1 LEADING THE FAMILY ENTERPRISE BY: GUSTAVO A.

CISNEROS World Family Business Forum, Sao Paulo, May 20, 2009 (MAY 8, 2009)

I am delighted to be here, and want to express my gratitude to the organizers of this Forum, and in particular to Professor John Davis and his colleagues, whose pioneering work on the topic of family enterprises has provided many of us with precious insights. I will present an overview of the Cisneros Group of Companies corporate history, of the values that guide us and current concerns, and of our vision for the future as a private equity group. Our corporate history has humble origins. We began 80 years ago, when my father, Diego Cisneros, then a seventeen year old boy full of energy and dreams, created his first business. Born in Cuba of a Cuban father and a Venezuelan mother, he was sent to an English boarding school in Trinidad, where he learnt English and completed his high school studies. He then decided to come to Venezuela, initially on his own. Once there, and supported by a letter of authorization from his mother because he was a minor, he got a loan from the bank and bought a second-hand truck, which he transformed into a bus. The latter grew into a profitable transportation service that came to be known for its quality and reliability. The business expanded, and in 1939 the Diego Cisneros & Company enterprise was founded. It would obtain the exclusive representation for Venezuela of several renowned brands. In what proved to be a giant step forward for all parties involved, Pepsi-Cola International granted Diego Cisneros and his brother, Antonio, an exclusive franchise for sales and marketing In Venezuela. Antonio had visited New Yorks World Fair in 1939, and there tasted Pepsi-Cola, and decided to bring the product to his country. My father immediately joined the initiative, and they opened the first Pepsi plant in 1940. The company quickly became the most successful soft drink bottler in Venezuela, expanding in time to Brazil, where plants were opened in Sao Paulo and Rio de Janeiro. The Pepsi deal is a good example of the entrepreneurial instinct that characterized Diego Cisneros business ventures. Our Pepsi bottling company was, in fact, the first vertically integrated business in Venezuela, and it included the bottling company, glass, carbonic gas,

2 plastic crates and bottle caps companies, as well as a sugar refining plant. All of this industrial organization was promoted and marketed by a media infrastructure which sold the product on a massive scale. It can be fairly said that my father was a visionary. The trait was again displayed in his early appreciation of the power of television. In 1960, at a decisive moment in Venezuelas history when the recently established democratic government was facing severe challenges, he purchased the local Caracas TV channel 4. The channel evolved into the Venevisin national network, and has become one of the most successful television networks in this Hemisphere. Venevisin is a production powerhouse that occupies a commanding position, generating entertainment content which is today distributed globally. During these years, my father and mother were also growing their family. My fathers businesses were supported by a corporate culture that was, in turn, backed by a sense of loyalty and purpose on the part of his family. The values he nurtured and instilled are an essential part of our family legacy. He taught us to focus on opportunities to offer quality services to mass markets, to assume calculated risks, and to maintain a balance between audacity and caution, as well as between central control and the operational autonomy of our companies. In particular, he stressed continuity, family unity, and a commitment to the communities to which we belong and in which we operate For my father this meant a commitment to Venezuelan democracy, to the nations economic prosperity, and to Venezuelas increased profile among the countries of the Americas. As the Cisneros Group has grown under my direction, we have acted to promote education and democratic principles throughout the Hemisphere. What today is called corporate social responsibility has been integral to our operations from the start. Let me expand a little on this point. Philanthropy has always been a part of our familys activities. To us, social responsibility and successful business practices must go together. We have, in other words, an entrepreneurial approach to philanthropy, and when we created the Cisneros Foundation in the 1970s, my wife, Patty, and I conceived of it as a central component of our mission. For instance, and just to mention three examples: Our mass-literacy program, named ACUDE, developed by the Cisneros Foundation in Venezuela in the seventies and eighties, reached

3 about 300,000 people, in a country with a population of, at the time, around 15 million. The program was executed with the strong support of several of our companies. The nation-wide Pepsi infrastructure, for example, took charge of distributing learning materials and transporting teachers and other staff, while our media enterprises promoted the benefits of the program. Secondly, the television channel Cl@se, was created as a complement to our DirecTV venture. As we built the first pan-regional television platform in Latin America, we likewise launched this first pan-regional, Spanish-language educational channel. I made sure that the contracts with our various local partners in DirecTV included clauses guaranteeing that Cl@se would be added in the programming grids for their countries. We had a similar experience with AME, a program created to advance the professional development of school teachers, leveraging both TV and the Internet. The educational potential of the Internet convinced me of the need to take advantage of the opportunities generated by it. Our Group conceived and developed comprehensive training courses for teachers on subjects including health education and the environment, which can be distributed across Latin America, and AME has become a flagship teaching program of vast social impact, that keeps producing excellent results. In addition to these efforts, the Cisneros Group also partners with the Cisneros Foundation on programs devoted to the preservation and promotion of Latin Americas cultural heritage, such as the Patricia Phelps de Cisneros Art Collection and its associated projects. Returning to our storyline, my father suffered a stroke in 1970, which weakened him, though without dampening his optimistic outlook on life. I was then 25 years old, and had recently completed my studies at Babson College. The circumstances forced me to assume leadership of the Group. With my brother Ricardo we began a new phase in the evolution of the familys businesses. We had already diversified into a number of industries in Venezuela, and reached all of the national market, and thus we began an ambitious process of international expansion. There were possibilities on a number of fronts: We could leverage our exceptional track record in soft-drink bottling and in television production, and make the jump to the U.S. market. On the other hand, in Latin America there was growing demand for international brands, and, given our experience in consumer products, we could extend popular and profitable brands throughout the region. Here are a few examples of how we proceeded:

4 Our Group, in conjunction with Fortsmann Little, acquired All American Bottling Company, a U.S. bottler of Seven-Up and Royal Crown Cola, from Beatrice Foods in 1981. When it was sold in 1987 we enjoyed an eight-fold return on the investment. This was possibly one of the first highly leveraged deals of that era, and quite innovative at the time, an experience we duplicated with the purchase of the Galeras Preciados chain of department stores in Spain in 1984. Also in 1984 we acquired Spalding, a maker of sports equipment, and Evenflo, a recognized baby products brand, in a combined deal from Donaldson, Lufkin & Jenrette for $ 350 million. In twelve years we tripled Spaldings sales. When we sold them in 1996 we enjoyed a 25% return on our investment, and Spalding and Evenflo were firmly established in Latin America, and were also two of the most recognized companies in their respective industries worldwide. In 1992, together with Emilio Azcarraga and Jerry Perenchio, we purchased the Univision TV network from Hallmark for $ 505 million. We already had experience selling television programming in the growing Hispanic market in the U.S., and by this time there was demand for a world-class Spanish-language network. Univision soon became the leading Spanish-language media company in the USA. We sold our participation in 2008 at a great profit. In these deals and others we share many similarities with private equity groups. And as a family-owned and controlled group we also have distinctive traits. One of them is that we do sometimes take more time to resell companies. With a longer-term vision in mind, we can explore new approaches to management and finance. In addition, given our long experience and familiarity with our markets, we can act audaciously when justified. In the end, we are able to realize a truly maximum return. This was in evidence in our 1996 switch from Pepsi to Coca-Cola. At the time Venezuela was one of the two countries in the world in which Pepsi led Coke in sales by a wide margin. But we had become disenchanted with some aspects of that operation, and, in exploring our options, negotiations led to an agreement that took the business and financial worlds by surprise. In the span of a couple of days, all of the production and distribution infrastructure for Pepsi in Venezuela was switched to Coke. The countrys supply of red paint was used up changing the huge industrial plants, and the hundreds of trucks, from Pepsi blue to Coca-Cola red overnight. The switch was highly profitable. I think it is time to sum up:

5 The Cisneros Group is characterized by a certain way of doing business, which embodies our principles and the lessons learnt by experience. This is a model we still follow, placing a premium on high quality work, maintaining highly experienced, talented and loyal employees, and on a partnership approach, working with other groups and bringing values to bear for all parties involved. Our Group began as a group of companies with Venezuelan roots and international aspirations, and it gradually evolved into an international organization with a presence on five continents. We are now nurturing new business initiatives in the U.S., Latin America, Europe and Asia, the huge Chinese market being one of our priorities. What our Group will become, as it reaches the 80-year mark and prepares for new decades of challenges, will very much be in the hands of a third-generation of the family. My father understood the importance of timely generational change. I want also to embrace it. I am a firm believer in the right of the younger generation to do things according to their own vision. Also necessary is a healthy respect for what the past can teach us, and for the achievements of our predecessors. And I trust that the values that have guided us thus far among them: entrepreneurial initiative, an emphasis on quality products and services, employee and family loyalty, and a sense of purpose in the communities in which we operate- will continue to prevail. My wife, Patty, and I have three children. We love them, and see that each is distinctly talented. Our younger daughter, Adriana, has enthusiastically followed in the familys business tradition. She is devoted to her family and to her work, and has recently been appointed Vice-Chairman and Vice-President of Strategy. Patty and I, Guillermo, Carolina, and Adriana are the members of our Family Council, which originated in the recommendation made by our trusted friend John Davis, to provide the family with a structured channel geared to the exchange of views and the discussion of new ideas and projects. It is now Adrianas turn to tell you, in her own words, how she intends to build our corporate future. Many thanks.