Subsection 1(10) of the Securities Act -- Application by reporting issuer for a decision that it is not a reporting issuer -- Issuer has one large Canadian securityholder that beneficially owns approximately 4.9% of the issuer's outstanding securities -- Other than the one large Canadian securityholder, Canadian resident shareholders beneficially own approximately 0.06% of the issuer's outstanding securities and represent approximately 0.6% of total number of beneficial shareholders -- issuer has no present intention of seeking public financing by way of an offering of its securities in any jurisdiction of Canada -- No securities of the issuer trade on any market or exchange in Canada -- issuer's securities listed on Brazilian stock exchange -- issuer is subject to reporting requirements under Brazilian securities law -- Large Canadian securityholder does not object to the order -- issuer has issued a press release announcing that it has submitted an application to cease to be a reporting issuer in the Jurisdictions -- requested relief granted.
Securities Act, R.S.O. 1990, c. S.5, as am., s. 1(10)(b).
August 21, 2009
IN THE MATTER OF
THE SECURITIES ACT,
R.S.O. 1990, CHAPTER S.5, AS AMENDED
CSA STAFF NOTICE 12-307 APPLICATIONS FOR
A DECISION THAT AN ISSUER IS
NOT A REPORTING ISSUER
("Staff Notice 12-307")
IN THE MATTER OF
MMX MINERAÇÃO E METÁLICOS S.A. (the "Filer")
UPON the Director having received an application from the Filer for an order under section 1(10)(b) of the Act that the Filer is not a reporting issuer in Ontario (the "Requested Order");
AND UPON considering the application and the recommendation of the staff of the Ontario Securities Commission (the "Commission");
AND UPON the Filer representing to the Commission as follows:
1. The Filer is organized and exists under the laws of Brazil. The Filer's registered address and head office is located at 66 Praia do Flamengo, 10th Floor, Rio de Janeiro, Brazil 22210-903.
2. The Filer is an integrated mining, mineral processing and production company focused on the production of iron ore for the steel industry and the production of pig iron for export. The Filer currently conducts its operations through two integrated operating systems, the MMX CorumbÁ System and the MMX Sudeste System, and the Filer also has an office in Chile focused on developing mining exploration.
3. The Filer first became a reporting issuer in the Province of Ontario as a result of a listing of global depositary receipts (the "GDRs") on the Toronto Stock Exchange (the "TSX"), trading of which became effective on June 27, 2007.
4. The Filer subsequently voluntarily delisted its GDRs from the TSX effective November 6, 2008.
5. The only securities that the Filer currently has outstanding are common shares and GDRs. Each GDR evidences one common share in the capital of the Filer.
6. The GDRs are posted for trading on an over-the-counter quotation service, being the OTC Bulletin Board (the "OTCBB") in the United States of America (the "U.S."). The GDRs do not trade on any other marketplace.
7. The common shares of the Filer are listed and posted for trading on a major foreign stock exchange, being the Novo Mercado segment of the BM&FBovespa (the "BM&FBovespa") in Brazil. The common shares do not trade on any other marketplace.
8. As of June 22, 2009, the Filer had a total of 304,866,640 common shares issued and outstanding (including 1,011,448 GDRs) worldwide.
9. The Filer is not in default of any of its obligations under the Act as a reporting issuer.
10. The common shares of the Filer are listed and posted for trading on a major foreign stock exchange, being the BM&FBovespa. The BM&FBovespa is a public company which resulted from the merger, in 2008, among Bolsa de Mercadorias e Futuros (the "BM&F", the Brazilian Commodities and Futures Exchange), Bolsa de Valores de São Paulo (the "Bovespa", the São Paulo Stock Exchange), and Companhia Brasileira de Liquidação e Custódia (the "CBLC", the Brazilian Clearing and Depositary Corporation). Before the merger, the BM&F and the Bovespa, which were not-for-profit entities owned by their member brokerage firms until 2007, conducted their initial public offerings and became public companies. Together the companies have formed one of the largest major foreign stock exchanges worldwide in terms of market value and the leading exchange in Latin America in terms of the number of contracts traded. In today's global scenario, the BM&FBovespa has not only positioned its marketplace, but it has also positioned Brazil as an international financial hub for equities, commodities and other futures contracts.
Market Value: Market capitalization of the 389 companies listed on the BM&FBovespa in June 2009 was BRL1.79 trillion (source: BM&FBovespa at www.bovespa.com.br).
Volumes and Trades: Equities, Equities Derivatives and Fixed Income: The BM&FBovespa markets reached a total volume of BRL112.74 billion in 7.04 million trades in June 2009, with daily averages of BRL5.37 billion and 335,458 trades, respectively. In May 2009, total volume reached BRL108.03 billion in 6.91 million trades (source: BM&FBovespa at www.bovespa.com.br).
In June 2009, the BM&FBovespa staged the first initial public offering held in Brazil in 2009, which was the largest ever held in the Brazilian market. VisaNet, formally called Cia Brasileira de Meios de Pagamentos, raised BRL8.4 billion, or $4.27 billion. That marked the world's largest initial public offering as of June 30, 2009, beating the $1.26 billion raised by Chinese manufacturer Zhongwang Holdings Ltd (source: The Wall Street Journal at www.wsj.com). In this regard, see table below extracted from Wall Street Journal's website:
In comparing the BM&FBovespa against the TSX and other major stock exchanges in the Americas, the World Federation of Exchanges reports that at the end of 2008: (a) the BM&FBovespa ranked as the fourth largest exchange (out of 11) in the Americas based on domestic market capitalization, immediately behind the TSX which was third largest, second largest being NASDAQ OMX and largest being NYSE Euronext (US); and (b) the BM&FBovespa ranked as the fifth largest exchange (out of 11) in the Americas based on total number of companies listed (equity securities), with American SE (AMEX) being the fourth largest, NASDAQ OMX being the third largest, NYSE Euronext (US) being the second largest and the TSX being the largest.
11. The only securities that the Filer has outstanding are common shares and GDRs.
12. The Filer is seeking an order that it is not a reporting issuer in Ontario, as this is the only jurisdiction of Canada in which the Filer is a reporting issuer. The Filer is not a reporting issuer in any jurisdictions other than Ontario and Brazil.
13. The Filer is a foreign private issuer in the U.S. and is exempt under Rule 12g3-2(b) of the Securities Exchange Act of 1934 from having to register and comply with the ongoing reporting obligations of the U.S. Securities and Exchange Commission (the "SEC"). In order to benefit from the exemption, the Filer must publish on its Internet website, in English, information it has made public or is required to make public under the laws of Brazil and pursuant to the BM&FBovespa filing requirements. No paper submissions to the SEC are required in respect of such disclosure. The Filer must maintain its exempt status under Rule 12g3-2(b) in the United States in accordance with the requirements of its GDR program and, as a result, it will continue to publish information that it makes public, or is required to make public under the laws of Brazil and pursuant to BM&FBovespa filing requirements, in English on its website for securityholders to access.
14. There is currently no market for the Filer's securities in Canada. The Filer has not taken any steps to indicate that there is a market for its securities in Canada since the GDRs were delisted from the TSX on November 6, 2008. The Filer has not conducted any offerings of its securities in Canada and it does not currently intend to conduct any offerings of its securities in Canada.
15. The GDRs are posted for trading on the OTCBB. The GDRs do not trade on any other marketplace. The common shares of the Filer are listed and posted for trading on the BM&FBovespa. The common shares do not trade on any other marketplace.
16. The Filer is not in default of any of its obligations under the Securities Act (Ontario).
17. In support of the representations set forth in paragraphs below concerning the percentage of outstanding securities and the total number of securityholders in Canada, the Filer has made inquiries in Brazil with Banco Itaú S.A. ("Banco Itaú") and the CBLC, which entities maintain the shareholder records for Brazilian public companies (just as a Canadian transfer agent and intermediaries would do so for Canadian public companies). The Filer has also made inquiries with The Bank of New York Mellon (the "BNY"), depositary for the GDRs, and who, together with Banco Itaú as custodian, maintains the official GDR ownership records of the Filer pursuant to the terms of a depositary agreement entered into with the Filer at the time the GDRs were created. The Filer believes that these inquiries were reasonable, as Banco Itaú, the CBLC and the BNY are the only official sources of information on the Filer's securityholders.
18. Based on the GDR holder information provided by the BNY, the following sets forth the number of holders of GDRs, and their aggregate beneficial ownership of GDRs, broken down by each Canadian jurisdiction in which GDR holders are resident (as of June 22, 2009):
(a) Alberta -- 6 securityholders holding 2,800 securities;
(b) British Columbia -- 9 securityholders holding 6,545 securities;
(c) Manitoba -- 1 securityholder holding 160 securities;
(d) New Brunswick -- 1 securityholder holding 3,000 securities;
(e) Nova Scotia -- 1 securityholder holding 100 securities;
(f) Ontario -- 33 securityholders holding 49,908 securities;
(g) Quebec -- 5 securityholders holding 12,800 securities; and
(h) Saskatchewan -- 1 securityholder holding 90 securities,
for a total of 57 GDR holders beneficially owning an aggregate of 165,313 securities of the Filer, representing approximately 0.05% of the issued and outstanding securities of the Filer worldwide.
Based on the shareholder information provided by Banco Itau and the CBLC, there are only 3 Canadian shareholders, all of whom are resident in Ontario, beneficially owning a total of 15,229,182 common shares of the Filer, representing approximately 4.9% of the total issued and outstanding common shares of the Filer (as at June 22, 2009). The 3 Canadian shareholders consist of Ontario Teachers Pension Plan Board ("OTPP"), holding 15,192,000 common shares (representing 4.98%), and two other sophisticated institutional shareholders holding 30,882 common shares (representing 0.01%) and 6,300 common shares (representing 0.002%), respectively.
According to the official common share ownership records of the Filer maintained by Banco Itaú, the CBLC and the BNY, as of June 22, 2009, there were a total of 9,269 registered and beneficial securityholders of the Filer worldwide, of which 60 were resident in Canada (57 GDR holders and 3 shareholders). Canadian residents therefore only represent approximately 0.6% of the Filer's securityholders worldwide, holding an aggregate of 15,394,495 common shares and GDRs and representing approximately 5% of the total issued and outstanding securities of the Filer worldwide.
19. The largest Canadian securityholder is OTPP which currently holds, and has historically held, approximately 4.98% of the total issued and outstanding common shares of the Filer. As noted above, the other Canadian securityholders beneficially own, in aggregate, approximately 0.06% of the securities of the Filer.
20. The OTPP has held approximately the same number of common shares since the time of the Filer's initial public offering (the "IPO") on the Bovespa in 2006, prior to the time that the Filer became a reporting issuer in Ontario as a result of its listing of GDRs on the TSX.
21. The OTPP, being the sole securityholder that brings the percentage of Canadian shareholdings in the Filer above 2%, has confirmed by written letter to the Filer that: (i) it has held approximately the same security position in the Filer since the time of the IPO, prior to the Filer's listing on the TSX; (ii) it receives disclosure from the Filer under the Brazilian securities law and the BM&FBovespa requirements; and (iii) it does not object to the Filer's request for an order or decision of the Commission to cease being a reporting issuer in Ontario.
22. The Filer issued a press release dated July 24, 2009, providing notice to its securityholders, including all Canadian resident securityholders, that it has applied to the Commission for a decision that it is not a reporting issuer in Canada and, if that decision is made, the Filer will no longer be a reporting issuer in any jurisdiction in Canada. The Filer represents that it has received no response from securityholders in connection with the press release.
23. The Filer has provided to the Commission an undertaking that it shall provide to its Canadian securityholders all disclosure that the Filer is required to provide to all other securityholders under the corporate/securities laws of Brazil and the rules and regulations of the BM&FBovespa and the Securities and Exchange Commission of Brazil (the "CVM"), in the same manner required under such laws, rules and regulations. All disclosure required to be made by the Filer under the said Brazilian laws, regulations and rules must be filed with the CVM and the BM&FBovespa and becomes publicly available to all securityholders. The Filer also publishes all such continuous disclosure documents on its website in English.
24. In the event that the Filer ceases reporting in Canada, Canadian securityholders will receive adequate disclosure under Brazilian corporate/securities laws and the rules and regulations of the CVM and the BM&FBovespa. The continuous disclosure requirements under the Brazilian corporate/securities laws and the rules and regulations of the CVM and the BM&FBovespa are very similar to the continuous disclosure requirements under the Securities Act (Ontario) (the "OSA"), including the requirement to file quarterly and year end annual financial statements, annual information forms, press releases and material fact notices, as well as to publish certain shareholder meeting materials (such as notices and voting results). Where the requirements appear to be different are with respect to the regime followed under Brazilian law/regulations for the calling of shareholder meetings. Unlike the requirements under the OSA to prepare a formal management information circular and physically mail materials to securityholders, in Brazil public companies are not required to prepare formal management information circulars and instead are required to publish a notice of meeting in a local national newspaper and file voting results and minutes of meeting publicly with the CVM in order to make them publicly available. Similarly, and as indicated above, Brazilian public companies are required to prepare quarterly and annual audited financial statements for filing publicly with the CVM; however they are not required to physically mail such financial statements to securityholders. All continuous disclosure requirements for Brazilian public companies are by way of public filings and do not include physical mailing of continuous disclosure documents. Appendix "A" to this order sets forth a detailed discussion of the Filer's disclosure requirements under Brazilian corporate/securities law and the rules and regulations of the CVM and the BM&FBovespa.
25. It is respectively submitted that, despite the fact that the total number of common shares held by Canadian securityholders represents more than 2% of the Filer's total issued and outstanding common shares worldwide, solely as a result of the OTPP's shareholdings, and despite the fact that the Filer's GDRs have been delisted from the TSX for a period of less than 12 months, based on the fact that:
(a) other than the OTPP, residents of Canada do not:
(i) directly or indirectly beneficially own more than 2% of each class or series of outstanding securities of the Filer worldwide; or
(ii) directly or indirectly comprise more than 2% of the total number of securityholders of the Filer worldwide; and
(b) the OTPP has confirmed in writing that (i) it has held the same approximate share position in the Filer since the time of the IPO, (ii) it receives disclosure from the Filer under the Brazilian securities law and the BM&FBovespa requirements, and (iii) it does not object to the Filer's request for an order of the Commission to cease being a reporting issuer in Ontario,
it would not be prejudicial to public interest for the Commission to order that the Filer is not a reporting issuer in Ontario pursuant to section 1(10)(b) of the Act.
AND UPON the Commission being satisfied that it would not be prejudicial to the public interest.
IT IS HEREBY ORDERED pursuant to clause 1(10)(b) of the Act that, for the purposes of Ontario securities law, the Filer is not a reporting issuer.
"James E.A. Turner"
APPENDIX "A" TO COMMISSION ORDER DATED AS OF _______________, 2009
IN THE MATTER OF
SECTION 1(10)(b) of THE SECURITIES ACT,
R.S.O. 1990, CHAPTER S.5, AS AMENDED (the "Act")
CSA STAFF NOTICE 12-307 -- APPLICATIONS FOR A DECISION THAT AN ISSUER IS
NOT A REPORTING ISSUER (Staff Notice 12-307)
IN THE MATTER OF
MMX MINERAÇÃO E METÁLICOS S.A. (the "Filer")
See attached letter of Veirano Advogados, Brazilian counsel to the Filer.