’ Board of Directors has 8 members, but Laércio José de Lucena Cosentino and Sergio Földes Guimarães do
not receive compensation and were not considered in the average individual payment calculation. The number of
officers represents the average weighted number of months worked in the year.
13.12. Describe all contractual arrangements, insurance policies or compensation mechanisms for manager in the case of resignation or retirement, indicating financial consequences incurred by the payer
The executive officers’ contracts set forth payment of compensation only upon resignation
after the following significant corporate alterations: alterations in the company’s control;
acquisitions or subscriptions by third parties of shares representing 20% of the company’s
capital stock; corporate reorganizations; or resolution to dissolve the company.
In the case of a major corporate alteration and the member be dismissed without cause
within the first 12 months counted from the date of said corporate alteration, the officer will
receive compensation equal to 18 months pay, as well as complete payment of relevant
bonuses for the fiscal year.
In the case of a relevant corporate alteration and unjust dismissal after the first 12 months,
counted from the date of said corporate alteration, the officer will receive compensation
equal to 6 months pay, as well as complete payment of relevant bonuses for the fiscal year.
If the officer is dismissed with just cause or voluntarily resigns after the first 24 months,
counted from the date of the relevant corporate alteration, the officer will not receive any
compensation or annual bonuses.
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Should an officer resign within 6 months of a relevant corporate alteration he or she will not
receive any compensation, but will receive all bonuses for the fiscal year, though only upon
signing a non-competition contract for 2 years starting on the date of resignation.
For the Chief Executive Officer and Executive Vice Presidents of the company the contract
guarantees payment of compensation upon dismissal without just cause, whether or not
there was a relevant corporate alteration (as described above), which can be equal to up to
30 months salary, in addition to the continuation of benefits (health and life insurance) for
no longer than 2 years.
13.13. In the last 3 fiscal years, indicate the percentage of total compensation of each body, as recognized in the result of the issuer, related to each member of the Board of Directors, statutory executives or Fiscal Council that is either a direct or indirect controller, according to applicable accounting rules
Not applicable. There is no direct or indirect controller in the company.
13.14. In the last 3 fiscal years, indicate the amounts paid to members of the Board of Directors, statutory executives or Fiscal Council, by body, for any reason not related to their position (i.e. commissions, consulting or advising services) as recognized in the payer’s results
None of the company’s managers have been paid for anything not related to their positions.
13.15. In the last 3 fiscal years, indicate the amounts recognized in the results of direct or indirect controllers, corporations under common control or the issuer’s subsidiaries, of compensation to members of the Board of Directors, statutory executives, or Fiscal of the issuer, by body, specifying the type of payment and to whom it was paid
There are no managers in the company that have received compensation from direct or
indirect controllers, corporations under common control or the issuer’s subsidiaries.
13.16. Provide any other relevant information
There is no more relevant information applicable to item “13”.
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14. HUMAN RESOURCES
14.1. Description of human resources
a) Number of employees (total, by groups based on the activity performed and by geographical location)
Activity Performed 2014 2013 2012
Services 3,965 3,661 3,378
Research and Development 1,972 1,869 1,403
Sales 553 536 435
Administrative 771 796 697
Total 7,261 6,862 5,924
Geographical Location 2014 2013 2012
Brazil 7,045 6,643 5,714
Mexico 118 114 110
Argentina 88 91 89
Portugal 0 0 0
USA 10 14 11
Total¹ 7,261 6,862 5,924 ¹ consolidated information, ie, human resources were also included in subsidiaries and affiliated companies.
b) Number of third parties (total, by groups based on the activity performed and by
geographical location)
Activity Performed 2014 2013 2012
Security, Doorkeeper Services and Cleaning 185 165 132
Sales Representatives 125 137 196
Other Activities 44 41 25
Total1 354 343 353
Geographical Location 2014 2013 2012
Brazil 354 343 352
Mexico 0 0 1
Argentina 0 0 0
Portugal 0 0 0
Total1 354 343 353 1 Consolidated information, i.e. also including human resources from controlled companies of the
Company.
c) Turnover rate
Rate 2014 2013 2012
Turn-over1 19.9% 22.1% 24.3% 1 Turn-over = [(Hired + Dismissed) / 2] / Active collaborators
d) Exposure to labor liabilities and contingencies
The Company did not identify additional exposures to the ones already included in items 4.3 to 4.7 of this Form.
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14.2. Relevant changes – Human Resources
The growth in the number of employees during the years is due to the acquisitions occurred in the period and due to the natural organic growth of the Company. It is important to mention that the "absorbed" employees of acquired operations are not considered when calculating the turnover rate in the year of purchase of the transaction.
14.3. Description of the employee compensation policy
a) salary and variable compensation policy The compensation policy of the Company includes provisions to establish compensation
according to the market standards for roles with similar activities and responsibilities, thus aiming at preserving the capacity for attracting and retaining the participants.
The compensation structure is approved by the Personnel and Compensation Committee
and the required changes are submitted to such committee for review. The Company organizes the roles within the same nature of function, based on hierarchy, strategic contribution, scope, technical-professional maturity, assignment complexity and inherent responsibility. Every role has its compensation established according to the responsibilities and qualifications required for performing the function, and the total compensation is divided into fixed and variable compensation.
Fixed compensation refers to the value earned each month by the participant, paid in the
payroll system, and aimed at compensating him (her) for the assignments and responsibilities relevant to the role, also named as “nominal salary”.
Variable compensation refers to the values periodically earned by the employee, rewarding
him (her) for differentiated individual performance, results from the specific performance area and/or global results of TOTVS, which may be due to the achievement of goals, as defined in specific program.
b) benefits policy The Company offers a number of benefits to its participants with the purpose of providing
them with better quality of life, and being one of the strategies for attracting and retaining professionals. The major benefits offered by the Company include: i) healthcare plan that provides medical, clinical and hospital care to all the participants and their direct dependents; ii) dental care plan to the participants and direct dependents; and iii) private security program (defined contribution plan), in partnership with financial institution, comprised by contributions from the Company and the participant.
c) compensation plans based on stocks for non-administrator employees The group formed by non-administrator employees of the Company, eligible to the grant of
Company stock options, is annually defined by the Management Board, based on recommendations from the Personnel and Compensation Committee. These options are an integral part of the same stock option plan described in the item 13.4 of this Form, and the same
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conditions are applicable to eligible non-administrator employees. The number of stocks granted to non-administrator employees is indicated in the charts of items 13.6 and 13.7 of this Form.
14.4. Issuer / Union relations
TOTVS keeps transparent and friendly relationship among the Unions that represent the
participants in all of its domestic Units, in terms of requirements for negotiations of collective
labor and specific agreements, by always prioritizing the fulfillment of the clauses
established.
The Company keeps a relation of respect to the roles of the parties involved, by recognizing
the importance for the employees of preserving the good level of such relationship. This
attitude helps the development of affordable and evolving agreements, which satisfy all the
parties involved.
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15. CONTROL
15.1. / 15.2. Shareholder’s Position
Name Nationality Taxpayer ID (CPF/CNPJ)
Number of stocks Percentage
Shareholder agreement Last change
LC EH Participações e Empreendimentos S/A(*) Brazilian 02.986.755/0001-32 26,760,990 16.370875 % No 11/08/2010
Fundação Petrobras de Seguridade Social – PETROS
Brazilian 34.053.942/0001-50 16,042,359 9.813817% No 12/16/2011
Genesis Asset Managers, LPP English N/A 8,436,429 5.160935% No 03/18/2015
Harris Associates, LP American N/A 8,223,500 5.030677% No 09/10/2015
Laércio José de Lucena Cosentino Brazilian 032.737.678-39 1,910,618 1.168809% No 03/27/2015
HG Senta Pua Fia (*) Brazilian 08.613.315/0001-16 43,500 0.026610% No 01/30/2008
Ernesto Mário Haberkorn Brazilian 029.258.698-15 38,810 0.023742% No 08/24/2015
Treasury Shares N/A N/A 2,271,096 1.389329% No 09/21/2015
Others N/A N/A 99,739,769 61.015205% No 09/21/2015
Total 163.467.071 100,00%
(*) Ernesto Mário Haberkorn and Laércio José de Lucena Cosentino hold interests in LC EH Participações e Empreendimentos S/A and HG Senta Pua Fia fund
Shareholding Composition – LC EH Participações e Empreendimentos S/A
Shareholders Common Stocks Preferred Stocks Total Quantity % Quantity % Quantity %
Laércio José de Lucena Cosentino 344,745 63.12% - 0.00% 344,745 63.12%
Ernesto Mário Haberkorn 109,019 19.96% 92,351 100.00% 201,370 37.37%
Total – LC EH Participações. 453,764 100.00% 92,351 100.00% 546,115 100.00%
15.3. Capital distribution
Capital distribution determined in the last Extraordinary Shareholders Meeting conducted on 09/03/2015:
Shareholders Quantity a) Individual shareholders 4,045
b) Corporate shareholders 183
c) Institutional investors 851
d) Stocks in circulation* 132,329,611
Percentage of total shares 80.951846%
(*) Number of outstanding shares refers to the total shares, excluding shares owned by the Management and related persons and treasury stocks.
Composition of HG Senta Pua Fia Quota holders
Shareholders
Quotas
Quantity %
Laércio José de Lucena Cosentino 2,311,444 52.78%
Ernesto Mário Haberkorn 2,063,289 47.12%
Marcelo Eduardo Sant'Anna Cosentino 4,355 0.10%
Total 4,379,088 100.00%
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15.4. Shareholder organization chart
The Company believes that the information provided in items 15.1 and 15.2 are sufficient
and does not require the inclusion of an organization chart.
15.5. Shareholders agreement filed in the Company headquarters or in the company to which the controller belongs to
The Management does not know the existence of any agreement among the Company
shareholders.
15.6. Relevant changes in the interests of members in the Company controlling group and administrators
Not applicable, as there is no controlling group in the Company.
15.7. Other relevant information.
The Company did not identify any other information related to this item.
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16. TRANSACTIONS WITH RELATED PARTIES
16.1. Description of rules, policies and practices of the issuer in terms of transactions with related parties
Related parties transactions are always carried out with observance of the Brazilian
Corporate Law and corporate governance best practices, being commissioned in the usual
rates and conditions of the market and therefore do not generate any benefit or loss to the
Company or to any other parties. In addition, the operations Company´s operations,
including those contracted with related parties, are always supported by appropriate
analysis prior to their conditions and the strict interest of the Company in its realization.
Accordingly, the Company negotiate individual contracts to be concluded with related
parties, analyzing their meaning in relation to the conditions prevailing on the market, as
well as the particularities of each operation (such as periods, values, standards, etc.).
Participate in the negotiations people without personal interests in the matters.
When needed, the decision-making procedure for conducting transactions with related
parties follows the terms of the Brazilian Corporation law, which determines that the
shareholder or administrator, as the case may be, in the General Meetings or at Directors
Meetings, refrain from voting in the deliberations on: (i) the appraisal of goods with that
contribute to social capital formation; (ii) the approval of their accounts as administrator;
and (iii) any material that may benefit him/her in particular, or that conflicts with the
Company interests.
Matters relating to transactions with related parties are subject to review by the Audit
Committee, so that it does recommend or not recommend the approval by the Board of
Directors. Transactions with related parties and all the decision making process that
preceded are documented to enable subsequent verification, when required.
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16.2. Information on transactions with related parties
Related party Transaction date
Amount involved (Reais)
Existing balance (Reais)
Amount corresponding
to related parties (Reais)
Duration Loan or
other debt type
Interests charged (%)
VIP IV Empreendimentos e Participações Ltda. 10/01/2011 1,066,520.88 411,902.70 420,955.79 09/30/2016 No 0.000000
Relation with the Company: The key member of the Issuer Management, Mr. Laércio José de Lucena Cosentino, indirectly holds 39.5% of the capital stock of the related party
Contract object: Rental Contract signed between the Company and VIP IV Empreendimentos e Participações Ltda. (“VIP IV”), for the property located at Av. Braz Leme, No. 1793, São Paulo/SP. Contract readjustment is annual according to the IGP-M index variation in the period.
Guarantee and insurance: None.
Termination or extinction: In case of contractual breach, penalty corresponding to the value of three monthly rental installments.
Nature and reason of the operation: -
Related party Transaction date
Amount involved (Reais)
Existing balance (Reais)
Amount corresponding
to related parties (Reais)
Duration Loan or
other debt type
Interests charged
VIP III Empreendimentos e Participações Ltda. 09/01/2010 14,596,850.78 2,172,499.76 3,733,874.43 08/31/2015 No 0.000000
Relation with the Company: The key member of the Issuer Management, Mr. Laércio José de Lucena Cosentino, holds 25.6% of the capital stock of the related party
Contract object: Rental Contract signed between the Company and VIP III Empreendimentos e Participações Ltda. (“VIP III”), for the property located at Av. Braz Leme, No. 1717, São Paulo/SP. Contract readjustment is annual according to the IGP-M index variation in the period.
Guarantee and insurance: None.
Termination or extinction: In case of contractual breach, penalty corresponding to the value of three monthly rental installments.
Nature and reason of the operation: -
Related party Transaction date
Amount involved (Reais)
Existing balance (Reais)
Amount corresponding
to related parties (Reais)
Duration Loan or
other debt type
Interests charged (%)
VIP IV Empreendimentos e Participações Ltda. 06/01/2011 4,346,708.64 1,405,908.90 1,715,645.90 05/31/2016 No 0.000000
Relation with the Company: The key member of the Issuer Management, Mr. Laércio José de Lucena Cosentino, indirectly holds 39.5% of the capital stock of the related party
Contract object: Rental Contract signed between the Company and VIP IV Empreendimentos e Participações Ltda. (“VIP IV”), for the property located at Rua Sóror Angelica, No. 269, São Paulo/SP. Contract readjustment is annual according to the IGP-M index variation in the period.
Guarantee and insurance: None.
Termination or extinction: In case of contractual breach, penalty corresponding to the value of three monthly rental installments.
Nature and reason of the operation: -
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Related party Transaction date
Amount involved (Reais)
Existing balance (Reais)
Amount corresponding
to related parties (Reais)
Duration Loan or
other debt type
Interests charged (%)
VIP Empreendimentos e Participações Ltda. 01/01/2008 39,611,995.12 18,214,440.60 15,674,446.47 12/31/2019 No 0.000000
Relation with the Company: The key members of the Issuer Management, Mr. Laércio José de Lucena Cosentino and Mr. Marcelo Eduardo Sant Anna Consetino hold, respectively, 32.6% and 7% of the capital stock of the related party
Contract object: Rental Contract signed between the Company and VIP Empreendimentos e Participações Ltda. (“VIP”), for the property located at Av. Braz Leme, No. 1631, São Paulo/SP. Contract readjustment is annual according to the IGP-M index variation in the period.
Guarantee and insurance: None.
Termination or extinction: In case of contractual breach, penalty corresponding to the value of three monthly rental installments.
Nature and reason of the operation: -
Related party Transaction date
Amount involved (Reais)
Existing balance (Reais)
Amount corresponding
to related parties (Reais)
Duration
Loan or other debt type
Interests charged
(%)
Banco Nacional de Desenvolvimento Econômico
e Social (BNDES) 10/10/2013 658,601,000.00 482,490,000.00 482,490,000.00 10/10/2019 Yes 6.200
Relation with the Company: Such related party has indirect interest in the capital of the issuer.
Contract object:
Financing line from BNDES in the amount of R$658,601,000.00, with an amortization period of seventy two (72) months, including a 24-month grace period over the principal amount, and is divided into three (3) “subcredits”, as described below: “Subcredit A”, in the amount of R$596,835,000.00, on which bears interest of one point five percent (1.5%) per year above the Long Term Interest Rate (“TJLP”), to be invested between 2013 and 2015 on the development of the qualitative solutions offered by TOTVS, in the range of the BNDES Program to the Development of the National Industry of Software and Information Technology Services (“BNDES PROSOFT”); “Subcredit B”, in the amount of R$ 58,466,000.00, on which bears interest of three point five percent (3.5%) per year, to be invested in the development of its platform named “FLUIG”, in the range of BNDES Program of Investment Supporting (“PSI”), Subprogram Innovation and Machinery and Efficient Equipments; “Subcredit C”, in the amount of R$3,300,000.00, on which bears the Long Term Interest Rate (“TJLP”), to be invested in corporate social responsibility projects to be performed by TOTVS.
Guarantee and insurance: Guarantees by a bank guarantee.
Termination or extinction:
There is the possibility of early maturity debt. If BNDES accept early debt settlement will be retained until the final contractually scheduled date to normal debt settlement, contractual obligations to do or do not be borne by the Beneficiary and the actors, especially the following: a) carry out the project object of financial support granted within the time limits; b) lack of certain convictions environmental and social aspect c) maintenance of financial ratios below: 1) Equity Value/Total Assets equal to or greater than 40% 2) Divide net banking/EBITDA: equal or less than 1.5 d) accountability in a timely manner to BNDES e) Maintenance of staff
Nature and reason of the operation:
“Subcredit A”, in the amount of R$596,835,000.00, on which bears interest of one point five percent (1.5%) per year above the Long Term Interest Rate (“TJLP”), to be invested between 2013 and 2015 on the development of the qualitative solutions offered by TOTVS, in the range of the BNDES PROSOFT; “Subcredit B”, in the amount of R$ 58,466,000.00, on which bears interest of three point five percent (3.5%) per year, to be invested in the development of its platform named “FLUIG”, in the range of BNDES Program of Investment Supporting (“PSI”);
“Subcredit C”, in the amount of R$ 3,300,000.00, on which bears the Long Term Interest Rate (“TJLP”), to be invested in corporate social responsibility projects to be performed by TOTVS.
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Related party Transaction date
Amount involved (Reais)
Existing balance (Reais)
Amount corresponding
to related parties (Reais)
Duration Loan or
other debt type
Interests charged (%)
Banco Nacional de Desenvolvimento
Econômico e Social (BNDES)
08/19/2008 204,589,384.60 0.00 0.00 08/19/2014 Yes 7,000000
Relation with the Company: Such related party has indirect interest in the capital of the issuer.
Contract object: PROSOFT Financing Line.
Guarantee and insurance: Guarantees by a bank guarantee.
Termination or extinction:
There is the possibility of early maturity of debt. If BNDES accept liquidation anticipated debt, will be maintained at the final date for the contract liquidation of the normal debit, the contractual obligations to or assumed by making Beneficiary and the actors, especially the following: a) undertake the design of object collaboration financial granted; b) provide the inspection authority of the BNDES execution of the project c) nonexistence of certain convictions aspect of environmental and social The Beneficiary and Speakers will relieved of obligations, to pay Beneficiary BNDES compensatory additional fees and charges, corresponding difference between the charges provided for in the contract with BNDES and Market Rate during the period of the contract.
Nature and reason of the operation:
Credit taken for funding research and development, the compounded interest rate TJLP payable semi-annually.
Related party Transaction date
Amount involved (Reais)
Existing balance (Reais)
Amount corresponding
to related parties (Reais)
Duration Loan or
other debt type
Interests charged (%)
BNDES Participações S.A. 08/19/2008 200,000,000.00 112,854,000.00 112,854,000.00 08/19/2014 Yes 7,000000
Relation with the Company: Such related party has indirect interest in the capital of the issuer.
Contract object: Convertible Debentures
Guarantee and insurance: Guarantees are listed in the clause VIII of the Debentures Deed.
Termination or extinction: Other information are found in item 10.1. of this application form.
Nature and reason of the operation:
Resources used to finance actions of consolidation of application software market in Brazil. Other information can be found in item 10.1.f this application form, which are described in the two serials of debentures and interest rates.
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Related party Transaction date
Amount involved (Reais)
Existing balance (Reais)
Amount corresponding
to related parties (Reais)
Duration Loan or
other debt type
Interests charged (%)
Banco Itaú BBA S.A. 01/01/2012 111,186,366.05 111,186,366.05 111,186,366.05 24 months No 0.000000
Relation with the Company: Board member and member of the controlling group of the related party
Contract object: Financial Applications
Guarantee and insurance: N/A
Termination or extinction: Repurchase applications that can be reduced in premium due to early redemptions.
Nature and reason of the operation: -
Related party Transaction date
Amount involved (Reais)
Existing balance (Reais)
Amount corresponding
to related parties (Reais)
Duration Loan or
other debt type
Interests charged (%)
Banco Itaú BBA S.A. 01/01/2013 48,598,627.36 48,598,627.36 48,598,627.36 24 months No 0.000000
Relation with the Company: Board member and member of the controlling group of the related party
Contract object: Financial Applications
Guarantee and insurance: N/A
Termination or extinction: Repurchase applications that can be reduced in premium due to early redemptions.
Nature and reason of the operation: -
Related party Transaction date
Amount involved (Reais)
Existing balance (Reais)
Amount corresponding
to related parties (Reais)
Duration Loan or
other debt type
Interests charged (%)
Banco Itaú BBA S.A. 01/01/2014 68,957,154.56 68,957,154.56 68,957,154.56 24 months No 0.000000
Relation with the Company: Board member and member of the controlling group of the related party
Contract object: Financial Applications
Guarantee and insurance: N/A
Termination or extinction: Repurchase applications that can be reduced in premium due to early redemptions.
Nature and reason of the operation: -
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Related party Transaction date
Amount involved (Reais)
Existing balance (Reais)
Amount corresponding
to related parties (Reais)
Duration Loan or
other debt type
Interests charged (%)
VIP VII Empreendimentos e Participações Ltda. 10/21/2013 177,247,319.51 177,247,319.51 62,312,029.86
Feb/2027, Since the
construction of the
Venture February 2014 to
2017 and the initial use and
payment of rent in
February 2017 by
2027.
No 0.000000
Relation with the Company:
The key members of the Issuer Management, Mr. Laércio José de Lucena Cosentino and Mr. Marcelo Eduardo Sant Anna Consetino hold, respectively, 35.15% (indirectly) and 0.000236% (directly) of the capital stock of the related party
Contract object: Leasing of Commercial Property in a "built to suit" (custom built) to meet the project objectives of new headquarters share of the Company in the city of São Paulo, located at Rua Euclides da Judge Silveira, 232. Contract between the Company and VIP VII - Empreedimentos e Participações Ltda. ("VIP VII")
Guarantee and insurance: N/A
Termination or extinction:
-If the beginning of the building process is 180 days after the contract provisions, the contract may be terminated without penalty to TOTVS -Should the Company be unable to occupy the property within 180 days of the deadline for its availability, due to the irregularities, the contract may be terminated without penalty to TOTVS -At the end of the building process, if the building area estimated in the contract varies by more than 5% (plus or minus) of the area of the contract can be terminated without charge for TOTVS -If the Company terminates the contract before the term of 10 years, a fine of 70% of the remaining rentals will be applied
Nature and reason of the operation: -
Related party Transaction date
Amount involved (Reais)
Existing balance (Reais)
Amount corresponding
to related parties (Reais)
Duration Loan or
other debt type
Interests charged (%)
Itaú Unibanco S.A 02/21/2011 11,600,000.00 7,600,000.00 11,600,000.00 Indeterminate No 0.000000
Relation with the Company: Board member and member of the controlling group of the related party
Contract object: Software Development and Software Licenses
Guarantee and insurance: N/A
Termination or extinction: Non-payment by the customer and the non-provision of services / access by the Company.
Nature and reason of the operation: -
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Related party Transaction date
Amount involved (Reais)
Existing balance (Reais)
Amount corresponding
to related parties (Reais)
Duration Loan or
other debt type
Interests charged (%)
Itaú Unibanco S.A 03/01/2013 4,996,260.86 0.00 4,996,260.86 03/01/2014 No 0.000000
Relation with the Company: Board member and member of the controlling group of the related party
Contract object: Software Rental
Guarantee and insurance: N/A
Termination or extinction: Non-payment by the customer and the non-provision of services / access by the Company.
Nature and reason of the operation: -
Related party Transaction date
Amount involved (Reais)
Existing balance (Reais)
Amount corresponding
to related parties (Reais)
Duration Loan or
other debt type
Interests charged (%)
Itaú Unibanco S.A 01/01/2014 5,290,571.00 148,943.00 5,290,571.00 01/01/2015 No 0.000000
Relation with the Company: Board member and member of the controlling group of the related party
Contract object: Software Rental
Guarantee and insurance: N/A
Termination or extinction: Non-payment by the customer and the non-provision of services / access by the Company.
Nature and reason of the operation: -
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16.3. Identification of measures taken for handling conflicts of interests and proof of the strictly commutative character of the conditions agreed or the proper compensation payment
In fulfillment of the Corporate Law, and in compliance with the strictest principles of
Corporate Governance, the Management of the Company submits to its Management
Board each transaction of such nature. Every transaction with a related party is analyzed,
approved or ratified by the Board of Directors based on the recommendation of the Audit
Committee on the transaction in matter. Whenever an item of the agenda holds potential
interest of one of the Board Members, this member abstains himself from voting such
subject.
All the Directors, Officers and employees of the Company are obliged to report to the
Management Board on any transaction with related party before performing such
transaction.
The intention of the Company is assuring that all the operations between the Company and
its officers, counselors and major shareholders, and its affiliated companies or related
parties, are approved by the Board of Directors and provide to the Company terms as
favorable as the ones that it could achieve from non-affiliated or non-related third parties.
TOTVS carries out market surveys in order that the terms of transactions with related
parties are favorable to the Company and its shareholders. The rental contracts disclosed
in item 16.2, with different real estate brokers, renowned in the business rental market of
the city of São Paulo, for properties located not only within the region where TOTVS is
located, but also in other business regions of the city, enables to reach the conclusion that
the value per square meter of such transactions is favorable to the Company.
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17. CAPITAL STOCK
17.1. Information on capital stock
Authorization or approval date: Capital (Reais)
Paid-in deadline
Number of common stocks (Units)
Number of preferred stocks (Units)
Total number of stocks (Units)
Capital type: Paid-in capital 12/19/2013 526,592,102.22 Immediate 163,467,071 0 163,467,071
Capital type: Authorized capital 04/09/2015 800,000,000.00 - 0 0 0
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17.2. Capital stock increases
Deliberation date
Body that deliberated on
the increase Issuance date
Total issuance value (Reais)
Increase type
Common stocks (units)
Preferred stocks (Units)
Total stocks (Units)
Subscription / Previous capital
Issuance price (Reais) Quotation factor
02/18/2011 Management Board
02/18/2011 46,160.00 Particular subscription
1,000 0 1,000 0.00011355 46.16 R$ per Unit
Criterion for determining the issuance price: Conversion price determined by the average value of the last five (5) trade periods before the grant of stocks, as provisioned in the Company´s stock options plan to its beneficiaries.
Paid-in form: Cash deposit for the issuance of stocks related to the exercise of stock options.
04/26/2011 Management Board
04/26/2011 28,243.80 Particular subscription
3,060 0 3,060 0.00006947 9.23 R$ per Unit
Criterion for determining the issuance price: Conversion price determined by the average value of the last five (5) trade periods before the grant of stocks, as provisioned in the Company´s stock options plan to its beneficiaries, already considering the effect of stock split (1:5) described in item 17.3.
Paid-in form: Cash deposit for the issuance of 3,060 common stocks amounting to R$ 28,243.80 related to the exercise of stock options by beneficiaries in the period from 02/18/2011 to 04/25/2011.
06/22/2011 Management Board
06/22/2011 2,201,170.40 Particular subscription
238,480 0 238,480 0.005414087 9.23 R$ per Unit
Criterion for determining the issuance price: Conversion price determined by the average value of the last five (5) trade periods before the grant of stocks, as provisioned in the Company´s stock options plan to its beneficiaries, already considering the effect of stock split (1:5) described in item 17.3.
Paid-in form: Cash deposit for the issuance of 238,480 common stocks amounting to R$ 2,201,170.40 related to the exercise of stock options by beneficiaries in the period from 04/26/2011 to 06/21/2011.
07/26/2011 Management Board
07/26/2011 134,693.39 Particular subscription
14,593 0 14,593 0.000329513 9.23 R$ per Unit
Criterion for determining the issuance price: Conversion price determined by the average value of the last five (5) trade periods before the grant of stocks, as provisioned in the Company´s stock options plan to its beneficiaries, already considering the effect of stock split (1:5) described in item 17.3.
Paid-in form: Cash deposit for the issuance of 15,593 common stocks amounting to R$ 134,693.39 related to the exercise of stock options by beneficiaries in the period from 06/22/2011 to 07/25/2011.
08/19/2011 Management
Board 08/19/2011 30,000,002.00 Particular
subscription 1,389,191 0 1,389,191 0.00881704 21.6 R$ per Unit
Criterion for determining the issuance price: Conversion price, as provisioned in the document “PRIVATE INSTRUMENT OF TRUST DEED OF THE 1st PRIVATE ISSUE OF DEBENTURES CONVERTIBLE INTO SHARES WITH FLOATING CHARGE OF TOTVS S.A.”, as per item 3.18.6.
Paid-in form: Conversion of 15% of the debentures issued by the Company on 08/19/2008.
09/02/2011 Management
Board 09/02/2011 193,599.25 Particular
subscription 20,975 0 20,975 0.000441099 9.23 R$ per Unit
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Criterion for determining the issuance price: Conversion price determined by the average value of the last five (5) trade periods before the grant of stocks, as provisioned in the Company´s stock options plan to its beneficiaries, already considering the effect of stock split (1:5) described in item 17.3.
Paid-in form: Cash deposit for the issuance of 20,975 common stocks amounting to R$ 193,599.25 related to the exercise of stock options by beneficiaries in the period from 07/26/2011 to 09/01/2011.
10/25/2011 Management
Board 10/25/2011 3,595,149.61 Particular
subscription 389,507 0 389,507 0.008187635 9.23 R$ per Unit
Criterion for determining the issuance price: Conversion price determined by the average value of the last five (5) trade periods before the grant of stocks, as provisioned in the Company´s stock options plan to its beneficiaries, already considering the effect of stock split (1:5) described in item 17.3.
Paid-in form: Cash deposit for the issuance of 389,507 common stocks amounting to R$ 3,595,149.61 related to the exercise of stock options by the beneficiaries in the period from 09/03/2011 to 10/24/2011.
12/20/2011 Management
Board 12/20/2011 1,011,838.75 Particular ren 109,625 0 109,625 0.002290895 9.23 R$ per Unit
Criterion for determining the issuance price: Conversion price determined by the average value of the last five (5) trade periods before the grant of stocks, as provisioned in the Company´s stock options plan to its beneficiaries, already considering the effect of stock split (1:5) described in item 17.3.
Paid-in form: Cash deposit for the issuance of 109,625 common stocks amounting to R$ 1,011,838.75 related to the exercise of stock options by the beneficiaries in the period from 10/25/2011 to 12/19/2011.
04/24/2012 Management
Board 04/24/2012 2,684,946.32 Particular
subscription 372,392 0 372,392 0.006012118 7.21 R$ per Unit
Criterion for determining the issuance price: Conversion price determined by the average value of the last five (5) trade periods before the grant of stocks, as provisioned in the Company´s stock options plan to its beneficiaries, already considering the effect of stock split (1:5) described in item 17.3.
Paid-in form: Cash deposit for the issuance of 372,392 common stocks amounting to R$ 2,684,946.32 related to the exercise of stock options by the beneficiaries in the period from 20/12/2011 to 23/04/2012.
04/24/2012 Management
Board 04/24/2012 202,137.00 Particular
subscription 21,900 0 21,900 0.00045262 9.23 R$ per Unit
Criterion for determining the issuance price: Conversion price determined by the average value of the last five (5) trade periods before the grant of stocks, as provisioned in the Company´s stock options plan to its beneficiaries, already considering the effect of stock split (1:5) described in item 17.3.
Paid-in form: Cash deposit for the issuance of 21,900 common stocks amounting to R$ 202,137.00 on 24/04/2012 related to the exercise of stock options by the beneficiaries in the period from 20/12/2011 to 23/04/2012.
06/27/2012 Management Board
06/27/2012 1,754,484.55 Particular subscription
190,085 0 190,085 0.3325060 9.23 R$ per Unit
Criterion for determining the issuance price: Conversion price determined by the average value of the last five (5) trade periods before the grant of stocks, as provisioned in the Company´s stock options plan to its beneficiaries, already considering the effect of stock split (1:5) described in item 17.3.
Paid-in form: Cash deposit for the issuance of 190,085 common stocks amounting to R$ 1,754,484.55 on 06/27/2012 related to the exercise of stock options by the beneficiaries in the period from 24/04/2012 to 26/06/2012.
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06/27/2012 Management Board
06/27/2012 1,484,935.55 Particular subscription
205,595 0 205,595 0.3325060 7.21 R$ per Unit
Criterion for determining the issuance price: Conversion price determined by the average value of the last five (5) trade periods before the grant of stocks, as provisioned in the Company´s stock options plan to its beneficiaries, already considering the effect of stock split (1:5) described in item 17.3.
Paid-in form: Cash deposit for the issuance of 205,595 common stocks amounting to R$ 1,484,935.55 on 06/27/2012 related to the exercise of stock options by the beneficiaries in the period from 24/04/2012 to 26/06/2012.
07/24/2012 Management Board
07/24/2012 117,011.09 Particular subscription
16,229 0 16,229 0.02601238 7.21 R$ per Unit
Criterion for determining the issuance price: Conversion price determined by the average value of the last five (5) trade periods before the grant of stocks, as provisioned in the Company´s stock options plan to its beneficiaries, already considering the effect of stock split (1:5) described in item 17.3.
Paid-in form: Cash deposit for the issuance of 16,229 common stocks amounting to R$ 11,7011.09 on 07/24/2012 related to the exercise of stock options by the beneficiaries in the period from 27/06/2012 to 23/07/2012.
07/24/2012 Management Board
07/24/2012 7,753.20 Particular subscription
840 0 840 0.00172359 9.23 R$ per Unit
Criterion for determining the issuance price: Conversion price determined by the average value of the last five (5) trade periods before the grant of stocks, as provisioned in the Company´s stock options plan to its beneficiaries, already considering the effect of stock split (1:5) described in item 17.3.
Paid-in form: Cash deposit for the issuance of 840 common stocks amounting to R$ 7,753.20 on 07/24/2012 related to the exercise of stock options by the beneficiaries in the period from 27/06/2012 to 23/07/2012.
08/20/2012 Management Board
08/20/2012 29,998,000.00 Particular subscription
1,267,849 0 1,267,849 0.06666915 23.66 R$ per Unit
Criterion for determining the issuance price: Conversion price, as provisioned in the document “PRIVATE INSTRUMENT OF TRUST DEED OF THE 1st PRIVATE ISSUE OF DEBENTURES CONVERTIBLE INTO SHARES WITH FLOATING CHARGE OF TOTVS S.A.” as per item 3.18.6.
Paid-in form: Conversion of 15% of the debentures issued by the Company on 08/19/2008.
09/26/2012 Management Board
09/26/2012 18,460.00 Particular subscription
2,000 0 2,000 0.00123806 9.23 R$ per Unit
Criterion for determining the issuance price: Conversion price determined by the average value of the last five (5) trade periods before the grant of stocks, as provisioned in the Company´s stock options plan to its beneficiaries, already considering the effect of stock split (1:5) described in item 17.3.
Paid-in form: Cash deposit for the issuance of 2,000 common stocks amounting to R$ 18,460.00 on 26/09/2012 related to the exercise of stock options by the beneficiaries in the period from 07/24/2012 to 09/25/2012.
09/26/2012 Management Board
09/26/2012 430,307.22 Particular subscription
59,682 0 59,682 0.03694518 7.21 R$ per Unit
Criterion for determining the issuance price: Conversion price determined by the average value of the last five (5) trade periods before the grant of stocks, as provisioned in the Company´s stock options plan to its beneficiaries, already considering the effect of stock split (1:5) described in item 17.3.
Paid-in form: Cash deposit for the issuance of 16,229 common stocks amounting to R$ 430,307.22 on 09/26/2012 related to the exercise of stock options by the beneficiaries in the period from 07/27/2012 to 09/25/2012.
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10/30/2012 Management Board
10/30/2012 4,245.80 Particular subscription
460 0 460 0.00088381 9.23 R$ per Unit
Criterion for determining the issuance price: Conversion price determined by the average value of the last five (5) trade periods before the grant of stocks, as provisioned in the Company´s stock options plan to its beneficiaries, already considering the effect of stock split (1:5) described in item 17.3.
Paid-in form: Cash deposit for the issuance of 460 common stocks amounting to R$ 4,245.80 on 10/30/2012 related to the exercise of stock options by the beneficiaries in the period from 09/26/2012 to 10/30/2012.
10/30/2012 Management Board
10/30/2012 148,864.87 Particular subscription
20,647 0 20,647 0.00429788 7.21 R$ per Unit
Criterion for determining the issuance price: Conversion price determined by the average value of the last five (5) trade periods before the grant of stocks, as provisioned in the Company´s stock options plan to its beneficiaries, already considering the effect of stock split (1:5) described in item 17.3.
Paid-in form: Cash deposit for the issuance of 20,647 common stocks amounting to R$ 148,864.87 on 10/30/2012 related to the exercise of stock options by the beneficiaries in the period from 09/26/2012 to 10/30/2012.
12/20/2012 Management Board
12/20/2012 34,520.20 Particular subscription
3,740 0 3,740 0.00231400 9.23 R$ per Unit
Criterion for determining the issuance price: Conversion price determined by the average value of the last five (5) trade periods before the grant of stocks, as provisioned in the Company´s stock options plan to its beneficiaries, already considering the effect of stock split (1:5) described in item 17.3.
Paid-in form: Cash deposit for the issuance of 3,740 common stocks amounting to R$ 34,520.20 on 12/20/2012 related to the exercise of stock options by the beneficiaries in the period from 10/31/2012 to 12/20/2012.
12/20/2012 Management Board
12/20/2012 9,913.75 Particular subscription
1,375 0 1,375 0.00085074 7.21 R$ per Unit
Criterion for determining the issuance price: Conversion price determined by the average value of the last five (5) trade periods before the grant of stocks, as provisioned in the Company´s stock options plan to its beneficiaries, already considering the effect of stock split (1:5) described in item 17.3.
Paid-in form: Cash deposit for the issuance of 1,375 common stocks amounting to R$ 9,914.00 on 12/20/2012 related to the exercise of stock options by the beneficiaries in the period from 10/31/2012 to 12/20/2012.
03/19/2013 Management Board
03/19/2013 54,846.47 Particular subscription
7,607 0 7,607 0.00470600 7.21 R$ per Unit
Criterion for determining the issuance price: Conversion price determined by the average value of the last five (5) trade periods before the grant of stocks, as provisioned in the Company´s stock options plan to its beneficiaries, already considering the effect of stock split (1:5) described in item 17.3.
Paid-in form: Cash deposit for the issuance of 7,607 common stocks amounting to R$ 54,846.47 on 03/19/2013 related to the exercise of stock options by the beneficiaries in the period from 12/20/2012 to 03/19/2013.
03/19/2013 Management Board
03/19/2013 7,856,785.60 Particular subscription
336,335 0 336,335 0.208090000 23.36 R$ per Unit
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Criterion for determining the issuance price: Conversion price determined by the average value of the last five (5) trade periods before the grant of stocks, as provisioned in the Company´s stock options plan to its beneficiaries, already considering the effect of stock split (1:5) described in item 17.3.
Paid-in form: Cash deposit for the issuance of 366,335 common stocks amounting to R$ 7,856,785.60 on 03/19/2013 related to the exercise of stock options by the beneficiaries in the period from 12/20/2012 to 03/19/2013.
04/30/2013 Management Board
04/30/2013 34,571.95 Particular subscription
4,795 0 4,795 0.00296035 7.21 R$ per Unit
Criterion for determining the issuance price: Conversion price determined by the average value of the last five (5) trade periods before the grant of stocks, as provisioned in the Company´s stock options plan to its beneficiaries, already considering the effect of stock split (1:5) described in item 17.3.
Paid-in form: Cash deposit for the issuance of 4,795 common stocks amounting to R$34,571.95 on 04/30/2013 related to the exercise of stock options by the beneficiaries in the period from 03/12/2012 to 04/17/2013.
04/30/2013 Management Board
04/30/2013 5,239,531.20 Particular subscription
224,295 0 224,295 0.13847602 23.36 R$ per Unit
Criterion for determining the issuance price: Conversion price determined by the average value of the last five (5) trade periods before the grant of stocks, as provisioned in the Company´s stock options plan to its beneficiaries, already considering the effect of stock split (1:5) described in item 17.3.
Paid-in form: Cash deposit for the issuance of 224,295 common stocks amounting to R$ 5,239,531.20 on 04/30/2013 related to the exercise of stock options by the beneficiaries in the period from 03/12/2012 to 04/17/2013.
06/18/2013 Management Board
06/18/2013 7,635.39 Particular subscription
1,059 0 1,059 0.00065289 7.21 R$ per Unit
Criterion for determining the issuance price: Conversion price determined by the average value of the last five (5) trade periods before the grant of stocks, as provisioned in the Company´s stock options plan to its beneficiaries, already considering the effect of stock split (1:5) described in item 17.3.
Paid-in form: Cash deposit for the issuance of 1,059 common stocks amounting to R$7,635.39 on 06/18/2013 related to the exercise of stock options by the beneficiaries in the period from 04/18/2012 to 06/18/2013.
06/18/2013 Management Board
06/18/2013 59,684.80 Particular subscription
2,555 0 2,2555 0.00157519 23.36 R$ per Unit
Criterion for determining the issuance price: Conversion price determined by the average value of the last five (5) trade periods before the grant of stocks, as provisioned in the Company´s stock options plan to its beneficiaries, already considering the effect of stock split (1:5) described in item 17.3.
Paid-in form: Cash deposit for the issuance of 2,555 common stocks amounting to R$59,684.80 on 06/18/2013 related to the exercise of stock options by the beneficiaries in the period from 04/18/2012 to 06/18/2013.
07/30/2013 Management Board
07/30/2013 877,518.40 Particular subscription
37,565 0 37,565 0.02315874 23.36 R$ per Unit
Criterion for determining the issuance price: Conversion price determined by the average value of the last five (5) trade periods before the grant of stocks, as provisioned in the Company´s stock options plan to its beneficiaries, already considering the effect of stock split (1:5) described in item 17.3.
Paid-in form: Cash deposit for the issuance of 37,565 common stocks amounting to R$877,518.40 on 07/30/2013 related to the exercise of stock options by the beneficiaries in the period from 06/19/2013 to 07/30/2013.
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08/19/2013 Management Board
08/19/2013 29,999,927.85 Particular subscription
1,141,532 0 1,141,532 0.70358898 26.28 R$ per Unit
Criterion for determining the issuance price: Conversion price, as provisioned in the document “PRIVATE INSTRUMENT OF TRUST DEED OF THE 1st PRIVATE ISSUE OF DEBENTURES CONVERTIBLE INTO SHARES WITH FLOATING CHARGE OF TOTVS S.A.” as per item 3.18.6.
Paid-in form: Conversion of 15% of the debentures issued by the Company on 08/19/2008.
09/17/2013 Management
Board 09/17/2013 8,515.01 Particular
subscription 1,181 0 1,181 0.00072283 7.21 R$ per Unit
Criterion for determining the issuance price: Conversion price determined by the average value of the last five (5) trade periods before the grant of stocks, as provisioned in the Company´s stock options plan to its beneficiaries, already considering the effect of stock split (1:5) described in item 17.3.
Paid-in form: Cash deposit for the issuance of 1,181 common stocks amounting to R$8,515.01 on 09/17/2013 related to the exercise of stock options by the beneficiaries in the period from 08/31/2013 to 09/17/2013.
09/17/2013 Management Board
09/17/2013 1,353,595.20 Particular subscription
57,945 0 57,945 0.03546516 23.36 R$ per Unit
Criterion for determining the issuance price: Conversion price determined by the average value of the last five (5) trade periods before the grant of stocks, as provisioned in the Company´s stock options plan to its beneficiaries, already considering the effect of stock split (1:5) described in item 17.3.
Paid-in form: Cash deposit for the issuance of 57,945 common stocks amounting to R$1,353,595.20 on 09/17/2013 related to the exercise of stock options by the beneficiaries in the period from 08/31/2013 to 09/17/2013.
10/29/2013 Management Board
10/29/2013 90,896.47 Particular subscription
12,607 0 12,607 0.00771331 7.21 R$ per Unit
Criterion for determining the issuance price: Conversion price determined by the average value of the last five (5) trade periods before the grant of stocks, as provisioned in the Company´s stock options plan to its beneficiaries, already considering the effect of stock split (1:5) described in item 17.3.
Paid-in form: Cash deposit for the issuance of 12,607 common stocks amounting to R$90,896.47 on 10/29/2013 related to the exercise of stock options by the beneficiaries in the period from 09/18/2013 to 10/29/2013.
10/29/2013 Management Board
10/29/2013 282,235.52 Particular subscription
12,082 0 12,082 0.00739210 23.36 R$ per Unit
Criterion for determining the issuance price: Conversion price determined by the average value of the last five (5) trade periods before the grant of stocks, as provisioned in the Company´s stock options plan to its beneficiaries, already considering the effect of stock split (1:5) described in item 17.3.
Paid-in form: Cash deposit for the issuance of 12,082 common stocks amounting to R$282,235.52 on 10/29/2013 related to the exercise of stock options by the beneficiaries in the period from 09/18/2013 to 10/29/2013.
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11/19/2013 Management Board
11/19/2013 86,315.20 Particular subscription
3,695 0 3,695 0.00226053 23.36 R$ per Unit
Criterion for determining the issuance price: Conversion price determined by the average value of the last five (5) trade periods before the grant of stocks, as provisioned in the Company´s stock options plan to its beneficiaries, already considering the effect of stock split (1:5) described in item 17.3.
Paid-in form: Cash deposit for the issuance of 3,695 common stocks amounting to R$86,315.20 on 11/19/2013 related to the exercise of stock options by the beneficiaries in the period from 10/30/2013 to 11/19/2013.
12/19/2013 Management Board
12/19/2013 4,253.90 Particular subscription
590 0 590 0.00036094 7.21 R$ per Unit
Criterion for determining the issuance price: Conversion price determined by the average value of the last five (5) trade periods before the grant of stocks, as provisioned in the Company´s stock options plan to its beneficiaries, already considering the effect of stock split (1:5) described in item 17.3.
Paid-in form: Cash deposit for the issuance of 590 common stocks amounting to R$4,253.90 on 12/19/2013 related to the exercise of stock options by the beneficiaries in the period from 11/20/2013 to 12/19/2013.
12/19/2013 Management Board
12/19/2013 125,326.40 Particular subscription
5,365 0 5,365 0.00328213 23.36 R$ per Unit
Criterion for determining the issuance price: Conversion price determined by the average value of the last five (5) trade periods before the grant of stocks, as provisioned in the Company´s stock options plan to its beneficiaries, already considering the effect of stock split (1:5) described in item 17.3.
Paid-in form: Cash deposit for the issuance of 5,365 common stocks amounting to R$125,326.40 on 12/19/2013 related to the exercise of stock options by the beneficiaries in the period from 11/20/2013 to 12/19/2013.
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17.3. Information on stock splits, grouping or bonuses
There were no stock splits, grouping or bonuses in the past 3 fiscal years.
17.4. Information on capital stock reductions
There was no capital reduction.
17.5. Other relevant information
The Company did not identify any other relevant information related to this item in addition
to the one already disclosed.
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18. SECURITIES
18.1. Rights of stocks
Stock or CDA type: Common
Tag along: 100%
Right for dividends: The stocks guarantee to their holders the right for mandatory dividend, in each accounting period, equivalent to 25% of the net profit adjusted in terms of article 202 of the Corporate Law. In addition, according to the Company´s Bylaws and Corporate Law, the owners of common stocks have the right of earning dividends or other distributions made in relation to common stocks, proportional to their interests in the capital stock.
Right to vote: Full
Convertibility: No
Right for capital refund: Yes
Description of the capital refund characteristics: See item 18.10
Restriction of circulation: No
Conditions for changing the rights guaranteed by such securities values:
See item 18.10
Other relevant characteristics: The Company did not identify any other relevant characteristics of its stocks, in addition to the ones already described in this item.
18.2. Description of eventual legal rules that limit the right to vote of significant shareholders or that oblige them to make public acquisition offer
Voting Limit There are no rules in the Bylaws that limit or restrict the right to vote of the Company stockholders. Chapter VII of the Company´s Bylaws includes rules that rule the performance of public bid for buyout of stocks in case of sale of the shareholding control, acquisition of relevant capital, cancellation of publicly-traded company registration and exclusion from the Novo Mercado. Bids Transcribed below are the clauses of TOTVS ByLaws, including provisions of events related to the obligation of conducting Public Acquisition Offer:
Article 37 - The direct or indirect disposal of the Company’s ownership control (as defined in
Paragraph 1 of this Article), either through a single or successive operations, shall be contracted
under either a suspensive or resolutory condition that the Ownership Control buyer be obliged
to carry out a Public Tender Offer (“PTO”) for acquisition of shares of the other shareholders,
subject to any conditions and terms set forth in legislation in force and the Novo Mercado
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Regulation, so that such shareholders are entitled to a treatment equal to that of the
Shareholder Controlling Seller (as defined in Paragraph 1 of this article).
Paragraph 1 - For purposes of the Bylaws, the expressions below started in capital letters shall
have the following meanings:
“Controlling Shareholder” means shareholder (s) or Group of Shareholders that owns the
Company's Control.
"Controlling Shareholder Seller" - means the controlling shareholder when it promotes the sale
of the Company's control.
"Control Shares" - means the block of shares that ensures, directly or indirectly, its holder (s) the
individual and / or combined control of the Company.
"Outstanding Shares" - means all shares issued by the Company, except shares held by the
Controlling Shareholder, by people linked to the Controlling Shareholder, by the Company's
management and treasury shares.
"Acquirer" means one for whom the Controlling Shareholder transfers Controlling Shares in a
Change of Control of the Company.
"Transfer of Control of the Company" - means the transfer to third persons, against payment, of
the Control Shares.
“Group of Shareholders” means a group of people who are (i) pegged by agreements or
contracts of any nature, either directly or by means of Controlled Companies, Controlling Parties
or Under Common Control; or (ii) among which there is controlling relationship; or (iii) under
common control. "Control" means the power effectively used to manage the activities and guide
the organs of the Company, directly or indirectly, in fact or law, regardless of ownership interest
held. There is a relative assumption of ownership of control related to the person or group of
shareholders that hold shares that have secured an absolute majority of votes of shareholders
present in 3 (three) last general meeting of the Company, even if they do not hold the actions
that ensure the absolute majority of the voting capital.
"Economic Value" - means the value of the company and its shares to be determined by a
specialized company, by using recognized methodology or based on other criteria that may be
defined by the CVM.
Paragraph 2 - In the event the acquisition of Control also subjects the Control Buyer to the
obligation of carrying out a Public Tender Offer required pursuant to Article 40 of the Bylaws,
the purchase price shall be the highest among those determined in conformity with this Article
37 and Article 40, Paragraph 2 of the Bylaws.
Paragraph 3 - The Controlling Shareholder Seller may not transfer the ownership of its shares
until the Buying Shareholder executes the Controlling Parties’ Instrument of Consent referred
to in the Novo Mercado Regulation.
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Paragraph 4 - The Company shall not register any transfer of shares to the Buying Shareholder
with Controlling Power up until said shareholder execute the Controlling Shareholders’
Instrument of Consent, which is related to the Novo Mercado Regulation.
Paragraph 5 - No Shareholders' Agreement providing for the exercising of the Controlling Power
may be registered in the Company's head office until its signatories have signed the Statement
of Consent referred to the Novo Mercado Regulation.
Article 38 - The public tender offer referred to in Article above shall also be carried out: (i) in
case of any remunerated assignment of subscription rights to shares or other securities or rights
to securities convertible into shares, which may give rise to the Disposal of the Company’s
Ownership Control; or (ii) in case of disposal of the Ownership control of a company holding the
Controlling Power of the Company and, in this case, the Controlling Shareholder Seller shall be
obliged to report to BM&FBOVESPA the amount assigned to the Company in such disposal and
attach any supporting documentation.
Article 39 - Any party which acquires the Controlling Power, in view of any private agreement
for purchase of shares entered into with the Controlling, involving any number of shares, shall
be obliged to:
(i) carry out the public tender offer referred to in Article 37 of the Bylaws;
(ii) Pay, under the following, the amount equivalent to the difference between the public offering and the amount paid per share eventually purchased in stock exchanges within 6 (six) months prior to the date of acquisition of the Company´s Control, updated until the payment date; This amount should be distributed among all the people who sold shares of the Company at the tradings where the buyer made purchases, in proportion to the selling net balance of each, while the BM&FBOVESPA operates the distribution in terms of its regulations, and
(iii) take any applicable measures to recover the minimum percentage of twenty five percent (25%) of the Company’s total outstanding shares, within the six (6) months subsequent to the acquisition of Control.
Article 40 - Any person or shareholder who purchases or becomes the holder of shares issued
by the Company, in a number equal to or higher than twenty percent (20%) of the total shares
issued by the Company shall, within no longer than sixty (60) days counted from the acquisition
date or the event giving rise to the ownership of shares in a number equal to or higher than
twenty percent (20%) of the total shares issued by the Company, carry out or request the
registration of, as the case may be, a Public Tender Offer of all shares issued by the Company,
subject to the applicable CVM regulation, the Novo Mercado Regulation, other BM&FBOVESPA
regulations and the provisions of this Article.
Paragraph 1 - The Public Tender Offer shall be: (i) equally addressed to all Company’s
shareholders; (ii) carried out in an auction to be held at BM&FBOVESPA; (iii) placed by the price
determined in conformity with the provisions of Paragraph 2 of this Article; and (iv) paid on
demand, in local legal tender, upon the acquisition of shares issued by the Company in the
Tender Offer.
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Paragraph 2 - The purchase price in the Public Tender Offer for each share issued by the
Company may not be lower than the highest amount between (i) one hundred twenty five
percent (125%) of the highest unit quotation reached for the shares issued by the Company
during the twelve (12) month period prior to the Public Tender Offer in any stock exchange in
which the Company’s shares are traded; (ii) 125% of the highest unit price paid by the Buying
Shareholder, at any time, for a share or a share lot issued by the Company; (iii) the economic
value determined in the appraisal report.
Paragraph 3 - Any shareholders who are holders of shares representing at least 10% of capital
stock may request a new appraisal report to be prepared in the same format as that referred to
in item (iii) of Paragraph 2 of this Article, but by a different institution. (I) In case the new
appraisal report determines a price per share lower than the one calculated as set forth in
Paragraph 2 of this Article, the higher price shall prevail and the shareholders who requested
the new appraisal report shall be fully liable for its costs proportionally to their interest in the
Company’s capital stock. (II) In case the appraisal report as set forth in this Paragraph determines
a price per share higher than that obtained as set forth in Paragraph 2 of this Article, the Buyer
may: (1) waiver the Public Tender Offer and agree to dispose the excess interest within three
months counted from the acquisition, and any costs on the preparation of new appraisal report
must be fully paid by the shareholders who requested its preparation, proportionally to their
interest in the Company’s capital stock; (2) carry out the Public Tender Offer for the price per
share stated in the new appraisal report, and any costs on the preparation of new appraisal
report must be fully paid by the Company.
Paragraph 4 - In the event the Public Tender Offer price is revised, as set forth in Paragraph 3 of
this Article, and provided that there is no waiver from the Buyer, the auction shall start at the
new price, and a material fact shall be published to report the price revision and the
maintenance or waiver of the Public Tender Offer.
Paragraph 5 - Upon revision of the Public Tender Offer price, the following procedure shall be
adopted:
(i) the request for a new appraisal report on the price per Company’s share, based on the
economic value, duly documented and supported by evidence showing the flaw or inaccuracy
of the calculation methodology employed or the evaluation criterion adopted, shall be carried
out within fifteen (15) days counted from the disclosure of the Public Tender Offer amount, and
shall interrupt the registration process or, in case such registration is already granted, it shall
interrupt the Public Tender Offer notice period, postponing the respective auction, and the
Buying Shareholder shall arrange for the publication of a material fact reporting such
postponement and the date stated for the holding of the Board of Directors’ meeting which shall
choose a specialized company to prepare the new appraisal report;
(ii) in case the Board of Directors decides that a new appraisal of the Company shall not be
prepared, the registration process or the Public Tender Offer itself shall be resumed for the
remaining period, as the case may be, and, for the latter, the Buying Shareholder shall arrange
for the publication of a material fact with the new auction date;
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(iii) in case the appraisal report determines an amount equal to or lower than the Public Tender
Offer value obtained as set forth in Paragraph 2 of this Article, the registration process or the
Public Tender Offer itself shall be resumed for the remaining period, as the case may be, and,
for the latter, the Buying Shareholder shall arrange for the publication of a material fact with
the new auction date;
(iv) in case the appraisal report determines an amount higher than the Public Tender Offer value
obtained as set forth in Paragraph 2 of this Article, the Buying Shareholder shall publish, within
five (5) days counted from the submission of the appraisal report, a material fact stating its
position to maintain or waive the Public Tender Offer, by clarifying, for the first case, that it will
resume the registration process, or of the Public Tender Offer itself for the remaining period, as
the case may be, and, for the latter, the Buyer shall arrange for the publication of a material fact
with the new auction date and the new price;
(v) the fifteen (15) day period referred to in item (i) of this Paragraph 5 shall only start after the
original appraisal report is delivered to CVM, or after it is made available as set forth in item (viii)
of this Paragraph 5, if it comes first, and the Buying Shareholder shall publish a material fact
reporting such delivery;
(vi) the Board of Directors’ meeting resolving on a new appraisal shall nominate the institution
in charge for the preparation of such appraisal report, approve the related fees, establish a
period no longer than thirty (30) days for conclusion of services, and determine that the
appraisal report be forwarded to the Company, for the attention of its Investor Relations Officer,
to the stock exchange in which the auction is to be held, and to CVM, in addition to being sent
to CVM electronic mail in the specific format determined by CVM;
(vii) the institution in charge for preparing the appraisal report shall also, on the same date it
forwards the appraisal report to CVM, inform the intermediate institution operating in the Public
Tender Offer, as set forth in Article 4, IV of CVM Instruction No. 361, of March 5, 2002 (“CVM
Instruction 361”), the outcome of such appraisal, so that such institution and the Buying
Shareholder adopt any applicable measures among those set forth in items (iii) and (iv) of this
Paragraph 5;
(viii) the appraisal report referred to in this Paragraph 5 shall be made available in the same
locations, and in the same format, of the appraisal report referred to in Article 8 of CVM
Instruction 361;
(ix) the minutes of the Board of Directors’ meeting referred to in this Paragraph 5 shall
necessarily state the names of the shareholders who requested the new appraisal, for effects of
the possible application of the provision in Paragraph 3, (I) and (II.2) of this Article 40.
Paragraph 6 - The Public Tender Offer mentioned in the main provision of this Article shall not
exclude the possibility of another shareholder of the Company or, if applicable, the Company
itself, to prepare a concurrent Public Tender Offer, pursuant to applicable regulation.
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Paragraph 7 - The Buyer shall be obliged to comply with any possible CVM requests or
requirements, related to the Public Tender Offer, made based on and within the deadlines set
forth in applicable regulation.
Paragraph 8 - In the event the Buyer fails to comply with any obligations imposed by this Article,
including those related to the compliance with deadlines for (i) carrying out or requesting
registration of the Public Tender Offer; or (ii) complying with any possible CVM requests or
requirements, or with any obligations provided for by Article 49 of the Bylaws, the Company’s
Board of Directors shall call an Extraordinary General Meeting, in which the Buyer may not vote,
in order to resolve on the suspension of the exercise of the rights of the Buyer who failed to
comply with any obligation imposed by this Article, provided for by Article 120 of Brazilian
Corporation Law, without prejudice to the Buyer’s liability for any losses and damages caused
to other shareholders arising from such noncompliance with obligations imposed by this Article.
Paragraph 9 - Any Shareholder or person acquiring or becoming the holder of other rights,
including usufruct or trust, on the shares issued by the Company in a number equal to or higher
than twenty percent (20%) of the total shares issued by the Company, shall be equally obliged
to carry out or request the registration, as the case may be, of a Public Tender Offer, within no
longer than sixty (60) days counted from the date of such purchase or the event which gave rise
to the holding of such rights on shares in an amount equal to or higher than twenty percent
(20%) of the total shares issued by the Company, pursuant to the provisions in this Article.
Paragraph 10 - The obligations stated in Article 254-A of the Brazilian Corporation Law and
Articles 37, 38 and 39 of the Bylaws do not release the Buying Shareholder from complying with
any obligations stated in this Article, except for the provisions in Articles 47 and 48 of the Bylaws.
Paragraph 11 - The provision in this Article shall not apply in the event of a person becoming the
holder of shares issued by the Company in a number higher than twenty percent (20%) of the
total shares issued, arising from: (i) any legal succession, under the condition that the
shareholder disposes of any excess shares within sixty (60) days counted from the material
event; (ii) any amalgamation of another company by the Company; (iii) the merger of shares of
another company by the Company; or (iv) the subscription of Company’s shares, carried out at
a single primary issue, which has been approved in a Company’s Annual General Meeting called
by its Board of Directors, and whose capital increase proposal has determined the issue price of
shares based on the economic value obtained from a valuation report on the Company
conducted by a specialized company with proven experience in the evaluation of publicly-held
companies.
Paragraph 12 - For calculation of the percentage of twenty percent (20%) of the total shares
issued by the Company described in the main provision of this Article, any involuntary additions
to ownership interest arising from cancellation of treasury shares or decrease in the Company’s
capital stock with the cancellation of shares shall not be computed.
Paragraph 13 - In the event the CVM regulation applicable to Public Tender Offer set forth in
this Article determines the adoption of a calculation criterion to define the purchase price of
each Company’s share in the Public Tender Offer which gives rise to a purchase price higher than
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that defined in Paragraph 2 of this Article, then the purchase price calculated pursuant to CVM
regulation shall prevail for holding the Public Tender Offer set forth in this Article.
Paragraph 14 - Any change which restricts the shareholders’ right to carry out the Public Tender
Offer set forth in this Article, or the exclusion of this Article, shall oblige the shareholders who
voted for such change or exclusion at a General Meeting to carry out the Public Tender Offer set
forth in this Article, in conformity with the provisions in Paragraph 3 of Article 10 of the Bylaws.
Article 41 - In the Public Tender Offer to be carried out by the Controlling Shareholder, or the
Company for the Company’s deregistration as a publicly-held company, the minimum price to
be offered shall correspond to the Economic Value determined in the appraisal report, referred
to in Article 50 of the Bylaws and subject to the applicable law and regulations.
Article 42 - In the event of Company delisting from the Novo Mercado, in order for trading of
securities outside the Novo Mercado, or if due to a corporate restructuring in which the
Company’s shares resulting from such restructuring are not admitted for trading in the Novo
Mercado, within 120 (one hundred twenty days) from the date of the Extraordinary General
Meeting which has approved the restructuring, the Controlling Shareholder shall carry out a
Public Tender Offer, with the minimum price to be offered shall correspond to the economic
value determined in the appraisal report, referred to in Article 46 of the Bylaws and subject to
the applicable law and regulations.
Article 43 - In the event of absence of a Controlling Shareholder when a there is a decision to
Company’s delisting from the Novo Mercado, , either for registration for trading of shares
outside the Novo Mercado or for corporate restructuring in which the Company’s shares
resulting from such restructuring are not admitted for trading in the Novo Mercado, within 120
(one hundred twenty days) from the date of the Extraordinary General Meeting which has
approved the restructuring, the Company’s delisting shall be conditioned to the carrying out of
a Public Tender Offer as set forth in Article 42 of the Bylaws.
Paragraph 1 – This General Meeting shall define the responsible for the Public Tender Offer. The
responsible must be an attendee at the General Meeting and shall expressly assume the
obligation to conduct the Public Tender Offer.
Paragraph 2 – In the absence of a responsible for the Public Tender Offer definition, in the event
of a corporate restructuring in which the resulting Company securities are not admitted for
trading in the Novo Mercado, the Public Tender Offer shall be carried out by the shareholders
who have voted in favor of the respective resolution at the General Meeting.
Article 44 – If there is no Controlling Shareholder and BM&FBOVESPA determines that the
quotations of securities issued by the Company be disclosed separately or have their trading
interrupted in the Novo Mercado in view of any noncompliance with the obligations stated in
the Novo Mercado Regulation, the Board of Directors’ Chairman shall call an Extraordinary
General Meeting to replace the whole Board of Directors within two (2) days from such
determination, and this period shall only compute the days in which the newspapers usually
used by the Company are published.
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Paragraph 1 - In the event the Board of Directors’ Chairman fails to call the Extraordinary
General Meeting referred to in the main provision of this Article within the established period,
such Meeting may be called by any shareholder of the Company.
Paragraph 2 - The new Board of Directors elected at the Extraordinary General Meeting referred
to in the main provision and in Paragraph 1 of this Article shall remedy any noncompliance with
the obligations stated in the Novo Mercado Regulation as soon as possible or within a new
deadline granted by BOVESPA for this purpose, whichever is shorter.
Article 45 - In the event of Company delisting from the Novo Mercado in view of any
noncompliance with obligations stated in the BM&FBOVESPA’s Novo Mercado Regulation, that
delisting shall be preceded by the carry out of a Public Tender Offer, with the minimum price to
be offered equals to the economic value determined in the appraisal report as referred to in
Article 46 of the Bylaws and subject to the applicable law and regulations.
Paragraph 1 - The Controlling Shareholder shall carry out the Public Tender Offer referred in the
caput of this article.
Paragraph 2 - If there is no Controlling Shareholder and the delisting from Novo Mercado arises
from a General Meeting resolution, the Public Tender Offer shall be carried out by the
shareholders who have voted at the General Meeting in favor of the matter that implied the
noncompliance with obligations stated by the Novo Mercado Regulation.
Paragraph 3 - If there is no Controlling Shareholder and the delisting from Novo Mercado arises
from any management’s act or fact, the Management shall call for a General Meeting to discuss
on how to remedy the arisen noncompliance, or to deliberate on the delisting.
Paragraph 4 - In the event the General Meeting reffered at Paragraph 3 above deliberates on
Company’s delisting from the Novo Mercado, this General Meeting shall define the responsible
for the Public Tender Offer. The responsible must be an attendee at the General Meeting and
shall expressly assume the obligation to conduct the Public Tender Offer.
Article 46 - The appraisal report referred to in Article 40, paragraphs 2 and 3, and Articles 41 and
42 of the Bylaws shall be prepared by a specialized company, with proven experience and
independence from the Company, , its management and/or Shareholders, and such appraisal
report shall also comply with the requirements of Paragraph 1 of Article 8 of the Brazilian
Corporation Law and include the obligation set forth in Paragraph 6 of the same Article 8.
Paragraph 1 - The selection of the specialized company or institution responsible for
determining the Company’s economic value, as set forth in Articles 41 and 42 of the Bylaws lies
privately with the General Meeting, as from the submission by the Board of Directors of a list
with three names, and the respective resolution, and with no blank votes considered, shall be
taken by the absolute majority vote of shareholders representing the Outstanding Shares who
attended the General Meeting instated at first call, shall have shareholders representing at least
twenty percent (20%) of the total Outstanding Shares or, if instated at second call, may have the
attendance of any number of shareholders representing these Outstanding Shares.
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Paragraph 2 - It is incumbent upon the Board of Directors to resolve for carrying out a new
appraisal of the Company and appoint who will prepare the report referred to in Article 40,
Paragraphs 2 and 3 of the Bylaws.
Paragraph 3 - Any costs on the preparation of the appraisal report shall be fully paid by those
parties responsible for carrying out the public tender offer, as the case may be, except for the
provision in Paragraph 3 of Article 40 of the Bylaws.
Article 47 - Carrying out a single Public Tender Offer, aiming at more than one of the purposes
set forth in this Chapter VII, in the Novo Mercado Regulation or in the regulation issued by the
CVM, shall be permitted, provided that it is possible to match the procedures of all types of
Public Tender Offers and there is no loss to the offer addressees and that the CVM approval be
obtained if required by applicable legislation.
Article 48 - The Company or the shareholders in charge of the Public Tender Offer set forth in
this Chapter VII, in the Novo Mercado Regulation or in the regulation issued by the CVM, may
ensure it is carried out by any shareholder, third party or, as the case may be, by the Company.
The Company or the shareholder, as the case may be, shall not be released from the obligation
of carrying out the Public Tender Offer until it is concluded in compliance with the applicable
rules.
Article 49 - Any Buyer who has subscribed and/or purchased shares issued by the Company in a
number equal to or higher than eight percent (8%) of the Company’s capital stock, and is willing
to purchase additional shares issued by the Company in stock exchanges, shall be obliged to,
prior to each new purchase, report its intention to purchase additional shares issued by the
Company, in writing, to the Company, with at least three (3) business days in advance of the
date scheduled for the new purchase of shares, always subject to the provisions of the legislation
in force and applicable CVM and BOVESPA regulations.
18.3. Describe exceptions and suspension clauses related to equity or political rights provisioned in the Bylaws
There are no exceptions and/or suspension clauses concerning equity or political rights provided
for in the bylaws of the Company.
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18.4. Traded volume and highest and lowest quotations of the securities trading values
Accounting period 12/31/2014
Quarter Securities Value
Type Market Administrative Entity1
Financial volume traded (Reais)
Highest quotation value (R$)2
Lowest quotation value (R$)2
03/31/2014 Stocks Common Stock Exchange
BMF&BOVESPA 1,470,326,063 36.60 30.98
06/30/2014 Stocks Common Stock Exchange
BMF&BOVESPA 1,137,453,003 41.95 34.20
09/30/2014 Stocks Common Stock Exchange
BMF&BOVESPA 1,216,844,966 41.85 36.70
12/31/2014 Stocks Common Stock Exchange
BMF&BOVESPA 1,471,279,824 39.00 32.00
Accounting period 12/31/2013
Quarter Securities Value
Type Market Administrative Entity1
Financial volume traded (Reais)
Highest quotation value (R$)2
Lowest quotation value (R$)2
03/31/2013 Stocks Common Stock Exchange
BMF&BOVESPA 1,036,322,033 44.39 39.55
06/30/2013 Stocks Common Stock Exchange
BMF&BOVESPA 1,494,943,894 41.17 32.79
09/30/2013 Stocks Common Stock Exchange
BMF&BOVESPA 1,132,592,266 38.30 34.00
12/31/2013 Stocks Common Stock Exchange
BMF&BOVESPA 898,200,575 37.98 35.50
Accounting period 12/31/2012
Quarter Securities Value
Type Market Administrative Entity1
Financial volume traded (Reais)
Highest quotation value (R$)2
Lowest quotation value (R$)2
03/31/2012 Stocks Common Stock Exchange
BMF&BOVESPA 953,730,430.30 34.01 23.93
06/30/2012 Stocks Common Stock Exchange
BMF&BOVESPA 848,491,715,99 38.70 32.00
09/30/2012 Stocks Common Stock Exchange
BMF&BOVESPA 895,063,050.57 42.11 37.43
12/31/2012 Stocks Common Stock Exchange
BMF&BOVESPA 1,071,128,732.76 43.75 38.01
1 BMF&BOVESPA – Bolsa de Valores, Mercadorias e Futuros. 2 Quotation by unit, considering the 1:5 split approved on 03/21/2011.
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18.5. Description of other securities issued
Securities: Common
Identification: Private issuance of debentures:
Issuance date: 08/19/2008
Maturity date: 08/19/2019
Quantity: 200,000
Value: R$ 200,000,000.00
Restriction of circulation: No
Convertibility and conditions: Yes, see item 18.10
Option for redemption and redemption value:
Yes, see item 18.10
Characteristics: See item 18.10
Conditions for change of rights: Not applicable
Other characteristics: The Company issued 100,000 (one hundred thousand) Units represented by up to 200,000 (two hundred thousand) Debentures, as follows: a) 100,000 (one hundred thousand) first-series Debentures (“1st-series debentures”); and b) 100,000 (one hundred thousand) second-series Debentures (“2nd-series debentures”).
18.6. Brazilian Markets where securities are accepted for trade
The Company securities are accepted for trade in Brazil. The Company stocks are specifically
traded in BM&FBOVESPA (Bolsa de Valores, Mercadorias e Futuros) Stock Exchange, under
ticker “TOTS3”, in the highest level of corporate governance, called Novo Mercado (“New
Market”).
18.7. Information on class and type of securities accepted for trade in foreign markets
There are no securities accepted for trade in foreign markets.
18.8. Public distribution offers made by the Company or third parties, including associated and controlled companies, related to the Company securities
Over the past three years, there were no public distribution offers made by the Company
or by its associated and controlled companies, related to the Company securities.
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18.9. Description of public buyout offers made by the issuer and related to stocks issued by third parties
There are no public buyout offers made by the Company and related to stocks issued by
third parties.
18.10. Other relevant information
Complement of item 18.1 – capital refund
The right for refund is provisioned in the cases below:
Company Liquidation
In case of Company liquidation, the shareholders are entitled to earn the amounts related to
capital refund, proportional to their interests in the capital stock, after paying all the
Company liabilities. Owners of common stocks are entitled to participate in future increases
of capital in the Company, proportional to their interests in the capital stock, but are not
obliged to subscribe stocks in these increases of capital.
Right of Appraisal
Any one of the Company shareholders excluded from certain deliberations taken in the
general meeting may leave the Company by reimbursing the value of his (her) stocks based
on the equity value.
According to the Corporate Law, the right of appraisal may be exercised in case of the events
below (among other events):
• split of the Company (once observed the provision below);
• reduction of the mandatory dividend of the Company;
• change of the business object of the Company;
• merger or incorporation of the Company in other legal entity; and
• interest of the Company in a group of legal entities, as defined in the Corporate Law.
The Corporate Law also establishes that the Company split will entitle the right of appraisal
in case it causes:
• change of business object, except when the split equity is converted to a legal entity with
major activity matching the business object of the Company.
• reduction of the mandatory dividend of the Company; or
• interest of the Company in a group of legal entities, as defined in the Corporate Law.
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In cases of merger of the Company, or also interest in a group of companies, the Company
shareholders will not have the right of appraisal when their stocks (i) have liquidity, that is,
are included in the general index of BM&FBOVESPA or index of any other stock exchange, as
defined by CVM, and (ii) have dispersion, in order that the controller shareholder, the
controller company or other legal entities under common control hold less than half of the
stocks of the type or object class as the right of appraisal.
The right of appraisal must be exercised within 30 days from the date of publication of the
general shareholders meeting minutes that deliberated on the subject that entitles such
right. In addition, the Company has the right of reconsidering any deliberation that has
originated the right of appraisal within 10 days after expiring the deadline for exercising such
right, if its understands that the payment of the reimbursement price of the stocks to the
leaving shareholders would pose risk to its financial stability.
In case of exercising the right of appraisal, the shareholders will be entitled to receive the
accounting value of their stocks, based on the last balance approved by the general
shareholders meeting. Notwithstanding, if the deliberation that provided the right of
appraisal has occurred for more than 60 days from the date of the last balance approved, the
shareholder may request for survey of special balance on date not less than 60 days before
the deliberation, for evaluating the value of its stocks. In this case, the Company must
immediately pay 80% of the estimated reimbursement value based on the last balance sheet
approved by its shareholders, and the remaining balance within 120 days from the date of
deliberation by the general shareholders meeting.
Complement of item 18.1 - Conditions for changing the rights guaranteed by such securities
Right for dividends: As the Company attends the Novo Mercado segment, and thus has one
type of stock (common) only, the only way for changing the minimum mandatory dividend,
mentioned in item 18.1(a), is by changing the own Articles of Incorporation, by summoning
the Extraordinary General Shareholders Meeting, according to the terms of article 135 of
the Corporate Law. The minimum attendance for the approval of the subject discussed in
Extraordinary General Shareholders Meeting will be defined based on article 136 of the
Corporate Law, and requiring the approval from a number of shareholders representing at
least half of the total stocks of the Company. It is important to mention that the reduction
of the mandatory dividend is a hypothesis that may result in the right of appraisal by the
leaving shareholder, as provisioned in article 137 of the Corporate Law.
Right to vote: Every stock entitles its owner to one vote in all the deliberations of the General
Shareholders Meeting. According to the Regulation of the Novo Mercado, the Company
should not issue stocks without right to vote or with restricted right to vote.
Right for reimbursement: According to the Corporate Law, stocks may be redeemed as
determined by the Company shareholders in extraordinary general meeting, and must be
approved by shareholders representing at least half of the stocks affected.
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Complement to item 18.1 – right for attendance in public bid for control sale
In case of direct or indirect sale of the Company control, even that by successive operations,
the sale must be contracted under suspensive or resolutive condition that the buyer obliges
itself to making public stock buyout offer (“OPA”) to the other shareholders, by observing
the conditions and deadlines in the legislation in force and in the Novo Mercado Regulation,
in order to assure equal treatment as the Control seller; (iv) in case of acquisition of Company
stocks, in quantity equal or greater than 20% of its capital stock, by any shareholder, right for
selling its stocks by a price not less than to the highest value between: (a) 125% of the highest
unit quotation reached by the stocks issued by the Company during the period of 12 months
before OPA in any stock exchange in which the Company stocks are traded; (b) 125% of the
highest unit quotation paid by the Buyer Shareholder, at any time, for a stock or batch of
stocks issued by the Company; (c) the financial value determined in evaluation report, as
provisioned in the Articles of Incorporation. Also, it may be requested the review of the OPA
price, by shareholders holding stocks representing at least 10% of the capital stock, under
the terms established by the Articles of Incorporation of the Company. Excluded from these
obligations are the shareholders that, on the date of publication of the Announcement of
Start, already own 20% or more of the total number of Company stocks, and their successors,
applied only to the investors that acquired stocks and became shareholders of the Company
after the effective date of adhesion and listing of the Company in the Novo Mercado. The
percentage of 20% detailed herein does not apply in the case of a person becoming owner
of stocks issued by the Company in quantity over 20% of the total stocks issued due to (1)
legal succession, under condition that the shareholder sells the excess stocks within 60 days
from the date of the relevant event; (2) incorporation of other legal entity by the Company;
(3) incorporation of stocks of other legal entity by the Company; or (4) subscription of
Company stocks, made in a single primary issuance, which has been approved in General
Meeting of Company shareholders, summoned by its Management Board, and which
proposal for increase of capital has determined the definition of stock issuance price based
on economic value achieved from an economical-financial assessment report for the
Company, prepared by specialized company with proven experience in evaluation of publicly
traded companies. Finally, for the purpose of calculating percentage of 20% of the total
stocks issued by the Company, non-planned increases of shareholding will not be computed
when resulting from cancellation of stocks in treasury or reduction of the capital stock of the
Company with cancellation of stocks; (v) if any investor became owner of 20% or more of the
capital stock of the Company due to acquisition of stocks within the Offer scope, the other
shareholders will be entitled to selling their stocks to such investor in public bid for stock
acquisition to be carried out according to the provisions of item (iv) above, with the exception
that the Offer procedure will not have any limitation of the capability of an investor to acquire
stocks that make him owner of 20% or more of the capital stock of the Company.
Complement of item 18.5 – Convertibility in stocks or check of the right of subscribing or acquiring stocks from the issuer, informing:
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In view of the mandatory conversion of 15% of the Units related to the Company’s 1st Private
Issue of Debentures Convertible into Shares, TOTVS’s Board of Directors approved on
08/20/2010, within the limit of authorized capital set forth in the Company’s Bylaws, the
issue of one million, five hundred and thirty-four thousand, three hundred and fifty
(1,534,350) registered, book-entry, common shares with no par value, at the issue price of
R$19.5495366¹ per share on 08/19/2011 within the limit of authorized capital set forth in the
Company’s Bylaws, the issue of one million three hundred and eighty-nine thousand, one
hundred and ninety-one (1,389,191) registered, book-entry, common shares with no par
value, at the issue price of R$21.596713 per share and on 08/20/2012 within the limit of
authorized capital set forth in the Company’s Bylaws, the issue of one million two hundred
and sixty-seven thousand, eight hundred and forty-nine (1,267,849) registered, book-entry,
common shares with no par value, at the issue price of R$23.660520 per share.
¹ values adjusted for stock split of shares approved in 2011.
i. Conditions (i) Units shall be mandatorily converted into common shares issued by the Company,
observing the limits provided for in item (ii) below, in the event, as of the Issue Date of Units,
the weighted average price of three hundred and sixty (360) consecutive days of Company
common shares, calculated at BVSP trading sessions and verified on the anniversary date of
Units in each conversion period provided for in the chart item (ii) is higher than the weighted
average price by share volume of Issuer, calculated at BVSP trading sessions, during the
period between June 6, 2008 and August 31, 2008, accrued of Premium on Price pursuant to
the following terms expressed in item (vi), and indexed until the emission date by:
[ { ( (1+IPCA)*(1+0.12) )(n/360) }(0.5) ] * [ { ( (1+TJLP)*(1+0.09) ) (n/360) }(0.5) ]
Where n = number of calendar days between the determination date and the emission date.
(ii) The mandatory conversion of Units into common shares issued by the Company, as
provided for in item (i) above, only shall occur after two (2) years as of Issue Date and shall
observe the following limits:
% of Units issued Date
Up to 15% accumulated In the 3rd year as of the Issue Date Up to 30% accumulated In the 4th year as of the Issue Date Up to 45% accumulated In the 5th year as of the Issue Date Up to 60% accumulated As of the 6th year as of the Issue Date
For each conversion period, the appreciation of weighted average price of three hundred and
sixty (360) consecutive days of Company common shares shall be calculated on the
Determination Date of respective period, for the purposes of compliance with the criterion
provided for in item (i).
The compliance with said criterion, on the respective Determination Date, shall cause the
mandatory conversion of percentage of Units issued established for that period and under
no circumstance, it shall determine the mandatory conversion in subsequent periods.
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Therefore, the appreciation of weighted average price of three hundred and sixty (360)
consecutive days of Company common shares shall be determined again, on the
Determination Date following after, for the purposes of new compliance with criterion
provided for in item (i).
Under any assumption, should the Determination Date fall on Saturdays, Sundays or national
Holidays or in the City and State of São Paulo, including banking holidays, it shall be extended
to the next business day where shares are traded on BVSP.
Once met the mandatory conversion criterion provided for in item (i), the Issuer undertakes
to deliver the common shares deriving from the mandatory conversion of Units, within no
later than fifteen (15) business days of the Determination Date. For all legal purposes, the
mandatory conversion date of Units shall be the Determination Date of respective conversion
period.
Whenever the mandatory conversion criterion provided for in item (i) has been met, the
Trustee shall send correspondence to Debenture Holders and to the Company, within three
(3) business days as of the Determination Date, informing the occurrence of said event.
(iii) In addition to the assumption of mandatory conversion provided for in item (i) above,
after two (2) yeas of Issue Date, Units may be converted into Company common shares, at
the exclusive discretion of Debenture Holders, observing the following limits:
% of Units issued Date
Up to 15% accumulated In the 3rd year as of the Issue Date Up to 30% accumulated In the 4th year as of the Issue Date Up to 45% accumulated In the 5th year as of the Issue Date Up to 60% accumulated As of the 6th year as of the Issue Date
(iv) The conversion percentages indicated in items (ii) and (iii) above shall be applied to the
number of Units held by each Debenture Holder, and in the assumption of existing a fraction
of Unit, the number of Units that may be converted by each Debenture Holder shall be the
whole number immediately preceding said fraction.
(v) Notwithstanding the provisions in items (ii) and (iii) above, the Debenture Holders may
convert one hundred per cent (100%) of outstanding Units:
(a) in the event a third party acquires more than twenty per cent (20%) of common shares
issued by the Company, third parties are eligible to participate in the public tender offer,
pursuant to article 44 of the Company’s Bylaws; or
(b) should the number of Independent Members of the Issuer’s Board of Directors be lower
than 50% of the total number of board members, excluding from this counting the board
member appointed by BNDESPAR. The definition of “Independent Member” shall be that one
included in the Novo Mercado Listing Regulation.
(vi) The conversion price of Units shall be the weighted average price by share volume of
Issuer, calculated at the trading sessions of BVSP during the period between June 6, 2008 and
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August 31, 2008, accrued of a premium calculated according to the chart below and adjusted
by the following factor (“Conversion Price”):
[ { ( (1+IPCA)*(1+0.08) )(n/360) }(0.5) ] * [ { ( (1+TJLP)*(1+0.05) ) (n/360) }(0.5) ]
Premium on Price (PSP) Date
50% Until the 3rd year as of the Issue Date 46% In the 4th year as of Issue Date 42% In the 5th year as of Issue Date 40% In the 6th year as of Issue Date 40% In the 7th year as of Issue Date 40% In the 8th year as of Issue Date
(vii) The Conversion Price shall be simultaneously and proportionally adjusted whenever
capital increase occurs due to bonus, splitting or reverse split of common shares issued by
the Issuer, on any account, to take place as of the Issue Date, without any burden to the Units
holders and at the same proportion established for said events.
(viii) The common shares issued by the Issuer resulting from the conversion of Units: (a) shall
have the same characteristics and conditions and shall benefit from the same rights and
advantages currently assigned by Bylaws and in the future to this type of share; and (b) shall
be entitled to profit sharing related to the fiscal year in progress, including dividends and
interest on shareholders’ equity.
(ix) Observing the conditions established herein and except for the provision in item (ii)
above, the Units holders shall express their intention of converting Units by means of
conversion request to be made in writing to the Issuer (“Conversion Request”). For all legal
effects, the conversion date shall be the date the Issuer receives the Conversion Request,
and the Issuer is required to deliver the common shares deriving from the conversion of
Units, within no later than fifteen (15) business days as of the receipt date of Conversion
Request.
(x) The fractions of common shares resulting from the conversion of Units shall be due in
cash, on the Conversion Request date and shall be paid up to the fifteenth (15th) business
day following the Conversion Request date, by the amount proportional to the Conversion
Price defined in item (vi) above.
(xi) Until the final maturity of this Issue, should the Issuer’s General Meeting resolve to issue
other debentures convertible into shares or units underlying these securities, for public or
private subscription, at conversion prices lower than the list of conversion of Units at the
time of new issue, as provided for in item (vi) above, the Debenture Holders shall be entitled
to convert their Units, observing the provisions in items (ii), (iii) and (v) above, into Issuer
common shares, by the conversion price of new issues, restated by IPCA from the subsequent
date to the expiration date of preemptive right related to the new issue of convertible
debentures or units.
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(xii) Until the final maturity of this Issue, in the event the Issuer’s General Meeting resolves
to issue warrants, at strike prices lower than the list of conversion of Units at the time of
issue of warrants, as provided for in item (vi) above, the Debenture Holders shall be entitled
to convert their Units, observing the provisions in items (ii), (iii) and (v), into Issuer common
shares by the strike price of said warrants, restated by IPCA from the day following the
expiration date of preemptive right related to the issue of warrants.
(xiii) Until the final maturity of this Issue, in the event the Issuer’s General Meeting or Board
of Directors’ Meeting resolve to increase capital stock for public or private subscription at
subscription price lower than the conversion ratio of Units at the time of new increase, as
provided for in item (vi) above, the Debenture Holders, observing the provisions in items (ii),
(iii) and (v), shall be entitled to convert their Units into Issuer common shares by the issue
price of new shares issued, restated by IPCA from the date following the expiration date of
preemptive right related to the issue of shares.
(xiv) The adjustments at conversion price of Units provided for in items (xii) to (xiii) above
shall be applicable to the conversion assumptions provided for in items (ii), (iii) and (v),
however, except for the assumptions of shares issued by the Company within the scope of
stock option plan or share subscription granted to its managers and/or employees, pursuant
to Article 6, paragraph 3 of the Company’s Bylaws.
ii. effects on capital stock
The Issuer’s capital increase deriving from the conversion of Units into its common shares,
observing the form established in Section III of Article 166 of the Brazilian Corporation Law
and in the Issuer’s Bylaws, shall be ratified within sixty (60) days and filed at the appropriate
Board of Trade within thirty (30) days after its effectiveness.
• Complement of item 18.5 – Convertibility in stocks or check of the right of subscribing
or acquiring stocks from the issuer, informing
i. maturity hypothesis
The maturity of Units shall be eleven (11) years as of the Issue Date, therefore August 19,
2019.
ii. calculation formula
The amount to be paid shall be the debentures nominal value.
• Complement of item 18.5 – when securities are debt, informing, when applicable:
i. maturity and acceleration clause
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The maturity of Units shall be eleven (11) years as of the Issue Date, therefore August 19,
2019. The conditions for acceleration clause are:
a) the Issuer fails to comply with any monetary liability related to the Units, not remedied
within thirty (30) business days as of the respective maturity date;
b) protest of bills against the Issuer in an individual amount exceeding ten million reais
(R$10,000,000.00) or added value within a period of twelve (12) consecutive months, which
exceeds, fifty million reais (R$50,000,000.00), unless if protest occurred due to error or third
parties bad faith, and this fact is validly evidenced by the Issuer, or if suspended or cancelled
thereby within no later than 15 business days as of its occurrence. The amount referred to
by this item shall be annually restated as of the Issue Date by IPCA;
c) petition for in-court or out-of-court reorganization by the Issuer;
d) dissolution and liquidation of the Issuer;
e) the failure to comply with any non-monetary liability provided for herein is not remedied,
within thirty (30) business days from the extrajudicial notice sent by any Debenture Holder,
unless if such default derives from act of God or unavoidable casualty;
f) statement of early maturity of any Issuer’s debt due to contractual default or final and
unappealable decision at court, the individual amount of which is equal or exceeds thirty
million reais (R$30,000,000.00) or whose added value, in a period of twelve (12) consecutive
months is equal or exceeds fifty million reais (R$50,000,000.00). The amount referred to by
this item shall be annually restated from the Issue Date by IPCA;
g) the inclusion in shareholders’ agreement or Issuer’s Bylaws, as of the Issue Date, of a
provision which requires a special quorum for resolution or approval of matters restricting
or curtailing the Company’s control by respective controlling shareholders, as provided for
by the Brazilian Corporation Law, or also the inclusion in those documents of provisions
implying:
(i) restrictions to the growth capacity of Issuer or to its technological development;
(ii) restrictions to Issuer’s access to new markets; or
(iii) the failure to pay financial liabilities deriving from this operation.
h) Issuer’s declarations made herein were false or misleading, or also significantly incorrect
or incomplete on the date they were declared;
i) change in the Issuer’s purposes, unless if previously approved by Units holders
representing most of outstanding Units, except for the inclusion of other activities, provided
that these are related to its main activity in the Issuer’s purposes;
j) approval of decrease in the Issuer’s capital stock; shareholders are entitled to a partial
refund of shares value due to decrease of their value, when not paid-up, to the amount of
entries, without the previous and express approval of Units holders representing most of
outstanding Units;
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k) creation of callable shares by the Issuer without the previous and express approval of
Units holders representing most of outstanding Units;
l) sale of effective Issuer’s share control, whether direct or indirect, by any means, unless if
previously approved by Units holders representing most of outstanding Units;
m) Issuer acquires share control or equity interest in other companies, joint ventures or
partnerships with purposes unrelated to information technology or services, which is
characterized as a deviation of the Issuer’s purposes, unless if previously approved by Units
holders representing most of outstanding Units;
n) Issuer delists from BM&FBOVESPA’s Novo Mercado, without the previous and express
approval of Units holders representing most of outstanding Units;
o) Reorganization and Redemptions operations are not concluded, for any reason, as laid
down in Whereas section of this Deed within one hundred and twenty (120) days as of the
Issue Date;
p) Issuer fails to comply with obligation set forth in item 5.1(m) of Section V, unless if
previously approved by Units holders representing most of outstanding Units;
q) Issuer’s investments, when not estimated in annual budget, which severally or
cumulatively within a same period exceed forty per cent (40%) of the amount approved in
the annual Capex budget, unless if previously approved by Units holders representing most
of outstanding Units;
r) the failure to comply with following financial ratios:
(i) not to sell, or in any way, encumber any of its fixed assets that are subject to registration of ownership above the limit of twenty million reais (R$ 20,000,000.00) per year, except if approved in advance by the holders of the Units representing the majority of the outstanding Units; and
(ii) to keep, during the existence of the Units, up to their final maturity, at least two of the following ratios annually calculated in the financial statements audited by external auditors registered at the Brazilian Securities and Exchange Commission: - Net Debt/EBITDA: equal or lower than four (4.0);
- EBITDA/ROL: equal or higher than ten percent (10%);
- EBITDA/Debt Service: equal or higher than one (1.0) (an integer); where:
- Net Debt: (Gross Debt – Available Funds), where (Gross Debt = Loans + Financings +
Debentures + any other forms of indebtedness, including installments to creditors) and
(Available Funds = Cash + Investments);
- EBITDA: Operating Results before interest, income tax, depreciation and amortization;
- ROL: Net Operating Income;
- Debt Service: Amortization of Principal + Payment of Interest.
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ii. interest
The debentures of the 1st series shall be entitled to the remuneration corresponding to the
monetary restatement calculated based on the National Extended Consumer Price Index
(IPCA) added by 3.5% a year (basis of 360 days), limited to the TJLP – Long-Term Interest Rate
(“TJLP”) added by 1.5% a year (basis of 360 days).
The Debentures of the 2nd Series shall be entitled to the remuneration corresponding to the
TJLP added by 1.5% a year (basis of 360 days)
iii. Guarantee
Floating charge type.
iv. In absence of guarantee, if the credit is unsecured or subordinate Unsecured
v. Eventual restrictions imposed to Issuer related to: Dividend distribution: No restriction. Asset disposal: Issuer may not sell, or in any way, encumber any of its fixed assets that are subject to registration of ownership above the limit of twenty million reais (R$ 20,000,000.00) per year, except if approved in advance by the holders of the Units representing the majority of the outstanding Units. Issuing new debt: There are no restrictions provided the following covenant is met: Net Debt/EBITDA: equal or
lower than four (4.0).
Issuing of new securities: Until the final maturity of this Issue, in the event the Issuer’s General Meeting or Board of
Directors’ Meeting resolve to increase capital stock for public or private subscription at
subscription price lower than the conversion ratio of Units at the time of new increase, the
Debenture Holders shall be entitled to convert their Units into Issuer common shares.
vi. Fiduciary agent, and the main contract terms:
Fiduciary agent:
Oliveira Trust DTVM S/A
Contract terms:
The Trustee’s duties and assignments, in addition to others provided for by Law, shall be as
follows:
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a) to protect the Debenture Holders’ rights and interests, employing, in the fulfillment of its
duties, all the care and diligence every active and law-abiding individual usually employs in
the management of his or her own assets;
b) to resign from its duty in the event of conflicts of interest or any other form of inaptitude;
c) to zealously guard all the records, correspondence and other documents related to the
fulfillment of its duties;
d) to ascertain, upon accepting the position, the truthfulness of the information contained
in this Deed, doing everything in its power to remedy omissions, flaws or shortcomings it is
aware of;
e) in case the Company fails to do it, to file this Deed and respective amendments at the
proper authorities, remedying the gaps and irregularities they may contain; in this case, the
registrar shall notify the Company’s management so that it supplies the necessary indications
and documents;
f) to follow the compliance with the frequency of required disclosures, warning Debenture
Holders about possible omissions or untruthfulness contained in said disclosures;
g) to request, whenever it deems necessary for the fulfillment of its duties, updated
certificates from the civil distributors, Lower Treasury Courts, protest offices, Boards of
Conciliation and Judgment, Office of the Attorney-General of the National Treasury, where
the Company is headquartered;
h) to call, whenever necessary, the Debenture Holders’ General Meeting upon call notice
published at least three (3) times in the newspapers where the Company publishes its
announcements;
i) to attend the Debenture Holders’ General Meeting in order to provide the information
required of them;
j) to prepare an annual report for Debenture Holders, pursuant to Article 68, paragraph 1,
sub-paragraph “b” of the Brazilian Corporation Law, that shall contain at least the following
information:
a. the material fact that took place during the fiscal year ended regarding the
fulfillment of the obligations undertaken by the Company herein;
b. optional redemption of Units and payment of interest accrued thereon made
during the period, as well as acquisitions and sales of Units carried out by the Company;
and
c. representation about its aptitude to continue exercising the duty of Trustee;
k) to make the report referred to in item “j” above available to Debenture Holders no later
than four (4) months as of the closing of the Company’s fiscal year, and for the minimum
period of three (3) months, at least in the following locations:
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a. at the Company’s headquarters; and
b. in their office, as mentioned in Section X below.
l) to exercise all rights and prerogatives available to Debenture Holders and the Trustee
provided for in this Deed and in the documents attached herein, except in case said rights
and prerogatives are waived at a Debenture Holders’ General Meeting called for this purpose
by the Debenture Holders representing all the outstanding Units, including, without
limitation, issuing and submitting all notices and announcements provided for therein;
m) to keep the list of Debenture Holders and their addresses updated, including through
lobbying with the Company and the Custodian Bank;
n) to oversee the compliance with the provisions herein, and, in regards to the method for
monitoring the Issuer’s financial obligations, to make said method available to Debenture
Holders, in writing, no later than ninety (90) days as of the Issue Date; and
o) notify Debenture Holders, severally if possible, and within the maximum period of thirty
(30) days, of the Company’s default on the obligations undertaken herein, mentioning the
place where further clarifications will be available to interested parties.
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19. STOCK BUY-BACK PROGRAM / TREASURE
19.1. Information on the stock buy-back plan of Company stocks
Date of resolution
Buy Back Period
Reserves /profit available (Reais)
Type Class Quantity Expected (Units)
float % Quantity Acquired Approved (Units)
Wheightened Average Price
Quotation Factor %
Acquired
Other Characteristics
02/27/2015 03/02/2015 until 03/01/2016
549,472,126.66 Ordinary 1,600,000 1.2000000 0 0.00 R$ by Unit 0,00%
Objective: Program aims to maximize the value generation for its shareholders, since the shares may be used with the purpose of fulfilling the stock options exercise under the scope of the Company´s Share-based Incentive Plan, and may also be held in treasury, cancelled and/or subsequently sold. Financial Institutions: BTG PACTUAL CTVM S.A. located at Avenida Faria Lima, nº 3477, 11º andar, São Paulo/SP, CEP 04538-133; ITAÚ CV S.A.
located at Avenida Faria Lima, nº 3400, 10º andar, São Paulo/SP, CEP 04538-132; CREDIT SUISSE (BRASIL) S.A. CORRETORA DE TÍTULOS E VALORES MOBILIÁRIOS located at Rua Leopoldo Couto de Magalhães Jr., 700 – 10º andar (parte) e 12º a 14º, CEP 04542-000; SANTANDER CCVM S.A. located at Avenida Presidente Juscelino Kubitschek, nºs 2041,2235 – parte, 24º andar, São Paulo/SP, CEP 04543-011; and MORGAN STANLEY CTVM S.A. located at Avenida Faria Lima, nº 3.600, 6º andar, São Paulo/SP, CEP 04538-132. The date of reserves and profit available is 12/31/2014.
Date of resolution
Buy Back Period
Reserves /profit available (Reais)
Type Class Quantity Expected (Units)
float % Quantity Acquired Approved (Units)
Wheightened Average Price
Quotation Factor %
Acquired
Other Characteristics
07/28/2014 08/01/2014 until 07/31/2015
480,128,000.00
Ordinary 1,400,000 1.000000 1,399,700 36,09 R$ by Unit 99.97%
Objective: Program aims to maximize the value generation for its shareholders, since the shares may be used with the purpose of fulfilling the stock options exercise under the scope of the Company´s Share-based Incentive Plan, and may also be held in treasury, cancelled and/or subsequently sold. The Board may decide the best time within the Program Term, to make acquisitions of shares and may perform one or several acquisitions. Financial Institutions: BTG PACTUAL CTVM S.A. located at Avenida Faria Lima, nº 3477, 11º andar, São Paulo/SP, CEP 04538-133; ITAÚ CV S.A.
estabelecida na Avenida Faria Lima, nº 3400, 10º andar, São Paulo/SP, CEP 04538-132; BRASIL PLURAL CCTVM S.A. located at Rua Surubim, nº 373, Térreo, conjuntos 01 – parte e 02, São Paulo/SP, CEP 04571-050; SANTANDER CCVM S.A. located at Avenida Presidente Juscelino Kubitschek, nºs 2041,2235 – parte, 24º andar, São Paulo/SP, CEP 04543-011; and MORGAN STANLEY CTVM S.A., located at Avenida Faria Lima, nº 3.600, 6º andar, São Paulo/SP, CEP 04538-132. The date of reserves and profit available is 06/30/2014.
Date of resolution
Buy Back Period
Reserves /profit available (Reais)
Type Class Quantity Expected (Units)
float % Quantity Acquired Approved (Units)
Wheightened Average Price
Quotation Factor %
Acquired
Other Characteristics
06/28/2013 07/01/2013 until 07/01/2014
393,332,410.87 Ordinary 3,200,000 2.40000 748,286 37.02 R$ by Unit 24.98%
Objective: Program aims to maximize the creation of value for shareholders by applying part of its available funds in the acquisition of shares issued by the Company to subsequently canceled, sold or held in treasury. Maximum price of the shares: The purchase price of the shares may not be higher than the market value. Financial Institutions: BTG PACTUAL CTVM S.A. located at Avenida Faria Lima, nº 3477, 11º andar, São Paulo/SP, CEP 04538-133; ITAÚ CV S.A.
located at Avenida Faria Lima, nº 3400, 10º andar, São Paulo/SP, CEP 04538-132; BRASIL PLURAL CCTVM S.A. located at Rua Surubim, nº 373, Térreo, conjuntos 01 – parte e 02, São Paulo/SP, CEP 04571-050; SANTANDER CCVM S.A. located at Avenida Presidente Juscelino Kubitschek, nºs 2041,2235 – parte, 24º andar, São Paulo/SP, CEP 04543-011; and MORGAN STANLEY CTVM S.A. located at Avenida Faria Lima, nº 3.600, 6º andar, São Paulo/SP, CEP 04538-132. Date of reserves and profit available is 06/30/2013.
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Date of resolution
Buy Back Period
Reserves /profit available (Reais)
Type Class Quantity Expected (Units)
float % Quantity Acquired Approved (Units)
Wheightened Average Price
Quotation Factor %
Acquired
Other Characteristics
11/27/2012 11/27/12 until 11/27/2013
313,332,410.87 Ordinary 600,000 0.450431 472,500 37.68 R$ by Unit 78.750000%
Objective: to repurchase Shares and held in treasury for subsequent sale or cancellation without capital reduction, in order to meet the first phase of implement the Incentive Plan based on Actions, in which people eligible to become beneficiaries of options to purchase shares of the Company, will acquire shares issued by the Company with funds of his participation in profit sharing. Maximum price of the shares: The purchase price of the shares may not be higher than the market value. Financial Institution: Itaú Corretora de Valores, located at Av. Brigadeiro Faria Lima, 3400 - 10º andar, CEP 04538-132 - CNPJ:61.194.353/0001-64,
São Paulo/SP. Date of reserves and profit available is 09/30/2012.
19.2. Negotiation of Treasure held securities
Fiscal Year 12/31/2014:
Shares
Type of Shares Preferred Class Description of the securities
Ordinary
Change Amount Total (R$) Average Price (RS)
Initial Total 363,364 12,959,732.93 35.67
Acquisitions 2,170,586 79,274,699.36 36.52
Alienation 1,100,940 40,022,307.58 36.35
Cancel 0 0,00 0,00
Final Total 1,433,010 52,212,124.71 36.44
Type of Shares Preferred Class Description of the securities
Ordinary
Change Amount Total (R$) Average Price (RS)
Initial Total 0 0,00 0,00
Acquisitions 501,000 18,813,522.64 37.55
Alienation 137,636 5,853,819.71 42.53
Cancel 0 0,00 0,00
Final Total 363,364 12,959,732.93 35.67
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19.3. Information on securities kept in treasury on the closing date of the last accounting period
Type of Shares
Class of Shares
Description of
the Securities
Amount (Unit)
Weighted average
price of the acquisition
Quoting Factor
Date of the acquisition
(%) of shares of the free
float
Ordinary - - 14,400 43.88 R$ per share 02/20/2013 0.010837
Ordinary 13,100 43.57 R$ per share 02/21/2013 0.009860
Ordinary 36,900 43.51 R$ per share 02/22/2013 0.027776
Ordinary 54,800 43.58 R$ per share 02/25/2013 0.041261
Ordinary 27,000 36.53 R$ per share 05/10/2013 0.020249
Ordinary 27,000 37.04 R$ per share 05/31/2013 0.020253
Ordinary 13,000 36.70 R$ per share 06/03/2013 0.009753
Ordinary 28,800 35.89 R$ per share 06/05/2013 0.021609
Ordinary 28,800 35.04 R$ per share 06/06/2013 0.021614
Ordinary 28,000 33.92 R$ per share 06/10/2013 0.021018
Ordinary 28,000 35.14 R$ per share 07/01/2013 0.021018
Ordinary 8,700 34.34 R$ per share 07/03/2013 0.006533
Ordinary 15,000 33.79 R$ per share 07/12/2013 0.011265
Ordinary 13,400 36.51 R$ per share 08/06/2013 0.010064
Ordinary 27,400 35.89 R$ per share 08/07/2013 0.020581
Ordinary 28,200 35.81 R$ per share 08/12/2013 0.021185
Ordinary 17,000 35.86 R$ per share 08/14/2013 0.012665
Ordinary 22,000 36.14 R$ per share 08/15/2013 0.016392
Ordinary 13,000 36.29 R$ per share 08/21/2013 0.009685
Ordinary 14,100 35.54 R$ per share 08/22/2013 0.010505
Ordinary 13,900 36.10 R$ per share 11/04/2013 0.010352
Ordinary 14,200 35.79 R$ per share 11/08/2013 0.010577
Ordinary 14,300 35.07 R$ per share 11/13/2013 0.010652
Ordinary 30,600 32.12 R$ per share 02/20/2014 0.022792
Ordinary 15,000 31.65 R$ per share 02/25/2014 0.011175
Ordinary 1,786 32.67 R$ per share 03/07/2014 0.001331
Ordinary 64,000 31.06 R$ per share 03/17/2014 0.047687
Ordinary 56,700 35.20 R$ per share 03/27/2014 0.042259
Ordinary 55,000 35.00 R$ per share 03/28/2014 0.041109
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Ordinary 55,000 35.78 R$ per share 04/14/2014 0.041022
Ordinary 34,800 39.10 R$ per share 05/13/2014 0.025895
Ordinary 76,000 39.43 R$ per share 05/14/2014 0.056618
Ordinary 52,900 39.52 R$ per share 05/15/2014 0.039411
Ordinary 53,500 39.47 R$ per share 05/16/2014 0.039846
Ordinary 32,600 38.63 R$ per share 05/19/2014 0.024305
Ordinary 52,000 38.87 R$ per share 05/20/2014 0.038769
Ordinary 38,600 38.84 R$ per share 05/22/2014 0.028781
Ordinary 38,000 39.28 R$ per share 05/23/2014 0.028331
Ordinary 38,000 39.53 R$ per share 05/27/2014 0.028332
Ordinary 25,300 39.49 R$ per share 05/28/2014 0.018864
Ordinary 51,100 39.81 R$ per share 05/29/2014 0.038105
Ordinary 6,500 38.65 R$ per share 08/07/2014 0.004842
Ordinary 46,100 38.90 R$ per share 08/08/2014 0.034339
Ordinary 50,000 41.05 R$ per share 08/15/2014 0.037257
Ordinary 100,000 39.96 R$ per share 08/19/2014 0.074539
Ordinary 50,000 39.92 R$ per share 08/20/2014 0.037297
Ordinary 21,500 41.19 R$ per share 09/01/2014 0.016044
Ordinary 50,000 40.08 R$ per share 09/09/2014 0.037315
Ordinary 53,200 37.61 R$ per share 09/25/2014 0.039718
Ordinary 325,500 34.61 R$ per share 10/30/2014 0.242513
Ordinary 56,500 35.43 R$ per share 11/03/2014 0.042300
Ordinary 37,600 35.43 R$ per share 11/04/2014 0.028154
Ordinary 58,100 34.37 R$ per share 11/07/2014 0.043510
Ordinary 30,000 34.01 R$ per share 11/11/2014 0.022481
Ordinary 58,300 34.66 R$ per share 11/14/2014 0.043689
Ordinary 88,400 33.95 R$ per share 11/17/2014 0.085595
Ordinary 58,000 34.50 R$ per share 11/18/2014 0.056176
Ordinary 53,000 35.09 R$ per share 11/26/2014 0.039781
Ordinary 55,500 36.13 R$ per share 11/28/2014 0.041659
Ordinary 55,800 35.87 R$ per share 12/01/2014 0.041931
Ordinary 56,500 35.39 R$ per share 12/02/2014 0.042457
Ordinary 58,400 34.35 R$ per share 12/05/2014 0.043914
Ordinary 30,800 33.07 R$ per share 12/09/2014 0.023166
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19.4. Other relevant information
Transactions of securities in treasury in 2015 up to the submission of this form.
Common Shares of the Company
Quantity Total Value R$
Weighted Average Price R$
Inicial Balance of 2015 1,433,010 52,212,124.71 36.44
Acquisition 1,599,905 48,867,750.91 30.54
Alienation 761,819 27,749,721.62 36.43
Cancellation - - -
Final Balance 2,271,096 73,330,154.00 32.29
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20. NEGOTIATION POLICY
20.1. Information on the securities negotiation policy
a. Approval date 09/11/2006
b. Role and/or function Individuals or legal entities related to the Company that have access to relevant information.
c. Major characteristics The purpose of the negotiation policy is establishing rules to be observed by the individuals and the Company, aiming at transparent and ordered trade of securities issued by the Company and preventing the improper use of relevant information. The trade policy of the Company has been prepared under the terms of Instruction CVM No. 358/2002.
The conditions for prohibiting trade and authorization for trade of securities issued by the Company are provisioned in items 20.1d. and 20.2 of this Form, respectively.
The Bound Persons responsible for breaching any provision included in the trade policy are obliged to reimburse the Company or other Bound Persons, integrally and with no limitation, all the losses incurred on the Company or other Bound Persons, and that result, directly or indirectly, from such breach.
Any change in the trade policy must be obligatorily approved by the Management Board of the Company and reported to CVM and Stock Exchange. The trade policy should not be changed in case of pending disclosure of Relevant Information.
d. Prohibition periods and description of inspection procedures Under the terms of Instruction CVM No. 358/2002, it is prohibited the trade, by the own Company or Bound Persons, of securities issued by the Company before the disclosure of relevant information to the market, and particularly whenever there is acquisition or sale in progress by the Company of stocks issued by the Company, its controlled and associated companies, or other company under common control, or when there is grant of option or order for the same purpose, as well as when there is intention of promoting incorporation, total or partial split, merger, transformation or reorganization of the shareholding. Under the context of public bid for distribution of securities and under their terms of article 48 of Instruction CVM No. 400/2003, the Bound Persons must abstain from trading securities issued by the Company until the publication of distribution closing announcement.
Bound Persons should not trade securities issued by the Company: (a) within fifteen (15) calendar days before the disclosure of quarterly (ITR) and annual (DFP and IAN) information, required by CVM; (b) from the date of deliberation by the competent body for increasing the capital stock, distributing dividends and paying interests on owned capital and the date of publication of the respective notices to bid or announcements.
Bound Persons that left the Company before the disclosure of relevant information originated during their management period should not trade securities of the Company: (i) during six (6) months after their leave; or (ii) until the disclosure by the Company of relevant information to the market.
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In case that any agreement or contract has been signed and is aimed at transferring the respective shareholding, or when any option or order has been granted for the same purpose, as well as when there is intention of promoting incorporation, total or partial split, merger, shareholding transformation or reorganization, and while the operation is not disclosed to the general public by publication of relevant fact, the Management Board of the Company should not deliberate on the acquisition or sale of stocks issued by the Company.
The prohibitions of trade of securities of the Company will cease as soon as the Company discloses the relevant information applicable to the market. However, such information will be kept, even after the disclosure of relevant information, in case those eventual trades with securities by Bound Persons may interfere, in prejudice of the Company or its shareholders, with the act or fact associated to the Relevant Information.
Even after its disclosure to market, the relevant information must proceed to be handled as it had not been disclosed until elapsing a minimum time period so as to enabling the participants of the market to receive and handle the relevant information.
The procedures adopted for inspection of fulfillment of the trade policy are based on the monitoring of the shareholding position of Bound Persons (including the terms of Instruction CVM No. 358/2002 related to the disclosure of information about trades of administrators and Bound Persons) and in the due connection with the existence of relevant information during the management period of the referred Bound Persons.
20.2. Other relevant information
Under the terms of Instruction CVM No. 358/2002, the Bound Persons may trade securities issued by the Company, except for the provisions of the item above, provided that such trades meet at least one of the characteristics below: (i) acquisition of stocks kept in treasury, via private trade, resulting from the exercise of buyout option according to the plan for grant of stock buyout option approved in general shareholders meeting; or (ii) trade, by Bound Persons, of securities with the purpose of long-term investment, and such investments should not be sold before elapsing ninety (90) days from the date of their respective acquisition.
The restrictions of the trade policy do not apply on trades made by investment funds in which the Bound Persons are quota holders, provided that they are not exclusive investment funds or investment funds in which trade decisions of the portfolio administrator or manager are influenced by the Bound Persons.
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21. DISCLOSURE POLICY
21.1. Description of internal standards, regulations or procedures related to the disclosure of information
Any related person, as defined in the Disclosure Policy, who is aware of acts or facts that may
be categorized as Relevant Information must proceed with immediate communication to the
Investor Relations Officer.
The Bound Persons who have knowledge of Relevant Information shall, whenever they
confirm any omission in the disclosure of Relevant Information, and the omission is
characterized after three (3) elapsed business days as from the proven acknowledgement of
written notice addressed to the Investor Relations Officer, communicate such Relevant
Information directly to the CVM.
The Relevant Information must, preferentially, be disclosed before the beginning or after the
closing of trading on the Stock Exchanges. Should the Stock Exchanges not be simultaneously
operating, the disclosure will be made complying with the trading hours of the Stock
Exchanges located in Brazil. The communication of Relevant Information to CVM and Stock
Exchanges must be made in written document, by describing details of the acts and /or facts
occurred, indicating whenever possible the values involved and other clarifications.
21.2. Description of the policy for disclosure of relevant act or fact and procedures related to the maintenance of secrecy on relevant information not yet disclosed
The Relevant Information must be disclosed to the general public through:
(i) the website of Valor Econômico (www.valor.com.br/fatosrelevantes);
(ii) the website of the Company (http://ir.totvs.com/);
(iii) CVM electronic system website (Sistema IPE), pursuant to CVM Rule No 547/14
(http://www.cvm.gov.br); and
(iv) the websites of the stock exchanges where securities issued by the Company are
negotiated.
Notwithstanding the new form of disclosure of Material Fact by the aforementioned
communication channels, any Material Fact may also be published in a newspaper of wide
circulation usually used by the Company and the ad may be made in summary form, provided
that it indicates the websites where the complete information is available to all investors in
content at least equal to that sent to the CVM, to stock exchanges and other entities, as
applicable.
Whenever Relevant Information is spread by any means of communication, including
information to the press or at meetings of class entities, investors, analysts or with selected
public, in Brazil or abroad, the Relevant Information will be simultaneously disclosed to the
CVM, the Stock Exchanges and the general investing public.
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Acts or facts that are considered as Relevant Information may not be disclosed when such
disclosure may pose risk the legitimate interests of the Company. In this case, the Company
may decide for sending such information to analysis by CVM.
Whenever the Relevant Information still not disclosed to the public becomes known by
several persons who (i) had originally knowledge; and/or (ii) decided to maintain the Relevant
Information confidential, or, should be verified that an unusual fluctuation in the quotation,
price or number of traded Securities took place, the Investor Relations Officer must provide
for the Relevant Information to be immediately disclosed to the CVM, the Stock Exchanges
and the public.
The Bound Persons must maintain confidentiality on Relevant Information which has not
been disclosed yet, to which they have access due to post or position they hold, until such
Relevant information is disclosed to the public, as well as to manage that reliable
subordinated persons or third parties also do the same.
Even after its disclosure to the public, the Relevant Information must be considered as
undisclosed until the market participants have received and processed the Relevant
Information in a reasonable time.
The Bound Persons must not discuss Relevant Information in public places. Accordingly, the
Bound Persons must only talk about issues related to the Relevant Information to those who
have the necessity to be aware of the Relevant Information.
Any violations of this Disclosure Policy verified by Bound Persons must be immediately
informed to the Company by the Investor Relations Officer.
Should any Bound Person verify that some Relevant Information still not disclosed to the
public became known by several persons who (i) had originally knowledge; and/or (ii) decided
to maintain the Relevant Information confidential, or, also, that an unusual fluctuation in the
quotation, price or number of traded Securities took place, such facts must be immediately
informed to the Company by the Investor Relations Officer.
21.3. Administrators in charge of implementing, maintaining, evaluating and inspecting the information disclosure policy
The Investor Relations Officer of the Company.
21.4. Other relevant information
The Company did not identify any other relevant information related to this item in addition
to the ones already disclosed.
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22. EXTRAORDINARY BUSINESSES
22.1. Acquisition or sale of any relevant asset not considered as normal operation within the Company business
The Company did not perform any transactions of such nature.
22.2. Indicate significant changes in the conduction of Company businesses
No significant changes have occurred in the conduction of Company businesses.
22.3. Identify relevant agreements signed by the Company and its controlled companies not directly related to its operational activities
There are no relevant agreements signed by the Company and/or its controlled companies
not directly related to its operational activities.
22.4. Other information considered as relevant by the Company
The Company did not identify any other relevant information related to this item.