7.6.3 Cards Collections Administrative Expenses Personnel Expenses Other Administrative Expenses...

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2 This report contains expectations, planned synergies, growth estimates, results forecasts and future strategies references and statements related to Banco do Brasil, its subsidiaries, associated companies and affiliates. Although these references and statements reflect management believes they involve imprecision and hard risks to predict, leaving room for results or consequences different from those anticipated and discussed here. These expectations highly depend on market conditions, on Brazil s economic performance, and on banking and international markets deevelopments. Banco do Brasil will not be held responsible for updating any estimate contained in this report. This report tables and charts present rounded off financial figures in R$ million. The rounding used complies with Regulation 886/66 of Fundação IBGE: if the last digit is equal to or higher than 5, the last remained digit is increased by one unit; if the last digit is lower than 5, it is discarded and the digit before it is maintained. Variations, both nominal and in percentage, were calculated using numbers in units. Banco do Brasil informs that studies for a eventual public offering were started. Before investing in Banco do Brasil s stocks, read carefully the Prospect, specially the Risk Factors section.

3 Summary Index of Tables... 5 Index of Figures... 9 Introduction...11 Summary of Results...12 Assumptions used in 2010 Guidance Prediction Economic Environment BB Securities Shares Warrants Performance of the Shares Corporate Governance Other Information Summarized Financial Statements Summarized Balance Sheet Summarized Corporate Law Income Statement Income Statement with Reallocations Details of the Reallocations Balance Sheet Analysis Breakdown Analysis of Assets Securities Portfolio Tax Credits Loan Portfolio Individual Loan Portfolio Business Loan Portfolio Agribusiness Loan Portfolio Analysis of Liabilities Liquidity Analysis Deposits and Money Market Funding Foreign Borrowing Analysis of Results Net Interest Income Analysis of Investments Analysis of Funding Analysis of Volume and Spread Provision for Credit Risk Retail Loan Portfolio SMEs Loan Portfolio Commercial Loan Portfolio Agribusiness Loan Portfolio Foreign Trade Loan Portfolio Foreign Loan Portfolio and Others Fee Income Revenues from Account Fees Asset Management...109

4 7.6.3 Cards Collections Administrative Expenses Personnel Expenses Other Administrative Expenses Distribution Network Automated Channels Productivity Coverage Ratios Operating Income Net Value Added Risk Management Risk Management Market Risks Liquidity Risk Credit Risk Operating Risk Capital Structure Shareholders Equity Regulatory Capital Economic Capital Social and Environmental Performance Employee Relations Eco-efficiency Social Environmental focused Business Investor Market Recognition Strategic Investments Information Insurance, Pension Plans and Capitalization Acquisition, Incorporations and Strategic Partnership Transactions in the Period Businesses in Progress - Security Summarized Balance Sheet Summarized Corporate Law Income Statement Income Statement with Reallocations...185

5 Index of Tables Table Guidance (BB Stand-alone) Table 2. Main Balance Sheet Items Table 3. Main Balance Sheet Items (Banco do Brasil stand-alone) Table 4. Loan Portfolio (Conglomerate) Table 5. Loan Portfolio Organic Growth (Banco do Brasil stand-alone) Table 6. Income Statement with reallocations Table 7. Main Indicators of Income/Expenses Table 8. Statement of Operations with reallocations (Banco do Brasil stand-alone) Table 9. Main Indicators of Income/Expenses (Banco do Brasil stand-alone) Table 10. Net Interest Income by business line Table 11. Annualized spread Table 12. Loan Portfolio Quality Indicators (BB+BV+BNC) Table 13. Allowance for loan losses Table 14. Expenses with Allowance for Loan Losses over Portfolio Table 15. Administrative expenses Table 16. Fee income Table 17. Extraordinary Items Table 18. Guidance Table 19. Main Macroeconomic Ratios Table 20. Shareholding Breakdown Table 21. Distribution of Dividends/Interest on Own Capital Table 22. Free Float by Range of Shares Owned Table 23. Breakdown of the Series C Warrant Holders Table 24. Series C Warrants Table 25. Expected Dilution of Capital Table 26. Other Information Table 27. Summarized Balance Sheet Assets Table 28. Summarized Balance Sheet - Liabilities Table 29. Summarized Corporate Law Income Statement Table 30. Income Statement with Reallocations Table 31. Reallocations Other Operating Income / Expenses Table 32. Fiscal Effects and Statutory Profit Sharing on Extraordinary Items Table 33. Breakdown of Assets Table 34. Securities Portfolio by Category Table 35. Securities Portfolio by Maturity - Market Value Table 36. Breakdown of Tax Credit Table 37. Acquired Portfolios and Interbank Deposits with Credit Guarantee Table 38. Loan Portfolio Table 39. Credit Portfolio Organic Growth Table 40. Individual Loan Portfolio Table 41. Business Loan Portfolio Table 42. Private Securities Businesses Table 43. ACC/ACE Average Volume per Contract Table 44. SME Credit Products Table 45. Exports Table 46. Brazil s participation on Global Agribusiness Table 47. Agribusiness Loan Portfolio by Region Table 48. Agribusiness Loan Portfolio by Purpose Table 49. Agribusiness Loan Portfolio by Product Table 50. Agribusiness Loan Portfolio by Financed Items Table 51. Funds Released for the 09/10 Crop by Customer Size Table 52. Agribusiness Portfolio by Size Banco do Brasil MDA 4Q09

6 Table 53. Equalizationable Resources from the Loan Portfolio Table /2010 Crop Plan Table 55. Costs Transaction Profile Table 56. Liabilities Table 57. Sourcers and Uses Table 58. Liquidity Balance Table 59. Deposits and Money Market Funding Table 60. Foreign Borrowing (without BNC) Table 61. Foreign Issues Table 62. Net Interest Income Table 63. Analysis of Volume (Earning Assets) and Quarterly Spread 3Q09 and 4Q Table 64. Analysis of Volume (Earning Assets) and Nine Months Spread 2008 and Table 65. Margin, Net of Interest and Profit Margin Table 66. Revenues from Loans Net of Exchange Impact (Res. 2,770) Table 67. Securities Income Table 68. Avg Balance of the BS accounts and info. on interest rates - Earning assets (quarterly) Table 69. Avg Balance of the BS accounts and info. on interest rates - Earning assets (annual) Table 70. Avg Balances of the BS accounts and info. on int rates Int.Bearing Liabilities (quarterly) Table 71. Avg Balances of the BS accounts and info. on int rates Int.Bearing Liabilities (annual) Table 72. Int. increase and decrease (Inc. and Exp.) due to changes in Volume and Rates (quarterly) 88 Table 73. Int. increase and decrease (Inc. and Exp.) due to changes in Volume and Rates (annual) Table 74. Net Financial Margin Table 75. Allowance for Loan Losses Expenses over Portfolio Table 76. Loan Portfolio by Level of Risk Table 77. Delinquency Ratio Table 78. Average Portfolio Risk Table 79. Retail Loan Portfolio by Level Risk Table 80. Changes in the Allowance Retail Table 81. Small and Micro Enterprise Loan Portfolio Table 82. Changes in the Allowance SMEs Table 83. Commercial Loan Portfolio by Level Risk Table 84. Changes in the Allowance Commercial Table 85. Portfolio with and without Roll Over Agribusiness Table 86. Changes in the Allowance Agribusiness Table 87. Portfolio with and without Roll Over - Agribusiness Table 88. Rates of the Agribusiness Portfolio Table 89. Foreign Trade Loan Porfolio by Level Risk Table 90. Changes in Allowance Foreign Trade Table 91. Foreign Loan Portfolio by Level Risk Table 92. Other Transactions Portfolio Banco Nossa Caixa and Banco Votorantim (50%) Table 93. Fee Income Table 94. Investment Funds and Managed Portfolios by Customer Table 95. Investment Funds and Managed Portfolios by Type Table 96. Total Cards Revenues Table 97. Commercial Income Table 98. Personnel Expenses Table 99. Other Administrative Expenses Table 100. Distribution Network Table 101. Wholesale Pillar Branches Table 102. Distribution Network Abroad Table 103. Coverage Ratios without extraordinary items Table 104. Cost Income Ratio without extraordinary items Table 105. Operating Income Table 106. Accumulated Amortization Table 107. Intangible Banco do Brasil MDA 4Q09

7 Table 108. Net Value Added Table 109. Balance in Foreign Currency Table 110. Consolidated BB VaR Table 111. Foreign Network's VaR Table 112. International Trading Porfolio s VaR Table 113. Domestic Trading Porfolio s VaR Table 114. Sensitivity to Interest Rate 12/31/ Table 115. Concentration of the Loan Portfolio on the 100 Largest Borrowers Table 116. Concentration of the Loan Portfolio of the 100 Largest Borrowers % in relation to RE Table 117. Concentration of the Loan Portfolio by Macro-sector Table 118. Monitoring of Operational Loss Table 119. Shareholders Equity Table 120. BIS Ratio Financial Conglomerate Table 121. Main accounts of the PEPR share (Economic Financial Conglomerate) Table 122. PRE for Market Risk by Risk Factor Table 123. Allocated capital for operational risk by line of business Table 124. Changes in Composition of BIS Ratio Table 125. Fixed Asset Ratio Table 126. Economic Capital Table 127. Distribution of Economic Capital in the Loan Portfolio Table 128. VaR by Risk Factor Table 129. Distribution of Economic Capital in the Loan Portfolio Table 130. Growth in the number of scholarships granted Table 131. Employee Training Annual Flow Table 132. Quarterly Average Expense per Employee (Statement with Reallocations) Table 133. Expenses with Statutory Porfit Sharing Table 134. Employee Turnover Table 135. Use of Water Table 136. Use of Paper Table 137. Sustainable Regional Development (DRS) Table 138. Microcredit operations Table 139. Credit with RSA - Other Programs Table 140. Investment funds with RSA criteria Table 141. Complaints registered in the Central Bank Table 142. Interest in the capital of companies Table 143. Insurance, Pension Plans and Capitalization Table 144. Income Statement by Line of Business Table 145. Securities Operating Highlights Table 146. Securities Operating Highlights Table 147. Banco Votorantim Highlights of the Result Table 148. Banco Votorantim Realocations - (Market to Market - MKT) Table 149. Banco Votorantim Realocations - (Market to Market - MKT) Table 150. Banco Votorantim Reallocations (Currency Variation) Table 151. Banco Votorantim Reallocations (Bank Credit Bills) Table 152. Banco Votorantim Equity Highlights Table 153. Banco Votorantim Loan Portfolio by Level of Risk Table 154. Banco Votorantim Delinquency Ratios Table 155. Banco Votorantim Vehicle Portfolio Table 156. Banco Votorantim Operational and Structural Highlights Table 157. Banco Nossa Caixa Income Statement Highlights Table 158. Banco Nossa Caixa Loan Portfolio Table 159. Banco Nossa Caixa Operating Highlights Table 160. Insurance, Pension and Capitalization Companies Table 161. Partnership Revision Principal Financial Group Table 162. Partnership Revision Principal Financial Group Banco do Brasil MDA 4Q09

8 Table 163. Balance Sheet Assets Table 164. Balance Sheet Liabilities Table 165. Summarized Corporate Law Income Statement Table 166. Income Statement with Reallocations Banco do Brasil MDA 4Q09

9 Index of Figures Figure 1. Earnings (R$ million) and ROE (%) Figure 2. Earnings per Share (R$) Figure 3. Dividends and Interest on Own Capital (R$ million) Figure 4. Delinquency 15 and 90 days - BB Stand Alone Figure 5. Delinquency 15 and 90 days Individuals Porfolio (loan as reference for interest rate) Figure 6. BIS Ratio Figure 7. International Reserves (US$ billion) Figure 8. Sovereign Risk (EMBI) x Foreign Exchange Rate (R$/US$) Figure 9. Trade Balance, Exports and Imports (US$ billion) Figure 10. Industrial production, growth rate (movable average - 3 months) Figure 11. Businessmen's Confidence Index Figure 12. Unemployment Rate (% of the Economically Active Population) Figure 13. IPCA (yearly variation) X Inflation Targets (%) Figure 14. Basic Interest Rate x Real Interest (% per annum) Figure 15. Total Credit Volume of the Brazilian Economy (% of GDP) Figure 16. Credit Evolution by Type of Financial Institution Figure 17. Free Float Breakdown Figure 18. Share of Equity Held by Foreign Investors Figure 19. BB Shares vs. Ibovespa Figure 20. BBAS3 in Ibovespa Figure 21. Average financial volume BBAS Figure 22. Average amount traded BBAS Figure 23. Market Ratios Figure 24. Decision Structure Figure 25. Earning Assets vs. Interest Bearing Liabilities Figure 26. Breakdown of Assets Figure 27. Agribusiness Participation in GDP and in Labor Market Figure 28. Trade Balance (FOB) Figure 29. Production vs. Planted Area Figure 30. Agribusiness Loan Portfolio by Customer Figure 31. Agribusiness Loan Portfolio by Funding Sources Figure 32. Equalization Revenues and Weighting Factors Figure 33. Agricultural Insurance and Proagro Figure 34. Evolution of contracted operations with mitigation Figure 35. Price/cost relation between soybean and corn Figure 36. Liquidity Balance Figure 37. Market Share of BB Funding Figure 38. NIM Analysis Figure 39. NIM by Loan Portfolio Figure 40. Securities Portfolio by Index (Multiple Bank) Figure 41. Allowances Breakdown Figure 42. Past due Loans + 15 and 90 days Figure 43. Allowance/Past Due Loans +90 days BB x BI (%) Figure 44. Quarterly Vintage Figure 45. Annual Vintage Figure 46. Annual vintage - Vehicle Financing Portfolio - Arena I Figure 47. Annual vintage - Vehicle Financing Portfolio - Arena II Figure 48. Stratified Agribusiness Portfolio Figure 49. Checking Account Base Figure 50. Asset Management Figure 51. Credit and Debit Cards Figure 52. Card Revenues Banco do Brasil MDA 4Q09

10 Figure 53. BB Billings Volume Figure 54. Business vs. Expenses Figure 55. Changes in Workforce Figure 56. Total Distribution Network Figure 57. Automated Teller Machines Figure 58. Costumer Access Options - % Figure 59. Coverage Ratios without Extraordinary Items Figure 60. Cost Income Ratio without Extraordinary Items Figure 61. Other Productivity Ratios Figure 62. Changes in Foreign Exchange Exposure Figure 63. Composition of Banco do Brasil's assets and liabilities in the country Figure 64. Net Position Figure 65. Financial Consolidated BB VaR Figure 66. Consolidated Foreign Network's VaR Figure 67. VaR for the International Trading Portfolio Figure 68. VaR for the Domestic Trading Portfolio Figure 69. Liquidity Reserve - Domestic Treasury Figure 70. DRL Indicator Figure 71. Liquidity Reserve - International Treasury Figure 72. Measuring and management instruments Figure 73. BIS Ratio Economic Financial Conglomerate Figure 74. Employees Age Figure 75. Aged Bracked Figure 76. Level of Education Figure 77. Transactions without use of paper Figure 78. Toner consumption in units Figure 79. PRONAF Portfolio / Proger Rural (R$ million) Figure 80. BBAS3 participation in ISE, ITAG and IGC Figure 81. Combined Ratio Banco do Brasil MDA 4Q09

11 Introduction The Management Discussion and Analysis (MD&A) report presents the economic/financial situation of Banco do Brasil (BB). Geared toward market analysts, stockholders and investors, with quarterly periodicity, this report addresses topics such as the economic environment, BB's shares performance, corporate governance practices, and risk management. There are separate analyses of the capital structure and the results. Moreover, in conformity with the Triple Bottom Line concept, the report also presents Social-Environmental Performance indicators of Banco do Brasil (Chapter 9), with the purpose of evidencing the generation of value of these initiatives to our shareholders and other stakeholders. The reader will also find eight period historical series tables of the Summarized Balance Sheet, the Summarized Corporate Law Income Statement, the Income Statement with Reallocations, the Analytic Spread, and other information about profitability, productivity, loan quality portfolio, capital structure, capital market, and structural data. According to the paragraph 55 of CVM Regulation 371/2000, Banco do Brasil decided to adopt, from the year-end 2009 on, in current and consistent basis, to account faster the income and losses related to the Plano de Benefícios I (Plano I of Previ). Aiming to allow a better comparability of the 4Q09 results with the previous quarters, the Bank decided not to adjust the recurring net income of the period. However, the analysis of the full year 2009 already takes into account this decision. Considering the strategic transactions relevance announced as of the second half of 2008 (acquisitions, mergers and partnerships), the detailing of the main information related to the companies associated with business in course and to transactions already executed are presented in this report, evidencing the impact of the transactions over the numbers of BB. In relation to the partnership with Banco Votorantim (BV), as from 3Q09, the accounting information of equity accounts is consolidated in BB's financial statements. On the other hand, income accounts were consolidated as of this quarter. The main figures of BV are presented in a specific chapter. Throughout this report, some indicators and tables evidence the numbers of BB separated from information of BV, aiming to facilitate comparison and analysis. We also emphasize that, as of 1Q09, all the financial statements and management analyses developed will be based on the "Economic Financial Consolidation" view, which provides for the consolidation of all the companies belonging to the economic group. Heretofore the Performance Analysis report contained the financial companies consolidation only. For comparability, we inform that 2008 results also respect the same vision. At the end of the report we present the Financial Statements and Explanatory Notes for the quarter under analysis. ON-LINE ACCESS The Performance Analysis report can also be read through Banco do Brasil s Investor Relations website. Further information about the Bank is also available there, such as: Corporate Governance, news, frequently asked questions, a download center which contains versions of this report for the Adobe Reader software. General information, Balance Sheet and Income Statement analysis and complete financial statements; the historical series in Excel; presentations to the market; Annual and Social and Environment Responsibility Report; Social Balance Sheet; Results Conference Calls and others are also available on the Website. LINKS OF INTEREST Banco do Brasil S.A. Investor Relations bb.com.br bb.com.br/ir 11 - Banco do Brasil MDA 4Q09

12 Summary of Results Banco do Brasil earns R$ billion in 2009 Banco do Brasil reported net income of R$ 10,148 million in The result corresponds to an annualized return on average equity (ROAE) of 30.7%. Segregating the extraordinary effects, recurring income amounted to R$ 8,506 million, 27.2% above the amount recorded in 2008, and correspondent to a recurring return on average equity of 25.8%. The recurring result for the year was influenced by the amount of R$ 3,030 million, as a result of the actuarial assets and liabilities update of the Plano de Aposentadoria e Pensão dos Funcionários do Banco do Brasil (Previ). In 4Q09, the Bank's net income reached R$ 4,155 million, which corresponds to an annualized ROAE of 56.8%. On recurring bases, the net income recorded R$ 1,819 million in 4Q09, 3.1% higher than the income of 3Q09 and 11.9% higher than the recurring net income of 4Q , ,803 8, ,463 1,644 2,037 1,867 1,626 1,522 1,727 1,764 10,148 1,819 6,685 2,944 1,665 4,155 2,348 1,979 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q Recurring Income Net Income Figure 1. Earnings (R$ million) and ROE (%) Earnings per share of R$ 3.95 in 2009 Recurring ROE - % ROE - % Net income per share reached R$ 3.95 in 2009, 14.7% higher than that observed in In the quarterly comparison, earnings per share recorded R$ 1.62, 109.9% higher than earnings per share of 3Q Figure 2. Earnings per Share (R$) 3Q08 4Q08 1Q09 2Q09 3Q09 4Q Banco do Brasil MDA 4Q09

13 40% of net income distributed to shareholders The amount distributed to shareholders totaled R$ 4,059 million in 2009, equivalent to 40% of the net income (payout). Of this total, R$ 1,858 million were distributed as interest on own capital (IOC) and R$ 2,201 million as dividends. 3,521 4, , , , ,973 2,201 1,548 1,858 3Q08 4Q08 1Q09 2Q09 3Q09 4Q Interest on Own Capital Dividends Figure 3. Dividends and Interest on Own Capital (R$ million) Performance confirms estimates for 2009 The performance of Banco do Brasil (stand alone) in 2009 has confirmed the majority of the estimates disclosed to the market upon the announcement of the result of 4Q08, except the following items: Recurring ROAE: in addition to the strong performance of the Net Interest Income, the growth of the Fee Income and the control of the administrative expenses, the recurring ROAE for 2009 has been affected by accounting profit/losses related to the Plano de Benefícios I (Plano I of Previ). As explained in the Introduction section of this report, from now on such bookings will be held on a consistent and recurring basis during the upcoming years. These factors were decisive to allow the ROAE to reach a higher performance than the prediction made in the 2009 Guidance. Spread: influenced by the changes in the mix of the loan portfolio, with an increase in the relative share of operations with less associated risks, and therefore a lower spread (such as payroll loans and vehicle financing) and by the increase of the share of short-term investments in total assets that, as they have lower spread, they have contributed for lowering the Bank s global spread. Deposits: the non-fulfillment of the guidance of growth of total deposits was motivated by the consolidation of Banco Nossa Caixa that added R$ 39,821 million to BB's deposit base, minimizing the need for funding; and Allowance for Loan Losses: Influenced by the deterioration of the macroeconomic panorama, generating a greater need for provisioning. Tax rate: the accounting of the actuarial profit and losses related to the Plano I of Previ on a recurring basis generated a positive impact on the taxable income of the Bank and consequently increase on deferred expenses with IRPJ and CSLL (at a higher tax rate than the effective tax rate observed in the Income Statement with Reallocations with the first nine months of 2009), which led the effective tax rate just above the range predicted in the 2009 Guidance Banco do Brasil MDA 4Q09

14 Table Guidance (BB Stand-alone) Items Performance - Conglomerate Performance - Proforma BB Stand Alone 2009 Guidance - Proforma BB Stand Alone Recurring Return on Equity 25.8% 24.5% 19% - 22% Net Interest Margin 6.7% 6.5% 6.8% - 7.2% Total Deposits 24.6% 5.4% 10% - 14% Domestic Loan Portfolio 35.2% 15.7% 13% - 17% Individuals 88.1% 30.3% 23% - 25% Businesses 29.0% 16.6% 16% - 19% Agribusiness 4.3% 3.1% 2% - 5% Allowance for Loan Losses 4.6% 4.6% 3.8% - 4.2% Fee Income 14.4% 5.7% 5% - 8% Administrative Expenses 24.9% 10.0% 9% - 12% Tax Rate 32.7% 33.5% 30% - 33% The main highlights of income/expenses and indicators above are discussed below. BB consolidates leadership: total assets reach R$ billion Banco do Brasil recorded R$ 708,549 million in total assets at the end of 2009, a growth of 3.3% quarter-on-quarter and of 35.9% compared to These figures already consider consolidation of all the interests in financial and non-financial companies, in addition to mergers (BESC and BEP), the acquisition of equity control in Banco Nossa Caixa (BNC) and the conclusion of the strategic partnership established with Banco Votorantim (BV). In addition to these corporate transactions, the growth of money market borrowings and of deposits, which backed the strong expansion of the loan portfolio in 2009, merits special emphasis. Table 2. Main Balance Sheet Items Chg. % R$ million Dec/08 Sep/09 Dec/09 On Dec/08 On Sep/09 Total Assets 521, , , Loan Portfolio 224, , , Securities 86, , , (4.2) Short-term Interbank Operations 119, , , Deposits 270, , , Demand Deposits 51,949 50,107 56, Savings Deposits 54,965 72,233 75, Interbank Deposits 14,065 9,627 11,619 (17.4) 20.7 Time Deposits 149, , , (0.6) Money Market Borrowing 91, , , Shareholder s Equity 29,937 33,661 36, For purposes of comparison with the 2009 guidance, the following table presents the main balance sheets items of BB on a stand-alone basis, allowing the comparison between the balance at the end of 2009 and that recorded in Segregating the effects of consolidation of BNC and BV, the growth of total assets of Banco do Brasil was 5.0% quarter-on-quarter and 14.9% in twelve months. Among the Assets, it is worth mentioning the loan portfolio and short-term interbank investments, which grew 15.6% and 30.1% in 12 months, respectively Banco do Brasil MDA 4Q09

15 Table 3. Main Balance Sheet Items (Banco do Brasil stand-alone) Chg. % R$ million Dec/08 Sep/09 Dec/09 On Dec/08 On Sep/09 Total Assets 521, , , Loan Portfolio 224, , , Securities 86,909 93,189 88, (5.2) Short-term Interbank Operations 119, , , Deposits 270, , , Demand Deposits 51,949 45,860 52, Saving Deposits 54,965 60,358 63, Interbank Deposits 14,065 7,974 10,748 (23.6) 34.8 Time Deposits 149, , , (1.3) Money Market Borrowing 91, , , Shareholder s Equity 29,937 33,661 36, Loan Portfolio surpasses the R$ 320 billion mark In an amplified concept, which includes guarantees provided and private securities, Banco do Brasil's loan portfolio ended the last quarter at R$ 320,696 million (already considering the portfolios of BNC and of BV), growth of 6.4% in the quarter and of 35.2% compared to the amplified portfolio of BB's amplified loan portfolio on a stand-alone basis reached R$ 279,707 million, a growth of 6.9% quarter on quarter and of 17.9% in 12 months. The classified loan portfolio (in accordance with CMN Resolution 2682) reached R$ 300,829 million, growth of 33.8% in 12 months and of 5.4% in the quarter. The domestic loan portfolio grew 35.2% in the year and 4.7% over 3Q09, surpassing again the industry's growth, which recorded a progression of 14.9% in 2009 and of 4.6% in the quarter. Table 4. Loan Portfolio (Conglomerate) Chg. % R$ million Dec/08 Sep/09 Dec/09 On Dec/08 On Sep/09 Loan Portfolio 224, , , Brazil 209, , , Individuals 48,811 85,717 91, Payroll Loan 17,626 33,973 36, Auto Loans 6,694 19,255 20, Businesses 97, , , SME 34,900 41,159 44, Other 62,292 75,834 80, Agribusiness 63,690 68,038 66, (2.4) Abroad 15,115 14,769 17, At the end of 2009, loans to individual clients amounted to R$ 91,791 million, an increase of 88.1% in the year and of 7.1% quarter-on-quarter. In both comparisons, the payroll loan was the main responsible for this growth of the individual customers portfolio, which since June has surpassed that of agribusiness, contributing to allow the individual portfolio to reach a relative share of 30.5% of the total portfolio at the end of 2009, as opposed to 21.7% at the end of The business portfolio, which represents 41.7% of BB's total portfolio, amounted to R$ 125,336 million in December 2009, expansion of 29.0% in twelve months and of 7.1% in the quarter, driven in both comparisons by the growth of working capital operations. Disregarding the consolidations of Banco Nossa Caixa and of Banco Votorantim, it is worth mentioning the strong growth of the loan portfolio of BB in an organic way. BB's domestic loan portfolio reached a 15 - Banco do Brasil MDA 4Q09

16 balance of R$ 242,572 million, growth of 5.0% in the quarter and of 15.7% in 12 months. Within the same concept, the total portfolio recorded R$ 259,840 million in December 2009, growth of 5.8% in the quarter. The following table allows the understanding of the evolution of stand-alone figures, and the impacts of Banco Votorantim's consolidation and evolution of Banco Nossa Caixa's portfolio. Table 5. Loan Portfolio Organic Growth (Banco do Brasil stand-alone) Chg. % R$ million Dec/08 Sep/09 Dec/09 On Dec/08 On Sep/09 Banco do Brasil 224, , , Individuals 48,811 58,747 63, Businesses 97, , , Agribusiness 63,690 67,237 65, (2.4) Abroad 15,115 14,769 17, Nossa Caixa - 19,308 19, Individuals - 14,524 15, Businesses - 3,984 3,904 - (2.0) Agribusiness (2.2) Banco Votorantim* - 20,498 21, Individuals - 12,446 13, Businesses - 8,052 8, Total 224, , , *Amounts equal to 50% of BV Loan Portfolio Recurring income reflects robustness of the financial margin, growth of banking service fees and control of expenses The table below, extracted from the statement of income with reallocations, presents the main highlights of the period. The breakdown of reallocations is in Section of the Performance Analysis Report. Table 6. Income Statement with reallocations Quarterly Flow Chg. % Annual Flow Chg. % R$ million 4Q08 3Q09 4Q09 On 4Q08 On 3Q On 2008 Financial Intermediation Income 20,412 16,048 17,984 (11.9) ,400 65, Loan operations + Leasing 11,253 10,756 12, ,821 42, Securities 8,097 5,083 5,321 (34.3) ,496 21, Financial Intermediation Expenses (13,335) (7,729) (8,715) (34.6) 12.8 (33,885) (32,269) (4.8) Net Interest Income 7,077 8,320 9, ,515 33, Allowance for Loan Losses (2,240) (3,017) (2,950) 31.7 (2.2) (6,799) (11,629) 71.1 Net Financial Margin 4,837 5,303 6, ,716 21, Fee income 3,058 3,526 3, ,811 13, Contribution Margin 7,534 8,461 9, ,058 33, Administrative expenses (4,344) (4,897) (5,465) (15,358) (19,185) 24.9 Personnel Expenses (2,301) (2,693) (2,844) (8,112) (10,280) 26.7 Other Administrative Expenses (2,043) (2,203) (2,621) (7,246) (8,905) 22.9 Commercial Income 3,144 3,540 3, ,560 14, Legal Claims (97) (40) (161) (242) 49.8 Labor Lawsuits (129) (216) (49) (61.7) (77.1) (560) (260) (53.6) Other Income and Expenses (537) (562) (938) (1,786) Income Before Taxes 2,380 2,723 2, ,052 13, Income and Social Contribution Taxes (557) (727) (853) (2,416) (4,155) 72.0 Corporate Profit Sharing (198) (230) (262) (951) (1,157) 21.6 Recurring Net Income 1,626 1,764 1, ,685 8, Banco do Brasil MDA 4Q09

17 Table 7. Main Indicators of Income/Expenses Indicators - % 4Q08 3Q09 4Q Global Spread 7,2 6,7 6,7 7,0 6,7 Expenses with Allowance for Loan Losses over Portfolio 3,6 4,7 4,6 3,6 4,6 Efficiency Ratio¹ 45,7 44,6 44,4 45,6 40,7 Recurring Return on Equity 24,5 23,1 22,5 24,7 25,8 Effective Rate of Tax 25,5 29,2 31,9 26,5 32,7 (1) The extraordinary effects of the period were segregated in the calculation. Table 8. Statement of Operations with reallocations (Banco do Brasil stand-alone) Quarterly Flow Chg. % Annual Flow Chg. % R$ million 4Q08 3Q09 4Q09 On 4Q08 On 3Q On 2008 Financial Intermediation Income 20,412 14,013 14,517 (28.9) ,400 58,001 (0.7) Loan operations + Leasing 11,253 9,643 9,878 (12.2) ,821 37, Securities 8,097 4,223 4,190 (48.2) (0.8) 20,496 18,621 (9.1) Financial Intermediation Expenses (13,335) (6,820) (6,949) (47.9) 1.9 (33,885) (28,797) (15.0) Net Interest Income 7,077 7,192 7, ,515 29, Allowance for Loan Losses (2,240) (2,779) (2,613) 16.6 (6.0) (6,799) (10,802) 58.9 Net Financial Margin 4,837 4,414 4, ,716 18, Fee income 3,058 3,213 3, (0.7) 11,811 12, Contribution Margin 7,534 7,325 7,485 (0.6) ,058 29, Administrative expenses (4,344) (4,215) (4,511) (15,358) (16,891) 10.0 Personnel Expenses (2,301) (2,314) (2,369) (8,112) (9,068) 11.8 Other Administrative Expenses (2,043) (1,901) (2,142) (7,246) (7,823) 8.0 Commercial Income 3,144 3,104 2,974 (5.4) (4.2) 12,560 12,409 (1.2) Legal Claims (97) (14) (161) (186) 15.2 Labor Lawsuits (129) (142) (560) (92) (83.6) Other Income and Expenses (537) (460) (270) (49.8) (41.4) (1,786) 1,151 - Income Before Taxes 2,380 2,488 2, ,052 13, Income and Social Contribution Taxes (557) (662) (942) (2,416) (4,113) 70.3 Corporate Profit Sharing (198) (218) (208) 5.4 (4.6) (951) (1,091) 14.7 Recurring Net Income 1,626 1,606 1,612 (0.8) 0.4 6,685 8, Table 9. Main Indicators of Income/Expenses (Banco do Brasil stand-alone) Indicators - % 4Q08 3Q09 4Q Global Spread Expenses with Allowance for Loan Losses over Portfolio Efficiency Ratio¹ Recurring Return on Equity Effective Rate of Tax (1) The extraordinary effects of the period were segregated in the calculation Banco do Brasil MDA 4Q09

18 Loan growth drives the increase of the Net Interest Income The Net Interest Income(NII) recorded growth of 11.4% quarter on quarter and of 31.0% year-over-year, influenced by the consolidation of Banco Votorantim's figures as of 4Q09. In a pro forma comparison, excluding the effects of the consolidation of BV and of BNC, the Net Interest Income of Banco do Brasil on a stand-alone basis amounted to R$ 7,568 million in 4Q09, up 10.2% over 3Q09, driven by the advance of revenues from loans due to the increase in the volume of these operations. In the annual comparison, the net interest income reached R$ 33,060 million in 2009, up 34.9% over Disregarding the effects of the consolidation of BV and of BNC, BB's net interest income on standalone view totaled R$ 29,205 million, growth of 19.1% over 2008, motivated essentially by the growth of the volume of loan operations and by the reduction of the cost of funding, offsetting the spreads reduction. The following table presents the breakdown of the Net Interest Income. The contribution of the loan portfolio in its main business lines, computing the revenues and the costs associated with these operations, including the fundraising cost, is highlighted. In addition, the amounts corresponding to revenue with recovery of receivables written-off as loss, and the amounts of revenues relating to compulsory deposits with remuneration are segregated. The item Other Income, comprised mainly of income from treasury, resulting from transactions with securities, derivatives and foreign exchange, completes the NII formation. Table 10. Net Interest Income by business line Quarterly Flow Chg. % Annual Flow Chg. % R$ million 4Q08 3Q09 4Q09 On 4Q08 On 3Q On 2008 Net Interest Income 7,077 8,320 9, ,515 33, Loan Operations 4,725 5,978 6, ,394 23, Individuals 2,273 3,299 3, ,356 12, Businesses 1,598 1,844 2, ,107 7, Agribusiness ,006 3, Other 2,352 2,342 2, ,121 9, Remunerated Compulsory (49.4) 0.5 1, (57.3) Recovery of Write-offs ,714 2, Other 1,462 1,603 1, (3.0) 4,496 6, BB Stand-alone Net Interest Income 7,077 7,192 7, ,515 29, Gross global spread ended the quarter at 6.7%, remaining stable quarter-on-quarter. In 2009, the spread came to 6.7%, 30 basis points below the spread recorded in Several factors affected the global spread of Banco do Brasil in 2009, with an emphasis on: The consolidation of BNC, which as it has an expressive base of low-cost deposits (judicial deposits), presented a higher spread than that of BB, which had affected positively the global spread; And those that had a negative effect: The decrease of the basic interest rate, which reduced the remuneration of the own securities portfolio; The change in the loan portfolio mix, with an increase of the relative share of operations with lower associated risk and, therefore, lower spread (such as payroll loans and vehicle financing); The consolidation of the interest of 50% in the capital of Banco Votorantim, which exhibits a lower global spread than that of Banco do Brasil, as it does not have a base of low-cost deposits and operates in segments characterized by lower risks and, therefore, lower spread; 18 - Banco do Brasil MDA 4Q09

19 Table 11. Annualized spread R$ million 4Q08 3Q09 4Q Loan Operations Individuals Businesses Agribusiness Other Global Spread Delinquency shows a strong decrease in 4Q09 The percentage of operations past due for more than 15 days in the conglomerate dropped to 5.1% in December 2009, as opposed to 5.8% in September. On the other hand, the percentage of loans overdue for more than 90 days recorded a decrease of 30 basis points in the last quarter. The monthly monitoring of BB's domestic loan portfolio (stand-alone) also demonstrates this downslide in default ratios: the ratio that measures the loans overdue for more than 15 days recorded a reduction of 110 basis points since August In the same period, the ratio that measures the loans overdue for more than 90 days fell by 50 basis points, confirming that the peak of default occurred in 3Q Jan/09 Feb/09Mar/09 Apr/09 May/09 Jun/09 Jul/09 Aug/09 Sep/09Oct/09 Nov/09Dec/09 ICRED_15 ICRED_90 Figure 4. Delinquency 15 and 90 days - BB Stand Alone The recovery of the labor market and the successful strategy of BB, concentrating the mix of its individuals loan portfolio in low risk operations, such as payroll loans, were decisive to allow the delinquency ratios of its portfolio to show successive drops from the peak shown in 1Q09. During this period, the ratios of operations overdue for more than 15 days and 90 days fell respectively 170 and 110 basis points Banco do Brasil MDA 4Q09

20 10.4% 9.7% 9.4% 9.6% 10.5% 9.2% 9.9% 8.8% 5.6% 5.8% 5.8% 5.8% 5.9% 5.7% 5.2% 4.8% Mar/08 Jun/08 Sep/08 Dec/08 Mar/09 Jun/09 Sep/09 Dec/09 ICRED_90 Individuals Portfolio ICRED_15 Individuals Portfolio Figure 5. Delinquency 15 and 90 days Individuals Porfolio (loan as reference for interest rate) Quality of the portfolio remains above the Banking Industry On the portfolio quality, average risk stood at 5.3% in December 2009, 40 basis points below that seen for September 2009, and below the average risk of the Banking Industry, that recorded 6.9% at the end of December. Delinquency above 90 days reached 3.3% of the total portfolio at the end of 2009, one more time better than the performance of the Banking Industry, which recorded 4.4%. Table 12. Loan Portfolio Quality Indicators (BB+BV+BNC) % Dec/08 Sep/09 Dec/09 Past Due Loans/Loan Portfolio Allowance/Loan Portfolio Past due loans + 60 days/total Portfolio (%) Past due loans + 90 days/total Portfolio (%) Allowance/Past Due Loans + 60 days Allowance/Past Due Loans + 90 days Average Risk BB Average Risk Banking Industry Transactions overdue + 90 days/total Portfolio Banking Industry Beyond the perception of improvement of the economic and business environment, Banco do Brasil maintained its prudent attitude on the balance of provisions for credit risk and on the percentage of coverage of the portfolio in The balance of provisions ended December 2009 at R$ 18,617 million, growth of 36.2% over that observed in 2008, in line with the expansion of 33.8% of the loan portfolio in 12 months and with the increase in the default rates compared to In the quarterly comparison the balance of provisions presented a downslide of 2.4%, in line with the improvement observed in the risk profile of the operations. The coverage ratio of provisions over the loan portfolio total balance came to 6.2%, a reduction of 50 basis points compared to the ratio of September 2009 and growth of 10 basis points in the comparison with the ratio recorded at the end of Banco do Brasil MDA 4Q09

21 Table 13. Allowance for loan losses Chg. % R$ million Dec/08 Sep/09 Dec/09 On Dec/08 On Sep/09 Required 12,079 16,167 15, (2.1) Additional 1,594 2,903 2, (4.2) Total 13,673 19,070 18, (2.4) Provision expenses recorded a decrease of 2.2% in the quarter, which contributed for the rate that measures the ratio between these expenses and the total portfolio to end 4Q09 at 1.0%, down 20 basis points compared to the rate of 3Q09. The ratio between expense in 12 months and the average portfolio of the same period reached 4.6%, as opposed to 4.7% in the 12 months ended in the previous quarter. Table 14. Expenses with Allowance for Loan Losses over Portfolio R$ million 4Q08 3Q09 4Q09 (A) Allowance for Loan Losses - Quarterly (2,240) (3,017) (2,950) (B) Allowance for Loan Losses - 12 Months (6,800) (10,919) (11,629) (C) Loan Portfolio 224, , ,829 (E) Average Portfolio 3 Months 218, , ,405 (E) Average Portfolio 12 Months 189, , ,888 Expenses over Portfolio (A/D) - % Expenses over Portfolio (B/E) - % Banco do Brasil MDA 4Q09

22 Operating Efficiency: expenses under control, growth of the service revenues and of the financial margin Disregarding the consolidation of the figures of Banco Nossa Caixa and of Banco Votorantim, the administrative expenses of BB, which include personnel expenses and the other administrative expenses, amounted to R$ 16,890 million in 2009, up 10.0% over 2008, in line with the guidance proposed for 2009 (9% to 12%). Also in the stand-alone view, the administrative expenses of 4Q09 reached R$ 4,511 million, growth of 3.8% in the comparison with 4Q08. Table 15. Administrative expenses Quarterly Flow Chg. % Annual Flow Chg. % R$ million 4Q08 3Q09 4Q09 On 4Q08 On 3Q On 2008 BB 4,344 4,897 5, ,358 19, Personnel Expenses 2,301 2,693 2, ,112 10, Other Administrative Expenses 2,043 2,203 2, ,246 8, BNC / BV ,294 - Personnel Expenses ,212 - Other Administrative Expenses ,082 - BB - BNC 4,344 4,215 4, ,358 16, Personnel Expenses 2,301 2,314 2, ,112 9, Other Administrative Expenses 2,043 1,901 2, ,246 7, The control of administrative expenses was followed by an increase in fee income, which totaled R$ 3,606 million in 4Q09, growth of 2.3% in the quarter and of 17.9% over 4Q08. In 2009, fee income amounted to R$ 13,511 million, recording growth of 14.4% over Segregating the effects of the consolidation of Banco Nossa Caixa and of Banco Votorantim, fee income of BB stand-alone, amounted to R$ 3,189 million in 4Q09, recording a slight decrease of 0.7% in the quarter. This performance was influenced by the discontinuation of the collection of the registration renewal fee pursuant to Circular 3,466 of September 11, 2009 of the Brazilian Central Bank. In the comparison with 4Q08, there was a growth of 4.3%. In 2009 the growth of BB stand alone fee income reached 5.7%, within the Guidance for the year (5% to 8% range). Table 16. Fee income Quarterly Flow Chg. % Annual Flow Chg. % R$ million 4Q08 3Q09 4Q09 On 4Q08 On 3Q On 2008 BB 3,058 3,526 3, ,811 13, BNC / BV ,031 - BB - BNC 3,058 3,213 3, (0.7) 11,811 12, The positive performance of Net Interest Income, fee income, combined with the increase of other operating income and the control of administrative expenses, contributed toward the improvement of the cost to income ratio. The conglomerate ratio for 2009 was of 40.7%, an improvement of 490 basis points compared to the 2008 ratio. In the quarterly comparison, the cost to income ratio of the group recorded 44.6% in 4Q09, remaining stable compared to 3Q09 and 109 basis points better than the rate recorded in 4Q08. BIS Ratio records growth Banco do Brasil's capital ratio (K) ended December 2009 at 13.7%, a 70 bps increase over the preceding quarter. The Basel ratio shown allows the Bank to expand its loan portfolio by R$ 104,600 million in credit assets, considering a 100% weighting. The improvement observed in the period results from the incorporation of profits, the issue of R$ 1 billion in Subordinated Bank Deposit Certificates and the issue of US$ billion worth of perpetual bonds Banco do Brasil MDA 4Q09

23 The Central Bank considered this last issue eligible for calculation purposes of the Tier I Capital, in the hybrid capital and debt instrument category. In 4Q09 Banco do Brasil released a material fact, informing the market that, with the consent of the National Treasury, it is finalizing studies to increase its capital by at least R$ 8 billion and by a maximum of R$ 10 billion, aiming to sustain its future growth Mar/08 Jun/08 Sep/08 Dec/08 Mar/09 Jun/09 Sep/09 Dec/09 Tier I Tier II Figure 6. BIS Ratio Extraordinary Events The extraordinary effects added R$ 2,336 million to BB's net income in 4Q09 and R$ 1,642 million in The main effects are as follows: 4Q09 Reversal of provisions for civil claims resulting from economic plans, generating extraordinary income of R$ 530 million, of which R$ 161 million are expenses arising from Banco Nossa Caixa. Assignment of credits written-off to Ativos S. A., generating extraordinary income in the amount of R$ 242 million in 4Q09. Extraordinary income of R$ 3,030 million regarding the partial accounting of non-recognized actuarial gains of Plano de Aposentadoria e Pensão dos Funcionários do Banco do Brasil PREVI. These gains are derived from the review of actuarial assets and liabilities performed in accordance with Resolution 26 issued by Conselho de Gestão da Previdência Complementar (CGPC) on September 29, 2008 in accordance with CVM Regulation 371/2000. Expenses of R$ 215 million arising from Voluntary Resignation Program for employees of Banco Nossa Caixa. Reversal of provision for labor claims due to changes in the methodology of recognition of these contingencies, generating extraordinary income of R$ 644 million, that from 4Q09 on, the provisions balance began to be established to cover the average value effectively disbursed by the Bank in legal claims of the same origin (until the moment the provision used to be set based on the amount requested by the applicant). Tax Impacts and profit sharing on extraordinary items generating expenses of R$ 1,895 million. 3Q09 Exercise of the Greenshoe Option, whereby BB sold the lot of 14,330,229 shares of CIELO, which generated extraordinary income of R$ 209 million before taxes. Partial sale of investments, corresponding to 56.1% of the shares of the BB group (Multiple Bank, CIELO and VisaVale) in the company Visa Inc., generating positive extraordinary result of R$ 361 million in 1Q08. In September 2009, a portion of the remaining shares was sold, generating an extraordinary revenue of approximately R$ 141 million. Assignment of credits written-off to Ativos SA, generating revenues in the amount of R$ 119 million Banco do Brasil MDA 4Q09

24 Expenses with civil claims regarding economic plans totaling R$ 84 million. Tax Impacts and profit sharing on extraordinary items generating expenses in the amount of R$ 171 million. 2Q09 Extraordinary Expense incurred in 2Q09, equal to an additional allowance for loan losses, in the amount of R$ 676 million according to a public announcement published on June 30, Sale of shares representing 7.1% of the capital stock of Companhia Brasileira de Meios de Pagamento - CIELO, an affiliate of BB Banco de Investimento S/A BB-BI, a wholly-owned subsidiary of Banco do Brasil, generating positive extraordinary result of R$ 1,415 million in 2Q09. Expenses with civil claims regarding economic plans totaling R$ 193 million. Assignment of credits written-off to Ativos SA, generating revenues in the amount of R$ 271 million. Tax Impacts and profit sharing on extraordinary items generating expenses in the amount of R$ 362 million. 1Q09 Expense of R$ 1,367 million, before taxes, that refers to the supplementation of provision to cover labor, civil and fiscal claims, according to the material fact released on April 29, Income of R$ 1,213 million relating to the recognition of tax credits originating from the alteration of the rate of Social Contribution on Net Income - CSLL from 9% to 15%, according to a public announcement published on April 29, Expenses with civil claims regarding economic plans totaling R$ 95 million. Tax Impacts and profit sharing on extraordinary items generating income in the amount of R$ 557 million. The table below details the extraordinary effects of the quarter and of the year 2009: Table 17. Extraordinary Items R$ million 4Q Recurring Net Income 1,819 8,506 (+) Extraordinary Effects of the Period 2,336 1,642 Sale of Interest in VISA Internacional Disposal of investments Visanet Brasil - 1,625 Economic Plans Credit Assignment Previ - Recognition of Actuarial Gains 3,030 - Additional Allowance for Loan Losses - (676) Provision for Labor, Civil, and Tax ccaims - (1,367) Reversal of Labor Liabilities Tax Credits - differential of CSLL rate - 1,213 Voluntary Resignation Program - BNC (215) (215) Tax Impacts and PLR on Extraordinary Items (1,895) (513) Net Income 4,155 10,148 Guidance: Estimates for 2010 confirm BB s confidence in the business expansion The estimates for 2010 include the entire conglomerate of Banco do Brasil, including the consolidation of Banco Nossa Caixa and Votorantim Banco do Brasil MDA 4Q09

25 The indicators that measure the growth of Administrative Expenses and Fee Income will be followed by 2009 pro-forma series, which consider the income and expenses from BV and BNC as these banks have been consolidated for accounting purposes during the entire year Table 18. Guidance 2010 Items 2010 Guidance Recurring Return on Equity 21% - 24% Net Interest Margin 6.5% - 7.0% Total Deposits 12% - 16% Domestic Loan Portfolio 18% - 23% Individuals 27% - 32% Businesses 16% - 21% Agribusiness 4% - 9% Allowance for Loan Losses 4.4% - 4.8% Fee Income 7% - 10% Administrative Expenses 10% - 12% Tax Rate 31% - 34% Assumptions used in 2010 Guidance Prediction Assumptions affected by the Administration: Improve the profitability of the customers base as a way to boost revenues; Alignment of the cost structure to the growth of the business volume; Contractual adjustments and collective bargaining agreement; Growth of sales force appropriate to the strategy of improving the profitability of the customers base; Current business model, not considering further acquisitions and/or strategic partnerships, which may occur for the exploration of specific segments; Account of actuarial profit and losses of Plano de Benefícios I from Previ, in accordance with paragraph 55 of CVM Regulation 371/2000. Assumptions that get out of the Administration control : Gradual resumption of the global and Brazilian economic growth in 2010; Increased resistance, but not immunity, of the Brazilian economy to external shocks; Additional improvement of the conditions of domestic loan granting; Political environment without institutional rupture; Maintenance of the current architecture of the domestic macroeconomic policy: floating exchange rate, inflation targeting and fiscal discipline, implying gradual and consistent reduction of the relation between the Public Sector Net Debt (PSND) and the Gross Domestic Product (GDP); Advance of the regulatory framework / microeconomic agenda, with incentives to public and private investments; Gradual increase in the growth potential of the Brazilian economy (potential GDP); Maintenance of the status of investment grade for Brazil; 2009/2010 crop plan; Regulatory stability, including tax rates on the Bank s activities and labor and social security laws; Interest rates, inflation and GDP evolution in line with market consensus Banco do Brasil MDA 4Q09

26 1 Economic Environment In the fourth quarter of 2009, there were more evidences of the resumption of global economic activity, particularly in the main emerging markets. At the same time, the signs from developed countries, despite containing uncertainty, reveal that the level of activity has been positively responding to the effects of the expansionary monetary and tax policies. This recovery environment, which significantly differs from the scenario seen in the last quarter of 2008, characterized by the collapse of the financial markets of developed economies, continues to produce favorable developments for foreign trade and the prices of assets, particularly the commodities markets and stock exchanges. Brazil continued to benefit from this scenario and, in response to the anti-cyclical political policies implemented as from the end of 2008, has been consolidating the beggining of a new cycle of economic growth. The positive outlooks on the Brazilian economy continued to be the main factor to favor the inflow of foreign funds, either as direct investments or investments in portfolios, easily financing the deficit in current transactions. Such inflow led to additional accumulated reserves, the balance of which increase by approximately US$ 15 billion in the quarter, reaching US$ 239 billion at the end of US$ Billion Mar-07 Jun-07 Sep-07 Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Sep-09 Dec-09 Source: BCB Figure 7. International Reserves (US$ billion) Accordingly, despite the lower country-risk rating, from 242 to 196 basis points, between September and December 2009, the foreign exchange rate remained relatively stable throughout the quarter averaging R$ 1.74/US$. The apparent interruption of the cycle of appreciation of the nominal foreign exchange rate was influenced, among other aspects, by the government's decision to introduce the collection of IOF (Tax on Financial Transactions) on inflows of foreign capital to be invested in the financial and capital market. In addition, there was a downturn in the trend of appreciation of the US dollar in the international market due to the uncertainties associated with the tax issues of certain European countries, such as Greece and Spain Banco do Brasil MDA 4Q09

27 EMBI + Brazil (b.p) EMBI + Brazil Exchange rate Dec/06 Jun/07 Dec/07 Jun/08 Dec/08 Jun/09 Dec/ Exchange rate (US$/R$) Source: BCB and Bloomberg Figure 8. Sovereign Risk (EMBI) x Foreign Exchange Rate (R$/US$) In the fourth quarter, imports grew 7.3% as compared with the immediately previous quarter, whereas the volume exported slightly decreased (-1.55%). As a result, the accumulated trade balance in the period (US$ 4.1 billion) decreased as compared with that for the previous quarter (US$ 7.3 billion). In 2009, the trade balance accumulated a surplus of US$ 25.3 billion, slightly above that for US$ Billion Trade Balancel Export (right axis) Import (right axis) US$ Billion Source: MDIC/ Secex Figure 9. Trade Balance, Exports and Imports (US$ billion) In the period under analysis, the continued economic growth was ratified by the evolution of industrial production. Despite the marginal drop in November, as compared with the previous month (in the series free of seasonal influence), the industry grew by 5.1% as compared with November 2008, the first positive amount in the inter-annual comparison after 12 consecutive months of downturn. In terms of the quarterly movable average, the rate continues to increase, with a highlight to the production of consumer durables and capital goods Banco do Brasil MDA 4Q09

28 3 Months Moving Average - Seasonally Adjusted (Base year: 2002=100) General Index Capital goods Intermediate goods Durable consumer goods Semi-durable consumer goods Months Moving Average - Seasonally Adjusted (Base year: 2002=100) Mar/07 Jun/07 Sep/07 Dec/07 Mar/08 Jun/08 Sep/08 Dec/08 Mar/09 Jun/09 Sep/09 Dec/09 Source: IBGE Figure 10. Industrial production, growth rate (movable average - 3 months) The favorable scenario to manufacturing activity was also corroborated by the evolution of businessmen's expectations which, based on a survey by the Getulio Vargas Foundation, recorded points in December. This threshold is the same as that seen in August 2008, the period right before the onset of the international financial crisis Index* Dec/03 Apr/04 Aug/04 Dec/04 Apr/05 Aug/05 Dec/05 Apr/06 Aug/06 Dec/06 Apr/07 Aug/07 Dec/07 Apr/08 Aug/08 Dec/08 Apr/09 Aug/09 Dec/09 Source: FGV * The Index is seasonally adjusted. Base year: average of last 10 years (jan/99 - dec/08) = 100 Figure 11. Businessmen's Confidence Index In the labor market, the unemployment rate, calculated by the Brazilian Institute of Geography and Statistics (IBGE), reached 7.4% of the PEA (economically active population) in November. This is the lowest threshold since December 2008 (6.8%) and the lowest unemployment rate of the entire historic series started in 2002 for November. The data disclosed by the Ministry of Labor and Employment, referring to the General Register of Hired and Dismissed Employees (CAGED) were also very favorable. November was the tenth consecutive month of net job generation in the formal market. In the period (Feb - Nov), the net balance between hires and dismissals reached thousand, greatly surpassing the net number of openings lost from November 2008 to January 2009 (approximately 800 thousand), at the culmination of the world financial crisis Banco do Brasil MDA 4Q09

29 Unemployment rate Unemployment rate out/02 nov/02 dez/02 out/03 nov/03 dez/03 out/04 nov/04 dez/04 out/05 nov/05 dez/05 out/06 nov/06 dez/06 out/07 nov/07 dez/07 out/08 nov/08 dez/08 out/09 nov/09 dez/09 Source: IBGE Figure 12. Unemployment Rate (% of the Economically Active Population) In this scenario of economic recovery, the IPCA (extended consumer price index) presented a variation of 1.06% in the quarter ended December 2009 as compared with 0.63% in the previous quarter. In the year, the accumulated IPCA variation reached 4.31%, a figure which is lower than the core target defined by the National Monetary Council (of 4.50%) and also lower than the one recorded in 2008 (of 5.9%). Accordingly, 2009 was the sixth consecutive year of fulfillment of the inflation target Change in the Consumer Price (IPCA) - % y.y Central Target Change in the Consumer Price (IPCA) - % y.y Sources: IBGE and BCB adjusted target 0.0 Figure 13. IPCA (yearly variation) X Inflation Targets (%) In this scenario, the Central Bank of Brazil maintained, in the last quarter of the year, a stable benchmark interest rate at the unprecedented threshold of 8.75% per year. However, the real interest rate (ex-ante), influenced by the increased inclination of the interest curve in the futures market (Swap pré-di 360), slightly rose throughout the last quarter, at 5.7% at the end of the year as compared to 5.0% as of September Banco do Brasil MDA 4Q09

30 Change % a.a Selic: COPOM target 24 Real interest rate* Dec/00 Dec/01 Dec/02 Dec/03 Dec/04 Dec/05 Dec/06 Dec/07 Dec/08 Dec/09 Source: BCB *Ex-ante return. The nominal interest rate (Swap pre-di 360 days) deflated by the consumer price expectations in a perspective of 12 month ahead (month medium of daily survey of BCB). Figure 14. Basic Interest Rate x Real Interest (% per annum) Finally, it is important to highlight that, together with the tax and monetary incentives improved by the employment and income indicators development, the loan market remained as one of the main instruments of the economic recovery. In November 2009, the volume of loans of the financial system amounted to 1,389 billion, which corresponds to 45% of the GDP as compared with 37.4% in September Accordingly, despite there being a significant downturn in the yearly growth rate of the credit volume in the Brazilian economy throughout 2009, it should be highlighted that, unlike what occurred in previous crises, the credit/gdp ratio continued to rise. Credit/GDP (%) Mexican Crisis Asian Crisis 28.8 Russian Crisis Exchange Rate Flotation 26.4 Brazilian Energy Crisis and Sept. 11 Attacks Argentina Crisis and Brazilian 2002 pre-election concerns Recent Crisis Credit/GDP (%) Source: BCB Figure 15. Total Credit Volume of the Brazilian Economy (% of GDP) 30 - Banco do Brasil MDA 4Q09

31 Such performance continues to rely on the important contribution made by publicly owned banks, whose total share of the loan portfolio of the Brazilian financial system reached 42.3% in November as compared with 34.2% in September The increased market share of publicly owned banks stems from the increased volume of loans granted by these institutions since the beggining of the international financial crisis (September 2008) as compared with the more conservative approach adopted by private national and foreign institutions Government-owned banks Private-owned banks Foreign-owned banks Index Sept./2008= Oct/08 Dec/08 Feb/09 Apr/09 Jun/09 Aug/09 Oct/09 Dec/09 Source: BCB Figure 16. Credit Evolution by Type of Financial Institution 31 - Banco do Brasil MDA 4Q09

32 Table 19. Main Macroeconomic Ratios 4Q08 3Q09 4Q09 Economic Activity GDP (% YTD in 12 months) 5.1 (1.0) - Family Consumption Government Consumption Gross Fixed Capital Formation 13.8 (10.2) - Exports (0.6) (10.9) - Imports 18.5 (10.5) - Use of Installed Capacity (%) Agent Population (% YTD in 12 months) Unemployment Rate (% YTD in 12 months) Formal employment net creation in the quarter (thousand jobs) (634.4) Formal employment net creation (% YTD in 12 months) (10.2) (85.8) (31.5) Industrial Production (% YTD in 12 months) 3.1 (10.2) (7.4) External Sector Current Transactions (% YTD in 12 months) (1.8) (1.2) (1.6) Direct Foreign Investment (US$ billion) International Reserves (US$ billion year accumulated) Sovereign Risk (base points EOP) Trade Balance (US$ billion year accumulated) Exports (US$ billion year accumulated) Imports (US$ billion year accumulated) Ptax Dollar Sale (EOP) Ptax Dollar Sale (% YTD in 12 months) 31.9 (0.1) (25.5) Monetary Ratios IGP-DI FGV (% YTD in 12 months) 9.1 (0.7) (1.4) IGP-M FGV (% YTD in 12 months) 9.8 (0.4) (1.7) IPCA IBGE (% YTD in 12 months) Selic (EOP %) Accumulated Selic (% YTD in 12 months) Accumulated TR (exbtn) (% YTD in 12 months) TJLP - IBGE (EOP %) Libor (EOP %) Public Finance Primary Surplus (% GDP 12 months accumulated) PSGD (% GDP) PSND (% GDP) - Without Petrobras Credit Ratios Credit/GDP (% YTD in 12 months) Total Default (% past due loans over 90 days) Individuals Businesses Total Investment Rate (%) Individuals Businesses Total Spread (%) Individuals Businesses Average Term (%) - Individuals Businesses Banco do Brasil MDA 4Q09

33 2 BB Securities 2.1 Shares At the end of 2009, Banco do Brasil s capital stock was R$ 18,566,919, made up of 2,569,860,512 ordinary shares, represented in dematerialized form and without any nominal value. The main shareholder is the National Treasury (65.3% of capital) and, from this quarter on, the shareholding structure will be broken down into Ministry of Finance and the various funds controlled by the agency. The second largest shareholder is Caixa de Previdência dos Funcionários do Banco do Brasil (Previ) with 10.4%, followed by BNDESPar the equity investment Company of National Bank for Economic and Social Development which has 2.4% of the capital. The other shares, totaling 21.8%, are spread out in the market (free float). The deadline given by BM&F Bovespa for BB to reach 25% of free float is June 28 th, There are studies in progress in order to analyze the feasibility and convenience of holding a public stock offering. With the National Treasury s consent, there is a possibility of increasing the capital by, at minimum, R$ 8 billion and, at most, R$ 10 billion, in order to sustain the future growth of the financial institution, preserving the Union s stock control. Beside that, the National Treasury and BNDES Participações BNDESPar are completing surveys to enable the achievement of the minimum percentage of 25% of shares in free float, with the sale of less than 5% (five per cent) of the shares that makes part of the total capital of the Bank. This information was published to the market in accordance with the Material Fact on November 11 th, 2009 and January 28 th, Treasury shares, totaling 1,150.4 thousand shares, correspond to shares of minority dissident shareholders not in agreement with the mergers of Banco do Estado de Piauí and of Banco do Estado de Santa Catarina. There are 1,674.0 thousand shares referring to Banco Nossa Caixa merger, that are standing by the Central Bank authorization and will make part of the free float. Table 20. Shareholding Breakdown Shareholders 4Q08 3Q09 4Q09 Federal Government Ministério da Fazenda Fundo de Garantia a Exportação Fundo Garantidor PPP Fundo de Inv. Caixa FHGAB Fundo de Garantia de Operações Fundo Garantidor para Investimentos Previ BNDESPar Treasury Shares Treasury Shares Free Float Individuals Companies Foreign Capital Total The policy of compensation for the shareholders defined by the Board of Directors established payout of 40% of net income. The periodicity for payment of dividends and/or interest on own capital is quarterly periodicity, pursuant to Art. 43 of the Bank's Bylaws. Hence, as for the forth quarter of current year, the Bank disbursed the amount of R$ 1,662.2 million to its shareholders, being R$ million as interest on own capital (R$ per share in the period) and R$ 1,184.4 million as dividends (R$ per share). % 33 - Banco do Brasil MDA 4Q09

34 Table 21. Distribution of Dividends/Interest on Own Capital R$ million 4Q08 3Q09 4Q09 National Treasury ,085.4 PREVI BNDES Individuals Companies Foreign Capital Total* 1, ,662.2 * In 4Q09 it considers R$ 1.1 million referring to Banco Nossa Caixa shares incorporation. BB's shareholder base is characterized by the great number of shareholders with a small share in the capital. As can be seen from the table below, 329,651 shareholders (94.08%) are responsible for 1.4% of the capital, while 20,738 shareholders (5.92%) hold 98.6% of the total of the shares. Table 22. Free Float by Range of Shares Owned Range of shares owned N. Shareholders % Shareholders Qty. Shares % Qty. Shares Free Float 350, ,867, to 10 shares 112, , to 50 shares 91, ,321, to 100 shares 37, ,741, to 1,000 shares 88, ,383, Over 1,000 shares 20, ,832, Controlling Shareholders (Over 1,000 shares) 3 0 2,008,993, Total 350, ,569,860, With regard to the total of the Bank s shares that are well spread out in the market (21.8%), that is, the free float, the predominance of foreign capital can be seen (54%), followed by Individuals (24.7%) and Businesses (21.3%). Dec/08 Sep/09 Dec/ % 24.2% 24.7% 52.4% 53.7% 54.0% 20.8% 22.2% 21.3% Individuals Businesses Foreign Capital Figure 17. Free Float Breakdown 34 - Banco do Brasil MDA 4Q09

35 Foreign Investors Holding From 2002 onwards, a noteworthy increase has been noted in the foreigners stake in the Bank's capital. With the Bank's Public Stock Offerings held in 2006 and 2007 and the "B" and "C" Warrant Subscription, the stake held by foreign parties significantly increased, from 0.9% in 2002 to 11.8% at the end of last year. As disclosed on September 17 th, 2009, through a Material Fact, the equity held by foreign investors was increased from 12.5% to 20.0%. On that occasion, another presidential decree authorized the issue of American Depositary Receipts (ADR) backed by common shares of BB. On November 12 th, 2009, in New York, Banco do Brasil launched its level 1 ADRs, a fact which was also disclosed through a Material Fact. On February 10 th, 2010, BB had issued 3.8 million ADRs Figure 18. Share of Equity Held by Foreign Investors 35 - Banco do Brasil MDA 4Q09

36 2.2 Warrants In 1996, on the occasion of BB's capital increase, three series of warrants were issued: A, B, and C, maturing in 2001, 2006, and 2011, respectively. The exercise price for these warrants was established at R$ 8.50, with readjustment by the IGP-DI pro rata temporis. The distribution and some characteristics of the "C" Warrants, in December 2009, are represented according to the following tables: Table 23. Breakdown of the Series C Warrant Holders Dec/08 Dec/09 Individuals Companies Foreign Capital Total Table 24. Series C Warrants % Warrant Code Exercise Date Number Exercise Price R$ Quotation in R$ Series C BBAS to ,880, In a simulation, considering the total of 2,569.8 million shares, the potential dilution in the Bank's capital is 0.7%, going from the assumption that until 2011 there will be no additional capital increases and that all the C warrants will be exercised by or before maturity (03.31 to ). Conversion: 1 Warrant = shares Total of Shares= 2,569,860,512 Table 25. Expected Dilution of Capital Warrants Qty. Warrants Qty. Shares Dilution of Capital - % Series C 5,880,483 18,416, Banco do Brasil MDA 4Q09

37 2.3 Performance of the Shares Market Unlike what occurred at the end of 2008, when the international economic environment was characterized by a possible collapse followed by a severe economic recession, at the end of 2009 there was a resumption of the growth trend, even though the latter is still incipient. Therefore, a gradual resumption of the economy is also expected for 2010, with a recovery of the average prices of commodities and increased fluidity of international liquidity, yet with selectivity in fund allocation. Despite the improvement in economic indicators in general, in 4Q09, the international market faced new turbulence, of lower intensity as compared with 2008, mainly caused by the declaration that the publiclyowned company Dubai World would suspend its financial commitments (US$ 4.1 billion). To some extent, the short-term risk of a new international collapse was resolved by a loan of US$ 10 billion granted by the government of Abu Dhabi to the financial fund of Dubai. The Dubai event shows that the difficulties related to the international financial crisis have not yet been fully dealt with and additional problems can still crop up in various parts of the globe. In addition to the problems faced in the Middle East, Fitch Rating downgraded Greece's sovereign rating (from A- to BBB+). In this context, the major concerns are now the economies which have a smaller recovery capacity or whose tax deficits are more of a structural nature. Internally, the Brazilian economy continued to show indicators which favor economic growth: industrial activity advanced 5.1%, position as of November 2009; the unemployment rate calculated by the Brazilian Institute of Geography and Statistics (IBGE) was 7.4% as of November 2009, the lowest level since December 2008; inflation within the target established by the Central Bank of Brazil (BACEN); and continued growth in the loan volume of the Banking Industry (SFN). BB shares As a consequence of the improvement of world economy prospects, the prices of the main shares from the Brazilian financial market experienced appreciation in BBAS3 shares closed last December quoted at R$ 29.70, appreciation of 117.0% (adjusted by earnings) in twelve months, as opposed to the appreciation of 82.7% of Ibovespa % 82.7% Dec/08 Jan/09 Feb/09 Mar/09 Apr/09 May/09 Jun/09 Jul/09 Aug/09 Sep/09 Oct/09 Nov/09 Dec/09 BB Ibovespa Source: Economática Figure 19. BB Shares vs. Ibovespa 37 - Banco do Brasil MDA 4Q09

38 Share in Ibovespa The Bovespa Index (Ibovespa) is a four-monthly index that represents the Brazilian stock market, made up of shares that were traded in at least 80% of the trading sessions carried out. From this, the Tradability Index is worked out, made up by the financial volume and by the quantity traded of each share transacted, which determines the ranking of the stock s share in the market. Out of the total of shares, the 80% with the highest Tradability index are determined, to represent the Ibovespa index. The growth of the Bank's share in the theoretical portfolio of Ibovespa can be verified in the following chart. In the theoretical portfolio of Ibovespa for the next four months (Jan/10 - Apr/10), Banco do Brasil occupies the 12th place. The Public Offering carried out in 2006 and 2007 and the split of shares, in the proportion of 1:3, favored the increase of BB's liquidity in the market, permitting access by small investors to the Bank's shares Sep/07 - Dec/07 Jan/08 - Apr/08 May/08 - Aug/08 Sep/08 - Dec/08 Jan/09 - Apr/09 May/09 - Aug/09 Sep/09 - Dec/09 Jan/10 - Apr/10 BBAS3 Banking Industry Source: Bovespa Figure 20. BBAS3 in Ibovespa The improvement in prospects of the global economy contributed to the growth of business involving shares of Banco do Brasil. The average number of shares traded in 4Q09 (5,344) surpassed the levels observed in the same period of 2008 (4,843) and in 3Q09 (4,439). The average volume traded reached R$ 95.1 billion in 4Q09 as compared with R$ 69.7 billion in 4Q08 and R$ 71.7 in 3Q09. R$ 122,000, ,000,000 82,000,000 62,000,000 42,000,000 22,000,000 2,000,000 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 Source: Economática Figure 21. Average financial volume BBAS Banco do Brasil MDA 4Q09

39 6,000 5,000 Units 4,000 3,000 2,000 1,000 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 Source: Economática Figure 22. Average amount traded BBAS3 Market Ratios The P/L ratio, which indicates a time estimate, in years, for investors to recover the capital invested in the purchase of shares, assuming the full distribution of company profits; attained 7.52x last December, as opposed to 4.28x in the same period of The EPS reached R$ 1.62 in 4Q09, compared to R$ 1.15 in 4Q08. The Price/Book value per share (VPA) ratio of 2.10 in December 2009 denotes that the Bank's shares are traded more than twice the BV, i.e., the Bank is worth 110% of the amount of Shareholders Equity at Bovespa. Market capitalization reached R$ 76,291 million at the end of December 2009, as opposed to R$ 37,701 million in the same period of the previous year, an increase of 102.4%. The capitalization of the free float was R$ 16,658 million, higher than the R$ 8,103 million in December In 4Q09, the Bank disbursed R$ 1,662 million to its shareholders, being R$ 478 million as interest on own capital (R$ per share in the period) and R$ 1,184 million as dividends (R$ per share in the period). The Dividend Yield in 4Q09, calculated on the basis of the division of the dividend distributed in the quarter by the market value of the Bank, reached 2.2%. The following charts show the behavior of Banco do Brasil's main multiples over the last quarters Banco do Brasil MDA 4Q09

40 Price / Earnings 12 months ** Earning s per Share - R$ ** Mar/08 Jun/08 Sep/08 Dec/08 Mar/09 Jun/09 Sep/09 Dec/ Q08 4Q08 1Q09 2Q09 3Q09 4Q Price / Book Value ** Book Value per Share - R$ ** Mar/08 Jun/08 Sep/08 Dec/08 Mar/09 Jun/09 Sep/09 Dec/09 Mar/08 Jun/08 Sep/08 Dec/08 Mar/09 Jun/09 Sep/09 Dec/09 Market Capitalization - R$ million Free Float Capitalization - R$ million 58,750 66,478 58,360 37,701 43,325 54,394 80,204 76,291 12,742 14,416 12,550 8,103 9,404 11,807 17,420 16,658 Mar/08 Jun/08 Sep/08 Dec/08 Mar/09 Jun/09 Sep/09 Dec/09 Mar/08 Jun/08 Sep/08 Dec/08 Mar/09 Jun/09 Sep/09 Dec/09 Net Income - R$ million Dividends and Interest on Own Equity R$ million 8,803 10,148 1,867 2,944 1,665 2,348 1,979 4, , ,662 3Q08 4Q08 1Q09 2Q09 3Q09 4Q Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 Dividend Yield - % Indice Payout - % Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 ** Adjusted series considering the stock split (1:3) occurred in the 2Q07. Figure 23. Market Ratios 40 - Banco do Brasil MDA 4Q09

41 3 Corporate Governance Banco do Brasil has achieved a prominent position due to practices that guarantee the balance of rights between its shareholders, high level of accountability to investors and other stakeholders, its business sustainability and ethics in the relationship with its audiences. Proof of this is BB's membership in Bovespa's Novo Mercado, which is a special listing segment that assembles the institutions with the most stringent Corporate Governance practices, and its shares listing in the ITAG and IGC indexes, which respectively group companies with differentiated Tag Along, and those with the best Corporate Governance practices. Management of the businesses has been based not only on ensuring compliance with the applicable legislation, but also on timely providing the market with as many details on the activities as possible, always focusing on the quality of the information provided. In addition to the wide range of reports and information made available at the Brazilian Securities Commission (CVM) and on the Investor Relations website, Association of Capital Market Investment Analysts and Professionals (APIMEC) meetings and other events with shareholders, the Bank has been inviting the market to attend conferences whenever management finds it necessary to clarify specific topics concerning the Company. The attitude adopted by BB in view of the new strategy for expanding businesses by means of acquisitions reinforces the Bank's transparency commitment: in order to reduce the information asymmetry as much as possible, and, in the best interest of minority shareholders, BB disclosed to the market the appraisal reports on the companies involved in acquisitions, mergers and strategic partnerships. Management BB's management bodies are the Board of Directors, advised by the Audit Committee, and the Executive Board, made up of the Executive Board of Officers (president and nine vice-presidents) and by 27 statutory directors. The Bank also has a permanent Board of Auditors. Decisions are taken collectively at all levels of the Bank. With the purpose of involving all the Executives in the definition of strategies and approval of proposals for BB's different businesses, the Management uses committees, subcommittees and commissions at a strategic level, which guarantee agility and security for the decision taking. The sophisticated governance structure developed by the Bank is reflected in the daily business management, the assumptions of which include a rigid structure of levels of decision-making authority and the segregation of duties. Loans, for example, are analyzed independently by the business areas, which evaluate the characteristics and the attractiveness of each operation, and by the Credit Directorate, which defines the maximum exposure by client, and sets individualized limits by business category. In this regard, the development of new products is submitted to all the intervening Directorships and Units, which analyze in a separate manner all the aspects involved in the deal, like its structure, pricing and risks involved Banco do Brasil MDA 4Q09

42 Board of Auditors Management Board Board of Directors Credit Risk Global Risk Market and Liquidity Risk Operational Risk COMITÊ DE PREVENÇÃO A ILÍCITOS FINANC./CAMBIAIS Information Technology COMITÊ DE NEGÓCIOS Solution for administrative Inquest Prevention of Financial and Exchange Fraud Credit Limit Operations Operational Administrative and Cost Rationalization Communication Business Committee Subcommittee Commission Resources Operations Economic and Financial Scenarios Debureaucratization and Cost rationalization Information Security Intranet Employee Assignment INTERNET Work Agreement Figure 24. Decision Structure Highlights of the period Launch of level 1 American Depositary Receipt (ADR) in the US market On December 2 nd, 2009, BB's level 1 ADRs were launched in New York. As from this date, the ADRs started to be issued and traded. Start of Studies for the Holding of a Public Offering of Shares A Material Fact was released to the market to inform that there are studies in progress in order to analyze the feasibility and convenience of holding a primary and/or public stock offering, preserving the Union s stock control over BB s capital. With the National Treasury s consent, there is a possibility of increasing the capital by, at minimum, R$ 8 billion and, at most, R$ 10 billion, in order to sustain the future growth of the financial institution. Beside that, the National Treasury and BNDES Participações BNDESPar are completing surveys to enable the achievement of the minimum percentage of 25% of shares in free float, with the sale of less than 5% (five per cent) of the shares that makes part of the total capital of the Bank. This information was published to the market in accordance with the Material Fact on November 11 th, 2009 and January 28 th, Closing of the Public Offering of Shares (OPA) of Nossa Caixa On November 30 th, 2009, there was the merger of 100% of the capital of Banco Nossa Caixa into BB. The National Register of Legal Entities (CNPJ) of Nossa Caixa was dissolved and the latter became a business unit of Banco do Brasil. The Central Bank of Brazil (Bacen) has to approve the transaction. Security Restructuring of the insurance area (see the material fact disclosed on October 6 th, 2009) and the startup of negotiations, with no binding effect, aimed at the acquisition of the ownership interest in IRB-Brasil Re S.A. held by the Federal Government. (material fact dated October 15 th, 2009). Reformulation of the partnership between BB and Principal Financial Group aimed at optimizing private pension sales (material fact dated October 27 th, 2009). Besides that, it was signed a Memorandum of Understanding (MOU) between BB and Grupo Icatu, in January 6 th, 2010, in order to set a strategic partnership to the development and marketing of Capitalization Plan in Brazil Banco do Brasil MDA 4Q09

43 4 Other Information Table 26. Other Information Balance Sheet Items R$ billion 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 Assets Shareholders Equity Credit Portfolio Deposits Demand Deposits Saving Deposits Time Deposits Profitability Net Income per Share - R$ ** Recurring Income per Share R$ ROE - Annual Basis % Recurring ROE - Annual Basis % ROE - Accumulated on Annual Basis % ROA - Annual Basis % NII / Earning Assets - Annual Basis Productivity Cost/Income ratio (without extraordinary items) - % Fee Income / Personnel Expenses - % Fee Income / Adm. Expenses - % Personnel Expenses per Collaborator - R$ 20,825 22,730 25,033 25,071 31,900 22,100 25,422 28,719 Collaborators / (Branches + PAA + PAB) Checking Accounts per Collaborator Assets per Collaborator R$ thousand 4,463 4,444 4,834 5,377 5,990 5,281 5,992 6,221 Loan Portfolio / Points of Service R$ million Loan Portfolio Quality Allowance / Loan Portfolio - % Allowance / (E + F + G + H) - % Portfolio Net of Allowance / Total Portfolio - % Capital Structure Leverage (times) BIS Ratio - % Total Quantity of Shares - thousand 2, , , , , , , ,568.7 Capital Market Price / Earnings 12 months ** Price / Book Value ** Market Capitalization - R$ million 58,750 66,478 58,360 37,701 43,325 54,394 80,204 76,291 Book Value per Share - R$ ** Price of Share - R$ ** Structural Information Total of Service Points 15,324 15,353 15,438 15,964 16,207 17,203 17,234 17,929 Total of Customers - thousand 44,553 46,197 47,492 48,022 53,890 53,530 54,236 52,695 Total of Checking Accounts - thousand 27,855 28,830 30,117 30,378 30,574 34,747 34,875 34,988 Individuals - thousand 26,157 27,055 28,173 28,494 28,701 32,555 32,657 32,781 Businesses - thousand 1,698 1,775 1,944 1,884 1,874 2,192 2,218 2,207 Total of Savings Accounts - thousand 17,091 17,710 18,002 18,459 19,432 19,389 19,429 23,371 Collaborators 92,801 93,733 94,935 96,938 98, , , ,888 Employees 83,417 84,258 85,392 88,972 89, , , ,971 Interns 9,384 9,475 9,543 7,966 9,291 9,943 10,293 9, Banco do Brasil MDA 4Q09

44 Global Ratings Fitch Ratings 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 Individual C / D C / D C / D C / D C / D C / D C / D C / D Short-Term - Local Currency F3 F3 F3 F3 F3 F3 F3 F3 Long-Term - Local Currency BBB- BBB- BBB- BBB- BBB- BBB- BBB- BBB- Short-Term - Foreign Currency F3 F3 F3 F3 F3 F3 F3 F3 Long-Term - Foreign Currency BBB- BBB- BBB- BBB- BBB- BBB- BBB- BBB- Moody's Financial Strength C C C C C C C C+ Short-Term - Local Currency P-1 P-1 P-1 P-1 P-1 P-1 P-1 P-1 Short-Term - Foreign Currency NP NP NP NP NP NP NP NP Long-Term Debt- Foreign Currency Baa3 Baa3 Baa3 Baa3 Baa3 Baa3 Baa3 Baa3 Long-Term Deposits - Local Currency A1 A1 A1 A1 A1 A1 A1 A2 Long-Term Deposits - Foreign Currency Ba2 Ba2 Ba2 Ba2 Ba2 Ba2 Baa3 Baa3 Standard & Poor's Long-Term - Local Currency BB+ BBB- BBB- BBB- BBB- BBB- BBB- BBB- Long-Term - Foreign Currency BB+ BBB- BBB- BBB- BBB- BBB- BBB- BBB- National Ratings Fitch Ratings Short-Term F1+(bra) F1+(bra) F1+(bra) F1+(bra) F1+(bra) F1+(bra) F1+(bra) F1+(bra) Long-Term AA+(bra) AA+(bra) AA+(bra) AA+(bra) AA+(bra) AA+(bra) AA+(bra) AA+(bra) Moody's Short-Term BR-1 BR-1 BR-1 BR-1 BR-1 BR-1 BR-1 BR-1 Long-Term Aaa.br Aaa.br Aaa.br Aaa.br Aaa.br Aaa.br Aaa.br Aaa.br Compulsory/Reserve Requirements Demand Deposits Rate (1) 45% 45% 45% 42% 42% 42% 42% 42% Additional (2) 8% 8% 8% 5% 5% 5% 5% 5% Reserve Requirements* 25% 25% 25% 30% 30% 30% 30% 30% Reserve Requirements (micro finance) 2% 2% 2% 2% 2% 2% 2% 2% Free 20% 20% 20% 21% 21% 21% 21% 21% Savings Deposits Rate (3) (5) 20% 20% 20% 15% 15% 15% 15% 15% Additional (2) 10% 10% 10% 10% 10% 10% 10% 10% Reserve Requirements* (5) 65% 65% 65% 70% 70% 70% 70% 70% Free 5% 5% 5% 5% 5% 5% 5% 5% Time Deposits Rate (4) 15% 15% 15% 15% 15% 15% 15% 14% Additional (2) 8% 8% 8% 5% 5% 4% 4% 4% Free 77% 77% 77% 80% 80% 81% 81% 83% Judicial Deposits Rate 0% 0% 0% 0% 0% 0% 0% 0% Free 100% 100% 100% 100% 100% 100% 100% 100% * Reserve Requirements at BB are directed to Rural Credit. The following legends refer to the rates due to 3Q09. (1) Collected in cash without remuneration. (2) Since 12/01/2008, the collection started to be at public bonds linked in Selic, remunerated by PU of the linked bonds. (3) Collected in cash at TR + interest of 6.17% p.a. (4) Since 14/11/2008 the requirement started to be collected 60% in cash, without remuneration, and 40% in federal bonds linked in Selic. (5) The rate informed in the table above refers to the Rural Savings. For the Housing Savings the rate remains in 20% Banco do Brasil MDA 4Q09

45 5 Summarized Financial Statements 5.1 Summarized Balance Sheet Table 27. Summarized Balance Sheet Assets Balance Chg. % R$ million Dec/08 Sep/09 Dec/09 On Dec/08 On Sep/09 ASSETS 521, , , Current and Long-term Assets 511, , , Available Funds 5,545 8,340 7, (6.0) Short-term Interbank Investments 119, , , Securities and Financial Derivatives 86, , , (4.2) Securities Available for Trading 26,136 44,590 38, (14.2) Securities Available for Sale 38,374 52,750 62, Securities Held to Maturity 20,123 30,773 22, (27.1) Financial Derivatives 2,276 1,706 1,463 (35.7) (14.2) Interbank Accounts 21,287 31,252 26, (14.9) Deposits with the Central Bank 20,882 26,468 24, (8.3) Compulsory Deposits on Demand Deposits and Float 12,439 12,398 11,919 (4.2) (3.9) Compulsory Deposits on Savings Deposits 8,443 14,069 12, (12.1) Other 405 4,784 2, (51.7) Intrabank Accounts Loans 190, , , Public Sector 12,471 4,975 5,667 (54.6) 13.9 Private Sector 191, , , ( Allowance for Loan Losses) (13,179) (18,118) (17,685) 34.2 (2.4) Leasing 2,968 4,636 4, Leasing and Subleasing Receivables 4,880 4,861 4, (Unearned Lease Income) (1,842) (Allowance for Lease Losses) (71) (225) (231) Other Receivables 83,279 89,641 95, Receivable on Guarantees Honored Foreign Exchange Portfolio 20,914 12,066 8,671 (58.5) (28.1) Income Receivable Trading and Brokerage of Securities (16.4) Specific Credits Specific Operations (0.2) Credits from Insurance, Pension and Capitalization Op Tax Credits 16,499 22,261 21, (1.6) Actuarial Assets 7,794 8,709 12, Warrants Deposits Receivable 18,007 20,888 21, Other Credits 19,325 24,523 29, (Provision or Doubtful Receivables) (1,377) (1,671) (1,682) (With Loan Characteristics) (579) (728) (702) 21.2 (3.7) (Without Loan Characteristics) (798) (943) (980) Other Assets 1,256 2,114 2, Interest in Companies Other Assets (5.4) (Provision for Possible Losses) (170) (191) (176) 3.3 (7.7) Prepaid Expenses 1,118 1,920 2, Permanent Assets 9,512 15,965 17, Investments 966 6,625 6, Property and Equipment 3,339 3,741 4, Leasing Assets (68.4) (36.0) Intangible 4,598 5,082 5, Deferred Charges (22.0) (8.3) 45 - Banco do Brasil MDA 4Q09

46 Table 28. Summarized Balance Sheet - Liabilities Balance Chg. % R$ million Dec/08 Sep/09 Dec/09 On Dec/08 On Sep/09 LIABILITIES AND SHAREHOLDER S EQUITY 521, , , Current and Long-term Liabilities 491, , , Deposits 270, , , Demand Deposits 51,949 50,107 56, Savings Deposits 54,965 72,233 75, Interbank Deposits 14,065 9,627 11,619 (17.4) 20.7 Time Deposits 149, , , (0.6) Investment Deposits (5.7) (19.2) Money Market Borrowing 91, , , Funds from Acceptances and Securities Placed 3,479 6,231 7, Foreign Securities 3,210 3,383 4, Interbank Accounts 21 2, (99.2) Intrabank Accounts 2,496 1,859 3, Borrowing 7,627 8,855 6,370 (16.5) (28.1) Foreign Borrowing 7,627 8,855 6,370 (16.5) (28.1) Domestic Onlending Official Institutions 22,436 26,761 31, National Treasury 3,485 2,826 2,101 (39.7) (25.7) BNDES 11,168 14,968 19, CEF (4.3) Finame 6,585 7,780 8, Other Institutions 1,199 1,034 1,133 (5.5) 9.5 Foreign Onlending (4.6) Financial Derivatives 3,895 6,098 4, (22.5) Other Accounts Payable 89, , , Collection of Taxes and Contributions 252 2, (85.7) Foreign Exchange Portfolio 15,964 15,466 12,174 (23.7) (21.3) Shareholder and Statutory Distributions 1,838 1,608 2, Taxes and Social Security 17,570 22,224 24, Trading and Brokerage of Securities Technical Prov. Insurance, Pension and Capitalization Op. 12,675 16,081 17, Financial and Development Funds 2,458 4,052 4, Perpetual Securities 1, , Special Operations 2 2, ,736.1 (91.2) Obligations for Lotto Operations FCO (Subordinated Debt) 11,772 16,409 18, Actuarial Liabilities 5,662 5,871 5, Other Liabilities 19,531 30,775 31, Unearned Income Corporate Profit Sharing (0) (99.3) Shareholders Equity 29,937 33,661 36, Capital 13,780 18,549 18, (Unpaid Capital) Capital Reserves (0.0) - Revaluation Reserves (7.4) (0.9) Revenue Reserves 15,977 13,299 17, Mark-to-Market Securities and Derivatives (16.6) Retained Earnings (Accumulated losses) (Treasury Shares) (31) (31) (31) (0.0) (0.0) Income Accounts - 1, Banco do Brasil MDA 4Q09

47 5.2 Summarized Corporate Law Income Statement Table 29. Summarized Corporate Law Income Statement Quarterly Flow Chg. % Annual Flow Chg. % R$ million 4Q08 3Q09 4Q09 On 4Q08 On 3Q On 2008 Financial Intermediation Income 18,824 15,637 17,794 (5.5) ,641 63, Loans 10,613 10,333 11, ,221 40, Leasing Securities 8,097 5,083 5,321 (34.3) ,692 21, Financial Derivatives (1,053) (664) (47) (95.6) (93.0) (1,283) (1,223) (4.7) Foreign Exchange Portfolio (47.3) (34.7) Compulsory Investments (49.4) 0.5 1, (57.3) Financial Inc. from Insur., Pension & Capit. Operations (6.7) Financial Intermediation Expenses (17,226) (10,841) (11,665) (32.3) 7.6 (42,822) (45,052) 5.2 Money Market Funds (8,432) (7,320) (7,997) (5.2) 9.2 (25,532) (30,146) 18.1 Borrowing, Assignments and Onlending (4,903) (593) (718) (85.4) 21.0 (8,685) (2,510) (71.1) Allowance for Loan Losses (3,892) (2,928) (2,950) (24.2) 0.8 (8,606) (12,396) 44.0 Gross Income from Financial Intermediation 1,597 4,795 6, ,819 18, Other Operating Income (Expenses) 2,744 (1,875) 1,065 (61.2) - (1,150) (4,641) Fee Income 2,338 2,647 2, ,771 10, Banking Fees Income ,040 3, Personnel Expenses (2,430) (2,909) (3,271) (8,870) (11,838) 33.5 Other Administrative Expenses (2,185) (2,596) (3,054) (7,917) (11,212) 41.6 Taxes (887) (807) (998) (2,635) (3,333) 26.5 Equity Interest in the Results of Subsidiaries, and Affiliates 707 (275) (49) - (82.1) 1,392 (991) - Income f/ Insurance, Pension & Capitalization Operations , Other Operating Revenues 7,090 3,162 6,794 (4.2) ,782 16, Other Operating Expenses (2,962) (2,367) (2,371) (19.9) 0.2 (7,605) (9,327) 22.6 Operating Income 4,342 2,921 7, ,669 13, Non-operating Income (94.2) 413 1, Income Before Taxes 4,347 3,300 7, ,082 15, Income and Social Contribution Taxes (1,022) (1,062) (2,463) (2,145) (3,903) 81.9 Statutory Profit Sharing (380) (258) (599) (1,134) (1,385) 22.1 Corporate Profit Sharing - (1) (1) - Net Income 2,944 1,979 4, ,803 10, Banco do Brasil MDA 4Q09

48 5.3 Income Statement with Reallocations Table 30. Income Statement with Reallocations Quarterly Flow R$ million 4Q08 3Q09 4Q09 On 4Q08 On 3Q On 2008 Financial Intermediation Income 20,412 16,048 17,984 (11.9) ,400 65, Loan Operations (4) (13) 11,106 10,609 11, ,507 41, Lease Operations Securities (11) 8,097 5,083 5,321 (34.3) ,496 21, Financial Derivatives (1,053) (664) (47) (95.6) (93.0) (1,283) (1,223) (4.7) Foreign Exchange Portfolio (47.3) (34.7) Compulsory Investments (49.4) 0.5 1, (57.3) Financial Income from Insurance, Pension and Capitaliz. Operatrions (6.7) FX Gain (Loss) on Foreign Investments (1) 711 (292) (74) - (74.8) 941 (1,042) - Other Op. Inc. of a Fin. Intermed. Nature (2) (88.3) 392 2, Hedge Fiscal (5) 334 (216) (58) - (73.2) 334 (776) - Financial Intermediation Expenses (13,335) (7,729) (8,715) (34.6) 12.8 (33,885) (32,269) (4.8) Money Market Funds (3) (8,432) (7,136) (7,997) (5.2) 12.1 (25,200) (29,759) 18.1 Borrowing, Assignments and Onlending (4,903) (593) (718) (85.4) 21.0 (8,685) (2,510) (71.1) Net Interest Income 7,077 8,320 9, ,515 33, Allowance for Loan Losses (6) (21) (2,240) (3,017) (2,950) 31.7 (2.2) (6,799) (11,629) 71.1 Net Financial Margin 4,837 5,303 6, ,716 21, Fee Income 3,058 3,526 3, ,811 13, Services Income 2,338 2,647 2, ,771 10, Banking Fee Income ,040 3, Insurance, Pension Plan and Capitalization Income , Taxes on Revenues (5) (7) (715) (760) (965) (2,362) (3,149) 33.3 Contribution Margin 7,534 8,461 9, ,058 33, Administrative Expenses (4,344) (4,897) (5,465) (15,358) (19,185) 24.9 Personnel Expenses (8) (25) (2,301) (2,693) (2,844) (8,112) (10,280) 26.7 Other Administrative Expenses (8) (9) (16) (2,043) (2,203) (2,621) (7,246) (8,905) 22.9 Other Tax Expenses (7) (45) (23) (27) (41.2) 13.6 (140) (100) (28.9) Commercial Income 3,144 3,540 3, ,560 14, Legal Risk (226) (256) (4) (98.4) (98.6) (722) (502) (30.5) Legal Claims (8) (10) (17) (20) (97) (40) (161) (242) 49.8 Labor Lawsuits (8) (17) (19) (129) (216) (49) (61.7) (77.1) (560) (260) (53.6) Other Operating Income (542) (590) (960) (2,198) Eq. Int. in Results of Subs. And Affil. (1) (11) (12) (15) (3) (97) 51 - FX Other Operating Income / Expenses (539) (607) (985) (2,102) Other Operating Income (2) (3) (4) (17) (22) 1,230 1,313 1, ,698 8, Other Operating Expenses (2) (6) (8) (9) (10) (23) (1,769) (1,920) (2,448) (5,799) (7,902) 36.3 Operating Income 2,375 2,694 2, ,639 13, Non-operating Income (11) (24) (22.8) (81.1) Income Before Taxes 2,380 2,723 2, ,052 13, Income and Social Contrib. Taxes (5) (14) (18) (20) (26) (557) (727) (853) (2,416) (4,155) 72.0 Interest on Own Capital Tax Benefit Statutory Profit Sharing (26) (198) (230) (262) (951) (1,157) 21.6 Corporate Profit Sharing - (1) (26) - Recurring Income 1,626 1,764 1, ,685 8, Extraordinary Items 1, , ,118 1,642 (22.5) Sale of Share in VISA Internacional (11) (60.9) Disposal of Investments Telemar (15) Revaluation of Consolidated Shares (12) Economic Plans (10) (44) (84) (372) Credit Assignment (13) Tax Efficiency (14) Change of Credit Card Basis (16) (54) - - Contingent Liabilities (BESC) (17) (360) - - Tax Credit (BESC) (18) PREVI Actuarial Assests Adjustments (22) 5,326-3,030 (43.1) - 5, CASSI Actuarial Assests Adjustments (23) (1,259) (1,259) - - Additional Provision for Loan Losses (21) (1,594) (1,594) (676) (57.6) Provision for labor, civil and tax claims (19) (1,367) - Tax Credits differential of CSLL rate (20) ,213 - Disposal of Investments Visanet Brasil (24) ,625 - Voluntary Resignation Program - BNC (25) - - (215) (215) - Reversal of Labor Liabilities (26) Tax FX and Statutory Profits over Extraord. Items (27) (1,110) (171) (1,895) ,007.4 (986) (513) (48.0) #REF! 2,944 1,979 4, ,803 10, Chg. % Annual Flow Chg. % 48 - Banco do Brasil MDA 4Q09

49 5.3.1 Details of the Reallocations In this chapter the adjustments made in the statement of income to get the Reallocated Statement of Income are detailed below. Such adjustments aim to: a) Separate the extraordinary items and show the recurring income for the period; b) Change the manner that income and expenses are shown, in order to provide a better understanding of the business and the company's performance; c) allow the financial margin recorded in the period to reflect, effectively, the gain from all the earning assets, seeking to inform the market what was the spread achieved from the division of this margin by the assets, except the permanent assets. For this, it was necessary to: Include in the financial margin the income recorded in Other Operating Income that had financial intermediation characteristics and which was derived from earning assets recorded in the Balance Sheet Under Other Receivables; Identify the foreign exchange gain/(loss) on financial assets and liabilities abroad in the period in a specific financial margin item (financial equity); To keep in financial margin, amounts related to negative foreign exchange adjustments that were recorded in Other Operating Income and Expenses to avoid inverting the balance of accounts of a financial intermediation nature; d) Detect and cancel the effects of Tax Hedge transactions entered into as of 4Q08, on the Effective Tax Rate and Financial Margin. In connection with these transactions, it should be reported that: Exchange variation on overseas investments reflect on Banco do Brasil's income by means of the equity income account. In order to minimize the effects of exchange fluctuations on the income, the Bank seeks to level its foreign exchange positions with transactions in the financial market or through commercial positions assumed with customers; Pursuant to tax legislation in force, the equity income on overseas investments does not affect the tax calculation bases (IRPJ, CSLL, PIS/PASEP, and COFINS), as opposed to the profits arising from foreign exchange hedge transactions which produced R$ 183 million in gains during the 3rd quarter of 2008, and may create losses in the subsequent periods if the Brazilian real begins to appreciate consistently again; In order to reduce fluctuations in its profit figures, the Bank decided to assume a foreign currency short position, considering the sum required for effective protection, including tax effects pursuant to article 4 in Circular 3389 dated June 25, 2008; This short position is assumed by entering into a hedge transaction in excess of the assets being protected, by means of a transaction known as a Tax Hedge, or overhedge. The Tax Hedge's value is specified in such a way that the outcome of the hedge transactions, net of their effects on taxes, will be equal to the impact of the exchange fluctuation on the income, which enhances protection and reduces the income's volatility; Reallocations in the net interest income (1) The foreign exchange gain (loss) on foreign financial equity is reallocated from equity interest in the results of subsidiaries and affiliates for inclusion in the financial margin. This adjustment is required to maintain the equilibrium and coherence of the analysis of the spread, since assets and liabilities previously included in permanent assets are included in other balance sheet items after consolidation. Without the reallocation, spread would be calculated incorrectly. The amounts of these reallocations were (R$ 292 million) in 3Q09 and (R$ 74 million) in 4Q09. In the annual view, the amounts were R$ 941 million in 2008 and (R$ 1,042 million) in (2) The reallocations of Other Operating Income/Expenses to Other Operating Income of a financial intermediation nature are detailed below: 49 - Banco do Brasil MDA 4Q09

50 Table 31. Reallocations Other Operating Income / Expenses Quarterly Flow Chg. % Annual Flow Chg. % R$ million 4Q08 3Q09 4Q09 On 4Q08 On 3Q On 2008 Income from Special Operations (34.6) (10.4) (13.2) Income from specific credits (14.3) (2.0) (0.0) FX Readjustment (92.9) 253 2, FX Readjustment Income - 1, (74.5) 1,012 5, FX Readjustment Expense 9 (626) (272) - (56.6) (759) (2,590) Total (88.3) 392 2, (3) Reallocation of Other Operating Income to Funding Operations in the Market. Refers to the reversal of charges with the restatement of savings deposits recorded upon the closing of the semesters. In the months after the closing of the Balance Sheets, this reallocation is necessary in order to correctly evidence the Net Interest Income. This reallocation is only performed in the first and third quarters of the year. The charges were R$ 185 million in 3Q09. In the annual view, the amounts were R$ 331 million in 2008 and R$ 387 million in (4) Reallocation of Other Operating Income to Loan Operations corresponding to the equalization revenues of charges on loan operations. As of January/2008 these revenues began to be accounted for in Other Operating Income, and had to be reallocated to the group of Loan Operations for purposes of comparability. Equalization revenues amounted to R$ 395 million in 3Q09 and R$ 488 million in 4Q09. In the 12 months, the amounts were R$ 1,354 million in 2008 and R$ 1,773 million in (5) Reallocations were performed in order to cancel the Tax Hedge's effects. In the fourth quarter of 2009, in view of the devaluation of the Brazilian real against the US dollar, the Tax Hedge adversely impacted Net interest income by R$ 57.8 million, an amount we reallocated to replace the positive impact on Taxes on Revenues (of R$ 6.3 million) and on Income Tax (IR) and Social Contribution on Net Profit (CSLL) (of R$ 51.5 million). If we consider the years 2008 and 2009, the amounts regarding Tax Hedge were R$ 334 million and (R$ 776 million), respectively. Reallocations in the net interest margin (6) The expense with the Allowance for Loan Losses includes credits without characteristics of financial intermediation, so this part of the allowance is reallocated to Other Operating Expenses. In 3Q09, this reallocation was of (R$ 89 million) and in 4Q09, (R$ 4 million). In the YTD in 12 months, the amounts were (R$ 213 million) and (R$ 90 million), considering the years 2008 and 2009, respectively. Reallocations in the contribution margin (7) Considering the model used for the income statement, tax expenses on revenues are reallocated and included in the contribution margin. In 3Q09, this reallocation was of R$ 783 million and in 4Q09, R$ 971 million. In 2008 and 2009, the amounts were R$ 2,495 million and R$ 3,233 million, respectively. Reallocations in the operational result (8) The expenses with Legal Claims and Labor Lawsuits were separated in the Income Statement with Reallocations, into a group called Legal Risk. It aims to provide a better analysis of the administrative expenses and giving more transparency to this kind of risk. Amounts reallocated in 3Q09 and 4Q09 were, respectively: - Labor claims: (R$ 216 million) and (R$ 87 million). In 4Q09, Banco Nossa Caixa accounted for (R$ 33 million); 50 - Banco do Brasil MDA 4Q09

51 - Civil claims: (R$ 40 million) and R$ 40 million. BNC accounted for (R$ 6.7 million) in the fourth quarter of the year (specifically at BNC, the claims registered until November/2009 were recorded in Other Operating Expenses, and also were reallocated to Civil Claims ). (9) As of 1Q09, in compliance with the resolution of the Central Bank, part of the premiums paid to customers began to be recorded in "Other Administrative Expenses". Aiming to maintain the comparability and considering the nature of the amounts disbursed, we reallocated the entire sum to "Other Operating Expenses", as was recorded up to December The amounts reallocated to 3Q09 and 4Q09 were R$ 380 million and R$ 325 million, respectively. Of these amounts, R$ 117 million in 3Q09 and R$ 78 million in 4Q09 refer to BNC. In 2009, the amount was R$ 1,100 million, of which R$ 307 million referring to BNC. Extraordinary Items (10) Civil claims of Economic Plans generating extraordinary expenses in the amount of R$ 84 million in 3Q09 and extraordinary revenues (due to reversal) of R$ 530 million in 4Q09 (of which R$ 161 million arising from expenses regarding Banco Nossa Caixa operations). The expenses (or reversals) from BB were reallocated from civil claims to economic plans and those BNC were reallocated from other operational expenses to economic plans. (11) Partial sale of investments, corresponding to 56.1% of the shares of the BB group (Multiple Bank, CIELO and VisaVale) in the company Visa Inc., generating positive extraordinary result of R$ 361million in 1Q08. In September 2009, a portion of the remaining shares was sold, generating an extraordinary revenue of approximately R$ 141 million in 3Q09. (12) As of the first quarter of 2008 the Bank started to proportionately consolidate its holdings in several companies. Extraordinary revenues of R$ 241 million were determined in 1Q08 due to the valuation by the Equity Method of Accounting of interests in companies that were not valued in this manner. The consolidation of the holdings was the subject of a Material Fact divulged on April 29, (13) Assignment of credits written-off to Ativos SA, generating extraordinary revenues in the amount of R$ 271 million in 2Q09, R$ 119 million in 3Q09, and R$ 242 million in 4Q09. In the 12 months, the amounts were R$ 67 million in 2008 and R$ 633 million in (14) Tax efficiency generated by the Bank in a periodic review as to the treatment of the deductibility of tax expenses used until then. In view of this review, it was feasible to obtain tax efficiency in the amount of approximately R$ 302 million in 1Q08 and R$ 110 million in 2Q08. (15) Sale of shares of Telemar Participações, belonging to Alutrens Participações, controlled by Brasilcap Capitalização S.A. and by Brasilveículos Companhia de Seguros S.A., associated companies of BB Banco de Investimentos, wholly-owned subsidiary of Banco do Brasil, generating positive extraordinary result of R$ 142 million in 2Q08. (16) Expense of R$ 54 million originating from the substitution of the base of credit cards with a magnetic stripe by cards with a chip. At the end of 2Q08 cards with a chip represented 95.5% of the credit card base. (17) Extraordinary expenses in 3Q08 of R$ 238 million net of taxes, corresponding to reinforcement of provisions for Contingent Liabilities - labor, civil and fiscal - originating from BESC, aiming to adapt them to the valuation criteria adopted by BB. The gross sums were reallocated from Other Operating Income (R$ 79 million), Personnel Expenses (R$ 198 million), Other Administrative Expenses (R$ 83 million), and Income and Social Contribution Taxes (R$ 122 million). (18) Tax Credit recorded in 3Q08, in the amount of R$ 194 million, originating from timing differences and Social Contribution recoverable generated at Besc/Bescri. Amounts not recorded at those institutions as there was no expectation of realization within the timelines established by BACEN. (19) As a result of the process of periodic reevaluations of the equity impacts originating from the lawsuits in which Banco do Brasil figures as complainant, plaintiff or stakeholder, an expense of R$ 51 - Banco do Brasil MDA 4Q09

52 1,367 million, before taxes was realized that refers to the supplementation of provision to cover labor, civil and fiscal claims. (20) Also on account of the reevaluation of the expected impacts of lawsuits, income of R$ 1,213 million was realized relating to the recognition of tax credits originating from the alteration of the rate of Social Contribution on Net Income - CSLL from 9% to 15%. The recognition of this tax credit results from the reevaluation of the prospect of success of the Direct Unconstitutionality Action (ADIN), number 4101/DF, against the raise of the rate of CSLL of the financial sector. (21) Extraordinary Expense incurred in 4Q08 and 2Q09, equal to an Additional allowance for loan losses, in the amounts of R$ 1,594 million and R$ 676 million, respectively. The additional provision is a result of adjustments to the Bank's statistical models in simulations and scenarios of stress, should there be a rise in the volatility of loan portfolio default rates owing to the reflexes of a likely downturn in the world economic crisis. As of the disclosure of CMN Resolution no. 3674/08, surplus provisions were included in the Tier I, for the purpose of calculating the capital ratio. (22) Extraordinary income of R$ 5,326 million and R$ 3,030 million in 4Q08 and 4Q09, respectively, regarding the partial accounting of non-recognized actuarial gains by Plano de Aposentadoria e Pensão dos Funcionários do Banco do Brasil - PREVI, by virtue of a review of actuarial assets and liabilities performed in accordance with Resolution 26 issued by Conselho de Gestão da Previdência Complementar (CGPC) on September 29, (23) Expense of R$ 1,259 million as a result of non-recognized actuarial losses by Plano de Assistência à Saúde Cassi. These expenses (items 22 and 23) were being calculated on a monthly basis and totaled R$ 440 million before taxes in 2008, which sums will no longer be stated as of (24) Sale of shares representing 8.1% of the capital stock of CIELO (former VISANET - Companhia Brasileira de Meios de Pagamento), an affiliate of BB Banco de Investimento S/A BB-BI, a whollyowned subsidiary of Banco do Brasil, generating positive extraordinary result of R$ 1,415 million in 2Q09 and R$ 209 million in 3Q09 (due to greenshoe exercise, that was only accounted for in 3Q09). Banco do Brasil remains as one of the main shareholders of this company, and currently holds 23.53% of its shares. (25) Expense arising from Voluntary Resignation Program for employees of Banco Nossa Caixa. (26) Reversal of provisions for labor lawsuits generating extra revenues amounting to R$ 644 million, once since 4Q09 the allowance balance began to be established to cover the average of the amounts effectively disbursed by the Bank in legal proceedings of the same nature (until then, the provision was set based on the amount requested by the applicant). (27) As of 4Q08, the DRE (Statement of Income) with Reallocations started to segregate the effects of extraordinary items of the period on the payment of Profit Sharing (PLR), and to unify the effects of these items on taxes (IR and CSLL). The table below shows separately the effect of each extraordinary item on taxes and on PLR Banco do Brasil MDA 4Q09

53 Table 32. Fiscal Effects and Statutory Profit Sharing on Extraordinary Items Quarterly Flow Chg. % Annual Flow Chg. % R$ million 4Q08 3Q09 4Q09 On 4Q08 On 3Q On 2008 Sale of Shares in VISA International - (63) (129) (63) (51.4) Economic Plans (237) (78) - Credit Assignment - (53) (108) (281) - Change of Credit Card Basis Contingent Liabilities (BESC) Previ - Non-recognized Actuarial Gains (2,215) - (1,357) (38.7) - (2,215) - - Cassi - Non-recognized Actuarial Losses Additional Provision for Loan Losses (50.8) Provision for labor, civil and tax claims Disposal of Investments Visanet Brasil - (93) (719) - Voluntary Resignation Program - BNC Reversal of Labor Liabilities - - (289) (289) - Total (1,110) (171) (1,895) ,007.4 (986) (513) (48.0) 53 - Banco do Brasil MDA 4Q09

54 6 - Balance Sheet Analysis 6.1 Breakdown Banco do Brasil attained R$ 708,549 million in total assets at the end of 2009, recording expansion of 35.9% in 12 months and of 3.3% in relation to the previous quarter. These figures already consider consolidation of all the interests in financial and non-financial companies, in addition to mergers (Banco Nossa Caixa, BESC, and BEP), and a 50% interest in the capital of Banco Votorantim (BV). As of 1Q09 and 3Q09, the consolidation of accounting information of BNC and Banco Votorantim, respectively, changed the mix of Assets and Liabilities of BB. As of those quarters, the proportion of Earning Assets to Total Assets started to show an upward trend, movement that stabilized in 4Q09. Earning assets kept their share of 82.6% of total assets. In December 2008, this percentage was 80.4%. In relation to the mix of Liabilities, there was a slight increase in the relative share of Interest Bearing Liabilities, which ended the quarter at 72.0%, whereas it stood at 71.9% and 68.7% at the end of 3Q09 and 4Q09, respectively. Earning Assets 2 vs. Interest Bearing Liabilities 3 - % Mar/08 Jun/08 Sep/08 Dec/08 Mar/09 Jun/09 Sep/09 Dec/09 Earning Assets Interest Bearing Liabilities Other Assets Other Liabilities Figure 25. Earning Assets vs. Interest Bearing Liabilities 2 Cash and equivalents in foreign currency, marketable securities, financial investments, loan operations, leasing, remunerated compulsory deposit and other earning assets vs. interest bearing liabilities. 3 Savings Accounts, Interbank Deposits, Time Deposits, Money Market Borrowings, Foreign Borrowings, onlendings, Financial and Development Funds, Subordinated Debts, Hybrid Capital and Debt Instruments and Foreign Securities Issued Abroad Banco do Brasil MDA 4Q09

55 6.2 Analysis of Assets The growth of Assets in the quarter resulted mainly from the performance of Loans and Leasing and Liquidity Assets except Securities, that grew 6.2% in the period, reaching relative share of 37.6% and 24.9%, respectively. Liquidity Assets except Securities have exhibited growth above other assets since 2008, increasing gradually their relative share over Total Assets. This movement began in 2Q08 with the worsening of the international financial crisis, in which period the Bank received deposits migrated from institutions less recognized by the market, which led to the deposit base growing at a faster pace than the loan portfolio. Part of the excess funding was placed in "Short-term interbank deposits", in particular with mediumsized banks and secured by the loan portfolio (mainly payroll-secured and vehicle loans, with a lower risk). Throughout 2009, "Short-term interbank deposits" were reinforced by Nossa Caixa. As of the acquisition of BNC by Banco do Brasil, the former started to allocate its excess funding, at that time placed almost all in securities transactions (representing 50% of total assets at year-end 2008), to more profitable assets, resulting in a rise in credit transactions and Inter-bank Investments, in particular those supported by credit portfolios. Loans and Leasing also recorded growth above the other assets in The Bank maintained its strategy of increase its market share in the loan market, what was reflected in BB's mix of assets Mar/08 Jun/08 Sep/08 Dec/08 Mar/09 Jun/09 Sep/09 Dec/09 Other Assets Loans and Leasings Liquidity Assets except Securities Tax Credit Securities Figure 26. Breakdown of Assets Table 33. Breakdown of Assets R$ million Mar/08 Jun/08 Sep/08 Dec/08 Mar/09 Jun/09 Sep/09 Dec/09 Total Assets 414, , , , , , , ,549 Liquidity Assets except Securities 77,478 60,037 77, , , , , ,241 Securities 81,490 82,301 85,954 86, , , , ,337 Loans and Leasing 150, , , , , , , ,484 Tax Credits 14,051 14,337 14,994 16,499 20,413 21,053 22,261 21,910 Other Assets 90,310 93, ,485 99, , , , ,578 *From Mar/08 on the series were remade with Financial-Economic data Banco do Brasil MDA 4Q09

56 6.3 Securities Portfolio The securities portfolio showed a decrease of 4.2%in the quarter, and growth of 43.1% in relation to the amounts recorded at the end of 4Q08. Since loan operations and short-term interbank deposits grew at a faster pace than funding, securities portfolio recorded decrease to supply the resources needed for this growth. In 12 months, disregarding the effect of Banco Votorantim (R$ 9.1 billion), the growth of the securities portfolio would be 32.6%. Table 34. Securities Portfolio by Category Balance Share % R$ million Mar/08 Jun/08 Sep/08 Dec/08 Mar/09 Jun/09 Sep/09 Dec/09 Dec/08 Dec/09 Securities 81,490 82,301 85,954 86, , , , , Available for Trading 24,717 26,009 26,475 26,136 32,475 31,661 44,590 38, Available for Sale 35,388 35,480 37,777 38,374 45,269 46,645 52,750 62, Held to Maturity 20,485 19,597 20,443 20,123 31,433 30,477 30,773 22, Financial Derivatives 899 1,216 1,258 2,276 1, ,706 1, Considering the securities portfolio breakdown per maturity, in the quarter we note that there was a larger concentration in shares with terms above 1 year. Securities with terms between 1 to 5 years represented relative participation of 57.5% total portfolio, while securities with terms between 5 to 10 years, 12.8%. Table 35. Securities Portfolio by Maturity - Market Value Up to 1 year 1 to 5 years 5 to 10 years Over 10 years R$ million Balance Share % Balance Share % Balance Share % Balance Share % Total Mar/08 29, , , , ,619 Jun/08 26, , , , ,101 Sep/08 27, , , , ,695 Dec/08 27, , , , ,612 Mar/09 35, , , , ,430 Jun/09 31, , , , ,040 Sep/09 35, , , , ,298 Dec/09 29, , , , , Banco do Brasil MDA 4Q09

57 6.4 Tax Credits In 1998, BB went to court with an application for the full carry forward of accumulated tax loss of IT and of negative bases of CS. Since then, the Bank has offset these tax losses in full against income tax and social contribution taxable income and has made judicial deposits of the taxes otherwise due (on 70% of the amount offset). In May 2007, the tax credits that had been written off since the beginning of the lawsuit were reactivated, in the sum of R$ 4,913.2 million, in contra account to the re-formation of provision relating to the portion of 70% of Income Tax and Social Contribution, for which judicial deposits were formed. The Tax Credit balance, including BNC's and BV's consolidated figures, reached R$ 21,910 million in December, 1.6% lower than that recorded at the end of September In the annual comparison the growth of the stock of tax credits was 32.8%. It is important to point out that, according to the material fact disclosed to the market on April 29, 2009, Banco do Brasil transformed into assets in the 1Q09 tax credits amounting to R$ 1,213 million. The recognition of this tax credit results from the reevaluation of the prospect of success of the Direct Unconstitutionality Action (ADIN), number 4101/DF, against the raise of the rate of CSLL of the financial sector, from 9% to 15%. Tax credits originated from intertemporal differences represent 78.6% of the stock. The intertemporal differences results from the fact that the tax legislation does not allow the inclusion of certain expenses in the calculation basis of taxes at the time they occur (accrual basis accounting), but rather at the time they are financially settled (cash basis accounting). Table 36. Breakdown of Tax Credit R$ million Mar/08 Jun/08 Sep/08 Dec/08 Mar/09 Jun/09 Sep/09 Dec/09 Time Differences 8,395 8,872 9,560 11,018 15,188 16,238 17,470 17,170 Social contribution to offset Income and social contribution taxes Lawsuit 4,846 4,895 4,959 4,932 4,691 4,349 4,045 3,918 Other* Total Tax Credit 14,051 14,337 14,994 16,499 20,413 21,053 22,261 21,910 Income Tax / Lair - % * Includes Tax Losses and Negative Bases and Mark-to-Market, Tax Credits Abroad and Pasep and Cofins The table above shows the breakdown of tax credits by type. The Tax/Lair ratio ended December at 31.9%, opposed to 29.2% in 3Q09 and 25.5% in 4Q08. Also in relation to the tax aspects, it is important to emphasize the contracting of a Tax Hedge operation as from 4Q08. Banco do Brasil contracted hedge operations in a higher sum than that of investments maintained abroad (over hedge), with the objective of annulling the effect of exchange variance on the result, considering the fiscal impacts of these operations. Further details about the Tax Hedge and about the motives that led Banco do Brasil to contract it can be consulted in chapter (Details of the Reallocations). During 2009, BB realized a tax credit totaling R$ 5,135 million. This amount is equivalent to 143.5% of the projection of using of tax credits in fiscal year 2009, which was reported in the technical study prepared on (R$ 3,578 million). For 2010, we expect the performance of R$ 4,309 million in tax credits, according to a study elaborated on December 31 st, Banco do Brasil MDA 4Q09

58 6.5 Loan Portfolio The loan portfolio of the National Financial System ended 2009 with a balance of R$ 1,410.3 billion, considering free and specific funds, growth of 14.9% over 2008, and 4.6% in relation to September The Credit/GDP ratio estimated by the Central Bank of Brazil (Bacen) reached 45.0%, in line with the figure observed in the previous quarter (45.1%) and higher than the one recorded in December 2008 (39.7%). It is important to note that part of this variation is determined by the modest GDP growth: R$ 3,131.5 billion in Dec/09 and R$ 3,089.4 billion in Dec/08, according to press release disclosed by BACEN. In the Banking Industry, loans granted with free funds, corresponding to 67.6% of the total, amounted to R$ billion in December 2009, an increase of 9.4% in twelve months. Using the same comparison basis, the loans granted to companies increased by 1.2%, whereas the loans granted to individuals grew by 19.4%, the balances of which were R$ billion and R$ billion, respectively. Just as occurs in the Banking Industry, the loans granted to individuals recorded strong growth of 30.3% in 12 months against 16.9% growth of the loans granted to businesses, without considering BV and BNC balances. As for BB's domestic loan portfolio, excluding the amounts of BNC (R$ 19,766 million) and BV (R$21,222 million), Bank's expansion was 5.0% in the quarter and 15.7% in 12 months, performance in line with the guidance proposed for 2009 (13% to 17%). Upon the inclusion of the amounts of BNC and BV, the growth rates of the total portfolio were: 5.4% in the quarterly comparison and 33.8% in the twelve-month period. As of the last semester of 2008, the process of acquisitions of loan portfolios from other financial institutions, particularly in payroll loans and vehicle financing, was intensified at BB. The table below evidences the balances of the portfolios acquired and the interbank deposits guaranteed by a loan portfolio of other institutions, recorded in Interbank Investments. Table 37. Acquired Portfolios and Interbank Deposits with Credit Guarantee R$ million Jun/09 Sep/09 Dec/09 Payroll loans 2,741 2,655 3,003 Vehicle financing 1,580 1,850 2,668 Interbank with Loan Guarantee 5,133 3,968 4,056 Total 9,454 8,473 9,728 The total loans granted to Individuals reached R$ 91,791 million in 4Q09, an increase of 7.1% in the quarter and of 88.1% in the twelve-month period, a result which includes acquisitions (BNC) and partnerships (BV). Regarding the businesses loan portfolio, the balance ended the 4Q09 reaching R$ 125,336 million, a figure which exceeds those recorded in 4Q08 and 3Q09 by 29% and 7.1%, respectively, also including the balances arisen from acquisitions and partnerships. The agribusiness portfolio decreased by 2.4% as compared to the previous quarter, but increased 4.3% in 12 months and ended 2009 with a balance of R$ 66,434 million, already including the amount of R$ 782 million from BNC. As a result of the expansion of the import and export financing abroad, the balance of the foreign portfolio at the end of 4Q09 was R$ 17,268 million, an increase of 14.2% in the yearly comparison and of 16.9% in the quarterly comparison. It is worth pointing out that there was a exchange devaluation (Ptax Dollar Sale) in these periods, of 25.5% and 2.1%, respectively Banco do Brasil MDA 4Q09

59 Table 38. Loan Portfolio Balance Chg. % R$ million Mar/08 Jun/08 Sep/08 Dec/08 Mar/09 Jun/09 Sep/09 Dec/09 On Dec/08On Sep/09 Brazil 162, , , , , , , , Individuals 36,620 40,503 43,435 48,811 61,138 68,467 85,717 91, Businesses 69,118 78,252 85,343 97, , , , , MSE 25,675 29,234 32,027 34,900 37,403 39,493 41,159 44, Other 43,443 49,018 53,315 62,292 64,373 63,858 75,834 80, Agribusiness 56,524 61,611 60,524 63,690 64,287 67,600 68,038 66, (2.4) - Individual 40,684 43,168 42,630 45,202 46,252 47,381 47,574 47, (0.6) - Companies 15,839 18,442 17,894 18,487 18,035 20,219 20,464 19, (6.3) Foreign 10,499 9,717 12,900 15,115 14,726 13,068 14,769 17, Total 172, , , , , , , , The table below shows the balances of the loan portfolio with the amounts of BV and BNC segregated. Table 39. Credit Portfolio Organic Growth Chg. % R$ million Dec/08 Sep/09 Dec/09 On Dec/08 On Sep/09 Banco do Brasil 209, , , Individuals 48,811 58,747 63, Businesses 97, , , Agribusiness 63,690 67,237 65, (2.4). Foreign 15,115 14,769 17, Nossa Caixa - 19,308 19, Individuals - 14,524 15, Businesses - 3,984 3,904 - (2.0). Agribusiness (2.2) Banco Votorantim - 20,498 21, Individuals - 12,446 13, Businesses - 8,052 8, Total 224, , , Banco do Brasil MDA 4Q09

60 6.5.1 Individual Loan Portfolio During this quarter, the loans granted to individuals reached R$ 91,791 million, an increase of 88.1% in twelve months and of 7.1% as compared with September These amounts already include the individual loan portfolios of BNC and BV. As regards the individual loan portfolio of Banco do Brasil, payroll loans continue to increase its participation, representing 39.8% of the total loans as compared with 36.1% in the same quarter of 2008, totaling R$ 36,514 million. This amount represents 34.4% of the total loans granted in the Banking Industry (R$ 106,173 million). The payroll loan operations of BB stand alone increased 8.8% in relation to 3Q09 and 33.4% in 12 months. In 2009, there were 3,238 thousand payroll loans, with an average term of 42 months and an average interest rate of 2.26%. In 2008, 3,392 thousand payroll loans were granted, with an average term of 36 months and an average interest rate of 2.40%. It is emphasized that these amounts do not include BNC and BV transactions. The loans granted to civil servants are the most representative of BB's payroll loan portfolio, accounting for 85.05% of the total loans. The remaining loans are granted to INSS pensioners (7.4%) and employees from the private sector (7,6%). Another segment in which BB has been increasing its market share is the auto sector. The balance of these operations reached R$ 9,425 million, up 9.1% over the preceding quarter and up 40.8% in twelve months. Of this amount, R$ 2,668 million arises from purchases of portfolios. In 4Q09, vehicle financing operations presented an average term of 45.4 months, average value per contract of R$ 20,818 and average rate of 1.59%. With regard to leasing transactions, in the same period, the average tenor was of roughly 49.4 months and an average value per agreement of R$ 28,962 and a 1.60% average rate. Around 20.0% of BB's vehicle portfolio balance are leasing operations. These information does not take into consideration the balances of BV and BNC. When the balances of these institutions were added, the amount totaled R$ 20,738 billion, representing a market share of 13.2%. Despite incipient, in view of the growth trend promoted by the strategy adopted by BB, the balance of Real Estate Financing operations amounted to R$ 676 million in 2009 as compared with R$ 80 million in the previous year. The average term of these operations is 228 months, with an average ticket of R$ 126 thousand. Adding the amount of R$ 854 million, accounted for by BNC, the total reaches R$ 1,530 million. The table below presents the main products of the loan portfolio to individual clients of BB, BNC and BV. It is important to note that, in relation to Votorantim, the amount presented refers to 50% of that portfolio Banco do Brasil MDA 4Q09

61 Table 40. Individual Loan Portfolio Balance Chg. % R$ million Sep/08 Dec/08 Mar/09 Jun/09 Sep/09 Dec/09 On Dec/08On Sep/09 Direct Consumer Credit (CDC) 23,041 26,491 28,138 30,673 33,574 36, Payroll Loan 14,539 17,626 18,411 20,000 21,612 23, Consumer Finance 4,515 4,958 5,418 6,035 6,926 7, Consumer Loan Backed by Direct Deposits 3,986 3,906 4,309 4,639 5,035 4, (3.0) Mortgage Vehicles Loan¹¹ 5,607 6,694 7,005 8,180 8,638 9, Credit Card 6,564 7,586 7,493 7,830 8,007 9, Overdraft Accounts 2,717 2,468 2,822 2,906 2,870 2,434 (1.4) (15.2) Microcredits Others 4,941 4,981 4,972 4,785 4,639 4,799 (3.7) 3.4 BNC - - 9,991 13,224 14,524 15, Payroll Loan - - 6,433 9,534 10,672 11, Consumer Finance - - 1,835 1,845 1,933 1,905 - (1.4) Mortgage Others ,056 1, (9.4) BV² ,446 13, Payroll Loan ,689 1,674 - (0.9) Vehicles Loan ,947 9, Leasing ,671 1, Others (0.1) Total 43,435 48,811 61,138 68,467 85,717 91, ¹ In Dec/09, it contains balance of Finame Pro-Caminhoneiro Individuals for R$ million and leasing for R$ 1,567.8 million. ² Amounts equal to 50% of BV Loan Portfolio 61 - Banco do Brasil MDA 4Q09

62 6.5.2 Business Loan Portfolio In the business segment, BB closed Dec/09 with a balance of R$ 125,619 million, an increase of 29.2% in twelve months and 7.1% in relation to the prior quarter. This sum represents 41.7% of BB's total portfolio and already includes the amounts originated from the acquisition of BNC and partnership with BV. It is also emphasized that the amounts referring to BNC and BV are evidenced separately, and therefore do not comprise the detailing of the business products portfolio contained in the table below. As regards Nossa Caixa's portfolio, business portfolio represented 19.8% of the total and the main product continued to be Working Capital, which represents 55.1% of the total. Loans to SMEs represented 41.2% of the total. As regards BV, the most representative product in the portfolio is Working Capital (32.8% of the total), followed by the BNDES and FINAME investment lines (30.4%). For further information on BV's portfolio, please refer to chapter 10 of this report. Table 41. Business Loan Portfolio Balance Chg. % R$ million Sep/08 Dec/08 Mar/09 Jun/09 Sep/09 Dec/09 On Dec/08 On Sep/09 Working Capital 40,737 45,199 46,630 48,550 52,789 59, Investment 17,237 19,183 19,415 19,934 20,671 22, Receivables 11,467 11,887 11,282 11,406 11,249 12, Pré-Approved Credit 2,394 2,548 2,565 2,568 2,713 2, ACC/ACE 7,912 11,101 11,807 10,711 8,945 7,923 (28.6) (11.4) BNDES Exim 3,054 4,417 4,105 3,988 4,692 4, (4.9) Credit Cards ,196 1,639 2, Overdraft Account (12.8) Others 1,593 1,691 1,679 1,819 2,098 1,672 (1.2) (20.3) BNC - - 3,065 3,001 3,984 3,904 - (2.0) BV* ,052 8, Working Capital ,383 2, BNDES/FINAME ,258 2, Export Letter of Credit ,427 1,350 - (5.4) Joint Lending (9.3) Others ,304 1,016 - (22.1) Total 85,343 97, , , , , * Amounts equal to 50% of BV Loan Portfolio Working capital lines attained a balance of R$ 59,294 billion, taking into consideration BB's stand alone portfolio, representing a growth of 12.3% in the quarter and of 31.2% in 12 months. These operations accounted for 52.3% of total portfolio. The lines of receivables recorded a more modest performance, with increase of 8.8% in the quarter and 3.0% in 12 months. It should be noted that the investment lines recorded strong growth again in the quarter (9.8%) and grew 18.4% in relation to the same quarter of BB ended 2009 as the leading bank in global onlending of the BNDES/Finame system, with a disbursement of R$ million and thousand operations carried out. Private Securities - Banco do Brasil, mindful of the needs of its large corporate clients, operates in the capital market, as an alternative to the traditional credit lines, by means of issues of debentures, promissory notes and bank credit bills. The balances of these private securities are presented in the table below: 62 - Banco do Brasil MDA 4Q09

63 Table 42. Private Securities Businesses Chg. % R$ million Dec/08 Mar/09 Jun/09 Sep/09 Dec/09 On Dec/08 On Sep/09 Private Securities 3,405 3,939 2,436 4,936 8, Banco do Brasil 3,405 3,939 2,436 4,936 5, BV , * Securities issued in Brazil registered according to Circular BACEN 3,068 in Available for Sale Considering the sum of private securities and the business loan portfolio, the growth of credit would be 33.5% in 12 months and 10.2% in relation to September Foreign Trade Loans - The Pre-Shipment/Post-Shipment Export Financing (ACC/ACE) ended the quarter at R$ 7,923 million, decrease of 11.4% in the quarter comparison, and of 28.6% in twelve months. This credit facility is strongly influenced by the foreign exchange rate behavior (American dollar) that increased 25.5% in 4Q09 in the 12-month comparison and 2.1% in relation to 3Q09, according to PTAX dollar sale disclosed by the Central Bank of Brazil. In 2009, the cool-down of the global economy impaired the demand for Brazilian products, impacting ACC/ACE contracted volumes, but they began to rise again in this quarter, recording a 2.6% variation in relation to the previous quarter. The contracted volume decreased 21.3% in 12 months. In 2009, Banco do Brasil maintained its leadership of the export and import exchange market, with volumes of US$ 47.1 billion and US$ 34.1 billion, respectively. As a result, BB increased its market share in the exports lines, going from 27.9% in 2008 to 31,4% in In relation to the import exchange market, BB market share increased from 24.7% (2008) to 25.4% (2009). Table 43. ACC/ACE Average Volume per Contract Chg. % ACC/ACE 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 On 4Q08 On 3Q09 Volume Contracted (US$ million) 3,906 3,457 2,325 3,182 2,653 2,722 (21.3) 2.6 Quantity of Contracts 5,760 4,097 3,765 4,021 4,332 4, Average Volume per Contract (US$ thousand) (27.9) (0.6) Loans to SMEs - In the delivery of services to SMEs, Banco do Brasil continued to act as principal partner of the segment. At the end of 2009, BB had 1.98 million checking accounts, with 1.85 million micro and small business clients. Around 652 thousand received differentiated service rendered by specialized relationship managers. BB has also been consolidating its share of the cooperativist credit segment, delivering appropriate products and services to the requirements of this market. The products include the Compe/SPB Integration Service, whereby credit cooperatives and its cooperative members have access to the System for the Clearing of Checks and Other Instruments and to the Payment Settlement and Transfer System (SPB). This service allowed bank products to be made available to around 356 thousand cooperative members, associated with 323 credit cooperatives, contributing with innovation in the supply of solutions in products and sale formats, essential functions for the growth of BB's competitiveness and maintenance of partnerships. BB supported 184 Local Productive Arrangements (APL) at the end of 2009, delivering services to 16.4 thousand ventures. A sum of R$ 1.38 billion was made available and contributed toward the sustainable growth of the locations where the APLs are included, with R$ 886 million in loans for working capital and R$ 213 million to finance the investments. The amount of R$ 134 million was set aside in funds for foreign trade at the end of 2009 and R$ 147 million earmarked for operations geared toward agribusiness. Disregarding BNC, the balance of transactions in favor of SMEs in 2009 was of R$ 43.3 billion, a 24.1% increase over In all, working capital and investment loans rose to R$ 42.7 billion of which R$ 10, Banco do Brasil MDA 4Q09

64 billion were allocated to manufacturing industries (25.2%), R$ 20,7 billion to trade (48.4%), and R$ 11,3 billion to service segment (26.4%). Table 44. SME Credit Products Balance Chg. % R$ million Sep/08 Dec/08 Mar/09 Jun/09 Sep/09 Dec/09 On Dec/08 On Sep/09 Working Capital 21,645 23,616 25,159 26,575 28,151 31, Investment 8,438 9,314 9,652 10,188 10,840 11, Foreign Trade* 1,944 1,970 1,143 1, (69.7) (10.6) BNC - - 1,450 1,420 1,501 1, Total 32,027 34,900 37,403 39,493 41,159 44, * The rating methodology of operations in such credit line was reviewed as of 3Q09 It is worth emphasizing the allocation, at the end of December 2009, of R$ 31.2 billion for working capital, which represented growth of 32.3% in relation to the same period of Among the credit facilities, the following should be highlighted: a) BB Giro Rápido aims to satisfy the need for working capital of the segment of micro and small businesses, without requiring tangible collateral. In 4Q09, this line of credit reached a balance of R$ 6 billion, representing 19% of the working capital block; b) The "BB Giro Empresa Flex", has the purpose of supplying working capital and financing for acquisition of goods and services. In this credit line, the customer can determine the form of loan payment in accordance with the company's cash flow. This credit line has reached the balance of R$8.4 billion, which represents growth of 63.4% in relation to 4Q08. Financing investments reached R$ 11.5 billion in the 4Q09, an increase of 23.1% in relation to These also deserve highlighting: a) the Proger Urbano Empresarial program, the key credit facility for investments by SMEs, which showed a record balance of R$ 5.3 billion; b) the BNDES Card, a product in which BB is a leader (in terms of amounts disbursed, number of cards and transactions) in 4Q09, presented a volume of R$ 2.4 million, an increase of R$1,7 billion in 12 months. In the issuance of cards, BB holds 65% of the market; In August, Banco do Brasil launched the Operation Guarantor Fund (FGO), a system which supplements, by up to 80%, the guarantees required from legal entities for loans and financing, and expands credit supply to companies, particularly micro and small-sized ones, with rates even more competitives. By the end of 4Q09, 93 thousand operations had been carried out under the FGO, totaling R$ 2.74 billion. In September, the operations of the BB Giro Décimo Terceiro Salário were resumed, a loan which finances the thirteenth salaries of employees, including the related payroll charges. The credit line can be repaid in up to 13 monthly installments and its interest rate is based on the TR (a managed prime rate) plus 1.13% per month, one of the most competitive rates in the market. In December 2009, such line presented a balance of R$ 523 million Banco do Brasil MDA 4Q09

65 6.5.3 Agribusiness Loan Portfolio Agribusiness is one of the main sectors of the Brazilian economy, with fundamental importance to the growth of the Country. In its role as an agent of public policies, Banco do Brasil represents a link between the government and the rural producer, acting as the largest financier of Brazilian agribusiness in all its segments and in all stages of the productive chain, from the small farmer to the large agroindustrial companies. The figure below shows both the importance of the share of agribusiness in the Brazilian GDP and the share of jobs generated by agribusiness in the Brazilian job market. 73.6% 26.4% 28.9% 33.0% 71.1% 67.0% % GDP Other Activities % GDP Agribusiness Cattle Agriculture Other Jobs Agriculture Jobs Source: IPEA Instituto de Pesquisa Econômica Aplicada (Economic Applied Research Institute) Figure 27. Agribusiness Participation in GDP and in Labor Market Brazilian foreign trade was affected by the world economic crisis and ended 2009 in a downturn. However, a rising trend was possible in the course of the year, keeping pace with the world economic recovery. For 2010, the prospect for Brazilian agribusiness is better than in 2009, due to the following assumptions: Lower prices for inputs, availability of funding for the coming harvest, a recovery in the price of grains, and an improved market for meat (chicken, pork, and beef). The Brazilian trade balance surplus ended 2009 at US$ 24.6 billion, a sum 0.5% lower than the amount recorded in The agribusiness surplus dropped by 8.4%, to US$ 54,9 billion as against US$ 60,0 billion in In 2009, this activity accounted for 42.5% of all Brazilian exports and 7.7% of total imports. US$ billion Agribusiness Brazil Source: MAPA Ministério da Agricultura, Pecuária e Abastecimento (Ministry of Agriculture, Cattle and Supply) * 3Q09 data not available. Figure 28. Trade Balance (FOB) 65 - Banco do Brasil MDA 4Q09

66 The tables below reflect the flow of exports broken down by key products and Brazil's share in international agribusiness. Table 45. Exports US$ million US$ million Soybeans and Related Products 9,477 9,308 11,381 17,980 17,240 Meat 8,066 8,641 11,295 14,545 11,787 Leather, Hides and Shoes 3,069 3,471 3,554 3,140 2,041 Sugar 4,684 7,772 6,578 7,873 9,716 Forest Products 7,197 7,881 8,819 9,326 7,223 Coffee, Mate and Spices 2,669 3,535 4,093 4,971 4,470 Fruit Juice 1,245 1,570 2,374 2,152 1,752 Tobacco 1,707 1,752 2,262 2,752 3,046 Other Products 5,487 5,495 8,059 9,066 7,480 Total 43,601 49,424 58,416 71,806 64,756 Source: MAPA Ministério da Agricultura, Pecuária e Abastecimento (Ministry of Agriculture, Cattle and Supply) Table 46. Brazil s participation on Global Agribusiness Production Export % Global Market Coffee 1º 1º 27% Orange Juice 1º 1º 85% Cattle 2º 1º 26% Sugar Cane 1º 1º 47% Soybeans 2º 2º 30% Poultry 3º 1º 40% Corn 3º 2º 11% Cotton 5º 4º 6% Source: USDA PSD Online The sector s performance in the last years is due to the permanent quest for new technologies and for valuing the services provided by the professionals from this area, always aiming improving profitability and continuity in the enterprises. In the following chart, the increased productivity per planted area, as a result of gains in productivity, can be visualized. Producão (million ton) /96 96/97 97/98 98/99 99/00 00/01 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10* Productivity (ton/ha)-% Production (million ton.) Area (million ha) Productivity (ton./ha) - % * Estimate Conab 4º crop survey Figure 29. Production vs. Planted Area 66 - Banco do Brasil MDA 4Q09

67 Agribusiness at BB In relation to the distribution of agribusiness operations by region of the country, continuity was verified in the distribution among Brazilian regions, with the South and Southeast regions appearing as most relevant, while the North and Northeast continue being the least represented regions. Table 47. Agribusiness Loan Portfolio by Region Region Share - % North 2.8 Northeast 6.2 Midwest 21.8 Southeast 34.9 South 34.3 Rural credit finances the costs of producing and marketing of agricultural products, stimulates rural investments, including warehousing, processing and the industrial transformation of agricultural products. Furthermore, it encourages the introduction of rational methods in the productive system. Agricultural and Livestock activity follows the agricultural calendar, known as the crop-year, which begins in July of each year and ends in June of the following one. Hence, the current 2009/2010 crop began in June 2009 and will end in June In the first quarter of the crop-year, resources are required for planting (funding) the summer crop. Also during this period there is a concentration of payments of the loans obtained for the planting of the preceding summer crop-year. Between October and December, the demand for financing continues, but in smaller volume than in the first quarter of the crop. During the crops's third quarter (January to March) the demand for financing cost of the winter crop and the summer crop of the northern and northeastern regions begins. In the last quarter of the crop year the demand for marketing resources grows due to the harvest period. The rural portfolio of Brazilian Banking Industry attained R$ 112,409 million in Dec/09, an increase of 5.7% in twelve months and of 1.7% in relation to Sept/09. At BB, the balance of the agribusiness portfolio attained R$ 66,434 million, an increase of 4.3% in 12 months and decrease of 2.4% in relation to Sept/09. The rural portfolio represented 22.8% of BB's total portfolio as opposed to 28.3% in Dec/08. The table below shows a breakdown of BB's agribusiness portfolio, divided into funding for costing, investments, and marketing. Please note the costing item, which accounted for 41.3% of the total sum Banco do Brasil MDA 4Q09

68 Table 48. Agribusiness Loan Portfolio by Purpose Balance Chg. % R$ million Sep/08 Dec/08 Mar/09 Jun/09 Sep/09 Dec/09 On Dec/08 On Sep/09 Costs 21,751 24,257 24,389 24,667 24,484 27, Investment 21,419 20,135 20,587 21,497 22,098 21, (0.6) Marketing 16,248 17,474 16,629 18,738 18,802 14,403 (17.6) (23.4) Other 1,106 1,824 1,887 1,873 2,655 2, (2.5) Total 60,524 63,690 63,492 66,775 68,038 66, (2.4) * From Sep/09 on, BNC portfolio was included. Proger Rural is a product that offers fixed loans for Agricultural and Livestock funding, besides financial support for fixed and semi-fixed investments; and the National Family Agriculture Empowerment Program - Pronaf aimed the financing of agricultural activity funding. These two products added up to R$ 18,279 million in December 2009, growing 21.1% in relation to the same period of the previous year, and 3.6% in relation to the previous quarter. FCO Rural offers a financial supplement for working capital and costs for the rural producer of the Middle-west region of Brazil. Transactions in the product fell in the quarterly comparison (4.1%) and in the past 12 months (4.3%), totaling R$ 5,390 million in December. The BNDES/Finame Rural products have the objective of financing investments in the modernization of machines and equipment intended for rural production. Transactions with these products totaled R$ 6,706 million, with positive variations of 47.0% in 12 months and 53.2% in relation to the previous quarter. The financial support for agrobusiness involved in selling, processing or manufacturing of agricultural and livestocks products are emphasized in Sales and Processing of Agricultural Goods. During this quarter, the decline seen in this item happened due to the reclassification of a portion of the balance line to BNDES, besides the settlement of operations. These facts also explain the significant growth of BNDES/Finame Rural transactions. The remaining products have been segregated in the "Others" caption as from September 2009, including BNC's portfolio. Table 49. Agribusiness Loan Portfolio by Product Balance Chg. % R$ million Sep/08 Dec/08 Mar/09 Jun/09 Sep/09 Dec/09 On Dec/08 On Sep/09 Agricultural and Livestock Costs 16,288 17,813 17,898 18,139 17,670 17,737 (0.4) 0.4 Loans to Companies 14,668 14,862 14,112 16,245 16,334 12,333 (17.0) (24.5) Pronaf / Proger Rural 13,955 15,088 15,545 16,597 17,645 18, FCO Rural 4,773 5,634 5,810 5,784 5,617 5,390 (4.3) (4.1) BNDES / Finame Rural¹ 4,850 4,561 4,441 4,398 4,378 6, Others² 5,990 5,730 5,685 6,438 6,394 5, (6.3) Total 60,524 63,690 63,492 67,600 68,038 66, (2.4) (1) BB Agriculturand and Livestock Investiment lines are considered (2) From Sep/09 on 68 - Banco do Brasil MDA 4Q09

69 The following table shows the balance of the loan transactions intended for agribusiness by item financed. Table 50. Agribusiness Loan Portfolio by Financed Items R$ million Chg. % Items Financed Dec/08 Share % Sep/09 Share % Dec/09 Share % On Dec/08 On Sep/09 Livestock 8, , , Soybeans 5, , , Corn 3, , , (14.6) 0.4 Sugar Cane 3, , , (12.8) (1.3) Machinery and Equipment 1, , , Coffee 1, , , (2.2) Rice 1, , , (16.4) Poultry 1, , , Fertilizers (41.4) (4.3) Cotton (0.9) Manioc (4.1) (1.0) Pork Other* 34, , , (1.6) (8.0) Total 63, , , (2.4) * From 3Q09 on BNC will be considered. In its work of financing Brazilian agribusiness, Banco do Brasil reaches all the segments, from the small producer to the large agro-industrial companies. The table below reveals this work, showing that while financing mini and small producers accounts for 88.5% of the total of contracts (27.2% of the amount contracted), the transactions with the other agents show a 72.8% share of the amount contracted. The information in the following table includes sums loaned during the current crop, but not efectively disbursed. This information is explained in this chapter's table 53. Table 51. Funds Released for the 09/10 Crop by Customer Size R$ million Qty. Contracts Qty. Contracts - % Amount Contracted Amount Contracted - % Mini 352, ,641,636, Small 393, ,469,543, Medium and Large Sized 96, ,809,384, Cooperatives ,529,038, Total 843, ,449,603, The table below shows the view by size of customer in relation to the total balance of the agribusiness loan portfolio. Table 52. Agribusiness Portfolio by Size R$ million Segment 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 Micro 10,099 10,181 10,871 11,212 11,083 11,262 Small 7,831 8,195 9,125 9,881 10,243 10,675 Medium and Large 41,411 39,688 40,786 43,011 43,152 40,952 Cooperatives 2,271 2,461 2,709 2,670 2,759 2,763 BNC Total 61,611 60,524 63,492 66,775 68,038 66, Banco do Brasil MDA 4Q09

70 In the figure below we present the distribution of the balance of the Agribusiness Loan Portfolio by type of client. R$ billion Individuals Businesses Figure 30. Agribusiness Loan Portfolio by Customer Next, the Agribusiness Loan Portfolio by Funding Sources is shown. R$ million Demand Deposits Saving Deposits FAT FCO BNDES/Finame Demais Dec/08 Mar/09 Jun/09 Sep/09 Dec/09 Figure 31. Agribusiness Loan Portfolio by Funding Sources The main source of funds for the agribusiness portfolio continued to be savings which in December/09 reached the sum of R$ 30,6 billion, as opposed to R$ 31,8 in the same period of It is emphasized that these resources account for 46.1% of the total. The Bank uses funding from Poupança Ouro (savings) and Demand Deposits, Fund for Worker Assistance - FAT, the Federal Treasury or Constitutional Fund for the Financing of the Center-West - FCO, for low-rate agricultural loans. In order to make this intermediation feasible, the National Treasury or the Constitution Fund pays the Bank an equalization fee which is the difference between the sum charged to the borrower and the funding costs, credit risk and administrative costs and taxes. Moreover, weighting factors are set for financing obtained with funds from demand and savings deposits. The weighting factor is a multiplier that helps to fulfill liabilities and raise revenues upon the release of funds in the Bank's cash for investments. The following figure shows a history of the revenues received by way of interest rate equalization and weighting factor Banco do Brasil MDA 4Q09

71 R$ million Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 Equalization Revenues Weighting Factors Figure 32. Equalization Revenues and Weighting Factors In this quarter the balance of equalization revenues, including weighting factor, grew 21.4% in comparison with the preceding quarter, following the increase of 10.9% in the balance of equalizable resources in the same period. In this quarter, the increase in equalizable resources occurred mainly in the investment lines (R$ 7,897 million). The table below evidences the distribution of equalizable funds from BB's agribusiness portfolio. Table 53. Equalizationable Resources from the Loan Portfolio R$ million Chg. % Sep/08 Dec/08 Mar/09 Jun/09 Sep/09 Dec/09 On Dec/08 On Sep/09 Equalizationable Resources 16,620 21,204 22,209 21,244 20,065 22, Costs 10,545 13,858 14,493 13,693 12,235 13,284 (4.1) 8.6 Investments 5,679 6,217 6,596 7,015 7,249 7, Marketing 396 1,129 1, ,068 (5.4) 83.6 Non-Equalizationable Resources 43,904 42,486 41,283 45,531 47,972 44, (7.9) Total Loan Portfolio 60,524 63,690 63,492 66,775 68,038 66, (2.4) 71 - Banco do Brasil MDA 4Q09

72 The Bank has mechanisms for mitigating risks from agriculture loan portfolio. For the current 2009/2010 crop, until December 2009, 67% of the costing operations (R$ 7,471 million) were contracted with the use of mitigators. Of this amount, R$ 3,206 million were guaranteed by Agricultural insurance from Proagro and R$ 4,265 million at the company Aliança do Brasil and at the reinsurance companies indicated below. The following chart shows the increase in percentage in the use of Agriculture Insurance and Proagro. R$ % 1.2% 6.9% R$ 11.2 R$ % 3.5% 13.5% 13.7% 46.0% 77% 23% With Proagro and PGPAF With Proagro With PGPAF Without Mitigation 19.9% Agricultural Costs = R$ 11.2 Working Capital = R$ 4.8 Family Agricultural Costs Businesses Agricultural Costs R$ % 27.3% 58.3% Investiment = R$ 3.4 Marketing = R$ 3.3 Agroindustrial Credit = R$ 1.7 Amounts in R$ billion Reinsurance % IRB 24 PARTNER RE 15 SWISS RE 15 SCOR RE 15 MUNCHENER 10 MAPFRE RE CATLIN RE 4 3 HANNOVER RE 3 EVEREST RE 1 TOTAL 90 With Insurance / Proagro Companies Risk / Cooperatives Without Insurance / Proagro Figure 33. Agricultural Insurance and Proagro The figure below evidences the growth of operations contracted with risk mitigators since the harvest of 2007/08. Crop 2007/2008 Crop 2008/2009 Crop 2009/ % 50% 38% 62% 33% 67% 62% Agricultural Costs with Mitigation Agricultural Costs without Mitigation Figure 34. Evolution of contracted operations with mitigation 72 - Banco do Brasil MDA 4Q09

73 The total sum established for the harvest of 2009/2010 is R$ 39,514 million. Of this amount, 55.4% has already been released up to December. The following table displays the 2009/2010 Harvest Plan, at estimated and realized values. Table /2010 Crop Plan 2009/2010 Crop R$ million Foreseen Realized Purpose Business Familiar Total Total % Realized (Jul/09 to Dec/09) Costs 22,702 5,700 28,402 14, Investment 2,412 3,700 6,112 3, Marketing 5,000-5,000 3, Total 30,114 9,400 39,514 21, We detail below the four key crops subject to agricultural funding, with the percentage share of funding for the 2009/2010 harvest and the concentration per state regarding each of these crops. Table 55. Costs Transaction Profile Soybeans Corn Rice Cotton 25.0% 11.7% 6.1% 1.0% PR 34.87% PR 21.21% RS 76.62% MT 41.09% RS 21.51% RS 22.81% SC 14.56% BA 11.20% GO 11.22% MG 18.74% MS 1.51% GO 15.57% MS 10.60% SC 20.16% PR 1.64% MS 15.14% 73 - Banco do Brasil MDA 4Q09

74 We show below a breakdown of price and cost of the corn and soybean crops for the 2009/2010 harvest. The margin is represented by the percentage of net revenues of the costs involved in each crop, i.e., the part designed for the producer. The figures regarding the plantations' price and costs are referenced to those of the Parana State, using its main municipalities for the calculation of a proportional average. % Margin Soybean R$/kg Evolution Price/Cost Soybean /05 05/06 06/07 07/08 08/09 09/10 Crops 04/05 05/06 06/07 07/08 08/09 09/10 Crops Price Cost Margin Corn Evolution Price/Cost Corn % /05 05/06 06/07 07/08 08/09 09/10 Crops R$/kg /05 05/06 06/07 07/08 08/09 09/10 Crops Price Cost Figure 35. Price/cost relation between soybean and corn 74 - Banco do Brasil MDA 4Q09

75 6.6 Analysis of Liabilities The volume of deposits taken by Banco do Brasil ended the quarter at R$ 337,564 million, growth of 3.2% in relation to the previous quarter and of 24.6% in relation to the same prior-year period. Money market borrowing ended December at R$ 160,821 million, growth of 4.7% over September and of 76.5% over December The consolidation of 50% of BV balance added R$ 12,239 million in deposits at the end of December, and R$ 12,384 million in money market borrowing. Still regarding BV, time deposits totaled R$ 11,300 million, or 92.3% of total deposits. The mix of liabilities presented alterations in the annual comparison, mainly due to the growth of the deposits base and the consolidation of BNC and BV numbers. At the end of 2008, deposits and money market borrowing represented 52.0% and 17.5% of total liabilities, respectively. At the end of 2009, these percentages became 47.6% and 22.7%, respectively. Table 56. Liabilities R$ million Mar/08 Jun/08 Sep/08 Dec/08 Mar/09 Jun/09 Sep/09 Dec/09 Deposits 189, , , , , , , ,564 Demand Deposits 44,142 43,603 42,955 51,949 47,276 49,075 50,107 56,459 Savings Deposits 48,112 49,096 52,693 54,965 70,567 69,011 72,233 75,742 Interbank Deposits 6,247 5,578 6,309 14,065 8,406 7,459 9,627 11,619 Time Deposits 90,939 96, , , , , , ,516 Investment Deposits Money Market Funding 99,716 93,097 85,339 91, , , , ,821 Foreign Borrowing 4,510 5,270 7,672 11,106 13,065 11,209 15,086 13,733 Domestic Onlending 18,250 19,255 19,640 22,436 22,220 22,626 26,761 31,390 Other Liabilities 76,558 76,844 87,887 95, , , , ,922 Shareholders Equity 25,407 26,371 27,889 29,937 30,859 32,360 33,661 36,119 Total Liabilities 414, , , , , , , ,549 The indicators of the following table show the relationship between funding sources and investments in Banco do Brasil. The Net Loan Portfolio / Total Funding index ended 2009 at 73.6%, same amount recorded at the end of 3Q09 and above the index of 70.4% observed in Cash equivalents, measured by the difference between the total funding and the net loan portfolio, reached R$ 100,713 million, growth of 13.7% in relation to 2008 and of 5.5% over September At the end of the quarter, cash equivalents represented 26.4% of Banco do Brasil's total funding Banco do Brasil MDA 4Q09

76 Table 57. Sourcers and Uses Balance Chg. % R$ million Dec/08 Sep/09 Dec/09 On Dec/08 On Sep/09 Funding Total 298, , , Total Funding 270, , , Domestic Onlending 22,436 26,761 31, Financial and Development Funds 2,458 4,052 4, FCO (Subordinated Debt) 11,772 16,409 18, Foreign Borrowing* 12,120 13,243 14, Compulsory Deposits (20,882) (26,468) (24,280) 16.3 (8.3) Net Loan Portfolio 210, , , Loan Portfolio 224, , , Allowance for Loan Losses (14,627) (20,013) (19,598) 34.0 (2.1) Disponibilidades 88,565 95, , Index - % Net Loan Portfolio / Total Deposits Net Loan Portfolio / Total Funding Available Funds / Total Funding (11.1) (0.3) * *Includes Foreign Borrowings, Obligations for Securities Abroad, Obligations for Foreign Onlendings and Hybrid Capital and Debt Instruments 76 - Banco do Brasil MDA 4Q09

77 6.7 Liquidity Analysis The liquidity of Banco do Brasil, determined by the difference between Liquidity Assets and Liabilities, attained R$ 128,138 million at the end of December This sum represents a reduction of 3.3% in the quarter but a growth of 38.3% in relation to the same prior-year period. R$ million 48,117 37,336 61,914 92, , , , ,138 Figure 36. Liquidity Balance In the quarter, the growth of 1.6% in the liquidity assets is due, mainly, to the expansion of 6.9% in the interbank investments. One important thing is that the securities operations (except linked to Bacen), registered decrease of 4.2% in the same period. These two lines together represented 97.4% of the total liquidity assets. In the other hand, the liquidity liabilities registered growth of 5.6% as opposed to September/2009. Table 58. Liquidity Balance Mar/08 Jun/08 Sep/08 Dec/08 Mar/09 Jun/09 Sep/09 Dec/09 R$ million Mar/08 Jun/08 Sep/08 Dec/08 Mar/09 Jun/09 Sep/09 Dec/09 Liquidity Assets (A) 154, , , , , , , ,578 Available Funds 4,790 5,181 6,847 5,545 7,516 6,212 8,340 7,843 Interbank Investments 72,689 54,283 71, , , , , ,398 Securities (except linked to Bacen) 76,602 76,546 75,624 72,902 95,208 93, , ,337 Liquidity Liabilities (B) 105,963 98,675 91, , , , , ,440 Interbank Deposits 6,247 5,578 6,309 14,065 8,406 7,459 9,627 11,619 Money Market Borrowing 99,716 93,097 85,339 91, , , , ,821 Liquidity Balance (A - B) 48,117 37,336 61,914 92, , , , , Banco do Brasil MDA 4Q09

78 6.8 Deposits and Money Market Funding Banco do Brasil's market funding reached R$ 498,385 billion at the end of 2009, a growth of 3.7% in the quarter and of 37.7% over the one recorded at the end of The year's income figures were influenced mainly by money market borrowing and by savings deposits, which rose respectively by 76.5% and 37.8%. Please note that with the exception of inter-bank deposits, all the funding lines grew over the last 12 months. Table 59. Deposits and Money Market Funding R$ million Mar/08 Jun/08 Sep/08 Dec/08 Mar/09 Jun/09 Sep/09 Dec/09 Demand Deposits 44,142 43,603 42,955 51,949 47,276 49,075 50,107 56,459 Saving Deposits 48,112 49,096 52,693 54,965 70,567 69,011 72,233 75,742 Interbank Deposits 6,247 5,578 6,309 14,065 8,406 7,459 9,627 11,619 Time and Investment Deposits 91,249 96, , , , , , ,745 Money Market Borrowing 99,716 93,097 85,339 91, , , , ,821 TOTAL 289, , , , , , , ,385 We present below the market shares of Banco do Brasil in deposits and money market funding of the Brazilian Banking Industry*. R$ million ,142 43,603 42, ,949 47,276 49,075 50,107 56, , , , , , , ,233 75,742 Mar/08 Jun/08 Sep/08 Dec/08 Mar/09 Jun/09 Sep/09 Dec/09 Demand Deposits Market Share - % Mar/08 Jun/08 Sep/08 Dec/08 Mar/09 Jun/09 Sep/09 Dec/09 Saving Deposits Market Share - % , , , , , , , , , , , , , , , ,385 Mar/08 Jun/08 Sep/08 Dec/08 Mar/09 Jun/09 Sep/09 Dec/09 Time Deposits Market Share - % Mar/08 Jun/08 Sep/08 Dec/08 Mar/09 Jun/09 Sep/09 Dec/09 Market Capitalization Market Share - % Figure 37. Market Share of BB Funding * The information about the participation in the Financial System are from the Central Bank website. The latest position in this system until the release ot this report was from Sep/ Banco do Brasil MDA 4Q09

79 6.8.1 Foreign Borrowing Except for the borrowing of the "Special" type, all foreign borrowing instruments recorded a growth in the quarter, which resulted in the 23.0% expansion in total foreign borrowings. The performance of the interbank market in 4Q09 increased the perception of recovery of liquidity and of the situation of the international financial system in general. This market was one of the main thermometers at the culmination of the financial crisis between September and October 2008, when virtually all interbank borrowing sources dried up. The recovery of the markets, associated with a constant improvement in the risk perception of the financial agents as regards BB and Brazil's economy, helped interbank funding occupy a leading position in the advance of foreign fundings. This modality advanced 28.1% in the quarter and 132.1% as compared with December Table 60. Foreign Borrowing (without BNC) US$ million Produtos Mar/08 Jun/08 Sep/08 Dec/08 Mar/09 Jun/09 Sep/09 Dec/09 Interbanking 2,709 2,951 3,019 2,707 3,838 3,900 4,907 6,285 Repo 3,074 3,101 2,855 3,441 2,832 1,588 2,425 2,609 Businesses 3,255 3,546 3,967 5,304 6,376 5,409 5,549 5,797 Special , Individuals 2,099 2,097 2,052 2,032 2,021 2,021 1,972 1,981 Issues 2,002 1,923 2,056 2,305 2,112 2,119 2,508 4,676 TOTAL 13,729 14,405 14,784 16,809 17,179 15,036 17,361 21,347 Another borrowing instrument abroad which should be highlighted in the mix of Banco do Brasil in 4Q09 was the issuance of securities. The issuance balance increased 86.4% in the quarter, reaching US$ 4,676 million. In October 2009, BB issued perpetual bonuses in the amount of US$ 1.5 billion. The bonuses are of the "junior class, non-cumulative subordinated perpetual" type, and will pay 8.5% per year in half-yearly coupons. The subordination characteristics of the transaction allowed BB to request from the Central Bank its classification as Tier I capital for purposes of calculation of the BIS ratio. Table 61. Foreign Issues Half-Yearly Volume in US$ million Term in years Cupom (%) Interest Interval Issue price Return for the Investor (%) Premium over Treasury Rating Program , ,260 Quarterly A-/A1 MT , ,911 Quarterly A-/A2 Visanet , ,777 Quarterly A-/A2 Visanet , ,550 Quarterly A-/A1 MT , ,500 Half-Yearly A2 Stand Alone ,000-7,95 Quarterly Baa3 Stand Alone , ,75 Half-Yearly Baa3 GMTN ** ,000 6 L3M+0,55 Quarterly L3M+0,55 - AAA/Aaa MT , ,25 Quarterly A-/A1 MT ,000 7 L3M+1,2 Quarterly L3M+1,2 - A-/A1 MT ,000 5 L6M+2,55 Half-Yearly L6M+2,55 - Baa3 GMTN ,500,000-8,5 Half-Yearly Baa2 Stand Alone 79 - Banco do Brasil MDA 4Q09

80 7 Analysis of Results 7.1 Net Interest Income Table 62. Net Interest Income Quarterly Flow Chg. % Annual Flow Chg. % R$ million 4Q08 3Q09 4Q09 On 4Q08 On 3Q On 2008 Financial Intermediation Income 20,412 16,048 17,984 (11.9) ,400 65, Loans 11,106 10,609 11, ,507 41, Leasing Securities 8,097 5,083 5,321 (34.3) ,496 21, Financial Derivatives (1,053) (664) (47) (95.6) (93.0) (1,283) (1,223) (4.7) Foreign Exchange Portfolio (47.3) (34.7) Compulsory Investments (49.4) 0.5 1, (57.3) Financial Income from Insur., Pension and Capital. Op (6.7) FX Gain (Loss) on Foreign Investments 711 (292) (74) - (74.8) 941 (1,042) - Other Op, Inc, of a Fin, Intermed, Nature (88.3) 392 2, Over Hedge 334 (216) (58) - (73.2) 334 (776) - Financial Intermediation Expenses (13,335) (7,729) (8,715) (34.6) 12.8 (33,885) (32,269) (4.8) Money Market Borrowing (8,432) (7,136) (7,997) (5.2) 12.1 (25,200) (29,759) 18.1 Borrowing, Assignments and Onlending (4,903) (593) (718) (85.4) 21.0 (8,685) (2,510) (71.1) Net Interest Income 7,077 8,320 9, ,515 33, The Net interest income(nii) - income from financial intermediation before provisions for credit risk - totaled R$ 9,268 million in 4Q09, an increase of 11.4% in comparison to the previous quarter, and of 31.0% in relation to 4Q08. In 2009, the net interest income was R$ 33,060 million, expansion of 34.9% over To enable a better understanding of the information, considering that in 2009 there was the acquisition of the controlling interest of Nossa Caixa and of 50.0% of the total capital of Banco Votorantim, we present below a list of the impacts of these corporate transactions on BB's Interest Income: Banco Votorantim (BV) BV's balance sheet items sensitized those of Banco do Brasil since September, and income accounts were recorded throughout 4Q09. To avoid distortions in the calculation of the indicators that evidence the spread, we segregated BV's assets and liabilities in September, since in 3Q09 the result of that Bank was not consolidated. However, in this quarter, however, the BV s performance accounts are considered, making part from the calculation of all rates established in chapters 7.1 to 7.4. Nossa Caixa (BNC) - As in the case of BV, we segregated the impact of the assets and liabilities of Nossa Caixa in March, since the equity consolidation started in that month, but the statement of income accounts only sensitized those of BB as from 2Q09, period in which all accounts of BNC were included on BB s accounting statements and integrated the contents and calculations established in Chapters 7.1 to 7.4. The growth of revenues from loan and lease operations merits a special emphasis in the quarter, which advanced respectively 12.8% and 44.7%. Such performance is directly associated with the expansion of the loan portfolio, which was benefited from the organic growth and from the loan revenues originated from the consolidation of Banco Votorantim. On the other hand, financial intermediation expenses recorded expansion of 12.8%. In the year 2009, the growth of the Interest Margin is a result of the consistent expansion both of income from loan operations, and of income originated from interbank investments and securities. As explained in more detail further on, the expansion of volumes sustained the growth of financial revenues. Although there was no expressive exchange rate oscillation inflating the financial intermediation income or expenses, it is important to stress the limitation of analyzing the captions that comprise the margin 80 - Banco do Brasil MDA 4Q09

81 individually. This occurs because exchange rate changes affect both the revenues and the financial intermediation expenses, but are recorded as a contra entry to hedging instruments which offset their effect on the income statement of BB. Therefore, revenues from foreign assets and loan operations denominated in foreign currencies are recorded as a contra entry to expenses on hedging transactions and vice-versa, in order for the effect on the NII to be null. There was no expressive effect in the last two quarters, but in 4Q08 the volatility of the foreign exchange rate produced a significant impact on various lines that form the margin. The tables below demonstrate the formation of the NII from the changes in the spread and from the growth in the volume of investments. It is possible to identify the impact of the reduction of spreads on revenues, and how this effect is being offset by the growth of volumes. Table 63. Analysis of Volume (Earning Assets) and Quarterly Spread 3Q09 and 4Q09 R$ million 3Q09 4Q09 Abs. Chg. Volume: Assets Earning Assets¹ 508, ,049 58,361 Net Interest Income 8,320 9, Spread - %² (0.0010) Gain/(loss) with volume 9, Gain/(loss) with spread 8,314 (5) Gain/(loss) with volume and spread (0.5922) (1) Average Balances (2) Net interest income/ (Earning Assets) Table 64. Analysis of Volume (Earning Assets) and Nine Months Spread 2008 and 2009 R$ million Abs. Chg. Volume: Assets Earning Assets¹ 351, , ,875 Net Interest Income 24,515 33,060 8,545 Spread - %² (0.3110) Gain/(loss) with volume 34,605 10,091 Gain/(loss) with spread 23,420 (1,095) Gain/(loss) with volume and spread (451) (1) Average Balances (2) Net interest income/ (Earning Assets) 81 - Banco do Brasil MDA 4Q09

82 Spread In annualized rates, the global spread (NII over average Earning Assets) ended 4Q09 at 6.7%, keeping the same level observed in the previous quarter and below the 7.2% observed in 4Q08. In the comparison between annual flows, the spread also exhibited reduction, from 7.0% in 2008 to 6.7% in In 2009 many factors affected the global spread of Banco do Brasil, including: The consolidation of Banco Nossa Caixa, which, as it has an expressive base of low-cost deposits (judicial deposits), presented a higher spread than that of BB; The decrease of the basic interest rate, which reduced the remuneration of the own securities portfolio; The change in the loan portfolio mix, with an increase of the relative share of operations with lower associated risk, and therefore, lower spread (such as payroll loans and vehicle financing); The consolidation of the interest of 50% in the capital of Banco Votorantim, which presents a lower global spread than that of Banco do Brasil, as it does not have a base of low-cost deposits and operates in segments characterized by lower risk and therefore, lower spread; Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q NII / (Earning Assets) Annualized Figure 38. NIM Analysis Table 65. Margin, Net of Interest and Profit Margin R$ million 4Q08 3Q09 4Q Average Earning Assets (AEA) 401, , , , ,841 Average Interest Bearing Liabilities (AIBL) 343, , , , ,224 Net Interest Gain (1) 6,132 7,883 8,533 22,018 30,606 Interest Income 19,366 15,528 17,161 55,625 62,549 Interest Expense (13,234) (7,645) (8,628) (33,607) (31,943) Net Interest Income Other Items (2) ,496 2,454 NII 7,077 8,320 9,268 24,515 33,060 AIBL / AEA % Interest Rate on AEA (3) (7)- % Interest Rate on AIBL (4) (7)- % Net Interest Rate (5) - % Adjusted NIM (6) (7) - % NIM (7) % (1) Defined as interest income less interest expenses. (2) Contains derivatives, debt assumption contracts, foreign exchange portfolio, recovery of write-offs, gold loans, credit guarantor fund, foreign exchange gain/loss abroad and other income of a financial intermediation nature (3) Total interest income divided by the average balance of assets generating income. (4) Total interest expenses divided by the average balance of liabilities generating expenses. (5) Difference between interest rate on AEA and interest rate on AIBL (6) Net interest gain divided by the average earning assets (7) Taxes are annualized 82 - Banco do Brasil MDA 4Q09

83 7.2 Analysis of Investments Loan and Lease Operation Revenues, disregarding recovery of write-offs, reached R$ 11,530 million in 4Q09, a growth of 12.7% in relation to 3Q09, and of 6.9% in relation to the same period of previous year. Disregarding the effect of exchange variation on operations under the terms of CMN Resolution 2770, these revenues amounted to R$ 11,609 million, with expressive growth both in the quarterly comparison and in relation to 4Q08, de 13.1% and 21.6% respectively. Table 66. Revenues from Loans Net of Exchange Impact (Res. 2,770) Quarterly Flow Chg. % Annual Flow Chg. % R$ million 4Q08 3Q09 4Q09 On 4Q08On 3Q On 2008 Loans and Leasing Revenues Average Balance * 199, , , , , Loans and Leasing Revenues 10,788 10,231 11, ,106 40, FX Impact in Loan Portfolio (Res. 2,770) 1,245 (38) (79) ,487 (835) - Loans and Leasing Rev. before FX Impact (Res. 2,770) 9,543 10,269 11, ,619 41, Annualized Interest Rate * Recovery of write-offs are not considered Spread by Portfolio The spread of loans contracted by Individual customers ended the quarter at 18.6%, as opposed to 20.6% in the previous quarter and 21.6% in 4Q08. The downslide observed since 2008 is a result of alterations in the loan portfolio, with an increase of concentration in operations of lower spread, with an emphasis on payroll loans and vehicle financing. In 4Q09 the consolidation of Votorantim intensified this movement, as its individual customer loan portfolio is concentrated precisely in these two credit lines. Operations with Business customers maintained the spread of 7.4% observed in the previous quarter, a rate 10 base points higher than that observed in the same period of The spread of agribusiness transactions exhibited recovery in the quarter, and reached 5.3%. 22.0% 21.6% 20.5% 21.2% 20.6% 18.6% 21.0% 18.7% 6.6% 7.3% 7.2% 7.5% 7.4% 7.4% 6.7% 7.2% 5.2% 5.6% 5.9% 5.5% 4.9% 5.3% 5.1% 5.3% 3Q08 4Q08 1Q09 2Q09 3Q09 4Q Individuals Businesses Agribusiness Figure 39. NIM by Loan Portfolio 83 - Banco do Brasil MDA 4Q09

84 Results with securities The result with securities and short-term interbank investments totaled R$ 5,321 million in 4Q09, a sum 4.7% higher than that recorded in the previous quarter, but 34.3% lower in relation to that observed in the same period of The recovery of revenues resulted from the trading of securities, besides the increase of revenues provided by the consolidation of Banco Votorantim, merit special emphasis in the quarter. The downslide of these revenues in the annual comparison results from the reductions organized by the Central Bank in the basic interest rate (SELIC) and from the currency appreciation observed in 4Q09 in relation to the closing of 3Q09 and 4Q08. As explained previously, the fluctuations in the exchange rate impact the different lines that constitute the margin, but without an effect on the Bank's net income. Table 67. Securities Income Quarterly Flow Chg. % Annual Flow Chg. % R$ million 4Q08 3Q09 4Q09 On 4Q08 On 3Q On 2008 Securities Income 8,097 5,083 5,321 (34.3) ,496 21, Fixed Income Securities 8,074 5,075 5,256 (34.9) ,452 21, Revaluation Curve 2,755 2,314 2,392 (13.2) 3.4 8,775 9, Income/Loss from Negotiation (84) Mark to Market 356 (107) (191) (238) - Interbank Accounts 2,808 2,852 2, ,655 12, Foreign Income 2, (99.9) 3, ,731 2 (99.9) Others The figure below presents the classification of BB's portfolio of securities by type of index. The classification below includes the portfolio of securities of Banco Nossa Caixa, but does not include the information of Banco Votorantim. 0.4% 0.3% 0.0% 22.3% 2.0% 75.0% Floating Fixed TR Dollar IGP-M IPCA Figure 40. Securities Portfolio by Index (Multiple Bank) 84 - Banco do Brasil MDA 4Q09

85 Table 68. Avg Balance of the BS accounts and info. on interest rates - Earning assets (quarterly) R$ million Average Balance 3Q09 Interest Annualized Rate (%) Average Balance Interest Annualized Rate (%) Earning Assets Available Funds in Foreign Currency Securities + Interbank Investments on Hedge 256,256 5, ,835 5, Loans + Leasing 238,008 10, ,174 11, Remunerated Compulsory Deposits 13, , Total 508,688 15, ,049 17, Non Earning Assets Tax Credits 21,429 22,325 Other Assets 73,461 79,939 Permanent Assets 20,220 24,327 Total 115, ,591 TOTAL ASSETS 623, ,640 4Q09 Table 69. Avg Balance of the BS accounts and info. on interest rates - Earning assets (annual) R$ million Average Balance Interest Annualized Rate (%) Average Balance Interest Annualized Rate (%) Earning Assets Available Funds in Foreign Currency 1, Securities + Interbank Investments on Hedge 154,383 20, ,751 21, Loans + Leasing 176,747 33, ,124 40, Remunerated Compulsory Deposits 19,809 1, , Total 351,967 55, ,841 62, Non Earning Assets Tax Credits 14,619 20,525 Other Assets 57,394 75,309 Permanent Assets 7,881 19,824 Total 79, ,658 TOTAL ASSETS 431, , Banco do Brasil MDA 4Q09

86 7.3 Analysis of Funding The average balance of the Interest Bearing Liabilities rose R$ 493,843 million in the 4Q09, growth of 13.2% in relation to the same period of previous year. In spite of the slight reduction in the average cost of borrowings (from 7.19% in 3Q09 to 7.17% in 4Q09), the expansion of volumes determined growth of 12.9% in expenses with interest in the period. Money Market Borrowings increased their relative share among Average Interest Bearing Liabilities from 26.8% in 3Q09 to 29.5% in 4Q09. The increase of volume, associated with the growth of the annualized rate of these operations, resulted in the increase of R$ 636 million in the interest expenses associated with this instrument, or 26.1%. Money Market Borrowing accounted for 64.7% of the increase of interest expenses in the period. The consolidation of Banco Votorantim largely explains the increase in interest expenses observed in the quarter. If the consolidation did not exist, in addition to the reduction in financial expenses, there would also be a reduction in the Average Interest Bearing Liabilities. This happened because BB's funding mix exhibits a higher concentration of low-cost deposits than that observed in the balance sheet of Banco Votorantim, which recorded an average rate of 9.0% on interest-bearing liabilities in 4Q09. Table 70. Avg Balances of the BS accounts and info. on int rates Int.Bearing Liabilities (quarterly) R$ million Average Balance Interest Annualized Rate (%) Average Balance Interest Annualized Rate (%) Interest Bearing Liabilities Saving Deposits 71,552 (1,119) ,062 (1,152) 6.4 Interbank Deposits 10,033 (180) ,403 (163) 6.4 Time Deposits 184,537 (3,287) ,014 (3,451) 7.2 Money Market Borrowing 116,849 (2,437) ,679 (3,073) 8.7 Foreign Borrowing 4,708 (41) 3.6 6,775 (60) 3.6 Onlending 26,408 (427) ,346 (539) 7.3 Financial and Development Funds + Subordinated Debt 18,977 (125) ,771 (118) 2.2 Foreign Securities Borrowing 3,064 (30) 3.9 6,520 (53) 3.3 Mortgage-backed Security 308 (0) 0.0 1,273 (18) 5.8 Total 436,434 (7,645) ,843 (8,628) 7.2 Other Liabilities - Demand Deposits 49,955 52,430 Other Liabilities 104, ,108 Shareholder s Equity 32,627 35,259 Total 187, ,797 3Q09 TOTAL LIABILITIES 623, ,640 4Q Banco do Brasil MDA 4Q09

87 Like in the quarterly view, in 2009 there was a reduction of the annualized average rate in relation to the same period of However, there was strong expansion in the average balance of these liabilities, which explains the growth of interest expenses in the period. Table 71. Avg Balances of the BS accounts and info. on int rates Int.Bearing Liabilities (annual) R$ million Average Balance Interest Annualized Rate (%) Average Balance Interest Annualized Rate (%) Interest Bearing Liabilities Saving Deposits 50,347 (3,868) ,410 (4,406) 6.4 Interbank Deposits 6,776 (432) ,269 (788) 7.7 Time Deposits 111,240 (10,582) ,790 (13,452) 7.5 Money Market Borrowing 91,309 (9,825) ,837 (10,639) 9.2 Foreign Borrowing 3,704 (6,915) ,405 (192) 3.5 Onlending 19,690 (1,282) ,519 (1,788) 6.5 Financial and Development Funds + Subordinated Debt 13,119 (487) ,622 (530) 2.8 Foreign Securities Borrowing 2,381 (215) 9.0 3,833 (129) 3.4 Mortgage-backed Security (18) 3.4 Total 298,703 (33,607) ,224 (31,943) 7.4 Other Liabilities Demand Deposits 43,307 48,397 Other Liabilities 63, ,319 Shareholder s Equity 26,838 32,559 Total 133, ,275 TOTAL LIABILITIES 431, , Banco do Brasil MDA 4Q09

88 7.4 Analysis of Volume and Spread The table below shows the appropriation of changes in interest income and expenses due to the change in the average volume of earning assets and interest bearing liabilities and the change in the average interest rate on such assets and liabilities, in the periods under analysis. The changes in volume and interest rate were calculated based on changes in average balances in the period and the changes in the average interest rates on assets generating income and liabilities generating expenses. The Average Rate variation was calculated by the variation in the interest rate in the period multiplied by the average quantity of assets generating income or by the average quantity of liabilities generating expenses in the first period. The Net Variation is the difference between the interest income of the present period and that of the previous period. The variation by Average Volume is the difference between the Net Variation and that resulting from the Average Rate. By analyzing the interest income that remunerated the earning assets in 4Q09, both in relation to the previous quarter and in comparison with the same period of 2008, it is observed that the volume effect has sustained the growth of these revenues over time. The growth of income resulting from the expansion of volumes is being partially offset by the shrinkage of average rates. The same movement can be observed in interest expenses. Interest expenses did not keep up with the vigorous expansion of average liabilities in a proportionate manner, on account of the decline of the annualized average rate, which ended 4Q09 at 7.2%, same level observed in 3Q09, but with a strong reduction in relation to the 16.3% observed in 4Q08. We should again emphasize that, when we analyze 4Q09 in comparison with 4Q08, in the last quarter of 2008 there was a considerable volatility in the exchange rate, which also inflated both financial intermediation income and expenses, hampering the comparison of each line. Table 72. Int. increase and decrease (Inc. and Exp.) due to changes in Volume and Rates (quarterly) R$ million 4Q09/3Q09 Average Average Volume (1) Rate (2) Net Change (3) 4Q09/4Q08 Average Average Volume (1) Rate (2) Net Change (3) Earning Assets Available Funds in Foreign Currency (90) Securities + Interbank Investments on Hedge 431 (193) 238 1,819 (4,595) (2,775) Loans + Leasing 1,557 (258) 1,299 3,178 (2,435) 743 Remunerated Compulsory Deposits (30) 32 1 (79) (130) (209) Total 1,766 (133) 1,634 5,020 (7,224) (2,204) Interest Bearing Liabilities Saving Deposits (39) 5 (34) (314) Interbank Deposits (6) (11) (15) (26) Time Deposits (219) 55 (164) (924) 1, Money Market Borrowing (608) (28) (637) (1,157) 814 (342) Foreign Borrowing (18) (0) (19) (18) 4,312 4,293 Onlending (70) (43) (113) (146) 40 (106) Financial and Development Funds + Subord. Debt (15) 22 7 (42) 40 (2) Foreign Securities Borrowing (28) 5 (23) (25) Mortgage-backed Security (14) (4) (18) (15) (3) (18) Total (1,003) 20 (983) (2,633) 7,239 4,606 (1) Net Change - Average Rate (2) ((Interest Current Period / Balance Current Period) x Balance Previous Period) - (Interest Previous Period) (3) Current Interest - Interest for Previous Period 88 - Banco do Brasil MDA 4Q09

89 The annual analysis ratifies the perception that the growth of the financial margin is based on the expansion of the Bank's business. The average volume effect, mainly the growth of loan operations, has brought about constant growth of financial income. On the other hand, these earnings are being partially annulled by the reduction of average rates. Table 73. Int. increase and decrease (Inc. and Exp.) due to changes in Volume and Rates (annual) R$ million 2009/2008 Average Volume (1) Average Rate (2) Net Change (3) Earning Assets Available Funds in Foreign Currency (87) Securities + Interbank Investments on Hedge 8,046 (7,192) 854 Loans + Leasing 10,120 (2,983) 7,137 Remunerated Compulsory Deposits (495) (599) (1,094) Total 18,239 (11,315) 6,924 Interest Bearing Liabilities Saving Deposits (1,163) 625 (538) Interbank Deposits (268) (88) (356) Time Deposits (5,129) 2,259 (2,870) Money Market Borrowing (2,253) 1,439 (814) Foreign Borrowing (60) 6,784 6,724 Onlending (509) 3 (506) Financial and Development Funds + Subord. Debt (157) 114 (43) Foreign Securities Borrowing (49) Mortgage-backed Security (14) (5) (18) Total (9,765) 11,429 1,664 (1) Net Change - Average Rate (2) ((Interest Current Period / Balance Current Period) x Balance Previous Period) - (Interest Previous Period) (3) Current Interest - Interest for Previous Period 89 - Banco do Brasil MDA 4Q09

90 7.5 Provision for Credit Risk The analysis of the provision for losses included in this chapter already takes into account the figures of Banco Nossa Caixa and Banco Votorantim. Table 74. Net Financial Margin Quarterly Flow Chg. % Annual Flow Chg. % R$ million 4Q08 3Q09 4Q09 On 4Q08 On 3Q On 2008 Net Interest Income 7,077 8,320 9, ,515 33, Allowance for Loan Losses (2,240) (3,017) (2,950) 31.7 (2.2) (6,799) (11,629) 71.1 Net Financial Margin 4,837 5,303 6, ,716 21, The net financial margin is obtained by deducting expenses with allowances for loan losses from the net interest income. During 4Q09, Allowance for Loan Losses, even considering the balance in BV (R$ million) declined by 2.3%, reflecting the general improvement in the economy in the course of The improved net interest income is explained above all by the rise in financial intermediation revenues resulting from the inclusion of BV's income figures, which fact added close to R$ 620 million to that item. In a 12-month comparison, the increase seen in the Allowance for Loan Losses is explained by the loan portfolio's expansion (33.8%), the rising default levels owing to world economic issues, and expenses occurred in BV and BNC. The ratio between expenses of provisions and the average total portfolio - both accumulated in 12 months - went from 3.6% in 4Q08 to 4.6% in 4Q09. During 4Q09, the relation between quarterly provisioned expenses and the average loan portfolio for the period was below that witnessed for the preceding quarter, and stood at 1.0%, the same level as on December Table 75. Allowance for Loan Losses Expenses over Portfolio R$ million 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 (A) Allowance for Loan Losses - Quarterly (1,534) (1,687) (1,338) (2,240) (2,491) (3,172) (3,017) (2,950) (B) Allowance for Loan Losses - 12 Months (5,483) (5,934) (6,056) (6,800) (7,757) (9,241) (10,919) (11,629) (C) Loan Portfolio 172, , , , , , , ,829 (D) Average Portfolio 3 Months 166, , , , , , , ,405 (E) Average Portfolio 12 Months 153, , , , , , , ,888 Expenses over Portfolio (A/D) - % Expenses over Portfolio (B/E) - % Banco do Brasil MDA 4Q09

91 The figure below details the allowance for loan losses, segregating the minimum provisions required by CMN Resolution 2,682/99 from the total booked. A decrease can be observed in the volume of provisions required, which dropped from R$ 16,167 million in September 2009 to R$ 15,835 million in December The Total Provision (Required + Additional) also presented decrease (2.4%) in relation to 3Q09, in line with the improvement of the Brazilian economy. Yet in 12 months, growth was of 36.2%, explained chiefly by the loan portfolio's growth (33.8%). Without the BV effect, growth would have been of 31.2% in 12 months, a 3.7% decline as compared to September R$ million 11,165 11,187 10,694 1, ,604 10,308 10,468 13,673 14,674 17,759 19,070 18,617 2,903 2,782 1,640 2,867 1,594 12,079 13,034 14,892 16,167 15,835 Mar/08 Jun/08 Sep/08 Dec/08 Mar/09 Jun/09 Sep/09 Dec/09 Required Provision Additional Provision Total Provision Figure 41. Allowances Breakdown 91 - Banco do Brasil MDA 4Q09

92 The loan portfolio's risk level in December 2009 improved if compared to September 2009, 91.6% of transactions were rated at the AA-C risk level, against 91.0% on September 2009 and 90.7% on December Transactions rated at the AA-C level in the Brazilian Banking Industry ended December 2009 at 91.0%, a level below those witnessed at BB. Table 76. Loan Portfolio by Level of Risk R$ million Dec/08 Sep/09¹ Dec/09¹ Balance Provision Share % Balance Provision Share % Balance Provision Share % BI² AA 63, , , A 42, , , B 73, , , C 24, , , D 8, , , E 2, , , F 1, , , G 1, , ,480 1, H 7,079 7, ,601 10, ,118 10, Total 224,808 12, ,517 16, ,829 15, AA-C 203,928 1, ,822 1, ,500 2, D-H 20,879 10, ,695 14, ,329 13, ¹ Banco Nossa Caixa and Banco Votorantim are included ² Prior data from December/2009. The average loan portfolio risk, considering the required provisions, was of 5.3% in December 2009, 40 base points below that witnessed in September 2009, in line with the December 2008 level (date of the worsening world financial and economic crisis) of 5.4% at BB. The past due loans + 15 days of the loans portfolio amounted to R$ 15,457 million, reaching 5.1% of the total portfolio in Dec/09. The past due loans + 60 days reached 3.7%, 90 basis points above that observed in December The past due loans + 90 days reached 3.3%, lower than the 3.6% recorded in September 2009 and the 4.4% presented by the Brazilian Banking Industry Banco do Brasil MDA 4Q09

93 Table 77. Delinquency Ratio R$ million 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09¹ 3Q09³ 4Q09 Loan Portfolio 172, , , , , , , ,829 Loans overdue 7,574 7,089 7,414 9,019 10,819 14,177 19,625 20,381 Past Due Loans/Loan Portfolio Past Due Loans + 15 days 7,521 6,899 7,376 8,951 10,692 13,204 16,571 15,457 Past Due Loans + 15 days/loan Portfolio Past Due Loans + 60 days 4,907 5,323 5,234 6,267 7,450 9,485 11,838 11,192 Past Due Loans + 60 days/loan Portfolio Past Due Loans + 90 days 4,164 4,689 4,471 5,305 6,197 8,299 10,399 9,783 Past Due Loans + 90 days/loan Portfolio Write-off 1,164 1,316 1,342 1,229 1,606 1,888 2,377 3,402 Recovery of Write-offs² (422) (425) (400) (467) (357) (802) (686) (847) Net Loss ,250 1,086 1,691 2,555 Net Loss/Loan Portfolio - % annualized Provision 10,694 11,165 11,187 13,673 14,674 17,759 19,070 18,617 Allowance/Loan Portfolio Allowance/Past Due Loans + 15 days - % Allowance/Past Due Loans + 60 days - % Allowance/Past Due Loans + 90 days - % ¹ Considers BNC. ² Considers credit assignment for R$ 271 million on 2Q09, R$ 119 million on 3Q09 and R$ 242 million on 4Q09. ³ Considers BV. The previous table shows numbers sensitized by BV s figures. In the 4Q09, excluding BV s effects, increase of the past due of loan portfolio would be at 6.6%, 280 basis points above that of December The volume in the past due loans + 15 would total R $ 13,573 million, reaching 4.9% on 4Q09. The past due loans + 60 days was 3.7%, 90 basis points above that of December The past due loans + 90 days would be 3.3% higher than the 2.4% observed in December The net loss in 4Q09 was impacted by R$ million from BV of which R$ refer to write-offs and $ 17.9 million referred to recovery. The following graph shows the monthly behavior of delinquency rates in Banco do Brasil's domestic loan portfolio, without Banco Nossa Caixa and Banco Votorantim, of the past due loans + 15 and This graph shows us that the delinquency peak took place in August 2009, a change in the growth trend for December Jan/09 Feb/09 Mar/09 Apr/09 May/09 Jun/09 Jul/09 Aug/09 Sep/09 Oct/09 Nov/09 Dec/09 ICRED_15 ICRED_90 Figure 42. Past due Loans + 15 and 90 days 93 - Banco do Brasil MDA 4Q09

94 The graph below shows the relation between the required provision by the past due loans + 90 of the Bank and of the Banking Industry. In comparison with the Banking Industry (BI), it can be observed that the Bank has a level of provision required that is more than sufficient to cover the past due loans Considering the total allowance (required + additional), the past due loans + 90 allowance coverage rate ended December 2009 at 173.8% Mar/08 Jun/08 Sep/08 Dec/08 Mar/09 Jun/09 Sep/09 Dec/09 90 Days BB 90 Days BI Figure 43. Allowance/Past Due Loans +90 days BB x BI (%) With the improvement of conjectural indicators of Brazilian economy, the allowance balance decreased in December 2009 in relation to September The decline of the average risk in BB was of 40 base points from September 2009 to December 2009, as against the 30 base point decline in the Banking Industry, as found in the table below: Table 78. Average Portfolio Risk Sep/08 Dec/08 Mar/09 Jun/09 Sep/09 Dec/09 Average Risk BB Average Risk BI Banco do Brasil MDA 4Q09

95 7.5.1 Retail Loan Portfolio During this quarter the retail loan portfolio was reorganized. The small and micro enterprises portfolio (SMEs) was segregated from retail business and shown separately in a specific chapter (chap ). Hence, the retail portfolio now consists practically of operations with individuals, without taking into consideration the balance of transactions arising from the takeover of BNC and the partnership with BV. The Retail Loan Portfolio grew 32.5% in Dec/09 in relation to the same period in the previous year and 8.6% in relation to September The operations with the largest impact on this result were Consumer lending (CDC) and Vehicle Financing in the Individual client segment, with increase of 36.8% and 40.8% in the Dec-08/Dec-09 period, respectively. Another factor that contributed towards the growth of the portfolio in the individual segment were the portfolio acquisitions. In the period, only BB (without the consolidation of the figures of BNC and BV) holds a balance of purchased portfolio of R$ 3,003 million in payroll loan portfolios and R$ 2,668 million in vehicle financing portfolios. Table 79. Retail Loan Portfolio by Level Risk Dec/08 Sep/09 Dec/09 R$ million Balance Provision Share Balance Provision Share Balance Provision Share AA A 3, , , B 24, , , C 12, , , D 2, , , E F G H 2,123 2, ,236 2, ,345 2, Total 47,323 3, ,737 3, ,700 3, AA-C 40, , , D-H 6,369 3, ,981 2, ,165 3, BNC and BV are not considered 95 - Banco do Brasil MDA 4Q09

96 The retail portfolio's average risk in December 2009 declined 10 basis points against the figure recorded in September 2009, and 190 above the same period in The movement of Allowance for Loan Losses of the retail portfolio is detailed in the table below: Table 80. Changes in the Allowance Retail R$ million 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 Retail Loan Portfolio 41,320 47,323 49,864 53,756 57,737 62,700 Initial Allowance 2,865 3,127 3,733 3,885 3,511 3, Risk Migration , a) Risk Deterioration 953 1,228 1,153 1,292 1,240 1,292 b) Risk Improvement (559) (551) (402) (183) (845) (807) 2 New Transactions Write-offs (525) (487) (624) (754) (883) (799) Total ( ): (244) (55) Other Impacts* (536) (1,262) Final Allowance** 3,127 3,733 3,885 3,511 3,544 3,732 Allowance Required by CMN Resolution 2,682 3,127 3,733 3,885 3,511 3,544 3,732 Provision Flow - R$ million (374) a) Added Provision b) Provision Expenses Provision / Portfolio - % Provision Flow / Portfolio - % (0.7) * Amortization, settlement, release of installments and debit from charges. Does not consider Banco Nossa Caixa and Banco Votorantim operations. Vintage We present the vintage of the individual loan portfolio in the graphs below. This methodology, known abroad as Vintage, affords greater detailing and closer to the portfolio than traditional indicators. Vintage makes possible to monitor how the default of the set of operations contracted in a particular period behaves over time. In the first graph, for example, the monitoring is performed in the quarterly view. The lines show how the delinquency of operations contracted in each quarter behaved in the subsequent periods. The longer lines, therefore, refer to the oldest monitoring period. In the case of the graphs below, we consider operations overdue for more than 90 days at default, and for determination of the loan portfolio for individual clients, the Overdraft accounts and Credit Card operations and Vehicle financing do not appear in these graphs. The monitoring shows how the operations contracted most recently present a more favorable default curve than those contracted at the beginning of the monitoring. This result mirrors the constant optimization in the credit analysis, concession and monitoring models Banco do Brasil MDA 4Q09

97 Delinquency 90 days Months crop Figure 44. Quarterly Vintage The second graph contains the vintage with annual periodicity, facilitating the viewing and interpretation of data. The changing curve for the 2004 crop resulted from credit assignments. Delinquency 90 days Months crop Figure 45. Annual Vintage 97 - Banco do Brasil MDA 4Q09

98 In the graphs below, we added detailing of the vehicle financing portfolio, segmented by the operation contracting origin: Arena I - operations contracted in the sphere of the Bank's branches; Arena II - operations contracted in the sphere of associated vehicle dealerships. In the graph below we emphasize the vehicle financing portfolio contracted by the Bank's branches: Delinquency 90 days Months crop Figure 46. Annual vintage - Vehicle Financing Portfolio - Arena I In this graph we emphasize the vehicle financing portfolio contracted by automobile dealing companies: Delinquency 90 days crop Months Figure 47. Annual vintage - Vehicle Financing Portfolio - Arena II 98 - Banco do Brasil MDA 4Q09

99 7.5.2 SMEs Loan Portfolio Since the fourth quarter, we present the SMEs loan portfolio separately. Until 3Q09 this portfolio appeared inside the Retail Portfolio. Foreign trade transactions by MSEs are not included in this portfolio. The SME loan portfolio rose by 30.2% over the last 12 months and 11.8% as against 3Q09. This performance is explained by BB Giro Empresa Flex transactions which rose to R$ 8.4 billion, a 63.4% rise if compared to 4Q08. By late December 2009, transactions rated as AA to C risk levels showed an 80 base-point improvement as compared to September 2009, and accounted for 90.1% of the portfolio's total balance. Table 81. Small and Micro Enterprise Loan Portfolio Dec/08 Sep/09 Dec/09 R$ million Balance Provision Share Balance Provision Share Balance Provision Share AA 5, , , A 8, , , B 13, , , C , D , E F G H ,874 1, ,766 1, Total 30,316 1, ,311 2, ,478 2, AA-C 28, , ,606 5, D-H 2,256 1, ,776 2, ,828 10, BNC and BV operations are not considered The following table details the changes in Allowance for Loan Losses for the SMEs businesses Portfolio: Table 82. Changes in the Allowance SMEs R$ million 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 Retail Loan Portfolio 27,648 30,316 31,637 33,294 35,311 39,478 Initial Allowance 1,086 1,221 1,484 1,792 2,309 2, Risk Migration a) Risk Deterioration , b) Risk Improvement (256) (313) (399) (437) (565) (833) 2 New Transactions Write-offs (254) (285) (394) (412) (531) (815) Total ( ): (567) Other Impacts* (14) Final Allowance** 1,221 1,484 1,792 2,309 2,625 2,595 Allowance Required by CMN Resolution 2,682 1,221 1,484 1,792 2,309 2,625 2,595 Provision Flow - R$ million (30) a) Added Provision b) Provision Expenses Provision / Portfolio - % Provision Flow / Portfolio - % (0.1) BNC and BV operations are not considered 99 - Banco do Brasil MDA 4Q09

100 7.5.3 Commercial Loan Portfolio The corporate portfolio reflected growth of 8.8% in Dec/09 over Sep/09 and of 18.1% over Dec/08. The business loan portfolio is strongly influenced by the entering into and settlement of operations in material amounts with large clients. At the end of December 2009, operations classified at risk levels AA to C exhibited a downslide of 30 basis points compared to September 2009, representing 96.2% of the total Portfolio. Table 83. Commercial Loan Portfolio by Level Risk Dec/08 Sep/09 Dec/09 R$ million Balance Provision Share Balance Provision Share Balance Provision Share AA 25, , , A 9, , , B 10, , , C , , D , E F G H Total 48, ,573 1, ,189 1, AA-C 47, , , D-H 1, , , BNC and BV operations are not considered The following table details the changes in Allowance for Loan Losses for the Commercial Portfolio. Table 84. Changes in the Allowance Commercial R$ million 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 Commercial Loan Portfolio 44,336 48,422 48,367 49,889 52,573 57,189 Initial Allowance , Risk Migration a) Risk Deterioration b) Risk Improvement (93) (118) (198) (53) (133) (295) 2 New Transactions Write-offs (54) (63) (60) (74) (75) (180) Total ( ): Other Impacts¹ (14) (141) 54 (143) (82) (51) Final Allowance ,005 1,085 Allowance Required by CMN Resolution 2, ,005 1,085 Changes in the Provision - in R$ million a) Additional Provision² b) Provision Expense Provision / Portfolio - % Changes in the Provision - % of Portfolio ¹ Amortization, settlement, release of installments and debit from charges. ² Additional Provision allocated to the agribusiness loan portfolio BNC and BV operations are not considered Banco do Brasil MDA 4Q09

101 7.5.4 Agribusiness Loan Portfolio The agribusiness portfolio grew 3% (Dec/08-Dec/09). In December 2009 the loans ranked at risk levels AA-C accounted for 87.8% of the portfolio, 180 basis points higher than the number presented in December The relationship between the provisions required (CMN Resolution 2,682) and the balance of operations went from 7.4% in 3Q09 to 7.0% in 4Q09, 40 base points below the results observed in 3Q09 and 50 base points above the results observed in 4Q08. Table 85. Portfolio with and without Roll Over Agribusiness Dec/08 Sep/09 Dec/09 R$ million Balance Provision Share Balance Provision Share Balance Provision Share AA 13, , , A 13, , , B 19, , , C 7, , , D 3, , , E 1, , , F G H 2,844 2, ,326 3, ,987 2, Total 63,690 4, ,237 4, ,571 4, AA-C 54, , , D-H 8,946 4, ,545 4, ,003 4, BNC and BV operations are not considered The following table details the changes in Allowance for Loan Losses for the Portfolio Agribusiness. Table 86. Changes in the Allowance Agribusiness R$ million 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 Agribusiness Loan Portfolio 60,524 63,690 63,492 66,775 67,237 65,571 Initial Allowance 4,665 4,329 4,784 5,087 5,042 4, Risk Migration (142) (315) a) Risk Deterioration b) Risk Improvement (387) (309) (226) (631) (1,064) (1,214) 2 New Transactions 874 1, , Write-offs (395) (217) (357) (288) (527) (944) Total ( ): 613 2,201 1,264 1, (695) Other Impacts¹ (949) (1,745) (961) (1,201) (288) 355 Final Allowance 4,329 4,784 5,087 5,042 4,950 4,610 Allowance Required by CMN Resolution 2,682 4,329 4,784 5,087 5,042 4,950 4,610 Changes in the Provision - in R$ million a) Additional Provision² (332) - - b) Provision Expense (41) Provision / Portfolio - % Changes in the Provision - % of Portfolio (0.1) (1)Amortization, settlement, release of installments and charge debt (2)Additional Provision allocated to the agribusiness loan portfolio BNC and BV operations are not considered The average risk of the portfolio is strongly influenced by the operations of 2005 to 2007 crop extended with total balance of R$ 11,743 million. In the following table, the Agribusiness Loan Portfolio is divided in extended and unextended operations Banco do Brasil MDA 4Q09

102 Table 87. Portfolio with and without Roll Over - Agribusiness Risk Balance Portfolio Without Roll Over Allowance for Loan Losses Past Due_90 Past Due 90/ Ballance² Balance Portfolio with Roll Over Allowance for Loan Losses Past Due_90 Past Due 90/ Ballance² AA 10, ¹ - 1,056-33¹ - A 17, B 16, , C 5, , D 1, , E F G H 1,098 1, ,889 1, Total 53,908 1, ,743 2,635 1, (1) Overdue operations at level AA refer to credit with third party risk (2) The delay resulting from overdue operations with third party risk was not included in the calculation of the rate According to the table above, transactions overdue for more than 90 days represent 1.5% of the total unextended portfolio. If we compare this indicator to the extended operations, there is a gap of only 740 basis points. In the table below we present the balances, rate of default 90 days and average risk of the agribusiness portfolio segmented in total portfolio, extended and not extended Banco do Brasil MDA 4Q09

103 Table 88. Rates of the Agribusiness Portfolio R$ million 4Q08 1Q09 2Q09 3Q09 4Q09 Loan Portfolio 63,691 63,492 66,775 67,237 65,651 Provision 4,785 5,087 5,042 4,950 4,611 Past Due Loans + 90 days 877 1,174 1,786 2,588 2,146 Past Due Loans + 90 days/loan Portfolio - % Allowance/Loan Portfolio - % Write-Off Extended Operations BB Risk + Third Parties 14,445 14,684 14,648 14,278 11,743 Provision 2,598 2,755 2,711 2,939 2,635 Past Due Loans + 90 days ,401 1,076 Transactions overdue + 90 days/total Portfolio (%) Provision/Extended Operations - % Write-Off Unextended Operations BB Risk + Third Parties 49,246 48,807 52,127 52,959 53,908 Provision 2,186 2,336 2,331 2,011 1,976 Past Due Loans + 90 days -% ,047 1,187 1,070 Transactions overdue + 90 days/unextended operations - % Provision/Unextended Operations - % Write-Off Extended Operations BB Risk 13,102 13,366 13,431 13,077 10,951 Provision 2,598 2,755 2,711 2,939 2,635 Past Due Loans + 90 days -% ,401 1,076 Transactions overdue + 90 days/unextended operations - % Provision/Unextended Operations - % Write-Off Unextended Operations BB Risk 46,471 46,021 49,315 50,321 52,078 Provision 2,186 2,336 2,331 2,011 1,976 Past Due Loans + 90 days -% ,047 1,187 1,070 Transactions overdue + 90 days/unextended operations - % Provision/Unextended Operations - % Write-Off Simulation Operations not Extended without drag effect of Extended Operations a- BB Risk + Third Parties ,807 52,127 52,959 53,908 b- Provision 995 1,093 1,243 1,209 1,219 Average Risk (b/a) c- BB Risk ,021 49,315 50,321 52,078 d- Provision 995 1,093 1,243 1,209 1,219 Average Risk (d/c) In the rate calculation, the delay resulting from overdue operations with third party risk was included in the calculation of the rate BNC and BV operations are not considered The average risk of the extended operations in 4Q09 grew 160 base points, from 22.5% in 3Q09 to 24.1% in 4Q09. CMN Resolution 2682/99, which regulates risk classification and the creation of allowance for loan losses, establishes the maintenance of risk of the operations renegotiated at the same risk level identified at the time of renegotiation. As a result of these rules, renegotiated transactions increased the loan portfolio's average risk. A simulation performed with BB risk transactions, after removing the drag effect caused by extended loans, shows that there would be a 3.8% to 2.3% decline in average risk in 4Q Banco do Brasil MDA 4Q09

104 In the agribusiness portfolio without extensions, R$ 1.83 billion refers to third-party risk transactions. Disregarding these operations, the average risk of the unextended portfolio rises from 3.7% to 3.8% in 4Q09 (unextended portfolio) and from 2.26% to 2.34% (unextended portfolio without drag effect), respectively. In the figure below the agribusiness portfolio is segregated in rescheduled and non-rescheduled operations, by appropriation and respective shares. 4Q09* 17.4% Cost 34.1% Investiment 49.7% Refinancing 16.3% Without Roll Over: R$ 10.9 billion Average Risk:24.1% 82.6% Portfolio with Portfolio without Roll Over Roll Over Cost 34.9% Investiment 60.0% Marketing 5.1% Without Roll Over: R$ 52.1 billion Average Risk:3.8% W/O Roll Over Effect:2.3% * AgribusinessPortfolio without third party risk Figure 48. Stratified Agribusiness Portfolio Banco do Brasil MDA 4Q09

105 7.5.5 Foreign Trade Loan Portfolio The foreign trade finance portfolio recorded a decrease of 22.4% (Dec/08 Dec/09), partially justified by the 25.5% appreciation of the real against the dollar in the same period. Loans rated at levels of risk AA to C came to 95.8% and those rated as D-H to 4.2% in Dec/09. Table 89. Foreign Trade Loan Porfolio by Level Risk Dec/08 Sep/09 Dec/09 R$ million Balance Provision Share Balance Provision Share Balance Provision Share AA 9, , , A 3, , , B 2, , , C , , D E F G H Total 17, , , AA-C 16, , , D-H BNC and BV operations are not considered The table below shows the effects of the global risk of the Foreign Trade Loan Portfolio on provisions, the provision vs. portfolio ratio of which pushed from 180 base points of 0.9% in 4Q08 to 2.7% in 4Q09 and 40 basis points in relation to the last quarter. Table 90. Changes in Allowance Foreign Trade R$ million 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 Foreign Trade Loan Portfolio 12,424 17,225 17,384 15,732 14,522 13,361 Initial Allowance Risk Migration (6) (62) a) Risk Deterioration b) Risk Improvement (42) (17) (72) (13) (60) (157) 2 New Transactions Write-offs (30) (16) (2) (54) (30) (70) Total ( ): Other Impacts¹ (172) (62) 40 (83) (48) (7) Final Allowance Allowance Required by CMN Resolution 2, Changes in the Provision - in R$ million a) Additional Provision² b) Provision Expense (10) Provision / Portfolio - % Changes in the Provision - % of Portfolio (1)Amortization, settlement, release of installments and charge debt (2) Additional Provision allocated to the Foreign Trade loan portfolio BNC and BV operations are not considered Banco do Brasil MDA 4Q09

106 7.5.6 Foreign Loan Portfolio and Others The table below shows the risk profile of BB s foreign loan portfolio. In December 2009 the loans ranked at risk levels AA-C accounted for 97.6% of the total portfolio, 10 base points higher than the previous quarter, and 150 base points lower than the same period of Table 91. Foreign Loan Portfolio by Level Risk Dec/08 Sep/09 Dec/09 R$ million Balance Provision Share Balance Provision Share Balance Provision Share AA 9, , , A 2, , , B 1, , , C 1, D E F G H Total 15, , , AA-C 14, , , D-H BNC and BV operations are not considered The table below exhibits the rating by risk of the other loans not classified in the Retail, Commercial, Agribusiness, Foreign Trade and Abroad portfolios, plus the loan portfolios of BNC and BV. Table 92. Other Transactions Portfolio Banco Nossa Caixa and Banco Votorantim (50%) Dec/08 Sep/09 Dec/09 R$ million Balance Provision Share Balance Provision Share Balance Provision Share AA , , A , , B , , C , , D , , E F G H ,359 2, ,111 2, Total 2,717 1, ,368 3, ,182 3, AA-C 1, , , D-H 1,684 1, ,720 3, ,086 2, Banco do Brasil MDA 4Q09

107 7.6 Fee Income Fee income, which include revenues from services provided and bank fee income (classification defined by the Central bank in 2008), amounted to R$ 3,606 million in 4Q09, an increase of 2.3% in the quarter and of 17.9% over 4Q08. In the YTD, fee income amounted to R$ 13,511 million, recording growth of 14.4% in relation to We point out that the income figures for this quarter and for 2009 were affected by the consolidation of Banco Nossa Caixa's figures since 2Q09, and those of Banco Votorantim since 4Q09. Banco Nossa Caixa added R$ 287 million in fees in 4Q09 and R$ 900 million in 2009, and Banco Votorantim added R$ 131 million in revenues in 4Q09. After removing these effects, BB's fee income stand alone added up to R$ 3,189 million in 4Q09, a 0.7% slight decline for the quarter, influenced by the extinction of the charging of renewal register fee according to Brazilian Central Bank Circular 3466 dated September 11, 2009, and 4.3% rise as against 4Q08. In the annual comparison, the growth of the revenues from BB stand alone in 2009 reached 5.7%, within the Guidance for the year furnished by the Bank to the market (5% to 8% range). The performance was kept in line with the expansion of the customer base and checking accounts, in addition to the ongoing trajectory of businesses increase, particularly with credit cards, capital market and services related to the checking accounts. Table 93. Fee Income Quarterly Flow Chg. % Annual Flow Chg. % R$ million 4Q08 3Q09 4Q09 On 4Q08 On 3Q On 2008 Fee Income 3,058 3,526 3, ,811 13, Account Fees ,124 3, Loan Fees (3.2) Credit Card Fees ,043 2, Capital Market Fees (11.6) Investment Fund Management Fees ,979 2, Collections ,044 1, Interbank (12.4) Billings Others (3.8) 1,635 2, Bank fee income, represented by the fees addressed by the Central Bank in Circular 3371, amounted to R$ 892 million in 4Q09. Without the consolidation of Banco Nossa Caixa and Banco Votorantim, these revenues added up to R$ 669 million for the quarter, a 5.4% decline over 3Q09 and of 7.0% over the same period in It is important to highlight that the classification by product of the table above does not segregate revenues from services from bank fee income Banco do Brasil MDA 4Q09

108 7.6.1 Revenues from Account Fees The new regulations of the Central Bank that governs the collection of individual fees came into force during the 2 nd. quarter of Provisions of the Central Bank directly affected the fee income with Loan Operations and Checking Accounts. Account fees amounted to R$ 3,743 million in 2009, which represented an increase of 19.8% over In 4Q09, these revenues totaled R$ 996 million, an increase of 1.3% over 3Q09 and of 19.2% over 4Q08. The performance of checking account fees has also benefited from the expansion of the current base of checking accounts, which increased 0.3% in 4Q09 and 15.2% in relation to December 2008, whereas a representative portion of this growth in the 12-month period is related to the acquisition of BNC (3.1 million individual accounts and 174 thousand business accounts in December 2009). From a broader perspective, which takes into consideration not only current accounts, but all the clients that have some active business with the Banco do Brasil Conglomerate, such as INSS beneficiaries, saving account holders and clients of other products (including the ones sold to non-account holders through partnerships entered into with retail networks), the total base reaches 52,695 thousand clients. It should also be highlighted that this number is still subjected to adjustments once BB is processing the consolidation of BNC clients. in thousand 26,157 27,055 28,173 28,494 28,701 32,555 32,657 32,781 1,698 1,775 1,944 1,884 1,874 2,192 2,218 2,207 Mar/08 Jun/08 Sep/08 Dec/08 Mar/09 Jun/09 Sep/09 Dec/09 Individuals Businesses Figure 49. Checking Account Base Banco do Brasil MDA 4Q09

109 7.6.2 Asset Management In the fourth quarter of 2009, Banco do Brasil accumulated R$ 540 million in Investment Fund Management Fees, a growth of 1.6% in relation to the 3Q09, driven by the increase in the average balance of funds obtained, and of 16.0% in relation to 4Q08, variation impacted by the consolidation of BNC's figures. In the YTD, income reached R$ 2,024 million, an increase 2.2% over BB Administração de Ativos - Distribuidora de Títulos e Valores Mobiliários (BB DTVM), a wholly-owned subsidiary of Banco do Brasil, ended 2009 as leader in the balance of Assets under Management, according to the AMBIMA ranking, with a total of R$ billion. At the end of December 2009, BB held a 21.1% market share in fund management against a 20.7% market share in Please note that these figures still do not include funds managed by Banco Votorantim, totaling R$ 19.1 billion in late December If 50.0% of the balance managed by BV were to be consolidated, a percentage equal to BB's interest in the latter's total equity capital, Banco do Brasil's market share would rise to 21.7%. R$ billion Mar/08 Jun/08 Sep/08 Dec/08 Mar/09 Jun/09 Sep/09 Dec/09 Figure 50. Asset Management Asset Management Market Share - % The table below shows the classification of assets under management per customer segment. Since September position, the classification started to include the funds from Banco Nossa Caixa. During the quarter, there was more noticeable growth in the funds obtained from institutional investors and individuals, which increased its relative share of the total funds managed. As for 2008, please note the increase of funding from governments, which share rose from 20.0% to 24.1% by year-end Institutional customers still represent the main part of the sum managed, with 37.7% of the total. Although the funds obtained from these investors have record growth, its relative share has been decreased in relation to the end of 2008, collaborating to a lower concentration of the Bank's portfolio in the main clients. Table 94. Investment Funds and Managed Portfolios by Customer Chg. % R$ million Dec/08 Share % Sep/09 Share % Dec/09 Share % On Dec/08 On Sep/09 Institutional Investors 102, , , Individuals 58, , , Government 49, , , (7.9) Businesses 23, , , Foreign Investors 12, , , Total 246, , , Analyzing the breakdown of funds by types and portfolios, it is possible to observe a rise in the relative share of variable income funds in 4Q09, which is in line with the increase of funding from institutional investors during the quarter, which use to assume greater risks in allocating their investments. In the annual comparison, we notice an increase mostly in the relative share of fixed income funds, a reflex of Banco do Brasil MDA 4Q09

110 the rising of funding from Government and individuals as compared to 2008, which by nature are more conservative when allocating their investments. Table 95. Investment Funds and Managed Portfolios by Type Chg. % R$ million Dec/08 Share % Sep/09 Share % Dec/09 Share % On Dec/08 On Sep/09 Investment Fund 235, , , Fixed 120, , , (1.5) Variable 38, , , Multimarket 44, , , Others 31, , , Managed Portfolios 11, , , (10.1) Fixed 7, , , (10.6) Variable 3, , , (36.5) (7.6) TOTAL 246, , , Banco do Brasil MDA 4Q09

111 7.6.3 Cards Fee income associated with card transactions ended the quarter at R$ 657 million (it s included BNC s revenues), reflecting a 10.1% growth as compared to 3Q09 and of 15.1% against the 4T08. Specifically in the case of these revenues, the comparison with the same period of the previous year is recommended, considering that part of the growth in the previous quarter is explained by seasonality, as the increased activity of the trade at the end of the year reflectes in business growth with cards. The total card base, including credit and debit cards, besides those issued through partnerships and for non-account holders, rose to 87.3 million items, a 2.6% increase in the quarter. A 12-month comparison shows that the total BB card base rose by 11.9% by virtue of its organic growth as well as the consolidation with the Nossa Caixa cards, which were included in the BB figures since June Without the BNC cards, the increase in the BB base for the 12-month period would be 5.2%. Credit Cards (in million) Debit Cards (in million) Mar/08 Jun/08 Sep/08 Dec/08 Mar/09 Jun/09 Sep/09 Dec/09 Mar/08 Jun/08 Sep/08 Dec/08 Mar/09 Jun/09 Sep/09 Dec/09 Figure 51. Credit and Debit Cards Besides the increase of the base of credit cards issued Banco do Brasil has also expanded significantly its quantity of transactions and the total sales. For this quarter, billings by cards rose to R$ 25.8 billion, after the consolidation with Banco Nossa Caixa which began as of June 2009, a 8.9% expansion as compared to 3Q09, under the effects of seasonal year-end purchases, and of 33.1% as compared to 4Q08. Under the same comparison base, the number of transactions rose by 21.3% against 3Q09 and by 25.9% against 4Q08. Card revenues for 2009 rose to R$ 88.6 billion, 33.9% above total billings for 2008, and the number of transactions increased by 27.5% as compared to the total for Considering BB stand alone (without the Nossa Caixa consolidation), card billings rose to R$ 23.7 billion in 4Q09, 7.9% of growth for the quarter and 22.6% if compared to 4Q08. Under the same comparison base, the number of transactions rose by 9.9% in the quarter and by 14.1% against 4Q accrued, card revenues topped R$ 83.3 billion, a 25.8% increase against accrued billings for Consequence of the satisfactory performance evidenced above, BB has been gaining market share in the indicators monitored by ABECS (Brazilian Association of Credit Card and Service Companies). In total sales the market share climbed from 17.6% in 2008 to 18.7% in Please note that the billings employed to find this ranking does not consider the BNC figures Banco do Brasil MDA 4Q09

112 R$ billion Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 Credit Cards Debit Cards Figure 52. Card Revenues The total revenues obtained with cards, which includes besides the Fee Income (RPS), Financing Revenues, Equivalence Revenues, Other Revenues and Other Services, reached R$ 1,196 million, growth of 3.8% in the quarter and 16.4% in relation to 4Q08. In 2009, cards total revenues amounted R $ 4,473 million, an increase of 24.0% compared to Table 96. Total Cards Revenues Quarterly Flow Chg. % Annual Flow Chg. % R$ million 4Q08 3Q09 4Q09 On 4Q08 On 3Q On 2008 Fee Income - Cards ,165 1, Financing Income (0.9) 1,534 2, Equity Income - Visanet (8.0) Other Income and Other Services (36.7) (0.0) (19.3) Total Revenues* 1,027 1,152 1, ,607 4, *Since 4Q09 it is included BNC cards revenues Banco do Brasil MDA 4Q09

113 7.6.4 Collections Revenues from collections reached R$ 308 million in 4Q09, an increase of 6.1% in relation to 3Q09 and of 13.2% in relation to 4Q08. In 2009, these revenues totaled R$ 1,138 million, a 9.0% increase in relation to A total of 137,2 million bank payment slips were issued in 4Q09 (disregarding BNC's figures), an amount 3.8% higher than 3Q09 and 7.4% above the volume issued in 4Q08. The volume collected entailed an increase of 4.9% and of 9.0%, respectively. R$ million 119, , , , , , , ,645 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 Figure 53. BB Billings Volume Banco do Brasil MDA 4Q09

114 7.7 Administrative Expenses Table 97. Commercial Income Quarterly Flow Chg. % Annual Flow Chg. % R$ million 4Q08 3Q09 4Q09 On 4Q08 On 3Q On 2008 Contribution Margin 7,534 8,461 9, ,058 33, Administrative Expenses (4,344) (4,897) (5,465) (15,358) (19,185) 24.9 Personnel Expenses (2,301) (2,693) (2,844) (8,112) (10,280) 26.7 Other Administrative Expenses (2,043) (2,203) (2,621) (7,246) (8,905) 22.9 Other Tax Expenses (45) (23) (27) (41.2) 13.6 (140) (100) (28.9) Commercial Income 3,144 3,540 3, ,560 14, Commercial income represents the Bank s business earnings after the deduction of the expenses necessary for carrying on the business. An increase of 9.6% was observed in commercial income in 4Q09 in relation to the preceding quarter. There was a 23.4% positive trend in the 12-month comparison. As a result of the recent acquisitions, administrative expenses were affected in 4Q09 by the sums of R$ 265 million from BV and R$ 689 million in connection with BNC. If we disregard the impact of the acquisition, there would be an increase of 3.8% in administrative expenses as compared with 4Q08 and in the annual comparison there would be a rise to 10.0%, in line with the guidance proposed for 2009 (8% to 12%). The graph below shows the development of commercial income as from ,807 16,709 18,107 12,398 13,020 13,448 7,648 8,888 9,902 24,515 15,358 11,811 13,511 33,060 19, Fee Income Net Interest Income Administrative Expenses Figure 54. Business vs. Expenses Banco do Brasil MDA 4Q09

115 7.7.1 Personnel Expenses Personnel Expenses reached R$ 2,844 million in 4Q09, an increase of 23.6% in relation to the same period of 2008, and of 5.6% in relation to the previous quarter. Please note that the takeover of Banco Nossa Caixa added R$ million to 4Q09 expenses and that of BV R$ 90.1 million, which sum did not appear in the 4Q08 financial statements. Without considering the effects of the acquisition, growth for 4Q08 would be equal to 3.0% and for 3Q09 would be equal 2.4%. Regarding the annual comparison, 2009 ended with R$ 10,280 million in personnel expenses, 30.1% above those for 2008, if the acquisitions were not considered, the growth would reach 11.8%. Table 98. Personnel Expenses Quarterly Flow Chg. % Annual Flow Chg. % R$ million 4Q08 3Q09 4Q09 On 4Q08 On 3Q On 2008 Personnel Expenses (2,301) (2,693) (2,844) (7,904) (10,280) 30.1 Salaries (1,298) (1,258) (1,360) (4,015) (5,060) 26.0 Benefits (315) (382) (423) (1,197) (1,486) 24.2 Social Charges (456) (464) (616) (1,372) (1,912) 39.3 Training (31) (19) (28) (8.3) 46.0 (74) (73) (0.7) Pension Fund - (47) (111) (232) - Remuneration for Counselors and Directors (9) (14) (15) (17) (50) Administrative Personnel Provisions (193) (510) (291) 50.5 (43.0) (1,228) (1,468) 19.5 The rise in personnel expenses occurred chiefly due to the 8.8% average salary readjustment in 2008 and 6.0% in The base-date for bank employees' collective wage agreement is September. From 4Q08 there was also an average increase of 8,865 staff members in BB. The figure below describes the growth of the total BB staff. By late December 2009, Banco do Brasil had 113,888 employees, a number 17.5% above that for the same month in 2008, due to the BNC acquisition, and 0.5% below September ,384 9,475 9,543 7,966 9,291 9,943 10,293 9,917 92,801 83,417 93,733 84,258 94,935 85,392 96,938 88,972 98,825 89, , , , , , ,971 Mar/08 Jun/08 Sep/08 Dec/08 Mar/09 Jun/09 Sep/09 Dec/09 Figure 55. Changes in Workforce Total Employees Interns Banco do Brasil MDA 4Q09

116 7.7.2 Other Administrative Expenses Other G&A Expenses attained R$ 2,621 million in the fourth quarter of this year, growth of 28.3% in twelve months and of 18.9% in comparison with the preceding quarter. Without other administrative expenses arising from BNC (R$ million) and BV (R$ million), growth for 4Q09 would have been 4.8% over 4Q08 and 12.7% over 3Q09. An annual comparison shows a 22.9% rise in 2009 over 2008, which would have been of 7.9% without the effects of the acquisitions. Table 99. Other Administrative Expenses Quarterly Flow Chg. % Annual Flow Chg. % R$ million 4Q08 3Q09 4Q09 On 4Q08 On 3Q On 2008 Other Administrative Expenses (2,043) (2,203) (2,621) (7,246) (8,905) 22.9 Telecommunications and Data Processing (427) (514) (618) (1,734) (2,076) 19.7 Amortization and Depreciation (215) (253) (269) (761) (998) 31.2 Security. Guard and Transport Services (284) (331) (355) (1,095) (1,280) 16.9 Expenses with Premises and Equipment (255) (295) (339) (922) (1,185) 28.5 Marketing and Public Relations (183) (127) (186) (482) (534) 10.8 Expenses with Outsourced Services (348) (334) (396) (1,149) (1,348) 17.3 Other Administrative Expenses (330) (350) (458) (1,103) (1,483) 34.5 Among the items found in other administrative expenses, the most expressive ones are communications and data processing expenses. During this quarter, in addition to contractual renewals, there were R$ 30 million in expenses from BV, which fact weighed on the 20.1% increase in 4Q09 over 3Q09. The annual overview shows that expenses arising from Besc/Bep affected only the last three months of 2008 and influenced the comparison base, in addition to the expenses with the acquisitions of BNC and BV. This item's growth in 2009 was of 19.7% over In other administrative expenses, which rose by 30.9% over 3Q09, the main expenses for 4Q09 constituted philanthropic contributions (R$ 16.5 million). In addition, in this period the expenditures with employee events increases. The annual overview shows a 34.5% increase over 2008, with adjustments in the companies' consolidation also influencing the income figures. The 28.5% (2009/2008) rise in expenses with property and goods for use was a result of the Besc/Bep takeover, the increase in points of service, and readjustments in rental agreements Banco do Brasil MDA 4Q09

117 7.7.3 Distribution Network With national coverage and presence in 3,552 Brazilian municipalities (64% of the total), besides overseas branches located in 23 countries, Banco do Brasil has the largest network of branches in Brazil. At the end of Dec./09, the Bank's distribution network comprised 17, 929 points of service. The background performance of the BB conglomerate's distribution network now includes the BNC s points of service since June 2009 (in December, BNC added 1,542 points of service, 566 of which are branches). Until September, the BNC network service was informed by that bank, and since the incorporation in November, the information started to be processed in the BB corporate systems. The difference in concepts adopted in Banco do Brasil and in Banco Nossa Caixa led to an increase in the SAA and PAE network, as found in the table below. Table 100. Distribution Network Mar/08 Jun/08 Sep/08 Dec/08 Mar/09 Jun/09 Sep/09 Dec/09 Branches 4,024 4,052 4,077 4,342 4,354 4,928 4,958 4,897 PAA PAB 1,251 1,249 1,225 1,389 1,360 1,734 1,729 1,697 PAE 5,935 5,911 5,969 6,055 6,061 6,102 6,094 6,529 SAA 3,925 3,951 3,980 3,987 4,248 4,262 4,272 4,626 PAP Total* 15,324 15,353 15,438 15,964 16,207 17,210 17,234 17,929 The Bank's distribution network is divided into 5 types of points of service, besides the branches: PAA Advanced Service Post: is a point of service intended for towns lacking banking services. They have a small staff and electronic services; PAB Banking Service Post: this type of unit is located inside the premises of companies or government offices. This service structure requires one employee and electronic services; PAE Electronic Service Post: the structure of services is exclusively electronic; SAA Self-Service Room: exclusively electronic structure of services, installed in the main areas of the branches; and PAP Payment and collection post: points of service comprised by employees and automated teller machines located mainly in government offices (town halls); North Retail 247 Wholesale 2 Govern 7 High Income 2 Midwest Retail 395 Wholesale 5 Govern 5 High Income 13 South Retail 997 Wholesale 22 Govern 3 High Income % 8.4% 22.1% 43.6% 20.7% Northeast Retail 1,001 Wholesale 7 Govern 9 High Income 10 Southeast Retail 2,067 Wholesale 45 Govern 5 High Income 42 Figure 56. Total Distribution Network Banco do Brasil MDA 4Q09

118 To render an excellent service and improve the level of satisfaction of clients, Banco do Brasil segments its customer base according to each profile and relationship, developing adequate strategies for each segment. The Retail distribution network, main element responsible for the relationship with Individual clients and Micro and Small Businesses (MSEs), ended the quarter with 4,786 branches, 44% of this total located in the southeast region. Moreover, in the delivery of services to individuals, BB makes available its network of bank correspondents that serve the clients of BB without using the Bank's infrastructure, releasing the branch network to focus on business. At the end of 4Q09, Banco do Brasil relied on a total of 9,591 correspondent banks, including 3,452 points of service that belonged to Banco Popular do Brasil and 804 correspondent banks from Banco Nossa Caixa. In relation to the Wholesale market, the service network is comprised by 82 branches, segmented by annual revenues, and that served 42.4 thousand customers in this quarter, figure 5.8% higher than that attended in the same quarter of Most of the network is located in the Southeast (56%) and South (27%) regions of Brazil with the largest concentration of large companies. Table 101. Wholesale Pillar Branches Industry Commerce Services Corporate Over R$ 90 million Over R$ 150 million Over R$ 150 million Business From R$ 10 to R$ 90 million From R$ 15 to R$ 150 million From R$ 15 to R$ 150 million The Government market, comprised by direct administration, federal entities, foundations and public companies, was comprised by 29 agencies, whose business focus is the relationship with the Federal Government and the State and Municipal spheres, encompassing the Executive, Legislative, and Judicial Authorities. The strategy of working in this market has ensured appropriate solutions for the specific aspects of each one of the niches of its segment, by means of an innovative approach, materialized in the proposal of new products and services, such as the exclusive electronic bidding service. The overseas network is comprised by 45 facilities located in 23 countries (13 branches, 8 subbranches, 11 representation offices, 7 subsidiaries, 4 associated subsidiaries, 1 shared service unit and 1 business unit). In order to supplement this structure, Banco do Brasil has an agreement with other foreign financial institutions to serve its clients: at the end of last December, there were 1,372 banks acting as BB's correspondent banks in 144 countries Banco do Brasil MDA 4Q09

119 Table 102. Distribution Network Abroad Branche s Sub-branche s Re pre s e ntative Office s Subs idiarie s and Branch Office s A ssuncion Cidade do Leste Caracas Banco do Brasil A G Buenos Aires Gif u Banco do Brasil Securities Cidade do México LLC Frankf urt Gunma Dubai BB Leasing Company Ltd. Grand Cayman Hamamatsu Hong Kong BA MB Brazilian A merican Merchant Bank La Paz Ibaraki Lima BB Securities Ltd. Londres London Nagano Luanda BB USA Holding Company Madrid Nagóia Montevidéu BB Money Transfers, Inc. Miami Santa Cruz de La Sierra Panamá Milan New Y ork Paris Santiago Tokyo Seul Washington Xangai Banco do Brasil A G - Branch Of fice in Portugal - Cascais Banco do Brasil A G - Branch Of fice in Portugal - Marquês de Pombal Banco do Brasil A G - Branch Of fice in Portugal - Parque das Nações Banco do Brasil A G - Branch Of fice in Portugal - Porto Share d Se rvices Units BB USA Servicing Center Bus ine ss Units Rome Banco do Brasil MDA 4Q09

120 7.7.4 Automated Channels Banco do Brasil s self-service network represents a strategic differential, offering an extensive range of services to BB client, besides supporting the cost control strategy of the institution. In December 2009, BB s network in Brazil relied on 45,442 automated teller machines (ATMs), being 3,685 ATMs from Nossa Caixa. The acquisition of BNC and the incorporation of the BESC system explain the increase of 5,728 terminals as compared with December ,692 38,766 39,918 39,714 40,543 43,976 43,772 45,442 Mar/08 Jun/08 Sep/08 Dec/08 Mar/09 Jun/09 Sep/09 Dec/09 Figure 57. Automated Teller Machines The ATM's are responsible for the processing of an expressive portion of the total banking operations performed by Banco do Brasil. In September 2009, 95.8% of the cash withdrawals, 80.0% of the checkbooks delivered, 74.8% of the deposits and 68.4% of the receipts of bills and contractual payments passed through the ATM network. Besides the cashiers at the branches and the ATMs, Banco do Brasil offers several other options for access to banking services, such as: Internet, Financial Manager (an Internet banking tool for businesses), POS equipment (credit and debit card machines at the commercial establishments), telephone, fax, and mobile banking (WAP). At the end of September, BB had approximately 1,1 million clients capable of using the mobile banking service, responsible for 31,5 million transactions in the quarter, and 9,3 million clients capable of using the internet channel. Banco do Brasil, in partnership with Visa, is the only bank to operate with Visa Mobile Pay technology in Latin America, which allows the clients of BB to pay for purchases using their mobile phones. This technology, combined with the mobile banking services already offered, confirms the Bank's vanguard position in banking technologies Banco do Brasil MDA 4Q09

121 The figure below presents the percentage of transactions processed by each one of the main customer service channels made available by Banco do Brasil. In December, the automated channels were accountable for 92.0% of the total transactions Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 ATM Internet Individuals Internet Businesses Cash POS COBAN and Others Automated Transactions Figure 58. Costumer Access Options - % Banco do Brasil MDA 4Q09

122 7.7.5 Productivity Coverage Ratios We present below the main existing productivity ratios for the analysis of a financial institution. The coverage ratio of personnel expenses reached 124.6% in 4Q09, opposed to 121.2% on 3Q09 and 125.8% in 4Q08. As for the Cost Income Ratio, that reached 44.4% in 4Q09, better than the 44.6% registered in 3T09 and a slight improve comparing to the 45.7% from 4T08. It is important to highlight that, comparing with the indexes observed in 2008, the Nossa Caixa consolidation must be awared, which didn t show indexes as favorable as BB did. Table 103. Coverage Ratios without extraordinary items R$ million 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 Fee Income 2,915 2,905 2,933 3,058 2,943 3,436 3,526 3,606 Administrative Expenses 3,660 3,877 3,972 4,571 4,128 4,937 5,153 5,469 Personnel Expenses 1,933 2,131 2,178 2,430 2,231 2,506 2,909 2,894 Fee Income / Personnel Exp.¹ Fee Income / Administ. Exp.² ¹ In the calculation of this ratio Labor Lawsuits are included, ² In the calculation of this ratio Legal Risk is included (Legal Claims and Labor Lawsuts), Service Revenues / Personnel Expenses Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 Service Revenues / Administrative Expenses Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 Figure 59. Coverage Ratios without Extraordinary Items Banco do Brasil MDA 4Q09

123 Table 104. Cost Income Ratio without extraordinary items R$ million 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 Operating Income (A) 8,128 8,415 8,686 10,003 9,839 11,673 11,558 12,315 Gross Income from Financial Intermediation 3,476 3,816 3,667 1,932 3,294 3,240 4,460 5,829 Allowance for Loan Losses 1,603 1,744 1,367 3,892 2,654 3,865 2,928 2,950 Fee Income 2,915 2,905 2,933 3,058 2,943 3,436 3,526 3,606 Equity Int. in the Results of Subs. and Affil. (88) (271) (90) (576) (275) (49) Income f/ Insurance, Pension & Capit. Op Other Operating Revenues 1,394 1,976 1,401 1,764 2,359 4,659 3,162 2,298 Other Operating Expenses (1,272) (1,975) (1,396) (1,702) (1,625) (3,422) (2,635) (2,726) Administrative Expenses (B) 3,798 3,944 4,134 4,602 4,134 4,937 5,153 5,469 Personnel Expenses 1,933 2,131 2,178 2,430 2,231 2,506 2,909 2,894 Other Administrative Expenses 1,866 1,813 1,956 2,172 1,903 2,431 2,244 2,575 Cost Income Ratio (B/A) - % Cost Income Ratio % Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 Figure 60. Cost Income Ratio without Extraordinary Items Banco do Brasil MDA 4Q09

124 The following figures show how the network and employees improvements have been more than compensated by the business expansion and customers basis, which reflects to the productivity indexes. Assets per Employee R$ thousand Checking Accounts per Employee 4,463 4,439 4,827 5,377 5,990 5,281 5,992 6, Mar/08 Jun/08 Sep/08 Dec/08 Mar/09 Jun/09 Sep/09 Dec/09 Mar/08 Jun/08 Sep/08 Dec/08 Mar/09 Jun/09 Sep/09 Dec/09 Employees / (Branches + PAA + PAB) Mar/08 Jun/08 Sep/08 Dec/08 Mar/09 Jun/09 Sep/09 Dec/09 Credit Portfolio / Points of Services Service Revenues / Points of Services Mar/08 Jun/08 Sep/08 Dec/08 Mar/09 Jun/09 Sep/09 Dec/09 Points of Service Credit Portfolio / Points of Service R$ million Mar/08 Jun/08 Sep/08 Dec/08 Mar/09 Jun/09 Sep/09 Dec/09 Points of Service Service Revenues / Points of Service - R$ thousand Personnel Expenses per Employee R$ thousand Checking Accounts / (Branches + PAA + PAB) ,100 5,252 5,490 5,133 5,186 5,077 5,079 5, Mar/08 Jun/08 Sep/08 Dec/08 Mar/09 Jun/09 Sep/09 Dec/09 Mar/08 Jun/08 Sep/08 Dec/08 Mar/09 Jun/09 Sep/09 Dec/09 Figure 61. Other Productivity Ratios Banco do Brasil MDA 4Q09

125 7.8 Operating Income Table 105. Operating Income Quarterly Flow Chg. % Annual Flow Chg. % R$ million 4Q08 3Q09 4Q09 On 4Q08 On 3Q On 2008 Commercial Income 3,144 3,540 3, ,560 14, Legal Risk (226) (256) (4) (98.4) (98.6) (722) (502) (30.5) Legal Claims (97) (40) (161) (242) 49.8 Labor Lawsuits (129) (216) (49) (61.7) (77.1) (560) (260) (53.6) Other Operating Income (542) (590) (960) (2,198) Eq Int. in Results of Subs. and Affil. (3) (97) 51 - Other Operating Income / Expenses (539) (607) (985) (2,102) Other operating income 1,230 1,313 1, ,698 8, Other operating expenses (1,769) (1,920) (2,448) (5,799) (7,902) 36.3 Operating Income 2,375 2,694 2, ,639 13, The Operating Income of Banco do Brasil ended 2009 at R$ 10,736 million, disregarding Previ s effects, which represents an increase of 11.4% in relation to In the quarterly analysis, this line ended 4Q09 at R$ 2,912 million, an increase of 8.1% in relation to 3Q09 and of 22.6% in relation to the same period of The operating income is determined with a basis on the Commercial Income, plus the results of two major lines: "Legal Risk" and "Other Operating Income (Expenses)". During 4Q09, BB concluded its improvement of the methodology to calculate provisions in connection with labor and civil claims. As of 4Q09 the balance of provisions was defined in a manner to cover the average sums actually paid by the Bank in lawsuits of the same nature (until that time provisions were defined based on the sum required by claimants). For this reason, the legal risk line ended 4Q09 at (R$ 4 million), a 98.6% decrease over the preceding quarter and of 79.2% over 4Q08. The account "Other Operating Income (Expenses)" comprises the items "Equity Interest in Results of Subsidiaries and Affiliated Companies", and "FX Other Operating Income/Expenses". In the 4Q09, there was an R$ 378 million increase (negative) in this last account. The key factor responsible for this item's change was consolidation with Banco Votorantim, which in 4Q09 resulted in - R$ 276 million for Other Operating Income (Expenses), amount already proportional to the BB s participation and that includes commissions paid to agents who work in loan concession. Comparing the years of 2009 and 2008, the FX Other Operating Income/Expenses results was driven by the increase of $ 390 million in expenses with premiums paid to customers, besides R$ 3,030 million from Previ, the acquisition of Banco Votorantim (see above), the acquisition of the BNC and the accounting of goodwill from acquisitions and strategic partnerships. Since 2Q09, BB is influenced by the accounting of goodwill for the acquisition of BNC, and since from 4Q09 the expenses by the accounting of goodwill for the acquisition of BV. The accounting of goodwill is not performed in a linear fashion due to improvements in models that measure the expectation of future earnings with strategic transactions, so that its value may change over time, maintaining relationship with the expectation of these companies results. Regarding the other companies of the conglomerate, there was no accounting of goodwill in the quarter. With the restructuring of the security area, companies that were controlled by BB BI came to be controlled by the holdings "BB Aliança Participações and BB Seguros Participações. Unlike BB BI, these other two companies are regulated by Law 11,638, which does not require accounting of goodwill arising from the expectation of future results Banco do Brasil MDA 4Q09

126 Table 106. Accumulated Amortization R$ million 2Q09 3Q09 4Q09 Banco Nossa Caixa Final balance for the period 3,659 4,957 4,961 Accumulated amortization (40) (81) (61) Amortization expenses for the period (40) (40) 21 Banco Votorantim Final balance for the period (*) Accumulated amortization - - (4) Amortization expenses for the period - - (4) Other expenses of the Conglomerate Final balance for the period Accumulated amortization (71) (95) (95) Amortization expenses for the period (47) (23) - The following table shows BB's intangible assets that include the payroll acquired from third party and the softwares acquired/developed. Table 107. Intangible R$ million 2Q09 3Q09 4Q09 Rights due to payroll acquisition Initial Balance 6,032 4,896 4,785 Amortization expenses for the period (371) (380) (403) Other (1) (891) 9 (10) Acquisitions Final Balance (a) 4,896 4,785 5,305 Acquisition/development of software Initial Balance Amortization expenses for the period (10) (12) (15) Acquisitions Other (1) (1) 4 0 Final Balance (b) Balance ( a+ b) 5,128 5,082 5,677 (1) Among other itens, this line comprises the amounts registered due to the acquisition and/or incorporation of other institutions, according to the stake owned by Banco do Brasil Banco do Brasil MDA 4Q09

127 7.9 Net Value Added The table Net Value Added shows how Banco do Brasil s income is made up of the generation of value from each of the Bank s businesses, and then shows a breakdown of the distribution of these proceeds. The point of view used is the gross financial margin, which includes financial intermediation income and expenses, without allowances for loan losses. Table 108. Net Value Added Quarterly Flow Chg. % Annual Flow Chg. % R$ million 4Q08 3Q09 4Q09 On 4Q08 On 3Q On 2008 Net interest income 7,077 8,320 9, ,510 33, Income from Non-Financial Products 2,513 2,813 2, ,756 10, Fee Income ,124 3, Investment Fund Management Fees ,979 2, Loans (3.2) (0.5) Billings ,044 1, Collections Credit Cards Fees ,042 2, Insurance (2.8) (1.1) (3.4) Others 2,130 2,461 2, ,965 12, Insurance Brokerage (3.7) Insurance Results (13.3) (13.2) Others Fee Income (3.4) 1,862 2, Equity Interest in Results of Subs.and Affiliates (154) (181) (145) (5.8) (19.9) (912) (684) (25.0) Res. from Insurance, Pension Plan and Cap.Operations , Other Operational Revenues 1,230 1,313 1, ,700 8, Non Operation Income (22.8) (81.1) Value Added 11,720 13,594 14, ,231 56, Distribution of Value Added (Except Shareholders) (8,775) (11,616) (10,637) 21.2 (8.4) (32,428) (43,106) 32.9 Operational Revenues (4,009) (4,937) (5,398) (12,598) (19,531) 55.0 Allowance for Loan Losses (2,240) (3,017) (2,950) 31.7 (2.2) (6,800) (11,629) 71.0 Other Operational Income (1,769) (1,920) (2,448) (5,798) (7,902) 36.3 Personnel Expenses (2,628) (3,139) (3,156) (9,623) (11,456) 19.0 Personnel Expenses (2,430) (2,909) (2,894) 19.1 (0.5) (8,672) (10,540) 21.5 Statutory Profits Sharing (198) (230) (262) (951) (916) (3.8) Administrative Expenses (2,140) (2,244) (2,575) (7,408) (9,146) 23.5 Tax Expenses (1,316) (1,511) (1,845) (4,917) (6,288) 27.9 Taxes on Sale (589) (760) (965) (2,362) (3,149) 33.3 Other Tax Expenses (170) (23) (27) (84.4) 13.6 (140) (100) (28.9) Income and Social Contribution Taxes (557) (727) (853) (2,416) (3,039) 25.8 Extraordinary Items 1, , ,118 3, Value Added to Shareholders 2,944 1,979 4, ,803 13, The Added Value is the sum of the Net Interest Income, which represented a share of 62.7% in the composition of the added value in 4Q09, Income from Non-Financial Products (19.7%) and Others (17.6%). Over the past quarters, the Net Interest Income has achieved higher growth than the Other Revenues, for which reason it increased its relative share in the composition of Net Value Added. In turn, the added value for shareholders is the difference between the added value and its distribution among the various accounts included in the above table. The line with the greatest share (among those comprising distribution, except for shareholders) is the block of Risk and Operating Expenses, which accounted for 50.6% of the distributions in 4Q09, compared to 45.7% in the same quarter of It should be noted that, since the second half of 2008, with the worsening of the international financial crisis, BB has been strengthening its reserves (the expenses with provisions are among the main elements in Operating and Risk Expenses) Banco do Brasil MDA 4Q09

128 8 Risk Management 8.1 Risk Management In this disclosure of results, the tables and graphs presented on this chapter are not impacted by the accounting information of Banco Votorantim (BV), unless otherwise stated. Accordingly, the term BB Consolidated is defined as Banco do Brasil in Brazil and abroad, including Banco Nossa Caixa (BNC) and excluding Banco Votorantim (BV) Market Risks Introduction BB uses statistical methodologies to measure the market risks of its positions. Among the metrics resulting from the use of these methodologies, it is worth highlighting: Sensitivities; Value at Risk (VaR); Stress. By using sensitivity metrics, simulations are made of the effects in the exposure values arising from changes in interest rate levels. VaR is a measurement used to estimate the maximum expected loss, under normal market conditions, put into monetary values on a daily basis and considering a certain confidence interval and time horizon. To measure VaR, Banco do Brasil adopts a Background Simulation method and the following parameters: 99% of one-tailed confidence interval 252 retrospective scenarios of daily shock factors and an investment time horizon of one business day. The risk factors used to measure VaR for market exposure risks are rated in the following classes: interest rates; exchange rates; share prices; and goods (commodities) prices. Performance of the VAR metrics is assessed every month by applying a backtesting procedure. This assessment is separated from the VaR metric development and its procedures. In conclusion, BB uses the Stress metrics arising from simulations of its exposure subject to market risks under extreme conditions, such as financial crises and economic upheavals. Stress Tests are intended to size plausible impacts or events, but unlikely to occur, in the regulatory and economic capital requirements. Stress Tests cover exposure simulations, retrospective and based on background series of shocks in market risk factors, as well as of a forward-looking nature, supported on projections of economic and financial scenarios. Policies The Policy on Market and Liquidity Risk and the Policy on the Use of Derivative Financial Instruments approved by the Board of Directors, are part of the strategic documentation regarding the BB's market and liquidity risk management Banco do Brasil MDA 4Q09

129 These documents are intended to establish guidelines to be complied with in the Company's business decisions involving market and liquiduity risk, dealing with quantitative aspects as well as the metrics used and the interest rate risk reference parameter, and also qualitative aspects such as the hedging policy, scope of management, and segregation of functions. Structure In accordance with CMN Resolution 3,464, of , financial institutions should implement a structure for the management of market risk segregated from the business units and from the unit executing the internal audit activity, and compatible with the nature of transactions, the complexity of products and the dimension of exposure to market risk of the institution. The Bank has a market risk management structure represented by the Risk Management Directorship (Diris), compatible with the Bank's nature of transactions, and totally segregated from the business units and the Internal Audit unit. One of the main responsibilities of Diris in market and liquidity risk management is the proposition of policies, guidelines, methodologies and limits of market risk, as well as the identification, assessment, monitoring and control of the market and liquidity risk of the Financial Group, the identification and monitoring of the market and liquidity risk of the other companies that form the Economic/Financial Consolidate. Foreign Exchange Exposure Banco do Brasil adopts the policy of managing its foreign currency exposure so as not to generate capital requirement for its coverage. Below, we present the statement of foreign currency assets and liabilities referenced to the American dollar of BB Consolidated. The net exchange position, at 12/31/2009, is a liability for US$ 1,323 million, which reflexts the Bank s tax hedge strategy adopted, according to Bacen s Circular 3,389, of June 25 th, The tax hedge is to reduce the volatility of the income, after tax effects, considering that the gains from foreign exchange variation on abroad investments are not taxed and, similarly, the losses do not generate a deduction in the tax rate. As a result, any change in the exchange rate takes effect on the account that records the exchange liabilities contrary to the effect recorded in the investment account, for instance, the effect of exchange rate changes will tend to a null result, in line with our policy Banco do Brasil MDA 4Q09

130 Table 109. Balance in Foreign Currency R$ million CURRENCY BALANCE SHEET ASSETS LIABILITIES U.S. Dollar 57, , Euro 5, , Pound Sterling Yen 3, , Swiss Franc Gold Ohters Total 66, , Net Position - Equity (3,217.45) CURRENCY BALANCE SHEET LONG SHORT U.S. Dollar 25, , Euro 5, , Pound Sterling Yen 2, , Swiss Franc Gold Total 33, , Net Position - Derivative Total Net Position (2,304.68) Total Net Position - in U.S. Dollar (1,323.60) Banco do Brasil Considated foreign exchange exposure calculated according to Bacen Circular 3,389, of June 25 th., 2009, was R$ million at December 31 st., The chart that follows shows the quarterly behavior of BB Consolidated s foreign exchange exposure in relation to the Referential Equity (RE) since March, % Changes in Foreign Exchange Exposure in % of PR 4.00% 3.30% 3.00% 0.08% 2.00% 1.04% 2.01% 0.18% 1.00% 0.34% 0.28% 0.22% 1.77% 1.23% 1.21% 2.00% 2.40% 0.14% 0.69% 0.09% 1.06% 0.11% 0.77% 0.00% Mar/08 Jun/08 Sep/08 Dec/08 Mar/09 Jun/09 Sep/09 Dec/09 Exposure % Current Basket Exposure % Other Currencies G Portion Figure 62. Changes in Foreign Exchange Exposure Banco do Brasil MDA 4Q09

131 Balance Sheet by Index We present below the composition of assets and liabilities, including derivatives, of BB Consolidated, detailed by index: R$ billion Assets Liabilities Fixed CDI/TMS/FACP IRP/TBF/TR Price Index TJLP US$/Gold Without Index Assets: Tax Credit; Permanent Liabilities: Equity; Adm. Pro.; Float Total R$ bi Figure 63. Composition of Banco do Brasil's assets and liabilities in the country The chart below shows Banco do Brasil s net mismatches, by index in Brazil % R$ billion % % % % % -5.75% Fixed Price Index CDI/TMS/FACP % TJLP US$/others S/INDEX PL/others IRP/TBF/TR Figure 64. Net Position Banco do Brasil MDA 4Q09

132 Value at Risk The figure below shows a Box-Plot analysis of the Consolidated BB Value at Risk (VaR without BNC and BV), since the first quarter of 2008 and shows the crisis behavior in the period in a graphical manner: 1,400,000 1,200,000 1,000, , , , , Q Q Q Q Q Q Q Q 2009 Figure 65. Financial Consolidated BB VaR The following table describe the BB Consolidated minimum, average, and maximum VaR observed on the following periods: Table 110. Consolidated BB VaR R$ thousand Period Minimum Average Maximum Jan to Dec/ , , ,740 Jan to Dec/ , ,895 1,301, Banco do Brasil MDA 4Q09

133 The following table presents the Banco do Brasil Box-Plot analysis of the Foreign Network s VaR since the first quarter of , ,000 80,000 US$ thousand 60,000 40,000 20, Q Q Q Q Q Q Q Q 2009 Figure 66. Consolidated Foreign Network's VaR The following table describes the Foreign Network's minimum, average, and maximum VaR for the following periods: Table 111. Foreign Network's VaR US$ thousand Period Minimum Average Maximum Jan to Dec/ ,349 21,842 41,887 Jan to Dec/2009 9,049 59, , Banco do Brasil MDA 4Q09

134 BB Trading portfolio For management purposes, Banco do Brasil separates trading operations from the others, establishing its own strategies and limits. The groups shown below, International and Domestic Trading, are subdivisions of the Trading Portfolio (Bacen Circular 3,354). The illustration below shows a Box-Plot analysis of the International Trading portfolio's VaR since the first quarter of , US$ thousand Q Q Q Q Q Q Q Q 2009 Figure 67. VaR for the International Trading Portfolio The table below sets out the average, minimum and maximum VaR of the international trading portfolio observed in the periods shown: Table 112. International Trading Porfolio s VaR US$ thousand Period Minimum Average Maximum Jan to Dec/ Jan to Dec/ Banco do Brasil MDA 4Q09

135 The illustration below shows a Box-Plot analysis of the Domestic Trading portfolio's VaR since the first quarter of ,000 5,000 4,000 R$ thousand 3,000 2,000 1, Q Q Q Q Q Q Q Q 2009 Figure 68. VaR for the Domestic Trading Portfolio The following table describes the Domestic Trading portfolio's minimum, average, and maximum VaR for the following periods: Table 113. Domestic Trading Porfolio s VaR R$ thousand Period Minimum Average Maximum Jan to Dec/ ,792 Jan to Dec/2009-2,012 5, Banco do Brasil MDA 4Q09

136 Sensitivity to Interest Rate We present below a table containing the inventory of operations sensitive to the variations in the interest rates, allocated by risk factor and by interest rate repricing period, of BB Consolidated: Table 114. Sensitivity to Interest Rate 12/31/2009 Assets Liabilities R$ million < 1 Mo 1 > 3 Mo 3 > 6 Mo 6 > 12 Mo 1 > 3 Yrs > 3 Yrs 0 Fixed 177,416 17,425 24,164 32,843 56,410 29, ,050 CDI/TMS 140, ,990 Inflation - 16, ,714 TR/IRP - 51, ,171 TJLP , ,381 US$/ME 19,963 17,372 9,110 7,979 17,845 10,576 82,845 Total - Earning Assets 338, ,442 33,274 40,822 74,255 40, ,151 Fixed (113,878) (14,358) (5,748) (7,345) (13,749) (9,299) (164,377) CDI/TMS (139,725) (139,725) Inflation - (6,166) (6,166) TR/IRP - (138,430) (138,430) TJLP (509) (30,744) (31,253) US$/ME (18,887) (13,875) (9,054) (14,276) (14,538) (15,515) (86,145) Total - Interest Bearing Liabilities (272,999) (203,572) (14,802) (21,621) (28,287) (24,814) (566,096) Gap 65,991 (70,130) 18,472 19,201 45,968 15,554 95,055 Accumulated Gap 65,991 (4,139) 14,333 33,534 79,502 95,056 Accumulated Gap as % Assets (Earning Assets) 19.5% -52.6% 55.5% 47.0% 61.9% 38.5% 14.4% Banco do Brasil MDA 4Q09

137 8.1.2 Liquidity Risk Banco do Brasil maintains levels of liquidity that are adequate for the institution's commitments assumed in Brazil and abroad, resulting from its broad and diversified depositor base and the quality of its assets, the capillarity of its network of overseas branches and of access to the international capital market. Stringent control over liquidity risk is in accordance with the Market and Liquidity Risk Policy established for the BB Consolidated, fulfilling the requirements of national banking supervision and of the other countries where the Bank operates. Management instruments adopted in the BB Conglomerate are: Short, Medium and Long Term Liquidity Forecasts, Liquidity Risk Limits, and Liquidity Contingency Plan. Short, Medium and Long-term Liquidity Forecasts permit the evaluation of the effect of mismatching between funding and investments, with the objective of identifying situations that could compromise the institution's liquidity, taking into consideration the budget planning of the institution, as well as market conditions. Regarding, liquidity risk limits, the Liquidity Reserve is utilized in short term liquidity management of the domestic and international areas, being the minimum level of assets of high liquidity to be maintained by the Bank, compatible with the exposure to risk resulting from the characteristic of its operations and from the market conditions. The Liquidity Reserve is utilized as a parameter for the identification of a liquidity crisis situation and to deploy the Liquidity Contingency Plan, being monitored on a daily basis. Dec/08 Jan/09 Feb/09 Mar/09 Apr/09 May/09 Jun/09 Jul/09 Aug/09 Sep/09 Oct/09 Nov/09 Dec/09 Average Liquidity Liquidity Reserve Figure 69. Liquidity Reserve - Domestic Treasury Still regarding liquidity risk limits BB utilizes, in the planning and execution of its annual budget, the indicator of Availability of Free Funds (DRL), which aims to guarantee a balance between funding and resources application from the commercial portfolio and to ensure the financing of liquidity with structural resources. A DRL limit is defined annually by the Global Risk Committee (CRG), and its monitoring takes place on a monthly basis, employed to guide the budget's planning in accordance with the targets for funding and commercial loans, and with the liquidity managing process as determined by the Board of Directors Banco do Brasil MDA 4Q09

138 Dec/08 Jan/09 Feb/09 Mar/09 Apr/09 May/09 Jun/09 Jul/09 Aug/09 Sep/09 Oct/09 Nov/09 Dec/09 Figure 70. DRL Indicator Monthly DRL Annual Limit After the implementation of the liquidity re-composition plan in June 2008, resulting in the adaptation of the DRL limit to that year, CRG established a new limit for 2009, with a view to the business strategy and the market conditions. During this period, comfortable liquidity conditions are witnessed in the Institution's structural liquidity as measured by this indicator. Jan/09 Feb/09 Mar/09 Apr/09 May/09 Jun/09 Jul/09 Aug/09 Sep/09 Oct/09 Nov/09 Dec/09 Average Liquidity Liquidity Reserve Figure 71. Liquidity Reserve - International Treasury The actions and steps to be taken in a liquidity crisis are defined in the Liquidity Contingency Plan. This Plan will be activated when the sum shown or the Liquidity projection points to levels below the Liquidity Reserve's pre-defined limit Banco do Brasil MDA 4Q09

139 8.1.3 Credit Risk Structure In Banco do Brasil, the credit risk management structure is composed of a Risk Management Directorship, a Credit Directorship, an Operating Assets Restructuring Directorship. The Risk Management Directorship, by appointment of the Board of Directors, is responsible for the Bank's credit risk management. This structure is in accordance with CMN Resolution 3721 dated April 30, The investor relations page in BB's website shows in detail information on the management structure and the credit risk management process. Credit Risk Management With the intention of fulfilling the demands of Basel II and aligned with best risk management practices, BB developed its own methodology for the determination of risk components: Expected Delinquency Frequency (FEI), Loss Given Default (LGD), exposure to credit risk, which are inputs for the measurement of the Economic Capital (EC) and of the Expected Loss (EL). The internal model for measuring the VaR of credit has its theoretical grounds based on the actuarial approach, used in the banking industry. The VaR of the loan portfolio is associated with a distribution of added loss for a given level of confidence. The mean value of this distribution is the Expected Loss, which represents how much the Bank expects to lose on average in a given period of time, the protection of which is performed by means of provision. The Economic Capital, which is associated with Unexpected Loss, is determined by the difference between VaR and EL. For this portion the Bank protects itself through the allocation of capital required for risk coverage. Reliance Level (%) Frequency % EL Economic Capital VaR Losses - $ Figure 72. Measuring and management instruments The distribution of aggregate loss is obtained utilizing the following risk components as data input: FEI, LGD and exposure subject to credit risk Banco do Brasil MDA 4Q09

140 The measurement of the VaR of Credit provides subsidies for the appraisal of risk and return of the Bank's loan portfolio, and for the process of establishment of limits for the loan portfolio. Its evaluation has helped in the decision-making process of the Bank, bringing historical information and permitting an analysis of the risk behavior trend. Furthermore, its use has proved extremely valuable in the dissemination of the credit risk management culture at the Bank. As regards the evaluation of the return, the values of EL and EC serve as inputs for the calculation of the Risk-Adjusted Return on Capital (RAROC). The use of RAROC is intended to subsidize important decision-making processes at the Bank. Its tracking in the historical perspective for the portfolios analyzed has allowed the assessment of risk and return to be present in the decisions of the Institution. In addition to the use of techniques for identification and measuring of risks, BB monitors and controls the credit risk concentration in terms of risk exposure and commitment of the Referential Equity (RE). The Bank developed a credit risk concentration control method, analyzing the interrelation among the various economic sectors that comprise the business loan portfolio. This model evaluates the credit risk concentration of the borrowers. BB also has other management tools of credit risk appraisal, with an emphasis on: Macrosectoral limits for the Business segment; QIP - Quality Index of the Portfolio - qualitative and quantitative indicator of the portfolio. The delinquency concept follows the precepts defined by CMN Resolution 2682/99; Delinquency Rates of 15 and 90 days - correspond to the division of the balance overdue for more than 15 and 90 days, respectively, by the balance of the portfolio; Budget of credit risk - corresponds to the projection of Allowance for losses to form the annual budget of BB; and Credit risk management reports - systematic monitoring and projections for the loan portfolio from different views. In the regulatory sphere, special emphasis is placed on the publication of Resolution nº 3721 on 4/30/2009, which establishes guidelines for implementation of the credit risk management structure at Financial Institutions and other institutions licensed to operate by Bacen and Release nº 18365, of 4/22/2009, which presents the preliminary criteria for use of the approaches based on internal models, topics that already comprise the Bank's process of preparation for the new guidelines established in the scope of Basel II Banco do Brasil MDA 4Q09

141 Concentration BB's amplified Loan Portfolio, formed by the foreign and domestic loan portfolio, guarantees granted and Private Securities, in addition to BNC and BV portfolio, totaled R$ 320,696 million in December In December 2009, 24.0% of the amplified loan portfolio was concentrated in the 100 largest borrowers. It should be noted, however, that for information on the concentration of the portfolio are set apart the amount of BNC and BV. Table 115. Concentration of the Loan Portfolio on the 100 Largest Borrowers R$ million Period 1st Customer Balance 2nd to 20th Balance 21st to 100th Balance 100th largest Balance Dec/ , , , ,677 Mar/ , , , ,118 Jun/ , , , ,844 Sep/ , , , ,429 Dec/ , , , ,675 Mar/ , , , ,194 Jun/ , , , ,832 Sep/ , , , ,956 Dec/ , , , ,983 Does not consider Banco Nossa Caixa and Banco Votorantim operations. Period Portfolio Colateral Securities Total Dec/07 160,739 4,689 1, ,107 Mar/08 172,760 5,864 1, ,055 Jun/08 190,082 6,582 3, ,629 Sep/08 202,201 7,132 4, ,617 Dec/08 224,808 8,220 4, ,203 Mar/09 228,101 7,899 4, ,662 Jun/09 235,400 8,600 3, ,900 Sep/09 245,712 10,155 5, ,615 Dec/09 300,829 9,875 9, ,696 The ratio between the exposure of the largest borrower and the Referential Equity Amount ended December 2009 in 13.9%, as per the table below: Table 116. Concentration of the Loan Portfolio of the 100 Largest Borrowers % in relation to RE R$ million Period 1st Customer Balance 2nd to 20th Balance 21st to 100th Balance 100th largest Balance Dec/ , , , ,677 Mar/ , , , ,118 Jun/ , , , ,844 Sep/ , , , ,429 Dec/ , , , ,675 Mar/ , , , ,194 Jun/ , , , ,832 Sep/ , , , ,956 Dec/ , , , , Banco do Brasil MDA 4Q09

142 The amplified business loan portfolio, disregarding BNC and BV loan portfolio, totaled R$ 169,649 million in December/2009. The largest concentration is in transactions contracted with companies from the Oil macro sector that corresponds to 10.7% of the amplified business portfolio, growth of 28.5% in the last 12 months. The distribution of the Loan Portfolio Economic Macro Sectors is shown in the table below: Table 117. Concentration of the Loan Portfolio by Macro-sector R$ million Chg. % Macro-sector Dec/08 Share % Sep/09 Share % Dec/09 Share % On Dec/08 On Sep/09 Oli 14, , , Foodstuffs of Vegetable Origin 13, , , (0.1) Metalworking and Steel 14, , , (1.4) Services 9, , , (6.4) Foodstuffs of Animal Origin 8, , , Automotive 8, , , Building 6, , , (13.5) Electricity 7, , , Transport 7, , , Telecommunications 7, , , (8.2) 5.0 Retail Trade 5, , , Textile and Garments 5, , , Paper and Pulp 5, , , Electrical and Eletronic Goods 5, , , Other Activities 3, , , Agricultural Consumables 4, , , Chemicals 4, , , (0.1) 10.5 Timber and Furniture 2, , , Wholesale Trade and Sundry Ind. 2, , , Beverages 3, , , Leather and Shoes 1, , , Total 140, , , Internal Loan Portfolio 115, , ,410 Abroad Loan Portfolio 15,106 14,896 17,371 Garantees 8,220 10,155 9,875 Securities 4,175 5,748 9,992 Total 142, , ,649 Does not consider Banco Nossa Caixa and Banco Votorantim operations Banco do Brasil MDA 4Q09

143 8.1.4 Operating Risk Introduction The structure of Banco do Brasil's operating risk management is composed of a Risk Management Directorship, Directorship of Internal Controls, and Security Management Directorship, according to CMN Resolution 3380, which governs on the implementation of an operating risk management structure. Information about the management structure and operating risk management process can be found in more detail on BB's Internet page, investors relations website. In order to meet the Basel II implementation schedule, in accordance with the Release of the Central Bank of Brazil (BACEN), of October 29, 2009, which provides for the use of advanced models as from 2013, as well as the guidance defined by the Central Bank of Brazil in Release , regarding determination of Required Referential Equity, the Bank has been carrying out actions aimed at the adoption of an internal operating risk model which enables more accurate management and fulfills the requirements established by the Regulator. During the fourth quarter, we emphasize the implementation during the fourth quarter of 2009 of a monitoring and analysis procedure for operating risk scenarios. In order to manage operational risk, Banco do Brasil, follows the best market practices, monitors operating risks through key risk indicators, operational loss exposure limits and a systematized internal database. Key Risk Indicators (KRI's) KRI is a tool that supports operational risk management. It is comprised of one or more combined and interrelated variables that is (are) an integral part of an operating process, with behavior expected according to predefined rules, and whose variation indicates greater or lesser exposure to the operational risk. At BB they are used with the objective of identifying weak points associated with the critical operating processes and to assist in the proposition of operating loss mitigation actions. During the fourth quarter of 2009, the KRI implemented by BB had their cause-effect relation with actual loss reviewed, in order to contribute more in mitigating operating losses. Operating Loss Exposure Limits In order to ensure an effective management of operating risks, Banco do Brasil employs operating loss exposure limits, which are intended to establish the limits acceptable to the Bank for operating losses, which are remitted for examination every month by the Operating Risk Sub-Committee and Global Risk Committee (GRC). In this respect, the BB created the Operating Loss Global Limit in order to allow operating loss management based on statistically pre-established tolerance levels, and to allow the detection of weaknesses associated with processes likely to cause significant losses. The table below presents the monitoring of BB's operational loss, and also includes the losses of BNC as from the third quarter of 2009, divided by loss event category, in percentages Banco do Brasil MDA 4Q09

144 Table 118. Monitoring of Operational Loss Loss Event Category 4Q08 1Q09 2Q09 3Q09 4Q09 Labor Issues 40.4% 41.9% 45.2% 39.1% 39.5% Business Failures 32.2% 14.5% 16.3% 22.1% 35.1% External Fraud and Theft 11.0% 18.2% 16.6% 18.0% 13.3% Process Failures 11.6% 19.8% 12.9% 11.8% 10.3% Physical Assets Damage 3.4% 4.6% 5.3% 4.1% 0.4% Internal Frauds 1.4% 0.9% 3.5% 4.8% 1.3% System Failures 0.0% 0.1% 0.2% 0.2% 0.1% Activities Interruption 0.0% 0.0% 0.0% 0.0% 0.0% The Bank also defines specific limits in order to reduce the level of exposure and to guarantee the adoption of mitigation actions at a lower level of granularity. The limit for foreign branches, the specific limit for losses with credit cards and the limit for self-service channels merit special emphasis. The latter, during the fourth quarter of 2009, had its methodology reviewed, so that in addition to giving priority to loss-reduction actions, it began to assess the effectiveness of the security technical tools implemented for the ATM, POS, Personal Internet, Withdrawals Abroad, CABB, Cell Phones, Lotteries, 24hr Banking, ATM (CEF), and Financial Manager channels ATM: Automated Teller Machines; POS: Storeowner debit terminal; CABB: Call Center Banco do Brasil; Lottery Ticket Sales Outlets: withdrawals performed at lottery ticket sales outlets; ATM (CEF): Terminals of CEF shared with BB Banco do Brasil MDA 4Q09

145 8.2 Capital Structure Shareholders Equity Banco do Brasil s Shareholders' Equity at year-end 2009 was of R$ 36,119 million, a sum 20.6% above the same period in the previous year and 7.3% above September The growth of shareholders' equity in the last 12 months was due to the incorporation of the Results. Table 119. Shareholders Equity R$ million Mar/08 Jun/08 Sep/08 Dec/08 Mar/09 Jun/09 Sep/09 Dec/09 Shareholders Equity 25,407 26,371 27,889 29,937 30,859 32,360 33,661 36,119 Capital 13,212 13,212 13,699 13,780 13,780 18,549 18,549 18,567 Reserves 10,131 13,101 12,762 15,990 15,771 13,626 13,311 17,313 MTM Securities and Derivatives (33) (Shares in Treasury) 1-0 (31) (31) (31) (31) - Retained earnings (accumulated losses) (31) P&L Accounts 1,978-1,461-1,215-1, Banco do Brasil MDA 4Q09

146 8.2.2 Regulatory Capital The implementation of the rules of Basel II in Brazil, especially in relation to the capital requirement, produced several modifications in the method of measuring capital to bear the risks inherent to banking activities. The implementation schedule of Basel II in Brazil was officialized by the Brazilian Central Bank - Bacen by means of Communication 12,746, of , and subsequently adjusted by Communication 6137, of This agenda was built in phases, initially establishing, as regards capital requirement, the use of a standardized approach (defined by Bacen), and at the end, the use of advanced models. On October 29 th., 2009, BACEN, through Release , adjusted the schedules previously disclosed, with a view to supplementing the measures and procedures required for proper implementation of Basel II in Brazil. To regulate the transition from Basel I to Basel II (standardized approach), Bacen published several rules about capital requirement (Pillar I), process of supervision and transparency of information (Pillars II and III). Referential Equity Amount (RE) On , CMN approved alterations in the rules for definition of the RE (Referential Equity) of financial institutions by means of Resolution 3444, revoking CMN Resolution 2837, of On the same date, BACEN published Circular 3343/2007, which refers to the procedures to be adopted in the request for categorization of borrowing instruments at Tier I and Tier II of RE. The RE is formed by the sum of the Tier I 5 and Tier II 6 portions, being deducted the asset balances represented by the following funding instruments issued by the financial institution: stock, hybrid capital and debt instruments, subordinated debt instruments and other financial instruments described in CMN Resolution 3444/2007, art. 12 and art. 13, 3. According to CMN Resolution no. 3444/2007, for purposes of RE composition, the value of preferred shares issued with a redemption clause having an original term of less than ten years, increased by the value of subordinated debt instruments (DS), is limited to 50% of RE Tier I (art. 14, clause III). On the other hand, the amount of hybrid capital and debt instruments (IHCD) is limited to the RE Tier I value, being deducted the existing DS amount and its remaining issue margin (art. 14, clause I). In December 2009, the IHCD margin available to compose RE was of R$ 17,0 billion, whereas for issue of DS the same was of R$ 3.4 billion. Required Referential Equity (RRE) CMN Resolution 3,490, of , established the Required Referential Equity (RRE) concept to substitute the Required Shareholders' Equity (RSE) concept, revoking exhibit IV of CMN Resolution 2099/1994, and other rules concerning the topic. The RRE was henceforth comprised of the following six portions: RRE = PEPR + PCAM + PJUR + PCOM + PACS + POPR Where: PEPR - portion referring to the exposures weighted by the FPR assigned thereto; PCAM - portion referring to the risk of exposures in gold, in foreign currency and in operations subject to exchange variance; PJUR - portion referring to the risk of operations subject to the variation of interest rates and classified in the trading book, as provided for by Resolution 3,464, of , where n = number of the different 5 Tier I = it is determined by the sum of the values corresponding to the net equity, to the credit income accounts balances and to a blocked account deposit to cure capital deficiency, excluded the items mentioned in Bacen Resolution 3.444/2007, art. 1, 1, clause I to VI. 6 Tier II it comprises the sum of the values corresponding to revaluation reserves, contingency reserves and special profit reserves related to nondistributed statutory dividends, increased by values corresponding to hybrid capital and debt instruments, subordinated debt instruments and other items described in CMN Resolution 3.444/2007, art. 1, 2, clauses I and II Banco do Brasil MDA 4Q09

147 portions relating to the risk of operations subject to the variation of interest rates and classified in the trading book; PCOM - portion referring to the risk of operations subject to the variation of the price of commodities; PACS - portion referring to the risk of operations subject to the variation of the price of shares and classified in the trading book, as provided for in Resolution 3,464, of ; POPR - portion referring to the operational risk. The reviews in the Referential Equity (RE) were incorporated by BB in July As regards the Required Referential Equity (RRE), the rule started to be required as of The following information is in compliance with the regulation in effect Banco do Brasil MDA 4Q09

148 Performance In December 2009, Banco do Brasil's Referential Equity reached R$ 58,264 million, 34.3% over that observed in December 2008 and 13.2% above September Table 120. BIS Ratio Financial Conglomerate R$ million Mar/08 Jun/08 Sep/08 Dec/08 Mar/09 Jun/09 Sep/09 Dec/09 Referential Equity Amount RE 35,934 33,231 35,271 43,391 47,644 50,087 51,456 58,264 Level I 25,022 22,455 23,954 31,201 32,915 35,218 36,121 41,068 Capital 13,212 13,212 13,699 13,780 13,780 18,549 18,549 18,567 Capital Increase Retained earnings (accumulated losses) Capital reserves Revenue reserves 10,131 13,101 12,762 15,990 15,771 13,626 13,311 17,313 Reavaluation reserves (6) (6) (7) (7) (15) (14) (7) (7) Mark-to-Market Securit. And Derivatives (33) Treasury shares (31) (31) Accumulated Earnings or Losses (31) (31) (31) Corporate Profit Sharing (0) Income accounts 1,978-1,461-1,215-1,509 - Tax Credit excl. RE's Tier I Res.3059 (22) (3,743) (3,702) (22) (22) (22) (22) (22) Deferred Assets (253) (303) (352) (513) (562) (638) (291) (242) Mark-to-market (104) (29) (97) (121) (144) (85) Additional Provision ,835 1,918 2,867 2,903 2,782 Hybrid Capital and Debt Instruments - Tier I ,524 Tier II 10,913 10,776 11,317 12,190 14,729 14,869 15,335 17,196 Subordinated debt 10,385 10,745 11,209 11,729 14,342 14,653 15,230 17,078 Hybrid Capital and Debt Instruments ,145 1, Inst of Cap. Issued by IF with FPR of 100% Revaluation reserves Mark-to-market 104 (134) (126) Financial Instruments Excluded from RE (452) (620) (711) (720) (859) (875) (917) (827) RSE/RRE 26,925 29,235 29,813 31,500 34,879 35,957 43,647 46,758 Credit Risk(1) 26,178 28,346 29,310 30,980 33,554 34,574 40,487 43,557 Market risk(2) Operating Risk(3) ,155 1,155 2,528 2,528 Surplus/(insufficiency) of RE 9,010 3,996 5,458 11,891 12,765 14,131 7,809 11,506 K Coefficient % (1) Referring to the PEPR portion pursuant to circular 3,360 of 9/12/2007. (2) Referring to the PCAM, PJUR, PCOM and PACS portions, Circulars 3,361 to 3,364/2007, 3,366/2007, 3,368/2007 and 3,389/2008. (3) Referring to the POPR portion, pursuant to circular 3,383, of 4/30/2008. BB's RRE reached the sum of R$ 46,785 billion in December, up 48.5% over December 2008 and 7.2% over September The main part of the requirement was caused by the credit risk portion (PEPR), which reflects chiefly the growth of loan operations. The following table presents the main accounts forming the PEPR quota in the third and fourth quarters of 2009, considering the Economic-Financial Consolidated: Table 121. Main accounts of the PEPR share (Economic Financial Conglomerate) R$ million Sep/09 Dec/09 Chg. % Loan Operations 22,454 23, Ohter Credits 5,284 6, Securities 1,461 1, Others 11,288 11, TOTAL 40,487 43, Banco do Brasil MDA 4Q09

149 With respect to market risk, we present in the following table the Required Referential Equity in December 2009, by risk factor. Table 122. PRE for Market Risk by Risk Factor R$ million Risk Factors Dec/09 PRE Exchange - PRE Interest Rate 599 PRE Commodities 32 PRE Shares 43 PRE Market Risk¹ 674 For the operational risk, BB has opted for the utilization of the Alternative Standardized Approach, with requirement of 80%. 7 of the sum required in accordance with Circular The total of R$ 2,528 million allocated takes into account BNC and BV. The allocated capital by business line is presented as follows. Table 123. Allocated capital for operational risk by line of business Business Line Amount (R$ million) Asset Management 70 Commercial (1) 594 Retail 270 Corporative Finance (2) 429 Trading and Sales 810 Payments and Settlements 304 Financial Agent Services 48 Retail Brokerage 3 TOTAL 2,528 (1) Included R$ 95 million from BNC; (2) Included R$ 152 million from BNC and R$ 227 million from BV. The K Coefficient exhibited growth in relation to 3Q09, going to 13.7% in 4Q09. This ratio allows BB leverage up to R$ 104,368 million in loan assets, considering the 100% weighting Mar/08 Jun/08 Sep/08 Dec/08 Mar/09 Jun/09 Sep/09 Dec/09 Tier I Tier II Figure 73. BIS Ratio Economic Financial Conglomerate 7 Since January 2010, the allocated percentage will reach 100% Banco do Brasil MDA 4Q09

150 The improvement observed in the period is launched from the profits capitalization, the issuance of R$ 1 billion in Certificates of Subordinated Banking Deposits and Perpetual Bonds of US$ 1,450 billion. This last issue was considered by the Central Bank as eligible for purposes of computing the Tier I in the Capital, in the form of capital and debt hybrid instrument. In 4Q09 BB released a Material Fact that informed the market that, with the consent of the National Treasury, is finalizing studies to increase its capital, in minimum, R$ 8 billion and, in maximum, R$ 10 billion, in order to sustain its future growth. Table 124. Changes in Composition of BIS Ratio R$ million Referential Equity Required Referential Equity Effect in Basel Ratio Effect in Leaverage Net Income deducted of Interest on Own Capital 2, ,666 Increase of Subordinated Debt 1, ,800 Other Changes in Referential Shareholders Equity 2, ,593 Tax Credit excluding RE's Tier I Res Hybrid Capital and Debt Instruments (18) - (0.0) (164) Increase of Market Risk Requirement - 42 (0.0) (386) Increase of Credit Risk Requirement - 3,069 (0.9) (27,901) Increase of Operational Risk Requirement Changes in the Quarter 6,808 3, ,608 Balance at Sep/09 51,456 43, ,992 Balance at Dec/09 58,264 46, ,600 Quarterly Net Variation 6,808 3, , Banco do Brasil MDA 4Q09

151 Fixed Asset Ratio In the last quarter, the Fixed Asset Ratio dropped from 11.7% to 11.4%. With the current fixed asset level, BB was able to increase its fixed assets by R$ 22.5 billion, without leading to be out of the maximum 50% limit of the Referential Equity. Table 125. Fixed Asset Ratio R$ million Mar/08 Jun/08 Sep/08 Dec/08 Mar/09 Jun/09 Sep/09 Dec/09 Shareholders' equity 25,407 26,371 27,889 29,937 30,859 32,360 33,661 36,119 Subordinated debts eligible as Capital 10,385 10,745 11,209 11,729 14,342 14,653 15,230 17,078 Hybrid Capital and Debt Instruments ,145 1, Other (727) (4,665) (4,765) 580 1,308 2,118 1,693 4,214 Adjusted Referential Equity Amount (A) 35,934 33,231 35,270 43,391 47,643 50,087 51,455 58,264 Permanent Assets 6,284 7,042 8,217 13,606 19,421 19,779 23,729 25,178 Variable Income Securities Stock Exchange and Cetip Clearing (0) (0) (1) (0) (0) (0) (1) (0) Leased assets (1,614) (2,271) (2,877) (4,078) (4,836) (5,221) (7,759) (8,166) Losses with Leasing to be Amortized (55) (58) (62) (55) (48) (42) (39) (35) Deferred Assets (Resolution CMN 3,444) (253) (303) (352) (513) (562) (638) (291) (242) Vested Rights Payroll up to 06/30/09 (Res Bacen) (3,921) (6,284) (4,894) (4,782) (5,305) Equity Int. in the Results of Subs and Affil (3,619) (5,028) (5,115) Total Fixed Assets (B) 4,362 4,449 4,964 5,067 7,716 5,396 6,035 6,623 Fixed Asset Ratio (B/A) - % Margin (Surplus) - % 13,605 12,167 12,671 16,628 16,105 19,648 19,693 22, Banco do Brasil MDA 4Q09

152 8.2.3 Economic Capital Banco do Brasil utilizes the concept of economic capital in its internal processes of risk management. The tables below present the total capital requirement and the requirement by sector of the economy (excluding BV). Table 126. Economic Capital Economic Capital Internal Model 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 Credit Risk Requirement (1) 4,443 4,809 5,150 5,737 7,397 8,060 Market Risk Requirement (2) Operating Risk Requirement 1,224 1,335 1,513 1,674 1,967 2,250 TOTAL 5,852 6,558 7,001 7,581 9,540 10,414 (1) To loans portfolio and guarantees (2) Trade portfolio, capital consumption (Circ Bacen 3,354), exchange and commodities. We present below the economic capital requirement over the Credit Risk detailed by macro-sectors and individuals/businesses, disregarding BNC's and BV's information. Table 127. Distribution of Economic Capital in the Loan Portfolio R$ million Dec/08 Share Dec/09 Share INDIVIDUALS 3, % 4, % COMPANIES 1, % 2, % Agribusiness of Animal Origin % % Agribusiness of Vegetable Origin % % Automotive % % Beverages % % Wholesale Trade and Sundry Ind % % Retail Trade % % Building % % Leather and Shoes % % Electrical and Eletronic Goods % % Electricity % % Agricultural Consumables % % Timber and Furniture % % Metalworking and Steel % % Pulp and Paper % % Oil % % Chemicals % % Services % % Telecomunications % % Textiles and Garments % % Transport % % Other Activities % % TOTAL 4, % 6, % Banco do Brasil MDA 4Q09

153 Next, we present the economic capital requirement for market risk, by risk factor, of BB Consolidated: Table 128. VaR by Risk Factor R$ million Risk Factors Dec/09 Pre-Fixed Interest Rate 63.0 Foreign Currency Coupom 15.4 Price Index Coupon 4.0 Exchange Variation 19.9 Commodities 1.7 PRE Market Risk* *Trading Book + Exchange Variation + Commodities Finally, we show the economic capital requirements for operational risks, according to class of operational loss events and taking into account BNC values. This calculation includes data associated with the severity of the loss events recorded in the internal database. Table 129. Distribution of Economic Capital in the Loan Portfolio Loss Event Categories R$ million Faults in Businesses 1,004 Damage to the Physical Property 6 Faults in Systems 11 Faults in Processes 236 External Fraud and Theft 280 Internal Fraud 72 Labor Issues 641 TOTAL 2, Banco do Brasil MDA 4Q09

154 9 Social and Environmental Performance Presentation Banco do Brasil holds the pioneer iniciative in the quarterly disclosure of the highlights of its Social and Environmental Performance (RSA), presenting historical series and analysis that allow the reader to understand how sustainability permeates the strategy and management of the company. The decision about the quarterly disclosure of this information is based on the commitment to the creation of social and environmental values, materialized in Agenda 21, and the understanding that this data is as important to the company's sustainability as the economic and financial information, deserving a similar treatment to that is already given to it. In addition, it seeks to respond to an ever growing mass of shareholders who take into account social and socio-environmental, and corporate governance aspects in their investment decisions. RSA practices selected to form a part of the MD&A were picked out based on their relevance to the Company's business, on the tangible return to shareholders, and on market research with pension funds and specialists on the subject. The selection of which data justifies the quarterly monitoring of its development (the other indicators are traditionally reported in the Annual Report) was also used as a criterion in the structuring of this report. Like the rest of the report, this set of information is constantly reviewed and monitored with a view to better adapting its reporting to the needs of analysts and shareholders, target audience of this publication. This chapter is divided into four major blocks, grouping the new RSA indicators and information that the Bank had already been disclosing, per related topics: Relationships with Staff, Ecoefficiency, Business with Socio-environmental Emphasis and Recognition of the Investor Market. Considering the fact that integration of the Banco Nossa Caixa systems is still in progress, part of this chapter's tables and figures still do not include information about BNC. For a better understanding, we suggest the careful reading of the footnotes that go together with the tables Banco do Brasil MDA 4Q09

155 9.1 Employee Relations This block contains the main actions regarding business sustainability, in connection with investments in people by Banco do Brasil. Characteristics of Workforce Banco do Brasil invests in the creation and strengthening of a bond with its collaborators, so that its professionals feel encouraged to build a career at the institution. People that join the staff tend to spend most of their professional lives at the Bank, which contributes to the low turnover and causes the stratification of the staff by age and length of service to evolve in a relatively linear manner, without abrupt oscillations. In 4Q09 there were small fluctuations in stratification, mainly due to consolidation of the BNC employee base resulting from that bank's takeover. There was an increase in the relative participation of the bracket of employees "above age 45", in detriment of the others. 4Q08 3Q09 4Q % 8.9% 27.5% 8.0% 29.3% 7.9% 34.3% 35.4% 34.6% 30.4% 29.1% 28.1% Up to 25 years from 26 to 35 years from 36 to 45 years Over 45 years Figure 74. Employees Age Stratification by length of service at the Bank was affected by more expressive changes in 4Q09. These changes arose basically from inclusion of BNC staff members, once all the new employees were admitted into BB on the date of corporate takeover, which resulted in an increase in the bracket including personnel with less than five years of employment. 4T08 3T09 4T09 14% 16% 14% 41% 15% 41% 14% 12% 48% 5% 4% 4% 2% 4% 2% 21% 22% 20% Up to 5 years 6 to 10 years 11 to 15 years 16 to 20 years 21 to 25 years Over 25 years Figure 75. Aged Bracked Banco do Brasil MDA 4Q09

156 Education and Professional Development Banco do Brasil develops countless professional education and development actions. These actions include onsite courses, the establishment of partnerships to provide distance learning solutions and the concession of scholarships (academic and of languages), besides the incentive to studies by means of the internal career planning system. The total number of scholarships granted reached 10,724 in the quarter, which corresponds to 10.3% of the staff. This percentage is lower than the comparison with the preceding quarter and with the same period in Part of this indicator's decline refers to the increased employee base owing to Nossa Caixa. In addition, Banco do Brasil has recently resumed the remote MBA programs, which should contribute to improve the indicators in the coming quarters. Table 130. Growth in the number of scholarships granted 4Q08 3Q09 4Q09 Undergraduate Scholarships 7,042 6,134 5,734 MBAs, Masters' and Doctors' Scholarships 2,535 1, Language Scholarships 4,289 4,066 4,010 Total Scholarships Granted 13,865 11,230 10,724 Number of employees in the period 86,059 89, ,971 Undergraduate Scholarships per Employee 8.2% 6.8% 5.5% MBAs, Masters' and Doctors' Scholarships per Employee 2.9% 1.1% 0.9% Language Scholarships per Employee 5.0% 4.5% 3.9% Total Scholarships per Employee 16.1% 12.5% 10.3% * On 1Q09, BESC and BEP employees are considered. On 4Q09, BNC employees were considered. With regard to training, Banco Nossa Caixa employees had a profile very similar to those of BB, only with a greater concentration in the "Holders of Bachelors Degree" classification and a lower percentage of staff members in "Specialization, Master s or Doctor s Degree." The inclusion of BNC employees, in conjunction with actions that aim to encourage graduation (explained in the preceding table), explain the fluctuations in the graph below. 4Q08 3Q09 4Q % 0.6% 22.9% 0.5% 20.6% 0.5% 30.0% 30.2% 33.0% 48.2% 46.5% 45.9% Elementary School Holders of Bachelor s Degree High School Specialization, Master s or Doctor s Degree Figure 76. Level of Education In addition to the formal education of employees, Banco do Brasil invests in other types of training, providing presence and distance learning courses to its staff. A significant number of these courses is developed by the Corporate University of Banco do Brasil, which identifies knowledge and competences that the employees have to obtain to perform their duties at the Bank. Other courses provided are those related to the personal growth, social and environmental awareness, and incentives to voluntary work, Banco do Brasil MDA 4Q09

157 among other theme areas considered important to the personal and professional experience of its collaborators. The total quantity of hours of training exhibited growth in relation to the previous quarter, but decrease in relation to the same period of the previous year The index that describes the relation between training hours and the total number of employees also reflected a decline in the period. As with the previous indicators, it is important noting that among the main factors the inclusion of Nossa Caixa personnel, who entered the employee base but have still not had sufficient time to enroll in the training courses held by BB. Table 131. Employee Training Annual Flow 4Q08 3Q09 4Q09 Hours of Training**² 12,434,598 11,929,817 93,172 Total employees*¹ 84,782 88, Hours of training by employees**² , Employees with Anbid Certification CPA 10 37,054 39,048 7,894 Employees with Anbid Certification CPA 20 7,352 7,848 47,509 (1) BESC and BEP staff members included since 1Q09. BNC employees included since 4Q09. (2) Index calculated with 12 months accumulated information We also emphasize the obtainment of Legal Certification in Financial Investments. Banco do Brasil is the institution with the highest quantity of employees certified by Anbid/Andima. From the start of the program, 47,509 employees have been certified, of which 39,615 under the basic mode and 7,894 under the advanced mode. Value Added to Employees Personnel Expenses in their diverse aspects comprise an important index of value added by the Bank to staff members. The table below shows the progress of these expenses in absolute terms and in average sums per employee. Not considering the consolidation of Banco Votorantim, personnel expenses rose to R$ 2,754 million in 4Q09. The average quarterly expenses per employee increased by 2.4% as compared with 3Q09 and by 0.9% as compared with 4Q08 (when BNC employees did not integrate BB s staff). The growth during the quarter resulted from the wage increase granted due to the collective bargaining agreement. Table 132. Quarterly Average Expense per Employee (Statement with Reallocations) 4Q08 3Q09 4Q09 Personnel expenses (reallocated) R$ 2,301,368, ,693,410, ,754,282, Number of employees in the period 86, , ,971 Quarterly Average Expense per Employee R$ 26, , , * Headcount does not include trainees. Since 1Q09, the employees of BESC and BEP were included. As from 4Q09, the employees of Banco Nossa Caixa were included either. As a manner of providing improved financial returns to staff members and at the same time confirming the commitment by everybody in the organization with the generation of consistent profits, Banco do Brasil has made efforts to constantly enhance its Profit Sharing Program - PSP. During 4Q09 the average sum provisioned for paying out to each employee reached R$ 4,279.6, 3.2% higher in relation to 4Q08. This performance was made possible by the increase in net income, which more than offset the increased number of employees. Table 133. Expenses with Statutory Porfit Sharing 4Q08 3Q09 4Q09 PLR provisioned in the quarter R$ 380,482, ,337, ,949, Number of employees in the period 86,059 89, ,971 Average PLR per Employee R$ 4, , , * Since 1Q09, BESC and BEP employees were included. Since 4Q09 BNC employees were also included Banco do Brasil MDA 4Q09

158 Turnover of Staff Members Rotation ratio ended 4Q09 at 0.68% against 0.75% in the previous quarter and 0.77% in the same period of During the quarter, the behavior arose chiefly from reduced terminations. As compared to the same period in 2008, the rate's performance was also influenced by the growth in the employee base (in particular due to BNC), which increased the equation denominator that calculate this rate. Table 134. Employee Turnover 4Q08 3Q09 4Q09 Rate of Employee Turnover¹ Nr. Employees in Previous Quarter³ 85,392 89,194 89,989 Nr. Employees in the Quarter³ 86,059 89, ,971 Releases in the Period² (1) Proportion of releases as compared to the average number of employees in the period. (2) The concept of releases includes firing, retirements, early retirements, deaths and self-request release. (3) Since 1Q09 BESC and BEP employees were included. BNC employees were included since 4Q Banco do Brasil MDA 4Q09

159 9.2 Eco-efficiency The disclosure of information on Eco-efficiency demonstrates the efforts of the Company in the efficient use of resources, with reflexes not only in reducing the impact on the environment, but also on the control of administrative expenses and on mitigating risks. To structure the indicators, we sought to relate the items that are being evidenced (such as: consumption of water and paper) with denominators that influence in a more direct way its fluctuation. For example, the use of water in Banco do Brasil's main buildings is intended chiefly to meet the needs of its staff members, and hence we relate its use to the average number of employees per period. Under the same reasoning, the use of paper relates to the base of checking accounts Annual Use of Water in the Main Buildings The ratio below refers to the use of water in Banco do Brasil's main buildings. Main buildings I, II, and III located in Brasilia concentrate a major part of Banco do Brasil's executive officers, in addition to support bodies. In the past 12 months, the average number of employees who were allocated in these buildings reached 5,771. The increase in the quantity of employees that work in the main office buildings results from the fact that a renovation is in the final stages in Edifício Sede II, which will gradually re-house teams of Executive Committees and Strategic Units, heretofore reallocated to other sites. As of 4Q09, BB also began to appoint to strategic positions employees who until that time had been outstanding in the General Management of Banco Nossa Caixa. This growth should not be kept up for many quarters, once a large portion of BNC's administrative area employees should be transferred to BB's sales force. The use of water by employees grew significantly, as compared to 4Q08 as well as to the preceding quarter. Table 135. Use of Water 4Q08 3Q09 4Q09 Use of Water in the Main Building (m³) 119, , ,317 Employees in Main Buildings I, II, and III (average) 5,149 5,559 5,771 Use of Water (m³) / Employees* * Indicator calculated based on data accrued over 12 months Banco do Brasil MDA 4Q09

160 White Paper - Annual Use Banco do Brasil has also put in place a number of measures to reduce the use of paper. Corporate systems were adapted to print preferably on both sides, there were employee awareness campaigns, and customers are encouraged more and more to employ automated channels not involving the use o paper. These measures have aided paper consumption to remain stable in absolute terms, and points to a decline in the ratio that related it to the quantity of accounts. Table 136. Use of Paper 4Q08 3Q09 4Q09 Use of Paper (tons) 3,412 3,351 3,376 Checking Accounts (average)² 29,294,820 30,921,949 31,250,446 Use per customer (gr)¹ ¹ Indicator calculated based on data accrued over 12 months ² As of 1Q09, BESC and BEP employees were included. Automated Transactions without the use of paper As informed in the preceding item, Banco do Brasil has invested in new channels for processing transactions and for doing business with its customers. There is growing trend to employ channels that do not involve printing and, therefore, do not consume paper. Among such channels, we may point out the Internet, Customer Assistance, and Mobile Banking. These channels increased their relative share from 38.6% in 4Q08 to 40.1% in 4Q09. The decline witnessed in the quarterly comparison is seasonal, as in the year's last quarter transactions through POS terminals increase (terminals installed inside stores and other points that use paper) in the processing of credit and charge card sales, which distorts the comparison base. Another important initiative is the DDA (Authorized Direct Debit), through which customers can enroll themselves as electronic payers and avoid the use of paper payment slips. BB is a leader in the DDA service, and reached this position because it started providing this service for customers even before it was launched by the Brazilian Bank Federation (Febraban). 37.8% 38.3% 39.8% 38.6% 40.0% 42.6% 44.6% 40.1% 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 Transactions without use of paper Figure 77. Transactions without use of paper Banco do Brasil MDA 4Q09

161 Use of Toner The use of toner is another potential creator of residues related to printing documents. Banco do Brasil already uses 100% of reconditioned cartridges, and has concentrated efforts to reduce the use of this kind of material. The consumption of toner exhibited growth of 7.4% in comparison with the previous quarter, and of 17.8% in relation to 4Q08. Growth in consumer spending arises from a vigorous expansion of the customer base and the increase in business volume. The indicator is also influenced by the program recently undertaken by the Bank to acquire printers, which at first creates a surge in paper use. Concurrence by DDA customers (Authorized Direct Charge) will gradually lead to a decline in the use of paper and toner, since there will be an increased use of this service by customers and printing of bank collection vouchers will be reduced. 22,423 22,822 23,096 22,398 21,653 22,857 24,549 26,378 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 Toner consumption in units Figure 78. Toner consumption in units Banco do Brasil MDA 4Q09

162 9.3 Social Environmental focused Business Banco do Brasil, with its concern for contributing to the improvement in the quality of life of the society and preserve the environment, carries out businesses that support the sustainable development of the country. Accordingly, the Bank offers environmentally and socially responsible products and services and designs business approaches intended to foster the sustainable development of the Brazilian regions in which BB operates. Sustainable Regional Development - DRS Sustainable Regional Development (DRS) is a Business Strategy through which Banco do Brasil seeks to drive sustainable development, by mobilizing the agents of economic, social, and political activities in order to support productive activities that are economically feasible, socially fair, and environmentally correct. In order to implement DRS, Banco do Brasil's traditional credit facilities are extended, such as microcredit loans, on-lending (such as Proger), or other facilities with unrestricted funds intended for individuals. DRS creates returns for the Bank, from a social as well as an economic viewpoint: it provides the opening of new checking accounts and the expansion of the loan portfolio, besides permitting the loyalty enhancement of a customer base that tends to have growing business potential. During the quarter, despite the volume of business having maintained its growth trend, there was a decline in the number of families assisted and in the number of active bank accounts. The decrease in these figures arises from a process of analysis of DRS projects, which involves a revision of the number of beneficiaries enrolled with the program. This process was started in 2009 and shall be concluded in the first quarter of Table 137. Sustainable Regional Development (DRS) 4Q08 3Q09 4Q09 DRS - Transaction concluded (R$ millions) 4,676 7,112 7,803 DRS - Programmed loans (R$ millions) 5,466 5,278 5,232 Business Plans under implementation 4,679 4,475 4,480 DRS - Families Assisted 1,211,368 1,175,597 1,094,086 Banking accounts opened in DRS assisted communities (*) 114, , ,864 (*) Accumulated Position Monitoring begun as of Banco do Brasil MDA 4Q09

163 Microcredit Microcredit consists in low volume loan transactions, normally aimed at low-income groups that do not have access to conventional credit facilities. Law 10,735/03 regulates the concession of loans to the low income population and refers to the allocation of funds corresponding to 2% of the demand deposits obtained by the financial institutions for microcredit operations, at a rate of up to 2% per month. Banco do Brasil is one of the country's key market agents in micro-finance. The distribution channels of the lines of credit are the chain of branches of Banco do Brasil and the network of banking correspondents (of BB itself and those previously related to Banco Popular do Brasil, that was taken over). The micro-credit loan portfolio ended 4Q09 with R$ 674 million, an increase of 22.9% over the preceding quarter, and of 31.9% as compared to the same period in Table 138. Microcredit operations 4Q08 3Q09 4Q09 Microcredit - Portfolio (R$ thousands) 511,022 1,373 1,010 Specific Productive Microcredit - Portfolio (R$ thousands) 924 1, ,735 Loans in the Period - (R$ thousands) 141, ,106 1,137,348 Number of Agreements in Portfolio 1,237,159 1,124,588 - Family Agriculture - Pronaf Banco do Brasil is the country's largest lender to Family-run Agriculture. Besides performing the social role of supporting small producers and the generation of income in the rural zone, PRONAF enables the Bank to prospect new clients, generate new income and seek new business based on the increase in the loyalty of these clients. The PRONAF portfolio ended 4Q09 at R$ 18,279 million, reflecting a growth of 3.6% in the quarter and of 21.1% as compared to the same period in the previous year. 13,348 14,233 13,955 15,088 15,545 16,597 17,645 18,279 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 Figure 79. PRONAF Portfolio / Proger Rural (R$ million) Banco do Brasil MDA 4Q09

164 Credit with RSA - Other Programs In addition to the programs already described, Banco do Brasil supports the organic foodstuffs activity (BB Produção Orgânica) and forest production (BB Florestal). The total amount invested in these two lines was R$ 613 million at the end of the quarter, representing an increase of 8.1% as compared with the previous quarter and of 45.7% over 4Q09. Table 139. Credit with RSA - Other Programs R$ million 4Q08 3Q09 4Q09 BB Florestal BB Produção Orgânica TOTAL In the concession of loans to companies there is compliance with the criteria and rules defined by the Bank and by the financial authorities, as well as the fulfillment of social and environmental requirements such as those contained in the Equator Principles and in the Global Pact, rules to which the Bank voluntarily adhered. BB also verifies whether the loan proponents are included in the list of the Ministry of Labor and Employment which identifies companies that submit their employees to degrading forms of labor or slave labor. Other Business with Socioenvironmental Attributes Banco do Brasil offers its customers two alternatives of investment funds that adopt RSA criteria. The portfolio of BB Ações ISE is comprised of companies that form the theoretical portfolio of the Business Sustainability Index - ISE. BB Referenciado DI Social 200 allocates 50% of its management fees, via Fundação Banco do Brasil, to social programs. The equity of the two funds reached R$ 77 million in the 4Q09, an increase of 36.8% in the quarter, and of 46.9% over 4Q08. Table 140. Investment funds with RSA criteria R$ million 4Q08 3Q09 4Q09 BB Ações ISE BB DI Social Total Banco do Brasil MDA 4Q09

165 Long-Term Relationship - Quality in Customer Assistance Quality in customer assistance is directly related to the company's abilities in customer retention, fidelity, and profitability. The table below shows the share of complaints made by Banco do Brasil customers at the Central Bank, as compared to total complaints in the Financial System. These data refer to banks with over one million customers in their portfolios. The ratios which measure valid complaints recorded by BB customers with the BACEN, in relation to the customer base and total number of complaints filed against the financial system, increased in the last three quarters. Among the factors which explain this high we highlight the consolidation of the complaints filed against Banco Nossa Caixa (which started to comprise BB's base) and the fact that the ruling of the proceedings by the Central Bank of Brazil (BACEN) not to be carried out on a linear basis, what make that in some months the concentration of judgements become accumulated. Despite understanding that certain factors contribute to the fluctuation in indicators, BB continues to work toward improving the quality of service, evaluating the need for a revision of the organizational and business model and taking one-off measures with respect to branches where there have been sharp drops in the indexes that measure the quality of service. Table 141. Complaints registered in the Central Bank 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 Complaints of BB registered at Bacen 1, , Total complaints registered at Bacen 9,529 8,173 7,829 4,020 1,771 1,455 Customer Base¹ 46,459,826 46,989,475 47,159,103 53,529,635 54,236,359 52,694,592 Complaints / Customer Base² Complaints BB / Total Bacen 13.0% 8.9% 6.4% 28.3% 18.5% 30.4% (1) Since 1Q09 the table includes BESC and BEP customers. BNC customers were included in 2Q09. (2) ((Number of complaints) / (number of customers)) x 100, Banco do Brasil MDA 4Q09

166 9.4 Investor Market Recognition Besides having a representative share in the Ibovespa, BB participates in the following indices in the São Paulo Stock Exchange: Differentiated Tag Along Index - ITAG; Differentiated Corporate Governance Share Index - IGC; and Corporate Sustainability Index - ISE. The objective of ITAG is to measure the performance of instruments of companies that offer better terms to minority shareholders, in the event of sale of control. The portfolio is composed of shares that grant tag along rights in excess of 80% to minority common shareholders. The Bank, as a participant of the New Market (NM) of BOVESPA, highest degree of Corporate Governance level of the exchange, grants 100% of tag along to minority shareholders. IGC's purpose is to measure the behavior of shares of companies with good levels of corporate governance and those listed in the Novo Mercado or in corporate governance levels 1 and 2 in BM&FBOVESPA. The ISE reflects the performance of the shares of companies with recognized commitment to social responsibility and to corporate sustainability. It is emphasized that BB has been part of this important indicator since its creation in ,2 3,4 3,3 3,8 3,1 3,2 3,1 3,1 3,2 1,2 3,6 3, ISE ITAG IGC To ITAG/IGC: 1 Jan to Apr/08; 2 May to Aug/08; 3 Sep to Dec/08; 4 Jan to Apr/09 To ISE: 1 Dec05 to Nov06; 2 Dec06 to Nov07; 3 Dec07 to Nov08; 4 Dec08 to Nov09 Source: Bovespa Figure 80. BBAS3 participation in ISE, ITAG and IGC With the purpose of selecting the main firms for the shareholders, Capital Aberto magazine drew up a ranking list last October. Five aspects were analyzed in this publication: Liquidity, economic result, share appreciation, corporate governance and sustainability. To appear among the top companies in the ranking, the firm has to fulfill some requirements: have its shares among the most liquid of BM&Fbovespa, and have remained above the median of its category in the other 4 items analyzed. In the category of firms with market value above R$ 15 billion, Banco do Brasil came in 2nd place, and was the best-placed bank. This award is an acknowledgement of the work conducted by BB as regards the corporate governance practices adopted, maintenance of profitability, besides the expansion of sustainability actions, which promote the social and economic development of the country Banco do Brasil MDA 4Q09

167 10 Strategic Investments 10.1 Information Since 1Q08, the non-financial companies of the insurance, pension plan, capitalization segment and other activities started to be included in the consolidated statements of Banco do Brasil. Table 142. Interest in the capital of companies Share Book Value Book Value Equivalence Results R$ thousand Activity T09 Financial Activity - Country BB Gestão de Recursos - Distrib de Tít. e Val. Mobiliários S.A. Asset Management 100% 130, , ,447 BB Banco de Investimento S.A. Investment Bank 100% 396,509 1,817, ,948 BB Banco Popular do Brasil S.A. Banking 100% 18,519 22, BB Leasing S.A. - Arrendamento Mercantil Leasing 100% 25,842 43,289 4,057 BESC Distribuidora de Títulos e Valores Mobiliários S.A. Asset Management 100% 9,810 7,903 (88) BESC Financeira S.A. - Crédito, Financiamento e Investimentos Credit and Financing 100% 18,795 18,715 (12) BESC Leasing S.A. Arrendamento Mercantil Leasing 99% 19,382 19, Banco Nossa Caixa S.A. Multiple Bank 99% 4,900,236 - (70,671) Banco Votorantim S.A. Multiple Bank 50% 3,774,777-46,999 Financial Activity Abroad Banco do Brasil Ag. Viena Banking 100% 218, ,096 (20,424) BB Leasing Company Ltd. Leasing 100% 74,781 93,003 (8,530) BB Securities LLc. Asset Management 100% 16,652 3,120 2,432 BB Securities Ltd. Asset Management 100% - 48,570 - Brasilian American Merchant Bank BAMB Banking 100% 656, ,995 (61,904) BB USA Holding Company, Inc Holding 100% Insurance, Pension and Capitalization BB Seguros Participações S.A Insurance Company 100% 594,604-40,752 BB Aliança Participações Insurance Company 100% 1,031,928-89,792 Seguradora Brasileira de Crédito à Exportação SBCE Insurance Company 12% 2,313 2, Nossa Caixa Capitalização Seguradora 100% 5,476 - (26) Mapfre Nossa Caixa Vida e Previdência Seguradora 49% 43,879-4,798 Other Activities Ativos S.A. Credit Acquisition 100% 435,962 47,021 26,240 BB Administradora de Cartões de Crédito S.A. Service Rendering 100% 21,325 21,342 1,994 Nossa Caixa S.A. - Administradora de Cartões de Crédito 100% 10,394 - (26) BB Administradora de Consórcios S.A. Consortiums 100% 16,920 16,920 12,271 BB Corretora de Seguros e Administradora de Bens S.A. Broker 100% 33,578 33,574 24,835 Cobra Tecnologia S.A. IT 99% 44,744-51,718 Cia. Brasileira de Soluções e Serviços CBSS Visavale Service Rendering 40% 56,002 53,620 7,412 Cielo S.A Service Rendering 32% 202, , ,268 Kepler Weber S.A. Industry 18% 30,159 29, Neoenergia S.A. Energy 12% 1,094, ,609 48,673 Cadam S.A Mineração 22% 46,331 53,181 (532) Cia. Hidromineral Piratuba Saneamento 16% 2,087 1, Cia. Catarinense de Assessoria e Serviços - CCA Prestação de Serviços 48% Companhia Brasileira de Securitização Cibrasec Credit Acquisition 9% 6,763 6, Tecnologia Bancária S.A. Tecban Service Rendering 9% 14,235 13, BV Participações S A Holding 50% 32, BB Money Transfers, Inc Service Rendering 100% - 2, Banco do Brasil MDA 4Q09

168 10.2 Insurance, Pension Plans and Capitalization Banco do Brasil, through BB Seguros Participações e BB Aliança Participações, a wholly-owned subsidiary, maintains interest in companies in the areas of insurance, pension plans and capitalization, which enables it to offer its clients a broad range of non-banking products. The table below details the holdings in total capital and the line of business of each one of these companies as of Dec/09. BB is restructuring the corporate structure of the insurance segment, as detailed in chapter of this report. Table 143. Insurance, Pension Plans and Capitalization Company Share % Business Partnership Cia. De Seguros Aliança do Brasil S.A Health and Other Activities - BrasilVeículos Cia de Seguros Vehicle Sul América Seguros Brasilprev Pension Principal Financial Group e Sebrae Brasilcap Capitalization Icatu Hartford, Sul América e Aliança da Bahia Brasilsaúde Health Sul América Seguros Companies Results The consolidated income of the insurance companies closed 2009 at R$ million. It should be highlighted that life/other operations accounted for 15.9% of the total insurance revenues and 44.6% of income. Private pension operations account for 52.0% of revenues and 36.4% of income. Table 144. Income Statement by Line of Business 2009 Insurance Pension Plans Capitalization Consolidated Life and R$ thousand Auto Health Total Other Rev. from Insurance Pension Plans and Capitalization 1,326, ,179 1,880,729 3,413,826 6,155,433 2,257,058 11,826,318 Retained Insurance Premiums 1,326, ,179 1,880,729 3,413, ,413,826 Revenues from Pension Plans ,155,433-6,155,433 Revenues from Capitalization ,257,058 2,257,058 Changes in Technical Provisions (162,239) (1,765) (125,600) (289,604) (5,924,307) (1,999,847) (8,213,759) Insurance (162,239) (1,765) (125,600) (289,604) - - (289,604) Pension Plans (5,924,307) - (5,924,307) Capitalization (1,999,847) (1,999,847) Benefits and Redemption Expenses (210,220) - (210,220) Earned Premiums 1,164, ,414 1,755,128 3,124, ,124,222 Retained Claims (743,254) (175,810) (571,281) (1,490,346) - - (1,490,346) Marketing Expenses (134,739) (11,803) (512,993) (659,535) (83,092) (149,724) (892,352) Insurances (134,739) (11,803) (512,993) (659,535) - - (659,535) Pension Plans (83,092) - (83,092) Capitalization (149,724) (149,724) Other Operating Income (Expenses) (95,729) (11,226) (146,844) (253,799) 353,979 (19,381) 80,799 Administrative Expenses (149,585) (15,916) (116,606) (282,108) (195,655) (58,523) (536,286) Tax Expenses (32,093) (319) (64,303) (96,715) - (12,854) (109,568) Financial Income 82,372 6, , , , , ,438 Financial Revenues 93,388 7, , ,351 2,341, ,893 3,035,157 Financial Expenses (11,016) (865) (75,084) (86,965) (2,005,192) (273,562) (2,365,718) Operating Income 91,651 2, , ,454 94,776 26, ,699 Equity Account Adjust 190-2,905 3, ,095 Non-operating Income 2,210 (5) (37) 2,168 (23) (891) 1,254 Income before Taxes 94,051 (3,876) 461, , , ,170 1,128,373 Income and Social Contribution Taxes (36,093) 1,638 (140,284) (174,738) (168,596) (55,793) (399,127) Profit Sharing (4,503) (1,385) (4,897) (10,784) (6,319) (3,301) (20,403) Net Income (Loss) 53,456 (3,623) 316, , ,921 85, , Banco do Brasil MDA 4Q09

169 The combined ratio, which expresses the percentage of earned premiums that is consumed by operating expenses in the insurance business (retained claims, marketing expenses, and administrative expenses), closed the quarter at 67.7%, compared to 77.2% in 12 months and 77.3% in 3Q09. Consolidated Health Q08 1Q09 2Q09 3Q09 4Q09 4Q08 1Q09 2Q09 3Q09 4Q09 Vehicle Life and Others Q08 1Q09 2Q09 3Q09 4Q09 4Q08 1Q09 2Q09 3Q09 4Q09 Administrative Expenses + Marketing / Earned Premius - % Raited Claims / Earned Premius - % Figure 81. Combined Ratio Banco do Brasil MDA 4Q09

170 The Insurance ratio reflects the share of insurance, social security and capitalization companies in BB's income, that is, how much these segments added to the Conglomerate's final income. The result per segment can be seen in the table below. The life and basic lines are the highlights, accounting for 63.2% of the total, whereas private pension has a 18.9% share. The basic insurance line comprises insurance on properties, except for auto insurance. Table 145. Securities Operating Highlights R$ thousand 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 Life and basic insurance result 82, , , , , , ,977 Brokerage net revenue 27,359 32,355 37,603 39,427 37,838 40,515 40,845 Service Fee net income 22,580 32,027 25,231 21,709 19,298 21,242 21,341 Equity in the earnings (loss) 32,415 67,032 62,809 58, ,028 78,973 89,792 Social Security Result 33,936 33,668 41,108 36,965 54,836 61,216 45,372 Brokerage net revenue 2,360 2,327 2,544 2,632 2,570 5,289 2,648 Service Fee net income 9,219 7,562 10,508 9,843 11,561 13,126 14,377 Equity in the earnings (loss) 22,357 23,779 28,056 24,489 40,705 42,802 28,347 Auto Result 19,594 24,149 19,260 20,559 31,159 22,554 18,993 Brokerage net revenue 10,104 11,537 12,721 13,905 12,810 13,995 14,446 Service Fee net income Equity in the earnings (loss) 9,490 12,612 6,538 6,654 18,349 8,559 4,547 Health Result 1,420 1, (698) (322) 466 Brokerage net revenue Service Fee net income Equity in the earnings (loss) (181) (1,120) (719) 110 Capitalization Result 24,930 27,248 28,162 39,366 33,589 28,382 23,564 Brokerage net revenue 2,962 2,836 3,075 3,667 3,275 3,035 2,595 Service Fee net income 14,281 12,645 13,832 14,933 14,432 14,370 12,478 Equity in the earnings (loss) 7,687 11,768 11,255 20,767 15,881 10,977 8,490 Total Insurance Result (A) 162, , , , , , ,371 BB Recurrent Result (B) 1,463,457 2,037,207 1,625,865 1,523,105 1,726,708 1,763,909 1,819,008 Total Insurance Ratio % (A/B) Operating Highlights Brasilveículos was appointed as the best insurance company by the Dinheiro & Direitos magazine of the Brazilian Association of Consumer Defense (Pro Teste), October/November 2009 issue. The analysis included the fifteen largest insurance companies in Brazil. Brasilveículos achieved the renewal of the quality seal "SAC Amigo do Cliente" issued by the Brazilian Institute of Customer Relations (IBRC). Aliança do Brasil, leader in the rural insurance sector, with a 51.4% market share. Brasilprev remained as a leader in net funding (total volume of contributions less redemptions), and also ranked first in the ranking of the Brazilian Federation of Private Pension Plans and Life Insurance (FENAPREVI) in terms of PGBL Collection and Reserves in the "Lower" Segment. Brasilcap, a leader in Collection and Technical Reserves, according to the Superintendency of Private Insurance (SUSEP), ranked among the 100 Best Companies to Work for in Brazil, being considered as the 5th best company to work for in Rio de Janeiro, according to the Great Place to Work Institute Brasil was also recognized by Prêmio Segurador Brasil, Cobertura Performance, E-insurance, Destaque no Marketing e Marketing Best, all of which are benchmarks in their related operating areas Banco do Brasil MDA 4Q09

171 Table 146. Securities Operating Highlights Chg. % R$ thousand Dec/08 Sep/09 Dec/09 On Dec/08 On Sep/09 Aliança do Brasil Lives Insured thousand 2,105 2,142 2, Volume of the Managed Portfolio 1,139,407 1,354,369 1,436, Market share - rural line - % 48.91% 54.04% 51.40% 2.5 p.p p.p. Market share - life line - % 8.90% 9.40% 9.80% 0.9 p.p. 0.4 p.p. Rural line position 1º 1º 1º Life line position 3º 4º 4º Brasilcap Quantity of Bonds thousand 4,004 54,165 77,120 1, Volume of the Managed Portfolio 3,267,883 3,638,196 3,807, Quantity of Prize-winning Bonds 9,100 7,342 6,900 (24.2) (6.0) Sum of Prizes Distributed 23,755 21,666 17,348 (27.0) (19.9) Technical Reserves 3,059,774 3,475,934 3,807, Market share - collection - % 23.20% 23.10% 22.60% -0.6 p.p p.p. Market share - reserves - % 22.50% 24.10% 24.10% 1.6 p.p. 0.0 p.p. Brasilprev Rate of Redemptions - % 8.53% 7.30% 7.00% -1.5 p.p p.p. Active agreements - thousands 2,598 3,042 3, Volume of the Managed Portfolio 20,402,125 24,873,332 26,954, Technical Reserves 19,968,810 24,447,378 26,527, Market share - collection - % 13.99% 15.87% 16.11% 2.1 p.p. 0.2 p.p. Market share - reserves - % 14.06% 14.70% 14.94% 0.9 p.p p.p. Ranking 3º 3º 3º Brasilsaúde Lives Insured (17.3) (12.2) Volume of the Managed Portfolio 62,488 57,056 55,450 (11.3) (2.8) Brasilveículos Fleet thousand Volume of the Managed Portfolio 593, , , Rate of Portfolio Retention - % 79.46% 82.55% 82.74% 3.3 p.p p.p. Market share - % 6.53% 7.13% 7.30% 0.8 p.p. 0.2 p.p. Ranking 6º 7º #N/D Minimum Capital Required 14.27% 26.33% 20.00% 5.7 p.p p.p Banco do Brasil MDA 4Q09

172 10.3 Acquisition, Incorporations and Strategic Partnership This chapter groups the main highlights of the transactions carried out by Banco do Brasil as of the first quarter of 2009, as well as those that are in progress, in conformity with material facts released to the market Transactions in the Period Banco Votorantim The strategic partnership announced between Banco Votorantim (BV) and BB was concluded on September 28 th., 2009, according to material fact released to the market on the same date. Banco do Brasil now holds 50% of the total capital and approximately 50% of the voting capital of Banco Votorantim. The business model and the team of collaborators will be maintained, and the board of directors will be on the same level, with the appointment of three members by every partner, and the chairmanship of the board of directors alternated between the two partners. All strategic decisions will be made jointly. The operation involves the acquisition, by BB, of 33,356,791,198 BV s common shares for the price of R$ 3 billion, paid directly to Votorantim Finanças, besides the subscription, also by BB, of new preferred shares issued by Banco Votorantim in the amount of R$ 1.2 billion. For further details on the payment terms, please refer to the Material Event Fact disclosed at the portal The consolidation of the financial statements, risk management and operating limits will be proportional to BB's ownership interest in the total capital of BV. The Assets and Liabilities have already been consolidated in the financial statements since 3Q09 and since this quarter the income statement accounts also form part of BB s net income. The partnership presents strong strategic rationale, as it will allow Banco do Brasil: To increase the asset origination capacity in the competitive consumption financing industry; Access to well developed alternative distribution channels - concessionaires, partners and stores of BV Financeira; Model of success in the promotion of sales with national activity in the vehicle financing market; Strengthening of the activity of BB in the capital market (Votorantim Corretora) and in the Corporate segment. The tables below illustrate the main highlights of the operation of BV. As regards the income statement, the reallocations carried out are detailed below and can differ from those made in the financial statements of BB. Accordingly, for a better understanding of BV's net income, the income statement with reallocations was maintained, despite the fact that the net income of BV is already consolidated in the financial statements of the BB conglomerate. Further information can be obtained from the website of Banco Votorantim Banco do Brasil MDA 4Q09

173 Table 147. Banco Votorantim Highlights of the Result Quarterly Flow Chg. % Annual Flow Chg. % R$ million 4Q08 4Q09 On 4Q On 2008 Financial Intermediation Income 2,321 2, ,599 10, Loan operations (1) (2) (3) (6) (7) (8) (10) (11) (18) 1,592 1, ,846 6, Lease operations (7) (1) Securities Income (7) (8) (10) (13) ,536 3, Income from Financial Derivatives (4) (5) (7) (8) (9) (19) (236) (292) 23.9 (26) (601) 2,184.6 Compulsory Investments Income from Financial Intermediation (1,482) (1,622) 9.5 (6,128) (6,548) 6.8 Market Borrowing (7) (8) (9) (1,322) (1,488) 12.6 (5,675) (6,045) 6.5 Borrowings, Assignments and Onlendings (8) (160) (134) (16.7) (453) (503) 11.1 Gross Financial Margin ,471 3, Allowance for loan losses (2) (12) (195) (288) 47.2 (840) (1,598) 90.2 Net Financial Margin (1.8) 2,631 2,259 (14.1) Bank fee income (12.6) Fee income (6) (12.7) Bank Fee Income (6) 0 (0) Taxes on Revenues (2) (3) (5) (104) (68) (35.2) (303) (298) (1.8) Contribution Margin ,694 2,281 (15.3) Administrative expenses (349) (450) 29.1 (1,276) (1,567) 22.8 Personnel Expenses (114) (159) 40.2 (427) (564) 32.1 Other Administrative Expenses (18) (19) (234) (290) 24.1 (846) (999) 18.2 Other Tax Expenses (1) (1) 74.0 (3) (4) 19.6 Commercial Income (12.8) 1, (49.6) Legal Risk (32) (25) (22.0) (80) (108) 35.0 Legal Claims (14) (7) (3) (54.1) 0 (11) - Labor Lawsuits (15) (3) (9) (14) (31) Fiscal Lawsuits (16) (22) (13) (43.1) (66) (66) 0.4 Other Components of the Result (48) (43) (10.6) 6 (23) - Other Operating Income (Expenses) (48) (43) (10.6) 6 (23) - Other Operating Income (4) (11) (12) (16) (17) (17) (11.5) Other operating expenses (1) (2) (3) (4) (11) (12) (14) (15) (16) (17) (20) (31) (47) 50.0 (106) (122) 14.9 Operating Result (11.7) 1, (56.6) Non-operating Income (21) 20 - (56) (86) 53.0 Profit before taxation and profit sharing , (61.4) Income and Social Contribution Taxes (2) (3) (5) (13) (17) (20) 64 3 (95.4) (160) 46 - Profit Sharing (135) (108) (19.7) (273) (201) (26.2) Profit before minority interest (17.2) (60.0) Minority interest (0) 0 - (1) (1) 35.9 Non-Recurring Items (17.0) (60.1) Extraordinary Items Assignment (2) REFIS (17) Net Income (11.1) (1) Reclassification of Other Operating Expenses to Loan Operations and Leasing corresponding to the amount of expenses with granted discounts on loan operations, being necessary its reallocation for comparability purposes. The expenses for granted discounts totaled R$ million (2008), R$ million (2009), R$ 70.8 million (4Q08) and R$ 95.5 million (4Q09). (2) Assignment of a loan portfolio generating extraordinary revenues of R$ 48.0 million in 2008 and R$ million in In 4Q08, this amount was of R$ 48.0 million and in 4Q09, R$ 227,0 million. (3) The effects related to assignment of the loan portfolio to (FIDCs) registered as Taxes Expenses, Other Operating Expenses and Income and Social Contribution Taxes were reallocated to the result of Loan Operations, in the amount of R$ 62.6 million in 2008 and R$ 39.1 million in In the quarterly periodicity, the amounts were R$ 2.6 million (4Q08) and R$ 10.0 million (4Q09). (4) The foreign exchange gain (loss) on foreign financial equity is reallocated from Other Operating Income/Expenses to Income from Financial Derivatives for inclusion in the financial margin. This adjustment is necessary to maintain the balance and consistency of spread analyses. In 2008, this reallocation was of R$ million and in 2009, R$ million. In 4Q08, this reallocation was of R$ million and in 4Q09, R$ 18.6 million Banco do Brasil MDA 4Q09

174 (5) Reallocations were performed in order to cancel the Tax Hedge's effects. In 2008, the amount reallocated to the income of Derivatives resulting from Tax Expenses on Revenues was R$ 20.5 million and that from Income Tax (IR) and Social Contribution on Net Profit (CSLL) was R$ million. In 2009, the amount reallocated from Tax Expenses on Revenues was R$ 22.4 million and that from IR and CSLL was R$ million. In 4Q08, the amount reallocated to the income of Derivative Financial Instruments resulting from Tax Expenses on Revenues was R$ 15.2 million and that from IR and CSLL was R$ million. In 4Q09, the amount reallocated from Tax Expenses on Revenues was R$ 1.3 million and that from IR and CSLL was R$ 10.9 million. (6) Fee revenues resulted from loan operations recorded under Revenues from Services Provided were reallocated to the income statement from Loan Operations in the amount of R$ million in 2008 and of R$ million in In the quarters, the amounts were R$ 76.0 million in 4Q08, and R$ million in 4Q09. Table 148. Banco Votorantim Realocations - (Market to Market - MKT) R$ million 4Q08 4Q Fee Income (6) (56.4) (151.0) (188.6) (458.1) Rate Repayment (6) (17.7) (3.8) (130.1) (29.2) Credit Card Fees (6) (1.9) (2.6) (3.9) (9.8) Allocation on Loan Operations (6) (76.0) (157.4) (322.6) (497.1) (7) All market to market due to the hedge were reallocated and can be found in the Financial Derivative Instruments, as follows: Table 149. Banco Votorantim Realocations - (Market to Market - MKT) R$ million 4Q08 4Q MKT Operações de Crédito (BV Financeira) (539.0) (521.3) 72.2 MKT Loans Operations (BV) (140.2) (0.3) (325.6) MKT Leasing (70.6) 18.2 (70.6) 7.0 MKT Securities (322.0) (18.9) MLT Funding 32.3 (1.3) Alocation of MKT on Derivatives 1,039.5 (259.4) (8) All the effects of fluctuations in foreign currencies, such as the US dollar, yen, Turkish lira, euro among others, were reallocated due to the hedge on the result of derivative financial instruments, as follows: Table 150. Banco Votorantim Reallocations (Currency Variation) R$ million 4Q08 4Q VCR Loans Operations (1,081.2) 95.5 (1,627.3) 1,142.7 VCR Securities (200.7) 54.3 (365.2) VCR Fundings (47.1) 1,487.3 (776.8) VCR Loans and On Lending (25.3) 1,323.1 (1,120.9) Alocation of VCR on Derivatives (679.9) (77.5) (817.9) - (9) The option BOX accounted in the Derivative Financial Instruments were reallocated to Money Market Funding with the amount of R$ 383,0 million in 2008 and R$ 355,0 million in In the quarters, the reallocations were R$ million in 4Q08, and R$ million in 4Q09. (10) We reallocated the profit effect upon realization of the CCB options recorded in the Securities results to the result of Loan Operations, as follows: Banco do Brasil MDA 4Q09

175 Table 151. Banco Votorantim Reallocations (Bank Credit Bills) R$ million 4Q08 4Q MKT Securities (Bank Credit Bills) - - (126.6) - Alocation MKT (Bank Credit Bills) on loans operations (11) The Operational Income and Expenses directly associated with the loan operations were reallocated from Other Operating Income/Expenses to Loan Operations line in the amount of R$ million in 2008 and of R$ million in In the quarters, the amounts were R$ million in 4Q08, and R$ 62.0 million in 4Q09. (12) The Allowance for Loan Losses resulted from the Assignments made with Co-obligations recorded under Other Operating Expenses were reallocated to the Allowance for Loan Losses expenses line in the amount of R$ 9.4 million in 2008 and R$ 24.7 million in In the quarterly periodicity, the reallocations were R$ 9.4 million in 4Q08, and R$ 16.3 million in 4Q09. (13) The effect of the tax benefit generated by the tax-free interest of securities issued abroad was reallocated from the Income Tax and Social Contribution line to the Result of Securities in the amount of R$ million in 2008 and R$ 99.3 million in 2009 (R$ 41.2 million in 4Q08 and R$ 20.9 million in 4Q09). We segregated the Expenses on Labor, Civil and Tax Lawsuits to the group named Legal Risk, in order to facilitate the analysis of the other operating expenses and to increase the transparency of this type of risk. The reallocated amounts were as follows: (14) Civil Claims: R$ 0.5 million in 2008 and (R$ 11.2 million) in 2009 R$ 7.1 million in 4Q08 and R$ 3.2 million in 4Q09 (15) Labor Lawsuits: R$ 13.9 million in 2008 and (R$ 31.1 million) in 2009 R$ 3.3 million in 4Q08 and R$ 9.5 million in 4Q09 (16) Tax claims: R$ 66.7 million in 2008 and R$ 65.9 million in 2009 R$ 22.1 million in 4Q08 and R$ 12.6 million in 4Q09 (17) We reallocated from Other Operating Income/Expenses and Income Tax/Social Contribution the net effect of the payment of taxes under the program for installment and cash payment of tax debts (REFIS), generating an extraordinary result of R$ 0 million in 2008 and of R$ 15.0 million in In the quarters, the amounts were R$ 0 million in 4Q08, and R$ 15.0 million in 4Q09. (18) Other Administrative Expenses directly related to loan operations were reallocated to the line Loan Operations in the amount of $ 0 million in 2008 and $ 26.7 million in In 4Q09, R$26.7 million were reallocated and $ 0 million in 4Q08. (19) Other Administrative Expenses directly related to derivative operations were reallocated to the line Income for Derivative Financial Instruments in the amount of $ 0 million in 2008 and R$ 11.1 million in 4Q09. (20) The amount of R$0.0 million was reallocated from Other Operational Expenses Foreign Income Tax (IRF) to Income Tax, in 2008 and R$ 46.1 million in In 4Q09 the amount was R$ 46.1 million and R$ 0 million in 4Q Banco do Brasil MDA 4Q09

176 Table 152. Banco Votorantim Equity Highlights Balance Chg. % R$ million Dec/08 Sep/09 Dec/09 On Dec/08 On Sep/09 Assets 72,310 88,121 84, (3.8) Securities 21,585 19,609 18,195 (15.7) (7.2) Loan Portfolio 38,184 40,996 42, Individuals 19,251 24,892 26, Payroll Loan 1,748 3,378 3, (0.9) Vehicles Loan 15,761 17,893 18, Leasing and Subleasing Receivables 1,472 3,342 3, Other (0.1) Businesses 18,933 16,105 16,193 (14.5) 0.5 Working Capital 5,776 5,123 5,309 (8.1) 3.6 BNDES/Finame 4,142 4,517 4, Export Letter of Credit 4,310 2,854 2,699 (37.4) (5.4) Other 4,706 3,611 3,267 (30.6) (9.5) Permanent Assets (0.8) Deposits¹ 18,932 26,320 24, (7.0) Demand Deposits (45.2) Saving Deposits Time Deposits 14,636 22,743 22, (0.6) Judicial (0.0) Others 14,635 22,743 22, (0.6) Money Market Borrowing 16,625 26,104 24, (5.1) Shareholders Equity 6,362 7,002 7, ¹ Except other deposits Table 153. Banco Votorantim Loan Portfolio by Level of Risk Dec/08 Sep/09 Dec/09 R$ million Balance Provision Share Balance Provision Share Balance Provision Share AA 11, , , A 20, , , B 4, , , C 1, , , D E F G H Total 38, ,996 1, ,444 1, Add. Allow Total Allow ,392 1,362 AA-C 37, , , D-H 1, ,952 1, ,915 1, Banco do Brasil MDA 4Q09

177 Table 154. Banco Votorantim Delinquency Ratios R$ million Dec/08 Sep/09 Dec/09 Loan Portfolio 38, , ,444.3 Loans overdue 2, , ,768.4 Past Due Loans/Loan Portfolio 6.2% 9.1% 8.9% Past Due Loans + 90 days , ,342.0 Past Due Loans + 90 days/loan Portfolio 1.8% 3.4% 3.2% Write-off (172.7) (242.0) (312.8) Recovery of Write-offs Net Loss (151.2) (209.8) (276.9) Saldo da Perda / Carteira de Crédito 1.6% 2.1% 2.6% Provision (774.1) (1,392.4) (1,362.0) Allowance/Loan Portfolio 2.0% 3.4% 3.2% Allowance/Past Due Loans + 90 days - % % 101.2% 101.5% Allowance Expenses / Loan Portfolio (12 months average) 2.4% 3.7% 3.8% Table 155. Banco Votorantim Vehicle Portfolio Dec/08 Sep/09 Dec/09 Average rate per crop (p.m.) Average term per crop Duration Average Portfolio Term (p.y.) Used Vehicles / Vehicles Portfolio - % Average Vehicle Age (years) Financed Value / Good Value average % Table 156. Banco Votorantim Operational and Structural Highlights Sep/09 Dec/09 Customers 3,559,515 3,829,581 Assets Under Management - R$ million 17,506 18,552 Employees* 5,636 5,859 Number of Branch Offices 243 *Includes employees and interns Banco do Brasil MDA 4Q09

178 Banco Nossa Caixa On November 30, 2009 arised the corporate merger of Banco Nossa Caixa (BNC), with absorption of 100% of its capital by BB. The transaction awaits approval of the Brazilian Central Bank. Considering that the 2009 Guidance monitoring was issued based on the pro forma segregation of Nossa Caixa and Banco Votorantim numbers, we show below operational highlights and BNC loan portfolio, besides a pro forma Reallocated Income Statement of 4Q09, based on the October/November corporate DRE. Table 157. Banco Nossa Caixa Income Statement Highlights R$ million Chg. % Income Statement 3Q09 4Q09 On 3Q09 Income from Financial Intermediation 2,036 1,929 (5.3) Loan operations 1,113 1, Securities Income (14.1) Expenses from Financial Intermediation (909) (849) (6.6) Net Interest Income 1,127 1,080 (4.2) Allowance for Loan Losses (238) (194) (18.6) Net Financial Margin (0.4) Fee income (8.5) Contribution Margin 1,135 1, Administrative Expenses (682) (689) 1.0 Personnel Expenses (380) (385) 1.4 Other Administrative Expenses (302) (304) 0.6 Commercial Income (58.5) Legal Risk (100) (61) (38.7) Legal Claims (26) (10) (60.6) Labor Lawsuits (74) (51) (31.1) Other Income and Expenses (102) (0) (99.7) Income Before Taxes (49.0) Income and Social Contribution Taxes (70) 40 (157.7) Recurring Income (2.9) The adjustments made in the statement of income to get the Reallocated Statement of Income are detailed below. Reallocations in the Net Interest Income (1) Reallocations of Other Operating Income/ Expenses to Other Operating Income with Financial Intermediation Characteristics, for the purpose of including in the Financial Margin the revenues with financial intermediation characteristics recorded under "Other Operating Income", arising from earning assets recorded under "Other Receivables" in the Balance Sheet, and to include in the Financial Margin amounts related to negative foreign exchange adjustments which were recorded under "Other Operating Income/Expenses" to avoid inverting the balance of accounts related to financial intermediation. Reallocations in the net financial margin (2) The expense with the Allowance for Loan Losses includes credits without characteristics of financial intermediation, so this part of provision expenses to loanlosses is reallocated to Other Operating Expenses. Reallocations in the contribution margin (3) Considering the model used for the income statement, tax expenses on revenues are reallocated and included in the contribution margin Banco do Brasil MDA 4Q09

179 Reallocations in the operating income (4) Statutory Profit Sharing was reallocated to Personnel Expenses. (5) The expenses with Legal Claims and Labor Lawsuits were separated in the Income Statement with Reallocations, into a group called Legal Risk. It aims to provide a better analysis of the administrative expenses and giving more transparency to this kind of risk. (6) As from 1Q09, in compliance with the decision of the Central Bank, a portion of the premiums paid to clients (amortization of the rights related to the payment of the payroll of state public servants and other payrolls) started to be recorded under "Other Administrative Expenses". Aiming to maintain the comparability and considering the nature of the amounts disbursed, the entire sum was reallocated to "Other Operating Expenses", as was recorded up to December One-off Items (7) Civil claims of Economic Plans on savings deposits and judicial deposits, generating extraordinary expenses before taxes in October and November (4Q09 Pro forma DRE basis) in the amount of R$ 48 million and R$ 87 million in 4Q09. (8) Tax credits arising from the equalization to the criteria adopted by Banco do Brasil, in the total amount of R$ 242 million. (9) Tax Credits arising from Economic Plan Expenses (item 7 above), in the amount of R$ 19 million in October and November 2009 and R$ 35 million in 3Q09. Table 158. Banco Nossa Caixa Loan Portfolio Chg. % R$ million Dec/08 Sep/09 Dec/09 On Dec/08 On Sep/09 Individuals 9,161 14,524 15, Payroll loans 5,804 10,672 11, Personal Loan 1,740 1,933 1, (1.4) Housing Loan Other 888 1, (9.4) Businesses 2,943 3,984 3, (2.0) Micro and Small 1,455 1,501 1, Overdraft Accounts (9.2) (12.1) Working Capital 798 2,000 2, Other 1,251 1, (24.7) (11.2) Agribusiness (1.1) (2.2) Total 12,896 19,308 19, Table 159. Banco Nossa Caixa Operating Highlights Chg. % Dec/08 Sep/09 Dec/09 On Dec/08 On Sep/09 Checking Accounts in thousands 3,420 3,449 3,296 (3.6) (4.5) Individual Customers Checking Accounts 3,223 3,256 3,122 (3.1) (4.1) Network of Branches ATM 3,732 3,715 3,685 (1.3) (0.8) Banco do Brasil MDA 4Q09

180 Businesses in Progress - Security Corporate Restructuring Moving forward with the strategy of increasing the share of the insurance area in the Bank's net income, in the last October BB carried out a corporate restructuration of its operations. Two subsidiaries were established: BB Seguros Participações S.A (BB Seguros) and BB Aliança Participações S.A (BB Aliança), both of which are non-financial companies directly related to BB. Moreover, BB filed a Letter of Intent without binding effect at Sul América S.A. on October 06 th., 2009, expressing its interest in acquiring, through BB Seguros, all the shares held by SulAmerica in Brasilveículos, representing 60% of the common shares and 30% of the total capital stock. In reference to the company Brasilsaúde, both BB and Sul América expressed interest in reviewing its business model and its corporate structure. BB Aliança will be the owner of 100% of the shares of Cia. de Seguros Aliança do Brasil and BB Seguros becomes the holder of the following interests: Table 160. Insurance, Pension and Capitalization Companies Company %-Total Capital Type of Shares %- ON %- PN Brasilprev Seguros e Previdência S. A Brasilveículos Companhia de Seguros Brasilcap Capitalizações S. A Brasilsaúde Companhia de Seguros Strategic Alliance with MAPFRE An intention to enter a strategic alliance with Grupo Segurador Espanhol MAPFRE (MAPFRE) was also filed, for the purpose of carrying out a strategic partnership for the elaboration, in the Brazilian market, of a risk insurance businesses, in the personal, elementary and automotive lines. MAPFRE is the largest insurance group in Spain and operates in 45 countries, mainly in the insurance, reinsurance and assistance markets of Latin America, where it ranks first in the non-life line. MAPFRE has over 34 thousand employees and 13 million clients worldwide. In 2009 first half, it achieved a net income of more than 530 million of Euros and revenues of over 10 billion Euros. In Brazil, the company is one of the largest in the sector, with a market share of 8.69% (without including VGBL pension plans), June 2009 position. At the end of the first semester of 2009, it recorded a profit of R$ million (before taxation and profit sharing). The company's total consolidated assets reached R$ 6.48 billion and shareholders' equity R$ 1.48 billion. These figures consolidated the Group as one of the six largest insurance groups in Brazil. If completed, the strategic partnership will give birth to an insurance company which is a leader in the life segment and the second largest risk insurance company in Brazil, with a 16% market share, involving R$ 4 billion in earned premiums in the first seven months of Ownership interest in IRB-Brasil Re When an insurance company enters into an insurance agreement in excess of its financial capacity, it has to transfer this risk, or a portion of it, to a reinsurance company. Reinsurance is a common practice all over the world as a means to mitigate risk, safeguarding the stability of insurance companies and ensuring the payment of the claim to the insured party. IRB-Brasil Re (IRB) is the largest reinsurance group in Latin America, with assets of R$ 10.4 billion, issued premiums of R$ 1.8 billion and retained premiums of R$ 940 million, position of July The Federal Government holds 100% of the common shares of IRB and 50% of total capital Banco do Brasil MDA 4Q09

181 In order to supplement the operations of its insurance companies and moving forward with the restructuring of the segment, BB has proposed, and the Federal Government, with the intermediation of the Ministry of Finance, has accepted to start negotiations, with no binding effect, aiming to purchase an ownership interest, in compliance with the prevailing regulations and the terms and conditions inherent to transactions of this nature, particularly the obtaining of the previous authorizations required. Revision of the partnership with Principal Financial Group BB Seguros signed a memorandum of understanding with Principal Financial Group (Principal) to increase its ownership interest in the total capital of Brasilprev from 49.99% to 74.99%. The proposal consists of increasing the ownership interest of BB Seguros in total capital through the issue of registered preferred shares by Brasilprev, in a manner that there will be no increase in the interest held by BB Seguros in this company's voting capital (registered common shares). Through this partnership, the distribution channels of Banco do Brasil will sell the pension plan products of Brasilprev on an exclusive basis for a period of 23 years. In return, the ownership interest of BB Seguros in total capital will be increased, as described in the previous paragraph. Concomitantly, Principal announced that it intends to purchase the 4% ownership interest held by the Brazilian Service of Support to Micro and Small Enterprises (SEBRAE) in Brasilprev, leading the company to present the ownership structure described in the table below: Table 161. Partnership Revision Principal Financial Group Current Future %- ON % - ON %- PN % - Total Capital BB Seguros Principal SEBRAE In addition, BB Seguros and Principal intend to start negotiations aimed at the purchase of the private pension portfolios sold by MAPFRE Nossa Caixa. Strategic alliance with Icatu Group In order to form a strategic alliance to develop and sell capitalization businesses in the Brazilian market, a Memorandum of Understanding was signed between BB and Icatu Group on January 6th., The businesses between the two institutions will be integrated in order to eliminate competition between the partners. Accordingly, the corporate structure will be revised, as shown in the table below: Table 162. Partnership Revision Principal Financial Group Current Future %- Common % - Common %- Preferred % - Total Capital BB Seguros Icatu SulAmérica Aliança da Bahia Minoritários The Icatu Group is leader among the companies not related to retail banks in the capitalization market and serves over 3.2 million people in various business lines. The information on the security businesses were addressed in Material Facts disclosed to the market on October 6th., 15th. and 27th., 2009 and January 6th., Banco do Brasil MDA 4Q09

182 11 Financial Statements 11.1 Summarized Balance Sheet Table 163. Balance Sheet Assets R$ million Mar/08 Jun/08 Sep/08 Dec/08 Mar/09 Jun/09 Sep/09 Dec/09 ASSETS 414, , , , , , , ,549 Current and long-term assets 406, , , , , , , ,539 Available funds 4,790 5,754 6,847 5,545 7,516 6,212 8,340 7,843 Short-term interbank investments 72,689 54,283 71, , , , , ,398 Open market investments 57,963 44,064 61,637 95, , , , ,174 Interbank deposits 14,725 10,219 9,454 24,249 28,440 21,267 23,495 24,224 Marketable securities 81,490 82,301 85,954 86, , , , ,337 Securities for trading 24,717 26,009 26,475 26,136 32,475 31,661 44,590 38,274 Securities available for sale 35,388 35,480 37,777 38,374 45,269 46,645 52,750 62,161 Securities held to maturity 20,485 19,597 20,443 20,123 31,433 30,477 30,773 22,439 Financial derivatives 899 1,216 1,258 2,276 1, ,706 1,463 Interbank accounts 36,340 38,260 38,238 21,287 30,925 29,127 31,252 26,592 Central Bank deposits 31,102 33,666 35,564 20,882 25,543 24,507 26,468 24,280 Compuls. dep, on demand, Dep & float 11,127 12,952 12,220 12,439 12,381 11,188 12,398 11,919 Compulsory dep, on savings dep, 19,975 20,714 23,344 8,443 13,162 13,319 14,069 12,361 Others 5,238 4,594 2, ,382 4,620 4,784 2,312 Interdepartmental accounts Loans 149, , , , , , , ,783 Public sector 6,286 14,670 3,038 12,471 3,767 2,816 4,975 5,667 Private sector 153, , , , , , , ,801 (Allowance for loan losses) (10,322) (10,773) (10,783) (13,179) (15,075) (16,904) (18,118) (17,685) Leasing 1,355 1,839 2,267 2,968 3,246 3,253 4,636 4,701 Leasing and sub-leasing receivables 1,380 1,875 2,310 4,880 3,352 3,406 4,861 4,932 Public sector Private sector 1,311 1,817 2,262 4,825 3,299 3,346 4,801 4,869 (Unearned lease income) (1,842) (Allowance for lease losses) (25) (36) (44) (71) (106) (153) (225) (231) Other receivables 59,211 58,917 68,375 83,279 86,156 87,034 89,641 95,233 Receivable on guarantees honored Foreign exchange portfolio 12,608 10,060 17,053 20,914 19,041 13,957 12,066 8,671 Income receivable Trading and brokerage of securities , Specific credits Special operations Credits from Insurance, Pension and Capitalization Op Tax credits 14,051 14,337 14,994 16,499 20,413 21,053 22,261 21,910 Atuarial Assets 2,180 2,092 2,003 7,794 7,794 8,410 8,709 12,655 Warrants Deposits Receivable 16,394 16,671 17,481 18,007 20,024 20,489 20,888 21,209 Other credits 13,120 15,074 16,008 19,325 18,363 20,916 24,523 29,539 (Provision or doubtful receivables) (1,014) (1,082) (1,121) (1,377) (1,676) (1,725) (1,671) (1,682) (With loan characteristics) (347) (357) (360) (579) (649) (702) (728) (702) (Without loan characteristics) (667) (726) (760) (798) (1,027) (1,023) (943) (980) Other assets ,256 1,642 1,652 2,114 2,358 Statutory profit sharing Others (Provision for possible losses) (164) (162) (165) (170) (183) (187) (191) (176) Prepaid expenses ,118 1,469 1,487 1,920 2,170 Permanent assets 7,964 8,271 9,002 9,512 14,574 14,551 15,965 17,010 Investments 1,055 1,190 1, ,184 6,625 6,645 Investm, in assoc. and subsidiary co, ,369 5,698 5,776 Other investments , (Provision for losses) (66) (62) (66) (68) (96) (87) (80) (78) Property and equipment 2,966 2,947 3,082 3,339 3,588 3,663 3,741 4,214 Land and buildings in use 2,585 2,612 2,692 2,668 2,825 2,970 3,061 3,336 Land and buildings in use reavaliation Other property and equipment in use 4,975 5,007 5,278 5,610 6,018 6,021 6,184 6,632 (Accumulated depreciation) (4,594) (4,672) (4,887) (4,940) (5,407) (5,478) (5,654) (5,753) Leased assets Leases assets (Accumulated depreciation) (457) (5) (5) (4) (426) (4) (2) (2) Intangible 3,294 3,507 3,674 4,598 9,391 5,128 5,082 5,677 Intangible Assets 3,294 3,507 3,674 4,600 10,544 6,657 6,998 7,659 (Accumulated amortization) (2) (1,154) (1,529) (1,916) (1,982) Deferred charges Organization and expansion costs 1,703 1,731 1,835 1,846 2,226 2,195 2,237 2,247 (Accumulated amortization) (1,060) (1,109) (1,183) (1,241) (1,594) (1,621) (1,722) (1,775) *Adjusted series since June 2007, concerning the CMN Resolution # 3,535, of For futher information see Presentation Banco do Brasil MDA 4Q09

183 Table 164. Balance Sheet Liabilities R$ million Mar/08 Jun/08 Sep/08 Dec/08 Mar/09 Jun/09 Sep/09 Dec/09 LIABILITIES AND SHAREHOLDERS' EQUITY 414, , , , , , , ,549 Current and long-term assets 388, , , , , , , ,429 Deposits 189, , , , , , , ,564 Demand deposits 44,142 43,603 42,955 51,949 47,276 49,075 50,107 56,459 Savings deposits 48,112 49,096 52,693 54,965 70,567 69,011 72,233 75,742 Interbank deposits 6,247 5,578 6,309 14,065 8,406 7,459 9,627 11,619 Time deposits 90,939 96, , , , , , ,516 Investment deposits Money market borrowing 99,716 93,097 85,339 91, , , , ,821 Own portfolio 37,545 45,999 28,632 21,927 31,133 28,755 45,543 31,902 Third-party portfolio 61,771 46,418 56,707 69,203 75,319 72, , ,745 Others , Funds from acceptances and securities placed 1,260 2,025 2,664 3,479 3,074 2,673 6,231 7,362 Foreign securities 1,169 1,857 2,465 3,210 2,762 2,337 3,383 4,597 Interbank accounts 3,049 3,611 2, ,940 2,677 2, Receipts and payments pending settlement 3,036 3,598 2, ,924 2,657 2,769 1 Correspondent banks Interdepartmental accounts 1,369 1,185 1,315 2,496 1,862 2,045 1,859 3,229 Third-party funds in transit 1,273 1,160 1,268 2,495 1,808 2,007 1,840 3,215 Internal transfers of funds Borrowing 3,251 3,244 5,008 7,627 9,991 8,536 8,855 6,370 Foreign borrowing 3,251 3,244 5,008 7,627 9,991 8,536 8,855 6,370 Domestic onlending official institutions 18,250 19,255 19,640 22,436 22,220 22,626 26,761 31,390 Federal Treasury 3,184 3,246 3,276 3,485 3,532 3,574 2,826 2,101 National Development Bank (BNDES) 9,198 9,555 9,380 11,168 10,753 11,118 14,968 19,630 Caixa Econômica Federal (CEF) Fed. Prog. for Cap. Equip. Finan. (FINAME) 5,194 5,802 6,085 6,585 6,826 7,009 7,780 8,381 Other institutions , ,034 1,133 Foreign onlending Financial derivatives 1,876 1,953 1,367 3,895 3,164 2,580 6,098 4,724 Other accounts payable 70,264 70,095 82,767 89, , , , ,848 Collection of taxes and contributions 2,443 2,505 2, ,156 2,853 2, Foreign exchange portfolio 10,939 7,949 15,761 15,964 15,380 16,339 15,466 12,174 Stockholders and statutory distributions 1,342 1,235 1,549 1, ,502 1,608 2,625 Taxes and social security 12,244 13,370 14,540 17,570 17,686 20,141 22,224 24,297 Trading and brokerage of securities Technical Prov. Insurance, Pension & Capitalization. Op. 10,575 11,183 12,075 12,675 13,771 15,017 16,081 17,339 Financial and Development Funds 2,125 2,251 2,277 2,458 3,741 4,076 4,052 4,135 Perpetual Securities ,185 1, ,516 Special operations ,136 2,140 2, Obligations for Lotto Operations Subordinated Debt (FCO) 10,405 10,774 11,232 11,772 14,371 14,689 16,409 18,553 Actuarial liabilities 4,111 4,166 4,285 5,662 5,738 5,796 5,871 5,927 Other liabilities 14,600 15,698 16,924 19,531 28,130 28,102 30,775 31,172 Deferred income Corporate Profit Sharing (0) Shareholders equity 25,407 26,371 27,889 29,937 30,859 32,360 33,661 36,119 Capital 13,212 13,212 13,699 13,780 13,780 18,549 18,549 18,567 (Unpaid Capital) Capital reserves Revaluation reserves Revenue reserves 10,125 13,090 12,750 15,977 15,759 13,614 13,299 17,301 Mark-to-market securities and derivatives (33) Retained earnings (accumulated losses) (Treasury shares) (31) (31) (31) (31) (31) Income accounts 1,978-1,461-1,215-1,509 - *Adjusted series since June 2007, concerning the CMN Resolution # 3,535, of For futher information see Presentation Banco do Brasil MDA 4Q09

184 11.2 Summarized Corporate Law Income Statement Table 165. Summarized Corporate Law Income Statement R$ million 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 Financial Intermediation Income 10,971 10,770 15,076 18,824 14,489 15,365 15,637 17,794 Loans 7,001 6,910 8,697 10,613 8,502 9,963 10,333 11,717 Leasing Securities 3,767 3,057 5,771 8,097 5,730 5,215 5,083 5,321 Financial Derivatives (448) 302 (85) (1,053) (62) (451) (664) (47) Foreign Exchange Portfolio 122 (112) (50) 503 (116) Compulsory Investments Financial Inc. from Insur., Pension & Capit. Op Financial Intermediation Expenses (7,232) (6,954) (11,409) (17,226) (11,131) (11,415) (10,841) (11,665) Money Market Funds (4,909) (5,122) (7,068) (8,432) (7,761) (7,067) (7,320) (7,997) Borrowing. Assignments and Onlending (720) (88) (2,973) (4,903) (716) (483) (593) (718) Allowance for Loan Losses (1,603) (1,744) (1,367) (3,892) (2,654) (3,865) (2,928) (2,950) Gross Income from Financial Intermediation 3,739 3,816 3,667 1,597 3,359 3,950 4,795 6,129 Other Operating Income (Expenses) (853) (1,593) (1,449) 2,744 (2,664) (1,167) (1,875) 1,065 Fee Income 2,915 2,259 2,259 2,338 2,255 2,557 2,647 2,714 Banking Fees Revenues Personnel Expenses (1,933) (2,131) (2,377) (2,430) (3,152) (2,506) (2,909) (3,271) Other Administrative Expenses (1,809) (1,855) (2,069) (2,185) (2,691) (2,871) (2,596) (3,054) Taxes (566) (605) (577) (887) (667) (860) (807) (998) Equity Int. in the Results of Subs. and Affil. 318 (129) (90) (576) (275) (49) Income f/ Insur., Pension & Capitalization Op Other Operating Revenues 1,394 1,976 1,322 7,090 2,061 4,957 3,162 6,794 Other Operating Expenses (1,272) (1,975) (1,396) (2,962) (1,371) (3,217) (2,367) (2,371) Operating Income 2,887 2,223 2,219 4, ,782 2,921 7,194 Non-operating Income , Income Before Taxes 3,111 2,301 2,324 4, ,208 3,300 7,217 Income and Social Contribution Taxes (462) (445) (216) (1,022) 1,182 (1,559) (1,062) (2,463) Statutory Profit Sharing (301) (212) (241) (380) (227) (300) (258) (599) Corporate Profit Sharing (1) (1) 1 Net Income 2,347 1,644 1,867 2,944 1,665 2,348 1,979 4, Banco do Brasil MDA 4Q09

185 11.3 Income Statement with Reallocations Table 166. Income Statement with Reallocations R$ million 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 Financial Intermediation Income 11,046 11,043 15,894 20,412 15,259 16,037 16,048 17,984 Loans 7,208 7,197 8,993 11,106 8,951 10,133 10,609 11,963 Leasing Securities 3,571 3,057 5,771 8,097 5,730 5,215 5,083 5,321 Financial Derivatives (448) 302 (85) (1,053) (62) (451) (664) (47) Foreign Exchange Portfolio 122 (112) (50) 503 (116) Compulsory Investments Financial Income from Insur., Pension & Capitalization Op FX Gain(Loss)on Foreign Investments 27 (294) (85) (592) (292) (74) Other Op. Inc. of a Fin. Intermed. Nature , Tax Hedge (64) (439) (216) (58) Financial Intermediation Expenses (5,477) (5,210) (9,862) (13,335) (8,275) (7,550) (7,729) (8,715) Money Market Funds (4,757) (5,122) (6,889) (8,432) (7,558) (7,067) (7,136) (7,997) Borrowing.Assignments and Onlending (720) (88) (2,973) (4,903) (716) (483) (593) (718) Net Interest Income 5,568 5,833 6,032 7,077 6,985 8,487 8,320 9,268 Allowance for Loan Losses (1,534) (1,687) (1,338) (2,240) (2,491) (3,172) (3,017) (2,950) Net Financial Margin 4,034 4,146 4,694 4,837 4,493 5,316 5,303 6,318 Fee Income 2,915 2,905 2,933 3,058 2,943 3,436 3,526 3,606 Fee Income 2,915 2,259 2,259 2,338 2,255 2,557 2,647 2,714 Banking Fee Income Res. From Insurance, Pension Plan and Capitalization Op Taxes on Revenues (534) (571) (541) (715) (618) (806) (760) (965) Contribution Margin 6,516 6,700 7,303 7,534 7,122 8,417 8,461 9,367 Administrative Expenses (3,535) (3,662) (3,817) (4,344) (3,931) (4,892) (4,897) (5,465) Personnel Expenses (1,801) (1,989) (2,020) (2,301) (2,129) (2,613) (2,693) (2,844) Other Administrative Expenses (1,734) (1,672) (1,797) (2,043) (1,801) (2,279) (2,203) (2,621) Other Tax Expenses (26) (34) (35) (45) (43) (7) (23) (27) Commercial Income 2,955 3,004 3,451 3,144 3,149 3,518 3,540 3,876 Legal Risk (125) (215) (155) (226) (197) (45) (256) (4) Legal Claims 6 (74) 4 (97) (95) (152) (40) 46 Labor Lawsuits (132) (141) (159) (129) (102) 107 (216) (49) Other Operating Income (Expenses) (525) (600) (525) (542) (554) (740) (590) (960) Eq.Interest in Resul. Subs. and Affil. (116) 23 0 (3) (5) Other Operating Income/Expenses (410) (624) (526) (539) (550) (755) (607) (985) Other Operating Income ,230 1,094 1,136 1,313 1,463 Other Operating Expenses (1,290) (1,324) (1,415) (1,769) (1,643) (1,891) (1,920) (2,448) Operating Income 2,305 2,189 2,771 2,375 2,397 2,733 2,694 2,912 Non-Operating Income Income Before Taxes 2,529 2,267 2,876 2,380 2,413 2,744 2,723 2,934 Income and Social Contribution Taxes (669) (592) (598) (557) (688) (771) (727) (853) Interest on Own Capital Tax Benefit Interest on Own Capital Tax Benefit (301) (212) (241) (198) (203) (220) (230) (262) Statutory Profit Sharing (26) (1) 1 Recurring Income 1,559 1,463 2,037 1,626 1,523 1,727 1,764 1,819 Extraordinary Items (170) 1, ,336 Sale of Interest in VISA Internacional Disposal of investments (Telemar) Revaluation of Consolidated Interest Economic Plans (82) (54) (192) (44) (95) (193) (84) 530 Credit Assignment Tax Efficiency Cards Replacement - (54) Contingent Liabilities (BESC) - - (360) Tax Credit (BESC) Previ Non-recognized Actuarial Gains , ,030 Cassi Non-recognized Actuarial Losses (1,259) Additional Provision for Loan Losses (1,594) - (676) - - Provision for labor, civil and tax claims (1,367) Tax credits diffirential of CSLL rate , Disposal of Investments (Visanet Brasil) , Voluntary Resignation Program - BNC (215) Reversal of Labor Liabilities Tax FX and Statutory Profit Sharing over Extraord. Items (101) (1,110) 557 (362) (171) (1,895) PREVI Actuarial Assets - Adjustments (166) Net Income 2,347 1,644 1,867 2,944 1,665 2,348 1,979 4, Banco do Brasil MDA 4Q09

186 Vice-Presidency of Finance, Capital Markets and Investor Relations Vice-President Ivan de Souza Monteiro Investor Relations Manager Marco Geovanne Tobias da Silva Executive Manager Gisele Campana Rodrigues Divisional Managers Eduardo Amaral Pilenghi Joaquim Camilo de Castro Analysts Bruno Santos Garcia Daniel Henrique Sousa Diniz Domingos Pereira dos Santos Neto Glauco Ribeiro Barbirato Tavares Hilzenar Souza Alves da Cunha Janaína Marques Storti Joabel Martins de Oliveira Leonardo Resende Nader Marcelo de Campos e Silva Marcone Edson de Vasconcelos Formiga Filho Mariana Reschke da Cunha Rafael Augusto Sperendio Banco do Brasil MDA 4Q09

187 FINANCIAL STATEMENTS 2009 Results Todo seu

188 INDEX MANAGEMENT REPORT FINANCIAL STATEMENTS Balance Sheet Income Statement Statement of Changes in Stockholder s Equity Cash Flow Statement Added Value Statement EXPLANATORY NOTES NOTE 1 The Bank and its Operations NOTE 2 Presentation of the Financial Statements NOTE 3 Summary of Main Accounting Practices NOTE 4 Consolidated Financial Statements NOTE 5 Acquisition of Banco Nossa Caixa S.A. and Banco Votorantim S.A. NOTE 6 Cash and Cash Equivalents NOTE 7 Short-term Interbank Investments NOTE 8 Securities and Derivatives Financial Instruments NOTE 9 Interbank Linked Credits NOTE 10 Loan Operations NOTE 11 Other Receivables NOTE 12 Foreign Exchange Portfólio NOTE 13 Other Assets NOTE 14 Investments NOTE 15 Premises and Equipment and Leased Assets NOTE 16 Intangible Assets NOTE 17 Deposits and Money Market Borrowing NOTE 18 Borrowings NOTE 19 Resources from Securities Issues NOTE 20 Other Liabilities NOTE 21 Insurance, Pension and Capitalization Operations NOTE 22 Other Operating Income / Expenses NOTE 23 Non-Operating Income / Expenses NOTE 24 Shareholder s Equity NOTE 25 Income and Social Contribution Taxes NOTE 26 Tax Credit NOTE 27 Related-Party Transactions NOTE 28 Employee Benefits NOTE 29 Remuneration of Employees and Management NOTE 30 Assignment of Employees to Outside Agencies NOTE 31 Commitments, Responsibilities and Contingencies NOTE 32 Risk Management and Regulatory Capital NOTE 33 Other Information

189 INDEPENDENT AUDITORS REPORT SUMMARY OF THE AUDIT COMMITTEE REPORT DECLARATION OF THE BOARD OF DIRECTORS FISCAL COUNCIL REPORT EXECUTIVE BOARD

190 Management Report 2009 Results Todo seu Unidade Relações com Investidores