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Fixed Income Research August, 2009

X-Ray Files

Brazilian Banks & Corporates Handbook

Volume VI

Please refer to page 89 of this report for important disclosure information

Fixed Income Research August, 2009

X-Ray Files

Brazilian Banks & Corporates Handbook

Volume VI

Ana Esteves [email protected] +351 21 381 1090 María Insausti [email protected] +351 21 381 1149 Bruno Baptista [email protected] +351 21 381 1136

INDEX

EXECUTIVE SUMMARY AIRLINES ­ SECTOR BRIEF Embraer Gol TAM BANKS ­ SECTOR BRIEF Banco BBM Banco BMG Banco Bradesco Banco Cruzeiro do Sul Banco Daycoval Banco do Brasil Banco Fibra Banco Industrial Banco Mercantil do Brasil Banco PanAmericano Banco Pine Banco Safra Banco Santander Brasil Banco Sofisa Banco Votorantim BICBANCO BNDES GP Investments Itaú Unibanco MINING AND STEEL ­ SECTOR BRIEF CSN Metalúrgica Gerdau Usiminas Vale OIL, GAS AND PETROCHEMICALS ­ SECTOR BRIEF Braskem Lupatech Petrobras Ultrapar SOFT COMMODITIES ­ SECTOR BRIEF Bertin (Bracol) Cosan Friboi (JBS) Independência Marfrig 7 9 11 12 13 14 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 39 40 41 42 43 46 47 48 49 50 53 54 55 56 57

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INDEX

Minerva Sadia TELECOMS AND MEDIA ­ SECTOR BRIEF Brasil Telecom Globo Net Serviços RBS Tele Norte Leste Participações (Oi) UTILITIES ­ SECTOR BRIEF AES Eletropaulo Celpa Cemat CESP Eletrobrás Energipe Isa Capital do Brasil Rede Group Sabesp DIVERSIFIED AmBev BRMALLS Camargo Corrêa Group Construtora Norberto Odebrecht DASA Votorantim Group GLOSSARY 58 59 60 62 63 64 65 66 67 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 87

EXECUTIVE SUMMARY

It is impressive to see how the decoupling idea remains on the table after the aggravation of the global economic and financial turmoil in the last quarter of 2008. As we can remember, in the first half of 2008 many shared the view that emerging economies would be more resilient to adverse conditions in the developed world than in previous economic crisis. Emerging markets in general, and Brazil in particular, were not immune to sustained credit restrictions, but the fact that concerns with their health only arose deep in 2008, well after the credit crisis started, seems a sign that these economies are in better shape than in the past, being more protected from external shocks. Changes in international fundamentals had to be deep and lasting for the Brazilian economy and financial markets start to be affected, supporting the idea that Brazil external vulnerability is low when compared with other peers and that investors have perceived it. High international reserves, low levels of external debt and a large domestic market might have been the most relevant characteristics explaining such belief. However, because in economics "everything has to do with everything" Brazil's sound , fundamentals have been progressively affected by the length and depth of the crisis. The decoupling story held-up well for a year but globalization ended up showing its influence as developed markets weakness proved less temporary than initially though. Brazilian financial markets performance was mostly a commodity story, as the Bovespa and the currency only started to give in when commodity prices receded in June 2008. The economic impact came immediately following. Since the second half of 2008, global credit restrictions, risk aversion and recession fed through to the domestic economy. While internal demand was resilient up until the third quarter of last year, lower confidence, lower access to credit and lower exports slowed it down, particularly investment. In such an environment, most of the companies covered in this publication have become more careful about their investment plans as they re-assess demand and funding prospects. We did not find a uniform trend regarding margins, leverage or cash flow generation. Each sector, and even within each sector, each issuer, showed their own characteristics which translated into specific performance. Therefore, and contrary to what happened in some of the previous publications of the "Brazilian Banks and Corporates Handbook" we , could not find a cross sector trend, as could be expected given generalized weakness of economic conditions. Broadly speaking it can be said that companies more focused on the domestic market and with lower leverage, such as telecoms, delivered better performance than exporters, with commodity linked businesses. The Brazilian financial system remained liquid and capitalized in 2008. Although in the fourth quarter, the pace of deposit redemptions increased, the largest banks maintained low dependence on open market funding and a large deposit base when compared to lending. Credit quality was on an improving trend until November 2008, despite adverse financial conditions, although slightly receding thereafter. The minimum BIS ratio admissible in Brazil is 11% and all the 10 largest banks by assets stand well above the

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AIRLINES ­ SECTOR BRIEF

requirement. In 2008, lending continued to grow at double digit pace, despite decelerating, at first due to a tighter monetary policy by the Central Bank as inflation concerns where high in the first half of 2008 and secondly due to tighter credit conditions in the third and fourth quarters of the year both in international and domestic markets. Now, in the end of the first half of 2009, we start to see again another wave of positive feelings towards emerging markets. Important stimulus packages being implemented in several countries, better than expected economic data out from China and higher commodity prices, underlie such a reasoning. China, through vigorous fiscal and monetary policies, is investing more and leveraging growth ­ its own and that of the region. Brazil gains from Chinese growth, as well as from its aggressive build-up of commodity inventories. Robust raw material sales continue to cushion the global downturn hit on Brazilian exports. Exports to China grew 42.3% YoY in the first half of 2009, while exports to the other two main trade partners, the United States and Argentina, fell by more than 40%. After years of consolidation of the macroeconomic framework, it was possible to use anticyclical monetary policy to fight the crisis. Brazil has potential consumption, investment projects and, more recently, a lower risk environment for external investors. Its increasing exposure to other fast-growing emerging economies and lower dependence on developed economies could be another plus for the country, as global economic dynamics change. In fact, the new era of risk assessment and valuation translated into high-risk aversion and growing concerns about liquidity and risk management practices by issuers lead us to introduce a new item on our X-ray files ­ risk policy. Similarly to previous publications, the companies included in this handbook are those that have at least one bond quoted by one entity on Bloomberg. Once again, we hope you enjoy. Air traffic in Brazil increased in 2008 at the slowest pace since the market retraction in 2003. On top of demand deceleration, installed capacity in the industry continued to grow with the entrance of a new low cost airline, Azul Linhas Aéreas. TAM and GOL maintained their dominant Brazilian market position, with a joint market share above 90%. TAM and GOL managed to increase revenues last year. However, record high oil prices, representing around 40% of their cost structure, pressured EBITDA and EBITDA margin down. Moreover, the strong BRL depreciation affected the industry's cost structure, as around 50% of its costs are denominated in USD. By the end of 2008, lower costs from oil prices were offset by the USD appreciation against the BRL on a pure conversion effect.

EBITDA Margin

14% 12% 10% 8% 6% 4% 2% 0% Embraer 2007

Source: Company Data, Banco Itaú Europa

Gol 2008

Tam

Leverage wise, total debt ­ including leasing ­ increased sharply: 51% in the case of TAM and 67% in the case of GOL. Net debt doubled. Funds from operations were positive in both cases, as well as free cash flow in the case of TAM. FCF/Total Debt

40% 30% 20% 10% 0% -10% -20% Embraer 2007

Source: Company Data, Banco Itaú Europa

Gol 2008

Tam

Going forward, the environment remains challenging for Brazilian carriers. Local demand should be sluggish, as economic activity will likely remain depressed and pose further restrictions to the recent development of airplane traveling as a form of leisure. Moreover, as this type of demand is more price-sensitive, price wars could be exacerbated. The industry's regulator, the National Civil Aviation

Agency (ANAC), has been taking measures to increase competition, such as the startup of operations at Santos Dumont airport and the liberalization of prices for the international market. In September 2008, ANAC announced the end of price floors for tickets from Brazil to South America, and fare prices declined 84% and 57% for routes linking Brazil ­ Peru and Brazil ­ Chile, respectively. In April 2009,

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Embraer

the regulator announced the gradual elimination of floor prices for international flights, which will be fully implemented by April 2010. However, pressures from Brazilian airlines and other entities of the sector, added to the economic crisis, might lead the regulator to review/delay the implementation of the international fares liberalization. Liberalization measures, along with increased competition and likely demand deceleration on the back of a weak economy, could create adverse conditions for TAM and GOL this year. Cost control, efficient investment management and a flexible business strategy become key pillars to face these adversities. Both companies already apply multi-fare policies, which encourage passengers to anticipate bookings and allow airlines to maximize the price according to the load factor. Nevertheless, these operational obstacles come at a moment of high leverage, high refinancing risk and lower financing availability. Furthermore, on the costs side, the future does not look good either, if oil prices resume the upward trend. On top of the operating outlook and challenging regulatory environment, the industry has high event risk of accidents, infrastructure problems and pandemics such as the current swine flu. Embraer is a different story. Despite of the slight EBITDA margin decrease in 2008, the company managed to post strong cash flow coverage ratios and maintain a net cash position. The operational outlook is somewhat challenging as well, given the concentration of the regional jets market in North America (half of the orders come from this region). However, orders from airlines in other regions are growing, and the company intends to diversify its customer base. Like in other segments, the turmoil in the financial markets will create financing difficulties for regional jets, which will likely reduce demand. Capacity cuts and other cost efficiency initiatives at major airlines could mean less need of aircrafts by regional partners. Other issue to monitor is the BRL strength, as sales are denominated in USD and last year's weakness could well fade on the back of lower risk aversion.

Positioning: Embraer is one of the largest airplane building companies in the world, and the largest manufacturer of regional jets with up to 120 seats. Embraer's commercial jets serve 50 airlines in 34 countries all around the world. Total assets amounted to 21.5 bn BRL in 2008. Description: Embraer is an aircraft manufacturer focused on specific market segments such as commercial, defense and executive aviation. The company was established by the state in 1969, and then privatized in 1994. Its headquarters are in Brazil, but it has offices in China, France, Portugal, Singapore and the United States. Currently, its workforce totaled 17,375 employees (after the lay-offs that occurred in February), 87.7% based in Brazil. The order backlog amounted to 19.7 bn USD (1Q09). Shareholders: Since March 2006, Embraer has a simplified capital structure composed by common shares only. The company's shares are listed on the NYSE and on the Bovespa stock exchanges. 48.5% of its capital is listed on São Paulo, and distributed as follows: Banco do Brasil's pension fund with 14.2%, Bozano Group with 8.3%, BNDES' pension fund -BNDESPAR- with 5.2% and others with 20.9%. 51.5% of Embraer's capital corresponds to ADRs. The remaining 0.3% belongs to the government, including a golden share.

Key Ratios 2006

EBITDA Margin EBITDA Growth Net Revenues Growth Exports ROA ROE EBITDA/ Net Int Expenses EBITDA/ Interest Costs Total Debt/EBITDA S-Term Debt/EBITDA Net Debt/EBITDA FC Debt/ Total Debt FC Hedged Debt*/ Total FC Debt Net Debt/ Assets Net Debt/ Equity FFO/Total Debt (FFO-Capex-Div)/Total Debt 11,5% -11,7% -9,5% 96,2% 3,8% 12,3% 9,3x 3,1x 3,0x 1,1x nm 78,0% 81,9% nm nm 44,8% 16,2%

Rating 2007

13,2% -6,7% 20,8% 95,3% 7,7% 25,6% nm 6,0x 2,4x 1,3x nm 55,2% 145,3% nm nm 11,1% <0

2008

12,8% 13,4% 17,5% 95,6% 2,0% 7,2% 6,5x 8,1x 2,9x 0,8x nm 65,8% 107,6% nm nm 53,7% 32,6%

Moody's

Issuer Rating Outlook Baa3 Stable

S&P

FC LT Iss. Credit LC LT Iss. Credit Outlook BBBBBBStable

Fitch

Not Rated

Moody's

Global FC Ratings Evolution S&P

Jan-06 BBBNot Rated

Fitch

Moody's

Not Rated

Local Rating Evolution S&P

Not Rated Not Rated

Fitch

Liquid Issues Amount

400 mn USD

Source: Bloomberg, BIE

Coupon

6.375%

Issue Date

10-25-2006

Call/Put

MW+25bps

Maturity

01-24-2017

Ratings

Baa3/BBB-

Source: Embraer, BIE. 2007 restament. 2007 growth rates considered the old method. *hedged with cash denominated in FC

MN BRL

Total Assets Cash Equity Short Term Debt Total Debt Net Debt Net Revenues EBITDA Net Income Funds from Operations Capex Dividends

Source: Embraer, BIE

2006

16.291,8 3.769,1 5.040,6 1.077,1 2.896,7 -872,4 8.265,2 951,8 621,7 1.298,6 476,3 352,0

2007

15.476,0 4.411,3 4.638,1 1.659,1 3.125,0 -1.286,3 9.993,7 1.322,0 1.185,2 346,1 413,4 329,5

2008

21.499,2 5.122,1 5.970,5 1.259,8 4.299,7 -822,4 11.746,8 1.499,8 428,8 2.307,4 482,2 423,5

Source: Embraer, BIE

Net Revenues Distribution 2008

24%

18% 53% 5% Europe Brazil America (ex. Brazil) Other

Debt Maturity Schedule 2008

1800 1500 (MN BRL) (MN BRL) 1200 900 600 300 0 2009

Source: Embraer, BIE

Net Revenues Profile

12000 10000 8000 6000 4000 2000 0

% CAGR: 12.3

2010

2011

2012

2013

2014

After 2014

2003 Commercial

Source: Embraer, BIE

2004

2005

2006

2007

2008 Other

Defense & gov.

Executive aviation

Aeronautic services

Risk policy: Embraer practices active management of credit, liquidity and market risks, through a formal policy. The company uses the USD currency as the benchmark currency for its business because most of its revenues are denominated in dollars. Therefore, foreign exchange exposure mainly results from the BRL-denominated operations, namely labor and local expenses, financial applications and BRL-denominated loans. The foreign exchange policy aims to balance assets and liabilities denominated in the same currency and to manage daily foreign exchange operations in order to assure that the natural hedge effectively materializes. Embraer also uses derivatives with hedging purposes, though not with speculative objectives. Credit positives: (i) strong backlog of orders despite of the slight decrease in 4Q08 and 1Q09, (ii) expanding and diversified sales portfolio by country and segment, (iii) sound competitive position in the commercial aviation industry worldwide, (iv) focus on the high-value business of executive aviation, (v) efficient and low-cost producer enjoying large scale production synergies, (vi) high cash flow generation and strong liquidity position, (vii) adequate debt coverage ratios, (viii) net cash position, (ix) foreign currency debt covered by cash and equivalents, (x) rapid response to adverse market conditions, cutting its workforce by 20%, planned capital expenditures and dividends. Credit negatives: (i) aggressive dividend policy (despite dividends were frozen in 4Q08), (ii) limited sales-financing availability, (iii) some dependence on government credit to finance its clients, (iv) 67% of its revenues come from commercial aviation, (v) volatile working capital, (vi) aggressive competition, despite few players in the industry, (vii) reduction of expectations for year 2009 ­ deliveries forecast reduced from 270 aircrafts in November to 242 in February and revenues forecast lowered from 6.3 bn USD to 5.5 bn USD. Outlook: Embraer's goal is to become one of the main global forces in the Aeronautical and Defense markets, leader in the segments where it is present and recognized for the levels of excellence of its entrepreneurial action. Embraer forecasts to deliver 242 aircraft in 2009, down from 270 expected in November. The company expects to spend 200 mn USD in research and development and 150 mn USD in improving plants and productivity, revised down as well from 210 and 240 mn USD, respectively, back in November. Embraer targets revenues of 5.5 bn USD in 2009 and EBIT margin of 10% for this year. The global crisis affected the company, which has been reducing forecasts since October. Nevertheless, sound credit metrics and a strong credit position, on top of a rapid response to the new environment by adjusting expenses, should help Embraer in the coming future.

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Gol

Positioning: Gol ranked #2 in the domestic market, with a market share of approximately 42.3% in 2008. In the Brazilian international market, its market share was 23.1%. The average occupation rate stood at 61.6% in 2008 and total assets amounted to 6.9 bn BRL in the same year. Description: Gol Linhas Aéreas Inteligentes, a holding company created in 2004 to integrate the operating company Gol Transportes Aereos SA, created in 2001, is a low fare airline focused on Brazil, but that also flies to Bolivia, Uruguay, Paraguay, Chile, Peru and Argentina. As of December 2008, it had a fleet of 115 airplanes, of which 90 were operating leases and 25 were finance leases, flying to 59 destinations (49 in Brazil and 10 in South America). In April 2007, Gol Linhas Aéreas Inteligentes acquired Varig, and integrated its operations during 2008. Gol provides cargo transportation services as well. Shareholders: Gol is controlled by Fundo de Investimento em Participações ASAS, after Aeropar and Comporte transferred their shares in an organizational restructuring, which did not change the controlling shareholders of the company. The fund belongs to the family Constantino de Oliveira. Gol has ordinary and preferred shares listed on Bovespa and NYSE.

TAM

Positioning: TAM is the largest Brazilian airline with a market share of approximately 50.3% in the domestic market and 75.2% in the international market (considering only Brazilian carriers) in 2008. The average occupancy rate in the period reached 71%. Total assets reached 13.2 bn BRL in the same year. Description: TAM was created in 1976, and actually flies to 42 cities in Brazil and 18 international destinations, in the US (New York, Orlando and Miami), Europe (Paris, London, Milan, Frankfurt and Madrid), Argentina (Buenos Aires and Bariloche), Bolivia (Santa Cruz de la Sierra and Cochabamba), Chile (Santiago), Paraguay (Asunción and Ciudad del Este), Uruguay (Montevideo), Venezuela (Caracas) and Peru (Lima). Its fleet counts with 132 airplanes. TAM also provides cargo transportation services. Shareholders: TAM is controlled by companies TEP and Nova Fronteira, with 46.25% of the total capital and 89.42% of the voting shares. TEP and Nova Fronteira belong to the Amaro Family. The remaining ordinary and preferred shares are free float, listed on the São Paulo and New York stock exchanges. TAM S.A. is the holding company of TAM Linhas Aéreas, TAM Mercosul, located in Asunción (Paraguay), and Fidelidade, a travel agency network. Since 2007, the company has also created three financial subsidiaries in Cayman Islands.

Key Ratios 2006

EBITDA Margin EBITDA Growth Net Revenues Growth ROA ROE EBITDA/ Net Int Expenses EBITDA/ Interest Costs Total Debt/EBITDA S-Term Debt/EBITDA Net Debt/EBITDA FC Debt/ Total Debt FC Hedged Debt/ Total FC Debt Net Debt/ Assets Net Debt/ Equity FFO/Total Debt (FFO-Capex-Div)/Total Debt

Source: Gol, BIE. Hedge includes cash and equivalents.

Rating 2007

0,8% -93,8% 30,6% 4,7% 11,1% nm 0,3x 124,2x 34,1x 89,7x 88,7% 31,6% 64,6% 154,4% <0 <0

Key Ratios Fitch

FC LT Iss. LC LT Iss. Senior Uns Nat LT B+ watchB+ watchB watchBBB(bra) *EBITDA Margin EBITDA Growth Net Revenues Growth ROA ROE EBITDA/ Net Int Expenses EBITDA/ Interest Costs Total Debt/EBITDA S-Term Debt/EBITDA Net Debt/EBITDA FC Debt/ Total Debt FC Hedged Debt/ Total FC Debt Net Debt/ Assets Net Debt/ Equity FFO/Total Debt (FFO-Capex-Div)/Total Debt

Source: TAM, BIE

Rating 2007

9,4% -30,5% 11,0% 4,9% 25,5% nm 2,0x 9,2x 2,1x 5,8x 88,2% 0,0% 42,6% 222,2% <0 <0

2008

0,3% -52,7% 29,0% nm nm 0,0x 0,1x 437,4x 99,3x 407,3x 98,6% 15,5% 116,1% 598,9% 9,7% <0

Moody's

LT Corp Fam Rat B1 Outlook Negative

S&P

2006

15,0% 114,4% 30,0% 11,8% 42,4% 24,3x 9,5x 5,4x 1,0x 3,2x 86,0% 22,2% 67,5% 241,8% 12,2% 9,4%

2008

11,2% 55,7% 29,9% nm nm 0,4x 3,1x 8,9x 1,2x 7,3x 94,4% 0,0% 65,7% 1382,3% 10,3% 3,0%

Moody's

S&P

FC LT Iss. LC LT Iss. Outlook LT Issuer Credit BBBBNegative brA+ FC LT Iss. LC LT Iss. Outlook Nat. LT

Fitch

BBBBNegative A- (bra)

17,6% 22,1% 42,4% 18,1% 33,1% nm 10,3x 4,2x 0,8x 1,7x 93,2% 41,8% 29,4% 53,7% 17,7% 1,5%

Not Rated

Not Rated

Moody's

Mar-06 May-08 Aug-08 Ba2 Ba3 B1

Global FC Ratings Evolution S&P

Jun-06 Jun-06 Aug-06 Jun-08 May-09

Fitch

BBBB BB+ BB B+

Moody's

Not Rated

Global FC Ratings Evolution S&P

Aug-06 Jul-08 BB BBAug-06 May-09

Fitch

BB BB-

Not Rated

MN BRL

Total Assets Cash Equity Short Term Debt Total Debt Net Debt Planned airplane purchases Net Revenues EBITDA Net Income Funds from Operations Capex Dividends

Source: Gol, BIE. Debt figures include leasings.

2006

3.780,2 1.706,3 2.068,0 562,6 2.816,3 1.110,0 11.549,0 3.802,0 667,3 684,5 498,4 273,7 181,1

2007

5.764,8 1.432,8 2.411,0 1.413,1 5.154,2 3.721,4 8,155,2 4.967,3 41,5 268,5 -202,9 541,5 250,7

2008

6.881,2 591,6 1.334,4 1.948,0 8.583,9 7.992,3 15.820,1 6.409,6 19,6 -1.237,1 830,0 984,0 36,3

Moody's

Not Rated

Local Rating Evolution S&P

Not Rated Jun-06 Jun-08 May-09

Fitch

AA-(bra) A+ (bra) BBB(bra)

MN BRL

Total Assets Cash Equity Short Term Debt Total Debt Net Debt Net Revenues EBITDA Net Income Funds from Operations Capex Dividends

Source: TAM, BIE. Debt figures include leasings.

2006

5.168,3 2.453,0 1.443,4 1.074,3 5.943,7 3.490,7 7.344,7 1.098,4 611,8 722,2 136,1 29,0

2007

10.350,3 2.606,8 1.982,2 1.624,0 7.012,1 4.405,3 8.151,2 763,5 505,1 -388,3 316,9 137,6

2008

13.223,9 1.914,0 628,1 1.464,2 10.596,1 8.682,1 10.592,0 1.189,1 -1.360,1 1.087,5 698,5 72,0

Moody's

Not Rated

Local Rating Evolution S&P

Aug-06 Apr-07 Jul-08 brA+ brAAbrA+ Aug-06 May-09

Fitch

A+(bra) A-(bra)

Amount

225 mn USD 200 mn USD

Coupon

7,500% 8,750%

Liquid Issues Call/Put Issue Date

10-19-2007 04-05-2006 MW+50 bps Call 4/11

Maturity

04-03-2017 Perpetual

Ratings

B1/B *B1/B *-

Amount

500 mn BRL 300 mn USD

Coupon

104.5%*DI 7,375%

Liquid Issues Call/Put Issue Date

09-15-2006 12-10-2007 Sink. MW+50 bps

Maturity

08-01-2012 04-25-2017

Ratings

na B+/BB-

Source: Bloomberg, BIE

Source: Bloomberg, BIE

Debt Maturity Schedule 2008

3000 2500 (MN BRL) 2000 1500 1000 500 50% 40%

Market Share Evolution

5000 4000 (MN BRL)

Debt Maturity Schedule 2008

12000 10000 8000 (MN BRL) 6000 4000 2000 0 2009

Source: TAM, BIE

Gross Revenues Profile

3.4%

CAGR: 2

30% 20% 10% 0 Jan-05 Apr-05 Jul-05 Oct-05 Jan-06 Apr-06 Jul-06 Oct-06 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 2009 2010 2011 2012 2013 After 2013

3000 2000 1000 500

2010

2011

2012

2013

Source: Gol, BIE Leasing maturities between 1 and 5 years equally distributed among periods.

International Market

Source: Gol, BIE

Domestic Market

After 2013

2004 Domestic

Source: TAM, BIE

2005 International

2006

2007 Cargo

2008 Other

Risk policy: Gol is exposed to market risks arising from its operations, mainly oil prices and foreign exchange rate, credit and interest rate risks. In order to minimize them, the company uses derivative financial instruments following a formal risk policy, responsibility of its directors, board and Risk Policy Committee. In 2008, oil represented 40.5% of the CoGS and administrative expenses of the company, which had a mixture of call options, collars and swaps to hedge approximately 12%, 37%, 39%, 9% and 2% of its oil consumption in 1Q09, 2Q09, 3Q09, 4Q09 and 1Q10, respectively. The company uses derivative instruments to hedge foreign exchange-denominated expenses and short-term liabilities. Credit positives: (i) high occupation rates, (ii) modern and efficient fleet, (iii) low air travel penetration in Brazil and improving living standards of the population (despite a challenging 2009), (iv) own maintenance centre, (v) growing revenues, (vi) hedges oil prices, (vii) diversification gains from the merger with Varig, now providing executive services, (viii) growth in cargo and ancillary revenues, (ix) as a low cost it is in better positioned to capture market growth. Credit negatives: (i) cyclical, price competitive and capital intensive industry, (ii) highly regulated industry in Brazil - new routes, frequencies, aircraft acquisitions, (iii) volatility of fuel prices, responsible for more than 40% of its operational costs, (iv) margins deteriorated sharply due to higher fuel costs and lower aircraft utilization, (v) increasing leverage, partially because of the BRL depreciation, (vi) decreasing proportion of foreign currency debt hedged, (vii) high proportion of short term debt, (viii) higher competition from the start-up of a new airline leading to price wars, (ix) negative free cash flow generation due to high capital expenditures related to fleet renewal, (x) prospects for a slowdown in air transportation demand in Brazil in 2009, (xi) event risk, (xii) challenging regulatory environment, unfriendly to investment. Outlook: Gol's strategy is based on segmentation and differentiation, while maintaining cost advantages (through new, larger, fuel-efficient aircraft, fleet standardization, lower fleet age and expanding in-house aircraft maintenance services). During 2008, the company achieved some goals such as fleet renewal, disciplined capacity growth, cost discipline, synergy gains from the merger, growth in cargo and ancillary revenues and client diversification. In 2009, Gol plans to reduce its fleet to 108 planes, which should grow afterwards up to 125 in 2014. Event risk related to the swine flu adds to an already challenging operating environment in the industry, both due to international conditions and domestic competition. Risks ahead are related to the company's capacity to grow, improve margins and decrease leverage in such an environment.

Risk policy: TAM uses financial derivative instruments with the objective of hedging foreign exchange risks on USD revenues and expenses, both financial and operational, and hedging oil price variations. The foreign exchange hedging policy tries to cover cash flow mismatches and has no speculative purpose. TAM's oil consumption amounted to almost 40% of total costs in 2008 while operations contracted to hedge future oil consumption covered 47% of such consumption in the next 12 months. Regarding foreign exchange, the company considers that the risk is somewhat mitigated by the fact that revenues are partially denominated in foreign currencies. The Risk Committee decided not to have any financial derivative instrument outstanding as of December 2008. Credit positives: (i) market leadership in Brazil, (ii) increasing national and international market shares, (iii) brand name and a broad loyalty program integrated in the Star Alliance, (iv) broad domestic range of destinations and profitable network of international destinations, (v) low air travel penetration in Brazil and improving living standards of the population, despite a challenging 2009, (vi) special focus on higher margin business travelers, (vii) modern and flexible fleet, (viii) focus on lowering costs that allowed to increase EBITDA margin, (ix) strong liquidity position, covering short term debt, (x) lower refinancing risk, (xi) hedging policy for oil prices. Credit negatives: (i) cyclical, price competitive and capital intensive industry, (ii) highly regulated industry in Brazil - new routes, frequencies, air traffic controllers, (iii) volatility of fuel prices, responsible for around 40% of its operational costs, (iv) high and increasing leverage, (v) high capital expenditures absorbing cash flow generation, (vi) high proportion of foreign currency debt with no hedge, (vii) capital imbalance, needs a capital increase, (viii) eroding profitability, (ix) higher competition from the start-up of a new airline leading to price wars, (x) prospects for a slowdown in air transportation demand in Brazil in 2009, (xi) event risk, (xii) challenging regulatory environment, unfriendly to investment. Outlook: TAM's main strategic goal is to consolidate its leadership and grow in the domestic and international Brazilian market. The company intends to open one new international route in 2009, expand its fleet from 129 planes in the end of 2008 to 132 by year-end 2009 and 150 by the end of 2013 and maintain an occupancy rate of 70%. The company is ready to implement some measures to increase or preserve liquidity if needed, such as acting on the balance sheet composition, postpone/reduce investments and focus further on the P&L to defend liquidity. Event risk related to the swine flu adds to an already challenging operating environment in the industry, both due to international conditions and domestic competition. Risks ahead are related to the company's capacity to generate cash flow and decrease leverage.

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BANKS ­ SECTOR BRIEF

Although overall exposure of Brazilian banks to international lending is low, the financial crisis hit the country through the credit channel. USD lines vanished, spreads for both corporate and individual clients climbed consistently on the back of risk aversion, and restrictions worldwide lasted longer than many would have expected one year ago. Consequences on agents' confidence and real activity followed through, putting a break to the lending expansion process the country was experiencing for over 10 years. Lending Evolution

1,400,000 1,200,000 1,000,000 800,000 600,000 400,000 200,000 0 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jul-00 Jul-01 Jul-02 Jul-03 Jul-04 Jul-05 Jul-06 Jul-07 Jul-08 45 40 35 30 25 20 15 10 5 0 300% 250% 200% 150% 100% 50% 450% 400% 350%

The slowing down of lending growth was sharper in the first quarter of 2009 than in the last quarter of 2008. In 2008, lending expanded 31% YoY to 1.227 tr BRL, the highest annual growth rate ever. In retail lending, mortgages and credit cards were the segments growing the most. Working capital, imports and real estate financing were the fastest expanding segments within lending to companies.

In those cases, credit quality measured by the relation of non-performing loans to total customer loans decreased, while the average ratio of the other five improved, suggesting that, on top of more adverse economic conditions, the sellers offered better credits given their liquidity needs. In our sample, non-performing loans to total customer loans worsened from 4.7% in 2007 to 5.8% in 2008. Risk aversion and uncertainty made funding in capital and money markets very difficult globally, and Brazil was no exception. Smaller banks went through more challenging times, and some had to sell a share of the Loans/Deposits Ratio

loan portfolio to access funding, therefore large-scale banks with a broader deposit base, showed a more resilient liability side of the balance sheet. In fact, risk aversion and perception that smaller banks could have more trouble in complying with their liabilities caused a deposit reallocation movement from smaller banks to larger ones. Economic agents prefer solid banks to keep their savings and that was shown by a double-digit deposit growth rate in our top four banks. Within our sample, nine presented deposit contraction. The ratio customer loans to deposits increased in the majority of the cases. The ratio change was higher in those banks mainly focused on retail lending.

Lending

Source: Company Data, Banco Itaú Europa. (RHS: mn BRL; LHS: %)

Lending/GDP (RHS)

The credit growth resilience in 4Q08 rested mainly on the speed of Brazilian authorities, namely the Central Bank and the federal government, to adopt measures to maintain credit growth. These measures included, among others: (i) easing reserve requirements, (ii) easing reserve requirements to allow banks to buy loans from other institutions, (iii) decrease additional reserves' exemption amounts, (iv) allowing the Deposits' Insurance Fund to purchase loans from small and medium-size lenders, (v) specific measures to the agricultural sector, civil construction and exporters, including auctions to support export financing. The easing on reserve requirements by itself injected more than 100 bn BRL of cash in the financial system. Therefore, banking reserves fell 13% MoM in October and 11% in November, when the majority of the measures were taken, to increase by 7% in December (end-month measurement). These measures tried to ease credit conditions and fuel lending after a long period of monetary policy decisions still reflecting inflation concerns. Despite international

credit conditions remaining tight for most of the year and international monetary policy maintaining a loose bias, the Brazilian Central Bank started 2008 with a Selic rate at 11.75%, which was kept on hold until June, when it was raised by 50 bps. The tightening cycle continued with two more hikes of 75 bps in July and September. Another period of stability followed and the benchmark rate closed the year at 13.75%. Therefore, the average interest rate applied on lending operations increased from 33.8% in December 2007 to 43.3% in December 2008. In such an environment, within our banks' universe, lending growth was not in 2008 as strong as it was in 2007, when growth rates reached at least double digit pace. Four banks experienced lending contraction in 2008, only partially explained by the use of loan assignments (cessions) to access liquidity. In fact, within our eighteenbank universe, thirteen practiced credit cession in 2008.

0% BMB BBM BIC Daycoval Santander Cruzeiro Fibra Safra Pine BMG Banco do Brasil PanAmericano Bradesco Itaú Unibanco Industrial Votorantim Sofisa

2007

Source: Company Data, Banco Itaú Europa

2008

As funding conditions tightened and provisions increased, more than 70% of our banks had net intermediation income compression, which led to lower intermediation margins in most of the cases. Operating income fell as well and provoked efficiency deterioration in most of the banks within our coverage universe. Overall, Brazilian banks remained well capitalized. The Brazilian Central Bank requires a BIS ratio equal or greater than 11%, already above the standard 8%. Among banks analyzed here, the BIS ratio fell from 19.7% in 2007 to 18.0% in 2008 on average.

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Banco BBM

BIS Ratio

40% 35% 30% 25% 20% 15% 10% 5% 0% Daycoval PanAmericano Itaú Unibanco Banco do Brasil Santander Industrial Cruzeiro Bradesco Fibra Pine Votorantim Sofisa BNDES Safra BBM BMG BMB BIC Net Intermed. Margin Cost:Income BIS ROE ROA Net Intermed. Growth Fee Income Growth Operating Income Growth Net Income Growth Customer Loans Growth Customer Deposits Growth Customer Loans/Deposits Customer Loans/Assets Securities/Assets Provisions/ Loans Provisions/NPL NPL/Loans Concentration AA-B

Source: BBM results release, BIE Positioning: Banco BBM ranks 18th by total assets, 24th by total deposits and 32nd by shareholders' equity in Brazil. Total assets reached 14.2 bn BRL in 2008. Description: Established in 1858 as Banco da Bahia, Banco BBM is a wholesale bank providing credit, working capital financing, BNDES' on-lending, trade finance, treasury, capital markets and asset management services to its clients, which are mainly large and mid size corporates. In 2007, the bank started to provide services to individual clients again, mainly through loans charged against payrolls and mortgage lending. By the end of 2008, it employed 493 people in 6 branches. Shareholders: Banco BBM is controlled by the Mariani Family with a 30% direct stake of its ordinary shares and 26% through BBM Holding. The Mariani family also has interests in others businesses such as packaging, petrochemical and IT. BBM has ordinary and preferred shares but neither of them are listed.

Key Ratios 2006

3,1% 25,3% 18,6% 25,2% 1,4% 48,6% 106,4% 64,8% 48,2% 65,3% 37,6% 123,0% 20,1% 56,9% 1,9% 95,1% 2,0% 74,1%

Rating 2007

8,1% 13,7% 16,3% 52,8% 3,1% 197,8% -28,3% 194,5% 215,7% 65,6% 41,7% 143,7% 23,9% 39,7% 1,5% 101,8% 1,5% 77,2%

2008

3,6% 58,7% 14,5% 12,7% 0,7% -78,8% 41,5% -86,0% -82,3% -27,5% -37,8% 167,5% 21,2% 16,6% 2,6% 81,8% 3,2% 79,3%

Moody's

FC LT Dep LC LT Dep FSR FC/LC ST Deb Outlook Ba2 watch+ Ba1 D+ NP Stable

S&P

LT Nat ST Nat Support

Fitch

A (bra) F1 (bra) 5

Not Rated

2007

Source: Company Data, Banco Itaú Europa

2008

Moody's

Oct-06 Aug-07 Ba3 Ba2

Global FC Ratings Evolution S&P

Not Rated Not Rated

Fitch

(MN BRL)

Going forward, the sector might face a difficult year, at least when compared to previous periods. Global risk aversion and a challenging funding environment might put a break to lending and asset expansion. However, on the other hand, issues seen as weaknesses in the past, such as the predominantly national character of the funding and more severe regulatory requirements, became strengths in the current crisis, limiting the sector's vulnerability to global volatility in asset prices and cross-border funding. Nevertheless, as domestic markets reflect to some extent a more challenging international environment, banks' funding will not be immune to the credit crisis and should reflect stricter conditions in terms of maturities and costs. Economic conditions ­a recession is widely expected in Brazil for 2009 - do not bode well for credit expansion. Itaú Securities estimates that total loans in the banking system should grow 8% in 2009, down from 31% in 2008. Of this total, corporate lending should grow 7%, loans to individuals 8%, and earmarked loans 12%. Moreover, deteriorating economic conditions, namely in the labour market, could add pressure to lower asset quality. In an attempt to offset economic deterioration, the monetary policy has been expansionary so far this year. Although positive for volumes, lower interest rates could have a negative effect on banks' net intermediation margins, unless compensated by a higher-risk premium.

One should not forget that Brazilian banks enjoy sound profitability levels by international standards and high capital ratios to face a potential lending growth stagnancy and pressure on margins. Large banks with diversified portfolios will likely outperform smaller and less diversified ones, which could catch the attentions of big players, namely national, and fuel a consolidation process. Low asset prices could be another reason for cash-rich banks to acquire assets at discount. As an example, Banco do Brasil, which despite of its state owned characteristics, could strengthen its market position benefiting from the recently made acquisitions. Itaú and Unibanco also took advantage of the situation and merged. Difficult times for small players could anticipate a natural consolidation process in the industry, which in the absence of the crisis, could had taken more time to come. Banks'ranking positions in this chapter follow the Brazilian Central Bank's information as of December 2008.

MN BRL

Net Intermed. Income Loan Loss Provisions Fee Income Operating Income Net Income Customer Loans Total Assets Customer Deposits Subordinated Liabilities Shareholders' Equity

Source: BBM results release, BIE

2006

301,0 18,9 35,3 279,4 167,8 2.498,5 12.401,8 2.032,0 0,0 665,1

2007

896,5 26,1 25,3 822,8 529,8 4.137,8 17.338,4 2.879,0 0,0 1.004,3

2008

190,3 18,2 35,8 115,6 93,8 3.001,0 14.177,9 1.791,7 0,0 737,3

Moody's

Not Rated

Local Rating Evolution S&P

Not Rated Jun-07

Fitch

A (bra)

Amount

150 mn USD

Coupon

7,500%

Liquid Issues Call/Put Issue Date

11-21-2006 na

Maturity

11-21-2009

Ratings

NR

Source: Bloomberg, BIE

Loan Composition 2008

14% 34% 13% 2500 2000 1500 1000 500 6% Sugar & Ethanol Other <5% 6% 9% Food Iron ore Construction Agriculture 0 2003 Eletric Energy Specialized services

Gross Revenues Profile

CAGR: 3

7.1%

12% 5%

2004

2005 Fees

2006

2007

2008 Other

Interest from lending

Securities, fx and derivatives

Source: BBM results release, BIE

Source: BBM results release, BIE

Risk policy: The Liquidity Risk is managed through the analysis of projected cash flows under different scenarios. The management policy is defined by the Directors' Committee, to assure that the bank's commitments are in line with its equity and actual policies of funding, lending and treasury. The bank has a structure for market risk management consisting of: (i) a Directors' Committee in charge of approving policies and limits, (ii) the Board, in charge of ratifying them, (iii) a Market Risk Department, responsible for identifying, measuring, monitoring and reporting them on a daily basis to the Director's Committee, (iv) an Internal Auditing, in charge of guaranteeing the adequacy of guidelines and consistency between theory and practice. The risk is monitored calculating the Value at Risk of BBM on a daily basis. BBM has also structures in place for managing credit and operational risks. Credit positives: (i) good asset quality in terms of NPL despite slight deterioration in 2008, (ii) strategic approach towards revenue diversification, (iii) executive commitment and shareholders' support, (iv) sophisticated risk controls, (v) prudent approach to credit concession, (vi) good funding access. Credit negatives: (i) high dependence on securities income, despite of efforts to diversify, (ii) earning volatility, (iii) deposit concentration and dependence on related parties, (iv) lack of deposit base as a source of funding, (v) big fall in deposits and lending, (vi) still high concentration on large companies, (vii) operational worsening in 2008 leading to a big fall in the net intermediation margin, (viii) large worsening in efficiency, (ix) low capitalization for the business profile. Outlook: BBM's strategy is to diversify its business, mainly focused on large companies, to include medium-sized companies and individuals, as well as asset management and capital market activity, and to diversify funding. The bank segregated the proprietary trading platform to the asset management subsidiary in order to avoid earnings volatility. BBM was one of the banks that experienced deposit flight in 2008 on the back of risk aversion, therefore the main challenge we see ahead is increasing deposits, in order to improve its share in funding and to decrease concentration and funding vulnerability. In addition, a high weight of securities in income remains a relevant weakness for its credit profile.

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Banco BMG

Positioning: Banco BMG is the 26th largest bank in Brazil by total assets, 35th by deposits and 15th by equity. Total assets reached 7.2 bn BRL in 2008. According to Dataprev, BMG held 21.3% of the market of lending charged against payrolls to INSS employees and retirees in 2007. Description: Banco BMG was established in 1930 and currently is specialized in consumer lending, debited directly in its customers' paycheck, mainly to public servants (INSS). It also offers vehicles financing and leasing and other sorts of financing to individuals and companies, as well as asset management (among which receivables funds). As of December 2008, Banco BMG had 392 employees and 13 branches located in the wealthiest regions of Brazil - South, Southeast and Centre-west (Belo Horizonte-Rio de Janeiro-São Paulo). Shareholders: Banco BMG is controlled by the Guimarães family. Mr. Flávio Pentagna Guimarães is the president of the board. Banco BMG belongs to BMG Group, which also has interests in real estate (in Belo Horizonte), industry (Brasfrigo and Damp Eletric), services (Centre Trading) and agriculture (grains). Its shares are not listed.

Banco Bradesco

Positioning: Banco Bradesco is the second largest privately-owned bank in Brazil by total assets and by deposits. It is the largest provider of insurance and private pension plans, with 13.8 bn BRL in net premiums written and revenues from private pensions (Susep/ANS). Total assets amounted to 454.4 bn BRL in 2008. Description: Bradesco, established in 1943 as a commercial bank, initiated a strong expansion period to become the largest private bank in Brazil in 1960's. In 1988, it incorporated investment banking and real estate units to build a diversified financial institution (multiple bank). Currently it offers a broad range of retail, wholesale and investment banking products such as lending, credit cards, leasing, brokerage services, asset management and insurance to a broad range of individual, small, medium and large corporates and institutional customers, countrywide. It is present outside Brazil in Buenos Aires, New York, Cayman, London, Nassau, Tokyo, Hong Kong and Luxembourg, and employs 79,784 people through 3,370 branches. Shareholders: Cidade de Deus Part has 24.51% of the ordinary shares, Fundação Bradesco 8.58%, BES 3.58%, NCF 2.14% and MUFG Bank 1.26%. The remaining 59.93% is free float. Fundação Bradesco holds 43.60% of the voting rights in Cidade de Deus while the other 53.70% is property of Elo Participações, a society held by Bradesco board and employees. The bank's board members manage Fundação Bradesco. Fundação and Cidade de Deus control NCF. Preferred and ordinary shares are listed on the São Paulo, New York and Madrid stock exchanges.

Key Ratios 2006

Net Intermed. Margin Cost:Income BIS ROE ROA Net Intermed. Growth Fee Income Growth Operating Income Growth Net Income Growth Customer Loans Growth RWA Growth Customer Deposits Growth Customer Loans/Deposits Customer Loans/Assets Securities/Assets RWA/Assets Provisions/ Loans Provisions/NPL NPL/Loans Concentration AA-B

Source: BMG, BIE

Rating 2007

41,1% 57,0% 12,3% 38,2% 7,7% 100,5% 125,8% 103,3% 92,9% 44,1% 44,2% 100,8% 266,8% 63,6% 7,5% 134,5% 4,6% 75,7% 6,0% 90,6%

Key Ratios Fitch 2006

Net Intrst. Margin Reported Net Intermed. Margin Cost:Income Combined BIS ROE Reported ROE ROA Reported ROA Net Intermed. Growth Fee Income Growth Operating Income Growth Net Income Growth Customer Loans Growth RWA Growth Customer Deposits Growth Customer Loans/Deposits Customer Loans/Assets Securities/Assets RWA/Assets Provisions/ Loans Provisions/NPL NPL/Loans Concentration AA-B

Source: Bradesco, BIE

Rating 2007

9,4% 7,3% 59,5% 86,0% 15,7% 28,3% 26,4% 2,4% 2,3% 12,8% 21,4% 46,5% 58,5% 36,5% 39,5% 16,7% 134,1% 38,5% 33,5% 87,0% 6,0% 89,4% 6,7% 75,5%

2008

20,0% 75,0% 15,6% 11,9% 3,3% -45,0% 7,3% -55,9% -52,6% 2,4% 48,0% -18,2% 333,9% 59,7% 14,0% 182,6% 13,7% 120,0% 11,4% 82,1%

Moody's

FC LT Dep LC LT Dep Sen. Unse. Deb FSR Short Term Outlook Nat. LT Nat. ST Ba2 Ba2 Ba2 D NP Stable Aa3.br BR-1

S&P

2008

8,3% 5,2% 66,3% 85,8% 16,9% 23,8% 22,2% 1,9% 1,7% -12,5% 3,8% -16,6% -4,9% 32,1% -1,0% 67,2% 105,9% 38,2% 29,0% 64,7% 5,9% 89,5% 6,6% 76,1%

Moody's

Senior unsec. FC LT Dep LC LT Dep FC ST Deb LC ST Deb FSR Outlook Nat LT Dep Nat ST Dep Baa3 watch+ Ba2 watch+ A1 NP P-1 BStable Aaa.br BR-1

S&P

FC LT Deb LC LT Deb FC ST Deb LC ST Deb Outlook Support Individual Nat LT Nat ST

Fitch

BBB BBB+ F2 F2 Stable 3 B/C AAA (bra) F1+(bra)

27,7% 57,9% 13,3% 26,2% 5,7% -4,3% -82,2% -34,2% -31,8% 56,5% 35,1% 19,8% 372,0% 63,0% 12,0% 133,3% 5,9% 91,5% 6,4% 88,4%

FC LT Iss LC LT Iss FC ST Iss LC ST Iss Outlook Nat. LT Iss

BBBBB B Negative br BBB+

Nat. LT Nat ST Support

A-(bra) F2 (bra) 5

Moody's

Apr-07 Dec-08 Ba1 Ba2

Global FC Ratings Evolution S&P

Jun-07 BBNot Rated

Fitch

Moody's 2006

961,2 170,8 26,0 377,3 263,2 2.911,4 4.619,0 6.155,6 782,7 0,0 1.003,8

Local Rating Evolution S&P

Aa2.br Aa3.br Jun-07

Fitch

A- (bra)

MN BRL

Net Intermed. Income Loan Loss Provisions Fee Income Operating Income Net Income Customer Loans Total Assets RWA Customer Deposits Subordinated Liabilities Shareholders' Equity

Source: BMG, BIE

2007

1.926,8 220,6 58,7 767,1 507,6 4.194,2 6.597,1 8.874,9 1.572,0 0,0 1.328,4

2008

1.060,2 391,9 63,0 338,6 240,7 4.294,0 7.192,0 13.135,1 1.286,0 0,0 2.017,4

Apr-07 Dec-08

8,5% 8,3% 64,9% 92,1% 18,8% 31,1% 20,5% 2,7% 1,9% 8,2% 21,1% -18,8% -8,3% 18,6% 26,3% 11,3% 114,7% 36,2% 36,6% 80,1% 6,9% 87,6% 2,9% 74,8%

FC LT Iss LC LT Iss FC ST Iss LC ST Iss Outlook Nat LT Nat ST

BBB BBB A-3 A-3 Stable brAAA brA-1

Moody's

Oct-06 Baa3

Global FC Ratings Evolution S&P

May-06 May-07 Apr-08 BB+ BBBBBB Jun-06 Aug-06 May-07 Jun-08

Fitch

BB BB+ BBBBBB

Moody's

Local Rating Evolution S&P

May-06 May-07 brAA+ brAAA Jun-06 May-07

Fitch

AA+(bra) AAA(bra)

MN BRL Amount

250 mn USD 116,7 mn USD 200 mn USD 300 mn USD

Source: Bloomberg, BIE

2006

15.982,1 4.412,4 8.897,9 6.375,9 5.054,0 96.219,2 265.547,3 212.719,7 83.905,1 11.890,0 24.636,4

2007

18.032,2 5.497,7 10.805,4 9.341,3 8.009,7 131.307,1 341.143,8 296.736,2 97.950,9 15.199,8 30.357,3

2008

15.772,3 7.884,1 11.215,1 7.788,8 7.620,2 173.423,2 454.413,0 293.796,6 163.795,1 19.236,4 34.256,5

Coupon

6,875% 8,750% 7,250% 9,150%

Liquid Issues Call/Put Issue Date

03-14-2008 06-29-2005 05-23-2008 12-22-2005 na Sink na Sink

Maturity

03-11-2010 07-01-2010 05-23-2011 01-15-2016

Ratings

Ba2 Ba2/BBBa2 Ba2/BB-

Net Intermed. Income Loan Loss Provisions Fee Income Operating Income Net Income Loans to Customers Total Assets RWA Customers' Deposits Subordinated Liabilities Shareholders' Equity

Source: Bradesco, BIE

Amount

227 mn BRL 45,525 mn USD 150 mn USD 17,500 mn JPY 500 mn USD 225 mn EUR 300 mn USD

Coupon

14.8%* 6,750% 10,250% 4,050% 8,750% 8,000% 8,875%

Liquid Issues Call/Put Issue Date

10-03-2005 08-20-2003 12-17-2001 04-25-2002 10-24-2003 04-15-2004 10-21-2005 na Sink. na na na na Call 06/10

Maturity

01-04-2010 08-20-2010 12-15-2011 04-17-2012 10-24-2013 04-15-2014 Perpetual

Ratings

NR A1/AA2 A2 A2 A2 Baa3 *+

Source: Bloomberg, BIE. *fx-linked

Loan Composition 2008

2% 1% 2500 23% (MN BRL) 2000

Gross Revenues Profile

CAGR: 42 .5%

(MN BRL) 200000 160000 120000 80000 40000 0 2002 2003 2004 Fees 2005 2006 2007 2008 Other

Source: Bradesco, BIE

Assets under Management

CAGR: 2 2.4%

(MN BRL) 100000 80000 60000 40000 20000 0 2002 2003 2004 2005 2006 2007 2008 2002

Gross Revenues Profile

CAGR: 6.7%

1500 1000 500 0

74%

2003

2004 Fees Other

2005

2006

2007

2008

Retail clients

Source: BMG, BIE

Financial institutions

Commerce and services

Industry

Interest from lending

Source: BMG, BIE

Securities, fx and derivatives

Interest from lending Compulsory applc.

Source: Bradesco, BIE

Securities, fx and derivatives Insurance premium

Risk policy: Since the second half of 2008, BMG has been improving institutional policies and risk management structures for market, liquidity, operational and credit risks. The bank's internal controlling system is constantly improving, supported by the Board, taking actions in line with the bank's size and operations. Credit positives: (i) market leader in payroll deduction segment, (ii) flexible operations based on a network of exclusive correspondents, (iii) still very high net intermediation margin despite falling to half in 2008, (iv) concentration on liquid payroll loans which are easy to sell, (v) diversification into vehicle financing segment, (vi) increased and high provisioning level, (vii) shareholder commitment to the bank shown through capital increases. Credit negatives: (i) exposure to an increasingly competitive segment, (ii) low business diversification, (iii) dependence on open market funding due to a low deposit base, (iv) large deposit fall in 2008 as risk aversion increased, (v) off balance sheet funding structure (securitization) increasing dependence on market conditions, (vi) low capitalization for the business, despite improving, (vii) deposit concentration with the 10 largest clients responsible for 40% of the bank's deposits, (viii) lending stability on the back of a large credit cession, (ix) low credit quality, (x) low efficiency. Outlook: Banco BMG plans to keep its leading position in personal financing committed by payroll deduction, sold through third party promoters and its own network, while diversifying its portfolio by introducing new products. BMG has been another example of a bank experiencing a fall in the deposit base on the back of the crisis. Going forward, the economic slowdown in Brazil, adverse funding conditions and competition from largest retail banks could limit the bank's loan origination and increase restrictions to funding. Improving the funding structure with a larger weight of deposits would be important albeit challenging.

Risk policy: Bradesco risk management structure is aligned with the business structure, allowing cooperation among the several activity areas of the bank, and without losing independency, focus and quality. Risk management is supported by an area exclusively loyal and directly subordinated to an executive officer and to the presidency of Bradesco Organization. The liquidity policy approved by the senior management comprises the daily monitoring of the composition of available funds, the observance of the minimum liquidity level and the contingency plan for stress situations. Credit positives: (i) strong franchise - market share leadership and strong profitability, (ii) diversified revenue profile, (iii) solid profitability indicators, (iv) sound capitalization, (v) rising weight of fee and insurance in operating revenues, (vi) strong balance sheet growth, (vii) sharp increase of the deposit base, reflecting soundness perception, (viii) improving coverage of loans by deposits, which is positive for funding (lower open market dependence), (ix) decreasing dependence of government securities for income although holdings are still above peers due to weight of insurance business. Credit negatives: (i) lower intermediation income and margins, (ii) efficiency deterioration, (iii) room to improve asset quality, (iv) loss of market power following the recent consolidation movements in Brazil. Outlook: Bradesco reaffirms as priorities three relevant targets: (i) to grow organically, while being aware of potential acquisitions and partnerships, committed to service quality and security of products and services, and pursuing improvement of the operating efficiency ratio; (ii) to identify and evaluate risks intrinsic to the business, applying adequate controls and acceptable levels for the operations; and (iii) to conduct businesses with total transparency, ethics and adequate compensation to investors. Bradesco ranks among those that have benefited from the crisis, by experiencing an increase in the deposit base due to generalized perception of its soundness, contributing to improve its funding profile. The main challenge ahead, in our view, is to maintain asset quality and a comfortable capital base, in this current financial environment. With the Central Bank of Brazil pursuing a looser monetary policy, which is already a margin compression factor per si, further pressure on top line profitability is likely.

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Banco Cruzeiro do Sul

Positioning: Banco Cruzeiro do Sul ranks 26th by shareholders' equity and deposits and 32nd by assets in Brazil. In 2008, total assets reached 5.7 bn BRL. Description: Created in 1993, Cruzeiro do Sul is a commercial bank focused on paycheck deductible consumer financing, and since 2003, operating in the credit market for mid-sized companies. The bank provides credit, investment, financial services, brokerage, credit card and consulting. As of December 2008, the bank was party to 2,800 public entities operating agreements authorizing and regulating activities in the paycheck deductible loan segment, with federal, state and municipal public agencies, including INSS (Social Security). Banco Cruzeiro do Sul´s products in the paycheck deductible loan market are distributed throughout Brazil mainly by a network of banking correspondents amounting to 360 companies last December. At the same time, Cruzeiro had 594 employees and 6 branches. Shareholders: 70% of its ordinary shares belong to Luis Felippe Indio Da Costa and 30% to Luis Octavio A. L. Indio Da Costa. Its preferred shares are listed on São Paulo Stock Exchange.

Banco Daycoval

Positioning: Banco Daycoval ranks 19th by shareholders' equity, 30th by total assets and 32nd by deposits. Total assets reached 6.8 bn BRL in 2008. In 2008, Daycoval won the award for Best Middle Market Bank by Gazeta Mercantil, a leading business daily newspaper, for the third consecutive year. Description: Banco Daycoval was created 40 years ago and is specialized in the middle market segment, complemented by a significant activity in retail business under the brand "Daycred" It offers lending and financing, . investment and trade finance products to corporate clients and vehicle and payroll-deductible loans to retail customers, among other products. In December 2008, Daycoval had 640 workers and 27 branches for corporate customers, located in 16 states and the Federal District, 15 "Daycred Stores" for retail customers and a foreign branch in Cayman Islands. Shareholders: Family Dayan controls the bank, holding all the ordinary shares. Its preferred shares are listed on the Bovespa stock exchange.

Key Ratios 2006

Net Intermed. Margin Cost:Income BIS ROE ROA Net Intermed. Growth Fee Income Growth Operating Income Growth Net Income Growth Customer Loans Growth RWA Growth Customer Deposits Growth Customer Loans/Deposits Customer Loans/Assets Securities/Assets RWA/Assets Provisions/ Loans Provisions/NPL NPL/Loans Concentration AA-B

Source: Cruzeiro do Sul, BIE - with FIDC

Rating 2007

14,4% 65,0% 30,0% 22,0% 4,5% 269,7% 21,1% nm nm 104,2% na 102,8% 276,8% 67,7% 14,5% na 1,1% 144,0% 0,8% 95,1%

Key Ratios Fitch 2006

Net Intermed. Margin Cost:Income BIS ROE ROA Net Intermed. Growth Fee Income Growth Operating Income Growth Net Income Growth Customer Loans Growth RWA Growth Customer Deposits Growth Customer Loans/Deposits Customer Loans/Assets Securities/Assets RWA/Assets Provisions/ Loans Provisions/NPL NPL/Loans Concentration AA-B

Source: Daycoval, BIE

Rating 2007

9,2% 37,4% 35,8% 13,6% 3,1% 69,8% 18,4% 119,9% 142,2% 112,1% 115,3% 66,8% 165,6% 53,0% 11,4% 56,8% 2,2% 84,2% 2,7% 94,3%

2008

6,7% 280,4% 20,4% nm nm -52,0% 7,8% nm nm -1,0% na -25,2% 366,6% 53,2% 14,0% na 1,4% 74,0% 1,9% 90,4%

Moody's

FC LT Dep FC LT Debt LC LT Dep FSR Subordinated FC/LC ST Debt Outlook LT Dep ST Dep Ba2 Ba2 Ba2 D Ba3 NP Negative A1.br BR-1

S&P

2008

10,0% 46,8% 28,2% 12,5% 2,9% 20,1% 94,0% 1,6% -2,9% 6,6% na -38,4% 286,5% 54,2% 14,2% na 5,2% 71,1% 7,3% 88,6%

Moody's

FC LT Iss LC LT Iss FC ST Iss LC ST Iss Nat. LT Nat. ST Outlook

S&P

BBBBB B brA brA-2 Stable

Fitch

LT FC/LC Iss ST LC/FC Deb Individual Support Nat. LT Nat. ST Outlook BBB C/D 5 A(bra) F1 (bra) Stable

7,0% 176,0% 15,7% -18,3% -1,2% 100,1% -30,1% nm nm 5,3% na 86,0% 275,1% 59,8% 23,0% na 1,0% 158,7% 0,6% 95,3%

Not Rated

Not Rated

Moody's

Jul-06 Apr-07 Dec-08 Ba3 Ba1 Ba2

Global FC Ratings Evolution S&P

Not Rated

Fitch

Not Rated

Moody's

Jan-06 Oct-06 Apr-07 Dec-08 Baa1.br A3.br Aa2.br A1.br

Local Rating Evolution S&P

10,6% 46,4% 20,4% 19,4% 2,8% 32,1% 39,0% 27,6% 4,4% 67,1% 55,4% 34,5% 130,3% 53,1% 17,0% 57,0% 2,8% 92,7% 3,0% 94,0%

Not Rated

Moody's

Not Rated

Global FC Ratings Evolution S&P

May-06 Jun-07 B+ BBNov-07

Fitch

BB-

Fitch

Moody's 2006

15.982,1 4.412,4 8.897,9 6.375,9 5.054,0 96.219,2 265.547,3 212.719,7 83.905,1 11.890,0 24.636,4

Local Rating Evolution S&P

May-06 Apr-07 Jun-07 brBBB brBBB+ brA May-06 Jun-07

Fitch

A- (bra) A (bra)

MN BRL

Not Rated Not Rated Net Intermed. Income Loan Loss Provisions Fee Income Operating Income Net Income Customer Loans Total Assets RWA Customer Deposits Subordinated Liabilities Shareholders' Equity

Source: Daycoval, BIE

2007

390,3 60,8 13,5 272,4 206,1 3.476,0 6.556,6 3.724,4 2.098,7 0,0 1.517,5

2008

468,7 176,8 26,2 276,8 200,2 3.705,5 6.831,0 na 1.293,3 0,0 1.607,2

Not Rated

MN BRL

Net Intermed. Income Loan Loss Provisions Fee Income Operating Income Net Income Customer Loans Total Assets RWA Customer Deposits Shareholders' Equity

Source: Cruzeiro do Sul, BIE - with FIDC

2006

144,8 12,2 23,2 -52,2 -30,0 1.503,7 2.514,6 na 546,7 164,0

2007

535,3 27,8 28,1 138,8 203,4 3.069,9 4.535,3 na 1.108,9 924,4

2008

257,0 17,5 30,3 -177,2 -116,4 3.039,6 5.709,2 na 829,2 649,9

Amount

110 mn USD 30 mn USD 60 mn USD 125 mn USD

Coupon

7,375% 7,500% 9,000% 9,375%

Liquid Issues Call/Put Issue Date

04-30-2008 12-05-2007 06-17-2009 09-26-2006 na na na Sink

Maturity

04-30-2010 05-26-2010 06-17-2011 09-26-2011

Ratings

Ba2 Ba2 Ba2 Ba2

Amount

120 mn USD 125 mn USD 100 mn USD

Coupon

7,750% 6,875% 7,250%

Liquid Issues Call/Put Issue Date

10-30-2006 06-09-2008 07-21-2008 na na na

Maturity

10-30-2009 06-09-2010 07-21-2011

Ratings

BBBBBB-/BB-e

Source: Bloomberg, BIE

Source: Bloomberg, BIE

Loan Composition 2008 Gross Revenues Profile

1% 0% 19%

Gross Revenues Profile

Loan Composition 2008

2% 7% 0% 1500 1000 500 0 91% Retail clients Financial institutions Commerce and services Industry Interest from lending

(MN BRL)

10%

(MN BRL)

CAGR: 5

1.5%

2000 41% 1500 1000 500 0 29%

CAGR: 61

.3%

2006 Fees

2007 Securities, fx and derivatives

2008 Other Insurance Retail clients Industry

Source: Daycoval, BIE

2004 Commerce and service Agriculture Interest from lending Fees

2005

2006

2007 Other

2008 Compulsory applc.

Public entities Services

Securities, fx and derivatives

Source: Cruzeiro do Sul, BIE - with FIDC

Source: Cruzeiro do Sul, BIE - with FIDC Source: Daycoval, BIE

Risk policy: In the fourth quarter of 2008, Banco Cruzeiro do Sul continued focusing on liquidity and asset quality. The policy allowed the bank to maintain a comfortable cash position. The reduction in origination in 4Q08 was in line with the strategy of selective origination, focusing on the development of operations with the most attractive agreements and maintaining strategic levels of liquidity. The bank used and intends to use credit cession when needed. Cruzeiro do Sul implemented special structures for managing operational and market risks and the Executive Board approved Operational and Market Risk Management Policies. Credit positives: (i) specialist in lending charged against payrolls ­low risk, (ii) sound capitalization after the equity offering, (iii) good asset quality despite of last year's slight deterioration, (iv) low weight of securities in income and assets. Credit negatives: (i) low fee based revenues, (ii) dependence on a specific business despite efforts to diversify, (iii) scale, (iv) weak and deteriorating efficiency reflecting adverse funding costs, (v) operational deterioration with net intermediation margin falling to more than half, (vi) deposits fall of 25% in 2008, reflecting the risk aversion environment, (vii) lack of deposit based funding and dependence on open market, (viii) foreign currency maturity concentration in 2009, (ix) decrease in the provisioning coverage of NPL. Outlook: Banco Cruzeiro do Sul strategy is based on four pillars: (i) continue to expand in the paycheck deductible market, by establishing new agreements with government agencies, continuously evaluating the paycheck deductible market for non-government employees, applying innovative tools to gain access to new customers, developing new products, such as credit cards, and entering into new partnership agreements with retail bank chains; (ii) consolidate and diversify the distribution network by fueling loyalty of its banking correspondents; (iii) consolidate the presence in the credit market for middle market companies in order to diversify the lending portfolio; and (iv) continue to diversify and extend the average term of the funding. 2008 was a challenging year for Cruzeiro do Sul as the bank experienced deposit flight. A more balanced funding structure is a must going forward.

Risk policy: Daycoval controls liquidity risk on a daily basis through estimates for portfolio renewals. Liquidity indicators are monitored on a monthly basis. Daycoval tracks liquidity in terms of the ratio between the cash position and total deposits and targets to prevent it from falling below 30% in general and to keep it above 50% at times of crisis such as the present. Stress scenarios are also considered in the liquidity analysis. The hedging policy is determined based on the risk exposure limits of the bank. When the exposure is above the established limits, the bank uses financial derivative instruments to hedge foreign exchange, interest rate and market risks, trying to match the maturity of operations. The bank uses financial derivative instruments for attending its own or its clients' needs. Previous to implementation, issues such as objectives, utilization, market and credit risks are carefully analyzed. Credit positives: (i) highly efficient, (ii) very well capitalized, (iii) positioned on higher margin and growth segments, has been delivering sound profitability, (iv) increasing revenues diversification, (v) net intermediation margin improvement, despite of the environment, (vi) lending diversification. Credit negatives: (i) small scale, (ii) decrease in deposits, (iii) modest growth in lending, probably due to the credit cession, (iv) low deposit base when compared to lending, (v) asset quality deterioration. Outlook: Daycoval aims at expanding its business in a consistent and sustained form, creating value for its shareholders. Therefore, the bank plans to: (i) maintain and increase presence in the middle market by broadening its client base, growing organically its distribution network, and retaining customers by offering a broad range of products and a relationship management strategy, (ii) expand its presence in consumer lending, (iii) diversify funding sources, (iv) maintain a solid financial structure, in particular in what regards asset quality and liquidity. Daycoval has been another example of a bank experiencing a fall in the deposit base on the back of the crisis. The main challenge it faces in our view is to improve its funding structure, while maintaining sound asset growth and quality in the current environment.

20

X-Ray Files

Brazilian Banks & Corporates Handbook

X-Ray Files

Brazilian Banks & Corporates Handbook

21

Banco do Brasil

Positioning: Banco do Brasil is the second largest bank in the country by total assets and the first by deposits. Total assets stood at 521 bn BRL in 2008 and clients reached 48,0 mn. Description: Banco do Brasil, established in 1808 by the Portuguese Crown, is the country's main state-owned bank. Currently, it provides a wide range of retail, wholesale and investment banking products to individuals and companies that go from credit and savings to insurance, asset management and leasing, being also a specialist in government and agribusiness services. It holds Previ, a leading Brazilian private pension fund, employs 107.5k people, has 4,390 branches countrywide, and is present in over 23 countries. Banco do Brasil bought Banco de Estado de Santa Catarina and Banco do Estado do Piaui in September and November 2008, respectively, and has already incorporated them. BB also acquired control of Banco Nossa Caixa (71.25%) in 2008 but its incorporation was still pending in December 2008. In January 2009, BB bought 50% of Banco Votorantim. In February, Banco do Brasil announced that it has initiated talks with the State of Espírito Santo aimed at purchasing its controlled bank, Banestes, and that it might acquire Banco de Brasilia as well. Shareholders: 65.6% Brazil Treasury, 10.4% Previ (the bank's pension fund), 2.5% BNDESPAR. It does not have preferred shares and the remaining ordinary shares (21.5%) are listed on São Paulo stock exchange.

Banco Fibra

Positioning: Banco Fibra is the 20th largest Brazilian bank by assets which reached 9.2 bn BRL in 2008. It is the 23rd largest deposit collector and ranks 31st by shareholders' equity. Description: Banco Fibra was established in 1987 to manage Vicunha Group financial assets. It is specialized in middle market clients and large companies, being also present in retail banking. Companies access products such as trade finance, working capital management and BNDES funds. The retail business has been gaining importance since 2005 through the expansion to personal lending, payroll deductible loans and real estate credit. Fibra provides financial solutions such as lending, leasing, treasury services, capital markets and asset management to its customers. Fibra employs 462 people and has 14 branches in 10 Brazilian states, on top of Nassau and Cayman. Shareholders: 92.1% Steinbruch Group and 7.9% IFC (Aaa stable/AAA stable by Moody's and S&P). Its shares are not listed. Vicunha Group has been operating for more than 40 years in Brazil, being present in textiles through Vicunha Textil, in steel through CSN (Ba1 stable/BB+ positive/BBB- stable by Moody's/S&P/Fitch) and in gas (Ceará Gas Company).

Key Ratios 2006

Net Intermed. Margin Cost:Income BIS ROE ROA Net Intermed. Growth Fee Income Growth Operating Income Growth Net Income Growth Customer Loans Growth RWA Growth Customer Deposits Growth Customer Loans/Deposits Customer Loans/Assets Securities/Assets RWA/Assets Provisions/ Loans Provisions/NPL NPL/Loans Concentration AA-B

Source: BB, BIE

Rating 2007

6,5% 69,2% 15,6% 20,8% 1,4% 38,7% 1,6% 13,0% -16,3% 21,3% 24,8% 18,5% 86,7% 43,3% 19,9% 58,2% 6,4% 70,0% 9,2% 79,3%

Key Ratios Fitch

FC LT Iss LC LT Iss FC ST Iss LC ST Iss Individual Support Outlook Nat. LT Nat. ST BBBBBBF3 F3 C/D 2 Stable AA+(bra) F1+(bra) Net Intermed. Margin Cost:Income BIS ROE ROA Net Intermed. Growth Fee Income Growth Operating Income Growth Net Income Growth Customer Loans Growth RWA Growth Customer Deposits Growth Customer Loans/Deposits Customer Loans/Assets Securities/Assets RWA/Assets*** Provisions/ Loans Provisions/NPL NPL/Loans Concentration AA-B

Source: Fibra, BIE

Rating 2007

4,0% 58,4% 13,2% 13,6% 0,5% 41,4% 19,8% -20,1% -3,8% 43,8% na 31,8% 182,2% 29,2% 14,0% na 2,7% 100,2% 2,7% 88,5%

2008

4,2% 58,9% 15,6% 29,4% 1,7% -17,6% 5,5% 58,9% 74,0% 39,0% na 40,4% 85,8% 42,3% 13,9% na 6,2% 66,4% 9,3% 79,7%

Moody's

FC LT Deb FC LT Dep LC LT Dep FSR FC ST Deb LC ST Deb Outlook Nat. LT Nat. ST Baa3 watch+ Ba2 watch+ A1 watchC NP P-1 watchPositive Aaa.br BR-1

S&P

2006

2,5% 40,6% 13,7% 16,2% 0,9% 73,0% 42,2% 254,1% 77,2% 33,0% na 50,1% 166,9% 33,6% 47,6% na 2,1% 106,6% 2,0% 85,3%

2008

3,2% 78,7% 15,4% 13,5% 1,1% -1,8% 28,3% -43,4% 49,1% -4,3% na 0,2% 174,0% 42,0% 36,6% na 3,5% 58,5% 5,9% 85,1%

5,3% 68,9% 17,3% 29,1% 2,0% 0,0% 16,2% -11,9% 45,5% 28,5% 22,4% 16,7% 84,7% 44,1% 24,7% 57,7% 6,5% 71,5% 9,0% 79,2%

Moody's

FC LT Dep LC LT Dep FSR FC/LC ST Debt Outlook Nat. LT Nat. ST Ba2 Ba2 D NP Stable A1.br BR-1 FC LT Iss LC LT Iss FC ST Iss LC ST Iss Nat Outlook

S&P

BBBBB B brAStable

Fitch

FC LT Iss LC LT Iss ST FC Iss Outlook

BBBBBBA-3 Stable

Nat. LT Nat. ST Support

A- (bra) F2 (bra) 5

Moody's

Aug-06 Baa3

Global FC Ratings Evolution S&P

Feb-06 May-07 Apr-08 BB BB+ BBBJun-06 Aug-06 May-07

Moody's

Apr-07 Aug-07 Ba3 Ba2

Global FC Ratings Evolution S&P

Jun-06 BBNot Rated

Fitch

Fitch

BB BB+ BBB-

MN BRL

Net Intermed. Income Loan Loss Provisions Fee Income Operating Income Net Income Customer Loans Total Assets RWA Customer Deposits Subordinated Liabilities Shareholders' Equity

Source: BB, BIE

2006

10.808,3 7.139,9 8.887,3 6.196,4 6.043,8 130.758,7 296.356,4 170.886,4 154.382,0 10.062,9 20.758,2

2007

14.987,1 5.653,7 9.028,3 6.998,9 5.058,1 158.599,3 366.332,4 213.244,6 182.911,3 10.916,6 24.262,1

2008

12.355,1 8.550,9 9.528,0 11.123,7 8.803,0 220.423,2 521.077,3 na 256.835,8 12.940,7 29.937,5

Moody's

Local Rating Evolution S&P

Not Rated May-07

Fitch

AA+ (bra)

Moody's 2006

167,8 44,4 19,2 103,4 71,4 2.798,5 8.339,5 na 1.676,6 65,7 440,6

Local Rating Evolution S&P

Jun-07 brAJul-08

Fitch

A- (bra)

MN BRL

Net Intermed. Income Loan Loss Provisions Fee Income Operating Income Net Income Customer Loans Total Assets RWA Customer Deposits Subordinated Liabilities Shareholders' Equity

Source: Fibra, BIE

2007

237,3 97,1 23,0 82,6 68,7 4.025,4 13.808,4 na 2.209,3 155,9 504,9

2008

233,0 150,4 29,5 46,8 102,5 3.853,4 9.181,5 na 2.214,0 209,5 757,8

Apr-07

A1.br

Amount

300 mn USD 350 mn BRL 500 mn USD

Coupon

8,500% 9,750% 7,950%

Liquid Issues Call/Put Issue Date

09-20-2004 07-18-2007 01-23-2006 na na Call 1/11

Maturity

09-20-2014 07-18-2017 Perp

Ratings

A2 *Baa3 *+ Baa3 *+

Amount

75 mn USD 150 mn USD 150 mn USD

Coupon

7,500% 6,750% 7,000%

Liquid Issues Call/Put Issue Date

12-18-2006 04-22-2008 06-06-2008 na na na

Maturity

12-18-2009 04-22-2010 06-06-2011

Ratings

BBBBBB-

Source: Bloomberg, BIE

Source: Bloomberg, BIE

Assets under Management

280000 240000 200000 (MN BRL) 160000 120000 80000 40000 0 2002

Source: BB, BIE

Gross Revenues Profile Loan Composition 2008

14%

Gross Revenues Profile

CAGR

:

24.5%

(MN BRL)

80000 60000 40000 20000 0

CAGR: 10.0%

5% 5% 3% 43% (MN BRL) 2%

3200 2400 1600 800 0 2003 Industry Agriculture Housing Public sector Interest from lending

Source: Fibra, BIE

CAGR: 31.6%

2003

2004

2005

2006

2007

2008

2002 Interest from lending

Source: BB, BIE

2003 Fees

2004

2005

2006

2007

2008 Other Retail Financial institutions

28% Commerce and services

2004 Fees

2005

2006

2007 Other

2008 Compulsory applc.

Securities, fx and derivatives

Compulsory applc.

Securities, fx and derivatives

Source: Fibra, BIE Risk policy: Banco do Brasil aims to maintain levels of liquidity that are adequate for the institution's commitments assumed in Brazil and abroad. Severe control over liquidity risk is done in accordance with a Market and Liquidity Risk Policy established for the Conglomerate, fulfilling the requirements of national banking supervision and of supervisory bodies of the countries where the bank operates. Instruments such as short, medium and long term liquidity forecasts, risk limits, and liquidity contingency plan are used to manage risk. A liquidity reserve, monitored daily, is a limit for risk assumed in short term liquidity management of the domestic and international areas and corresponds to the minimum level of high liquidity assets to be maintained by the bank, compatible with its exposure to risk inherent to the characteristic of its operations and market conditions. This reserve is used as a parameter for the identification of a possible liquidity crisis and potential engagement of the Liquidity Contingency Plan. A minimum limit for the Indicator of Availability of Free Funds (DRL) is defined annually by the Global Risk Committee (CGR) with the purpose of managing the liquidity structure in the domestic area. Credit positives: (i) large and low-cost deposit base, (ii) geographic and product diversification in Brazil, (iii) fee revenues, income, lending and deposits growth, (iv) market leader in some segments, (v) technological platform, (vi) growing diversification of the loan book, (vii) support from the shareholder - state - in case of need, (viii) improving profitability, (ix) recent acquisitions, along with its strategy of acquiring loan portfolios from small-cap banks increased largely its size, (x) high improvement in efficiency, (xi) sound capitalization, (xii) increase of the deposit base, reflecting soundness perception. Credit negatives: (i) government policies may affect lending criteria, (ii) exposure to government risk via securities portfolio and ownership, (iii) low asset quality despite stability, (iv) falling net intermediation income and margin, (v) low provisioning levels. Outlook: In its 200th anniversary, BB strives to keep the tradition and pioneering that made the company the country's largest bank. Among the most important guidelines for this year are (i) expansion in the offering of mortgage loans, (ii) expansion in the operations with the public sector and its servants, (iii) growth in the business with non-account holders by means of partnerships with large companies, (iv) enhancement of the relationship with account holders, (v) advances in the customer base management tools, (vi) expansion of BB's presence and operations in the local and foreign markets, (vii) maintenance of the leadership in innovative self-service solutions, (viii) consolidation of the bank's social and environmental commitment. BB ranks among those who have benefited from the crisis, by experiencing an increase in the deposit base due to generalized perception of its soundness, contributing to improve its funding profile. With the Central Bank of Brazil pursuing a looser monetary policy, which is already a margin compression factor per si, further pressure on top line profitability is likely. However, the bank's highly competitive funding cost, due to a broad deposit base, could enhance profitability if credit quality and efficiency improve.

Risk policy: The Risk Management Department has the objective of protecting the bank's capital prioritizing prudency over high profitability. The department operates independently from business units, managing credit, operational, market and liquidity risks. Liquidity controls intend to maintain liquidity levels adequate for the bank's portfolio. Apart from the contingency plan, the bank manages its cash daily, through control instruments and establishes a target cash position of around 80% of its equity. Fibra's liquidity was high in the period, with a cash position ranging from 1.2 to 1.6 bn BRL, more than twice the level normally maintained by the institution. The bank continues to pay close attention to keep liquidity at a fairly high level. Since the 1Q08, the bank has a hedging policy to protect the net income and equity from the foreign exchange variation derived from its investment in Grand Cayman full-branch. Therefore, it has a short position in USD, enough to annul direct and indirect impacts on net income. Credit positives: (i) specialist in its niche - middle market, (ii) broad sales platform in retail totaling 9,200 points of sales, including stores and correspondents, (iii) shareholder support expressed by several capital increases, the last one in 2008 of 275 mn BRL, contributing to improve the BIS ratio, (iv) improving profitability, (v) funding diversification, with a rising deposit base in the current crisis environment, (vi) financial and strategic flexibility, (vii) high liquidity to face the current cycle, (viii) asset diversification into retail, (ix) growing fee income. Credit negatives: (i) lack of scale, (ii) strong competition in the core business, (iii) low intermediation margin, (iv) dependence on Vicunha group business, (v) low deposit base when compared to lending, which penalizes the cost of funding, despite improving, (vi) important weight of securities on earnings and assets, (vii) efficiency worsening, (viii) fall in provisions and credit quality, mostly due to the retail business. Outlook: Banco Fibra plans to grow by keeping its focus on middle-market and upper-middle market companies (companies with annual revenues between 40-400 mn BRL), while diversifying to retail customers by expanding its portfolio of services and products as well as its business platforms. Fibra plans to focus on originating its own credit portfolio using its cash and the capital base to strengthen its own internal business. Fibra has been proving some resilience through hard times. Although lending fell in 2008, the broadening of the deposit base and the capital increase were positives for the credit. However, diversification of funding sources in the current difficult market conditions and consolidation of the consumer business platform along with maintaining asset quality, are key challenges ahead.

22

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Brazilian Banks & Corporates Handbook

X-Ray Files

Brazilian Banks & Corporates Handbook

23

Banco Industrial

Positioning: Banco Industrial ranks 41st by equity and deposits and 50th by total assets. Banco Industrial do Brasil was rated best Brazilian Middle Market bank in 2006 and 2007 by Riskbank. Total assets reached 1.6 bn BRL in 2008. Description: Grupo Bunge y Born held Banco Industrial do Brasil, previously named Banco Santista. In 1994, it was sold to Mr. Carlos Mansur. Initially the bank focused on treasury operations. Credit concession, both working capital and investment-related for companies, mainly middle market, Southeast located, followed through. The bank also operates in the retail business, with the main product being credit charged against payrolls to Social Security's current and former employees. As of December 2008, BIB employed 250 people in 5 branches and had a broad range of correspondent agents countrywide. Shareholders: Banco Industrial is held by Carlos Alberto Mansur, former controller of Vigor, a dairy products' company recently sold to Bertin Group. Its ordinary and preferred shares are not listed.

Banco Mercantil do Brasil

Positioning: Banco Mercantil do Brasil ranks shareholders' equity, 30th by29th largest by total assetsdeposits. Total assetsshareholders' bn BRLin Brazil. Total assets reached 6.8 bn BRL in 2008. Daycoval ranks 19th by the 20th largest by deposits, total assets and 32nd by and 36th largest by reached 6.8 equity in 2008. In 2008, Daycoval won the award for Best Middle Market Bank by Gazeta Mercantil, a leading business daily newspaper, for the third consecutive year. Description: Banco Mercantil do Brasil was established in 1940 and offers retail, wholesale and investment banking services like lending charged against payrolls, credit cards, insurance, pension funds, leasing, brokerage, among others, to retail customers, focused created 40 years ago and is according in the socio-economic references, and to companies, focusing on those in retail business under to brand "Daycred" It offers lending and 2008 and Description: Banco Daycoval was on those classified as B and Cspecialized to IBGEmiddle market segment, complemented by a significant activity with annual revenues up the15 mn BRL. It employed 3,485 people in financing, . had 150 branches in the most products to corporate clients and vehicle a focus on São Paulo, Rio de to retail customers, among other products. In Gerais - its hometown, concentrating almost 50% of its agencies. The bank investment and trade finance important economic centers of Brazil, withand payroll-deductible loans Janeiro, Brasília, Goiás, Espírito Santo and MinasDecember 2008, Daycoval had 640 workers and 27 branches for corporate has a branch in Grand Cayman. customers, located in 16 states and the Federal District, 15 "Daycred Stores" for retail customers and a foreign branch in Cayman Islands. Shareholders: The bank is controlled thethe Araújo family.the ordinary shares. Its preferred shares are listed on thethe voting capital), Cristiana Nogueira de Araújo (6.15%), Maurício de Faria Araújo (6.86%), Renato Augusto de Family Dayan controls by bank, holding all The main shareholders are Milton de Araújo (22.51% of Bovespa stock exchange. Araújo (4.36%), Marisa de Araújo Longo (2.81%), Milton Loureiro Júnior (3.06%), Eliana Maria Loureiro Rocha (2.93%), Soc. Com. Agr. Sta Luzia (8.55%), Sapil (6.67%) and Agropar (7.34%). Its ordinary and preferred shares are listed on the Bovespa stock exchange.

Key Ratios 2006

Net Intermed. Margin Cost:Income BIS ROE ROA Net Intermed. Growth Fee Income Growth Operating Income Growth Net Income Growth Customer Loans Growth Customer Deposits Growth Customer Loans/Deposits Customer Loans/Assets Securities/Assets Provisions/ Loans Provisions/NPL NPL/Loans Concentration AA-B

Source: BIB, BIE

Rating Key Ratios 2007

5,9% 48,4% 27,5% 9,9% 1,9% 33,0% 75,6% 25,9% 18,1% 41,2% 37,7% 157,1% 43,5% 48,9% 1,1% 37,7% 3,0% 40,8%

Rating 2007

12,0% 90,4% 13,5% 6,5% 0,5% 36,3% 7,1% 11,8% 83,5% 33,8% 17,9% 120,1% 51,3% 10,6% 5,3% 67,0% 8,0% 64,6%

2008

6,3% 58,8% 22,9% 9,6% 2,2% -18,0% 55,6% -25,9% 1,7% 0,4% 8,2% 145,7% 50,5% 31,8% 1,4% 44,4% 3,1% 93,6%

Moody's

FC LT Dep LC LT Dep FSR ST Outlook Nat LT Nat ST Ba3 Ba3 DNP Stable A3.br BR-2

S&P

Fitch

Net Intermed. Margin Cost:Income BIS ROE ROA Net Intermed. Growth Fee Income Growth Operating Income Growth Net Income Growth Customer Loans Growth Customer Deposits Growth Customer Loans/Deposits Customer Loans/Assets Securities/Assets Provisions/ Loans Provisions/NPL NPL/Loans Concentration AA-B

Source: BMB, BIE

7,7% 46,9% 21,3% 17,2% 1,9% 16,8% -8,9% 20,2% 23,1% 32,0% 50,3% 153,3% 35,8% 26,2% 1,6% 37,1% 4,2% 93,1%

2006

11,9% 90,2% 11,7% 3,5% 0,4% 10,7% -0,3% 104,5% 11,7% 23,1% 11,7% 105,8% 49,9% 9,8% 6,7% 63,5% 10,5% 67,8%

2008

11,0% 107,1% 14,4% 7,7% 0,6% -12,2% 8,3% -170,7% 17,2% 5,7% 2,5% 123,9% 58,2% 5,2% 5,8% 55,1% 10,5% 83,7%

Moody's

FC LT Dep LC LT Dep Sen Debt Subord. Debt FSR FC/LC ST Deb Outlook FC ST Debt LC ST Debt Ba2 Ba2 Ba2 Ba3 D NP Stable Aa3.br BR-1

S&P

Fitch

Not Rated

Nat LT Nat ST Support

BBB+ (bra) F2 (bra) 5

Moody's

Apr-07

Ba3

Global FC Rating Evolution S&P

Not Rated Not Rated

FC LT Iss LC LT Iss FC ST Iss LC ST Iss Nat. LT Iss Outlook

B B B B brBBBStable

Not Rated

Fitch

Moody's

Sep-06 Apr-07 B1 Ba2

Global FC Ratings Evolution S&P

Not Rated

Fitch

Moody's 2006

78,5 7,8 4,1 39,8 30,4 585,6 1.633,7 382,1 0,0 177,1

Local FC Rating Evolution S&P

Not Rated Jun-08

Fitch

BBB+ (bra)

MN BRL

Net Intermed. Income Loan Loss Provisions Fee Income Operating Income Net Income Customer Loans Total Assets Customer Deposits Subordinated Liabilities Shareholders' Equity

Source: BIB, BIE

2007

104,4 7,9 7,2 50,1 35,9 826,6 1.898,5 526,3 27,8 360,9

2008

85,6 11,7 11,2 37,1 36,5 829,7 1.643,7 569,6 36,3 380,7

Apr-07

A3.br

Moody's MN BRL

Net Intermed. Income Loan Loss Provisions Fee Income Operating Income Net Income Customer Loans Total Assets Customer Deposits Subordinated Liabilities Shareholders' Equity

Source: BMB, BIE

Local Rating Evolutionn S&P

Not Rated

Fitch

2006

395,4 200,6 107,6 54,4 20,0 2.779,9 5.576,1 2.628,7 0,0 567,1

2007

538,8 210,1 115,2 60,8 36,7 3.720,5 7.247,6 3.098,8 235,1 562,1

2008

473,3 235,9 124,8 -43,0 43,0 3.934,2 6.765,5 3.175,4 301,9 559,4

Jun-06 Apr-07

Baa2.br Aa3.br

Amount

11 mn USD

Coupon

6,750%

Liquid Issues Call/Put Issue Date

05-07-2008 na

Amount

104.79 mn USD 97.5 mn USD 125 mn USD 26.73 mn USD

Coupon

8,500% 7,750% 10,625% 9,000%

Liquid Issues Call/Put Issue Date

11-08-2007 05-08-2007 09-22-2006 08-03-2009 na Sink. Call 9/11 Put 11/10

Maturity

11-08-2010 05-08-2012 22-09-2016 11-08-2011

Ratings

Ba2/B Ba2/B Ba3 Ba2-e

Maturity

05-07-2010

Ratings

NR

Source: Bloomberg, BIE

Source: Bloomberg, BIE

Loan Composition 2008

Gross Revenues Profile

Loan Composition 2008

Gross Revenues Profile

350 22% 300 250 200 57% 21% 150 100 50 0 2002 Retail clients

Source: BIB, BIE

2500

CAG

R: 7.7%

39%

31% (MN BRL)

2000 1500 1000 500 0 2002 Industry 2003 Fees Other

CAGR: 8.6%

30% 2003 2004 Fees 2005 2006 2007 2008 Other

Source: BMB, BIE Source: BMB, BIE

2004

2005

2006

2007

2008

Retail customers

Services and commerce

Interest from lending Insurance

Securities, fx and derivatives

Compulsory applc.

Commerce and Services

Industry

Source: BIB, BIE

Interest from lending

Securities, fx and derivatives

Risk policy: The Treasury Department is responsible for the liquidity management and rates pricing, supporting the operational areas of the bank. Banco Industrial do Brasil acts in the primary and secondary market of federal public bonds. Trading bonds and equities is not part of the bank's strategy, but it is holding them until maturity. Nevertheless, given the financial crisis, the bank reclassified some of its portfolio and sold it. The bank acts in the derivatives and foreign exchange markets with the unique purpose of hedging its operations. Credit positives: (i) sound efficiency and capitalization, despite decreasing slightly in 2008, (ii) deposits growth in an adverse environment, (iii) earnings growth and net intermediation margin improvement, (iv) conservative policy in credit concession and treasury department, (v) shareholder's support, especially after it sold Vigor and the bank remained its main business, (vi) sound asset quality, (vii) liquid assets, as shown by the historic credit cession. Credit negatives: (i) small scale, (ii) still lack of deposit-based funding despite managing to register a modest growth, (iii) funding dependence on credit cessions, (iv) low revenue diversification and lack of fee-based business, (v) increased competition specially in payroll-deductible business, (vi) stable lending growth, (vii) low provisioning. Outlook: Banco Industrial do Brasil plans to: (i) increase and consolidate its position in the middle market segment by increasing the distribution network; (ii) expand loans charged against payrolls by reaching new agreements with public institutions and maintaining the actual ones; (iii) diminish the funding costs and diversify its funding sources, including Eurobond issues and credit cessions. Revenue and funding diversification is key going forward. Revenue from payroll-charged loans is becoming more difficult due to higher competition and the economic momentum.

Risk policy: Mercantil has an independent risk management department that reports directly to the bank's Executive Vice-President, whose attributions are planning, controlling and managing liquidity, credit and market risks. Such management is based upon a tripod constituted by internal models using the most advanced techniques, latest technological tools and a well-prepared staff of specialists constantly in training. Regarding liquidity risk management, the bank applies appraisal models of unhedged flows behavior system and daily products behavior. The first model allows verifying each operation by product, index and maturity and the second one provides statistical cash flows of assets and liabilities. Credit positives: (i) diversified revenue profile compared to peers, (ii) comfortable coverage of loans by deposits and liquidity, (iii) lending and deposits growth in a challenging environment, specially for low dimension banks, (iv) sound net intermediation margin, (v) low dependence on securities for income, (vi) adequate coverage of lending by deposits, indicating lower vulnerability to open market fluctuations, (vii) brand recognition and track record. Credit negatives: (i) very low efficiency (ii) low capitalization, suggesting difficulty in generating internal funds to boost the capital base, (iii) low asset quality and provisioning levels, (iv) lack of scale, (v) the bank ceased credits amounting to more than 929 mn BRL, which could have contributed to the credit quality worsening, (vi) some lending concentration by client, with the 100 largest standing for 18% of the total lending. Outlook: Banco Mercantil do Brasil aims to increase its market participation by expanding the client base and lending, therefore diversifying its assets, increasing and diversifying its funding sources and maintaining asset quality and excellence in client relationship. Specifically for 2009, Banco Mercantil do Brasil aims at maintaining a balanced growth, expanding its commercial business and prioritizing operational efficiency. In such a challenging environment, it is impressive to see that such a small bank managed to maintain adequate lending coverage by deposits, which is a plus for funding in times that are more volatile. Nevertheless, efficiency and credit quality are the main issues to improve going forward.

24

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25

Banco PanAmericano

Positioning: Banco PanAmericano ranks 25th largest by total assets, 22nd by shareholders' equity and 27th by deposits in Brazil. Total assets reached 9.0 bn BRL in 2008. Description: Banco PanAmericano is part of Sílvio Santos media Group. Its origins date back to 1969 when the group acquired Real Sul. Authorized to operate as a multiple bank since 1990, it currently offers services like credit concession, including credit charged against payrolls and personal loans, credit cards, leasing and insurance, focusing on retail customers classified between class B and E according to IBGE socio-economic references, although with a more relevant exposure to middle-low income brackets. It operates in 85% of the national territory through 196 points of sale and more than 32,000 commercial partners. Shareholders: Banco PanAmericano belongs to Silvio Santos group, a media group that ranks among the 70th largest in Brazil. The bank was responsible for 62% of the group's revenues. Banco PanAmericano ordinary and preferred shares are listed on Bovespa.

Banco Pine

Positioning: Banco Pine ranksranks by total assets, 30th byequity, 30th by total assets and 32nd by deposits. Total assets reached 6.2 bn BRL in 2008. In 2008, Daycoval won the award for Best Middle Market Bank by Gazeta Daycoval 39th 19th by shareholders' shareholders' equity and 37th by deposits in Brazil. Total assets 6.8 BRL in 2008. Mercantil, a leading business daily newspaper, for the third consecutive year. Description: Banco Pine was created in 1997. Banco Pine is primarily focused on and specialized in (middle-market and large) corporate loans. The bank offers to its clients a complete range of credit facilities, and services such as financial and strategic advisory, created 40 years investment options, specialized credit lines and onlending of funds provided by the BNDES. In 2008, the business under the payroll loans and offers lending and financing, Description: Banco Daycoval wastreasury products, ago and is specialized in the middle market segment, complemented by a significant activity in retailbank began reducingbrand "Daycred" Itdiscontinued the pilot project . on vehicle-financing. Banco Pine employed 293 people and and vehicle and payroll-deductible loans to retail investment and trade finance products to corporate clientshad 13 branches in Brazil and 1 in Grand Cayman. customers, among other products. In December 2008, Daycoval had 640 workers and 27 branches for corporate customers, located in 16 states and the Federal District, 15 "Daycred Stores" for retail customers and a foreign branch in Cayman Islands. Shareholders: Banco Pine is wholly owned by Mr. Norberto Pinheiro. Banco Pine ordinary shares are not listed while its preferred shares are listed on the São Paulo Stock Exchange. Shareholders: Family Dayan controls the bank, holding all the ordinary shares. Its preferred shares are listed on the Bovespa stock exchange.

Key Ratios Key Ratios 2006

Net Intermed. Margin Cost:Income BIS ROE ROA Net Intermed. Growth Fee Income Growth Operating Income Growth Net Income Growth Customer Loans Growth Customer Deposits Growth Customer Loans/Deposits Customer Loans/Assets Securities/Assets RWA/Assets Provisions/ Loans Provisions/NPL NPL/Loans Concentration AA-B

Source: PanAmericano, BIE

Rating 2007

9,1% 55,1% 18,3% 18,7% 2,6% 95,9% 77,2% 170,0% 138,9% 102,8% na 145,1% 167,6% 50,7% 40,9% 76,3% 2,2% 96,3% 2,3% 91,5%

Rating 2006 2007

25,2% 81,6% 26,3% 11,0% 1,8% 50,5% -40,1% 17,9% 36,1% 126,4% 41,3% 258,7% 70,2% 5,7% 78,2% 5,5% 61,2% 9,0% 85,0%

2008

7,8% 54,6% 19,3% 16,1% 2,1% -4,0% 32,4% -13,1% -11,2% 5,0% 4,3% -26,9% 240,5% 48,9% 45,0% 73,1% 2,5% 122,5% 2,0% 94,6%

Moody's

FC LT Dep LC LT Dep FSR FC ST Debt LC ST Debt Outlook Nat. LT Nat. ST Ba2 Ba2 D NP NP Stable A1.br BR-1

S&P

FC LT Iss LC LT Iss FC ST Iss LC ST Iss Ind. Support Outlook Nat LT Nat ST

Fitch

B+ B+ B B D 5 Stable A-(bra) F2(bra)

2008

17,4% 82,3% 24,2% 8,0% 1,1% -9,2% -18,1% -8,1% -26,5% 33,0% -23,0% 446,8% 73,9% 5,3% na 6,3% 51,7% 12,2% 82,1%

Moody's

FC LT Debt LC/FC LT Dep Sub. Debt FSR Short Term Outlook Nat. LT Nat. ST Ba2 Ba2 Ba3 D NP Stable A1.br BR-1 FC LT Iss LC LT Iss FC ST Iss LC ST Iss Nat. LT Nat. ST Outlook

S&P

B+ B+ B B br BBB+ br A-3 Negative

Fitch

35,9% 80,4% 16,9% 20,2% 2,6% 15,8% 20,1% 30,7% 32,5% 19,8% 4,6% 161,4% 59,5% 8,5% 117,5% 8,9% 67,4% 13,2% 82,1%

Nat. LT Nat. ST Support

BBB+ (bra) F2 (bra) 5

Moody's

May-08 Ba2

Global FC Rating Evolution S&P

Feb-06 Jun-07 B B+ Not Rated

Fitch

Net Intermed. Margin Cost:Income BIS ROE ROA Net Intermed. Growth Fee Income Growth Operating Income Growth Net Income Growth Customer Loans Growth RWA Growth Customer Deposits Growth Customer Loans/Deposits Customer Loans/Assets Securities/Assets RWA/Assets Provisions/ Loans Provisions/NPL NPL/Loans Concentration AA-B

Source: Pine, BIE

8,3% 64,5% 19,2% 18,7% 1,9% 27,7% -57,0% -17,5% -7,5% 72,8% na 60,2% 202,5% 43,6% 46,2% na 2,5% 50,2% 4,9% 89,1%

LT FC/LC Iss ST FC/LC Iss Nat. Outlook

BBB brAStable

Moody's

Oct-06 Aug-07 Ba3 Ba2

Global FC Ratings Evolution S&P

May-06 Jun-07 B+ BBSep-06

Fitch

B+

Moody's 2006

903,1 380,5 64,6 208,1 95,5 2.202,7 3.700,4 4.347,7 1.364,8 279,3 473,2

Local FC Rating Evolution S&P

Feb-06 Jun-07 brBBBbrBBB+ Not Rated

Fitch

MN BRL

Net Intermed. Income Loan Loss Provisions Fee Income Operating Income Net Income Customer Loans Total Assets RWA Customer Deposits Subordinated Liabilities Shareholders' Equity

Source: Pine, BIE

2006

242,5 26,4 10,1 80,3 62,7 1.423,3 3.263,4 na 702,7 0,0 335,2

2007

475,0 50,2 17,9 216,8 149,8 2.886,8 5.699,3 4.345,9 1.722,5 0,0 800,4

2008

455,8 76,6 23,7 188,3 133,0 3.029,9 6.196,9 4.533,0 1.259,9 35,0 827,2 Oct-06 Apr-07

MN BRL

Net Intermed. Income Loan Loss Provisions Fee Income Operating Income Net Income Customer Loans Total Assets RWA Customer Deposits Subordinated Liabilities Shareholders' Equity

Source: PanAmericano, BIE

2007

1.359,4 404,8 38,7 245,4 130,0 4.986,6 7.102,7 5.552,8 1.927,8 232,7 1.179,4

2008

1.235,0 541,9 31,7 225,4 95,6 6.630,7 8.976,5 na 1.483,9 306,9 1.187,6

Jun-06 Oct-06 Apr-07

Baa1.br A3.br A1.br

Moody's

A3.br A1.br

Local Rating Evolutionn S&P

Jun-06 Jun-07 brBBB brAMay-07

Fitch

A- (bra)

Amount

75 mn USD 130 mn USD 125 mn USD

Coupon

7,375% 7,250% 11,000%

Liquid Issues Call/Put Issue Date

04-16-2007 05-29-2008 07-18-2006 na na Call 7/11

Maturity

04-16-2010 05-29-2010 07-18-2016

Ratings

NR Ba2 Ba3

Amount

150 mn USD

Coupon

7,375%

Liquid Issues Call/Put Issue Date

06-17-2008 na

Maturity

06-17-2010

Ratings

BB-

Source: Bloomberg, BIE

Source: Bloomberg, BIE

Loan Composition 2008 Gross Renenues Profile

0% 4% 4% 23% 1800 1500 (MN BRL) 1200 900 600 300 69% Retail clients Other

Source: Pine, BIE

Gross Revenues Profile

Loan Composition 2008

2% 16% 3000 2500 2000 15% 49% 1500 1000 500 18% Personal lending Leasing

Source: PanAmericano, BIE

: 23.3 CAGR

%

CAGR: 4

5.2%

0 2003 2004 2005 Fees 2006 2007 2008 Other Commerce and services Industry Housing

Source: Pine, BIE

0 Credit cards 2003 Net intermed. imcome

Source: PanAmericano, BIE

Credit charged against payrolls Others

2004 Fees

2005 Securities, fx and derivatives

2006

2007

2008 Insurance

Financial institutions

Interest from lending

Securities, fx and derivatives

Compulsory applc.

Risk policy: The Board is responsible for defining the risk policy, establishing limits according to expected revenues and acceptable exposure levels. The implementation responsability belongs to the risk department. The Board is in line with the strategic policies of Silvio Santos Group and intends, in a consolidated way, to minimize losses to the group's companies. The liquidity risk is managed by the Internal Control Guidelines, where technical limits for liquidity exposure and daily controls are established. Credit positives: (i) diversified credit portfolio for a small bank, as it focuses on retail customers, (ii) synergy gathering with the group, (iii) low debtor concentration, with the 150 largest clients representing less than 2% of lending, (iv) high intermediation margin and overall profitability levels, despite 2008 decrease, (v) low dependence on securities income, (vi) very sound capitalization, (vii) track record, (viii) shareholder commitment shown by several capital increases. Credit negatives: (i) low asset quality with portfolio focused on low income clients - C, D, which implies worse credit quality than peers, (ii) very low efficiency, (iii) lack of deposit-based funding and low liquidity - mainly wholesale deposit base, (iv) lack of scale, (v) more sensitive to the economic cycle and risk perception issues than peers, shown by the large decrease experienced in its deposit base, (vi) decreasing net intermediation income and margin, (vii) PanAmericano ceased credits amounting to more than 2.2 bn BRL which could have worsened the NPL ratio, (viii) extremely high loans/deposit ratio, (ix) low provisioning level and deteriorating credit quality. Outlook: Banco Panamericano intends to focus on three strategic points in 2009: (i) cost reduction, (ii) severity in credit concession, and (iii) liquidity. To achieve each objective, the bank intends to (i) replace fixed with variable costs by subcontracting; restructure the bank; and take actions with suppliers; (ii) reduce maturities; harden credit concession criteria; and change the products' mix; (iii) increase long term deposits and FIDCs; broaden the investors' base; and produce assets with liquidity and guarantees. Lack of scale and a thin deposit base could turn 2009 in a challenging year for PanAmericano. Credit quality and efficiency remain key weaknesses to be addressed going forward.

Risk policy: Banco Pine tries to minimize market risk. The main purpose of the Dealing Desk is to offer alternatives for mitigating mismatches on its clients' balance sheets, through spot foreign exchange operations, nondeliverable forwards (NDFs), hedges and swaps, mostly maturing in the short-term. Banco Pine's treasury has no material exposure to either foreign exchange or interest rate risk as it combines strong risk control instruments and a conservative posture with very low exposure to market risks. It hedges 100% of its foreign currency funding. In 4Q08, the bank's treasury area managed liquidity and market risks efficiently and, even repurchasing the bank's shares and bonds, kept the cash level at 40% of time deposits. Credit positives: (i) sound and improving efficiency, (ii) sound capitalization, (iii) improving provisioning levels translating a more conservative risk approach, (iv) sound asset quality, (v) high profitability, (vi) low dependence on securities income despite increasing, (vii) the bank is decreasing its participation in the retail business (vehicles and payroll-charged lending, a business more mature and dependent on the cycle) which reduces long-term funding needs, (viii) credit assignment, (ix) prudent treasury policies. Credit negatives: (i) lack of scale and business diversification, concentrated on middle-market companies, (ii) client concentration in credit, (iii) deposits' large decrease in 2008, reflecting a high risk aversion environment, (iv) low deposit base for funding and low coverage of loans by deposits, (v) modest loan growth, (vi) net intermediation margin and income deterioration. Outlook: Banco Pine intends to maintain focus on credit to mid-sized companies, based on rigid credit and risk control policies, while accelerating the growth of its loan portfolio and diversifying its funding sources. On the corporate loan segment, the bank plans to offer new products (custom-made products especially), expand its sales team and coverage area, continue to serve large corporate groups and maintain long-term relationships with clients. On the individual loan segment, the strategy is to reduce the importance of payroll loans to individuals in the bank's total credit. As a small size bank, Pine experienced deposit contraction in 2008, although less affected than many peers. The main challenge the bank faces ahead is, in our view, to build and maintain stable and diversified funding, along with some asset diversification.

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27

Banco Safra

Positioning: Safra is the 8th largest bank in Brazil by total assets, and the 9th by shareholders' equity and deposits. Total assets amounted to 61.9 bn BRL in 2008. Banco Safra is among the largest private banking institutions in Brazil. Description: Banco Safra has its origins in mid XIX century. Currently, it offers a wide range of financial products from credit and leasing to savings, investment funds, asset management, capital markets, brokerage, treasury operations and insurance. It focuses on private banking and commercial services to high net worth individuals and corporate clients, mainly in the middle market segment. Banco Safra employs 4,882 people and has 125 branches (one in Cayman), mostly located in the states of São Paulo and Rio de Janeiro. Besides the bank in Brazil, the Safra family controls other banks in US, Europe, Latin America and in the Caribbean. Shareholders: Banco Safra is controlled by Joseph Safra, after the signing of a shareholder agreement in 2006. Banco Safra is part of the Safra Group that also has stakes in pulp and paper (Aracruz). Its shares are not listed.

Banco Santander Brasil

Positioning: Banco Santander (Brasil) is the 4th largest Brazilian bank by total assets, the 1st one by shareholders' equity and the 5th by total deposits. Total assets amounted to 340.6 bn BRL in 2008. Description: Santander Group has been present in Brazil since 1982, expanding through acquisitions and organic growth. In 2000, the Spanish Group acquired Banespa, which jointly with Banco Santander Brasil, Banco Santander Meridional, and Banco Santander, operated under the brand name Santander Banespa. In 2007, Banco ABN Amro Real became part of Santander Group, following the ABN Amro's global assets split between Fortis, Royal Bank of Scotland and Santander. Since 2008, Banco Real consolidates into the holding company of the group in Brazil. Banco Santander is present in all market areas, from retail to investment banking, asset management and insurance, serving a broad range of clients such as individuals, companies, states and institutions, with nationwide presence and focused on the South and South-East regions of the country (74% of the Brazilian GDP). It has 2,279 branches, most of them located in the state of São Paulo, and employs 54,419 people. Shareholders: Banco Santander Central Hispano (Aa2 neg/AA neg/AA stable by Moody's/S&P/Fitch) controls Santander holdings in Brazil. It has less than 3% of its ordinary and preferred shares listed on São Paulo stock exchange.

Key Ratios 2006

Net Intermed. Margin Cost:Income BIS ROE ROA Net Intermed. Growth Fee Income Growth Operating Income Growth Net Income Growth Customer Loans Growth Customer Deposits Growth Customer Loans/Deposits Customer Loans/Assets Securities/Assets Provisions/ Loans Provisions/NPL NPL/Loans Concentration AA-B

Source: Safra, BIE

Rating 2007

4,2% 50,5% 12,6% 21,1% 1,3% 6,3% 10,7% 4,9% 6,2% 23,1% -0,9% 278,2% 44,8% 40,2% 3,0% 55,9% 5,4% 93,4%

2008

3,4% 56,3% 14,7% 20,4% 1,4% -21,4% -3,8% -3,8% 1,5% -10,7% 12,5% 220,8% 40,8% 43,6% 3,7% 90,7% 1,7% 92,9%

Key Ratios Moody's

FC LT Dep LC LT Dep FSR FC ST Debt LC ST Debt Outlook Nat. LT Nat. ST Ba2 watch+ Baa1 CNP P-2 Stable Aaa.br BR-1

Rating 2007

9,1% 72,1% 14,2% 19,9% 1,6% 86,6% 131,2% 87,5% 129,6% 16,6% 19,9% 22,2% 113,4% 37,7% 17,6% 70,3% 4,1% 47,8% 8,6% 89,3%

S&P

Fitch

FC/LC LT Iss Sen. Uns. Debt LC LT Debt FC/LC ST Iss Indiv. Support Outlook Nat LT Nat ST BBBBBBBB+ F3 C 4 Stable AA+ (bra) F1+ (bra)

4,3% 47,4% 12,4% 20,6% 1,4% 8,9% 14,1% 15,2% 23,4% 18,3% 7,6% 224,0% 41,6% 48,3% 3,7% 55,9% 6,6% 90,8%

2006*

Net Intermed. Margin Cost:Income BIS ROE ROA Net Intermed. Growth Fee Income Growth Operating Income Growth Net Income Growth Customer Loans Growth RWA Growth Customer Deposits Growth Customer Loans/Deposits Customer Loans/Assets Securities/Assets RWA/Assets Provisions/ Loans Provisions/NPL NPL/Loans Concentration AA-B

Source: Santander Brasil, BIE * post restructuring. ** 2008 consolidates Banco Real

2008**

3,5% 87,0% 14,7% 3,2% 0,5% 18,1% 13,6% -35,2% -14,3% 218,8% na 216,6% 114,2% 40,9% 16,4% na 5,7% 67,5% 7,3% 87,1%

Moody's

FC LT Dep. LC LT Dep. FSR FC ST Debt LC ST Debt Outlook Nat LT Nat ST Ba2 watch+ A2 C NP P-1 Stable Aaa.br BR-1 FC LT Iss LC LT Iss FC ST Iss LC ST Iss Outlook LT Iss ST Iss

S&P

BBBBBBA-3 A-3 Stable brAA+ brA-1

Fitch

FC LT Iss LC LT Iss FC ST Iss LC ST Iss Individual Supp Outlook Nat LT Nat ST BBB BBB+ F2 F2 C 2 Stable AAA(bra) F1+ (bra)

FC LT Iss LC LT Iss FC ST Iss LC ST ISS Outlook

BB+ BB+ B B Stable

Moody's

Aug-06 Aug-07 Ba3 Ba2

Global FC Ratings Evolution S&P

Jan-06 Feb-06 Jun-07 BBBB BB+ Jun-06 Aug-06 Jun-08

Fitch

BB BB+ BBB-

MN BRL

Net Intermed. Income Loan Loss Provisions Fee Income Operating Income Net Income Customer Loans Total Assets Customer Deposits Subordinated Liabilities Shareholders' Equity

Source: Safra, BIE

2006

2.141,6 123,2 502,3 1.124,6 782,5 23.019,1 55.390,5 10.275,1 450,4 3.802,7

2007

2.276,6 181,8 556,2 1.180,0 830,9 28.334,6 63.228,6 10.185,7 698,9 3.928,7

2008

1.790,5 292,7 534,8 1.135,7 843,4 25.300,7 61.940,0 11.460,9 699,3 4.126,3

Moody's

Local Rating Evolution S&P

Not Rated Jun-06 Jun-08

Fitch

AA (bra) AA+ (bra)

4,1% 70,9% 15,4% 10,1% 0,8% nm nm nm nm nm nm nm 118,9% nm 38,8% 66,7% 4,3% 72,1% 6,0% 91,7%

Moody's

Oct-06 Aug-07 Ba3 Ba2

Global FC Rating Evolution S&P

Feb-06 Sep-06 Sep-06 May-07 Apr-08 BB WR BB BB+ BBBSep-06 May-07 Jun-08

Fitch

BB+ BBBBBB

MN BRL

Net Intermed. Income Loan Loss Provisions Fee Income Operating Income Net Income Customer Loans Total Assets RWA Customer Deposits Subordinated Liabilities Shareholders' Equity

Source: Santander Brasil, BIE * post restructuring. ** 2008 consolidates Banco Real

2006*

3.133,9 802,9 1.618,2 1.031,6 803,6 37.508,8 102.027,1 68.035,1 31.541,0 4.036,1 7.975,6

2007

5.849,1 2.084,5 3.741,4 1.934,2 1.845,4 43.724,6 116.036,9 81.567,4 38.557,3 4.219,6 9.264,6

2008**

6.905,3 4.370,7 4.250,3 1.252,9 1.580,6 139.410,4 340.635,5 na 122.083,0 9.188,5 48.756,6 Oct-06

Moody's

Aaa.br

Local FC Rating Evolution S&P

Sep-06 May-07 brAA brAA+ Sep-06 May-07

Fitch

AA+(bra) AAA(bra)

Amount

100 mn USD 300 mn BRL

Coupon

5.150% 10.875%*

Liquid Issues Call/Put Issue Date

07-14-2008 04-03-2007 na na

Maturity

07-02-2010 04-03-2017

Ratings

na BBB-

Amount

Coupon

Liquid Issues Call/Put Issue Date

02-22-2005 03-28-2007 09-20-2005 na na Call 9/10

Maturity

02-22-2010 01-01-2014 Perpetual

Ratings

NR NR Baa3 *+

Source: Bloomberg, BIE *fx-linked

Loan Composition 2008

17% 1% 0% 0% 4% 12000 26% (MN BRL) 10000 8000 6000 4000 2000 52% 0 2002 Retail clients Public entities

Source: Safra, BIE

Gross Revenues Profile

740 mn BRL** 16,200%* 114.275 mn BRL 10,000%* 8,700% 500 mn USD

Source: Bloomberg, BIE. *fx-linked. ** Banco Real

CAGR: 1

1.4%

Loan Composition 2008

40000 25% 32000 24000 16000

Gross Revenues Profile

CAGR: 13.8%

43%

2003

2004

2005 Fees Other

2006

2007

2008

11% 0% 21% Retail costumers

Source: Santander Brasil, BIE

8000 0 2002 2003 2004 2005 2006 2007 2008

Financial institutions Agribusiness

Commerce and services Others

Industry

Interest from lending Compulsory applc.

Source: Safra, BIE

Securities, fx and derivatives

Financial institutions Industry Services

Commerce

Interest from lending Compulsory applc.

Source: Santander Brasil, BIE

Fees Securities, fx and derivates Other Insurance and pensions

Risk policy: The main purpose of using financial derivatives by Banco Safra is to provide customers with products to hedge their assets from currency and interest rate fluctuations. Furthermore, these instruments are used by the bank in the daily management of credit, market and liquidity risks inherent to its operations, including the securities portfolio hedge defined by the management. Banco Safra's positions are monitored by an independent control area, which uses a specific system to manage the risk, by calculating VaR (value at risk) with a confidence interval of 95%, stress tests, back testing and other technical resources. The bank has a Market Risk Committee, consisting of top executives, which meets on a weekly basis to analyze the strategies, stress scenarios and risk limits. Credit positives: (i) important domestic player in wholesale and middle-market segments, with well established reputation, (ii) stable client base supported by long-term relationships, (iii) liquid balance sheet, on the back of short-term securities portfolio and lending, (iv) expertise in selected markets and successful track record, (v) sound operating efficiency despite worsening, (vi) sound asset quality and improving in a challenging environment, (vii) shareholder support, (viii) increase in provisions, (ix) deposit increase at double digit pace, representing favorable risk perception of its clients and counterparts, (x) rising BIS ratio and improving coverage of lending by deposits. Credit negatives: (i) predominantly wholesale deposit base may pressure margins, (ii) low level of deposits in relation to lending decreases the efficiency of the cost of funding, (iii) dependence on securities income, (iv) lending fall of more than 10% in 2008, (v) operational worsening leading to a low net intermediation margin. Outlook: Banco Safra continues to operate under its traditional three pillars: (i) a conservative approach towards risk management, (ii) sustained growth, and (iii) dynamic product development. Banco Safra intends to continue its organic growth expansion within its target market. Safra is an example of a bank favorably perceived as low risk, managing to grow its deposit base in an adverse environment. As main challenges ahead, we see maintaining asset growth along with asset quality. Strong shareholder support is an important factor mitigating risk.

Risk policy: Santander Brasil acts in line with global policies and consequently with the risk tolerated by the Group in Spain, aligning the objectives in Brazil with those abroad, according to the instructions of the Board, to Brazilian Central Bank's rules and to good international practices. The group developed its own business of Risk Management. The Credit and Market Risk Department is an independent area in charge of implementing risk policies. Market risk management measures and accompanies predefined limits by internal committees, portfolios' risk values, and sensibility analysis for foreign exchange, rates and liquidity gaps. In this context, the bank uses derivative financial instruments to minimize market risks derived from its global exposure. Credit positives: (i) Spanish Santander's commitment, (ii) established in the wealthiest region of Brazil, (iii) brand recognition and solid branch network, (iv) increased market share, scale, and geographic and customer diversification with the consolidation of Banco Real, (v) strengthened position in retail, (vi) cross selling opportunities as the number of products/customer is low by country standards, (vii) decreasing weight of securities in revenues and assets, (viii) revenues' diversification, (ix) lending and deposits grew sharply on the consolidation, (x) large deposit base, positive for funding, (xi) group's track record in digesting acquisitions, (xii) banks' operations are already consolidated (and managed by Santander), although Santander intends to keep the two brands separated until 2010. Credit negatives: (i) very low efficiency and deteriorating, (ii) eroding net intermediation margin, (iii) weak BIS ratio when compared to peers, (iv) moderate asset quality despite improvement, (v) execution risks related to integration. Outlook: Santander's strategy is based on a well-defined segmentation of its clients' base, with differentiated relationship models, between four business areas: Retail, Corporate, Global Banking & Markets and Asset Management. Santander intends to develop the complementariness brought by Banco Real in terms of retail banking, consistent with its strategy to strengthen its retail brand. It emphasizes quality and innovation of its products and services in order to improve their match with the client's financial type, while strengthening its commercial and operational structure. The main risks, in our view, could come from the integration processes, such as higher-than-expected restructuring costs. Such risks could constrain growth. Efficiency improvement would be a must.

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29

Banco Sofisa

Positioning: Banco Sofisa ranks 33rd by total assets and deposits and 29th by shareholders' equity in Brazil. Total assets reached 4.5 bn BRL in 2008. Description: Banco Sofisa, operating in the financial market for 48 years, focuses on the small and medium enterprises segment (companies with annual revenues from 5 mn BRL to 300 mn BRL) and on the consumer-finance segment, especially car loans and payroll loans. In the small and medium enterprises segment, Banco Sofisa serves 1,691 customers through 19 branches in 13 states, and employs 293 people. The bank opened a branch in Grand Cayman in September 2008. Shareholders: Banco Sofisa is controlled by the Burmaian family, that holds 100% of the controlling shares and 72.3% of the total capital. Its shares are listed on the São Paulo stock exchange.

Banco Votorantim

Positioning: Banco Votorantim ranks 7th by total assets, 8th by deposits and 6th by shareholders'by deposits. Total assets reached 6.8 bn BRL in 2008. In 2008, Daycoval won the award for Best Middle Market Bank by Gazeta Daycoval ranks 19th shareholders' equity, 30th by total assets and 32nd equity in Brazil. Total assets amounted to 72.3 bn BRL in 2008. Mercantil, a leading business daily newspaper, for the third consecutive year. Description: Banco Votorantim was created in 1988 as a broker-dealer and began operating as a full-service bank three years later. It was the financial arm of Votorantim Group. Its main activities are corporate and retail business, treasury and Banco Daycoval was created 40 years Asset Management (VAM). It middle market segment, complemented by a significant through BV Leasing, and under the brand "Daycred" It Corretora de Títulos e Valores Description:asset management through Votorantim ago and is specialized in thealso offers consumer finance through BV Financeira, leasingactivity in retail businessbrokerage through Votorantim offers lending and financing, . Mobiliários. and trade finance products to corporate de Janeiro, Porto Alegre, Curitiba, Campinas, Nassau, London and New York, employing 1,103 In December 2008, Daycoval had 640 workers and 27 branches for corporate investment Based in São Paulo, it is also present in Rioclients and vehicle and payroll-deductible loans to retail customers, among other products. people. customers, located in 16 states and the Federal District, 15 "Daycred Stores" for retail customers and a foreign branch in Cayman Islands. Shareholders: Votorantim Participações, belonging to the Moraes family, was the controlling shareholder until January 2009, when Banco do Brasil bought 49.99% of the voting capital and 50% of the total capital. The transaction is pending for approval by competent regulators. Its shares are not listed. Shareholders: Family Dayan controls the bank, holding all the ordinary shares. Its preferred shares are listed on the Bovespa stock exchange.

Key Ratios 2006

Net Intermed. Margin Cost:Income BIS ROE ROA Net Intermed. Growth Fee Income Growth Operating Income Growth Net Income Growth Customer Loans Growth RWA Growth Customer Deposits Growth Customer Loans/Deposits Customer Loans/Assets Securities/Assets RWA/Assets Provisions/ Loans Provisions/NPL NPL/Loans Concentration AA-B

Source: Sofisa, BIE

Rating 2007

7,0% 60,9% 22,0% 8,9% 1,9% 106,2% -6,5% 24,0% 67,7% 186,0% 202,6% 77,2% 131,0% 64,8% 19,7% 90,7% 1,2% 146,5% 0,8% 93,3%

Key Ratios Fitch

Net Intermed. Margin Cost:Income BIS ROE ROA Net Intermed. Growth Fee Income Growth Operating Income Growth Net Income Growth Customer Loans Growth Customer Deposits Growth Customer Loans/Deposits Customer Loans/Assets Securities/Assets Provisions/ Loans Provisions/NPL NPL/Loans Concentration AA-B

Source: Banco Votorantim, BIE

Rating 2007

5,8% 39,2% 15,2% 19,4% 1,8% 17,2% 176,9% 9,2% 15,1% 59,1% -25,0% 188,4% 40,3% 30,3% 2,1% 72,2% 2,9% 94,5%

2008

8,3% 65,1% 19,8% 10,7% 2,0% 24,2% 297,2% 14,0% 21,9% 5,5% na -52,4% 290,6% 61,2% 18,6% na 2,0% 72,6% 2,8% 90,9%

Moody's

Foreign LT Dep Ba2 watch+ Local LT Dep Ba1 Senior Un Debt Ba1 FSR D+ F/L ST Debt NP Outlook Stable Nat LT Deposit Aa2.br Nat ST BR-1

S&P

6,8% 56,2% 22,9% 14,2% 2,4% 8,5% 14,9% 15,0% -0,7% 13,9% 28,9% 18,1% 81,2% 49,2% 42,7% 65,0% 2,2% 161,3% 1,4% 92,3%

2006

6,8% 35,2% 16,1% 20,1% 1,8% 3,5% 80,4% 3,7% 25,4% 38,4% 14,8% 88,7% 29,7% 30,3% 2,6% 71,1% 3,6% 87,0%

2008

4,8% 52,7% 13,5% 14,2% 1,2% 6,8% -0,5% -22,2% -22,5% 42,7% 3,8% 258,9% 52,8% 29,9% 2,0% 70,5% 2,9% 94,0%

Moody's

FC LT Dep Ba2 watch+ LC LT Dep Baa1 watch+ Senior Unsec Baa3 watch+ FSR CLC ST Debt P-2 FC ST Debt NP Nat. LT Aaa.br Nat. ST BR-1

S&P

FC LT Iss LC LT Iss FC ST Iss LC ST Iss Outlook Nat. LT FC Iss Nat. ST BB+ BB+ B B Stable brAA+ brA-1

Fitch

FC LT Iss Def LC LT Iss Def LC ST Deb Individual Support Outlook Nat. LT Nat. ST BBBBBBF3 C/D 2 Stable AA+(bra) F1+(bra)

Not Rated

Support Rat Nat LT Nat ST

5 A+(bra) F1(bra)

Moody's

Jun-08 Ba1

Global FC Ratings Evolution S&P

Not Rated Not Rated

Moody's

Aug-06 Aug-07 Ba1 Baa3

Global FC Ratings Evolution S&P

Feb-06 May-07 BB BB+ Jun-06 Aug-06 May-07

Fitch

BB BB+ BBB-

Fitch

Moody's 2006

116,3 4,7 7,7 52,0 45,1 914,7 1.859,2 1.208,8 1.127,0 0,0 318,6

Local Rating Evolutionn S&P

May-07 brAA+ Jun-06

Fitch

AA+(bra)

MN BRL

Net Intermed. Income Loan Loss Provisions Fee Income Operating Income Net Income Customer Loans Total Assets RWA Customer Deposits Subordinated Liabilities Shareholders' Equity

Source: Sofisa, BIE

2007

239,8 13,8 7,2 64,5 75,6 2.616,2 4.035,6 3.658,3 1.996,9 0,0 854,2

2008

297,7 37,6 28,6 73,5 92,2 2.761,0 4.510,1 na 950,1 0,0 858,6 Oct-07

Moody's

Aa2.br

Local Rating Evolution S&P

Not Rated Apr-08

Fitch

A+(bra)

MN BRL

Net Intermed. Income Loan Loss Provisions Fee Income Operating Income Net Income Customer Loans Total Assets Customer Deposits Subordinated Liabilities Shareholders' Equity

Source: Banco Votorantim, BIE

2006

2.301,5 426,6 450,9 1.345,3 1.010,6 16.821,1 56.680,1 18.953,9 0,0 5.034,0

2007

2.697,9 543,6 692,2 1.469,1 1.163,7 26.765,3 66.401,1 14.206,3 2.578,8 6.003,7

2008

2.881,8 830,5 689,0 1.142,9 901,8 38.183,9 72.310,0 14.750,4 2.869,7 6.362,2

Apr-07

Aaa.br

Amount

100 mn USD 110.75 mn BRL 139.855 mn BRL 128.344 mn USD 100,774 mn USD

Coupon

L+200 16,200%* 10,625%* 6,875% 6,750%

Liquid Issues Call/Put Issue Date

08-19-2005 11-25-2005 04-10-2007 10-14-2005 09-22-2006 na na na Call 10/10 Call 9/11

Maturity

08-19-2010 11-25-2010 04-10-2014 10-14-2015 09-22-2016

Ratings

BB+ NR Baa3*+ BB+ BB+/BB+

Amount

111 mn USD

Coupon

7,250%

Liquid Issues Call/Put Issue Date

07-03-2008 na

Maturity

07-07-2011

Ratings

Ba1

Source: Bloomberg, BIE

Source: Bloomberg, BIE. *fx-linked

Loan Composition 2008

2% 1500 1250 (MN BRL) 1000 750 500 250 0 2006 Retail clients

Source: Sofisa, BIE

Gross Revenues Profile

Assets Under Management

Gross Revenues Profile

CAG

R: 10

7%

20000 (MN BRL) 15000 10000 5000 0 2003

Source: Banco Votorantim, BIE

15000

3.0% CAGR: 1

(MN BRL)

CAGR: 2

6.9%

12000 9000 6000 3000 0

41%

57%

2007 Fees Securities, fx and derivatives

2008 Other

2004

2005

2006

2007

2008

2002

2003

2004 Fees Other

2005

2006

2007

2008

Public entities

Private entities

Interest from lending

Source: Sofisa, BIE

Interest from lending Compulsory applc.

Source: Banco Votorantim, BIE

Securities, fx and derivatives

Risk policy: Sofisa's risk management is done in accordance with the guidelines provided by regulators and the best market practices, consistent with the institutional understanding that an adequate risk management has the main objective of mitigating losses. The bank manages credit, market, liquidity and operational risks. Liquidity risk management allows Sofisa to control the mismatch between the maturity dates of the assets, liabilities, and financial instruments used in the management of its financial positions. This management is done through the daily monitoring of resources in line with the liquidity policy and contingency plan approved by the Board. The bank uses derivative financial instruments to hedge price variations in its assets and liabilities, and does not use target forward swap or any other kind of leveraged derivative. Credit positives: (i) well-established operation and recognized brand in the middle market, (ii) flexible business model with conservative policies, (iii) operational improvement despite of the crisis, with increasing net intermediation margin through time, (iv) revenues diversification, (v) sound capitalization ratio, (vi) lending portfolio diversification by segment, (vii) sound profitability indicators, (viii) sound asset quality, despite a slight worsening in 2008, (ix) shareholder's commitment. Credit negatives: (i) small scale, (ii) modest participation in the deposit market, (iii) big fall in deposits in 2008, of more than 50%, (iv) lending stagnancy last year, (v) loans/deposits ratio very high, which worsens the funding cost, (vi) deterioration in credit quality, partially due to credit cession, but still above peers. Outlook: Sofisa intends to continue expanding its businesses and enjoying opportunities to increase profitability. The bank plans to continue to focus on the middle market, offering new products to actual clients and gaining new clients, and to diversify to other segments such as retail and large middle market. Sofisa plans to diversify its funding sources, including bond issuances locally and abroad, while maintaining its financial solidity. The bank intends to consolidate its market leadership, and could eventually consider acquisitions. Affected by the current risk aversion mood and experiencing deposit flight, the main challenge, in our view, is to maintain a diversified funding structure while fueling growth in the deposit base.

Risk policy: The administration of Votorantim Finanças Group established strict policies and procedures through a Global Risk Management. The Risk Management Committee meets regularly with the objective of evaluating risks and defining operational limits. There are three commissions subordinated to this Committee, each one with a risk on focus: financial risk (market and liquidity), credit risk and operational risk. The group uses financial derivative instruments, mainly with the objective of hedging its commercial portfolio and of doing a market risk management in line with its policy. The market risk management is done by a commission independent from the operational department. Credit positives: (i) increasing earnings diversification, (ii) shareholders' commitment to the bank, despite of the sale, Votorantim group is still the controlling shareholder, (iii) operating efficiency despite deterioration, (iv) revenues and lending growth, (v) asset quality, (vi) brand recognition. Credit negatives: (i) still some revenue dependence on treasury gains and arbitrage, (ii) weight of securities in total assets, (iii) net intermediation margin deterioration, (iv) loans/deposits ratio very high, showing high dependence on open market funding, (v) lack of deposit growth could jeopardize funding even further, (vi) fast asset growth eroding capital levels translated into a weak BIS ratio, (vii) deteriorating efficiency. Outlook: Banco Votorantim, through the partnership with Banco do Brasil, intends to accelerate its growth trajectory, by expanding its origination and distribution capacity not only in consumer credit, but also in the other businesses the bank operates. Banco do Brasil intends to strengthen its position in those sectors where Banco Votorantim's position is specialized, such as vehicle financing business, corporate banking and capital markets. The indirect state ownership of Banco Votorantim could be a plus for its credit profile, a positive influence on margins and contribute to increase the deposit base.

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BICBANCO

Positioning: Banco Industrial e Comercial (BICBANCO) ranks 14th by deposits, 18th by shareholders' equity and 19th by assets in Brazil. In 2008, total assets reached 12 bn BRL. In 2008, BICBANCO was classified as the more sustainable mid-size bank in Latin America by M&E and gained the "Recognition Award" by IFC as the "Most Active Bank in Global Trade Finance Program in Latin America" . Description: Created in 1938, BIC is focused on credit operations to the middle market segment. The bank offers investment and import/export finance products and is present in the retail business, mostly through payrolldeductible loans. In the end of 2008, BIC had 819 workers and 33 branches in Brazil and one in Cayman. Shareholders: It is controlled by the Bezerra de Menezes family. Its preferred and ordinary shares are listed on Bovespa.

BNDES

Positioning: BNDES is the largest development bank in Latin America, with total assets amounting to 277.3 bn BRL and shareholders' equity of 25.3 bn BRL in 2008. Description: BNDES is a federal company created by Law 1628, in June 1952. Through the enactment of Law 5662 and Decree 68786, both dated June 21, 1971, it became a state owned and ran company under private law, subject to general budgetary and accounting rules and specific regulations established by the National Monetary Council. Its purpose is to finance and support projects that contribute to the development of many sectors of the Brazilian economy, by lending funds to the industry for purchases of machinery equipment and exporting capital goods (FINAME) and acquiring equity stakes in companies (BNDESPAR). BNDES acts mostly at infrastructure investments, innovation, productive capacity, capital goods, micro, small and mid-sized businesses, urban and regional development, social development and environment and international integration levels, being present in the most important financing projects of the country with a marked position in agriculture, commerce, services and small and medium enterprises. Shareholders: BNDES is a federal company binding to the Ministry of Development, Industry and External Commerce of Brazil.

Key Ratios 2006

Net Intermed. Margin Cost:Income BIS ROE ROA Net Intermed. Growth Fee Income Growth Operating Income Growth Net Income Growth Customer Loans Growth RWA Growth Customer Deposits Growth Customer Loans/Deposits Customer Loans/Assets Securities/Assets RWA/Assets Provisions/ Loans Provisions/NPL NPL/Loans Concentration AA-B

Source: BIC, BIE

Rating Key Ratios 2007

5,7% 36,0% 19,4% 11,6% 1,7% 52,8% 26,2% 79,0% 74,7% 71,8% 57,3% 73,0% 182,5% 69,3% 19,4% 69,3% 1,7% 66,5% 2,6% 88,7%

Rating 2007

3,4% 6,8% 28,3% 29,3% 3,6% 4,9% 104,6% 17,8% 15,5% 11,5% 1,6% 642,0% 84,3% 6,8% 3,3% 94,4% 3,5% 91,4%

2008

8,7% 33,1% 19,3% 19,0% 2,7% 36,9% 25,4% 45,3% 76,2% 5,9% na -1,6% 196,5% 67,2% 5,5% na 3,9% 82,0% 4,7% 87,2%

Moody's

FC LT Dep LC LT Dep Subord. Debt FC LT Debt FSR Nat. LT. Dep Nat. ST. Dep Outlook Ba2 watch+ Ba1 Ba2 Ba1 D+ Aa2.br BR-1 Stable

S&P

Fitch 2006 2008

1,8% 11,2% 19,1% 21,0% 1,9% -30,3% 29,2% -27,0% -27,4% 29,1% -2,8% 853,1% 79,5% 8,3% 2,1% 114,3% 1,8% 74,2%

5,4% 52,8% 15,2% 19,7% 1,4% 31,1% 38,8% 29,4% 26,8% 59,7% 59,9% 30,0% 183,8% 60,6% 30,6% 66,1% 2,1% 55,0% 3,8% 92,4%

Moody's

FC LT Deb FC LT Dep FC Iss FC ST Debt LT ST Debt Nat. LT Nat. ST Baa3 watch+ Ba2 watch+ A1 watchNP P-1 watchAaa.br BR-1

S&P

Fitch

FC LT Iss Def LC LT Iss Def LC Unsec. D. Outlook FC ST Iss LC ST Iss Nat LT Nat. ST Support BBBBBBBBBStable F3 F3 AA+ (bra) F1+ (bra) 2

FC LT Iss LC LT Iss ST LT Iss ST LT Iss Nat. LT

BBBBB B brA-

Nat. LT Nat. ST Support

A- (bra) F2 (bra) 5

Moody's

Apr-07 Ba1

Global FC Ratings Evolution S&P

Feb-07 Jun-07 B+ BBNot Rated

Fitch

Net Intermed. Margin Cost:Income BIS ROE ROA Net Intermed. Growth Affil./Equ. Sale Income Grwth Operating Income Growth Net Income Growth Customer Loans Growth Customer Deposits Growth Customer Loans/Deposits Customer Loans/Assets Securities/Assets Provisions/ Loans Provisions/NPL NPL/Loans Concentration AA-B

Source: BNDES, BIE

3,4% 7,6% 24,7% 33,2% 3,4% 43,7% 10,7% 70,6% 97,7% 3,9% 23,4% 584,9% 81,7% 9,9% 2,9% 61,5% 4,5% 89,0%

FC LT Iss LC LT Iss Outlook

BBBBBB+ Stable

Moody's

May-06 Oct-06 Ba1 Baa3

Global FC Rating Evolution S&P

Feb-06 May-07 Apr-08 BB BB+ BBBJun-09

Fitch

BBB-

Moody's 2006

361,7 60,3 34,0 152,6 104,1 4.433,7 7.319,9 4.840,5 2.412,4 266,1 527,3

Local Ratings Evolution S&P

Feb-07 Jun-07 brBBB+ brADec-07

Fitch

A- (bra)

MN BRL

Net Intermed. Income Loan Loss Provisions Fee Income Operating Income Net Income Customer Loans Total Assets RWA Customer Deposits Subordinated Liabilities Shareholders' Equity

Source: BIC, BIE

2007

552,5 138,7 42,9 273,1 181,9 7.617,9 10.992,1 7.613,0 4.173,3 214,5 1.563,4

2008

756,3 na 53,8 396,9 320,5 8.066,4 12.007,3 na 4.106,0 285,7 1.685,1

Apr-07

Aa2.br

Moody's MN BRL

Net Intermed. Income Loan Loss Provisions Affiliate and Equ. Sale Income Operating Income Net Income Customer Loans Total Assets Customer Deposits Subordinated Liabilities Shareholders' Equity

Source: BNDES, BIE

Local FC Rating Evolution S&P

Not Rated May-07

Fitch

AA+ (bra)

2006

5.895,9 -1.051,9 2.081,0 8.529,0 6.331,3 153.234,0 187.474,9 26.197,4 72.775,7 19.091,9

2007

6.187,0 -1.382,2 4.257,2 10.046,7 7.313,8 170.839,4 202.652,1 26.611,4 85.503,8 24.923,5

2008

4.311,7 444,6 5.501,8 7.336,0 5.313,0 220.549,3 277.294,4 25.853,1 97.339,1 25.266,6

Amount

150 mn USD 180 mn USD 120 mn USD

Coupon

8,250% 7,000% 9,750%

Liquid Issues Call/Put Issue Date

09-21-2006 04-23-2008 03-03-2006 na na Call 3/11

Maturity

09-21-2009 04-23-2010 03-03-2016

Ratings

Ba1 Ba1 Ba2

Amount

300,000 mn ITL 300 mn USD 1000 mn USD 1000 mn USD

Coupon

8,000% 9,625% 6,369% 6,500%

Liquid Issues Call/Put Issue Date

04-28-1998 12-12-2001 06-04-2008 06-10-2009 na na na na

Maturity

04-28-2010 12-12-2011 06-16-2018 06-10-2019

Ratings

Baa3*+/BBBA1*Baa3*+/BBBBaa3*+/BBB-

Source: Bloomberg, BIE

Loan Composition 2008

1% 6% 3% 2% 2250 2000 1750 1500 1250 1000 750 500 250 0 2002

Gross Revenues Profile

Source: Bloomberg, BIE

Loan Composition 2008

0.1 CAGR: 2 %

26% 16% 1% 40000 30000 20000 23% 10000 2003 2004 Fees 2005 Securities 2006 2007 2008 Other Public sector Services

Source: BNDES, BIE

Gross Revenues Profile

CAGR: 1.5%

39% 49%

(MN BRL)

Retail clients Industry

Source: BIC, BIE

Financial institutions Agribusiness

Commerce and services Public sector

34% Rural Industry Commerce

0 2002 2003 2004 2005 2006 2007 2008 Interest from lending Securities, fax and derivatives

Source: BNDES, BIE

Interest from lending

Source: BIC, BIE

Compulsory applc.

Affiliate and equ. sale income Other

Risk policy: The bank operates with financial derivative instruments as part of the range of products offered to its clients and to meet its own needs of market risk management. BICBANCO adopts the policy of minimizing exposure to market risks consistent with its main business operation, which is lending. Risk management is made directly by top management through instruments previously tested and evaluated. The great volatility of foreign exchange markets did not have a major impact on the bank as all foreign currency funding is hedged. The maturity structure of assets and liabilities allowed a balanced cash flow in spite of the liquidity shortage from September onwards. That was because the existing gaps made possible to receive assets before liabilities. Thus, there was a steady rise in liquid assets, despite of its higher costs. Prospective analyses of its cash reserve shows a minimal liquidity risk throughout time, even in a stress scenario. Credit positives: (i) lending secured by receivables and mainly short-term, (ii) high and improving efficiency, (iii) revenues, income and net intermediation margin growth despite of the crisis, (iv) rapid and efficient reaction to the crisis, (v) sound asset quality although deteriorated, (vi) sound profitability and capitalization, (vii) decreasing weight of securities in total assets, (viii) low dependence on securities income. Credit negatives: (i) increasing competition in its core segment, (ii) deposit concentration by client with the 10 largest standing for 20% of total deposits, (iii) low coverage of lending by deposits, decreasing funding efficiency, (iv) modest lending growth, partially due to credit cession (more than 400 mn BRL in 2008), (v) deposits fell slightly, (vi) low diversification by product, (vii) closing branches and firing people could be negative for growth in 2009. Outlook: BICBANCO is focused on middle market lending. It clearly aims to be number 1 in the segment in Brazil by increasing volumes, return on assets and efficiency. The bank focuses on diversification of its funding by maximizing the match with the credit portfolio, as a mean to minimize currency, term and interest rate gaps, and to guarantee liquidity to optimize growth opportunities. The bank had a rapid and efficient reaction to the crisis, as shown by the operational performance registered in 2008. Increasing the deposit base and diversification would be positive for the cost of funding, and potential lending and income growth going forward.

Risk policy: Risk management and internal control procedures are integrated in the Risk Management Area (AGR), which is formed by the departments of Internal Controls, Credit Risk, Market Risk and Operational Risk. Among the AGR's main functions are the definition of general risk management guidelines and the monitoring of risk exposure levels. Risk Management Committee is formed by BNDES' President, Vice-President and directors, meeting monthly. The Market Risk Department manages volatility from interest rates, foreign exchange and equity prices and develops studies for the implementation of an own model for market risk management. Foreign exchange and interest rate derivatives are used, aim to adjust the composition and volatility of the exchange and interest rate positions of foreign financial liabilities of BNDES so that its "currency basket" credit product, which represents the composition of the bank's foreign currency exposure, is more attractive to borrowers. Pursuant to its financial policy, BNDES tries to transfer to borrowers exchange and interest rate risks, including those arising from derivative transactions, and ultimately assumes any credit risk derived from the effect of exchange or interest rate volatility on its customers. Derivative transactions intend to increase the dollar weight in the "currency basket" and minimize any adverse impact that the volatility of other hard currencies may cause on borrowers of funds denominated in the currency unit linked to the "currency basket" of BNDES, and reduce the risk associated to a possible currency mismatch in the BNDES balance sheet. Credit positives: (i) access to cheap funding due to constitutional mandate, (ii) strong role in Brazil's development and investment, (iii) BNDES is legally not subject to intervention, liquidation by the central bank, or bankruptcy proceedings, although its assets are subject to seizure and attachment, (iv) likely government support in case of need due to its importance to the financial system and the country's economy, (v) improving asset quality (NPL) despite of the decrease in top quality loans, (vi) very sound efficiency, (vii) asset growth. Credit negatives: (i) lending portfolio concentrated in financial institutions that act as intermediaries between projects and BNDES financing - top 10 exposures representing more than 30% of total lending and top 60 representing 70%, (ii) fund raising also dependent on international markets - loans and multilaterals, (iii) possible government intervention to achieve political purposes, (iv) low net intermediation margin and decreasing, (v) capitalization worsened but remains sound, (vi) decrease in deposits, (vii) lower AA-B concentration credits. Outlook: BNDES is the main instrument of the Brazilian Federal Government to provide financing to the economy in the long term and national private enterprise incentives. Its structure is designed to stimulate national development and job creation, and its priorities are: infrastructure investment, basic input investment to revive industrial growth, exports, national technology, support to small and medium companies and continental integration within South American. Apart from its development role, the BNDES is important in the design of national development policies and helping to solve structural problems of the economy. With a prudent risk management, BNDES has been delivering improving asset quality, and remains key to Brazil's progress. Although its credit risk is closely tied to that of the sovereign, sound country fundamentals act as an important mitigating factor. Moreover, lack of investment in Brazil, in particular infrastructure, turns the institution key to economic welfare.

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GP Investments

Positioning: GP is one of the largest private equity companies in Latin America. Description: GP Investments targets private equity business and asset management. The private equity business is conducted either directly by GP Investments or by funds that it manages. GP Asset Management units offer fixed income funds, equity funds and hedge funds, focusing on different risk profiles and investor bases. Established in 1993, the company gained a good reputation after investments such as Banco Garantia (investment banking), AmBev (beverage company), and Lojas Americanas (retail store), among others. Currently, it does not hold any of these investments following the restructuring in 2003. GP invests in companies at attractive valuations with one or more of the following characteristics: (i) products with strong market positions, (ii) not primarily dependent on public sector orders, (iii) potential for significant productivity or growth increases, (iv) global competitive advantage, (v) customer driven, (vi) low technological risk, (vii) high proportion of export revenues, and (viii) high barriers to entry in the industry. Shareholders: Partner Holding has 100% of the votes in GP Investments. Partner Holding is property of Antonio Bonchristiano, Fersen L. Lambranho, Carlos Medeiros, Octavio Pereira Lopes, Alcalay and Márcio Tabatchnik Trigueiro and Danilo Gamboa, among others. GP Investments' preferred shares are listed on the São Paulo stock exchange.

Itaú Unibanco

Positioning: Itaú Unibanco Banco Múltiplo is the largest bank in Brazil by total assets and credit concession, the largest in South America and among the 20 largest in the world by market value in the fourth quarter of 2008. Total assets amounted to 632.7 bn BRL at year-end 2008. Description: Itaú Unibanco Banco Múltiplo is the result of a merger between Banco Itaú Holding Financeira and Banco Unibanco, in November 2008. It is present in more than 1,100 towns in Brazil, and in 12 countries worldwide, with 35 mn clients, 4.9k branches and 108k workers. As of December 2008, Itaú Unibanco Banco Múltiplo corresponded to the former Banco Itaú Holding Financeira, holding of Banco Itaú and Banco Itaú BBA, with the incorporation of Unibanco. Itaú Unibanco Banco Múltiplo provides retail, investment banking, private banking, asset management, brokerage, leasing, insurance, among other financial services, to individuals and small, medium and large corporate clients across all segments. Shareholders: Itaú Unibanco Banco Múltiplo is held as follows: Itaú Unibanco Participações with 51% of the ordinary shares, Itaúsa with 36%, Bank of America with 2.5% and the remaining 10.5% is free float. Itaú Unibanco Participações is equally held by Itaúsa and the Moreira Salles Family. By its turn, Itaúsa is held by Egydio de Souza Aranha Family with 60.8% of the ordinary capital, with the remaining being free float. Adding direct and indirect participations, Itaú Unibanco Banco Múltiplo is ultimately held by Egydio de Souza Aranha Family with 31.9% of the voting shares, the Moreira Salles Family with 25.5%, Bank of America with 2.5%, and the remaining 40.1% being free float.

Key Ratios Mn USD

Cash and Equivalents Investment Total Assets Loans and Financings - ST Loans and Financings - LT Shareholders' Equity Appreciation FV investments Management and Performance Fees Advisory Fees Securities Fair Value - Trading Equity in Results Total Revenues Net Financial Income Operating Expenses Net Income Assets under Management

Source: GP Investments, BIE

Rating 2007

199,6 1.165,6 1.479,3 0,0 9,6 570,6 279,8 26,2 0,0 0,0 0,1 369,3 36,6 -47,1 185,3 3.528,0

2006

312,7 173,9 504,7 0,0 7,2 372,4 17,4 15,5 0,5 6,3 0,2 44,3 22,0 -24,4 26,0 392,0

2008

323,7 1.381,9 1.782,0 0,0 144,0 573,8 -224,2 31,6 0,0 1,9 3,6 -187,2 -3,1 -51,3 -241,7 4.435,0

Moody's

FC LT Iss LC LT Iss Outlook

S&P

BBBBStable

Fitch

LT Iss Def Sen Secured Outlook B+ B+ Stable Net Intermed. Margin Cost:Income BIS ROE ROA Net Intermed. Growth Fee Income Growth Operating Income Growth Net Income Growth Customer Loans Growth RWA Growth Customer Deposits Growth Customer Loans/Deposits Customer Loans/Assets Securities/Assets RWA/Assets Provisions/ Loans Provisions/NPL NPL/Loans Concentration AA-B

Key Ratios *ITAÚ UNIBANCO PROFORMA 2007

7,9% 53,9% 18,7% 29,2% 2,7% na na na na na na na 163,2% 45,7% 19,6% na 5,4% na na na

**ITAÚ UNIBANCO BANCO MÚLTIPLO 2007

8,7% 51,9% 18,7% 29,3% 2,9% 23,5% 11,8% 81,8% 96,7% 37,3% 17,6% 35,5% 144,5% 39,2% 20,8% 66,9% 6,9% 74,8% 9,2% 86,3%

Rating

Not Rated

2008

6,4% 55,3% 16,1% 22,9% 1,6% 14,4% 1,8% 6,5% -16,1% 33,9% na 63,3% 133,8% 43,0% 21,9% na 7,3% 91,9% 8,0% 86,8%

2008

2,8% 104,5% 16,1% 17,9% 1,2% -32,5% 12,4% nm -7,9% 108,6% 109,9% 154,2% 118,6% 38,1% 21,9% 65,4% 8,3% 93,1% 8,9% 85,5%

Moody's

LC Curr Issuer FC Curr Issuer Seniou Unsecured Debt Bank Financial Strength Short Term Nat. LT Bank Depoit Nat Short Term A1 Ba2 *+ Baa3 *+ BP-1 Aaa.br BR-1

S&P

LT Foreign Iss LT Local Iss ST Foreign Iss ST Local Iss Outlook Nat LT Iss Nat ST Iss BBB BBB A-3 A-3 Stable brAAA brA-1

Fitch

FC LT Deb LC LT Deb FC ST Deb LC ST Deb Individual Support Outlook Nat. LC LT Nat. LC ST BBB BBB+ F2 F2 B/C 3 Stable AAA (bra) F1+(bra)

Moody's

Not Rated

Global FC Rating Evolution S&P

Jan-07 Jun-08 B+ BBJan-07 Jun-08

Fitch

B B+

Moody's

Not Rated

Local FC Rating Evolution S&P

Not Rated Not Rated

Fitch

Moody's

Aug-06 Aug-07 Ba3 Ba2

Global FC Ratings Evolution S&P

Feb-06 May-06 May-07 Apr-08 BB BB+ BBBBBB Jun-06 Aug-06 Jun-08

Fitch

BB BB+ BBB

Amount

190 mn USD

Coupon

10,000%

Liquid Issues Call/Put Issue Date

01-23-2007 Call 1/12

Maturity

Perp

Ratings

BB-/B+

Source: Annual Report Itaú Unibanco Banco Múltiplo, BIE

Moody's MN BRL 2007

22.954,0 7.020,0 14.217,0 15.362,0 11.921,0 203.141,0 444.473,0 na 124.470,0 17.132,0 40.806,0 393.634,0

Local Rating Evolution S&P

May-07 brAAA Jun-06 May-07

Fitch

AA+(bra) AAA(bra)

Source: Bloomberg, BIE

2008

26.270,0 9.720,0 14.466,0 16.359,0 10.004,0 271.938,0 632.728,0 413.812,9 203.268,0 22.464,9 43.664,0 464.441,0

2007

15.476,5 5.494,9 10.174,4 11.045,5 8.473,8 115.547,9 294.876,3 197.140,3 79.975,6 11.375,3 28.969,2 393.634,0

2008

10.442,0 12.991,2 11.439,3 -692,1 7.803,5 241.043,1 632.728,4 413.812,9 203.268,2 22.464,6 43.664,0 464.441,0

Equity Investment Value as 2008

Private Equity Funds

400 350 300 (MN USD) 250 200 150 100 50 0 Magnesita Imbra San Antonio Leitborn BR Properties Estácio BRMALLS Allis Fogo de Chão BRZ Investimentos Hypermarcas LA Hotels Tempo Par (MN USD)

1000 800 600 400 200 0 GPCP3 2007

Source: GP Investments, BIE

Net Intermed. Income Loan Loss Provisions Fee Income Operating Income Net Income Customer Loans Total Assets RWA Customer Deposits Subordinated Liabilities Shareholders' Equity Assets under management

Amount

325.38 mn BRL** 180 mn USD* 30,000 mn JPY* 100 mn USD* 500 mn USD**

Coupon

8.700% 10,000% 4,250% 5,800% 8,700%

Liquid Issues Call/Put Issue Date

02-11-2005 08-13-2001 08-13-2001 01-24-2008 07-29-2005 na na na na Call 07/10

Maturity

Ratings

02-11-2010 Baa3*+/BBB 08-15-2011 A2 08-15-2011 A2 01-24-2012 Baa3*+/BBB/BBB Perpetual Baa3*+

Source: Annual Report Itaú Unibanco Banco Múltiplo, BIE

Source: BIE, Bloomberg. Issued by * Itaú ** Unibanco

GPCP4 2008

GPCP5

Source: GP Investments, BIE As reported by the company.

Credit positives: (i) management and investments track record, (ii) sound cash flow generation, (iii) investment policy expected to continue to target large and established companies instead of start-ups, (iv) reputation, (v) strict investment guidelines in terms of leverage and investment diversification limits, among others, (vi) GP Investments did not divest in 2008, so lower market values did not have an effect on cash flow, (vii) the company could take opportunity of current market conditions (low asset prices for a long term investment perspective), (viii) creation of a new fund, (ix) investments in new companies increased its portfolio to 13 companies. Credit negatives: (i) investment concentration, (ii) geographic exposure centered in Brazil, (iii) lack of revenue diversification with low weight of management fees, (iv) volatile business (negative revenues last year), (v) succession issues in a business where talent is key, (vi) increasing competition in the industry, (vii) the new fund, GPCP5 , should take longer than 1 year (the case of GPCP4) to reach its full investment capacity due to market conditions. Outlook: GP Investments aims at generating a higher-than-average long term return to investors and shareholders. The company operates under a "transaction-oriented" strategy, aimed at acquiring the voting control or sharing control through shareholders agreements: (i) pursuing opportunistic deals, (ii) focusing on varied sectors, (iii) focusing on mature companies and business models, (iv) reducing risk through a disciplined investment process, (v) implementing management philosophy in portfolio companies.

*Itaú Unibanco Pro Forma: 4Q08 data is the result of the consolidation of both banks, while previous periods' data result simplely from adding individual data. **Itaú Unibanco Banco Múltiplo: 4Q08 data is the result of the consolidation of both banks, while previous periods' data correspond to Itaú Holding Financeira.

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MINING AND STEEL ­ SECTOR BRIEF

Commodity-linked industries like steel and mining were among the most affected by the global economic contraction, as commodity prices, measured by the Reuters/Jefferies CRB index, fell 50% during the second half of 2008. Iron ore producer Vale, with a multi-commodity profile, suffered from this global growth contraction and generalized falling commodity demand, due to its exportoriented revenues. Despite of its EBITDA decrease, the company managed to strengthen its credit metrics and cash position, on the back of record cash flow generation partially derived from the BRL depreciation. Global Steel Production since 2006

140000 120000 (000' metric tons) 100000 80000 60000 40000 20000 0 May-03 May-04 May-05 May-06 Jan-03 Sep-04 Jan-04 Sep-04 Jan-05 Sep-05 Jan-06 5000 4500 4000 3500 3000 2500 1500 1000 500 0

Source: Company Data, Banco Itaú Europa

Brazilian steel producers felt the consequences of the large fall in demand as well, especially in the last two months of the year. According to the Brazilian Steel Institute (IBS), domestic steel sales rose 6% to 21.8 mn tons in 2008 over 2007, reflecting the positive performance of the sector until October, when the accumulated growth stood at 14.4%. Export-oriented companies suffered more in volume, as Brazilian steel exports fell 10.9% YoY to 9.3 mn tons in 2008, but revenues managed to increase 21.1% on the back of high prices and the BRL effect.

Global consolidation and capacity expansion movements continued to be key characteristics of the industry and Gerdau and Usiminas made some acquisitions in 2008. Gross leverage increased in the four companies analyzed in this chapter, but their cash position did as well, namely in the case of Vale (through a capital increase) and in the case of CSN (through a 40% divestment in Namisa). Stronger EBITDA generation pressured the ratio net debt/EBITDA down in all the cases, but was not always enough to compensate the leverage increase.

Net Debt/EBITDA

(X) 2.5 2.0 1.5 1.0 0.5 0.0 -0.5 Vale Gerdau 2007 Usiminas 2008 CSN

Global (LHS)

Source: IISI, Banco Itaú Europa

China (LHS)

Brazil (RHS)

LatAm (RHS)

In this environment, steel producers analyzed in this book showed EBITDA margin gains in 2008, reflecting the positive performance of the first ten months of the year and their rapid response to the crisis with production cuts. Crude steel production totaled 33.7 mn tons in 2008, down 0.2% when compared to one year ago, mostly because of large production falls in November and December, as production accumulated an increase of 7% YoY in the first nine months of 2008. EBITDA Margin

60%

Capital expenditures were high, and increased in the majority of the cases with the exception being Gerdau. Dividend payments rose in all the cases and free cash flow to total debt fell in all of our steel makers, on the back of decreasing operating cash flow. Vale was the exception.

Operating Cash Flow less Capex less Dividends to Total Debt

80% 60% 40%

50%

40% 20% 30% 0% -20% -40% 10% Vale Gerdau 2007

Source: Company Data, Banco Itaú Europa

20%

Usiminas 2008

CSN

0% Vale Gerdau 2007

Source: Company Data, Banco Itaú Europa

Usiminas 2008

CSN

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CSN

Brazilian steel producers entered the crisis with an advantaged position over competitors, as they enjoy higher EBITDA margins than their international peers, mainly due to lower production costs and vertical integration in cases such as CSN and Usiminas. However, this vertical integration, that has been positive when iron ore prices were high, could play against, or at least not be so positive, now that the input price is much lower. Steel producers that face lower output prices can benefit from lower input prices as well if they buy them from a third party. This is not the case in a vertically integrated structure, and therefore, margins could suffer more in relative terms. For example, in annual contract negotiation of iron ore, Vale has already signed price reductions of between -25% and -50% for benchmark products with ArcelorMittal, Nippon Steel Corporation, POSCO, Sumitomo Metal Industries, Kobe Steel and Nisshin Steel. As a way to mitigate the margin erosion from lower steel prices and preserve cash flow generation, Brazilian steelmakers have focused on working capital management and cost reductions and have postponed capex plans. However, cash balances were very strong as of December, leading companies to be in a comfortable financial position to face a potential reduction in operating cash flow generation. One important issue to monitor in the industry is the BRL evolution, as its appreciation makes imports more attractive, which could ultimately jeopardize or delay a recovery in the domestic market and consequently of domestic producers. The Brazilian government responded to the economic downturn with some measures benefiting the steel sector, such as a tax incentive on car sales and the project "My House My Life" targeting the construction of one million homes, which has already been reflected in monthly gains in domestic steel consumption. The domestic focus of CSN and Usiminas is a plus nowadays. After a difficult end of 2008 and beginning of 2009, the global economic recovery might happen in 4Q09 and markets are already anticipating such a reality, pressuring commodity prices up in the second quarter of 2009. If growth resumption also stimulates demand, the most important threats the sector faces ahead might well be minimized as early as this year. Moreover, Brazilian steel and mining companies have entered the global economic crisis in a position of strength, with low production costs and comfortable cash positions. When growth resumes, global players might be less in number and Brazilian companies will be ready to take advantage of the recovery.

Positioning: CSN is among the largest integrated steel-making companies in Latin America, with annual installed production capacity of 5.6 mn tons of crude steel, 5.1 mn tons of rolled products, 21 mn tons of iron ore and 1.5 bn tons of reserves at Casa da Pedra mine (fully owned). It had market shares of 34%, 26%, 49% and 99% in hot-rolled products, cold-rolled products, galvanized products and tin mill products, respectively, and total assets reached 31.5 bn BRL in 2008. Description: CSN, established in 1941 and privatized in 1993, is an integrated steel producer with operations in mining, steel, logistics, cement and energy (self-sufficient). CSN produces a broad range of flat steel products, from slabs to higher value-added hot rolled, cold rolled, galvanized and tin plate, and plans to debut in the long steel market as well. The company employed more than 15,629 people in 2008. In December 2008, the company sold 40% of Namisa, a mining company, to an Asian consortium formed by Itochu, JFE Steel, Nippon Steel, Sumitomo Metal Industries, Kobe Steel, Nisshin Steel and Posco, which paid 3 bn USD. Shareholders: CSN is controlled by Vicunha Group via Vicunha Siderúrgica, a company with the only purpose of holding CSN's shares. Vicunha Siderúrgica (which is owned by the Steinbruch family) holds 43.4% of CSN, BNDESPAR holds 3.6%, CBS (CSN employees pension fund) holds 4.4%, treasury shares account for 4.3%, and the remaining is free float. The company is listed on the São Paulo and New York stock exchanges, and has no preferred shares, only ordinary.

Key Ratios 2006

EBITDA Margin EBITDA Growth Net Revenues Growth % Sales Abroad ROA ROE EBITDA/ Net Int Expenses EBITDA/Interest Costs Total Debt/EBITDA S-Term Debt/EBITDA Net Debt/EBITDA FC Debt/ Total Debt FC Hedged Debt/Total FC Debt Net Debt/ Assets Net Debt/ Equity FFO/Total Debt (FFO-Capex-Div)/Total Debt

Source: CSN, BIE

Rating 2007

42,6% 34,7% 26,6% 28,1% 10,8% 38,7% nm 6,6x 1,8x 0,4x 1,0x 70,0% 3,0% 18,2% 65,1% 58,6% 32,8%

2008

47,1% 35,4% 22,4% 22,8% 18,3% 86,7% 2,4x 9,0x 2,2x 0,5x 0,8x 65,7% 37,4% 16,9% 79,9% 9,2% <0

Moody's

LC Curr Debt FC Curr Debt Outlook Senior Unsecured Ba1 Ba1 Stable Aa1.br FC LT Iss LC LT Iss Outlook Nat.

S&P

BB+ BB+ Positive brAA+

Fitch

FC LT Iss LC LT Iss Senior Uns. Debt Outlook Nat LT BBBBBBBBBStable AA(bra)

40,0% -21,8% -9,9% 29,2% 4,7% 19,1% 4,0x 3,4x 2,6x 0,3x 1,9x 81,2% 2,3% 27,2% 111,1% 25,6% <0

Moody's

Sep-08 Ba1

Global FC Ratings Evolution S&P

Jun-08 BB+ Apr-06 Jun-06 Aug-06

Fitch

BB BB+ BBB-

Moody's

Sep-08 Aa1.br

Local Rating Evolution S&P

Jun-08 brAA+ Jun-06

Fitch

AA(bra)

MN BRL

Total Assets Cash Equity Short Term Debt Total Debt Net Debt Net Revenues EBITDA Net Income Funds from Operations Capex Dividends

Source: CSN, BIE

2006

25.028,3 2.623,1 6.124,1 1.080,5 9.425,3 6.802,2 9.040,4 3.616,4 1.167,5 2.409,6 1.450,2 2.069,7

2007

27.052,2 3.846,2 7.542,3 1.828,0 8.758,9 4.912,7 11.441,0 4.870,3 2.922,4 5.132,4 1.571,0 686,0

2008

31.497,4 9.224,1 6.662,6 2.997,4 14.549,1 5.325,0 14.002,9 6.593,0 5.774,1 1.343,9 2.305,3 2.274,6

Amount

Coupon

Liquid Issues Call/Put Issue Date

07-16-2003 05-04-2006 06-10-2004 12-23-2003 09-24-2004 06-09-2005 07-14-2005 02-09-2006 MW+50 bps na MW+50 bps na MW+50 bps MW+50 bps Call 7/10 Call 2/11

Maturity

08-04-2010 02-01-2012 05-03-2012 12-16-2013 01-15-2015 05-06-2015 Perp Perp

Ratings

BBB brAA+ BBB-/BBB Ba1/BB+/BBBBa1/BB+/BBBBBB-/BBB BB+/BBBBB-/BB

7,280% 42,6 mn USD 600 mn BRL 103.6%*DI 80,979 mn USD 7,427% 9,750% 550 mn USD 10,000% 400 mn USD 220,48 mn USD 6,148% 9,500% 750 mn USD 9,875% 450 mn USD *

Source: Bloomberg, BIE, * Vicunha Aços.

Debt Maturity Schedule 2008

Net Revenues Evolution by Segment

100% 4000

(MN BRL)

80% 60% 40% 20% 0 2009 2010 2011 2012 2013 2014 After Perpetual 2014

Source: CSN, BIE

3000 2000 1000 0

2006 Steel

2007 Mining Other

2008

Source: CSN, BIE

Risk policy: CSN's financial policy controls credit and market risks. Derivatives contracted to hedge interest rate and foreign exchange risks should respect the parameters established in the policy. Because part of its debt is denominated in foreign currencies and the majority of revenues come from Brazil, CSN hedges this exposure using unleveraged derivatives such as swaps and future contracts and cash and equivalents denominated in foreign currencies. The company has contracted a total return swap on its own equity ­ADRs in New York- being exposed to its own equity price and the BRL/USD variation. By the time of closing this publication, the company announced the end of the equity swap. Credit positives: (i) one of the lowest cost producers worldwide, primarily due to its vertically integrated structure, with ownership of key raw materials (iron ore mines and energy and coke self-sufficiency), (ii) increasing business diversification in related industries and by product, (iii) expansion to valuable iron ore business, (iv) strong operational performance reflected in increasing EBITDA margin, (v) increasingly exposure to Brazil, (vi) favorable domestic market position, (vii) sound liquidity position, (viii) decrease in foreign currency debt and increase in its hedging. Credit negatives:(i) exposure to volatile steel prices and sector cyclicality, (ii) sharp fall in steel demand and prices, (iii) high competition in the sector, (iv) leverage increase, (v) high short term refinancing risk, although covered by strong cash position, (vi) aggressive capex plan and dividend policy, (vii) no geographical diversification, (viii) drop in operating cash flow generation, (ix) the equity swap linked to its own ADRs led to a large financial loss in 2008. Outlook: CSN's basic principles are financial solidity, fully integrated structure, self-sufficiency in its main inputs and to have one of the lowest steel production costs worldwide. The company plans to increase production capacity of iron ore, long steel and cement. In the case of iron ore, it expects to increase its production capacity from the actual 28 to 90 mn tons/year up to 2013. For 2009, iron ore production and sales are expected to be 37 and 32 mn tons, respectively. In steel, CSN plans to threefold its annual crude steel capacity to 15 mn tons. The company intends to increase its market participation in Brazil and to expand abroad, especially in the EU and US, through its subsidiaries and new acquisitions. CSN plans to produce locally, where costs are lower, and to finish higher-added products in the external markets in order to act there as a local player, namely in the EU and US. CSN also targets to expand the product portfolio, starting to produce 600k tons of long steel in 2010. The environment is adverse, although exposure to the domestic market could be a buffer to more severe international conditions. The main challenge for CSN this year will be, in our view, to decrease leverage in a hostile operational cash flow generation environment coupled with aggressive capex and dividend's policies.

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Metalúrgica Gerdau

Positioning: Metalúrgica Gerdau is the largest long steel producer in the Americas and the second largest in the world. The company has an installed capacity of 26 mn tons and produced 19.5 mn tons of steel in 2008, ranking the 13th largest steel producer in the world (Source: Worldsteel). It is the most international Brazilian company of the sector, with operations in 14 countries. Total assets reached 60.2 bn BRL in 2008. Description: Metalúrgica Gerdau, through its subsidiary Gerdau SA, produces crude, long, specialty, rolled and drawn steel. The group operates in Brazil, Uruguay, Guatemala, Chile, Argentina, Peru, Colombia, Venezuela, Mexico, Dominic Republic, Canada, USA, Spain and India. Its creation dates back to 1901 and currently employs around 46,000 people worldwide. In 2008, Gerdau spent 3.7 bn USD in the acquisition of stakes in 18 companies, among which the acquisition of Macsteel (second largest specialty producer in the US), the participation increase in Aços Villares by 28.9% to 63.9% (Brazilian specialty steel producer) and the participation increase by 20% to 60% in Corporación Sidenor SA (holding of the largest specialty steel producer in Spain), aimed at reinforcing its presence in the specialty steel business. Shareholders: Metalúrgica Gerdau is controlled by companies owned by the Gerdau family (24.1% of the total capital and 67.4% of the voting capital). The company is listed on the São Paulo stock exchange. The subsidiary Gerdau SA, which is 48.9% owned by Gerdau companies (80.1% voting capital) is listed on the São Paulo, New York, and Madrid stock exchanges. Gerdau SA owns 66.4% of Gerdau Ameristeel, which is listed on the New York and Toronto stock exchanges.

Usiminas

Positioning: Usiminas is the largest fully integrated steel group in Brazil, the largest flat steel producer of Latin America and the 38th largest steel producer in the world, with an annual production of 8 mn tons of crude steel and 3.8 mn tons of iron ore. The Usiminas System has a leadership position in the domestic flat steel segment, with 49% of the market in 2008. Total assets amounted to almost 27.6 bn BRL in 2008. Description: Usiminas System was established in the 50s and is the result of the integration of Usiminas and Cosipa's operations, along with the acquisition of stakes in other Latin American producers like Siderar, Sidor and Hylsamex, based in Argentina, Venezuela and Mexico, respectively. Usiminas also holds equity stakes in logistics and distribution companies. With the acquisition of J. Mendes, a mining company, Usiminas got access to all the parts of the productive chain. The group's main products comprise uncoated flat steel products (slabs, heavy plates, hot-rolled and cold-rolled steel), coated products like electro galvanized coils and hot dip galvanized sheets, as well as processed products, such as blanks, strips and stamped parts. In March 2009, Usiminas bought Zamprogna, the largest independent distributor in Brazil. The company had 29,784 direct employees in Brazil at year-end 2008. Shareholders: The controlling group is comprised by Japan's Nippon group (27.76% of the voting shares), Brazilian group Camargo Corrêa (12.98%), Votorantim Group (12.98%), Usiminas' employees pension fund (10.13%), and Banco do Brasil pension fund Previ (10.44%). Its ordinary and preferred shares are listed on the São Paulo, Madrid and New York (ADR) stock exchanges.

Key Ratios 2006

EBITDA Margin EBITDA Growth Net Revenues Growth % Sales Abroad (vol)* ROA ROE EBITDA/ Net Int Expenses EBITDA/Interest costs Total Debt/EBITDA S-Term Debt/EBITDA Net Debt/EBITDA FC Debt/ Total Debt FC Debt**/ Total Debt FC Hedged Debt/Total FC Debt Net Debt/ Assets Net Debt/ Equity FFO/Total Debt (FFO-Capex-Div)/Total Debt 22,6% 5,9% 9,9% 73,3% 5,0% 10,5% nm 7,6x 1,7x 0,4x 0,6x 72,1% 47,3% 16,0% 11,7% 24,6% 47,3% 9,0%

Rating 2007

20,3% 6,8% 18,3% 71,5% 10,3% 26,4% nm 5,1x 2,6x 0,4x 1,7x 76,7% 30,6% 0,0% 25,9% 66,2% 39,9% 14,8%

Key Ratios Fitch

FC LT Iss LC LT Iss Senior Uns Outlook Nat LT BBBBBBBBBStable AA+(bra) EBITDA Margin EBITDA Growth Net Revenues Growth % Sales Abroad (vol) ROA ROE EBITDA/ Net Int Expenses EBITDA/ Interest Costs Total Debt/EBITDA S-Term Debt/EBITDA Net Debt/EBITDA FC. Debt/ Total Debt FC. Hedged Debt/Total FC Debt Net Debt/ Assets Net Debt/ Equity FFO/Total Debt (FFO-Capex-Div)/Total Debt

Source: Usiminas, BIE

Rating 2007

36,2% 17,8% 11,4% 23,5% 15,4% 25,6% 806,9x 22,2x 0,5x 0,1x nm 78,6% 54,1% nm nm 156,4% 71,3%

2008

23,8% 60,1% 36,9% 74,7% 8,1% 19,9% 4,3x 5,7x 2,4x 0,4x 1,9x 81,1% 32,8% 0,0% 31,6% 78,0% 14,3% <0

Moody's

LT Fam. Rating Sen Unsec Debt Outlook Ba1 Ba1 Stable FC LT Iss LC LT Iss LT Nat Iss

S&P

BBB- watchBBB- watchbrAAA watch-

2006

34,2% -21,9% -4,8% 32,9% 13,5% 24,1% 12,8x 15,1x 0,7x 0,2x 0,1x 83,5% 64,0% 1,8% 3,2% 116,0% 69,3%

2008

38,3% 20,1% 13,6% 17,2% 11,8% 21,5% 5,1x 16,6x 1,1x 0,2x 0,4x 68,9% 58,6% 9,7% 17,8% 32,5% <0

Moody's

Senior Unsec. Subordinated Debt Outlook LT Issuer Subordinated Baa3 Ba1 Aa1.br Aa2.br

S&P

Fitch

BBBBBBStable brAAA FC LT Issuer LC LT Issuer Seniour Uns. Outlook Nat LT Nat Sr Uns Subordinated BBBBBBBBBStable AA+(bra) AA+(bra) AA(bra)

FC LT Iss LC LT Iss Outlook LT Iss Credit

Moody's

Global FC Ratings Evolution S&P

Jun-07 BBBApr-06 Jan-07

Fitch

BB+ BBB-

Moody's

Jan-06 Jul-07 Dec-07 Ba3 Ba1 Baa3

Global FC Ratings Evolution S&P

May-06 Jun-07 BB+ BBB-

Fitch

Feb-07

BBB-

Source: Gerdau, BIE. *exports plus operations abroad **FC debt, excluding debts of companies abroad From 2007 on, the reporting follows the International Financial Reporting Standards - IFRS

MN BRL

Total Assets Cash Equity Short Term Debt Total Debt Net Debt Net Revenues EBITDA Net Income Funds from Operations Capex Dividends

Source: Gerdau, BIE

2006

27.112,8 5.837,9 12.862,8 2.014,5 9.006,2 3.168,3 23.547,8 5.317,4 1.345,5 4.263,7 2.281,2 1.172,6

2007

41.835,7 5.068,0 16.343,6 2.614,0 15.887,0 10.819,0 30.614,0 6.223,0 4.318,5 6.342,5 2.758,2 1.233,0

2008

60.156,9 5.307,9 24.377,9 3.955,0 24.326,0 19.018,1 41.907,8 9.961,0 4.842,8 3.470,4 2.738,6 1.677,4

Moody's

Not Rated

Local Rating Evolution S&P

Jun-07 brAAA Jan-07

MN BRL Fitch

AA+(bra) Total Assets Cash Equity Short Term Debt Total Debt Net Debt Net Revenues EBITDA Net Income Funds from Operations Capex Dividends

Source: Usiminas, BIE

2006

18.697,0 2.721,1 10.418,0 739,9 3.059,1 338,0 12.415,3 4.247,8 2.515,5 3.548,1 524,2 903,2

2007

20.698,7 3.950,9 12.474,3 563,9 2.575,9 -1.375,0 13.824,8 5.002,7 3.187,4 4.029,4 1.193,5 999,2

2008

27.580,1 4.008,0 15.115,4 1.088,4 6.691,3 2.683,3 15.707,0 6.008,4 3.248,8 2.171,5 2.224,9 1.151,4 Dec-07 Jul-09

Moody's

Aaa.br Aa1.br

Local Rating Evolution S&P

May-06 Jun-07 brAA+ brAAA Feb-07

Fitch

AA+(bra)

Amount

Coupon

Liquid Issues Call/Put Issue Date

Maturity

Ratings

Amount

1,500 mn USD 600 mn USD

Coupon

7,250% 8,875%

Liquid Issues Call/Put Issue Date

10-22-2007 09-22-2005 Put @101% Call 09/10

Maturity

10-20-2017 Perp

Ratings

02-01-2013 Ba1/brAA+e Sinkable 500 mn BRL DI+42 bps 03-05-2008 06-14-2016 Baa3/BBB-/BBBna 06-14-2006 200 mn USD 8,250% 01-18-2008 Call MW+50 bps,Put @101% 01-18-2018 Baa3/BBB-/BBB400 mn USD 7,250%

Source: Bloomberg, BIE

BBB-*-/BBBBa1/BBB-*-/BBB-

Source: Bloomberg, BIE

Debt Maturity Schedule 2008

2008 Production by Origin (tons)

15%

2008 Sales by Destination (tons)

excluding sales for controlled companies

Debt Maturity Schedule 2008

3000 2750 2500 2250 2000 1750 1500 1250 1000 750 500 250 0

Other Germany

2008 Sales Profile

10%

Processed Slabs products 8% 3% Hot dip galvanized coils

14% 25%

14%

South Korea

Thailand

7000

(MN BRL)

4%

(MN BRL)

6000 5000 4000 3000 2000 1000 0 2009 2010 2011 2012 2013 2014 onwards

10%

34%

12%

6%

Heavy plates

6%

25%

Argentina

17%

Eletrogalvanized coils

3%

9%

13%

Chile 7% Taiwan Mexico Vietnam Cold coils

US

24%

Spain

41% North America

Source: Gerdau, BIE

40% Specialty steel Brazil LatAm (ex. Brazil) Brazilian exports

12% 2009 2010 2011 2012 2013 2014 onwards

5%

Hot coils

31%

10%

2%

Source: Usiminas, BIE

Source: Usiminas, BIE

Source: Gerdau, BIE

Risk policy: Gerdau believes that risk management is important for its strategy of growth with profitability. The company is exposed to market risks, mainly interest rate and foreign exchange risks. The objective of managing such risks is to avoid the unexpected variations in the consolidated results that those risks could provoke. Internal policies establish that liabilities have to be denominated in the same currencies as cash flow generation. According to Gerdau's internal policy, the financial result must stem from the generation of cash from its business and not from gains in financial markets. It therefore considers that the use of derivatives should serve non-speculative purposes and is intended to hedge possible risks. Contracting a derivative must have as underlying reference a specific asset or liability, and the position should not be leveraged. Gerdau assesses its exposure to the exchange rate by subtracting its assets in dollars to liabilities and thereby calculating its net foreign exchange exposure. Such a result is what really will be affected by a movement in the foreign currency, and therefore will be hedged through swap operations, if the company has more liabilities in dollars than assets. Credit positives: (i) geographic diversification of revenues and production, (ii) vertical and horizontal integration, (iii) diversified raw material sources, (iv) strong market position in long steel where it operates, (v) product diversification, (vi) revenue and EBITDA growth, (vii) strong cash flow generation and rising margins, (viii) adequate interest coverage, (ix) strong liquidity, (x) low cost position in Brazil, focused on efficiency worldwide, (xi) got approval from 40 financial institutions and respective debt holders to relax covenants temporary, (xii) already implemented initiatives to reduce fixed costs and capital expenditures. Credit negatives: (i) cyclical business and commodity exposure, partially mitigated by its geographic diversification, (ii) competitive pressures, especially in North America, (iii) need for further improvement of operational efficiency in North America, (iv) acquisitions and associated integration risks, (v) reduction of operational cash flow to half, that jointly with high dividends and capex, led to negative free cash flow in 2008, (vi) leverage increased, (vii) high exposure to North America, (viii) strong fall in demand, namely in North America. Outlook: Gerdau plans to focus on maintaining its leadership in long steel in Brazil and Latin America, on top of being a relevant player in all the markets where it acts. The company intends to participate in all steel segments, including long, flat and specialty steels, developing expertise in all the steel businesses. Gerdau also plans to diversify geographically, expanding operations outside America. Deleveraging is the main challenge this year, as the environment is not supportive in terms of prices and demand, especially in the US, where it has a high exposure and operations already lag. The company is already taking measures to content costs and expenditures, including capex.

Risk policy: Usiminas has a conservative financial policy, managed by the Board. This policy has the following objectives: (i) maintain liquidity, (ii) define the concentration level of its operations, and (iii) control the exposure level to financial market risks. The company uses derivatives to protect financial liabilities and reduce its foreign exchange exposure, avoid currency mismatches and reduce volatility of its cash flows. The company manages actively foreign exchange and interest rate risks. Exports, equivalent to around 14% of Usiminas net revenues, are used as a natural hedge for the external operational payments, on top of the use of derivatives for operational and financial flows. Usiminas does not use derivatives with speculative purposes. Credit positives: (i) among the lowest production costs worldwide, on the back of logistics, proximity to raw materials and technology, (ii) dominant position in the flat steel market, (iii) shareholding structure including large and recognized groups, (iv) more focused on higher margin domestic market, (v) strong cash position, (vi) sound interest coverage, (vii) vertical integration with the acquisition of the iron ore mine J. Mendes and distributor Zamprogna, (viii) increasing EBITDA margin, (ix) diversified product portfolio, (x) rapid response to the crisis by cutting capex, reducing working capital and focusing on cost reduction, (xi) very low short term debt maturity risk and comfortable debt maturity schedule. Credit negatives: (i) exposure to output and input price volatility, (ii) high competition in the industry, both domestically and internationally, (iii) leverage increased sharply, although credit metrics continued sound, (iv) exposure to USD-linked debt not fully hedged, (v) aggressive dividend policy, (vi) execution risk of the capex program, (vii) sharp fall of demand and consequently prices, (viii) reduction in operating cash flow generation, (ix) Vale sold its shares in the company. Outlook: Usiminas' strategy is to increase its productive capacity to capture the internal market growth and enjoy internalization opportunities, to expand the product portfolio, and to achieve vertical integration upstream and downstream. By integrating the distribution, Usiminas intends to maintain its domestic market share around 50% and to assure presence in new growing markets and products. Domestic market focus is a plus, due to its higher margin and the fact that Brazilian growth could resume in the second half of the year. The main challenge we see ahead is the implementation of its capex program (2.9 bn BRL planned for 2009) along with the maintenance of the sound credit metrics in this more adverse operational environment.

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Vale

Positioning: Vale is the largest diversified mining company of the Americas and the second largest in the world, being the leading producer and exporter of iron ore and pellets, with a 33% global market share, and the world's #2 producer of nickel. Its reserves in both minerals are also the highest, with 7,619 mn tons of iron ore and 11.6 mn tons of nickel. Total assets reached 185.8 bn BRL. Description: CVRD has a multi-commodity business approach, ranging from iron ore, pellets, manganese, iron alloys, copper, steel, kaolin, bauxite, alumina, nickel, coal, aluminium to potassium. Vale operates in the five continents through its mining operations, mineral research plants, and commercial offices, present in Brazil, Canada, USA, Colombia, Peru, Chile, Argentina, Barbados, Norway, England, Germany, Switzerland, Wales, France, Gabon, Guinea, Mozambique, Congo, Angola, South Africa, Zambia, Afghanistan, Oman, India, Mongolia, China, Thailand, Singapore, Japan, South Korea, Indonesia, Philippines, New Caledonia and Australia. Vale is also present in the logistics and energy businesses. Vale is the name of the company since November 2007. Shareholders: The largest shareholder is Valepar, a non-operational holding company whose main asset is CVRD stake, owning 53.9% of the voting capital and 33.3% of the total capital. In turn, Valepar is owned by Litel/Litela (Banco do Brasil's employees pension fund - Previ), Bradespar, Mitsui, BNDESPAR and Elétron. BNDESPAR also holds directly 6.9% of Vale's voting capital. Apart from this 4.3% total capital participation, the Federal Government has 1.2% more through the National Treasury and 12 preferred shares representing a Golden Share. The company is listed on the Bovespa, NYSE and Latibex stock exchanges.

OIL, GAS AND PETROCHEMICALS ­ SECTOR BRIEF

A quick look to the graph below gives an idea of the impacts of the crisis in the oil and petrochemical sector. Oil prices fell around 75% during the second half of 2008, and oil-linked products followed through. Commodities in International Markets since January 2006

250 225 200

Key Ratios 2006

EBITDA Margin EBITDA Growth Net Revenues Growth External Market/ Gross Revenues ROA ROE EBITDA/ Net Int Expenses EBITDA/ Interest Costs Total Debt/EBITDA S-Term Debt/EBITDA Net Debt/EBITDA FC Debt/Total Debt FC Hedged Debt/Total FC Debt Net Debt/ Assets Net Debt/ Equity FFO/Total Debt (FFO-Capex-Div)/Total Debt

Source: Vale, BIE

Rating 2007

51,9% 47,7% 43,0% 85,4% 15,1% 35,1% nm 12,6x 1,1x 0,1x 1,0x 70,9% 0,0% 25,3% 59,1% 56,8% 6,4%

2008

49,6% 4,2% 8,9% 84,0% 11,5% 22,1% 9,1x 15,3x 1,3x 0,1x 0,4x 72,9% 0,0% 8,3% 15,9% 72,2% 18,1%

Moody's

LC Curr Issuer Senior Uns. Debt Outlook Nat LT Senior Uns. Debt Baa2 Baa2 Stable Aaa.br Aaa.br LT FC Iss LT LC Iss Outlook Nat LT

S&P

BBB+ BBB+ Stable brAAA

Fitch

FC LT Debt LC LT Debt Sen. Unsec. Deb Outlook Nat LT BBB BBB BBB Stable AAA(bra)

50,3% 36,3% 33,2% 81,6% 10,9% 34,4% 13,0x 7,8x 2,2x 0,2x 1,8x 80,2% 0,0% 32,4% 102,0% 28,0% 1,7%

175 150 125 100 75

Moody's

Nov-06 Aug-08 Baa3 Baa2

Global FC Ratings Evolution S&P

May-06 Oct-06 Jul-08 BBB+ BBB BBB+ Apr-06 Jun-06 May-09

Fitch

BB+ BBBBBB

50 25 Jan-06 Jan-07 Jan-08 Mar-06 May-06 Sep-06 Nov-06 Mar-07 May-07 Sep-07 Nov-07 Mar-08 May-08 Sep-09 Nov-08 Jan-09 Jul-06 Jul-07 Jul-08 Mar-09 May-09 Jul-09 0

Moody's

Local Rating Evolution S&P

Nov-06 brAAA Oct-06 May-09

Fitch

AA+(bra) AAA(bra)

Oil

Ethylene

Naphtha

Propylene

Prolyethylene

Polypropylene

Source: Bloomberg, Banco Itaú Europa. Base indices (100) as of January 1st, 2006.

MN BRL

Total Assets Cash Equity Short Term Debt Total Debt Net Debt Net Revenues EBITDA Net Income Funds from Operations Capex Dividends

Source: Vale, BIE

2006

123.008,9 9.778,0 39.099,0 3.661,2 49.664,8 39.886,8 45.291,0 22.759,0 13.431,0 13.929,0 10.102,0 2.974,0

2007

132.899,0 2.128,0 57.030,0 3.361,4 35.806,1 33.678,1 64.764,0 33.619,0 20.006,0 20.347,0 13.159,0 4.882,0

2008

185.781,0 30.033,0 96.275,0 2.671,0 45.365,0 15.332,0 70.541,0 35.022,0 21.279,0 32.769,0 18.716,0 5.827,0

Amount

Coupon

Liquid Issues Issue Date Call/Put

12-17-2006 05-13-2002 08-08-2003 12-08-2003 12-17-2006 09-26-2003 01-10-2006 11-21-2006 09-23-2002 01-15-2004 11-21-2006 na MW+35 bps na na na MW+25 bps na MW+25 bps MW+40 bps na MW+35 bps

Maturity

11-20-2010 05-15-2012 08-15-2013 08-15-2013 11-20-2013 10-15-2015 01-11-2016 01-23-2017 09-15-2032 01-17-2034 11-21-2036

Ratings

Baa2/brAAA Baa2/BBB+/BBB Baa2 Baa2 Baa2/brAAA Baa2/BBB+/BBB Baa2/BBB+/BBB Baa2/BBB+/BBB Baa2/BBB+/BBB Baa2/BBB+/BBB Baa2/BBB+/BBB

1,500 mn BRL 101.75%*DI 400 mn USD* 7,750% 17.85 mn USD 9,000% 106.15 mn USD 9,000% 4,000 mn BRL DI+25bps 300 mn USD* 5,700% 1,000 mn USD 6,250% 1,250 mn USD 6,250% 400 mn USD* 7,200% 800 mn USD 8,250% 2,500 mn USD 6,875%

Source: Bloomberg, BIE. * issued by Inco.

Despite of this large decline in output prices, net revenues increased in all the companies studied in this chapter, as annual prices were higher on average. EBITDA margins behaved mixed, with Petrobras and Braskem suffering more at this point - despite of the lower input EBITDA Margin Evolution

35% 30% 25% 20%

naphtha prices at the later - and Lupatech outperforming. Ultrapar managed to post an EBITDA margin gain as the consolidation of Ipiranga started to show synergies compensating gas price pressures.

Debt Maturity Schedule 2008

25000 22500 20000

(MN BRL) Europe 24%

Gross Revenues by Product and Destination 2008

Other 4% Other Logistics 4% 5% Other non-ferrous 11% North America 12% South America (ex. Brazil) 3% Asia (ex-China) 24% Source: Vale, BIE China 17% Copper 5% Iron ore 43%

Brazil 16%

15000 12500 10000 7500 5000 2500 0 2009 2010 2011 2012 2013 2014 from Perp

15% 10%

Nickel 15% Other iron ore-linked 4% Iron ore pellets 13%

5% 0% Petrobras Ultrapar 2007

Source: Company data, Banco Itaú Europa

Braskem 2008

Lupatech

Source: Vale, BIE

Risk policy: Vale practices a formal risk management policy focused on market (foreign exchange, interest rate and commodity prices), credit and operational risks. Vale's market risk mitigation strategies are strictly oriented to promote the stability of cash flows in USD and to reduce the mismatch produced by the fact that revenues are mainly denominated in USD and costs are mainly denominated in BRL and Canadian dollars. In order to reduce this mismatch, the company uses non-leveraged "plain vanilla" derivatives such as swaps, forwards and zero-cost collars, and does not allow the use of derivatives with speculative purposes. Notional amounts of the contracts cannot be higher than the exposure itself. Credit positives: (i) global leading position, (ii) large long-lived reserves and high quality portfolio of products, (iii) key positions in transportation logistics in Brazil, (iv) low-cost structure, (v) strong revenues and earnings growth along with high margin business, (vi) strong and steady cash flow generation and profitability, even in adverse years, (vii) net debt reduction on the back of a very strong cash position, and low leverage even after large acquisitions, (viii) comfortable debt maturity schedule with no short term refinancing risk, (ix) availability of medium and long-term credit lines, (x) well positioned to capture future growth, (xi) high exposure to exports leads to natural hedge for foreign currency denominated debt, (xii) active commodity price hedging policy, (xiii) operations in Brazil supported by in-house rail, logistics, and power generation, (xiv) rapid response to the crisis, (xv) divest in non core business, such as Usiminas. Credit negatives: (i) risks associated with the execution of the diversification strategy into other metals, (ii) multicurrency exposure management, (iii) severe downturn in commodity prices and demand worldwide, (iv) price negotiations ending in negative adjustments, (v) aggressive dividend payments, (vi) aggressive capital expenditures despite of the recent adjustment. Outlook: Vale maintains its focus on product and geographic diversification, through organic growth, but aware of the recession, the company has planned some actions to respond to it, such as costs savings, strengthen competitiveness and financial flexibility initiatives. These measures are the following: maximizing efficiency of its corporate activities, in sourcing, re-sourcing of supplier contracts, cutting costs of project development, optimizing plant and labor utilization, optimizing flow of materials, streamlining line of products and shutting down higher cost operating units. After implementing a record capex program of 10.2 bn USD in 2008, Vale plans to invest 9 bn USD in 2009, which was revised down in May from the 14.2 bn USD announced in October, as follows: 34.4% in non ferrous minerals, 25.5% in ferrous minerals, 20.6% in logistics, 7% in power generation, 6.4% in coal, 2.9% in steel and 3.3% in others. With a commodity linked business, Vale seems vulnerable to the current international turmoil, especially if economic weakness continues to push commodity prices further down. Nevertheless, its very sound credit profile is a buffer for such a risk.

Operating cash flow generation was resilient, with the exception being Petrobras, generating almost 50 bn BRL of operating cash in 2008, up 18% YoY. However, high capital expenditures continued, along with acquisitions, especially in the cases of Ultrapar and Lupatech, which led free cash flow to be negative. Consequently, leverage

increased. The BRL depreciation during the second half of the year also pushed foreign currency-denominated debt up.

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Net Debt/EBITDA

(X) 5.0 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0 Petrobras Ultrapar 2007

Source: Company data, Banco Itaú Europa

Braskem 2008

Lupatech

Another possibility could be awarding to Petrobras all of the non-awarded pre-salt blocks. In this case, Petrobras will be chosen by the newly created Petrosal to explore the blocks with pre-salt potential through a productionsharing contract. This case could not be very positive for Petrobras, because (i) the company might be forced into contracts that are not necessarily its first priority (the government has confirmed that the pre-salt rent goes straight into a social fund), eventually competing with projects whose profitability is higher based on current concession contracts, and (ii) might prevent the company from bringing in partners to share risk and also the massive capex burden.

As exposed above, risks derived from the lack of regulatory definition are here. Once this issue is solved, the potential for success of the pre-salt is huge, but problems will arise for sure in the way. Petrobras' regulatory definition is not easy either, because each potential model presents advantages and disadvantages for the company. In any case, we do not expect the government to define a regulatory framework which could adversely affect its participated company.

Further steps were taken in 2008 for the consolidation of the petrochemical industry. As far as our issuers in the sector are concerned, Petrobras' minority stakes in Copesul, Ipiranga Petroquímica, IQ Soluções Químicas and Petroquímica Paulínia were transferred to Braskem, following an investment agreement that the two companies made in 2007. In exchange, the oil producer increased its participation in the petrochemical company to 31% of the voting capital. Petrobras created Quattor Participações with Petroquisa and Unipar with the objective of consolidating 75% of Rio Polímeros, 76.6% of Suzano Petroquímica, 77.2% of Petroquímica União, 99.9% of Polietilenos União and Unipar Divisão Química. Petrobras holds 40% of Quattor and the remaining is held by Unipar. Going forward, as economic growth resumes, oil and petrochemical prices should increase. However, when looking at the first graph, it seems that moves in the first are more extreme than in petrochemical products, which could be a disadvantage at the time of the recovery. Moreover, capacity additions in Asia and in the Middle East by year-end, in a fragile demand context, should somewhat bar any increasing price trend. Domestic petrochemical prices have been historically higher than international ones, although following similar paths and indexations, due to internalization, import taxes and service fee differentials. The continued appreciation of the local currency should open room

for more imports, restricting material price increases in BRL. Moreover, as domestic prices usually follow an international parity adjusted by the premium in dollar terms, an appreciated currency reduces the premium for local players. In contrast with the competitive environment seen in the petrochemical industry, Petrobras currently plays in a quasi monopoly and should benefit from the resumption of oil prices. Nevertheless, the actual regulatory scenario is very uncertain, due to the lack of definition for the presalt development, which is expected to be announced at anytime soon. Meanwhile, news suggests different exploration models. One model could consist of blocks ­ both onshore and pre-salt ­ continuing to be auctioned as concessions. Companies winning pre-salt auctions will get production sharing contracts in exchange of exploratory rights. The Mines and Energy Minister has already confirmed the creation of Petrosal, which could become a partner for the development of reservoirs. Since it is unlikely that the company will be in a position to contribute with its portion of the capex, the government would have to create a carry system whereby the original block holders carry Petrosal's share of the capex in exchange for some sort of future remuneration. This would just add more uncertainty to the pre-salt equation, which already has so much capex invested up front.

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45

Braskem

Positioning: Braskem is the leader thermoplastic resins producer in Latin America and the third largest in the Americas. It held a 50% market share in the Brazilian polyethylene market, 52% in polypropylene, and 53% in PVC as of December 2008. Braskem was the world's first company to produce PE (high and low density, linear and ultrahigh molecular weight) and PP certified as 100% made from renewable raw materials, with sugarcane ethanol used as feedstock. Total assets reached 22.7 bn BRL in 2008. Description: Created in the 70s and previously named Copene, Braskem is the result of the merger of Odebrecht and Mariani groups' petrochemical and chemical assets. It was the first company to integrate first and secondgeneration petrochemicals' production in Brazil. Braskem has 18 plants located in Maceió and Marechal Deodoro (Alagoas state), in Camaçari (Bahia state), Triunfo (in the state of Rio Grande do Sul) and in São Paulo. Following an investment agreement made with Petrobras in 2007, Petrobras' minority stakes in Copesul, Ipiranga Petroquímica, IQ Soluções Químicas and Petroquímica Paulínia were transferred to Braskem in September 2008. In April, Braskem inaugurated the polypropylene (PP) unit at Paulínia located in São Paulo state, which will have an annual capacity of 350k ton/year and use as feedstock propylene provided by Petrobras refineries. Braskem has an annual production capacity of 11 million tons of chemical and petrochemical products and employed more than 4.7k people in 2008. Shareholders: Its controlling shareholder is the Odebrecht Group with a 46.8% direct voting stake (32.2% of total capital) and 15.6% indirectly (6.1% of the total) through Norquisa (100% owned by Odebrecht). Other shareholders are Petroquisa (Petrobras Group), which has 31.0% of the voting capital and 25.3% of the total. The remaining belongs to minority shareholders. Braskem is listed on São Paulo, New York, and Madrid.

Lupatech

Positioning: Lupatech is the market leader in Brazil in the three segments where it operates: (i) energy products consisting of equipment or services for the oil and gas industries, (ii) flow control comprising valves, including well-known brands "Valmicro""Mipel""Valbol" and "Jefferson" and (iii) metallurgy comprising the development and production of parts, complex parts and subassembly operations targeted at the global automobile industry. Total , , , assets reached 1.6 bn BRL in 2008. Description: Lupatech started its operations in August 1980, with the creation of Microinox. Actually, Lupatech operates in three business segments: (i) Energy Products (deepwater platform anchoring ropes, valves, oil wells completion tools, tube coating, natural gas compressors, sensors and services through the "MNA""CSL OffShore""Tecval""Petroima""Esferomatic""Gasoil""K&S""Aspro""Gavea Sensors""Sinergás" and "Norpatagonica" brands for the , , , , , , , , , oil and gas sector), (ii) Flow Control (industrial valves, primarily for the chemical, petrochemical, pharmaceutical, pulp and paper and construction industries, under the "Valmicro""Mipel""ValBol" and "Jefferson" brand names), and , , (iii) Metallurgy (parts, complex parts and sub-assemblies, mainly for the global auto industry, as well as high-corrosion-resistant cast-alloy housings for industrial valves and pumps, chiefly for applications in the oil and gas industry under the "Microinox""Steelinject" and "Itasa" brands). In 2008, Lupatech realized five acquisitions, one in Argentina, and closed the year with 3,400 workers. , Shareholders: Lupapar Negócios e Empreendimentos Ltda, property of Perini family, has 25.09% of the total capital, BNDESPAR has 11.45%, Fundação PETROS has 11.30% and Executive Officers and Members of the Board of Directors have 5.10%. The remaining shares are free-float traded on the São Paulo Stock Exchange since April 2006. The company has only ordinary shares, no preferred.

Key Ratios 2006

EBITDA Margin EBITDA Growth Net Revenues Growth % Exports ROA ROE EBITDA/ Net Int Expenses EBITDA/ Interest Costs Total Debt/EBITDA S-Term Debt/EBITDA Net Debt/EBITDA FC Debt/ Total Debt FC Hedged Debt/ Total FC Debt Net Debt/ Assets Net Debt/ Equity FFO/Total Debt (FFO-Capex-Div)/Total Debt

Source: Braskem, BIE

Rating 2007

16,4% 43,9% 35,8% 20,1% 3,0% 9,9% 7,7x 6,2x 2,9x 0,4x 2,2x 71,0% 0,5% 30,0% 99,5% 42,0% 25,4%

Key Ratios Fitch

FC LT Iss LC LT Iss Senior Uns Outlook Nat LT BB+ BB+ BB+ Stable AA(bra) EBITDA Margin EBITDA Growth Net Revenues Growth % Exports ROA ROE EBITDA/ Net Int Expenses EBITDA/ Interest Costs Total Debt/EBITDA S-Term Debt/EBITDA Net Debt/EBITDA FC Debt/Total Debt FC Hedged Debt/Total Debt Net Debt/ Assets Net Debt/ Equity FFO/Total Debt (FFO-Capex-Div)/Total Debt

Source: Lupatech, BIE

Rating 2007

25,2% 54,3% 73,1% 26,3% nm nm 1,8x 1,2x 6,8x 0,6x 4,4x 54,9% 0,0% 38,6% 166,6% <0 <0

2008

13,5% -16,5% 1,8% 18,6% nm nm 0,7x 4,3x 5,0x 0,9x 3,7x 76,0% 5,9% 39,8% 245,6% 30,3% 22,3%

Moody's

LT Corp Familiy Outlook LT Corp Familiy Ba1 Stable Aa2.br FC LT Iss LC LT Iss Outlook Nat.

S&P

BB+ BB+ Stable brAA watch +

15,5% -17,3% -0,6% 21,3% 0,6% 2,3% 3,1x 1,8x 3,3x 0,9x 2,4x 49,0% 1,9% 29,2% 110,6% 15,1% <0

2006

28,3% 23,0% 29,1% 39,3% 4,2% 9,7% 21,8x 3,4x 4,1x 0,3x 0,9x 0,7% 0,0% 10,0% 23,3% 1,9% <0

2008

29,8% 115,4% 82,0% 22,2% nm nm 1,1x 0,9x 5,7x 0,8x 4,2x 59,5% 0,0% 54,0% 451,6% 3,4% <0

Moody's

LT Corp Family Ba3 watchLT Corp Family A3.br watch-

S&P

LT Foreign Iss LT Local Iss Outlook LT Issuer BBBBNegative brA-

Fitch

Not Rated

Moody's

Nov-07 Ba1

Global FC Ratings Evolution S&P

Dec-07 BB+ Apr-06 Jun-06

Fitch

BB BB+

Moody's

Jun-07 Ba3

Global FC Ratings Evolution S&P

Jun-07 BBNot Rated

Fitch

Moody's

Nov-07 Aa2.br

Local Rating Evolution S&P

Apr-06 brAA Jun-06

Moody's

Jun-07 A3.br

Local Rating Evolution S&P

Sep-06 brANot Rated

Fitch

Fitch

AA(bra)

MN BRL

Total Assets Cash Equity Short Term Debt Total Debt Net Debt Net Revenues EBITDA Net Income Funds from Operations Capex Dividends

Source: Braskem, BIE

2006

16.304,3 1.961,0 4.311,9 1.811,6 6.729,6 4.768,6 12.992,7 2.012,7 101,3 720,1 953,0 343,4

2007

20.780,7 2.138,9 6.276,4 1.180,0 8.381,9 6.243,0 17.642,5 2.896,2 621,8 3.516,3 1.345,5 43,8

2008

22.701,9 2.948,6 3.679,9 2.146,3 11.986,1 9.037,5 17.959,9 2.418,0 -2.492,1 3.631,3 653,8 301,0

Amount

300 mn BRL 500 mn BRL 250 mn USD 250 mn USD 275 mn USD 500 mn USD 150 mn USD 200 mn USD

Coupon

DI*104.1% DI*103.5% 11,750% 9,375% 8,000% 7,250% 9,750% 9,000%

Liquid Issues Call/Put Issue Date

06-01-2005 09-25-2006 01-22-2004 08-24-2005 09-26-2006 06-05-2008 06-17-2005 04-28-2006 na na na na na MW+50bps Call 6/10 Call 4/11

Amount

275 mn USD

Coupon

9,875%

Liquid Issues Call/Put Issue Date

07-10-2007 Call 07/12

Maturity

Perp.

Ratings

Ba3*-/BB-

Maturity

06-01-2010 09-01-2011 01-22-2014 06-01-2015 01-26-2017 06-05-2018 Perp Perp

Ratings

NR brAA+ BB+/BB+ BB+ BB+/BB+ Ba1/BB+/BB+ BB+/BB+ BB+/BB+

MN BRL

Total Assets Cash Equity Short Term Debt Total Debt Net Debt Net Revenues EBITDA Net Income Funds from Operations Capex Dividends

Source: Lupatech, BIE

2006

569,9 204,3 245,7 20,4 261,5 57,2 223,6 63,2 23,8 5,0 25,8 12,3

2007

1.107,9 238,3 256,7 62,5 665,9 427,6 387,0 97,5 -49,5 -51,5 56,8 5,8

2008

1.616,7 316,9 193,3 173,2 1.189,9 873,0 704,4 210,0 -87,4 40,9 119,5 0,0

Source: Bloomberg, BIE

Net Revenues Breakdown 2008

13%

Source: Bloomberg, BIE

23% 64%

Debt Maturity Schedule 2008

6500 6000 5500 5000 4500 4000 3500 3000 2500 2000 1500 1000 500 0 2009 2010 2011 2012 2013 onwards 16000 14000 12000 10000 8000 6000 4000 2000 0 2006

Net Revenues Evolution

Metallurgy

Source: Lupatech, BIE

Flow Control

Energy Products

(MN BRL)

(MN BRL)

Debt Maturity Schedule 2008

800 (MN BRL) (MN BRL) 600 400 200 0 2009 2010 2011 2012 2013 2014 2015 2016 Perpetual

Source: Lupatech, BIE

EBITDA Breakdown and Evolution

150 100 50 0 Energy Products 2006 Flow Control 2007 Metallurgy 2008

2007 2008 Domestic Market

2006 2007 2008 International Market Basec Petrochemicals Units Other

Ployolefins Unit Vinyls Unit Business Development

Source: Braskem, BIE

Source: Braskem, BIE

Source: Lupatech, BIE

Risk policy: With the objective of protecting its cash flow and reducing the volatility of working capital and investment programs financing, Braskem adopts procedures for managing market and credit risk aligned with its Financial Management Policy and Risk Management Policy. In this context, Braskem has no target forward operations or other operations involving similar derivatives. With practically 100% of its revenues directly or indirectly pegged to the variation in the US dollar and approximately 85% of costs pegged to the same currency, the company believes that maintaining a significant portion of its debt also in US dollar creates a "natural hedge" This position . is based on the principle that the company's debt should always be denominated in the same currency as its cash flow. To protect cash flow in the short term, Braskem seeks to balance the maturity of dollar-denominated liabilities with its dollar-denominated revenue plus cash in the same currency. At the end of 2008, Braskem held two derivative transactions for hedging purposes and with maturities, currencies, rates and amounts perfectly adequate to the assets or liabilities at stake. In any given scenario, negative or positive adjustments in derivative positions will be compensated by positive or negative adjustments in the protected assets and liabilities. Credit positives: (i) integrated operations allowing to capture synergies and maintain a competitive cost structure, (ii) strong domestic market share and leading position in Latin America, (iii) active role in the consolidation of the industry in Brazil, which has enhanced its position, (iv) commitment to efficiency and cost improvement programs proven historically, (v) high capacity utilization rates despite of falling in 4Q08, (vi) product diversification and customization, (vii) prudent liquidity management, shown in a sound cash position, (viii) recovery in operating cash flow generation, (ix) leveraging relationship with Petrobras, a relevant shareholder, business partner and supplier, (x) focus on sustainability, with plans to become the world's first green polyethylene producer at industry scale, (xi) flexible capex depending on business conditions, expected to remain under 900 mn BRL, (xii) focus on the local market, (xiii) extended debt maturity profile. Credit negatives: (i) cyclical sector and commodity price exposure, namely to oil and naphtha, (ii) volatile cost structure, due to correlation of naphtha and ethylene prices with oil and sensitivity to foreign exchange rate, (iii) higher competition in the local industry from imports, due to the strong BRL, (iv) fall in EBITDA margin due to cost pressures, competitive pressures from a strong BRL and demand falling at year end, (v) sizable and increasing leverage, due to foreign exchange exposure, and worsening credit metrics, (vi) high short term refinancing risk compensated by a strong cash position, (vii) increasing foreign currency debt and almost unhedged, (viii) risk of internationalization related to Venezuelan projects, a worse country risk than Brazil, (ix) on top of the current negative conditions, the industry faces uncertainty related to capacity additions worldwide. Outlook: Braskem's strategic vision is becoming one of the top 10 petrochemical companies in the world by 2012. To achieve this goal, Braskem is focused on strengthening its current position by increasing and protecting its core Latin American business, on imparting greater flexibility to its energy matrix by gaining access to raw materials at competitive terms, and on expanding access to attractive markets such as installing its green polymer plant based on renewable feedstock and opportunities for acquisitions or partnerships. In the area of renewable raw materials, 2009 marks the start of construction of the Green PE plant, planned to start production in early 2011, with capacity of 200k ton/year. High competition internally and a challenging international environment are relevant threats for the company ahead. Braskem's main challenge, in our view, is to decrease leverage, while implementing its investment plan.

Risk policy: Lupatech is exposed to several financial risks, such as market risk (including currency risk, fair value interest rate risk, cash flow interest rate risk and price risk), credit risk and liquidity risk. Its program for global risk management is focused on the unpredictability of financial markets and seeks to minimize potential adverse effects on Lupatech's financial performance through the use of derivative financial instruments to protect certain exposures. Risk management is carried out by the group's treasury according to approved policies. The Board of Directors sets forth principles for global risk management, as well as for specific areas such as foreign exchange risk, interest rate risk, use of derivative and non-derivative financial instruments. The group operates internationally, therefore, is exposed to foreign exchange risk, mainly the US Dollar and the Argentine Peso. The Management has established a policy that requires group companies to manage their foreign exchange risk related to their functional currency. In order to manage foreign exchange risk resulting from trade operations, the companies seek to balance purchases and sales in currencies different from their functional currency. In funding operations through debt with no maturity date (perpetual bonds, for example, which account for more than 90% of the debt's foreign currency exposure), no instrument of foreign exchange protection was used, since there was no principal settlement flow involved and, therefore, no relevant effect on the cash position. Financial debts with maturity date, in which there is a cash exposure to currency variations, are hedged by rate and index swap operations, which are "perfect" in relation to the amount outstanding, maturity date and valuation, removing foreign exchange risk completely. Credit positives: (i) leading market position in Brazil, (ii) long standing relationship with Petrobras, its main client, which certified Lupatech as an "A" supplier, (iii) positive perspectives for the oil and gas industry in Brazil, specially taking into account Petrobras' capex program and pre-salt discoveries, (iv) the benefits of national content incentives for investments in the Brazilian oil & gas sector, (v) increasing focus on the oil & gas segment, which has the highest margin, (vi) backlog of energy products at record 605 mn BRL, (vii) well-positioned to meet the industry's strict manufacturing requirements, (viii) increasing EBITDA margin, on the back of an improvement in the metallurgical segment, whose EBITDA margin is still well below the others. Credit negatives: (i) high and increasing leverage, (ii) small scale, (iii) low geographic diversification, with less than 25% of its sales from exports, (iv) does not consider the perpetual to calculate leverage, (v) poor cash flow generation, (vi) aggressive growth strategy via acquisitions, planning to take part in the consolidation of the Brazilian and Latin American valves markets, (vii) costumer concentration on Petrobras, responsible for 39% of Lupatech's consolidated revenues in 2008, (viii) negative prospects for industrial demand, (ix) imbalanced capital structure. Outlook: Lupatech's main objective is to take advantage of the opportunities associated with the investments in the oil and gas industry. In addition, Lupatech will try to increase its market share in the global automobile supply chain, as well as to avail itself of other opportunities for growth and investments in areas and products related to its current business. In order to do so, Lupatech's strategy is based on the following points: consolidate its leadership position in the market through strategic acquisitions, enhance productive capacity through investment, expansion of its product portfolio by developing new technologies and products, increase strategic partnerships in the metal segment, and continue investing in operating efficiency and cost reduction. Well positioned to leverage on Petrobras growth and on the sector's good perspectives, the company has a somewhat aggressive financial profile. The main challenge we see ahead is to reduce debt in a hostile economic environment, provoked by Lupatech's dependence on energy products, and within an explicit expansion strategy.

46

X-Ray Files

Brazilian Banks & Corporates Handbook

X-Ray Files

Brazilian Banks & Corporates Handbook

47

Petrobras

Positioning: Petrobras is the world's 7th largest company by market value and the 3rd largest when considering only oil companies, according to Bloomberg data as of June 2009. It ranked the 5th worldwide in terms of oil and gas production with a daily average production of 2.4 mn boe in 2008 and the 4th by proven reserves (SEC criteria). Total assets reached 292.2 bn BRL in 2008. Description: Petrobras was established in 1953 through law 2004 to be a global integrated public company. It is specialized in the following segments of the oil, gas and energy industries: exploration and production, refining, sales, transportation, distribution of oil products, natural gas and energy, and petrochemicals' production. Besides Brazil, Petrobras also operates in 26 other countries in 4 continents. The company closed 2008 with a daily production of 2.4 mn barrels of oil equivalent (boe), and with proven reserves of 15.1 bn of boe (SPE criteria) or 11.2 bn of boe (SEC criteria). The relation reserves/production amounted to 18.2 and 13.5 years, respectively. These proven reserves do not reflect the oil and gas discoveries in the pre-salt layer (only the Tupi field, discovered in 2006, is estimated to have between 5 and 8 bn barrels). During 2008, Petrobras acquired Japanese Nansei Sekiyu Kabushiki Kaisha, won totally or partially auctions to explore 23 blocks in the Gulf of Mexico (operating 15 of them), and signed an agreement to purchase ExxonMobil's participation in Esso Chile Petrolera, on top of the signature of various cooperation memorandums. In the petrochemical industry, Petrobras, Petroquisa and Unipar created Quattor Participações to consolidate 75% of Rio Polímeros, 76,6% of Suzano Petroquímica, 77,2% of Petroquímica União, 99,9% of Polietilenos União and Unipar Divisão Química. Petrobras also increased its participation in Braskem in exchange of Petrobras' minority interests in some companies (see Braskem file). Petrobras had 74,240 employees at year-end 2008. Shareholders: Petrobras is a state - controlled company, with the Federal Government owning 55.7% of the voting capital (32.2% of the total capital). The company is listed on São Paulo (Bovespa), New York, Madrid (Latibex), and Buenos Aires.

Ultrapar

Positioning: Ultrapar is the largest LPG (Liquefied Petroleum Gas) distributor in Brazil, with a 24% domestic market share (Ultragaz). The company is the sole producer of ethylene oxide and derivatives, the largest specialty chemicals producer in the country, and the largest producer of ethylene oxide derivatives in Latin America (Oxiteno). It is also the largest provider of storage for liquid bulk in South America (Ultracargo) and Brazil's second largest distributor of fuels and lubricants, with a national market share of 22%. Total assets reached 9.7 bn BRL in 2008. Description:Ultrapar roots date back to the 1930s and through its fully owned subsidiaries is involved in fuel distribution (Ultragaz/Ipiranga), chemicals (Oxiteno) and integrated solutions for special bulk cargo (Ultracargo). (i) Ultragaz's Liquefied Petroleum Gas (LPG) distribution network includes 15 filling plants that provide national coverage; (ii) Ipiranga (acquired in 2007) operates in the South and Southeast regions of the country and its fuel and lubrificants distribution network held approximately 3,300 services stations. (iii) Petrochemical and chemical production, through Oxiteno, which has 5 plants located in or close to Brazil's main petrochemicals complexes, 3 in Mexico and 1 in Venezuela, and commercial offices in Argentina, in the United States and in Belgium; (iv) Transportation and storage services of fuel and petrochemical products through Ultracargo, which accounts for approximately 70% of all tank capacity for liquids at the Aratu terminal in the State of Bahia, which serves South America's largest petrochemical complex. Ultracargo is also present at the ports of Suape and Santos, and provides support facilities and multimodal terminals in Camaçari, in Paulínia and Tatuí (São Paulo state) and in Montes Claros (Minas Gerais). During 2008, Ultrapar made some acquisitions, such as União Terminais e Armazéns Gerais Ltda. -a company involved in the storage and handling of bulk liquids with operations in the ports located in Santos (in the state of São Paulo), Rio de Janeiro and Paranaguá (Paraná)- and Texaco's fuel distribution business in Brazil. At year-end 2008, Ultrapar had 9,496 employees. Shareholders: Ultrapar is listed on the São Paulo and New York stock exchanges. The company's voting shares are 66% controlled by the holding company Ultra (24% of the total capital), which in turn is controlled by management and Pery Igel founding family.

Key Ratios 2006

EBITDA Margin EBITDA Growth Net Revenues Growth % Exports ROA ROE EBITDA/ Net Int Expenses EBITDA/ Interest Costs Total Debt/EBITDA S-Term Debt/EBITDA Net Debt/EBITDA FC Debt/Total Debt FC Hedged Debt/Total FC D.* Net Debt/ Assets Net Debt/ Equity FFO/Total Debt (FFO-Div-Capex)/Total Debt

Rating 2007 2008 Moody's

LC Curr Issuer FC LT Debt LC LT Debt Outlook Nat LT A3 Baa1 A2 Stable Aaa.br FC LT Iss LC LT Iss Outlook

Key Ratios Fitch

BBBBBBStable FC LT Issuer Default LC LT Issuer Default Sen Unsec debt Outlook Nat LT BBB BBB+ BBB Stable AAA(bra) EBITDA Margin EBITDA Growth Net Revenues Growth ROA ROE EBITDA/ Net Int Expenses EBITDA/Interest Costs Total Debt/EBITDA S-Term Debt/EBITDA Net Debt/EBITDA FC Debt/ Total Debt FC Hedged Debt / Total FC Debt* Net Debt/ Assets Net Debt/ Equity FFO/Total Debt (FFO-Div-Capex)/Total Debt

Rating 2007

3,9% 50,9% 315,5% 2,0% 3,9% 6,5x 3,4x 4,1x 2,3x 2,0x 31,1% 93,7% 16,9% 33,5% 18,5% <0

S&P

26,8% 29,7% 32,9% 13,5% -2,6% 8,1% 26,1% 7,8% 15,8% Net importer on an annual basis 11,3% 9,3% 12,3% 23,4% 17,9% 24,7% 82,4x 58,0x 38,8x 17,3x 19,8x 17,4x 1,1x 0,8x 0,8x 0,2x 0,2x 0,2x 0,8x 0,5x 0,3x 64,0% 68,8% 74,0% 100,0% 100,0% 100,0% 16,2% 10,9% 7,7% 33,6% 21,0% 15,5% 78,9% 110,3% 99,1% <0 <0 11,0%

2006

10,8% -5,5% 2,1% 7,3% 14,6% nm 3,6x 2,9x 0,2x 0,8x 58,1% 100,2% 11,1% 22,1% 30,9% <0

2008

3,8% 38,6% 41,9% 4,0% 8,3% 6,4x 3,3x 3,4x 1,5x 1,4x 31,9% 86,9% 16,0% 33,0% 17,5% <0 LC Iss Outlook

Moody's

Baa3 Stable FC LT Iss LC LT Iss Outlook LT Nat.

S&P

BB+ BB+ Positive brAA+

Fitch

Not Rated

Moody's

Aug-07 Baa1

Global FC Ratings Evolution S&P

Jan-07 May-08 Jun-09 BBBBBB BBBApr-06 Jun-06 May-07 Jun-08

Fitch

BB BB+ BBBBBB

Moody's

May-08 Baa3

Global FC Ratings Evolution S&P Local Rating Evolution S&P Liquid Issues Call/Put Issue Date

06-22-2006 MW+50bps

Fitch

Not Rated

Moody's

Not Rated

Fitch

Not Rated

Moody's

Local Rating Evolution S&P

Not Rated

Fitch

Source: Petrobras, BIE. *Hedged debt with current assets.

Source: Ultrapar, BIE. *Hedged debt with receivables, cash and current financial assets.

Amount

250 mn USD

Coupon

7,250%

Maturity

12-20-2015

Ratings

BB+

MN BRL

Total Assets Cash Equity Short Term Debt Total Debt Net Debt Net Revenues EBITDA Net Income Funds from Operations Capex Dividends

Source: Petrobras, BIE

2006

210.538,1 27.829,1 105.006,0 12.522,3 44.065,1 16.236,0 158.238,8 52.070,9 25.918,9 43.658,5 32.070,0 6.751,3

2007

231.227,8 13.070,8 120.160,2 8.501,2 38.307,8 25.237,0 170.577,7 50.721,2 21.511,8 42.238,7 41.404,7 7.474,4

2008

292.163,8 15.888,6 141.018,4 13.274,5 63.323,9 47.435,3 215.118,5 57.582,2 32.987,8 49.951,8 52.117,7 6.212,6

Amount

Coupon

Liquid Issues Call/Put Issue Date

10-01-2002 12-21-2001 07-06-2001 08-01-2002 05-21-2003 07-02-2003 09-15-2004 05-21-2003 10-06-2006 11-01-2007 12-10-2003 02-11-2009 na Sink. na na MW+50bps na na MW+50bps MW+25 bps MW+25 bps na MW+50 bps

Maturity

10-01-2010 12-01-2010 07-06-2011 08-01-2012 06-01-2013 07-02-2013 09-15-2014 06-01-2015 10-06-2016 03-01-2018 12-10-2018 03-15-2019

Ratings

A3 AAA A3/BBB A3 Baa1/A-*-/BBB+ Baa1/BBB Baa1/BBB Baa1/A-*-/BBB+ Baa1/BBB-/BBB Baa1/BBB-/BBB Baa1/BBB-/BBB Baa1/BBB-/BBB

MN BRL

Total Assets Cash Equity Short Term Debt Total Debt Net Debt Net Revenues EBITDA Net Income Funds from Operations Capex Dividends

Source: Ultrapar, BIE

2006

3.849,8 1.070,1 1.933,5 115,6 1.497,4 427,3 4.794,0 516,1 282,1 463,3 319,1 148,6

2007

9.224,5 1.622,9 4.635,6 1.818,6 3.177,9 1.555,0 19.921,3 779,0 181,9 588,1 694,6 65,7

2008

9.667,2 2.126,4 4.688,4 1.658,1 3.671,9 1.545,5 28.268,0 1.079,4 390,3 642,3 889,4 398,9

Source: Bloomberg, BIE

775 mn BRL 10,300% 13.674 mn USD US Lib+100 bps 235.36 mn USD 9,750% 750 mn BRL 11,000% 98.76 mn USD 3,748% 374.23 mn USD 9,125% 397.9 mn USD 7,750% 266.29 mn USD 6,436% 899.10 mn USD 6,125% 1,750 mn USD 5,875% 576.78 mn USD 8,375% 2,750 mn USD 7,875%

Source: Bloomberg, BIE

EBITDA Margin Evolution

30% 25% 20% 15% 10% 5% 0 2006 Other

Source: Ultrapar, BIE

2007 International Market

2008 Vinyls Unit

Debt Maturity Schedule 2008

25000 20000 (MN BRL) (MN BRL) 15000 10000 5000 0

Source: Petrobras, BIE

Revenues and Results Breakdown by Business Segment 2008

210000 180000 150000 120000 90000 60000 30000 0 -30000 54% 60% 40% 20% -3% Supply -3% 3% -6% 0%

Business Development

Basec Petrochemicals Units

Debt Maturity Schedule 2008

1800 1600 1400 1200 1000 800 600 400 200 0 2009 2010 2011 2012 2013 2014 onwards

Source: Ultrapar, BIE

Renevues Evolution

25000 20000 15000 10000 5000 0 2006 Ultragaz Oxiteno 2007 Net Revenues Ultracargo Ipiranga 2008

2009

2010

2011

2012

2013

> 2014

Prodution & Exploration Net Revenues (LHS)

-20% Gas & Distribution International Energy Operating Result (LHS) Operating Margin (RHS)

Source: Petrobras, BIE

Risk policy: Petrobras has a global risk management policy developed by the company's officers. In 2004, the Executive Committee of Petrobras set up the Risk Management Committee, composed by executive managers from business and corporate departments, to assure integrated management of exposures, formalize the main guidelines for the company's operations, concentrate information and discuss actions. Regarding foreign exchange risk, taking advantage of operating in an integrated manner in the energy segment, the company seeks, primarily, to identify or create natural hedges, i.e. to benefit from the correlation between its income and expenses. In the specific case of exchange rate variations inherent to the contracts with the cost and remuneration in different currencies, this hedge is carried out through allocating the cash investments between the real and the US dollar or another currency. The management of risks is done looking at the net exposure. Periodical analyses of the exchange rate risk are prepared, to support the decision making of the executive committee. The foreign exchange risk management also involves the use of derivative instruments to minimize the exposure of certain obligations of the company. The subsidiary Petrobras Distribuidora carries out operations for covering the trading margins of exports (aviation segment) for foreign clients. Internal policy limits hedging operations to the volume of products exported. Credit positives: (i) quality of E&P operations, (ii) integrated nature of its activities - exploration & production, refining, transportation and distribution, (iii) dominant market position in the Brazilian hydrocarbon industry and market leadership in distribution (market share of 34.9% at year-end), (iv) despite being an open industry, the company operates in a quasi-monopoly status, (v) strong position to capture growth in the country's natural gas market, (vi) consolidating its market position in the Brazilian petrochemicals sector, (vii) sizable hydrocarbon reserves with various discoveries announced in 2008 and refining capacity, (viii) reserve replacement ratio of 109% (SPE criteria), (ix) diversified oil reserves by country, (x) focus on increasing refining capacity in the country to reduce external dependence, (xi) low leverage and sound credit metrics despite recent worsening, (xii) high interest coverage, (xiii) strong liquidity position and sound operating cash flow generation, (xiv) high profitability, (xv) Brazil is the 9th largest oil consumer worldwide, with its estimated consumption growing faster than the global average. Credit negatives: (i) risk of government interference, (ii) limited geographic diversification, (iii) large proportion of foreign currency debt, albeit hedging ability, (iv) environmental and legal risks, (v) negative free cash flow generation on investments and dividend payments, (vi) capex expected to continue high in the future (average of 35 bn BRL per year in the 2009-2013 period), although likely covered by operational cash flow generation, (vii) slight deterioration in credit metrics, (viii) falling EBITDA margin, (ix) increase in the average exploration cost per barrel, (x) the company is being investigated at Congress for allegations of fraud, corruption, over-invoicing and tax avoidance, (xi) regulatory risks associated to the definition of the model for the pre-salt exploration. Outlook: Petrobras aims at expanding operations in target markets of oil, oil products, petrochemicals, gas and energy, biofuels and distribution, being a world benchmark as an integrated energy company, by (i) growing oil and gas production in a sustainable form, and become one of the five largest oil producers in the world, (ii) capturing value added through the expansion of integrated operations in refining, commercialization, logistics and distribution with a focus on the Atlantic Basic and Far East, (iii) consolidating leadership in the Brazilian natural gas market while establishing an international presence and increasing domestic electricity generation, (iv) expanding integrated petrochemicals operations while capturing synergies, (v) having a global presence in the biofuels business with participation in biodiesel and ethanol. By 2020, the company intends to be one of the five largest integrated energy companies in the world and reach a production of 5.729 mn boed, 5.097 mn barrels in Brazil. The business plan envisages capital expenditures of 174.4 bn USD from 2009 to 2013, being 158.2 bn USD to invest in Brazil and 16.2 bn USD abroad. 59% targets E&P, 25% Downstream, 7% Gas and Energy, 3% Petrochemical, and 2% Distribution, Biodiesel and Corporate each. Expected production by 2013 should reach 3.655 mn boed, being 3.314 mn boed in Brazil. Falling commodity prices are a negative for the company and if the operational environment weakens further, the execution of the capex plan becomes more challenging without compromising credit metrics.

Source: Ultrapar, BIE

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(MN BRL)

Risk policy: Economic/financial risks are managed through control policies, specific strategies, and limits establishment. Ultrapar has a conservative policy for the management of assets, financial instruments and financial risks approved by its Board of Directors. In accordance with this policy, the main objective of financial management is to preserve the value and liquidity of financial assets and ensure financial resources for the proper conduction of business. Most transactions of Ultrapar and its subsidiaries are located in Brazil and, therefore, the reference currency for currency risk management is the Real. Currency risk management is based on neutrality of currency exposures and considers the transactional, accounting, and operational risks of the company and its subsidiaries and their exposure to changes in exchange rates. Ultrapar considers as its main currency exposure the assets and liabilities in foreign currency and the short-term flow of Oxiteno's net sales in foreign currency. The subsidiaries of the company use foreign exchange rate hedging instruments (especially between the Real and the U.S. Dollar) available in financial markets to protect their assets, liabilities, receipts and disbursements in foreign currency from changes in exchange rates within the exposure limits under its policy. Such foreign exchange hedging instruments have amounts, periods, and rates substantially equivalent to those of assets, liabilities, receipts and disbursements in foreign currency to which they are related. Credit positives: Ipiranga: (i) strong brand and market presence, (ii) robust resellers network, (iii) differentiated product and services portfolio, (iv) governmental measures to push up car sales. Oxiteno: (i) sole producer of ethylene oxide and derivatives in Brazil and the largest in Latin America, not only in derivatives but in specialty chemicals as well, (ii) exposure to specialty chemicals, which have better margins, (iii) broad coverage of markets and applications. Ultracargo: (i) leader in storage services for liquid bulk in South America, (ii) highly specialized services, (iii) strategic location of storage facilities. Ultragaz: (i) highly efficient LPG network with low distribution cost, (ii) significant market presence, (iii) strong brand recognition, as Brazil's leading LPG producer, (iv) market under penetration of the product, (v) exclusive network with 4,000 independent dealers, (vi) ongoing operational efficiency improvement programs, (vii) commercial initiatives, especially in new niche markets. General: (i) balanced and diversified business mix in four correlated businesses, (ii) favorable market positioning and brand recognition, (iii) conservative management, (iv) good interest coverage, (v) strong liquidity and cash generation, (vi) EBITDA and net revenues growth, (vii) improving credit metrics on the back of EBITDA growth, (viii) Ultrapar is focused on cash generation and debt reduction, along with a lower level of investments, (ix) track record in consolidating acquisitions. Credit negatives: (i) cyclicality of petrochemical and cargo businesses, (ii) margin erosion on input cost pressures at Ultragaz and Ultracargo, (iii) fierce competition in the LPG and fuels distribution businesses, (iv) almost 45% of its debt matures in 2009, leading to high short term refinancing risk, although covered by a sound cash position, (v) Ipiranga's EBITDA margin of 2.6%, typical for the business, albeit weaker than Ultrapar's previous levels, (vi) high capex and dividend payments when compared to operating cash generation, (vii) higher competition from imports (Oxiteno), (viii) risks of integrating Texaco into Ipiranga and União Terminais into Ultracargo. Outlook: Ultrapar is focused on the sustainable growth of its businesses, reinforcing the fuel distribution brands, Ultragaz and Ipiranga, maintaining the exclusivity of LPG distribution, expanding capacity at Oxiteno through scale growth and technological differentiation in Brazil and abroad, and expanding Ultracargo's operations as a provider of integrated logistics services, on top of maintaining its financial profile. During 2009, Ultracargo and Ipiranga will consolidate the recently acquired União Terminais and Texaco, respectively. The investment plan for 2009 amounts to 528 mn BRL, 69 mn BRL of which to be invested at Ultragaz, 239 mn BRL at Ipiranga, 175 mn BRL at Oxiteno and 36 mn BRL at Ultracargo. The company operates in the competitive environment of distribution. The main challenge, in our view, will be the recovery of the EBITDA margin while reducing leverage.

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SOFT COMMODITIES ­ SECTOR BRIEF

2008 was not an easy year for Brazilian meat producers, as the industry had to deal with a lot of event risk ranging from the European Union suspension of purchases of fresh Brazilian beef to the global recession that hit international trade hardly. The EU, which bought a quarter of Brazil's fresh-beef exports in 2007, restricted imports early last year on concerns the country failed to ensure the meat was free of foot-and-mouth disease. As Brazilian states have different sanitary status, the EU had to be sure that imported cattle or meat from an authorized state had never been in an unauthorized zone. The problem was not with slaughterhouses, but with the process in place to track where the cattle had been breed. Since the ban started, the EU regulator has been authorizing farmers to export, and estimates suggest that around 40% of the farms exporting before the ban in February 2008 have regained the traceability certification necessary to export again. EBITDA Margin

(X) 16% 14% 12% 10% 8% 6% 4% 2% 0% Cosan Bertin (Bracol) Friboi (JBS) 2007 Independência 2008 Marfrig Minerva Sadia 0.0 Cosan Bertin (Bracol) Friboi (JBS) Independência 2007 2008 Marfrig Minerva Sadia 3.0 2.0 1.0 6.0 5.0 4.0

The EU ban and the global demand contraction provoked meat companies to redirect exports (around 50% of its sales on average) to the local market, pressuring local prices down. This situation was aggravated by increased competition and excess capacity, resulting from the aggressive expansion the industry experienced in recent years. This beef processing overcapacity in relation to the size of the cattle herd pressured cattle prices up and consequently operating costs. EBITDA margin compression during 2008 was widespread. The BRL depreciation played in favor of export revenues, as prices are set abroad and when converting them into BRL, they are higher if the local currency depreciates.

Net Debt/EBITDA

(X) 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 Cosan Bertin (Bracol) Friboi (JBS) Independência 2007 2008 Marfrig Minerva Sadia

Source: Company data, Banco Itaú Europa. In the case of Cosan, 2007 refers to the year from May 2007 to April 2008, and 2008 refers to the 9M period from May 2008 to January 2009.

As financial conditions worsened internationally, funds became scarcer, specially export financing in USD, aggravating working capital investment ­ already pressured by the operational situation - and refinancing risk for the sector. In the majority of the cases, operating cash flow generation worsened and was not enough to cover capital expenditures and dividend payments.

Short Term Debt/EBITDA

Source: Company data, Banco Itaú Europa. In the case of Cosan, 2007 refers to the year from May 2007 to April 2008, and 2008 refers to the 9M period from May 2008 to January 2009.

Source: Company data, Banco Itaú Europa. In the case of Cosan, 2007 refers to the year from May 2007 to April 2008, and 2008 refers to the 9M period from May 2008 to January 2009.

On the other hand, the BRL depreciation against the USD did not help the financial account, and caused leverage to jump, as more than 75% of the meat producers' debt, on average, was denominated in foreign currency both in 2007 and 2008. Hedging foreign currency debt should be a positive practice to implement broadly speaking.

Since September 2008, some meat companies have sought for bankruptcy protection, including bond issuers Arantes and Independência. From an operating point of view, that is good news for those remaining active in the industry, as supply pressure and competition diminish. However, these occurrences could further deteriorate the refinancing capacity of the remaining peers by increasing the inherent risk of the industry.

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Bertin (Bracol)

In light of such a difficult situation, the BNDES intervened in 2008 through direct equity investments totaling almost 6 bn BRL ­ as much as 4.7 bn BRL to Bertin, Friboi, Marfrig and Independência. On top of that, the government decided to aid the agro-industry in April 2009 with a 10 bn BRL lending package also through BNDES, which should contribute to lower funding costs and lengthen debt maturities. Operationally, the outlook continues challenging due to a still weak global economic scenario, pressuring export volumes and prices down. The external situation, in turn, puts downward pressure on domestic prices, and prospects for a GDP growth deceleration in Brazil should restrict quantities sold. As the world economy recovers, exports should resume. Regaining full access to export to the EU and achieving pre-ban levels would be very positive albeit challenging in the short-term. Moreover, given the sector difficulties in getting funding and its high leverage on the back of local currency depreciation, aggressive growth strategies mirrored in high capex and M&A activity should be temporarily suspended. However, a natural consolidation process should result from the closing of some companies or from buying opportunities to acquire companies in difficulties by companies with a more sound cash position. The merger of Sadia and Perdigão shows precisely that. In a long-term perspective, there is no doubt that global demographic and economic dynamics should benefit the development of the industry, and that Brazil is very well positioned to take advantage of such an opportunity because it has: (i) the lowest beef production cost in the world, (ii) a vast area for expansion, (iii) a low cattle slaughter rate, (iv) grass-fed cattle which has various benefits such as lower risk of BSE-disease, (v) favorable climate conditions. However, in the meantime, the sector faces high event risk that could appear in trade embargos, sanitary issues and/ or diseases, such as the already commented embargo from the European Union or other historical bans. Just for the record, an evidence of the sanitary issues involving the industry are countries such as United States, Japan, Mexico, South Korea and Canada, still banning Brazilian beef in natura. Brazil, despite being the largest beef exporter in the world, is excluded from around 60% of world beef import operations. The country has still enormous growth potential in this business. The latest appearance of the swine flu is another example of the high event risk of the industry. At an initial stage, the outbreak should provoke a fall in consumption because consumers become worried that they might catch the disease through eating the protein. This was the first reaction to Bird Flu, although consumers quickly understood that it was not possible, and then volumes went back to normal. This would be negative for companies with exposure to pork such as JBS (14% of the net revenues in 2008), Sadia and Marfrig (6% each), although the impact should be low and temporary. In a more advanced stage, pork-importing countries could ban countries infected, which could create an opportunity for Brazilian exporters, assuming it remains immune. JBS is in a more delicate situation as its pork production facilities are located in the US. Nevertheless, uncertainty related to this issue is high, especially if the case for a pandemic materializes. In a worst-case scenario, countries could totally close their frontiers to pork imports.

Positioning: Bertin is one of the leading Latin America producers and exporters of animal products, including fresh and processed beef, leather, dairy and pet products. Bertin was responsible for more than 40% of Brazilian processed beef exports and above 10% of Brazilian fresh beef exports in 2008, when its beef daily slaughtering capacity totaled 14k heads. At that time, total assets reached 12.6 bn BRL. Description: Headquartered in the state of São Paulo, Bracol is the holding company of Bertin group, resulting from a corporate restructuring that took place in July 2007. The company has three business units: agribusiness (farming and cattle breeding), industrial hygiene and bio-diesel. Bracol's main subsidiary is Bertin SA, responsible for more than 93% of the consolidated net revenues. Bertin's main activities are slaughtering, industrialization, sale, marketing, and distribution of beef and derivates, industrialization, distribution, sale and marketing of domestic, personal cleaning and hygiene products, leather processing, production of toys for pets, production of metal packages, cargo transportation and recycling, through 37 industrial plants, in Brazil and abroad. Bertin has a slaughtering capacity of around 14,000 heads per day. Bracol and its subsidiaries employed 31,220 workers as of December 2008. Shareholders: Bracol is a private company, property of Bertin family, who also has interests in other businesses such as civil construction, basic sanitation, roads, electric energy and in the leisure industry, holding one resort. Bracol had 100% of Bertin SA's capital in 2007, but in 2008, BNDES injected capital into the company in exchange of a stake of 27.5%, held through BNDESPAR.

Key Ratios Bracol Holding Ltda.

EBITDA Margin EBITDA Growth Net Revenues Growth % Sales Abroad ROA ROE EBITDA/ Net int expense Total Debt/EBITDA S-Term Debt/EBITDA Net Debt/EBITDA FC Debt/ Total Debt FC Hedged Debt/Total FC Debt Net Debt/ Assets Net Debt/ Equity FFO/Total Debt (FFO-Capex-Dividends)/Total Debt

Source: Bertin, BIE

Rating 2007

14,7% 45,1% 35,8% 36,2% 3,6% 10,2% 10,2x 5,3x 2,0x 3,4x 60,5% na 27,8% 79,9% 25,2% 6,4%

2006

13,8% 55,2% 17,4% 49,2% 4,2% 15,4% 13,0x 6,3x 1,0x 2,8x 56,1% na 26,2% 96,8% <0 <0

2008

11,8% 15,1% 44,0% 40,1% nm nm 0,7x 6,6x 1,8x 3,5x 63,3% 22,5% 23,0% 79,8% 32,1% 12,4%

Moody's

FC LT Deb LC LT Deb Outlook

S&P

BBNegative

Fitch

LT Corp Family B1 watch -

Not Rated

Moody's

Dec-08 Mar-09 May-09 B2 Ba3 B1

Global FC Rating Evolution S&P

Jun-09 B-

Fitch

Not Rated

Amount

350 mn USD 100 mn USD* 50 mn USD*

Coupon

10,250% 9,250% 10,500%

Liquid Issues Call/Put Issue Date

10-13-2006 02-23-2007 10-24-1997 na Call 02/2012 na

Maturity

10-05-2016 02-23-2017 10-24-2013

Ratings

B1 *-/BB2 NR

Source: Bloomberg, BIE. * issued by Vigor. Bertin Group acquired a controlling stake in Vigor in 2007 and reinforced its position through time until February 2009, when it acquired the capital left through a tender offer. After that, Vigor was de-listed.

MN BRL

Total Assets Cash Equity Short Term Debt Total Debt Net Debt Net Revenues EBITDA Net Income Funds from Operations Capex Dividends

Source: Bertin, BIE

2006

5.316,9 1.766,1 1.438,3 519,2 3.158,2 1.392,1 3.629,2 500,9 221,6 -28,0 440,0 56,0

2007

8.948,1 1.342,9 3.112,9 1.474,8 3.829,2 2.486,3 4.930,0 726,6 318,6 966,0 687,0 35,0

2008

12.627,9 2.657,4 3.632,9 1.494,6 5.557,1 2.899,7 7.100,5 836,2 1.038,6 1.784,0 575,9 516,3

Source: Bertin, BIE

Bertin Net Revenues Breakdown

6% 12% In Natura Beef Processed Beef Beef-by-Products Leather Dairy Other Bertin revenues

13% 7% 15%

47%

Debt Amortization Schedule 2008

1750 1500 1250 (MN BRL) 1000 750 500 250 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Source: Bertin, BIE Source: Bertin, BIE

Bertin Net Revenues Evolution

4000 3000 (MN BRL) 2000 1000 0 In Natura Beef Processed Beef Beef-byProducts Leather Dairy Other Bertin revenues 2007 Proforma 2008

Risk policy: Bracol's controlled company Bertin SA has a formal policy on the management of financial risks, under the responsibility of the Financial Management, which uses control instruments, adequate systems and expert professionals to measure, analyze and manage such risks in order to reduce the company's daily exposure. Bertin considers that exports are a natural hedge for dollar-denominated loans. In order to protect the remaining foreign exchange mismatch (net balance of the inflows and outflows in dollars), Bertin uses financial instruments and derivatives to reduce the natural long dollar exposure, following internal policies. The time horizon analyzed for this purpose is 12 months and the hedging operations tend not to exceed 180 days. Additionally, the company does not conduct transactions involving financial instruments with speculative purposes. Credit positives: (i) brand awareness, (ii) production facilities in different Brazilian states, (iii) diversified export profile by country, which increased from 38 in 2007 to over 80 countries actually, (iv) sound EBITDA margin, (v) focus on vertical integration and costs, (vi) adequate operating cash flow generation and positive free cash flow, (vii) despite of the total leverage increase, debt metrics remained contained by industry standards, (viii) BNDES possible support. Credit negatives: (i) highly leveraged, (ii) very high refinancing risk as short term debt exceeds EBITDA, although mitigated by the fact that its cash position covers short term debt, (iii) foreign exchange exposure of its debt, very low hedging, (iv) fall in net financial income coverage due to the BRL depreciation, (v) concentration on beef (64% of the group's revenues), (vi) room to improve corporate information disclosure, (vii) event risk related to embargos and sanitary and trade issues. Outlook: Bertin's focus for 2009 is to invest in its distribution chain and strengthen its relationship with consumers in key markets, while tapping new markets in order to strengthen international operations. The company intends to execute the business plan and improve operating efficiencies, while expanding the process to enrich the product mix and brands, strengthen operations in new segments of the domestic market, manly on higher added value products. Bertin plans to increase slaughtering capacity to 19,000 beef heads per day in the end of 2009. The company's strategy is consistent with increasing beef products consumption in the long run, which should double sales to 19 bn BRL in 5 years. Capex plans for the period amount to 3.1 bn BRL. Event risk and export exposure could turn 2009 into a very challenging year. Short-term financial risks are mitigated by a large cash position, but leverage reduction is key going forward, which might not be easy in adverse operational conditions and aggressive capex plans.

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Cosan

Positioning: Cosan is the largest producer and exporter of sugar and ethanol in Brazil. With a crushing capacity of 45 million tones of sugar cane per year, Cosan is the largest sugarcane producer and processor in the world. The company is leader in ethanol exports and 2nd in sugar exports worldwide. Production wise, Cosan ranks 3rd in sugar and 4th in ethanol globally. Cosan CL ranks as one of the four biggest fuel distributors in Brazil, with a distribution network of nearly 1,500 gas stations. Total assets reached 11.0 bn BRL in January 2009. Description: Cosan was established in early 2000, after the deregulation of the Brazilian sugar and alcohol industries. Its primary activity is the manufacturing and trading of sugar, ethanol and co-generation of electricity from sugarcane, from its own plantations or from third parties'. The company has 18 producing units, all located in São Paulo state, with a nominal capacity of milling 45 mn tons of sugarcane per year, producing varied qualities of raw and refined sugar, anhydrous and hydrated ethanol. Its subsidiaries Cosan Operadora Portuária S.A. and TEAS provide logistic support to sugar and ethanol exports.The company, through its subsidiary Cosan Combustíveis e Lubrificantes S.A., currently named Esso Brasileira de Petróleo Ltda., has expanded its business model and became the first integrated renewable energy company, present from the plantation of sugar cane to the distribution and retail sales of fuels. Cosan CL operates in 40 fuel distribution bases and has a distribution network of nearly 1,500 gas stations in Brazil. Cosan acquired Esso Brasileira de Petróleo in 2008 and 9M09 results already consolidated 2 months of Esso's operations. Shareholders: Cosan S.A. is held by Cosan Ltda, holding 62.8% of its voting capital, being the remainder traded on the Bovespa's stock exchange as free float. The company has no preferred shares. Cosan Ltd. is listed on the New York Stock Exchange (NYSE) and on Bovespa. All the investments of the Cosan Group in Brazil are made through Cosan S.A. The group is controlled by Mr. Rubens O. Mello.

Friboi (JBS)

Positioning: JBS-Friboi is the largest beef producer in the world, in terms of production, exporting and slaughtering capacity, which reaches 65,200 heads per day. The company is the third largest pork producer in the US with slaughtering capacity of 47.9k hogs/day. JBS is the leader in beef sales in Brazil, Argentina and Australia. Total assets doubled to 16.1 bn BRL in 2008. Description: Established in 1953, JBS-Friboi produces chilled and fresh beef, processed beef, and fresh and chilled pork, as well as beef and pork by-products, through 64 manufacturing units, 22 located in Brazil, 6 in Argentina, 18 in the United States, 10 in Australia and 8 in Italy. JBS owns a logistic network to support distribution, with a global platform including countries such as United Kingdom, Russia, Angola, Congo, Algeria and Poland, on top of those where its production facilities are based. JBS has a consolidated beef slaughtering capacity of 65.2k heads/day, distributed as follows: 18,900 in Brazil, 6,700 in Argentina, 28,100 in the US, 8,500 in Australia and 3,000 in Italy. The company has slaughtering capacities of 47,900 pork heads/day in the US and 20,500 heads of small animals per day in the US and Australia. JBS also has related activities such as beef cold storage, meat industrialization, fat, animal rations, beef by-products, cattle breeding and metallic cans. In 2008, the company acquired 50% of Inalca in Italy, the Tasman Group in Australia and Smithfield Beef (including the Five Rivers feedlot operation) in the USA. In the end of 2008, JBS had 55,000 workers worldwide, being 16,900 in Brazil. Shareholders: The company is property of Batista family, which controls 50.1% of the voting capital. PROT-FIP, an Investment Fund belonging to BNDES, Funcef, Petros and Antigua, holds 14.3% of the voting shares and BNDESPAR holds 13.0%. The company has no preferred shares and its voting shares are listed on the São Paulo Stock Exchange.

Key Ratios 2007

EBITDA Margin EBITDA Growth Net Revenues Growth % Sales Abroad ROA ROE EBITDA/ Net Int Expenses EBITDA/ Interest Costs Total Debt/EBITDA S-Term Debt/EBITDA Net Debt/EBITDA FC Debt/ Total Debt FC Hedged Debt/Total FC Debt Net Debt/ Assets Net Debt/ Equity FFO/Total Debt (FFO-Capex-Dividends)/Total Debt

Source: Cosan, BIE.

Rating 2008

6,3% -81,4% -24,1% 43,9% nm nm nm 0,5x 13,2x 0,5x 7,3x 73,3% 5,2% 17,1% 38,0% <0 <0

Key Ratios Fitch

BB BB Negative FC LT Iss LC LT Iss Outlook Nat LT BB BB Stable A-(br)

Rating 2007

4,2% 7,9% 228,7% 39,1% nm nm 1,5x 2,1x 6,3x 4,0x 4,0x 86,8% 0,0% 28,0% 77,5% <0 <0

9MO9

11,1% 243,6% 107,1% 37,5% nm nm 0,7x 2,3x 7,6x 2,6x 6,4x 55,8% 23,3% 33,5% 100,1% 4,3% <0

Moody's

LT Corp Fam Sen Unsec Debt Outlook Nat LT Ba3 Ba3 Negative A3.br FC LT Iss LC LT Iss Outlook

S&P

2006

EBITDA Margin EBITDA Growth Net Revenues Growth % Sales Abroad ROA ROE EBITDA/ Net Int Expenses EBITDA/ Interest costs Total Debt/EBITDA S-Term Debt/EBITDA Net Debt/EBITDA FC Debt/Total Debt FC Hedged Debt/Total FC Debt Net Debt/ Assets Net Debt/ Equity FFO/Total Debt (FFO-Capex-Dividends)/Total Debt 12,7% 37,2% 16,0% 52,7% 4,6% 86,8% 2,2x 2,1x 4,9x 1,2x 4,4x 61,3% na 70,2% 1329,2% 3,7% <0

2008

3,8% 95,6% 114,5% 32,0% 0,2% 0,4% 1,9x 2,1x 4,9x 1,9x 2,9x 68,2% 1,6% 20,7% 54,2% 17,1% <0

Moody's

LT Corp Fam. B1 Senior Unsec Deb. B1 Outlook Stable FC LT Iss LC LT Iss Outlook

S&P

B+ B+ Negative

Fitch

LT Issuer Def Senior Unsec Deb. Outlook Nat LT B+ B+ Stable BBB+

25,7% 79,3% 45,5% 60,4% 5,7% 21,9% nm 3,3x 2,4x 0,1x 1,9x 79,4% 1,6% 28,7% 110,3% 32,9% <0

Moody's

Jan-06 B1

Global FC Rating Evolution S&P

Jan-06 B+ Nov-08

Fitch

B+

Moody's

Jan-06 Sep-08 Ba2 Ba3

Global FC Rating Evolution S&P

Jan-06 Oct-08 BB BBJul-09

Fitch

BB-

Moody's

Not Rated

Local FC Rating Evolution S&P

Not Rated Nov-08

Fitch

BBB+ (bra)

MN BRL

Total Assets Cash Equity Short Term Debt Total Debt Net Debt Net Revenues EBITDA Net Income Funds from Operations Capex Dividends

Source: Cosan, BIE

2007

6.263,4 1.217,1 1.631,0 140,3 3.015,3 1.798,2 3.605,1 928,0 357,3 743,3 683,5 75,8

2008

7.393,5 1.010,1 3.325,8 83,3 2.274,6 1.264,5 2.736,2 172,9 -47,8 -19,2 1.050,5 75,8

9MO9

11.039,4 689,7 3.696,6 1.484,7 4.389,2 3.699,5 3.920,3 435,4 -433,6 141,2 984,9 0,0

Moody's

Sep-08 A3.br

Local FC Rating Evolution S&P

Not Rated Jul-09

Amount

275 mn USD 700 mn USD 300 mn USD

Coupon

9,375% 11,625% 10,500%

Liquid Issues Call/Put Issue Date

02-06-2006 04-27-2009 08-04-2006 na MW+50 na

Maturity

02-07-2011 05-01-2014 08-04-2016

Ratings

B1/B+/B+ B1/B+/B+ B1/B+/B+

Fitch

A-(br)

Source: Friboi, BIE Exports consider sales to other region different that the production country

Source: Bloomberg, BIE

MN BRL Amount

35,81 mn USD 400 mn USD 450 mn USD

Source: Bloomberg, BIE

2006

3.464,8 261,1 183,0 653,6 2.693,6 2.432,5 4.301,7 547,8 158,9 100,4 389,0 11,2

2007

8.448,2 1.381,7 3.054,6 2.384,8 3.749,6 2.367,9 14.141,6 591,1 -165,0 -437,5 1.748,1 17,5

2008

16.096,3 2.291,6 6.134,4 2.214,8 5.616,5 3.324,9 30.340,3 1.156,1 25,9 961,6 1.237,7 51,1 20 15 10 5 0 -5 Beef USA (inc. Australia)

Source: Friboi, BIE

EBITDA Margin by Business Unit

Coupon

9,000% 7,000% 8,250%

Liquid Issues Call/Put Issue Date

10-25-2004 01-26-2007 02-06-2006 na MW+50 Call 02/11

Maturity

11-01-2009 02-01-2017 Perp

Ratings

Ba3 Ba3/BBBa3/BB-

Debt Amortization Schedule 9M09

3000 2500 (MN BRL) 2000 1500 1000 500 0 From 13 to 24 months From 25 to 36 months From 37 to 48 months From 49 to 60 months From 61 to 72 months From 73 to 84 months From 85 to 96 months Next 12 months Afterwards 1000 2500 2000 1500

Net Revenues Evolution

Total Assets Cash Equity Short Term Debt Total Debt Net Debt Net Revenues EBITDA Net Income Funds from Operations Capex Dividends

Source: Friboi, BIE

Pork USA

Italy

Brasil

Argentina

Debt Amortization Schedule 2008

2500 2000

2008 Sales Distribution by Business Unit

19% 3% 5% 12% 14% 2009 2010 2011 2012 2013 2016

Source: Friboi, BIE

500 (MN BRL) 1500 1000 500 0

Source: Friboi, BIE

0 Sugar Ethanol Other - Cosan Açúcar e Etanol 2008 9MO9 CCL - Cosan Combustível e Lubrif.

47%

2006

Source: Cosan, BIE

2007

Beef USA Pork Australia Beef Australia Beef Italy Beef Argentina Beef Brazil

Source: Cosan, BIE

Risk policy: Cosan and its subsidiaries are exposed to sugar price volatility and foreign exchange risk. In order to manage such uncertainties, the company uses policies and procedures approved by the Board of Directors through its Risk Committee. Risk and financial instrument management activities are carried out through the definition of strategies, establishment of control systems and determination of limits of exposure. Financial instruments are contracted exclusively in positions opposite to the company's natural exposure arising from its sugar and ethanol sales to mitigate the foreign exchange exposure of exports. The company does not use derivative financial instruments to hedge foreign exchange exposure from its balance sheet, but to hedge interest payment flows. The company practices active commodity price hedging policy through derivatives with the objective of mitigating its exposure to sugar price oscillation in the international market. These derivatives, jointly with the previous ones mentioned, intend to assure a minimum average profit for future production. Credit positives: (i) strong competitive position in Brazil and worldwide (despite of slight deterioration), (ii) low cost and efficient production, as São Paulo is the most efficient region in the world for sugarcane processing, (iii) moderating export exposure, (iv) flexible mills to switch within ethanol and sugar production following demand, (v) fuel distribution allows to diversify revenues and decrease earnings' volatility, (vi) improvement in EBITDA margin, (vii) positive operating cash flow generation, (viii) depreciation of the BRL is positive for revenues, (ix) adequate interest coverage, (x) efficient working capital management, despite high needs during the crop, (xi) active policy to hedge exports (both prices and foreign exchange risks), (xii) expectation of a global sugar deficit as a consequence of a supply fall. Credit negatives: (i) distribution business had an EBITDA margin of 1.6%, while the traditional one had 17.7%, (ii) dependence on Europe, accounting for 35% of its sales in 2008, (iii) high refinancing risk, not covered by its cash position, (iv) leverage doubled, (v) weak debt metrics, despite recent improvement, specially when measured by the relation of debt to EBITDA, (vi) foreign exchange exposure only partially hedged, (vii) competitive sector in Brazil due to high fragmentation and entrance of international players, (viii) aggressive capex needs leading to negative free cash flow generation in the past and expected to continue, (ix) client concentration, with the main three customers accounting for almost 60% of its sales, (x) integration challenges following the acquisition, (xi) dependence on weather conditions. Outlook: Cosan plans to expand its presence in the international sugar and ethanol markets and to pursue growth through strategic acquisitions. The company is also focusing on reducing operating costs, increasing operating efficiency and obtaining synergies with the integration of acquisitions. Cosan is also focused on fuelling the sale of ethanol as a combustible and the sale of electricity derived from sugarcane bagasse. Esso's acquisition has the advantage of reducing Cosan's business volatility, but on the other hand, the fuel and lubricant distribution business bears much lower margins than traditional operations. Going forward, market conditions should be supportive for the company's activities (expected sugar deficit), but an aggressive growth strategy does not bode well for leverage reduction, necessary to improve currently weak debt metrics. Esso's integration could pose some challenges, although Cosan has experience in integrating acquisitions. A tight credit market should also impose some restrictions to its activities.

Risk policy: JBS and its subsidiaries are exposed to foreign exchange, interest rate, credit and commodity price risks and use derivative financial instruments to minimize exposure. JBS has a formal policy for risk management, responsibility of the Treasury Department, and constantly monitored by the Financial Committee and Financial Executives who define maximum exposure limits. Financial instruments with speculative purposes are not allowed. Exchange rate and interest rate risks related to financings, receivables from clients denominated in foreign currencies and inventories are hedged through derivative instruments, such as swap contracts (dollar to CDI or LIBOR to fixed interest rates or vice-versa), futures contracts traded on the Bolsa de Mercadorias e Futuros (BM&F) and forward contracts. The company is subject to credit risk, minimized by the pulverization of the portfolio, with no client representing more than 10% of consolidated sales. JBS practices a hedging policy for cattle prices through purchases in advance and future market operations. As decided by the Board of Directors, the company does not hedge investments made in foreign companies. Credit positives: (i) size and leading position in the global beef business, (ii) diversified asset base that reduces event risk, (iii) revenues diversification by country, (iv) adequate cash position, (v) low cost structure, (vi) BNDES support, (vii) improved capital structure, (viii) improvement in debt metrics, (ix) improvement in cash flow generation. Credit negatives: (i) low and eroding EBITDA margin due to US and Argentine exposure, (ii) high capex and aggressive growth strategy, (iii) high short-term debt when compared to EBITDA, mitigated by its cash position, (iv) no material hedging policy in place in what regards foreign exchange risk of its debt, (v) integration challenges, (vi) product dependence on beef, (vii) event risk related to embargos and sanitary and trade issues. Outlook: JBS bases its strategy on growth, leadership, expansion and profit. The company looks for investment and acquisition opportunities in order to grow locally and internationally. JBS intends to improve the product portfolio, prioritizing products with higher value-added. The company intends to live through 2009 with caution, i.e. maintaining a conservative financial management with focus on liquidity and tight financials, being conservative on investments and trying to decrease leverage. Operations wise, the focus continues to be on reducing costs by further integrating acquisitions made, increasing productivity, and tightly managing working capital. Despite of the caution, the company continues vigilant towards investment opportunities. Improving EBITDA margin and cash flow generation is a must going forward, in order to continue with its aggressive expansion strategy and reducing leverage, as the company states to aim.

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55

Independência

Positioning: Independência is one of the largest Brazilian exporters of fresh and frozen beef and one of the leading Brazilian producers of leather. Its beef slaughtering capacity stood at 12k heads/day in 2008. In addition, it is the largest logistics operator among Brazilian beef producers and one of the largest logistics operators overall in the country. Total assets reached 2.9 bn BRL in 2008. Description: Created in 1977, Independência is a beef and leather producer whose main products are fresh and frozen beef, beef-by-products, dry and salted beef, and leather. In addition to processing beef and leather, Independência is in the logistics business and produces cattle by-products, including fertilizers and biodiesel made from beef tallow with the goal of maximizing the profitability of the cattle slaughtered at its plants. As of December 2008, its total daily slaughter capacity was approximately 12,000 heads of cattle and its daily leather processing capacity was approximately 10,000 hides (not including additional outsourced capacity of 3,000 hides per day). The company is present in 7 Brazilian states and in Paraguay (after the acquisition of a plant in 2008), with 14 slaughterhouses and deboning plants, 3 tanneries, 3 salted and dried meat factories, 5 modules of biodiesel production and distribution centers in Cajamar, Itupeva and in the port of Santos. In December, direct workers were above 11.5k but firings have been taking place since then. Shareholders: Independência is a private company, controlled by the Russo family. BNDES has a minority stake in the holding Independência Participações S.A., after agreeing to inject 450 mn BRL in Independência, equivalent to a maximum of 1/3 of its capital. The first injection of 250 mn BRL took place in November 2008 and the second one of 200 mn BRL was to take place in March, but failed to happen due to the bankruptcy proceedings. According to BNDES, the bank had an equity interest of 13.9% in the company through preferred shares as of December 2008.

Marfrig

Positioning: Marfrig is the 4th largest world producer of beef and beef products and among the 10 largest world poultry processors. Being among the most internationalized and diversified companies in the Brazilian meat sector, with a total slaughtering beef capacity of 21.1k heads/day, it is the largest beef company in Argentina in terms of slaughtering capacity, sales and exports. It is also the largest private company in Uruguay, responding for 30% of the country's beef slaughtering capacity and exports, and the largest poultry products processor in the UK. Total assets amounted to 9.2 bn BRL in 2008. Description: Marfrig is a meat producer whose activities focus on beef, pork, poultry and lamb slaughter, industrialization, distribution and commercialization of animal-derived products, including food and non-food products such as hygiene and cleaning. The company has 57 plants in 9 countries, including Brazil, Chile, Uruguay, Argentina, United Kingdom, Ireland, France, Holland and the US. Overall, Marfrig has a daily slaughtering capacity of 21,100 heads of beef, 4,200 heads of pork, 8,400 heads of lamb, 1,726,000 heads of poultry and a daily processing capacity of 2,208 tons of industrialized products. In Brazil, the group has also a leather facility with a production capacity of 1,500 leathers per day, its own fleet and operates a wholesale distribution business, delivering additional food products ranging from meat to fish, chips and vegetables that buys locally and abroad. Marfrig employs more than 39k workers, 58.8% of which in Brazil. In the last three years, the group has realized 35 acquisitions, being more than half outside the country. Shareholders: Marfrig is held by MMS Participações, which has 50.44% of its voting capital. MMS is, in turn, equally controlled by Marcos Antonio Molina dos Santos and Márcia A. Pascoal Marçal dos Santos, initial owners of Marfrig (before the IPO in 2007). BNDES has 14.66% through a capital injection in 2008 and OSI Group has 7.51%. The poultry group entered the shareholding structure following an agreement through which Marfrig acquired some of OSI's assets in Brazil and Europe. The company is listed on the São Paulo stock exchange, and has no preferred shares.

Key Ratios 2006

EBITDA Margin EBITDA Growth Net Revenues Growth % Sales Abroad ROA ROE EBITDA/ Net Int Expenses Total Debt/EBITDA S-Term Debt/EBITDA Net Debt/EBITDA FC Debt/Total Debt FC Hedged Debt/Total FC Debt Net Debt/ Assets Net Debt/ Equity

Source: Independência, BIE

Rating 2007

15,8% 71,6% 63,4% 58,0% nm nm 1,7x 4,5x 1,5x 4,2x 91,1% na 45,0% 163,9%

Key Ratios 2006

EBITDA Margin EBITDA Growth Net Revenues Growth % Sales Abroad ROA ROE EBITDA/ Net Int Expenses EBITDA/ Interest costs Total Debt/EBITDA S-Term Debt/EBITDA Net Debt/EBITDA FC Debt/Total Debt FC Hedged Debt/Total FC Debt Net Debt/ Assets Net Debt/ Equity FFO/Total Debt (FFO-Capex-Dividends)/Total Debt

Source: Marfrig, BIE

Rating 2007

11,4% 53,3% 56,8% 54,1% 2,0% 6,6% 1,5x 1,3x 5,5x 1,1x 2,7x 82,5% 16,6% 23,6% 79,9% <0 <0

2008

14,9% 28,2% 35,7% 50,0% nm nm 0,3x 10,6x 5,3x 8,9x 95,9% 6,5% 88,2% nm

Moody's

FC LT Iss. LC LT Iss.

S&P

D D

Fitch

2008

14,3% 132,6% 85,7% 46,6% nm nm 0,9x 2,0x 4,9x 1,4x 3,7x 81,6% 0,9% 35,4% 118,8% <0 <0

Moody's

LT Corporate Family B1 Outlook Negative FC LT Deb Outlook

S&P

B+ Negative FC LT Iss LC LT Iss Outlook Nat LT

Fitch

B+ B+ Stable BBB+ (bra)

15,0% 15,5% 3,4% 57,0% 1,2% 5,0% 1,7x 5,2x 3,5x 4,5x 95,8% na 54,7% 226,0%

LT Corporate Family

Ca

Not Rated

Moody's

Jan-07 May-08 Feb-09 Mar-09 B3 B2 B3 Ca

Global FC Rating Evolution S&P

Jan-07 Mar-09 B D Not Rated

Fitch

11,6% 104,8% 56,7% 53,1% 3,7% 28,8% 1,5x 1,4x 4,2x 0,5x 3,0x 88,4% 43,3% 44,0% 338,4% na na

Moody's

Oct-06 B1

Global FC Rating Evolution S&P

Oct-06 B+ Sep-08

Fitch

B+

Moody's

Not Rated

Local FC Rating Evolution S&P

Not Rated Sep-08

Fitch

BBB+ (bra)

Amount MN BRL

Total Assets Cash Equity Short Term Debt Total Debt Net Debt Net Revenues EBITDA

Source: Independência, BIE

Coupon

9,625%

Liquid Issues Call/Put Issue Date

11-16-2006 na

Maturity

11-16-2016

Ratings

B1/B+/B+

2006

1.075,0 94,6 260,0 456,0 682,3 587,7 873,4 131,4

2007

2.088,7 81,8 572,8 336,1 1.020,7 938,9 1.427,0 225,5

2008

2.907,2 493,5 -850,9 1.539,7 3.057,9 2.564,4 1.936,9 289,2

375 mn USD

Amount

300 mn USD 225 mn USD

Coupon

9,875% 9,875%

Liquid Issues Call/Put Issue Date

05-15-2008 01-31-2007 na na

MN BRL Maturity

05-15-2015 01-31-2017

2006

1.717,8 291,7 223,2 118,1 1.047,1 755,4 2.130,5 248,0 64,3 na na na

2007

4.330,7 1.049,8 1.282,3 428,1 2.074,0 1.024,2 3.339,9 380,2 84,9 -204,8 553,9 49,0

2008

9.155,2 1.071,7 2.729,9 1.232,1 4.313,5 3.241,8 6.203,8 884,4 -35,5 -728,5 285,0 0,0 7% 8% 8%

Ratings

D D

Source: Bloomberg, BIE

Debt Amortization Schedule 2008

3Q08 Meat Exports Breakdown by Country

Total Assets Cash Equity Short Term Debt Total Debt Net Debt Net Revenues EBITDA Net Income Funds from Operations Capex Dividends

Source: Marfrig, BIE

2008 Exports Breakdown

2% EU/Europe Africa NAFTA Asia Central & South America Middle East Russia

45%

15% 16%

Source: Marfrig, BIE

Net Revenues Evolution Debt Amortization Schedule 2008

6500 6000 5500 5000 4500 4000 3500 3000 2500 2000 1500 1000 500 0 2006 Beef-Brazil 2009 2010 2011 2012 2013 2014 2015 2016 Argentina

Source: Marfrig, BIE

1750 1500 1250 (MN BRL) 1000 750 500 250 0 2009

Source: Independência, BIE

3% 4% 26%

5% 6% 6% 8%

15% 13% 2010 2011 2012 2013 2014 2015 2016 2017

Source: Independência, BIE

14%

Other Jordan Lebanon Palestine Algeria Singapore Israel Hong Kong Egypt Russia

1250 1000 (MN BRL) 750 500 250 0

Source: Marfrig, BIE

(MN BRL)

2007 Food service - Br Uruguay Br Pork & Ind. Europe

2008 Br Poultry & Ind. Trading & others

Risk policy: Independência is mainly exposed to foreign exchange, interest rate and cattle price risks. These risks are managed on a daily basis by the Financial Direction and on a monthly basis through reports evaluated by the Executive Committee. The company has around 50% of its sales coming from exports and 80% of its liabilities linked to the USD. The Committee established that a maximum exposure of 50% of the expected monthly exports should be hedged. Hedge operations intend to protect exports from a USD depreciation against the BRL. Liabilities linked to foreign currencies are not hedged, but the company hedges interest payments. Independência does not hedge cattle price risk. Credit positives: (i) high EBITDA margin, above peers, (ii) increasing revenues and EBITDA, (iii) high degree of customization for its clients in terms of cuts, packaging and serving sizes, (iv) increased geographic diversification with the acquisition of a plant in Paraguay, (v) possible BNDES support. Credit negatives: (i) small size compared to competitors, (ii) high leverage and high refinancing risk, (iii) low interest coverage, (iv) weak liquidity position when compared to short term debt, (v) USD denominated debt remains high and lacks hedging, (vi), dependence on beef, accounting for 93% of its total sales in the third quarter, (vii) exports dependence on Asian countries, (viii) event risk related to embargos and sanitary and trade issues, as the majority of the production is in Brazil, (ix) the company has filed for bankruptcy and is undergoing a restructuring process. Outlook: Since the beginning of the year, Independência has closed seven slaughtering plants in Mato Grosso do Sul, Goiás and São Paulo, as well as a dried and salted beef unit in Goiás and a distribution center in São Paulo. In addition, the company is adjusting operations in other units, with the objective of reducing costs and increasing efficiency. In March 2009, Independência announced it has sought court protection under the New Bankruptcy and Reorganization Law in Brazil and Chapter 15 of the U.S. Bankruptcy Code in the United States. Independência presented a restructuring plan at mid-July that included the transformation of the company into a holding and the creation of a new operational company, called Nova Independência S.A. or Nisa, which would hold operational assets and around 1/3 of its debt. Independência SA, keeping 2/3 of the debt, would then hold 66% of Nisa, with BNDESPAR and the founding Russo family controlling the rest. As debt holders disliked the plan, the company is working on a revised version.

Risk policy: Marfrig has policies and procedures to minimize exchange, interest rate and commodities price exposures and may use hedging instruments, as long as previously approved by the Board of Directors. The company's policies consist mainly in monitoring levels of exposure to each market risk; measuring these risks; setting limits for taking decisions and using hedging mechanisms, always aiming at minimizing the foreign exchange exposure of its debts, cash flows and interest costs. The company does not enter into leveraged transactions with derivatives or similar instruments, which do not offer a minimum protection against its exposure to other currencies, and adopts a policy of not entering transactions that could affect its financial position. The company also has a sound financial policy, maintaining high levels of cash balance and short-term financial investments. In December 2008, Marfrig did not have derivatives for hedging interest rate or commodity price risk. Given that approximately 70% of its revenues are denominated in currencies other than the Brazilian real, the company considers it has a natural hedge against the maturities of future obligations in foreign currency. Credit positives: (i) rising scale, (ii) diversified exports portfolio, selling to 120 countries, and increasing sales to developed countries, (iii) increased diversification of revenues by product, (iv) international presence with production in 9 countries, (v) increasingly sound EBITDA margin, (vi) liquidity position, almost covering short term debt, (vii) improved capitalization following the IPO and recent capital increase, (viii) stronger focus on value added products, (ix) possible support from the BNDES. Credit negatives: (i) dependence on Europe, destiny of more than 50% of its exports, (ii) negative operating cash flow generation, derived from intensive working capital needs, (iii) poor interest coverage, (iv) highly leveraged, debt doubled in each of the last two years, lately due to the currency depreciation, (v) high refinancing risk, specially because 80% of its short term debt is denominated in foreign currencies, (vi) high proportion of foreign currency debt, almost with no hedge, although almost covered by exports revenues, (vii) growth strategy could continue to lead to negative free cash flow, at least in the short-term, (viii) challenge of integrating the recently acquired units, (ix) negative net income on the back of the BRL depreciation, (x) event risk related to embargos and sanitary and trade issues. Outlook: Marfrig's goal is to increase its market share in the domestic and international markets and enhance its growth and profitability by pursuing the following vectors: (i) geographic diversification, with operations closer to the final consumer, (ii) creation of a production base structured on animal protein (beef, chicken, pork and mutton), (iii) balanced structure between domestic sales and exports, (iv) increased share of processed food in the sales revenue mix, (v) higher sales in the Food Service distribution channels in Brazil and abroad, and (vi) consolidation of its brands in the domestic and export markets. For 2008, Marfrig targets net revenues between 10.5 and 12 bn BRL, EBITDA between 840 mn and 1.2 bn BRL, EBITDA margin between 8 and 10%, capex of 220 mn BRL and net debt/EBITDA <3x. After the aggressive expansion strategy realized in the last three years, Marfrig's main challenge in 2009 will be the consolidation of the different operations and cultures and the achievement of synergies in order to improve cash flow generation. Its diversification in terms of country and product is a plus in this economic environment.

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57

Minerva

Positioning: Minerva is one of the leading producers and sellers of beef, leather and live cattle in Brazil, and is one of the country's three largest exporters of the sector in terms of gross revenue. In 2008, its beef daily slaughtering capacity was 6,600 heads and total assets reached 2.0 bn BRL. Description: Minerva, established in 1992, produces and sells fresh and processed beef, leather and live cattle. The company has slaughter capacity of 6,600 head/day, processing capacity of 1,300 tons/day and leather capacity of 5,000 hides/day. With a presence in 4 Brazilian states (São Paulo, Goiás, Tocantins and Mato Grosso do Sul) as well as in Paraguay, Minerva operates seven slaughter and deboning plants, two tanneries and five distribution centers. Based on a "one-stop-shop" concept, Minerva's distribution network sells, in addition to Minerva products, more than 400 different third-party food products. The coverage of Minerva's distribution network already reaches 850 cities, with some 18,000 active clients supplying products to small and midsized retailers, convenience stores and other establishments. In 2008, Minerva acquired 70% of meatpacker Friasa, located in Paraguay, with slaughter capacity of 700 head/day and beef producer Lord Meat, in the state of Goiás, with a 500 head/day slaughtering capacity. In March 2009, the first production unit of Minerva Dawn Farms, a joint venture between Minerva and Dawn Farms and one of the largest processed animal protein (beef, chicken and pork) plants in Brazil, was inaugurated. The plant will also produce meat with vegetables and sauces. Shareholders: Minerva is controlled by the Vilela de Queiroz family, who holds 68% of the voting shares. The remaining is free float. The company is listed on the São Paulo stock exchange and has no preferred shares.

Sadia

Positioning: Sadia is one of the largest food companies in Latin America and the sixth largest exporter in Brazil ­first in chicken exports with a market share of 23.5% and second in pork with a market share of 18.3%. The company is also leader in frozen and refrigerated processed products in Brazil, with market shares of 45.7% and 31.7%, and in margarine as well, with a 47.5% market share. In the Middle East, Sadia is the leading company in processed meat products, whole chicken and poultry cuts, catering to Saudi Arabia, United Arab Emirates, Kuwait, Qatar, Oman and Bahrain markets, where it holds a market share of more than 25%. Total assets reached 13.7 bn BRL in 2008. Description: Established in 1944, Sadia's main business activities are organized in four operational segments: processed products, poultry (chickens and turkeys), pork and beef. The company distributes its products through a large number of sale points in the local market and exports to countries in Europe, Middle East, Eurasia, Asia and Americas. The company has 18 industrial units of its own, 4 leased units and 16 distribution centers located in 14 Brazilian states, on top of sales offices in 11 countries (England, Germany, United Arab Emirates, Russia, Japan, China, Turkey, Argentina, Uruguay, Chile and Panama) and a partnership system with 10 thousand integrated farms. Sadia has an annual processing capacity of 1,450k tons of products, and annual slaughtering capacities of 963.3 mn poultry heads, 6.3 mn pork heads and 400k beef heads. In the end of 2008, it employed more than 60k people. Shareholders: Old Participações Ltda. (resulting from a shareholders' agreement) has 10.41% of the voting shares and 3.92% of the total shares. Sunflower Participações S.A. owns 14.12% of the voting and 5.31% of the total capital. Other local shareholders resulting from a shareholders' agreement own 31.77% of the voting shares, and 13.97% of the total. Banco do Brasil Pension Fund has 0.30% and 7.33% of the voting and total capital, respectively. Dodge & Cox has 7.09% of the total shares through the ownership of 11.36% of preferred shares. The company is listed on the Bovespa, NYSE and Latibex stock exchanges. Sadia recently announced its merger with Perdigão, but regulatory issues are still pending.

Key Ratios 2006

EBITDA Margin EBITDA Growth Net Revenues Growth % Sales Abroad ROA ROE EBITDA/ Net Int Expenses EBITDA/ Interest costs Total Debt/EBITDA S-Term Debt/EBITDA Net Debt/EBITDA Net Debt/ Assets FC Debt/Total Debt FC Hedged Debt/Total FC Debt Net Debt/ Equity FFO/Total Debt (FFO-Capex-Dividends)/Total Debt

Source: Minerva, BIE

Rating 2007

8,2% -1,1% 22,7% 70,6% 2,6% 6,5% nm 1,3x 4,4x 0,5x 1,3x 11,3% 93,2% na 28,9% <0 <0

Key Ratios Fitch

LT Issuer Def LT LC Issuer Def Senior Uns. Debt Nat LT B watch B watch B watch BBB- (bra) watch EBITDA Margin EBITDA Growth Net Revenues Growth % Sales Abroad ROA ROE EBITDA/ Net Int Expenses EBITDA/ Interest costs Total Debt/EBITDA S-Term Debt/EBITDA Net Debt/EBITDA FC Debt/Total Debt FC Hedged Debt/Total FC Debt* Net Debt/ Assets Net Debt/ Equity FFO/Total Debt (FFO-Capex-Dividends)/Total Debt

Source: Sadia, BIE *including cash denominated in foreign currencies

Rating 2007

11,9% 77,4% 26,6% 46,3% 8,9% 24,1% nm 4,3x 3,5x 0,9x 1,0x 65,1% 65,6% 11,4% 30,9% 37,7% <0

2008

7,2% 27,2% 45,0% 69,2% nm nm 0,4x 0,8x 9,2x 2,3x 6,1x 46,7% 81,3% 24,4% 300,3% <0 <0

Moody's

S&P

LT FC Issuer Cred CCC+ LT LC Issuer Cred CCC+ Outlook Negative

2006

8,5% -28,7% -6,0% 43,6% 5,0% 15,3% nm 2,5x 6,6x 2,1x 2,5x 72,6% 69,9% 19,3% 59,5% 6,9% <0

2008

10,4% 7,3% 23,2% 45,8% nm nm 0,3x 3,4x 7,7x 3,7x 4,5x 59,8% 87,4% 36,9% 1226,5% 0,2% <0

Moody's

FC LT Iss LC LT Iss

S&P

B watch + B watch +

Fitch

10,2% 112,2% 26,8% 76,8% 6,0% 28,5% 4,6x 2,2x 3,7x 2,1x 2,9x 39,2% 86,7% na 187,9% <0 <0

Not Rated

LT Corp Fam.

B2 watch +

Not Rated

Moody's

Mar-06 Sep-08 Nov-08 Mar-09 Ba2 Ba3 B1 B2

Global FC Rating Evolution S&P

Jun-08 Oct-08 Apr-09 BB+ BB B Not Rated

Fitch

Moody's

Not Rated

Global FC Rating Evolution S&P

Jan-07 Jun-09 B CCC+ Feb-07 May-09

Fitch

B+ B

Amount

250 mn USD

Coupon

6,875%

Liquid Issues Call/Put Issue Date

05-24-2007 na

Maturity

05-24-2017

Ratings

B2*+/B*+

MN BRL

Total Assets Cash Equity Short Term Debt Total Debt Net Debt Net Revenues EBITDA Net Income Funds from Operations Capex Dividends

Source: Minerva, BIE

2006

900,8 92,9 188,0 253,3 446,2 353,3 1.192,4 122,0 53,6 -58,0 12,9 0,0

2007

1.359,0 376,4 530,0 62,7 529,5 153,1 1.462,6 120,6 34,7 -165,2 102,7 0,0

2008

2.018,2 466,5 314,1 357,8 1.409,9 943,4 2.120,8 153,4 -215,5 -114,1 351,0 0,0

Moody's

Not Rated

Local FC Rating Evolution S&P

Not Rated Jan-07 May-09

Fitch

BBB(bra) BBB- (bra)

Source: Bloomberg, BIE

MN BRL

Total Assets Cash Equity Short Term Debt Total Debt Net Debt Net Revenues EBITDA Net Income Funds from Operations Capex Dividends

Source: Sadia, BIE

2006

7.576,4 2.421,5 2.458,4 1.207,9 3.885,4 1.463,9 6.876,7 584,3 376,6 270,0 1.055,4 169,9

2007

8.624,9 2.683,6 3.183,8 980,3 3.668,4 984,8 8.708,1 1.036,5 768,3 1.383,5 1.048,6 106,8

2008

13.659,0 3.509,3 410,9 4.164,4 8.549,1 5.039,8 10.728,6 1.112,1 -2.484,8 20,2 1.710,6 215,7

Source: Sadia, BIE

2008 Exports Breakdown

16%

22% Middle East Asia America Euroasia Europe

Amount

200 mn USD

Coupon

9,500%

Liquid Issues Call/Put Issue Date

01-26-2007 na

Maturity

02-01-2017

Ratings

CCC+/B *-

16% 27% 19%

Source: Bloomberg, BIE

Debt Amortization Schedule 2008

Sales Evolution by Product

Debt Amortization Schedule 2008

500 400 (MN BRL) 300 200 100 0 2009

Source: Minerva, BIE

Net Revenues Evolution

12000 10000 (MN BRL) 8000 6000 4000 2000 0

2000 1500 (MN BRL) (MN BRL) Meat

Source: Minerva, BIE

1000 500 0

2010

2011

2012

2013

2014

2017

Leather 2006 2007

Resale 2008

Life Cattle

4500 4000 3500 3000 2500 2000 1500 1000 500 0

2009

2010

2011

2012

2013

2014 onward

Source: Sadia, BIE

2004

2005

2006 Poultry Pork

2007 Beef

2008 Others

Processed products

Risk policy: Minerva uses derivative financial instruments to hedge market risks such as foreign exchange, interest rate, credit and commodity prices. The market risk management is done through the application of VaR models, monitoring the risk at least twice a day. Minerva does not use exotic derivatives and the foreign exchange policy has the objective of minimizing the currency effect on income and its volatility. Minerva hedges foreign currency flows in a one year horizon (short term debt, exports, imports, transportation costs), long term debt related flows and hedges commodity price risk actively. Credit positives: (i) brand recognition, (ii) fresh and made-to-order products fueling differentiation and customer loyalty, (iii) geographically diversified export profile, (iv) new projects expected to increase EBITDA generation, (v) Minerva Dawn Farms should help to diversify revenues, (vi) good cost management, (vii) active hedging policy of commodity price risk, (viii) Minerva obtained 215 mn BRL in January from BNDES and Banco da Amazonia to extend debt maturities. Credit negatives: (i) production facilities concentrated in Brazil, (ii) focus on fresh beef, responsible for almost 75% of its sales, (iii) worsening and low EBITDA margin compared to peers with a negative EBITDA in the Paraguayan plant, (iv) very high proportion of foreign currency debt mostly unhedged, (v) dramatic increase in leverage and huge deterioration in credit metrics, not only due to the currency depreciation but also because of aggressive capex needs, (vi) very high refinancing risk when comparing short-term debt to EBITDA, mitigated by its cash position and somewhat covered by recent credit lines, (vii) negative operating cash flow generation, (viii) event risk related to embargos and sanitary and trade issues. Outlook: Minerva´s business strategy rests on: (i) continued focus on the most profitable markets, (ii) expanding production capacity, playing an active role in the consolidation of the Brazilian slaughterhouse market, (iii) enhancing operating efficiencies and lowering operating costs, (iv) increasing sales of value added products. Minerva is building two new plants in Brazil, expected to start operations in 2009, with a total slaughtering capacity of 1,500 heads/day. Refinancing risk is high and the company has a bond covenant preventing Minerva and its subsidiaries from raising any debt if whilst raising new debt (an "incurrence" test) the company's net debt/EBITDA ratio were to exceed 3.75x up until December 31, 2008 or 3.50x as of January 1, 2009. As there was no additional debt, the "incurrence" test implies that no considerations over the breach of the covenants are necessary. Any surpassing of the net debt/EBITDA ratio caused solely by foreign exchange variation is not considered a breach of the covenant, but the reality was a net debt/EBITDA ratio above 6x in 2008. Improving cash flow generation would help, although the high exposure to exports could be a handicap in the actual global context.

Source: Sadia, BIE

Risk policy: Sadia's treasury policy establishes that market risks are managed by the Risk Management Department, which has the objective of determining parameters for the use of derivative instruments in the hedging of the assets and liabilities, both operating and financial, exposed to variations in foreign exchange and interest rates and prices of commodities, as well as to establish credit limits with financial institutions. The treasury policy for foreign exchange determines that the limit of exposure (liabilities-financial investments-derivative instruments-exports receivables) must respect the lowest of the following amounts: (i) 20% of the company's net equity, or (ii) for the three months following the base date, the limit of up to 10 days of exports or for the 12 months following the base date, 50% of the net cash generation. The control and management of the exposures are updated by market quotations in real-time. Within its foreign exchange hedging strategy the company used exchange futures contracts (non deliverable forwards, target forwards and options, mainly in US dollars), as a way of mitigating the impacts of exchange rate variations. On credit risk, the criteria for maximum net exposure per financial institution (financial assets less financial liabilities) may not be greater than the lowest of 10% of the financial institution's net equity or the company's equity. Sadia does not have any customer or group representing 10% or more of its consolidated revenues. Sadia has a Commodities Committee and Risk Management, but did not have outstanding commodities derivative contracts at year-end 2008. Credit positives: (i) leading market position and well-known brand in Brazil and other markets such as Russia and some Middle East countries, (ii) competitive cost structure reflected in a sound EBITDA margin (despite recent reduction), (iii) exports diversification by country, (iv) processed products, with higher value added, represent more than 40% of net revenues, (v) strategy towards globalization, (vi) launching new products frequently, (vii) wide presence to be close to the clients, (viii) corporate changes in policies and management after the losses with the BRL bet exposure. Credit negatives: (i) negative free cash flow generation, (ii) aggressive capex program (1.8 bn BRL) in 2008, (iii) financial loss of 760 mn BRL due to derivative instruments betting on the BRL appreciation against the USD, (iv) high refinancing risk not totally covered by its cash position, (v) leverage doubled and debt metrics worsened, (vi) foreign currency debt with half hedged by cash, (vii) unbalanced capital structure, (viii) event risk related to embargos and sanitary and trade issues. Outlook: Sadia intends to consolidate the growth strategy in higher value-added segments (processed products) and proceed with its globalization strategy. The company prioritizes a growth strategy based on the construction of new plants, which give Sadia more freedom to build competitive manufacturing complex, although without ruling out an acquisition based path. For 2009, Sadia targets an EBITDA margin between 8% and 10% and plans to make investments of 600 mn BRL. As its cash position is not enough to cover short-term debt, refinancing risk becomes an issue this year, on top of the planned capex that needs to be financed. Improving Sadia's capital structure by reducing debt is a must, but the merger with rival Perdigão should be positive to solve Sadia's short-term financial issues.

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TELECOMS AND MEDIA

Although the macroeconomic environment worsened in the end of 2008, telecom and media companies managed to benefit from the gradually improving income levels of the population and cross selling initiatives, observed in recent years. Consequently, revenues and EBITDA grew. EBITDA Margin Among telecom companies covered in this publication, mobile and internet businesses continued to drive growth, while the wireline business remained stable. EBITDA margins did not behave uniformly, but were quite sound even in the cases that posted deterioration. Operating Cash Flow less Capex less Dividends to Total Debt

80% 70% 60% 50% 40% 40% 35% 30% 25% 20% 15% 10% 5%

Source: Company Data, Banco Itaú Europa

30% 20% 10% 0% -10% -20% BT TNLP Globo Net RBS

2007

2008

0% BT TNLP Globo RBS RBS

2007

Source: Company Data, Banco Itaú Europa

2008

Challenges going forward are big, as the sector is characterized by rapid technological changes and fierce competition. Technology wise, capital expenditures are likely to be high due to quality service improvement and continuing network upgrades and expansion. Third generation is at initial stages of implementation, requiring high investments in the short-to-medium term, and because of more expensive handsets, it should have little effect on revenues at first. Competition has become even fiercer on the back of higher penetration rates and portability in mobile. Growth has been coming from mobile and Internet operations, as the wireline business is in a mature stage of development. However, as mobile penetration, currently above 80%, gets closer to its limit, operators will likely focus on providing updated services and new technologies, such as 3G, and on reducing churn by retaining existing clients rather than acquiring first-time subscribers, which currently are located in lower income segments. Portability, recently implemented, should be another factor to fuel competition, inducing to price reductions and increasing the costs of retaining clients. In this environment, quality becomes crucial.

Convergence of services and consolidation should continue on the table as they stimulate efficiency and scale, while decreasing competition and retaining clients. Even TV players, such as Net, have entered into the convergence play. Growth prospects for the industry include the exploration of lower income client segments, given the large penetration among high-income population, and therefore rest on the country's sound macroeconomic fundamentals in the long term. In the short-term, focus on the local market could provide a buffer from the economic turmoil worldwide. Don't forget to keep an eye on regulatory issues such as: (i) definition of rates, (ii) pay-TV service offering by traditional fixed-line operators, (iii) voting capital control of media companies by foreigners, (iv) television and radio broadcasting licenses renewals. All could bring some news ahead.

Consolidation has been a key characteristic of the industry. In our universe, Net Serviços proceeded with its acquisition strategy and Telemar purchased Brasil Telecom, participating in the largest operation since the privatization of the sector. In order to allow the integration, the law had to be changed, as a company was not allowed to operate in more than one of the three regions the country had been divided into at the time of the industry´s privatization. In mobile, after the license auctions, third generation technology is being implemented and consequently pressuring capital expenditures of companies such as Telemar with the 3G launch in São Paulo state. Even with consolidation activity and technology investment, telecoms and media companies maintained healthy financial metrics, despite of some deterioration. The exception was Telemar due to its large acquisition. Net debt/EBITDA

(X) 2.0 1.5 1.0 0.5 0 -0.5 -1 BT TNLP Globo Net RBS

2007

Source: Company Data, Banco Itaú Europa

2008

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Brasil Telecom

Positioning: Brasil Telecom is the 3rd largest telecommunication company in Brazil by number of subscribers, and a leader within its concession area in all segments: an 89.8% market share in local services, 85.0% in intra-state calls, 65.2% in inter-regional calls and 41.4% in international calls. In the mobile business, the company's Region II market share reached 14.4%. Total assets amounted to 17.7 bn BRL in 2008. Description: Brasil Telecom, established in 1998 following the privatization of the telecommunication sector, offers fixed-line telecommunication services in central and southern Brazil, where it is the incumbent company, in the states of Acre, Rondônia, Mato Grosso, Mato Grosso do Sul, Tocantins, Goiás, Paraná, Santa Catarina, Rio Grande do Sul and Brasilia city. The concession area covers 34% of the Brazilian territory and 24% of the population. The company also provides local and long-distance inter-regional telephone services, network interconnection and data transmission services, conference calls, caller ID, toll-free numbers and mobile services in its footprint region since 2004. Brasil Telecom has more than 8.1 mn fixed lines in service, 5.6 mn mobile accesses and 1.8 mn ADSL accesses. Brasil Telecom was acquired by Oi (see file) in April 2008, a transaction approved by Anatel in December 2008. Consolidated results started to be presented in January 2009. Shareholders: Brasil Telecom is controlled by Brasil Telecom Participações. In January 2009, Telemar Norte Leste S.A. acquired through its direct subsidiary, Copart 1 Participações S.A., the share control of Brasil Telecom Participações S.A. and of Brasil Telecom S.A. As a result of the acquisition, Telemar Norte Leste S.A. became the indirect holder of 61.2% of Brasil Telecom Participações S.A.'s voting shares.

Globo

Positioning: Globo is the leading media group in Brazil owning the largest television broadcaster in the country - 5 own stations and affiliated stations reaching 5,477 towns, covering almost the whole national territory with nearly 100% of in-house production. Globo is one of the main content producers in the world. It controls the leading pay-television programmer in Brazil ­Globosat- and holds an interest in the leading Brazilian satellite directto-home television distributor ­Sky Brasil- and in the leading Brazilian cable operator -Net Serviços. Globo's network had an average nationwide broadcast television audience share of approximately 45% in 2008 (in the period from 7 am to midnight), reaching 50% during prime time (from 6 pm to midnight). Total assets reached 8.2 bn BRL in 2008. Description: Globo is the company resulting from the merger of TV Globo Ltda. (TV Globo) and Globo Comunicações e Participações S.A. (Globopar), in August 2005. Globo's main lines of business are broadcast television, programming, publishing and pay-TV distribution. Revenues from advertising, i.e., broadcast TV revenues accounted for more than 75% of the company's net revenues in 2008. The broadcasting TV business unit has 5 own stations and a network comprising affiliated stations in 5,477 Brazilian towns. The company has its headquarters in Rio de Janeiro, where it produces its own programming content. Around 76% of the programs broadcasted by the Globo Network are homemade. Globo employed directly around 12k workers in 2008. Shareholders: Globo is controlled by the Marinho Family. The company is not listed.

Key Ratios 2006

EBITDA Margin EBITDA Growth Net Revenues Growth % Exports ROA ROE EBITDA/ Net Int Expenses EBITDA / Interests Costs Total Debt/EBITDA S-Term Debt/EBITDA Net Debt/EBITDA Net Debt/Assets FC Debt/Total debt FC Hedged Debt/Total FC Debt Net Debt/Equity FFO/Total Debt (FFO-Div-Capex)/Total Debt

Source: Brasil Telecom, BIE

Rating Key Ratios 2007

34,4% 7,3% 7,4% 0,0 5,2% 14,5% 6,1x 1,1x 1,2x 0,1x 0,5x 12,7% 16,6% 55,6% 35,9% 71,1% 33,2%

Rating 2007

19,9% 2,2% 6,6% 7,4% 16,4% nm 6,0x 0,9x 0,1x nm 82,3% na nm nm 100,4% 73,7%

2008

34,7% 3,0% 2,2% 0,0 5,8% 16,5% 6,6x 4,0x 1,2x 0,2x 0,7x 16,1% 18,1% 25,2% 45,6% 62,5% 19,1%

Moody's

LC Curr Issuer LT Issuer Rat Outlook Baa3 Aa1.br Stable

S&P

LT Iss Cred ST Iss Cred brAA+ brA-1

Fitch 2006

LT LC Issuer Outlook Nat LT BBBStable AA+(bra) EBITDA Margin EBITDA Growth Net Revenues Growth ROA ROE EBITDA/ Net Int Expenses EBITDA/ Interest Costs Total Debt/EBITDA S-Term Debt/EBITDA Net Debt/EBITDA FC Debt/Total Debt FC Hedged Debt/Total FC Debt Net Debt/ Assets Net Debt/ Equity FFO/Total Debt (FFO-Capex-Div)/Total Debt

Source: Globo, BIE

34,4% 24,0% 1,6% 0,0 2,8% 8,1% 5,4x 4,1x 1,5x 0,3x 0,8x 17,5% 18,9% 44,2% 51,1% 46,6% 12,8%

2008

22,4% 28,5% 14,0% 6,0% 14,8% 6,9x 9,8x 0,9x 0,0x nm 84,3% na nm nm 115,8% 57,2%

Moody's

S&P

FC LT Iss LC LT Iss Outlook Nat LT Issuer BBBBBBStable D

Fitch

FC LT Iss LC LT Iss Senior Uns Outlook Nat LT BBBBBBBBBStable AA+(bra)

Moody's

May-06 May-08 Ba1 Baa3

Global FC Ratings Evolution S&P

Not Rated Apr-06 Oct-07 Jan-09

Fitch

BBBBBB BBB-

Moody's

Local Rating Evolution S&P

May-06

Fitch

AA+(bra)

20,7% -4,3% 11,9% 7,9% 17,9% 18,7x 19,6x 1,1x 0,0x 0,5x 50,1% 7,3% 9,0% 20,4% 79,2% 61,0%

Issuer Baa3 Senior Uns. Debt Baa3 Outlook Stable

Moody's

Apr-07 Jun-09 Ba1 Baa3

Global FC Ratings Evolution S&P

Mar-06 Sep-06 Jul-07 Aug-08 BBBB BB+ BBB-

Fitch

Sep-08

BBB-

MN BRL

Total Assets Cash Equity Short Term Debt Total Debt Net Debt Net Revenues EBITDA Net Income Funds from Operations Capex Dividends

Source: Brasil Telecom, BIE

2006

15.970,6 2.631,0 5.455,1 1.129,4 5.419,9 2.788,9 10.296,7 3.545,4 444,5 2.525,7 1.504,8 324,5

2007

15.534,9 2.430,6 5.505,5 518,0 4.408,4 1.977,8 11.058,5 3.803,5 800,1 3.134,8 1.317,7 352,0

2008

17.670,2 2.040,5 6.241,0 760,6 4.886,0 2.845,5 11.296,8 3.919,0 1.029,8 3.055,2 1.438,4 684,6

Amount

1080 mn BRL 200 mn USD

Coupon

DI*104% 9,375%

Liquid Issues Call/Put Issue Date

07-09-2006 12-14-2004 Sink. Call 09/09

MN BRL Maturity

06-01-2013 02-18-2014

2006

7.377,0 803,0 3.254,1 42,9 1.468,3 665,3 6.253,3 1.296,6 582,9 1.163,5 221,6 45,7

2007

7.812,2 1.732,0 3.509,8 133,4 1.236,0 -496,0 6.667,0 1.325,0 574,8 1.241,3 282,8 48,1

2008

8.221,0 2.596,3 3.349,0 35,3 1.480,0 -1.116,3 7.601,5 1.703,0 496,7 1.713,9 337,5 529,9

Ratings

brAAA BBB-

Source: Bloomberg, BIE

Total Assets Cash Equity Short Term Debt Total Debt Net Debt Net Revenues EBITDA Net Income Funds From Operations Capex Dividends

Source: Globo, BIE

Moody's

Not Rated

Local Rating Evolution S&P

Sep-08

Fitch

AA+(bra)

Amount

200 mn USD 325 mn USD

Coupon

7,250% 9,375%

Liquid Issues Call/Put Issue Date

04-26-2007 04-20-2006 Call 04/12 Call 10/09

Maturity

Ratings

04-26-2022 Baa3/BBB-/BBBPerpetual BBB-

Source: Bloomberg, BIE

Debt Amortization Schedule 2008

17500 15000 (MN BRL) 800 (MN BRL) 600 400 200 0 2009 2010 2011 2012 2013 2014 2015 Onwards 12500

Gross Revenues Profile

Consolidated Debt Amortization Schedule 2008

8000

Globo Consolidated Net Revenues

CAGR: 5.1%

600 500

(MN BRL)

7000 6000 5000 4000 3000 2000 1000 0 2005 Advertising 2006

CAGR:

10.8%

5000 2500 0 2005 Fixed line

Source: Brasil Telecom, BIE

(MN BRL)

2006 Mobile 2007 Data and other 2008

10000

400 300 200 100 0 2009 2010 2011 2012 2022 Perpetual

Source: Brasil Telecom, BIE

2007 Others

2008 Net Serviços

Content/ Programming

Source: Globo, BIE. Excluding Net Serviços. Principal payments only.

Source: Globo, BIE

Risk policy: Brasil Telecom has implemented an Integrated Risk Management approach to monitor the level of corporate risks, identifying opportunities to maximize return on its decisions and add value to the business. Brasil Telecom's Corporate Risk Management Policy classifies risks in the following categories: Strategic, Financial and Market, Credit, Operational and Regulatory. Exposure to market risks, i.e., to interest rates, inflation and foreign exchange fluctuations, is monitored daily through the VaR ­ Value at Risk ­ method. According to a policy approved in May 2007, Brasil Telecom can contract derivatives with the objective of hedging liabilities up to a maximum limit of: (i) 10% of the cash and equivalents or (ii) foreign exchange denominated debt. Contracting derivative financial instruments requires the Board's approval. The company uses both swaps and options. The company did not have derivative operations to hedge interest rate risk in the end of 2008, but monitors continuously those rates to evaluate the need to hedge. Credit positives: (i) dominant position within its concession area, (ii) increasingly diversified revenues base, (iii) low level of foreign exchange denominated debt, (iv) cost reduction to increase efficiency, (v) sound EBITDA, margins and interest coverage, (vi) consistent revenue growth and successful launching of new products, (vii) sound cash flow generation, leading to good cash flow coverage of debt, (viii) high cash position, (ix) low refinancing risk and comfortable debt maturity schedule, (x) part of the largest national player. Credit negatives: (i) high dependence of revenues on fixed telephony, a segment with stable to low growth prospects, (ii) strong competition in mobile, national data and long distance, (iii) low EBITDA margin from mobile operations, despite improvement from 2.9% in 2007 to 9.4% in 2008, (iv) meaningfull part of foreign currency debt was not hedged, (v) consolidation into a company with higher leverage profile. Outlook: Brasil Telecom's strategy is to offer integrated service packages, to anticipate market demands, to understand and offer products and services focused on the emerging Brazilian middle class, to win the loyalty of top customers, to monitor and explore new opportunities and markets, and to invest in the customer relationship management. During 2009, the consolidation into Oi will take place.

Credit positives: (i) largest television network in Brazil and one of the leading content producers in the world, (ii) strong brand in Internet, (iii) quality content production, suited to its market, produced in-house and reducing margin volatility, (iv) premier media brand in advertising due to higher-than-average audiences, (v) horizontal programming strategy, (vi) comfortable debt maturity schedule with no important redemptions until 2012, (vii) strong cash flow generation and coverage of debt, (viii) net cash position, (ix) operational improvement, (x) Globo has the exclusive transmission rights for the 2010 and 2014 FIFA World Cups, (xi) negotiation power, (xii) conservative debt management policy in the recent years, (xiii) Brazil is the largest TV market in Latin America. Credit negatives: (i) cyclical nature of the business, (ii) high dependence on broadcast TV revenues, that represented more than 75% of Globo's total revenues, (iii) significant portion of the debt is USD denominated while revenues are in BRL, (iv) highly regulated business, (v) increased competition from cable, satellite TV and other broadcasting providers, (vi) strong dependence on technology, (vii) high fixed cost structure, (viii) exposure of financial income and debt to local currency depreciation, (ix) large capex related to HDTV (high-definition television), (x) low information disclosure. Outlook: Going forward, Globo intends to maintain its audience shares, through excellence in content production and programming strategy. The company plans to continue investing in digital media not only from a technological point of view, but also on new languages and formats, in order to get its public more involved with the company by participating and giving opinions. Globo intends to maintain a conservative financial strategy. Given the economic deceleration expected for Brazil and the cyclical nature of advertising spending (the main source of revenues of the company), 2009 should be a challenging year for Globo, although domestic market focus is a plus in current global circumstances. Greater competition in the free-to-air TV business could lead to cost inflation on strategic events. An improvement of disclosure patterns would be a plus.

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Net Serviços

Positioning: Net Serviços de Comunicação is the largest multi-service cable company in Latin America, offering pay TV, broadband Internet access and voice services through a single cable. With a 50% share of the pay-TV market and a 24% share of the broadband segment, it is the leader in the Brazilian cable pay-TV market with an above-70% market share. It operates in 92 Brazilian cities, including São Paulo, Rio de Janeiro, and Brasília. The company has 3.3 million pay TV subscribers (NET), 2.5 million broadband subscribers (NET Vírtua) and 2.1 million voice subscribers (NET Fone via Embratel). Total assets reached 6.1 bn BRL in 2008. Description: Net Serviços was established in 1994 by Mr. Antonio Dias Leite, under the name Multicanal Participações. Multicanal was sold to Globopar in 1997, and the name was changed to Globo Cabo one year later. The company got its current name in 2002, when it defaulted on its debt payments. The restructuring process was fully concluded in 2005. Currently NET's main services include pay-television and pay-per-view programming under the "NET" brand name, digital cable services under the "NET Digital" brand name, high definition digital video under the "NET Digital HD" brand name, broadband Internet service under the "NET Virtua" brand name since 2000, and voice under the "NET Fone via Embratel" brand name since 2006 (meant the entrance of the company in the triple play market). In addition to triple-play services, NET also offers complete solutions for clients and their families under the recently launched NET Lar concept. Net Serviços acquired BigTV in 2007 but did not get Anatel's approval until December 2008. The integration process is currently in place. In August 2008, Net signed a contract for the acquisition of ESC90, a cable company in the cities of Vitória and Vila Velha in Espírito Santo state, but the acquisition is pending for Anatel's approval. Shareholders: Net's capital is held as follows: GB 51.0% of the voting shares and 17.0% of the total shares, Globo 2.1% of the voting and 1.3% of the total, Distel Holding 8.3% of the voting and 2.8% of the total, Embratel S.A. 2.1% of the voting and 5.7% of the total and Embratel Participações 35.8% of the voting and 15.5% of the total capital. The shares are listed on the Bovespa, Nasdaq and Latibex stock exchanges. As Telmex (A3 stable/BBB+ stable/Astable) owns Embratel Participações (Baa3 stable), a holding company for Embratel S.A. and 49% of GB, the Mexican company controls, directly and indirectly, 62.9% of Net Serviços' voting capital. Globo has the remaining 51% in GB's voting capital and controls Distel as well, leading to a total direct and indirect holding in the company of 36.4% of Net's ordinary shares.

RBS

Positioning: RBS is present in the south of Brazil with 18 TV stations in Rio Grande do Sul and Santa Catarina, being the biggest regional TV network covering 790 towns and 17 mn viewers. The newspaper business is formed by 8 papers and is the second largest in Brazil, as all RBS' newspapers hold leading positions in their niches. Radio wise, RBS has 26 stations and is the largest radio group targeted at population aged between 15 and 29 years in the South of Brazil. Total assets reached 1 bn BRL in 2008. Description: RBS Participações S.A. is the holding company of Grupo RBS, a multimedia communications company operating in Rio Grande do Sul and Santa Catarina states. Established by Mauricio Sirotsky Sobrinho in 1957, the group pioneered Brazilian regional television and is Globo Network's eldest affiliate. RBS Participações was created in 2005 with the purpose of integrating all the media companies of the group operating in four different businesses: newspaper publishing (RBS-Zero Hora Editora Jornalistica SA), Internet, radio and television broadcasting. The group operates 18 broadcast TV stations (affiliates of TV Globo), 26 radio stations, 8 newspapers, 4 Internet portals, a publishing company, a music label and a logistics company, among others. Currently, it has over 5.7 thousand workers, with offices in Parana, São Paulo, Rio de Janeiro and the Federal District. Shareholders: The group is controlled by the founding family Sirotsky. Its shares are not listed.

Key Ratios Key Ratios 2006

EBITDA Margin EBITDA Growth Net Revenues Growth ROA ROE EBITDA/ Net Int Expenses EBITDA/ Interest Costs Total Debt/EBITDA S-Term Debt/EBITDA Net Debt/EBITDA FC Debt/Total Debt FC Hedged Debt/Total FC Debt Net Debt/ Assets Net Debt/ Equity FFO/Total Debt (FFO-Capex-Div)/Total Debt

Source: Net, BIE

Rating 2007

27,4% 0,2% 10,5% 12,9% nm 4,3x 3,5x 1,8x 0,2x 1,2x 38,1% 6,8% 0,0% nm 51,1% 28,5%

Rating 2006 2007

27,1% 44,2% 41,5% 3,4% 6,4% 10,0x 6,1x 1,5x 0,0x 0,7x 23,8% 7,9% 10,9% 20,3% 69,2% 4,4%

2008

25,6% 1,9% 9,0% 20,6% 110,9% 3,9x 4,5x 1,6x 0,2x 0,8x 18,7% 16,2% 0,0% 101,0% 62,9% 24,4%

Moody's

Not Rated

S&P

LT Foreign Iss LT Local Iss Outlook BB BB Stable Not Rated

Fitch

2008

26,5% 31,8% 34,8% nm nm 3,1x 6,2x 1,8x 0,1x 1,0x 46,8% 20,0% 16,8% 38,7% 73,4% 17,0%

Moody's

LT Corp Family Senior Unsecured Outlook LT Corp Family Ba2 Ba2 Stable Aa3.br

S&P

FC LT Issuer LC LT Issuer Outlook LT Issuer BB BB Stable brAA-

Fitch

26,6% 14,5% 21,5% 2,7% 6,6% 4,4x 4,4x 1,8x 0,0x 0,8x 35,6% 0,0% 13,1% 32,5% 59,4% 5,8%

Not Rated

Moody's

May-06 Dec-06 Jan-08 B1 WR Ba2

Global FC Ratings Evolution S&P

Mar-06 Sep-07 BBBB Not Rated

Fitch

EBITDA Margin EBITDA Growth Net Revenues Growth ROA ROE EBITDA/Net Int Expenses EBITDA/Interest Costs Total Debt/EBITDA S-Term Debt/EBITDA Net Debt/EBITDA Net Debt/Assets FC Debt/Total Debt FC Hedged Debt/Total FC Debt Net Debt/ Equity FFO/Total Debt (FFO-Div-Capex)/Total Debt

Source: RBS, BIE

30,3% na na 17,2% nm 4,8x 3,4x 1,7x 0,5x 0,7x 21,4% 66,4% 53,3% nm 59,6% 37,6%

Moody's

Not Rated

Global FC Ratings Evolution S&P

Apr-06 Dec-06 Apr-07 Jun-08 B B+ BBBB Not Rated

Fitch

MN BRL

Total Assets Cash Equity Short Term Debt Total Debt Net Debt Net Revenues EBITDA Net Income Funds From Operations Capex Dividends

Source: Net, BIE

2006

3.074,7 506,5 1.240,2 8,6 909,3 402,8 1.936,0 515,4 81,9 540,2 487,8 0,0

2007

5.086,3 569,6 2.738,4 24,6 1.124,6 555,0 2.738,7 743,1 174,3 778,4 729,4 0,0

2008

6.086,6 736,9 2.643,4 58,3 1.759,8 1.022,9 3.690,4 979,7 -95,0 1.291,6 992,9 0,0

Moody's

Aug-07 Aa3.br

Local Rating Evolution S&P

Mar-06 Nov-06 Sep-07 brA brA+ brAANot Rated

MN BRL Fitch

Total Assets Cash Equity Short Term Debt Total Debt Net Debt Net Revenues EBITDA Net Income Funds from Operations Capex Dividends

Source: RBS, BIE

2006

827,3 250,6 -110,3 118,9 427,9 177,3 811,4 245,5 142,0 255,0 36,9 57,4

2007

742,5 169,2 -77,9 46,1 452,1 282,9 896,9 246,0 96,0 230,8 38,2 63,6

2008

1.035,8 217,8 192,2 42,2 412,0 194,2 977,5 250,6 213,1 259,3 113,0 45,6

Amount

300 mn BRL

Coupon

11,250%

Liquid Issues Call/Put Issue Date

06-22-2007 na

Maturity

06-15-2017

Ratings

BB

Source: Bloomberg, BIE

Amount

580 mn BRL 150 mn USD

Coupon

DI+70 bps 9,250%

Liquid Issues Call/Put Issue Date

12-28-2006 11-28-2006 Sink. Call 11/09

Maturity

12-01-2013 Perpetual

Ratings

brAA BB+

Source: Bloomberg, BIE

Debt Amortization Schedule 2008

4000 350 300 (MN BRL) 250 (MN BRL) 200 150 100 50 0 2009

Source: Net, BIE

Gross Revenues Breakdown Debt Amortization Schedule 2008 Gross Operating Revenues

3500 3000 2500

CAGR

: 29.3%

300 1250 (MN BRL) 200 (MN BRL) 1000 750 500 250 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 0 2006 Advertising Subscriptions

Source: RBS, BIE Source: RBS, BIE

CAGR: 9.9%

2000 1500 1000 500 0

100

2007 Classified advertisment Commerce & services

2008 Circulation Other

2010

2011

2012

2013

2017-19

Perpetual

2006 pro-forma Monthly Fees

2007 pro-forma Installments

2008 pro-forma Pay per view Other

Source: Net, BIE. Pro-forma includes Vivax such as if the acquisition had occurred on Jan. 1, 2006. Risk policy: Net Serviços is exposed to market risks arising from its operations and uses derivative financial instruments to minimize that exposure. Revenues are mainly BRL-denominated while the company has liabilities and costs linked to foreign currencies, namely USD. The company only uses foreign exchange derivative instruments to protect a portion of its anticipated capital expenditures that are denominated in US dollars and the payment of interest on US dollar debt. The management of the instruments is done through operational strategies, aimed at protection, security and liquidity. Net monitors permanently the rates contracted and those prevailing in the market. The company does not use financial instruments with speculative purposes and has a formal policy for risk management, under the oversight of the Finance Committee and the Administration Council, which establishes that the financial result should be derived from the company's operations and not from financial market gains. Credit positives: (i) leading position in Brazil's pay-TV industry with presence in main cities, (ii) extensive and high quality cable network in major cities, (iii) shareholders' support (Telmex) and synergies with Globo group, (iv) market with a high growth potential, (v) prudent financial policies and moderate levels of debt, (vi) almost null refinancing risk, and comfortable maturity schedule (vii) consistent EBITDA and revenues growth along with sound margins, (viii) strong cash position and generation, (ix) focus on integrated services (triple-play), (x) permanently launching new products, (xi) successfully complete the integration of Vivax with improving operations and sound credit metrics. Credit negatives: (i) limitations to market growth derived from the strong presence of open-air TV and income levels, (ii) fierce competition in pay TV and broadband services, (iii) aggressive capex expected ahead for network updates, although the majority is discretionary (related to new installments) and could be reduced if necessary, (iv) no hedging policy for the principal of the foreign currency denominated debt, (v) highly regulated sector, (vi) proneness to make acquisitions. Outlook: Net's goal is to become a multiservice company leader of entertainment and communications services in the Brazilian residential market. The strategy to achieve the goal is to provide triple play offerings focusing on (i) maintaining the position as Brazil's leading provider of pay-television services, (ii) pursuing the continuing growth of the broadband Internet business, (iii) further developing the offering of voice services under the "NET Fone Via Embratel" brand name, (iv) making strategic acquisitions of other cable television and broadband Internet providers, such as the acquisitions of Vivax and BIGTV Companies, and (v) improving the customer service. The company intends to continue supporting growth through internal cash flow generation, although the evidenced appetite for making acquisitions could be a threat to its credit quality.

Risk policy: According to RBS' risk management policy, the nature and general position of financial risks is monitored and managed on a regular basis to evaluate results and the financial impact on cash flows. The company's risk management policy was established by the management. To manage liquidity in local and foreign currency, assumptions for future disbursements and receipts are established and monitored daily by the Treasury. RBS contracted interest rate swaps to exchange the USD variation for a fixed rate linked to the local CDI interest rate. However, none of these contracts were opened at year-end 2008. Credit positives: (i) television broadcasting companies form part of the Globo's network, benefiting from its content, (ii) strong brand, key for Globo in RBS' region, supported by a more than 35 years relationship, (iii) sound operating cash flow generation and debt coverage, (iv) adequate liquidity position, (v) consistently high operating margins, (vi) group's dominant share of audience and advertising in its service area, (vii) adequate financial risk profile, (viii) small proportion of foreign currency debt, (ix) history of support from shareholders, (x) very low refinancing risk and comfortable debt maturity schedule. Credit negatives: (i) dependence on the cyclical media industry and advertising budget, (ii) expected high capital expenditures and dividend distributions in the next years, (iii) concentration of revenues on advertising, (iv) exposed to volatility in newsprint prices, (v) some of the TV and radio licenses have expired and although renewal is considered granted, the no-renewal risk exists. Outlook: After the group completed the integration of the main businesses under RBS Comunicações S.A. in August 2008, through the acquisition of direct and indirect control of operational companies that represent the main operations (resulting from a shareholding rearrangement started in January 2006), RBS' main goal is to strengthen its presence in the region where it operates (South of Brazil) in order to achieve a leading position in the media business countrywide. Given the cyclicality of advertising revenues, the business could experience harder times in 2009 on the Brazilian GDP deceleration prospects. Nevertheless, a sound cash position bodes well for short-term refinancing risk.

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TNLP (Oi)

Positioning: Oi, the commercial brand of Tele Norte Leste Part (TNLP), is Brazil's largest telecom operator, in terms of revenues, and the largest fixed telephony company in South America, in terms of total lines in service, with a market share of 54% in Brazil. On top of the wireline leadership, it enjoys a market share of 20% of Brazilian mobile subscribers and 30% of the broadband market. It was the first operator to provide integrated telecom services. Market shares include Brasil Telecom. Total assets reached 41.1 bn BRL in 2008. Description: TNLP (Oi), was established in 1998, after the split of Telebras in the same year and the privatization of the sector. TNLP, through its commercial brand Oi, offers a broad range of integrated and convergent communication products, including fixed, mobile, ADSL/cable broadband accesses and pay-TV. The concessions and authorizations allow TNLP group of companies to provide fixed and wireless services in National Region I, comprising the 16 states in the north, northeast and southeast of Brazil. In 2008, the group launched mobile operations in São Paulo state (which is region III) and acquired Brasil Telecom (the incumbent of region II), reaching a national coverage in mobile and an almost-national in wireline with the exception being São Paulo State. After acquiring Way TV in 2007, Oi started to offer pay-TV in four cities in Minas Gerais state. In number of clients, Oi Fixed had 13.9 mn, Oi Mobile 24.4 mn, Oi Velox 2.0 mn clients and Oi TV 61k users. The company resulting from the merger has almost 56 mn clients. Shareholders: TNLP is listed on Bovespa and NYSE, with a free-float of 82.1% of the total capital. Telemar Participações holds the remaining capital, with a 53.8% voting stake. In turn, Telemar Part is controlled by: (i) BNDESPar, the holder of several equity stakes of Banco Nacional de Desenvolvimento, BNDES (31.4%), (ii) Fiago, a company owned by several pension funds like Funcef, Previ, Petros, Petrobras, Embratel, Caixa Econômica Federal, among others (25%), (iii) AG Telecom, belonging to Andrade Gutierrez, (19.3%), (iv) La Fonte Telecom held by members of the Jereissati family, which also hold shopping centers like São Paulo's Iguatemi (19.3%), and (v) Fundação Atlântico (5%), a social security fund of telecom employees.

UTILITIES ­ SECTOR BRIEF

Despite more protected from external shocks than most of the sectors, utilities were not immune to the influence of the global crisis that in the second half of 2008 started to affect Brazil. That is particularly true in the case of companies more exposed to the industrial segment, which normally has a more volatile demand pattern, amplified in recessive environments. Eletric Energy Consumption Growth in the Nacional Grid (Gwh)

15%

Key Ratios 2006

EBITDA Margin EBITDA Growth Net Revenues Growth % Exports ROA ROE EBITDA/ Net Int Expenses EBITDA / Interests Costs Total Debt/EBITDA S-Term Debt/EBITDA Net Debt/EBITDA Net Debt/Assets FC Debt /Total Debt FC Hedged Debt * /Total FC Debt Net Debt/Equity FFO/Total Debt (FFO-Div-Capex)/Total Debt 36,1% -10,0% 0,7% 0,0% 5,3% 70,0% 4,7x 8,3x 1,6x 0,3x 0,8x 17,7% 50,5% 83,0% 54,3% 44,5% 9,7%

Rating 2007

37,1% 7,0% 4,2% 0,0% 7,6% 112,2% 13,6x 10,0x 1,4x 0,3x 0,4x 9,1% 43,9% 72,0% 25,8% 55,4% 23,6%

2008

32,4% -6,9% 6,5% 0,0% 2,8% 28,5% 4,4x 4,8x 3,4x 0,7x 1,6x 23,9% 21,8% 66,0% 102,2% 28,0% <0

Moody's

S&P

FC LT Issuer LC LT Issuer Outlook LT Nat. BB+ BB+ Positive brAA+ FC LT Iss LC LT Iss Outlook Nat LT

Fitch

BBBBBBStable AA+(bra)

10% 5% 0% 5%

LC Curr Issue

Baa3

Moody's

Not Rated

Global FC Ratings Evolution S&P

Feb-07 BB+ Jun-06 Aug-06 Oct-07

Fitch

BB BB+ BBB-10% -15% 1008/07 2008/07 Industrial AA+(bra)

Source: EPE

3008/07 Residential

4008/07 Commercial GDP

1009/08

Moody's

Not Rated

Local Rating Evolution S&P

Feb-07 brAA+ May-06

Fitch

Source: TNLP, BIE. * includes all kinds of financial instruments, not only derivatives contracted for the purpose.

MN BRL

Total Assets Cash Equity Short Term Debt Total Debt Net Debt Net Revenues EBITDA Net Income Funds from Operations Capex Dividends

Source: TNLP, BIE

2006

27.637,7 4.687,2 8.988,7 2.074,6 9.569,8 4.882,6 16.871,8 6.089,9 1.452,9 4.254,9 2.382,3 944,9

2007

30.316,4 6.690,0 10.657,6 2.066,3 9.442,3 2.752,3 17.584,3 6.517,1 2.317,8 5.233,8 2.596,9 406,3

2008

41.065,2 10.737,9 9.591,0 4.047,2 20.542,4 9.804,5 18.735,9 6.067,8 1.154,3 5.750,9 5.061,0 2.563,2

Amount

1,620 mn BRL 964.4 mn BRL 1,607.2 mn BRL 540 mn BRL 920 mn BRL 150 mn USD 460 mn BRL 750 mn USD

Coupon

DI*103% DI*115% DI*120% DI+55 DI+140% 8,000% DI+155 9,500%

Liquid Issues Call/Put Issue Date

03-23-2006 04-06-2009 04-06-2009 03-23-2006 07-08-2008 10-29-2004 07-08-2008 04-23-2009 na na na na Sink Call 09/09 Sink na

Maturity

03-01-2011 05-30-2011 04-06-2012 03-01-2013 04-15-2013 12-18-2013 04-15-2015 04-23-2019

Ratings

Baa2 Baa2 Baa2 Baa2 brAA Baa3 brAA Baa3*+/BBB-

Although net revenues grew in most of the companies covered in this publication, earnings before interest, taxes, depreciation and amortization presented a widespread behavior and its respective margin deteriorated all across the board. Higher energy and general and administrative costs were relevant pressures on the top line profitability of the business.

Source: Bloomberg, BIE

EBITDA Margin Evolution

Gross Revenues Profile

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2008 Wireless 2006 2007 2008 Celpa Cemat Cesp CTEEP Eletrobrás Eletropaulo Energipe Rede Sabesp

Debt Amortization Schedule 2008

6000 5000 (MN BRL) (MN BRL) 4000 3000 2000 1000 0 2009

Source: TNLP, BIE

30000 25000 20000 15000 10000 5000 0 2010 2010 2012 2013 2014 Onwards

Source: TNLP, BIE

CAGR: 4.7%

2005 Data

2006

2007

Wireline (ex. Data)

Risk policy: Oi is mainly exposed to the market risk arising from foreign exchange variations, as part of its debt is denominated in foreign currency and revenues are BRL linked. Oi uses derivatives to hedge this foreign exchange risk, through swaps, cash and investments in foreign currencies. Telemar does not use derivatives with speculative purposes. These operations are done by the Treasury department following the strategy defined by the Board. The company has set the maximum limit for foreign exchange exposure at 12% of Oi group's gross debt. In December, that exposure was 6.61% of the group's gross debt. The company is exposed to floating interest rates as well, but mitigates this risk by linking financial investments to also variable rates in order to protect short-term interests' payments. Credit positives: (i) dominant position and strong brand, (ii) integrated telecom service provider, (iii) national coverage in wireless after the acquisition of Brasil Telecom and 3G licenses in the state of São Paulo, (iv) almost national coverage in wireline after the acquisition of Brasil Telecom, (v) diversified revenue mix, allowing for sustained growth and consistently high margins, (vi) sound balance sheet, despite of the recent increase in leverage, (vii) strong operating cash flow generation and sound debt coverage, (viii) decreasing foreign currency denominated debt, (ix) focus on convergence: after acquiring Way-TV, the company has become the first telecom to offer quadruple-play packages, including fixed telephony, mobile, Internet and TV, (x) strategically well positioned to benefit from growth opportunities as it operates at a national level and in different businesses, (xi) clear strategic intention to be one of the market consolidators, (xii) biggest and most widespread backbone nationwide, (xiii) already refinanced the bridge funds obtained for Brasil Telecom's acquisition that pressured short term leverage metrics. Credit negatives: (i) strong competition pressuring margins, (ii) increased capex and dividend payments led to negative free cash flow generation, (iii) rising capex in the future, due to a continuously shifting technology, (iv) regulatory risk, (v) integration challenges, (vi) increased debt led to a worsening in leverage ratios and interest coverage. Outlook: Oi aims at using integration to achieve differentiation, based on the following issues: (i) keep the focus on convergence, (ii) increase the offering of broadband services, (iii) increase the growth opportunities of the mobile business while maintaining profitability, (iv) expand data business, (v) increase efficiency and cost control. The company is focused now on the integration of Brasil Telecom in order to capture synergies and improve efficiency, to consolidate its leading position in the Brazilian telecom industry and to continue growing. The consolidated company will reinforce the strategy of differentiation through convergence, with a segmented approach. Oi intends to generate cash in order to reduce the level of debt to 1.5x EBITDA in 2011. Consolidation risks might appear due to the aim of having a single portfolio as soon as possible and a single corporate approach to the market.

Source: Company Data, Banco Itaú Europa

A more challenging operating environment and relatively stable investment plans led to relevant deterioration of credit metrics during 2008. Net debt coverage by EBITDA deteriorated, as well as operating cash flow less capital expenditures and dividends to total debt.

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Operation Cash Flow less Capex and Dividendes/Total Debt

60% 40% 20% 0% -20% -40% -60% -80% -100% -120% Celpa Cemat Cesp Eletrobrás Eletropaulo Energipe Rede Sabesp

Installed capacity expansion will proceed through concessions and auctions. In 2008, the results of the auctions were positive. For example, in September 2008, the government held the 2013 delivery auction (A-5 auction), contracting a total of 3,125MW average to the captive market. Thermal projects contracted in the auction represented 3,004MW (96%) and the only hydro project, Baixo Iguaçu, accounted for merely 121MW (4%). The average price of the thermal projects was R$145/MWh, while the hydro price came out at R$99/MWh. The thermal prices came out better than expected by our utility analysts and close to the cap of R$146/MWh. The demand of 3.1GW also exceeded expectations by approximately 10%. On the flip side, the R$99/MWh of Baixo Iguaçu was rather disappointing considering that 70% of its volume was sold to the captive market. However, do not forget the global effect of the current crisis. Although Brazil is expanding its transmission grid too, a more adverse economic environment in the fourth quarter of the year affected the last transmission auction. In November 2008, ANEEL auctioned seven transmission lines that will connect the hydro plants located in the Northern region (Madeira River) to the state of São Paulo. According to EPE, the total capex amounts to 7.2 bn BRL. The total RAP (Annual Permitted Revenue) reached 742 mn BRL, representing an average discount of 7% over the maximum RAP of 799 mn BRL. This is the lowest average discount relative to the previous auctions (20% in June of 2008 and 37% in October of 2008), most likely explained by a deteriorated global economic scenario, which makes the companies demand higher returns. Besides the low average discount, only two companies monopolized the auction: Transmissão Paulista and Eletrobrás. The result was more significant for Transmissão Paulista than for Eletrobrás, as the additional RAP of 177 mn BRL represents 8.7% of the company´s estimated net revenues for 2009. For Eletrobrás, the additional RAP of 308 mn BRL accounts for less than 1% of its 2009 estimated net revenues. The current crisis can also open some good investment opportunities. The utilities sector could see a wave of consolidation, with smaller companies being acquired by larger ones as companies with ample cash on hand could buy new assets at low prices in transmission, distribution and generation businesses. Of course, if there is enough cash.

2006

Source: Company Data, Banco Itaú Europa

2007

2008

As liquidity restrictions mounted and financial market volatility increased during the year, companies more exposed to foreign exchange risk through USD denominated debt outstanding also experienced earnings volatility, on the back of the financial account. The fact that typically utilities, with some punctual exceptions, lack foreign currency denominated revenues aggravated such an effect. Liquidity and foreign exchange risk management are certainly relevant challenges to address in the future, with financial markets far from stabilizing. Nevertheless, the sector environment has been improving, and on a cross sector perspective, it might be more favorable to

have exposure to a stable cash flow local demand driven business than to more vulnerable commodity exporters. The Brazilian economy, although not immune to the global crisis, has clearly outperformed several emerging market peers. EPE (Empresa de Pesquisa Energética), a research company of the sector, in its 10 year energy expansion plan, estimates that electric energy demand growth will exceed 4% on average within the next 10 years. The same study concluded that electric energy deficit is a low risk event, with a probability of occurrence always below 5% in the several scenarios considered.

Expected Electric Energy Consumption Growth

8% 7% 6% 5% 4% 3% 2% 1% 0% Residential Commercial Industrial Other CGP

2008-2012

Source: EPE

2012-2017

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AES Eletropaulo

Positioning: AES Eletropaulo is the largest energy distributor in Latin America measured by gross revenues, reaching 5.8 mn consumers in Brazil. The company holds 10.6% of the distribution market in the country, ranking immediately after Cemig. Total assets amounted to 12.6 bn BRL in 2008. Description: Eletropaulo Metropolitana holds a 30-year concession granted in 1998, with an option to renew for a further 30 years, to distribute and sell electric power in its concession area. It covers 24 municipalities in the Metropolitan area of São Paulo, out of 78 including the city, an area with 4,526 km2. 35% of its customers are residential and 17% commercial. Countrywide, Eletropaulo attends nearly 10% of the total population through a distribution network of 44.5 thousand km. It employed more than 4,141 people in 2008. Shareholders: The federal government holds 20% of Eletropaulo's ordinary shares and AES Elpa has 77.8%. The remaining belongs to minorities. Both ordinary and preferred shares are listed on the Bovespa stock exchange. Together with AES Tietê and AES Uruguaiana, Eletropaulo is part of the Brasiliana group, controlled by Brasiliana, which has 98% of AES Elpa's ordinary shares. Brasiliana shareholders are BNDES and AES Corp (Ba3/BB-/BB+ stable by Moody's, S&P and Fitch), with 49.99% and 50.01%, respectively.

Celpa

Positioning: Celpa is the monopolist distributor of electric energy in all of the 143 municipalities of the state of Pará. The company serves around 7.4 mn inhabitants in a concession area of 1,247,690 km2. Total assets amounted to 3.7 bn BRL in 2008. Description: Celpa was created in 1962 with the objective of providing electric energy to the state of Pará. It was sold to Rede group in 1998, by means of an auction, and currently operates under a distribution concession contract. Celpa remains part of Rede Group (see file), generating and distributing electric energy. The company has 1.55 mn consumers on a standalone basis, covering 143 municipalities in Pará state, generating and distributing energy under 30 year concession contracts expiring in 2028. The energy generated by Celpa represented nearly 4.9% of the energy distributed by the company. Installed capacity was over 34.05 MW. Celpa employed 2,145 people in 2008. Shareholders: Celpa's voting capital is held by QMRA ­ Participações (54.98%), Eletrobrás (34.79%) and Rede Energia (10.2%). Its total capital is in the hands of QMRA ­ Participações (51.26%), Eletrobrás (34.24%), and Rede Energia (10.11%). QMRA belongs to Rede Group, owned by Jorge Queiroz de Moraes Jr. Celpa is listed on the São Paulo Stock Exchange.

Key Ratios 2006

EBITDA Margin EBITDA Growth Net Revenues Growth % Exports ROA ROE EBITDA/ Net Int Expenses EBITDA/ Interest Costs Total Debt/EBITDA S-Term Debt/EBITDA Net Debt/EBITDA Net Debt/ Assets FC Debt / Total Debt FC Hedged Debt / Total FC Debt Net Debt/ Equity FFO / Total Debt (FFO-Div-Capex) / Total Debt

Source: Eletropaulo, BIE

Rating 2007

24,0% -4,9% 3,1% 0,0% 5,9% 21,5% 9,8x 7,2x 1,1x 0,1x 0,4x 5,3% 2,1% 68,8% 19,4% 99,3% 45,9%

Key Ratios Fitch

BBBBPositive brA+ FC LT Iss LC LT Iss Senior Uns Outlook LT Nat. BBBBBBStable A (bra) EBITDA Margin EBITDA Growth Net Revenues Growth % Exports ROA ROE EBITDA/ Net Int Expenses EBITDA/ Interest Costs Total Debt/EBITDA S-Term Debt/EBITDA Net Debt/EBITDA Net Debt/ Assets FC Debt / Total Debt FC Hedged Debt / Total FC Debt Net Debt/ Equity FFO / Total Debt (FFO-Div-Capex) / Total Debt

Source: Celpa, BIE

Rating 2007

25,4% 0,3% 10,0% 0,0% 3,3% 10,3% 4,5x 5,3x 2,1x 0,3x 1,5x 12,7% 46,2% 101,2% 39,4% 20,2% <0

2008

21,7% -5,3% 4,7% 0,0% 8,2% 31,1% nm 7,3x 1,2x 0,1x 0,3x 4,0% 1,3% 78,9% 15,3% 70,0% 14,9%

Moody's

S&P

LT FC Iss LT LC Iss Outlook LT Issuer Credit

25,3% 54,6% -7,9% 0,0% 3,3% 17,0% 5,1x 5,6x 1,4x 0,4x 1,1x 17,1% 3,1% 99,3% 87,1% 60,9% 45,1%

2006

27,9% 25,0% 3,1% 0,0% 2,3% 6,2% 1,1x 6,1x 2,1x 0,3x 1,4x 11,4% 66,7% 53,3% 31,2% 46,7% <0

2008

22,9% 0,8% 11,9% 0,0% 1,0% 3,5% 2,5x 4,1x 3,6x 1,3x 3,3x 25,4% 45,9% 76,1% 85,3% <0 <0

Moody's

LT Iss Outlook Nat LT Iss B3 Negative B1.br FC LT Iss LC LT Iss Outlook

S&P

CCC+ CCC+ Negative FC LT Iss LC LT Iss Sen Unsec

Fitch

B watch B watch B watch -

Not Rated

Moody's

Not Rated

Global FC Ratings Evolution S&P

Nov-06 BBOct-06

Fitch

BB-

Moody's

Mar-07 Apr-09 B2 B3

Global FC Ratings Evolution S&P

May-08 May-09 B CCC+ Jul-06

Fitch

B

Moody's

Not Rated

Local Rating Evolution S&P

Nov-06 Apr-07 Jun-08 brAbrA brA+ Sep-07

Fitch

A (bra)

Moody's

Mar-07 Apr-09 Ba1.br B1.br

Local Rating Evolution S&P

Not Rated Not Rated

Fitch

MN BRL

Total Assets Cash Equity Short Term Debt Total Debt Net Debt Net Revenues EBITDA Net Income Funds from Operations Capex Dividends

Source: Eletropaulo, BIE

2006

11.211,3 501,4 2.196,1 717,9 2.414,7 1.913,3 6.919,5 1.751,0 373,3 1.470,1 377,6 3,8

2007

12.152,5 1.332,6 3.321,8 123,3 1.977,2 644,6 7.192,8 1.728,7 712,6 1.964,3 433,4 622,7

2008

12.556,4 1.541,6 3.298,8 150,9 2.044,9 503,3 7.529,7 1.636,3 1.027,1 1.430,8 541,1 585,3

Amount

Coupon

Liquid Issues Call/Put Issue Date

06-28-2005 10-23-2007 12-23-2005 12-17-2007 na Sink Sink/call Sink

Maturity

06-28-2010 09-15-2013 08-20-2018 11-01-2018

Ratings

BB-/BBbrA+ NR brA+

Amount MN BRL

Total Assets Cash Equity Short Term Debt Total Debt Net Debt Net Revenues EBITDA Net Income Funds from Operations Capex Dividends

Source: Celpa, BIE

Coupon

9,500%

Liquid Issues Call/Put Issue Date

02-14-2006 Sink.

Maturity

02-14-2012

Ratings

CCC+/B *-

2006

3.516,0 193,7 1.284,2 75,5 594,5 400,8 1.026,7 286,2 79,3 277,7 393,8 21,1

2007

3.449,6 174,7 1.111,5 100,3 613,0 438,3 1.129,5 287,1 114,2 124,1 510,8 203,3

2008

3.727,2 106,2 1.109,4 368,9 1.052,3 946,1 1.263,6 289,5 38,8 -33,2 579,6 61,2

474.06 mn BRL 19,125% 600 mn BRL DI+90 bps 250 mn BRL DI+175 bps 200 mn BRL DI+175 bps

Source: Bloomberg, BIE

36.201 mn USD*

Source: Bloomberg, BIE. * - half issued by Celpa and half by Cemat

Energy Losses Index

35% 30% 25% 20% 15% 10% 5% 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Source: Celpa, BIE

Energy Losses

15% 10% 5% 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Source: Eletropaulo, BIE

Debt Maturity Schedule 2008

Revenues Evolution

Debt Maturity Schedule 2008

600 450 (MN BRL) (MN BRL) 300 150 0 12000 10000 8000 6000 4000 20000 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2003

Revenues Evolution

(MN BRL)

125 100 75 50 25 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 > 2019

Source: Celpa, BIE

% CAGR: 6.3

2000 (MN BRL) 1500 1000 500 0 2003 2004

CAGR: 9.1

%

2005

2006

2007

2008 Other

Eletric power supply 2004 2005 2006 2007 2008 Provision for transmission and system

Source: Celpa, BIE

Eletric power delivery

Eletric power supply Other

Source: Eletropaulo, BIE Source: Eletropaulo, BIE

Eletric power delivery

Risk policy: The company uses derivatives as hedging instruments to cover foreign currency and interest rate risk related to its balance sheet items and cash flows, specifically swaps, for foreign currency denominated debt. Operations with derivatives are done in the financial division according to the strategy previously approved by the management. These instruments are not subject to margin calls or other triggers and will be redeemed in full at the maturity of the item they are hedging. Credit positives: (i) region with lower competition and higher growth than the national average, (ii) small exposure to lower margin and more volatile industrial clients (around 60% of the revenues come from residential and commercial consumers), (iii) operating cash flow generation capacity despite the negative effect from working capital management in 2008, (iv) active hedging policy. Credit negatives: (i) limited financial flexibility and access to funding, due to Rede Group's high leverage and high short-term concentration of debt, (ii) high capital expenditures in the future to improve efficiency, decrease technical and commercial losses and to meet the required social program "Luz para Todos" (iii) substantial part of its residential clients could be considered low income (but have federal subsidies), (iv) still higher-than-the industry , average energy losses, (v) short-term refinancing risk and some foreign exchange risk, (vi) higher leverage than in the past, (vii) challenge to reduce past due receivables from clients, (viii) negative effect from working capital management on operating cash flow, (ix) EBITDA margin erosion, although less than in other group companies, (x) hydrological and regulatory challenges of the country. Outlook: Celpa aims at improving efficiency indicators and consumers' service, modernizing the electric system, reducing technical and commercial losses, improving the company's public image, and restructuring the capital profile. It will also continue to develop the program "Luz para Todos" targeted at providing electric energy to all rural unconnected customers. The program largely contributed to increase by 1.7 bn BRL the capital expenditures planed for 2009-2010. Economic growth is key for Celpa's operations, although the domestic character of the industry is somewhat a shield from the global crisis. However, cooping cash flow generation with an aggressive capex plan is necessary for the improvement of the company's credit profile, and the most relevant challenge ahead.

Risk policy: In order to minimize the impact of the fluctuations of the foreign exchange rate on USD denominated debt, the company entered swap contracts that exchanged the variation of the USD currency plus a fixed rate by the CDI (deposit certificate) floating rate. The maturity of these instruments is the same as the debt instruments they cover. Credit positives: (i) high valuable concession area in Brazil, responsible for around 30% of GDP, (ii) high proportion of sales to residential clients and little exposure to industrial consumers, reducing revenue and earnings volatility, (iii) sound cash flow and interest coverage, (iv) low leverage and capitalization, (v) low exposure to foreign currency denominated debt, (vi) no refinancing risk as the cash position largely exceeds short-term debt, (vii) improved efficiency ratios and reduced energy losses, (viii) clients credit quality. Credit negatives: (i) low revenue growth, (ii) eroding EBITDA margin reflecting higher energy purchase costs and SG&A, (iii) aggressive dividend policy, (iv) litigation, (v) uncertainty about the shareholding structure as BNDES and AES may sell their stakes in Brasiliana (if AES sells its stake it may cause the accelerated amortization of 1.9 bn BRL of debt), (vi) hydrological and regulatory challenges of the country. Outlook: AES Eletropaulo aims at developing and improving profitability by increasing efficiency, service quality and productivity, and by reducing costs. In 2009, Eletropaulo expects to invest 562 mn BRL. An adverse economic environment ahead could be compensated by an improvement in the cost structure. Issues related to the shareholding structure remain the most important uncertainty.

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Cemat

Positioning: Cemat has the monopoly of electric energy distribution in the 141 municipalities of Mato Grosso state, attending 2.9 mn people in a concession area of 903,358 km2. The company's total assets amounted to 3.2 bn BRL in 2008. Description: Cemat was created in 1958 with the objective of distributing electric energy in the state of Mato Grosso and afterwards its functions were extended to electricity generation, transmission and transformation. Currently, Cemat holds two 30-year concessions that expire in 2027 for electric energy generation and distribution in the mentioned state. The company generates only 2% of the energy it distributed. Since 1997, Cemat is part of Rede Group. Installed capacity reached 61.95 MW. Cemat employed around 1,600 people in 2008. Shareholders: Cemat's voting capital is held by Rede (61.8%), Eletrobrás (5.1%) and Inepar SA - Indústria e Construções (26.3%), a supplier of equipment for infra-structures. Rede Group is owned by Jorge Queiroz de Moraes Jr. Cemat is listed on the São Paulo Stock Exchange.

CESP

Positioning: CESP is the largest electric energy generator in the State of São Paulo, the 4th largest of the country by installed capacity and the 3rd largest by produced energy, according to ANEEL, being responsible for 8% of the national hydroelectric generation capacity and 10% of the assured energy. São Paulo responds for around 30% of the country's GDP. Total assets reached 17.1 bn BRL in 2008. Description: CESP was established in 1966, after the merger of 11 electric energy companies, which were split in 1999 leading to the creation of 3 generation companies, among which CESP, and one transmission company. CESP operates under a concession agreement, to generate electricity in the State of São Paulo, accounting for 60% of the state's capacity. Its capacity is hydraulic, reaching 7,456 MW in 2008. The company has 6 plants producing energy that is sold to the largest distributors in São Paulo such as Eletropaulo, Bandeirante, CPFL and Elektro. The generation concessions expire from 2011 (Três Irmãos) to 2021 (Paraibuna) depending on the central. CESP employed around 1,321 people in 2008. Shareholders: The State of São Paulo holds 94.1% of CESP ordinary shares. Its ordinary and preferred shares are listed on the São Paulo stock exchange.

Key Ratios 2006

EBITDA Margin EBITDA Growth Net Revenues Growth % Exports ROA ROE EBITDA/ Net Int Expenses EBITDA/ Interest Costs Total Debt/EBITDA S-Term Debt/EBITDA Net Debt/EBITDA Net Debt/ Assets FC Debt / Total Debt FC Hedged Debt / Total FC Debt Net Debt/ Equity FFO / Total Debt (FFO-Div-Capex) / Total Debt

Source: Cemat, BIE

Rating 2007

26,8% 53,9% 1,9% 0,0% 3,6% 9,3% 3,7x 5,2x 2,0x 0,2x 1,8x 19,3% 41,1% 99,5% 50,2% 36,5% <0

Key Ratios Fitch 2006

B watch B watch B watch BBB (bra) EBITDA Margin EBITDA Growth Net Revenues Growth % Exports ROA ROE EBITDA/ Net Int Expenses EBITDA/ Interest Costs Total Debt/EBITDA S-Term Debt/EBITDA Net Debt/EBITDA FC Debt/Total debt FC Hedged Debt/ Total FC Debt Net Debt/ Assets Net Debt/ Equity FFO/Total Debt (FFO-Div-Capex)/Total Debt

Source: CESP, BIE

Rating 2007

65,8% 15,7% 5,9% 0,0% 0,9% 1,7% 4,6x 2,2x 2,5x 0,4x 2,1x 67,7% 0,0% 15,2% 28,9% 22,5% 17,4%

2008

27,7% 14,5% 10,7% 0,0% 2,6% 7,5% 3,2x 7,7x 3,0x 0,7x 2,9x 30,8% 42,8% 72,8% 88,1% 12,3% <0

Moody's

LT Iss Outlook Nat LT Iss B3 Negative B1.br FC LT Iss LC LT Iss Outlook

S&P

BBNegative FC LT Iss LC LT Iss Sen Unsec Nat. LT

2008

57,0% -1,7% 13,6% 0,0% nm nm 1,0x 2,8x 2,8x 0,2x 2,5x 69,9% 0,0% 20,4% 44,1% 32,8% 25,7%

Moody's

LT Corp Fam. Rat. Ba2 Se. Unsec. Ba2 Outlook Stable FC LT Iss LC LT Iss Outlook LT Iss

S&P

B B Positive brBBB-

Fitch

22,6% -22,3% -0,2% 0,0% 3,2% 8,3% 11,3x 3,5x 2,5x 0,5x 1,8x 17,6% 58,0% 53,1% 45,2% 12,6% <0

Moody's

Mar-07 Apr-09 B2 B3

Global FC Ratings Evolution S&P

May-08 May-09 B BJul-06

Fitch

B

Moody's

Mar-07 Apr-09 Ba1.br B1.br

Local Rating Evolution S&P

Not Rated Jul-06

Fitch

BBB (bra)

62,9% 24,5% 12,0% 0,0% nm nm 1,5x 2,0x 4,0x 1,0x 3,7x 78,5% 0,0% 24,6% 47,8% nm nm

Not Rated

Moody's

Aug-06 Dec-06 Sep-08 B2 Ba3 Ba2

Global FC Ratings Evolution S&P

Jun-06 Nov-06 Oct-07 CCC+ BB Not Rated

Fitch

Amount MN BRL

Total Assets Cash Equity Short Term Debt Total Debt Net Debt Net Revenues EBITDA Net Income Funds from Operations Capex Dividends

Source: Cemat, BIE

Coupon

9,500%

Liquid Issues Call/Put Issue Date

02-14-2006 Sink.

Maturity

02-14-2012

Ratings

CCC+/B *-

Moody's MN BRL

Total Assets Cash Equity Short Term Debt Total Debt Net Debt Net Revenues EBITDA Net Income Funds from Operations Capex Dividends

Source: CESP, BIE

Local Rating Evolution S&P

Jun-06 Nov-06 Oct-07 brCCC+ brBB brBBBNot Rated

Fitch

2006

2.582,7 165,6 1.005,1 116,6 620,4 454,8 1.107,6 250,2 83,8 78,0 263,6 1,0

2007

2.770,9 80,1 1.063,5 46,0 614,4 534,3 1.128,9 302,0 98,7 224,0 417,2 0,9

2008

3.230,5 40,3 1.129,4 241,6 1.034,8 994,5 1.249,6 345,9 84,6 127,1 598,3 19,7

36.201 mn USD*

2006

19.675,0 328,5 10.146,5 1.349,5 5.176,2 4.847,7 2.060,3 1.296,6 -118,3 -1.002,6 235,3 0,0

2007

19.647,8 679,7 10.325,1 555,4 3.664,0 2.984,3 2.183,7 1.437,9 178,6 825,0 185,9 0,0

2008

17.061,2 411,8 7.904,5 340,8 3.895,9 3.484,1 2.479,7 1.413,4 -2.351,6 1.276,4 209,9 65,5 Not Rated

Source: Bloomberg, BIE. * - half issued by Celpa and half by Cemat

Energy Losses Index

Amount

183.6 mn USD 220 mn USD 750 mn BRL

Coupon

10,000% 9,250% 9.75%*

Liquid Issues Call/Put Issue Date

03-02-2006 08-11-2006 01-22-2007 na na na

Maturity

03-02-2011 08-11-2013 01-15-2015

Ratings

Ba2 Ba2 Ba2

25% 20% 15% 10% 5% 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Source: Cemat, BIE

Source: Bloomberg, BIE. *IPCA linked.

Debt Maturity Schedule 2008 Revenues Evolution

2000 3000 2500 (MN BRL) 2000 1500 1000 500 0 2009 2010 2011 2012 2013 2014 +2014 Final Clients

Source: CESP, BIE Source: CESP, BIE

Revenues Evolution

Debt Maturity Schedule 2008

250 2500 200 (MN BRL) 150 (MN BRL) 100 50 0 2009 2010

Source: Cemat, BIE

CAGR: 5.4%

2000 1500 1000 500 0 2003 2011 2012 2013 2014 2015 2016 2017 2018 2019 > 2019

Source: Cemat, BIE

(MN BRL)

CAGR: 1

1.0%

1500 1750 1000 500 0

2004

2005

2006

2007

2008 Other

2002

2003

2004

2005

2006

2007

2008

Eletric power supply

Eletric power delivery

Sales to distributors

MAE (free energy)

Energy auctions

Risk policy: The company uses derivatives as hedging instruments to cover foreign currency and interest rate risk related to its balance sheet items and cash flows, specifically swaps, for foreign currency denominated debt. Operations with derivatives are done in the financial division according to the strategy previously approved by the management. These instruments are not subject to margin calls or other triggers and will be redeemed in full at the maturity of the item they are hedging. Credit positives: (i) low competition, (ii) small exposure to lower margin and more volatile industrial clients (around 52.5% of the total volume is sold to residential and commercial consumers), (iii) sound EBITDA margins, (iv) adequate interest coverage and moderate leverage, (v) moderate refinancing risk, (vi) better credit quality (past-due receivables) than peers, (vii) operating cash flow generation capacity despite the negative effect from working capital management in 2008, (viii) active hedging policy. Credit negatives: (i) limited financial flexibility and access to funding, given Rede Group's high leverage, (ii) rising leverage and refinancing risk, (iii) its residential clients could be considered low income (but have federal subsidies), (iv) still higher-than-industry average energy losses index, (v) some foreign exchange risk, (vi) rising dividend payments in a negative free cash flow environment, (vii) working capital consumption affecting operating cash flow generation, (viii) margin deterioration despite revenue growth on the back of rising operating costs, (ix) hydrological and regulatory challenges of the country. Outlook: Cemat aims at improving quality, efficiency indicators and consumer's service, reducing technical and commercial losses, improving the company's public image, and restructuring its capital composition. It will also continue to develop the program "Luz para Todos" targeted at providing electric energy to all rural unconnected customers. Economic growth is key for Cemat's operations, although the domestic character of the industry is somewhat a shield from the global crisis. Improving working capital management and efficiency is a must going forward.

Risk policy: CESP does not use derivative instruments for foreign exchange and interest rate risk hedging. The company's strategy to mitigate such risks is the progressive substitution of foreign currency denominated debt by debt denominated in the local currency. Credit positives: (i) high EBITDA margin showing not only revenue growth but also efficiency, (ii) expertise to operate its six power plants, (iii) proximity to main consumer centers, (iv) regulatory framework to improve cash flow and revenues predictability, (v) reduced exposure to the spot market. Most of the energy generated by Cesp has its sale assured by contracts that start to expire only in 2013, with selling prices linked to inflation. Although in a scenario of strong demand growth it would be more advantageous to sell energy freely, in the current adverse environment, it might serve as a buffer to the crisis, (vi) lower short-term capex requirements by historical standards, (vii) strong deleveraging, with net debt/EBITDA below the company's target, and wide capital base, (viii) low refinancing risk, (ix) sound cash flow generation, (x) government support. Credit negatives: (i) earnings still penalized by the financial burden imposed by high interest and foreign exchange rate volatility, (ii) deteriorating interest coverage, (iii) nearly 70% of the total debt was denominated in foreign currencies and unhedged, (iv) high leverage when including FDIC debt in the analysis, (v) litigation, (vi) hydrological and regulatory challenges of the country, despite of the favorable location of its centrals in the south east , (vii) uncertainty regarding concession renewal, particularly those expiring in 2015 that stand for 67% of Cesp's current installed capacity, (viii) uncertainty regarding its privatization, increasingly unlikely in the current economic and market environment. Outlook: CESP has nearly all of its production capacity allocated to long-term contracts, therefore the company plans to use its cash to reduce debt and maintain and modernize its generation facilities. CESP targets debt reduction until net debt/EBITDA reaches 3.5x. The company is also focused on operating efficiency by investing in maintenance and training, optimizing the portfolio of customers by targeting free clients, and improving corporate governance. CESP´s efficiency continues to be a sector benchmark, but reluctance to hedge foreign exchange risk increases the volatility of the company's earnings. Local economy focus is a plus given the global environment.

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Eletrobrás

Positioning: Eletrobrás is the holding of several public companies of the electricity sector, mainly in generation and transmission and to a lower extent distribution. Total assets reached 138.0 bn BRL in 2008. Description: Established in 1962 with the purpose of promoting construction projects in order to develop the Brazilian electricity sector, Eletrobrás currently produces, generates, transmits and distributes electric energy in Brazil through several companies countrywide. It continues to be a key institution in the sector regulation, as it plans, finances, coordinates and supervises expansion projects for its subsidiaries, in coordination with the Ministry of Mines and Energy, and manages the sector resources and development programs. Among its subsidiaries are Chesf, Furnas, Eletronorte, Eletrosul, Eletronuclear, CGTEE, and Itaipu Binacional (on behalf of the government). Together these companies generate 39.402 MW or around 40% of the country's electricity and transmit 65% of the total energy of the country, through more than 59,765 km. In distribution, Eletrobrás holds Eletroacre, Ceal, Cepisa, Ceron, Manaus Energia and Boa Vista Energia. Eletrobrás also has ample shareholdings in several companies of the sector and employed around 23,522 people in 2008. Most of its subsidiaries operate under concession contracts, most of them expiring on or after 2015. Also in 2008, the law 11.651/08 changed the law that initially created Eletrobrás, to allow the company to directly or through its controlled entities, with or without funding consumption, constitute partnerships or societies, with or without full control, in Brazil or abroad, to explore production and transmission of electric energy. International expansion should obey to strict profitability guidelines and geographical expansion should privilege South American countries. Shareholders: União holds 54% of the ordinary shares, BNDESPAR 14.8%, FND (Fundo Nacional de Desenvolvimento) 5%, and the remaining is dispersed. The company is listed in São Paulo, New York (ADR) and Madrid.

Energipe

Positioning: Energisa Sergipe (Energipe) distributes energy to the 63 municipalities in the state of Sergipe, in a monopolistic concession regime, reaching 546 thousand clients and covering an area of 17,465 km2. The company's total assets amounted to 1 bn BRL in 2008. Description: Energipe is a distributor of electric energy under the holding company Energisa. It distributes energy in the state of Sergipe under a monopolistic system covering the state's municipalities. It was established in 1959 and privatized in 1997 when it became part of Cataguazes group. Energipe's concession expires in 2027 and the company employs more than 900 people. Shareholders: Energipe is controlled by Energisa, holding of a group belonging to the Botelho Family. Its shares are not listed.

Key Ratios Key Ratios 2006

EBITDA Margin EBITDA Growth Net Revenues Growth % Exports ROA ROE EBITDA/ Net Int Expenses EBITDA/ Interest Costs Total Debt/EBITDA S-Term Debt/EBITDA Net Debt/EBITDA Net Debt/ Assets FC Debt / Total Debt FC Hedged Debt / Total FC Debt Net Debt/ Equity FFO / Total Debt (FFO-Div-Capex) / Total Debt

Source: Eletrobrás, BIE

Rating 2007

38,1% 6,8% 4,1% 0,0% 4,1% 11,9% 2,5x 2,6x 0,2x 1,2x 18,9% 72,7% 121,6% 54,3% 47,0% 24,8%

Rating 2007

22,9% -10,0% 18,7% 0,0% 1,3% 1,9% 6,1x 2,0x 2,6x 0,3x 1,1x 5,0% 80,4% 0,0% 7,6% 43,5% 14,0%

2006 Fitch

EBITDA Margin EBITDA Growth Net Revenues Growth % Exports ROA ROE EBITDA/ Net Int Expenses Total Debt/EBITDA S-Term Debt/EBITDA Net Debt/EBITDA Net Debt/ Assets FC Debt / Total Debt FC Hedged Debt / Total FC Debt Net Debt/ Equity FFO / Total Debt (FFO-Div-Capex) / Total Debt

Source: Energipe, BIE. Individual accounts.

2008

31,3% -22,2% -5,3% 0,0% nm nm 0,9x 3,7x 0,3x 2,7x 34,6% 73,7% 111,8% 150,4% 32,4% <0

Moody's

Sen Uns debt Nat Outlook Ba3 A3.br Stable FC LT Iss LC LT Iss Outlook Nat.

S&P

BBBBStable brA

Fitch

FC/LC LT Iss Sen Uns debt Nat. Outlook BBBBA (bra) Stable

2008

27,8% 50,9% 24,2% 0,0% 4,4% 7,2% nm 2,8x 2,3x 0,2x 0,8x 4,7% 83,5% 0,0% 7,5% 46,6% 16,8%

Moody's

S&P

37,2% 1,1% -5,5% 0,0% 1,0% 1,5% 2,1x 1,1x 2,7x 0,3x 2,0x 11,8% 76,0% 0,0% 18,4% 33,7% 15,0%

Not Rated

FC LT Iss LC LT Iss Outlook

BBBBBB+ Stable

FC LT Iss LC LT Iss FC LT Outlook

BBBBBBStable

Moody's

Not Rated

Global FC Ratings Evolution S&P

Feb-06 May-07 Apr-08 BB BB+ BBBJun-09

Fitch

BBB-

37,2% 16,0% 12,3% 0,0% 7,8% 38,2% 1,9x 3,7x 0,7x 3,4x 55,1% 64,6% 18,6% 269,1% 29,4% 19,7%

Moody's

Feb-08 Ba3

Global FC Ratings Evolution S&P

May-06 Jun-08 B+ BBFeb-08

Fitch

BB-

Moody's

Feb-08 A3.br

Local Ratings Evolution S&P

Feb-08

Fitch

A(bra)

Moody's

Not Rated

Local Rating Evolution S&P

Not Rated Not Rated

Fitch MN BRL

Total Assets Cash Equity Short Term Debt Total Debt Net Debt Net Revenues EBITDA Net Income Funds from Operations Capex Dividends

2006

992,2 44,5 203,2 109,7 591,3 546,8 427,9 159,1 77,6 63,3 85,2 52,5

2007

1.055,7 238,7 367,4 41,1 438,2 199,5 445,6 169,9 43,7 206,1 51,7 45,7

2008

1.023,2 138,7 235,7 37,4 493,2 354,5 422,2 132,1 -20,5 159,8 82,8 103,8

Amount

350 mn BRL 250 mn USD* 150 mn BRL 73,25 mn BRL

Coupon

DI+200 bps 10,500% DI+110 bps 8,850%

Liquid Issues Call/Put Issue Date

10-30-2006 07-19-2006 04-29-2008 02-25-2008 Sink na Sink Sink/call

Maturity

10-01-2011 07-19-2013 04-01-2014 11-08-2015

Ratings

NR Ba3/BB-/BBNR NR

MN BRL

Total Assets Cash Equity Short Term Debt Total Debt Net Debt Net Revenues EBITDA Net Income Funds from Operations Capex Dividends

Source: Eletrobrás, BIE

2006

121.891,6 5.459,1 77.835,8 1.990,1 19.809,1 14.350,0 19.635,5 7.307,0 1.161,3 6.683,2 3.153,7 555,6

2007

121.927,9 8.387,9 79.963,2 1.450,8 14.479,9 6.092,0 24.734,9 5.661,4 1.547,9 6.301,5 3.521,6 751,1

2008

138.043,9 13.566,4 85.618,4 1.714,6 20.012,2 6.445,8 30.731,9 8.541,0 6.136,5 9.324,7 4.243,7 1.718,8

Amount

300 mn USD 1000 mn USD

Coupon

7,750% 6,875%

Liquid Issues Call/Put Issue Date

11-30-2005 07-30-2009 na na

Maturity

11-30-2015 07-30-2019

Ratings

BBBBBB-/BBB-

Source: Bloomberg, BIE. * 125 mn USD Saelpa, 125 mn USD Energipe.

Source: Bloomberg, BIE

Energy Losses Index

13% (MN BRL)

Source: Energipe, BIE Non-consolidated figures to show the de-verticalization in process.

12%

Debt Maturity Schedule 2008

35000 12000 10000 (MN BRL) (MN BRL) 8000 6000 4000 2000 0 2009 2010 2011 2012 2013 2014 +2014 30000 25000 20000 15000

Revenues Evolution

11% 2003 2004 2005 2006 2007 2008

Source: Energipe, BIE

CAGR: 9.6%

Debt Maturity Schedule 2008

250 200 (MN BRL) 150 100 50 2002 2003 2004 2005 Fuel 2006 Other 2007 Equ. Stakes

Source: Energipe, BIE

Revenues Evolution

10000 5000 0 2008

800 (MN BRL) 600 400 200 0 2003 2004

CAGR: 9.6

%

0 2009 2010 2011 2012 2013 2014 +2014

Energy sales

Source: Eletrobrás, BIE Source: Eletrobrás, BIE

2005

2006

2007

2008 Other

Electric power supply

Source: Energipe, BIE

Electric power delivery

Risk policy: Eletrobrás manages the foreign exchange mismatch between assets and liabilities, mostly caused by Itaipu receivables, using derivative instruments. According to the company, derivates act exclusively as a mean to hedge foreign exchange risk and not as a leverage instrument. Credit positives: (i) government's likely support because of the importance of the company in the sector, (ii) decreasing debt levels when compared to operating cash flow generation, (iii) comfortable debt repayment schedule with low refinancing risk in the short-term, (iv) large amount of account receivables relative to total debt, (v) wide access to international and domestic capital markets, (vi) strong cash flow generation. Credit negatives: (i) exposure to sovereign related risks, (ii) regulatory environment still evolving, (iii) high exposure to foreign exchange variations as most of its debt is foreign-currency denominated and unhedged, although this is partially offset by the company's large USD stock of receivables and a degree of revenue linkage to the USD, (iv) some of its subsidiaries might require financial support, (v) influence of the government on the company's strategy, (vi) hydrological and regulatory challenges of the country. Outlook: Eletrobrás targets to create, offer and implement solutions that fit national and international markets of electric energy, to reach sound profitability and responsibility with the environment. Eletrobrás should manage efficiently its stakes in other companies, to coordinate the sector expansion and social programs, to continue to be a key financial agent for the energy sector, while managing and controlling federal electricity assets, to establish partnerships for new projects on generation and transmission and to develop alternative energy sources. International expansion might be a source of future uncertainty. There are several internationalization projects under study aiming at fueling energy generation that can be transmitted to Brazil by interconnecting energy systems in South America. The company plans to invest 30.2 bn BRL until 2012, mostly in generation and transmission projects.

Risk policy: Energipe tries to minimize exposure to market risks by using derivative instruments such as swaps and foreign exchange contracts. Current foreign exchange derivative instruments outstanding are closely monitored and could be restructured at any time. Since 2006, Energipe is advised by an external service provider about its cash and debt management. Credit positives: (i) clients are mostly higher margin and less volatile residential customers with low exposure to industrial clients (61% of the revenues comes from residential and commercial clients), (ii) high operating margins for the sector's average, despite some erosion, (iii) sound operating cash flow generation capacity, (iv) adequate coverage of debt by cash flow, (v) low refinancing risk in the short-term, (vi) plenty of room to accommodate higher debt maturities, (vii) monopolistic operations. Credit negatives: (i) small size of its concession area, (ii) low interest coverage by EBITDA, despite improvement, (iii) exposure to foreign currency risk, despite hedging awareness, (iv) relevant number of customers in arrears, (v) rising leverage, although levels still acceptable, (vi) litigation (labor disputes) and unfunded pension liabilities, (vii) high dividend payments, (viii) hydrological and regulatory challenges of the country. Outlook: Energipe intends to supply high quality, trustable and reliable services to its customers, fuel shareholder returns, develop human capital and act responsibly with society and the environment, having a particular focus on efficiency of the cost structure and working capital management. The company is implementing the program "Luz para Todos" We expect the company to face a more challenging operating environment in 2009, although its . monopolistic position in Sergipe along with its mostly residential client base is a buffer to more adverse conditions. Improving the efficiency of foreign exchange hedging would be a plus.

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75

Isa Capital do Brasil

Positioning: Isa Capital do Brasil controls CTEEP, the only concessionaire allowed to transmit energy in the State of São Paulo. It transports approximately 30% of the energy consumed in Brazil and is responsible for the transmission of nearly all the energy of São Paulo state. Isa is the largest transmission group in Latin America. Total assets reached 5.7 bn BRL in 2008. Description: Isa Capital do Brasil is a holding whose purpose is to host interests in companies through shareholdings, joint ventures or any other form of relation. Currently it bears Interconexión Eléctrica SA's stake in CTEEP. Isa Capital explores indirectly, through CTEEP, electric energy concessions such as IEMG (Minas Gerais), IENNE (North-NorthEast), IE Pinheiros (São Paulo), IE Sul (Rio Grande so Sul), all still in pre-operational phase. CTEEP was created in 1999 following the split of generation, transmission and distribution assets of Cesp (see file). In 2001, it incorporated the transmission assets split from Eletropaulo (see file) and EPET - Empresa Paulista de Transmissão de Energia. In 2006, the Brazilian state privatized the company and Isa Capital do Brasil assumed its control. CTEEP operates, maintains, expands and explores electric energy transmission systems, operates an electric energy transmission infrastructure of 12,140 km in the state of São Paulo, with 102 substations on tension up to 550 KW and capacity to process 43,069 MW p.a. It is regulated by ANEEL, supplies services to generators, distributors and free consumers of electric energy, through a concession expiring in 2015, and employs 1,290 people. In 2008, CTEEP participated with a 51% stake in the consortium Madeira Transmissão, which won two transmission auctions and aims at integrating Rio Madeira in the National Interconection System (SIN). Shareholders: Isa Capital do Brasil controls CTEEP with 89.4% of the votes and Eletrobrás holds 9.85%. In turn, Isa Capital do Brasil is controlled by the Colombian electric energy transmission company Interconexión Elétrica SA (BB+ stable by S&P), which is also a leading player in the transmission business in Peru and Bolivia, among other activities. Interconexión Elétrica is controlled by the Republic of Colombia (Ba1 stable/BBB- stable/BB+ stable by Moody's/S&P/Fitch). CTEEP has ordinary and preferred shares listed on the São Paulo Stock Exchange and ADR's in New York. Interconexion Electrica has shares listed on the Bogota stock exchange and ADRs in New York.

Rede Group

Positioning: Rede is one of the largest electric energy groups in Brazil. Its concessions cover 34% of the country's territory and reach more than 16 mn people in 578 municipalities. Rede Group distributes around 6% of the energy in Brazil. Total assets stood at 11.3 bn BRL in 2008. Description: Rede was established in 1903 as Empresa Elétrica Bragantina (EEB). Thereafter the group proceeded with an acquisition policy adding Empresa de Eletricidade Vale Paranapanema (EEVP), Companhia Nacional de Energia Elétrica (CNEE), Caiuá Serviços de Eletricidade, Companhia de Energia Elétrica do Estado do Tocantins (CEET), Companhia Força e Luz do Oeste (CFLO), Centrais Elétricas Matogrossenses (CEMAT), Centrais Elétricas do Pará (CELPA) and Empresa Energética de Mato Grosso do Sul (ENERSUL) to reinforce the distribution business. Rede Group is also present in generation through UHE Lajeado (TO), and UHE Guaporé (MT). After a restructuring, Rede started to act as a holding company for the generators, transmission, distributors and marketers of electric energy of the group. Its concessions expire in 2015, 2025, 2027, 2028 and 2033 and it generates 19.2% of the energy it distributes. Rede employs more than 6,368 people. Shareholders: Rede, controlled by Jorge Morais de Queiros Jr, has ordinary and preferred shares listed on the São Paulo Stock Exchange.

Key Ratios 2006 2007

29,6% 19,4% 2,6% 0,0% 0,3% 1,1% 2,6x 2,6x 3,6x 0,4x 2,9x 29,0% 47,4% 32,8% 112,7% 4,4% <0

Rating 2008

24,7% 0,9% 21,1% 0,0% 1,8% 8,1% 5,3x 2,1x 4,5x 1,0x 4,1x 36,1% 36,1% 46,7% 162,1% <0 <0

Moody's

Se. Unsec. LT Fam. Outlook Nat. Ca Caa1 Negative Caa1.br

S&P

FC LT Iss LC LT Iss Sen Unsec Nat.

Fitch

CCC watch CCC watch CCC watchCCC(bra) wt-

Key Ratios CTEEP

EBITDA Margin EBITDA Growth Net Revenues Growth % Exports ROA ROE EBITDA/ Net Int Expenses EBITDA/ Interest Costs Total Debt/EBITDA S-Term Debt/EBITDA Net Debt/EBITDA Net Debt/ Assets FC Debt / Total Debt FC Hedged Debt / Total FC Debt Net Debt/ Equity FFO / Total Debt (FFO-Div-Capex) / Total Debt

Source: CTEEP, BIE

Rating 2007

85,8% 59,9% -0,6% 0,0% 16,7% 21,7% 7,4x 56,5x 0,5x 0,1x 0,3x 0,1x 0,0% 0,0% 8,6% 69,9% <0

2006

53,4% 12,4% 9,8% 0,0% 2,3% 3,1% nm 86,1x 0,0x 0,0x nm nm 0,0% 0,0% nm nm nm

2008

84,4% 16,9% 18,9% 0,0% 14,6% 20,2% 4,5x 19,9x 0,6x 0,3x 0,6x 0,1x 0,0% 0,0% 17,9% 87,3% <0

Moody's

Not Rated FC LT Iss LC LT Iss Outlook

S&P

BB+ BB+ Stable

Fitch

FC LT Iss LC LT Iss Sem Uns debt Outlook BB BB BB Stable

Moody's

Not Rated

Global FC Ratings Evolution S&P

Jan-07 Mar-07 BB BB+ Jan-07

Fitch

BB

EBITDA Margin EBITDA Growth Net Revenues Growth % Exports ROA ROE EBITDA/ Net Int Expenses EBITDA/ Interest Costs Total Debt/EBITDA S-Term Debt/EBITDA Net Debt/EBITDA Net Debt/ Assets FC Debt / Total Debt FC Hedged Debt / Total FC Debt Net Debt/ Equity FFO / Total Debt (FFO-Div-Capex) / Total Debt

Source: Rede, BIE

28,1% 9,9% 15,0% 0,0% 1,2% 3,5% 1,8x 2,7x 3,1x 0,9x 2,5x 31,5% 27,2% 53,2% 91,4% 1,0% <0

Not Rated

Moody's

Mar-07 Apr-09 Jul-09 B3 Caa3 Ca

Global FC Rating Evolution S&P

Not Rated Jul-06 May-09

Fitch

B CCC

Moody's

Mar-07 Apr-09 Ba1.br Caa1.br

Local FC Rating Evolution S&P

Not Rated Jul-06 May-09

Fitch

BBB (bra) CCC(bra)

Moody's

Not Rated

Local Rating Evolution S&P

Not Rated

Fitch

Not Rated

Amount MN BRL 2006

7.242,0 500,4 2.497,5 801,2 2.782,6 2.282,2 3.216,7 905,4 88,5 28,2 862,0 0,0

Coupon

DI*120% 11,125%

Liquid Issues Call/Put Issue Date

06-12-2009 04-02-2007 na Call 4/12

Maturity

06-07-2010 Perp

Ratings

na Ca/CCC*-

2007

9.918,9 612,3 2.551,3 375,6 3.488,4 2.876,1 3.300,2 977,0 28,7 151,9 1.261,6 0,0

2008

11.334,2 396,0 2.523,0 1.015,4 4.484,7 4.088,7 3.995,8 986,2 205,3 -98,8 1.482,7 0,0

320 mn BRL 496.6 mn USD

CTEEP - MN BRL

TTotal Assets Cash Equity Short Term Debt Total Debt Net Debt Net Revenues EBITDA Net Income Funds from Operations Capex Dividends

Source: CTEEP, BIE

2006

5.217,0 514,5 3.745,5 0,1 0,7 -513,9 1.323,0 706,0 117,8 480,0 419,4 204,8

2007

5.130,1 191,6 3.948,8 132,2 532,9 341,3 1.315,4 1.129,1 855,4 372,6 435,6 781,7

2008

5.669,6 123,0 4.103,3 345,5 856,8 733,8 1.564,1 1.319,6 827,1 748,3 289,6 713,7

Amount

200 mn USD 354 mn USD

Coupon

7,875% 8,800%

Liquid Issues Call/Put Issue Date

01-29-2007 01-29-2007 Call 1/10 [email protected] bps

Maturity

01-30-2012 01-30-2017

Ratings

BB/BB BB/BB

Source: Bloomberg, BIE

Isa Capital do Brasil Highlights 2008 (MN BRL)

Total assets Cash Equity ST Debt Total Debt Net Debt

Source: Isa, BIE

6.229,9 124,6 817,6 451,3 2.013,0 1.888,4

Net Revenues EBITDA* Net Income FFO Capex Dividends

1.564,1 1.378,6 -34,7 707,7 289,6 461,3

EBITDA Margin NetDebt/EBITDA S-TerD/EBITDA Net Debt/ Equity ROA ROE

88,1% 1,4x 0,3x 231,0% nm nm

Total Assets Cash Equity Short Term Debt Total Debt Net Debt Net Revenues EBITDA Net Income Funds from Operations Capex Dividends

Source: Rede, BIE

Source: Bloomberg, BIE

Energy Losses Index

25% 20% 15% 10% 5% 0% 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Source: Rede, BIE

Debt Maturity Schedule 2008 CTEEP Debt Maturity Schedule 2008

2000 (MN BRL) 150 (MN BRL) 100 50 0 2009 2010 2011 2012 +2012 1500 1000 500 0 2004 2005 2006 2007 2008

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 +2019 Perp

Revenues Evolution

7000 6000 5000 4000 3000 2000 1000 0 2002 Other

Source: Rede, BIE

CTEEP Gross Revenues Evolution

1250

.2% CAGR:11

1000 750 500 250

Basic Network Usage

Source: CTEEP, BIE Source: CTEEP, BIE

Other Networks

Charges

Other

0

2003

2006

2007

2008

Electric power delivery

Electric power supply

Source: Rede, BIE. Perp mark to market. Without MtM: 1.3 bn BRL

Risk policy: Isa Capital contracted financial derivative instruments to hedge foreign exchange risk inherent to the issuance of international bonds. CTEEP does not have any policy on derivative usage as its foreign exchange exposure is nil. CTEEP Credit positives: (i) monopolistic and stable regulatory environment, (ii) very low leverage, (iii) improving transmission efficiency, (iv) high quality of receivables due to the nature of its customers, (v) high margin business, (vi) rising earnings and profitability, (vii) no refinancing risk nor foreign currency exposure, (viii) sound cash flow generation capacity. CTEEP Credit negatives: (i) aggressive dividend policy, (ii) risk of potential state intervention due to strategic positioning of the company, (iii) hydrological and regulatory challenges of the country. Outlook: ISA Capital and its Colombian shareholder plan to assure, improve and promote the quality of electric energy transmission made by CTEEP, fueling financial performance. CTEEP plans to continue to provide services with high quality standards and environmental responsibility and generate adequate shareholders' returns, benefiting both from economic growth and a protected operating environment. Efficiency improvement is also a key area of focus. CTEEP invests in modernization, innovation and capacity expansion of its transmission system aiming at optimizing existing assets, participating in new transmission auctions, and evaluating new acquisition opportunities. The company plans to expand its presence beyond São Paulo State and currently the company's presence reaches 12 Brazilian states, through concessions acquired in auctions. CTEEP will be investing an additional 1.3 bn BRL between 2009-2010 to improve and expand infrastructures and a further 867 mn BRL in the new transmission companies, IENNE, Pinheiros, IEMadeira and IESul. Leverage should remain low as the company is highly cash generative and its bonds have several clauses that protect bond investor's interest such as the prohibition to increase debt, asset pledges, investments and dividends restrictions, among others.

Risk policy: The company uses derivatives as hedging instruments to cover foreign currency and interest rate risk related to its balance sheet items and cash flows, specifically swaps, for foreign currency denominated debt. Operations with derivatives are done in the financial division according to the strategy previously approved by the management. These instruments are not subject to margin calls or other triggers and will be redeemed in full at the maturity of the item they are hedging. Credit positives: (i) monopolies in some regions, (ii) Brazilian electricity market important position, (iii) high weight of residential and commercial customers, which bear higher margins and lower volatility than industrials (54%), (iv) growing revenues. Credit negatives: (i) high leverage, (ii) low interest coverage, (iii) high re/financing risk, given the maturity profile of the current debt and capex plans ahead, (iv) low cash flow generation capacity and weak working capital management, (v) eroding cost structure, mainly due to higher energy costs pressuring margins, (vi) mandatory capex ("Luz para Todos"), (vii) exposure to some foreign exchange risk, (viii) proneness to make acquisitions (Enersul), (ix) dependence on dividends for cash flow generation, (x) hydrological and regulatory challenges of the country. Outlook: Rede plans to expand the client base, decrease losses, improve technical and operating efficiency, invest selectively in small and medium dimension generation projects, expand marketing and maintain a solid capital structure. Grupo Rede plans to invest around 1.7 bn BRL in 2009/10 mostly reflecting the goals of the program "Luz para Todos" in Celpa's concession area. Thereafter investments should decrease to 300 mn BRL. Economic growth is key for the industry, although its lack of export exposure is a buffer to the current crisis environment. Deleveraging continues to be a must going forward, leaving limited scope for acquisitions, which seem to be on the company's mind. Working capital management is certainly an issue to monitor in the short term, as it explains lack of operating cash flow generation in the group's companies.

76

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X-Ray Files

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77

Sabesp

Positioning: Sabesp is the largest water and sewage company in Latin America in terms of number of clients. It operates under a monopoly in the 366 municipalities of the State of São Paulo (out of a total of 645), including the capital, and furnishes water to other 6 municipalities, which have their own distribution schemes, supplying 67% of the state's population. Total assets reached 20.5 bn BRL in 2008. Description: Sabesp, through several concession contracts with the state of São Paulo, plans, constructs and operates sewage and water systems in its concession. The company was established in 1973, after the merger of the local water supply and sewage companies. Sabesp has a water distribution network of 62.3 thousand km and 40.6 thousand km of sewage and collector lines, supplying 23 mn customers with water and 19 mn people with sewage collection. The company's concessions will be expiring until 2034 and under the new sector regulation, Sabesp will have to establish until 2010 contracts with all the municipalities it serves. It employed nearly 17,516 people in 2008. Shareholders: The State of São Paulo (Ba2 stable by Moody's) holds 50.2% of the company's ordinary shares with the remaining being free float. The company is listed on the São Paulo and New York (ADR) stock exchanges.

DIVERSIFIED

In this section we include the profiles of conglomerates that due to their business diversity did not fit in any sector in particular and issuers from sectors where there aren't enough bond issuers in fixed income markets to justify a separate analysis.

Key Ratios 2006

EBITDA Margin EBITDA Growth Net Revenues Growth % Exports ROA ROE EBITDA/ Net Int Expenses EBITDA/ Interest Costs Total Debt/EBITDA S-Term Debt/EBITDA Net Debt/EBITDA Net Debt/ Assets FC Debt/Total debt FC Hedged Debt/ Total FC Debt Net Debt/ Equity FFO/Total Debt (FFO-Div-Capex)/Total Debt

Source: Sabesp, BIE

Rating 2007

44,6% 7,8% 8,0% 0,0% 5,7% 10,8% 3,8x 5,2x 2,1x 0,3x 2,0x 28,0% 21,9% 0,0% 53,4% 39,0% 21,6%

2008

43,0% 2,6% 6,4% 0,0% 4,9% 9,6% 3,9x 5,5x 2,5x 0,5x 2,3x 30,4% 33,2% 0,0% 59,5% 36,8% 6,2%

Moody's

S&P

FC LT Iss Crd LC LT Iss Crd Outlook LT Iss Crd BBBBPositive brA+

Fitch

FC/LC LT Iss Sen Unsec Outlook Nat. BB BB Positive A+(bra)

46,0% 11,1% 11,6% 0,0% 4,8% 9,6% 3,9x 3,2x 2,5x 0,3x 2,4x 33,2% 23,3% 0,0% 65,8% 31,9% 15,9%

Not Rated

Moody's

Not Rated

Global FC Ratings Evolution S&P

Oct-06

Fitch

BB

Moody's

Not Rated

Local Ratings Evolution S&P

Jun-06 brA+ Oct-06

Fitch

A+ (bra)

MN BRL

Total Assets Cash Equity Short Term Debt Total Debt Net Debt Net Revenues EBITDA Net Income Funds from Operations Capex Dividends

Source: Sabesp, BIE

2006

18.093,7 328,2 9.112,2 852,5 6.326,8 5.998,6 5.527,3 2.539,9 872,7 2.020,8 842,5 169,4

2007

18.659,9 465,0 9.780,5 742,1 5.685,2 5.220,2 5.970,8 2.663,2 1.055,2 2.215,6 848,9 136,3

2008

20.522,9 625,7 10.492,4 1.448,8 6.865,1 6.239,4 6.351,7 2.731,8 1.008,1 2.527,9 1.395,5 708,8

Amount

Coupon

Liquid Issues Call/Put Issue Date

03-01-2005 09-01-2004 06-01-2005 11-05-2008 11-15-2008 11-03-2006 na na na Sink/call Sink/call na

Maturity

03-01-2010 09-01-2010 06-01-2011 10-15-2013 10-15-2013 11-03-2016

Ratings

NR brA+ NR brA+e brA+e BB-/BB

100 mn BRL IGPM link 179.92 mn BRL IGPM link 350 mn BRL IGPM link 100 mn BRL DI+275 bps 120 mn BRL 12,850% 140 mn USD 7,500%

Source: Bloomberg, BIE

Debt Maturity Schedule 2008

1800 1600 1400 1200 (MN BRL) 1000 800 (MN BRL) 600 400 200 0 2009 2010 2011 2012 2013 2014 >2014 4000 6000 8000

Revenues Evolution

CAGR: 9.4%

2000

0 2002 2003 São Paulo City 2004 2005 Suburbs 2006 2007 2008

Source: Sabesp, BIE

Source: Sabesp, BIE

Risk policy: Sabesp has no derivative instruments to cover foreign exchange risk although it implements an active debt management, through debt exchange operations. Credit positives: (i) new regulation established in 2007 improves the sector operating framework, (ii) low competition and strategic importance for the state of São Paulo, (iii) growing revenues and EBITDA, (iv) strong EBITDA margin, (v) sound cash flow generation, (vi) low refinancing risk, (vii) sound leverage metrics. Credit negatives: (i) exposure to currency fluctuations as the company does not hedge its foreign currency denominated debt, (ii) still some degree of leverage, (iii) high future capital expenditures for the improvement of the water and sewage services, (iv) challenge to reduce its past-due account receivables from wholesale clients and water losses, (v) contract negotiation risk, (vi) hydrological risk. Outlook: Sabesp plans to increase its presence in the state of São Paulo and expand its services within the country and abroad, to universalize its water and sewage services until 2018 in all its São Paulo concessions while increasing efficiency, quality, taking advantage of the scale of its operations and focusing on environmental solutions. The company plans to invest 8.6 bn BRL until 2013 in infrastructure and facility improvement. Sabesp remained a state cash generative company. However, operations could improve if receivables' collection were more efficient.

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79

AmBev

Positioning: AmBev is the largest brewer in Latin America and the fourth largest worldwide in terms of volume, leader in six beer markets throughout the Americas: Brazil (with a 67.5% market share as of 2008), Canada (42.9%), Argentina (75%), Paraguay, Uruguay and Bolivia. In Brazil, the company sells 3 leading brands: Skol, Brahma and Antarctica, the first one being the fourth most consumed beer in the world and Brahma being the seventh. AmBev has 17.8% of the Brazilian soft drinks market (as of 2008). Total assets reached 37.3 bn BRL in 2008. Description: AmBev is the American arm of the Inbev group, the result of the combination of Interbrew and AmBev activities in 2004. The company produces and sells beer, draft beer, soft drinks, other non-alcoholic beverages and malt, either directly or by participating in other companies in Brazil and elsewhere in the Americas. It is present in 15 countries, including Brazil, Argentina, Canada, Venezuela, Uruguay, Paraguay, Chile, Bolivia, Dominican Republic, Guatemala, Nicaragua, El Salvador, Ecuador, and Peru. Its core brands are Skol, Brahma, Antarctica, Bohemia, Original, Quilmes, Labatt Blue, Brahva and Guaraná Antarctica. AmBev is also the largest PepsiCo bottler outside USA and through a franchise agreement, it sells Pepsi products, such as Pepsi, Lipton Ice Tea and Gatorade, in Brazil and other Latin America countries. AmBev also maintains a licensing agreement with Anheuser-Busch, Inc., through its subsidiary Labatt Canada, to produce, bottle, sell and distribute Budweiser products in the mentioned country. AmBev employed more than 39k people at the end of 2008. Shareholders: AmBev is integrated in the Inbev Group (Baa2 stable by Moody's/ BBB+ stable by S&P), which controls 74.0% of AmBev's voting shares and 61.8% of its total shares. António and Helena Zerrener Foundation, FAHZ, has 16.6% of AmBev's voting shares and 9.3% of its total shares. The company has ordinary and preferred shares listed on the São Paulo and New York stock exchanges.

BRMALLS

Positioning: BRMALLS is the largest national shopping center company, present in all of Brazil's five regions and servicing customers from all different income classes in the country. BRMALLS is the largest integrated shopping mall operator in Brazil, with a portfolio of 34 malls, comprising 984.1 thousand m² of total GLA (Gross Leasable Area) and 428.6 thousand m² of owned GLA with about 5.9 thousand stores. Total assets reached 3.4 bn BRL in 2008. Description: BRMALLS was created in 2006 following a corporate restructuring. The company's roots rest on ECISA, a company established in 1949 and focused on building and construction activities. In the 1970s, ECISA entered the shopping center development and investment industry and gradually decreased its involvement in other activities. Apart from its shopping malls ownership -the average ownership interest in the 34 shopping malls is 43.6%BRMALLS provides management, leasing and marketing services to 25 of the 34 malls in which it has an interest. The company currently has 5 greenfield projects under development and 9 expansion projects, which, together, will increase total GLA by 262.5 thousand m² and owned GLA by 189.9 thousand m² within the next few years. Shareholders: BRMALLS is owned by ECISA's founders, Mr. Richard Paul Matheson and Miss Adayl de Barros Stewart, who have 7% each, Equity International (Samuel Zell) has 15% and GP Investments Group has 8.8%. The remaining is free float, traded on Bovespa. The company has no preferred shares.

Key Ratios 2006 Key Ratios 2006

EBITDA Margin EBITDA Growth Net Revenues Growth % Sales Abroad ROA ROE EBITDA/ Net Int Expenses EBITDA/ Interest Costs Total Debt/EBITDA S-Term Debt/EBITDA Net Debt/EBITDA FC Debt/ Total Debt FC Hedged Debt/Total FC Debt Net Debt/ Assets Net Debt/ Equity FFO/Total Debt (FFO-Capex-Dividends)/Total Debt

Source: AmBev, BIE

Rating 2007

67,1% 1393,5% 1007,0% nm nm 1,3x 2,1x 6,0x 0,4x 1,9x 39,8% 0,0% 9,6% 15,2% 0,7% <0

2008

74,8% 74,4% 56,5% nm nm 1,8x 1,7x 6,0x 0,4x 2,9x 28,4% 0,0% 20,6% 40,4% 16,0% <0

Moody's

S&P

LT Foreign Iss. LT Local Iss. Outlook Natl LT Issuer BBBBNegative brA

Fitch

FC LT Issuer LC LT Issuer Senior Uns Outlook BBBBBBStable

Rating 2007

44,3% 16,8% 11,6% 36,6% 7,9% 16,2% 6,9x 9,0x 1,1x 0,3x 0,8x 51,4% 87,1% 20,8% 42,3% 72,1% 35,7%

2008

43,1% 3,6% 6,4% 37,4% 8,2% 17,7% 8,2x 7,9x 1,2x 0,4x 0,9x 44,0% 69,9% 20,7% 44,7% 62,9% 17,8%

Moody's

LC Curr Issuer FC Curr Issuer Outlook Nat LT Baa1 Baa3 watch+ Stable Aaa.br LT F Issuer LT L Issuer Outlook LT Iss. Nat.

S&P

BBB BBB Stable brAAA

Fitch

FC LT Issuer LC LT Issuer Nat. LT BBB watchBBB watchAAA(bra)

42,3% 18,1% 10,4% 37,8% 7,9% 14,6% 6,9x 10,4x 1,3x 0,3x 1,0x 62,6% 81,2% 21,9% 40,5% 62,6% 28,9%

Moody's

May-06 Aug-06 Aug-07 Ba2 Ba1 Baa3

Global FC Ratings Evolution S&P

Aug-06 BBB Jan-06 Jun-06

Fitch

BBBBBB

EBITDA Margin EBITDA Growth Net Revenues Growth ROA ROE EBITDA/ Net Int Expenses EBITDA/ Interest Costs Total Debt/EBITDA S-Term Debt/EBITDA Net Debt/EBITDA FC Debt/ Total Debt FC Hedged Debt/ Total FC Debt Net Debt/ Assets Net Debt/ Equity FFO/Total Debt (FFO-Capex-Div)/Total Debt

Source: BRMALLS, BIE

49,7% na na 0,0% 0,1% nm 4,4x 6,9x 2,7x nm 37,8% na nm nm na na

Not Rated

Moody's

Not Rated

Global FC Ratings Evolution S&P

Jul-07 BBAug-08

Fitch

BB-

Moody's

Not Rated

Local Rating Evolution S&P

Jul-07 Jun-08 brA+ brA

Fitch

Not Rated

MN BRL Moody's

Jun-09 Aaa.br

2006

681,3 112,2 517,4 25,2 64,5 <0 18,7 9,3 0,3 na na na

2007

2.790,8 566,1 1.769,4 59,9 835,2 269,1 207,0 138,9 -70,4 6,1 1.336,7 0,0

2008

3.413,3 758,5 1.743,9 90,7 1.462,2 703,7 323,9 242,2 -30,5 233,6 359,5 0,0

Local Rating Evolution S&P

Jul-06

Fitch

AAA(bra)

MN BRL

Total Assets Cash Equity Short Term Debt Total Debt Net Debt Net Revenues EBITDA Net Income Funds from Operations Capex Dividends

Source: AmBev, BIE

2006

35.560,9 1.765,0 19.268,1 2.104,6 9.566,6 7.801,6 17.613,7 7.444,6 2.806,3 5.985,3 1.425,7 1.790,8

2007

35.475,8 2.483,0 17.420,0 2.476,3 9.852,2 7.369,2 19.648,2 8.697,0 2.816,4 7.102,5 1.630,9 1.952,6

2008

37.270,1 3.298,9 17.278,0 3.960,7 11.025,4 7.726,5 20.899,5 9.007,0 3.059,5 6.933,6 2.055,4 2.913,7

Amount

Coupon

Liquid Issues Call/Put Issue Date

12-19-2001 08-03-2006 09-18-2003 MW+50 na MW

Maturity

12-15-2011 07-01-2012 09-15-2013

Ratings

Baa1/BBB/BBB Baa1/brAAA Baa1/BBB/BBB

500 mn USD 10,500% 1,248.03 mn BRL DI*102.5% 500 mn USD 8,750%

Source: Bloomberg, BIE

Total Assets Cash Equity Short Term Debt Total Debt Net Debt Net Revenues EBITDA Net Income Funds from Operations Capex Dividends

Source: BRMALLS, BIE

Amount

270 mn BRL 175 mn USD

Coupon

7,900% 9,750%

Liquid Issues Call/Put Issue Date

08-02-2007 11-08-2007 Sink. Call 11/12

Maturity

07-15-2016 Perp

Ratings

na BB-/BB-

Source: Bloomberg, BIE

Shopping Malls owned by BRMALLS (As of Dec 31, 2008)

State NorteShopping Shopping Recife Shopping Estação Shopping ABC Plaza Niterói Shopping Villa-Lobos Minas Shopping Amazonas Shopping Center Iguatemi Belém Shopping Campo Grande Fashion Mall Shopping Curitiba Shopping Del Rey Pantanal Shopping Shopping Tamboré Top Shopping Iguatemi Maceió Shopping Piracicaba Iguatemi Caxias do Sul Goiânia Shopping Shopping Natal Ilha Plaza Big Shopping Araguaia Shopping Rio Plaza Shopping Independência Esplanada Shopping Shop. Mueller Joinville Shopping Metrô Tatuapé São Luís Shopping Osasco Plaza Shopping Campinas Shopping Center Shopping West Shopping Total RJ PE PR SP RJ SP MG AM PA MS RJ PR MG MT SP RJ AL SP RS GO RN RJ MG GO RJ MG SP SC SP MA SP SP RJ RJ Total GLA (000 m²) 75,7 61,1 54,7 46,5 31,3 27,3 36,7 38,4 19,3 28,6 15,1 23,9 37,4 42,9 31,5 18,1 24,4 27,8 14 17,4 17,1 19,6 17,5 18,9 7,1 23,3 24 27 32,9 34,1 14,5 32,3 12,7 31 984,1 Own. (%) 74,1 31,1 100,0 0,7 100,0 39,7 1 17,2 13,6 65,1 100 35,0 65,0 10,0 100,0 35,0 34,2 19 45,5 49,6 50 100,0 13,0 50 100,0 8,0 3,4 10,4 3,0 15 39,6 100 30 30 43,6 Owned GLA (000 m²) 56 19 54,7 0,3 31,3 10,9 0,4 6,6 2,6 18,6 15,1 8,4 24,3 4,3 31,5 6,4 8,4 5,3 6,4 8,6 8,6 19,6 2,3 9,4 7,1 1,9 0,8 2,8 1 5,1 5,7 32,3 3,8 9,3 428,6 Service Business Man/Leas Leasing Man/Leas Man/Leas Man/Leas Man/leas Third Man/Leas Third Man/Leas Man/Leas Man/Leas Man/Leas Third Man/Leas Leasing Third Man/Leas Man/Leas Man/Leas Leasing Man/Leas Third Man/Leas Man/Leas Man/Leas Third Third Third Third Leasing Man/Leas Man/Leas Man/Leas

Debt Maturity Schedule 2008

800 (MN BRL) 600 400 200 0

Debt Amortization Schedule 2008

Net Revenues Profile

5000 (MN BRL) (MN BRL) 4000 3000 2000 1000 0 2009 2010 2011 2012 2013 2014 onwards

25000 20000 15000 10000 5000 (MN BRL) 0 2004 2005 Beer-Brazil

Source: AmBev, BIE

2008

2009

2010

2011

CAGR: 1

4.8%

Source: BRMALLS, BIE

2012 onwards

Gross Revenues Breakdown

300 250 200 150 100 50 0 Rent Parking Key Money Services and Transfer Fee Provided 2007

Source: BRMALLS, BIE

2006 Soft drinks-Brazil

2007 Other-Brazil North America

2008

International Operations (LatAm)

Source: AmBev, BIE

Others

Risk policy: AmBev's use of derivatives observes strictly the financial risk policy approved by the Board of Directors. The purpose of the policy is to set out guidelines for the management of financial risks inherent to the capital market in which AmBev carries out its operations. The policy establishes that all the financial assets and liabilities in each country where the company operates must be maintained in their respective local currencies whenever possible. The policy also sets forth the procedures and controls needed for identifying, measuring and minimizing market risks, such as variations in foreign exchange rates, interest and commodities (mainly aluminum, wheat and sugar) that may affect the company's revenues, costs and/or investments. Any exception to the policy must be approved by the Board of Directors. To meet its objectives, AmBev and its subsidiaries use interest rate and commodities derivatives. Derivative instruments authorized by the risk policy are futures contracts on foreign exchange, deliverable forwards, non-deliverable forwards and swaps. On December 31, 2008, the company and its subsidiaries had no target forward operations, swaps with currency verification or any other derivative operation implying leverage above the nominal value of their agreements. The derivative operations are classified per strategy according to its purpose, as (i) financial hedge (operations contracted with the purpose of protecting the company's net indebtedness against foreign exchange and interest rate variations), (ii) operational hedge (for reducing the company's exposure to the fluctuations in foreign exchange and raw material prices), and (iii) fiscal hedge (for minimizing the fiscal impact of operations between the company and subsidiaries). Credit positives: (i) core business (domestic beer market) generates strong profitability and predictable cash flows, (ii) dominant market position in Brazil and other beer markets such as Canada, Argentina, Paraguay, Uruguay and Bolivia, (iii) broad geographical presence, (iv) product diversification, (v) extensive distribution network, (vi) very high EBITDA margin compared to peers, derived from the focus on cost control and emerging market exposure, (vii) low leverage and sound credit metrics, (viii) part of the InBev group, (ix) strong operating cash flow generation, (x) strong cash flow / debt coverage measures, (xi) hedged foreign currency debt, (xii) sound interest coverage. Credit negatives: (i) increased competition, (ii) emerging markets arm of Inbev and consequently higher risk, (iii) aggressive dividend policy, by distributing the excess cash generation in the form of interest on capital, dividends and share repurchases, (iv) proneness to make acquisitions, in line with the group's strategy, (v) was charged by the competition regulator with a fine of 353 mn BRL in July 2009 for anticompetitive practices in 2003, (vi) some short term debt concentration, although fully covered by its cash position, (vii) industry regulation such as drink and driving, advertising restrictions. Outlook: AmBev's strategy is to fuel net revenues growth, by stimulating higher per capita consumption, maintaining market share and building strong brands and leveraging on increasing drinking expenditure, especially in high-value products. The company is also focused on continuing to improve the efficiency of its distribution system, and on cost reduction and financial discipline. Despite competition and the crisis, AmBev operating and financial performance remained resilient. In our view, the main challenge ahead is dealing with this hostile environment while maintaining cash flow generation and the above-peers EBITDA margin.

2008

Source: BRMALLS, BIE. Man = management, leas = leasing and third = third parties.

Risk policy: BRMALLS risk policy determines that the financial result has to come from operations and not from financial market gains. The company uses non speculative financial instruments to hedge its foreign exchange and interest rate exposures. BRMALLS started to contract derivative instrument in 2008. The company does not hedge the principal payment of the perpetual bond, but its coupon payments are hedged for the next 3.75 years. Credit positives: (i) strong position in the Brazilian shopping mall industry, as the largest shopping mall company in the country, (ii) high and increasing EBITDA margin, above industry peers, (iii) asset diversification by state and type of client, (iv) low refinancing risk in the medium term, with the majority of its debt maturing after 2012, (v) high and increasing occupancy rate, (vi) more exposure to the Southeast region of the country, where living standards are higher, (vii) strong cash position, (viii) improving operating cash flow generation, (ix) active role in the consolidation of the market. Credit negatives: (i) increasing competition in the consolidation process of the fragmented shopping center industry, (ii) aggressive financial profile, (iii) increasing leverage and worsening credit metrics, (iv) aggressive capex plan, (v) risk of aggressive debt-financed growth strategy. Outlook: BRMALLS intends to be the largest shopping center company in Latin America, therefore it has an aggressive growth strategy. For its expansion purposes, the company follows five lines: (i) acquire new shopping centers, (ii) increase participation in existing ones, (iii) expand existing shopping malls. (iv) develop new shopping malls, (v) increase the leasing and marketing business. In 2009, BRMALLS intends to adopt a more conservative approach for its plans. It expects to inaugurate four expansions during the year, adding 16,300 square meters of owned GLA to the current portfolio and to begin the construction of two greenfield projects (Granja Vianna and Sete Lagoas) and one important expansion project (Tambore). The company has a capex program totaling 846 mn BRL for the 2009-2013 horizon, being 163 mn BRL or 19% expected to be spent this year. Although sector momentum is high as living standards in Brazil improve, the main challenge of the company is to implement the growth strategy successfully without compromising its credit quality.

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Camargo Corrêa Group

Positioning: Camargo Corrêa Group is the 25th largest Brazilian private group according to the latest ranking by Exame Magazine which refers to 2008. Camargo Corrêa controls Camargo Corrêa Cimentos, which is one of the largest cement and concrete producers in South America, being among the largest in Brazil with brands such as Cauê and Cimento Brasil and the market leader in Argentina with Loma Negra in cement and Lomax in concrete; one of the largest Brazilian heavy construction companies (CCConstruction), leader in the construction of hydroelectric plants and with presence in South America and Africa; and the leader in the Brazilian sandals and footwear market (Alpargatas). The group also has stakes in energy distributor CPFL, with a 13% market share in the Brazilian distribution market, road concessionaire CCR, which operates 15% of the Brazilian road system, Usiminas (see file) and Itaúsa (Banco Itaú holding company). Total assets reached 19.7 bn BRL in 2008. Description: Operating since 1939, Camargo Corrêa is primarily engaged in the management of Camargo Corrêa Group companies. Its subsidiaries operate in (i) engineering and construction, including infrastructure, building and real estate units, (ii) cement, (iii) footwear, textiles and steel, (iv) concessions, including energy and airport management, and (v) environmental and corporate issues. The group classifies its businesses into three categories according to its importance: (i) main businesses generating the majority of the group's revenues: cement, energy concession, road concession and construction, (ii) businesses in which the group has a relevant participation, such as shoes, rail concession, engineering, environmental and steel, and (iii) businesses in development, in line with the country's long term strategy, such as naval, oil and gas and airport management. Actually, the group is present in 18 countries and employs around 54.4K people. Shareholders: Camargo Corrêa S.A. is the holding company of Camargo Corrêa Group and is held by Participações Morro Vermelho S.A., a company owned by the three family heirs of the group's founder Sebastião Camargo.

Construtora Norberto Odebrecht

Positioning: Construtora Norberto Odebrecht (CNO) is the largest engineering and construction company in Latin America as measured by 2007 gross revenues. According to ENR (Engineering News-Record), CNO is the largest international builder of sanitary and storm sewers, transmission lines and aqueducts, the second largest international builder of hydroelectric power plants, the third largest international builder of bridges and water supply systems, and the fourth largest international builder of distribution centers and warehouses worldwide. Total assets reached 14.4 bn BRL in 2008. Description: Established in 1944, the main operations of CNO include the planning and execution of engineering projects of all types and specialties (contractor, administrator or other roles), technical installations of civil engineering, industrial assembly, consulting, planning, assistance and technical studies; rendering of administrative or technical services; urban and rural real estate ventures, investments in other companies for the purpose of greater development, stability and profitability, other related activities, including import and export, rental and purchase and sale of equipment and transportation. CNO counts with a widely diversified client portfolio by region, types of projects and segments, with presence in 22 countries in Africa, America, Europe and the Middle East. In December 2008, CNO had 162 ongoing projects in 16 countries, and its backlog amounted to 18.1 bn USD or three years of future services. CNO had 81,991 employees, 36,440 located in Brazil and 45,551 outside Brazil. Through its subsidiaries, CNO also conducts diamond prospecting and exploration in Angola. The company has participated in the construction of over 178 km of bridges, over 52,500 MW of hydroelectric power plants, approximately 280 km of tunnels, over 11,200 km of roads and over 147 km of subway lines. Shareholders: CNO is a wholly-owned subsidiary of the Odebrecht Group, which is engaged in Engineering and Construction, Chemicals and Petrochemicals ­ with Braskem (see file), Sugar and Alcohol, Investments in Infrastructure, Environmental Engineering, Oil and Gas and Real Enterprises. CNO is not listed. The Odebrecht Group is one of the 10 largest Brazilian owned private conglomerates, held by the Odebrecht family.

Key Ratios 2006

EBITDA Margin EBITDA Growth Net Revenues Growth ROA ROE EBITDA/ Net Int Expenses Total Debt/EBITDA S-Term Debt/EBITDA Net Debt/EBITDA FC Debt/ Total Debt FC Hedged Debt/ Total FC Debt Net Debt/ Assets Net Debt/ Equity FFO/Total Debt (FFO-Capex-Div)/Total Debt

Source: CC, BIE

Rating 2007

21,3% 57,8% 26,9% 7,1% 16,9% nm 2,5x 0,4x 1,0x 41,5% 0,0% 12,0% 28,5% 35,2% 7,9%

Key Ratios 2006 2007

10,3% 60,1% 18,6% 69,2% 5,4% 25,8% nm 6,4x 1,3x 0,5x nm 83,0% 2,1% nm nm 80,4% 0,9%

Rating 2008

14,0% 162,7% 93,5% 76,3% 4,1% 23,5% 3,5x 12,1x 1,1x 0,4x 0,1x 83,4% 7,0% 0,9% 5,3% 87,7% 46,8%

Moody's

Not Rated

S&P

FC LT Issuer LC LT Issuer Outlook LT Local ST Local BB BB Stable br AAbr A-2

Fitch

FC LT Issuer LC LT Issuer Senior Uns Outlook LT BB+ BB+ BB+ Stable AA(bra)

2008

18,0% 2,9% 21,6% 2,8% 7,0% 4,2x 2,9x 0,8x 1,6x 27,4% 18,7% 18,8% 46,6% 15,3% <0

Moody's

FC LT Iss LC LT Iss

S&P

BB watchBB watchLT FC Iss LT LC Iss Outlook Nat LT

Fitch

BB BB Negative AA-(bra)

17,1% 41,3% 35,4% 3,9% 9,8% nm 3,6x 0,6x 1,5x 43,9% 0,0% 13,5% 33,9% 24,7% 7,8%

Not Rated

Moody's

Not Rated

Global FC Ratings Evolution S&P

May-06 BB May-06

Fitch

BB

Moody's

Not Rated

Local Rating Evolution S&P

Not Rated May-06 Nov-07

Fitch

A+(bra) AA-(bra)

EBITDA Margin EBITDA Growth Net Revenues Growth % Foreign Market ROA ROE EBITDA/ Net Int Expenses EBITDA/ Interest Costs Total Debt/EBITDA S-Term Debt/EBITDA Net Debt/EBITDA FC Debt/ Total Debt FC Hedged Debt/ Total FC Debt Net Debt/ Assets Net Debt/ Equity FFO/Total Debt (FFO-Capex-Div)/Total Debt

Source: CNO, BIE

7,6% 20,5% 16,2% 64,9% 1,7% 7,6% 36,7x 3,7x 2,1x 0,5x nm 96,5% 15,7% nm nm 107,4% 28,1%

Moody's

Not Rated

Global FC Ratings Evolution S&P

Oct-07 BB Jul-07

Fitch

BB+

Moody's

Not Rated

Local Rating Evolution S&P

Jun-06 Nov-06 Oct-07 brA brA+ brAAJul-07

Fitch

AA(bra)

Amount 2006

6.534,0 1.489,6 1.462,9 272,8 1.176,0 -313,6 7.222,8 550,0 111,6 1.263,3 353,8 579,3

Coupon

9,625% 7,500% 9,625%

Liquid Issues Call/Put Issue Date

04-09-2009 10-18-2007 09-22-2005 na Call 10/12 Call 9/10

Maturity

04-09-2014 10-18-2017 Perp

Ratings

BB/BB+ BB/BB+ BB/BB+

MN BRL

Total Assets Cash Equity Short Term Debt Total Debt Net Debt Net Revenues EBITDA Net Income Funds from Operations Capex Dividends

Source: CNO, BIE

2007

8.044,7 1.391,6 1.681,4 431,8 1.101,1 -290,5 8.563,5 880,8 434,2 884,8 874,6 0,0

2008

14.352,7 2.442,4 2.510,2 872,7 2.574,9 132,5 16.574,6 2.313,6 589,0 2.259,1 1.053,7 0,0

200 mn USD 400 mn USD 200 mn USD

MN BRL

Total Assets Cash Equity Short Term Debt Total Debt Net Debt Net Revenues EBITDA Net Income Funds from Operations Capex Dividends

Source: CC, BIE

2006

15.727,1 2.982,6 6.265,2 866,3 5.108,9 2.126,3 8.322,8 1.422,5 615,3 1.263,1 734,2 132,9

2007

18.078,3 3.381,1 7.594,8 994,0 5.542,3 2.161,2 10.559,5 2.245,2 1.285,5 1.952,4 1.429,5 87,8

2008

19.707,1 2.900,2 7.939,5 1.882,7 6.601,7 3.701,5 12.842,9 2.310,7 555,3 1.013,2 2.316,6 133,4

Amount

250 mn USD 150 mn USD

Coupon

7,875% 8,875%

Liquid Issues Call/Put Issue Date

05-17-2006 07-20-2005 na na

Source: Bloomberg, BIE

Maturity

05-17-2016 08-01-2015

Ratings

BB*-/BB Ba3/BB*-

Revenues Profile by Contract

20000 15000 10000 5000 0 2006 2007 Dams & Power Plants Tranportation Infrastructure Assembly

Source: CNO, BIE

Source: Bloomberg, BIE

2008 Building & Manufacturing

Debt Maturity Schedule 2008 Debt Maturity Schedule 2008 2008 Net Revenues Breakdown

15% 1000 Construction Energy Concessions Other Steel Shoes Cement (MN BRL) 750 500 250 0 2009

Source: CNO, BIE

Revenues Profile by Country

17500 15000 12500

2000 (MN BRL) 1500 1000 500 0 2009

Source: CC, BIE

7%

(MN USD)

R: CAG

50.5

%

36%

10000 7500 5000 2500 0

15%

12% 2010 2011 2012 2013 2014 Afterwards

Source: CC, BIE

15%

2010

2011

2012 onwards

Source: CNO, BIE

2006 Brazil Portugal

Venezuela Angola

2007 Other LatAm Other African

2008 United States Middle East

Risk policy: The group is exposed to foreign exchange and interest rate risks and uses financial instruments, including derivates, in order to hedge them. Their management is done through policies, strategy definition and control systems, monitored by the group's administration. Credit positives: (i) diversified and low correlated portfolio of businesses, (ii) solid market position and leadership in most of the markets it operates, (iii) low leverage capital structure, despite of the recent increase, (iv) diversified revenue profile, (v) sound liquidity, (vi) track record of successful acquisition integration, (vii) high correlation of Camargo's core businesses (cement, construction, energy and road concessions) with general economic conditions of Brazil and Argentina. Credit negatives: (i) high exposure to Argentina, (ii) aggressive capital expenditure program leading to negative free cash flow, (iii) low hedge of foreign currency risk, (iv) proneness to make acquisitions, (v) increase in financial leverage, resulting from M&A activity, leading to worsened credit metrics, (vi) short term refinancing risk, mitigated by a strong cash position, (vii) decrease in EBITDA margin and operating cash flow generation. Outlook: Camargo Corrêa aims at consolidating and strengthening its position as one of the largest private conglomerates in Brazil. For that, the group has started to focus on operations related with the long-term development of the country, such as real estate construction for lower income segments, naval construction, airport management and services for oil and gas exploration. The group plans to expand internationally as well, so it is building cement plants in Angola and Paraguay, through partnerships with local players, and plans to continue investing in the international presence of the brand "Havaianas" Economic conditions in Brazil could specially affect the group's more . cyclical lines of business such as cement, homebuilding, and engineering and construction, leading to lower operating cash flow generation and therefore restrict debt reduction.

Risk policy: CNO and its subsidiaries have financial risk management policies that set forth the guidelines for the management of such risks. Under those policies, the nature and general position of financial risks is regularly monitored and managed in order to evaluate results and the financial impact on cash flow. The credit limits and hedge quality of counterparts are frequently reviewed. The company believes that the foreign exchange exposure of its liabilities and operating expenses is largely mitigated by the significant level of revenues from projects outside Brazil in USD or other currencies. Under its risk management policies, market risks ­namely foreign exchange and interest rate- are hedged when the company believes it is necessary to support the corporate strategy, using derivative instruments for the sole purpose of creating hedges and not for speculation. CNO does operations with derivative instruments with the objective of combining uses and sources of funds within the same currency. The operations with foreign exchange derivative instruments have a maximum period of twelve months and an average period of six months. Credit positives: (i) dominant market position in Brazil and Latin America, (ii) diversified portfolio in terms of regions and industry segments, (iii) strong revenue growth, (iv) strong international presence, (v) growing EBITDA and margin, (vi) sound cash position and operating cash flow generation, (vii) sound interest coverage, (viii) strong backlog growth, (ix) low leverage and sound credit metrics, (x) CNO matches revenues and costs using the same currency for each project, (xi) development of relationships with key local sub-contractors, (xii) its projects are funded under Brazilian trade credit or multilateral agency credit facilities. Credit negatives: (i) exposure to a cyclical sector, (ii) concentration of backlog both in the public sector in Brazil and some exposure to countries with instable political and economic situations, despite mitigated by large advanced payments, long-term presence in the countries, financed by exports, multilateral and international agencies, (iii) price-fixed backlog, (iv) volatile working capital needs, (v) foreign exchange risk exposure, with revenues penalized by the BRL appreciation, (vi) large capital expenditures, although covered by operating cash flow generation. Outlook: CNO's main goal is pursuing international business opportunities, along with focusing on complex large-scale construction and concession projects and offering differentiated services to its clients. As of December 2008, its backlog represented approximately 18.1 bn USD or almost three years of future services and CNO expects to complete in 2009 approximately 30-40% of it. CNO seems well positioned to benefit from emerging markets growth both internally and abroad, especially in this time of crisis when stimulus packages include large infrastructure projects worldwide. The company has a long and proven track record in managing the sovereign risk of the countries where it operates.

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DASA

Positioning: DASA is the largest private medical diagnostics company in Latin America offering a portfolio of over 3,000 clinical analyses and imaging tests. Nowadays DASA detains 21 distinct brands, present in 12 states and in the Federal District through 328 Private Patient Service Centers. Besides its own patient service centers, DASA provides support services for more than 3,000 laboratories throughout the country with the Alvaro brand since 2005 and operates in the Public Sector through CientificaLab brand, acquired in 2007. Total assets reached 1.9 bn BRL in 2008. Description: Diagnósticos da América dates back to 1961 from the foundation of Associate Physicians in Clinical Pathology by two Professors from Escola Paulista de Medicina. The current name was adopted in 2000. Nowadays, DASA specializes in diagnostic medicine and preventive health focused on three segments: (i) clinical analyses and imaging tests, (ii) services for independent private laboratories and (iii) services for the Public Sector. DASA has done 14 acquisitions since 2005, two of them (Maximagem in São Paulo and Cedic/Cedilab in Cuiabá) in 2008. At year-end 2008, the company had 11,878 workers. Shareholders: DASA is 93.5% publicly owned. Board members and management own the remaining 6.5%. The company is listed on the São Paulo stock exchange and has no preferred shares.

Votorantim Group

Positioning: According to the latest data available at this moment, Votorantim Group is among the largest private conglomerates in Brazil and Latin America. Through its subsidiaries, it is one of the 10th largest cement producers in the world and the largest in the country, with a domestic market share of more than 40%. The group ranks #1 in aluminium integrated production with a 25% market share in Brazil, #1 in nickel production and #3 in zinc. Votorantim Celulose e Papel leads several areas of the domestic market and Citrovia is among the 3 largest producers of concentrate orange juice in the world with a 14% market share. Votorantim is a leading chemical producer in all the segments it operates. Banco Votorantim is also a reference name in the industry (see file). Total assets reached 133 bn BRL in 2008. Description: Votorantim, established in São Paulo in 1918, currently is a diversified conglomerate, divided in three areas: industry, finance, and new businesses. The industrial arm includes the cement business, the group's flagship, pulp and paper, metals, chemicals, agribusiness, energy and metallurgy. In new businesses, it develops venture capital activities investing in technological enhanced businesses, and Votorantim Finanças holds Banco Votorantim. Votorantim Participações is the holding of the group, primarily responsible for developing and implementing the business strategies at the group's level. Votorantim employed around 60 thousand people. In light of a more challenging operating environment and aiming to strengthen priority areas of the business, Votorantim Group sold assets such as 49.99% of the voting capital in Banco Votorantim, to Banco do Brasil, its stake in VBC (holder of CPFL) and acquired control in Aracruz Celulose. Shareholders: Through Votorantim Participações, Ermírio Moraes Family controls directly and indirectly all the companies that comprise the group. Its shares are not listed. The shares of Votorantim Celulose are listed on the São Paulo and New York stock exchanges.

Key Ratios 2006

EBITDA Margin EBITDA Growth Net Revenues Growth % Foreign Market ROA ROE EBITDA/ Net Int Expenses EBITDA/ Interest Costs Total Debt/EBITDA S-Term Debt/EBITDA Net Debt/EBITDA FC Debt/ Total Debt FC Hedged Debt/ Total FC Debt Net Debt/ Assets Net Debt/ Equity FFO/Total Debt (FFO-Capex-Div)/Total Debt

Source: DASA, BIE

Rating 2007

20,9% 30,6% 28,1% 0,0% 4,6% 11,0% 2,1x 2,8x 2,3x 0,6x 2,0x 23,9% 14,5% 29,5% 70,2% 22,2% -23,8%

2008

21,6% 36,7% 32,5% 0,0% nm nm 10,9x 1,7x 4,1x 0,8x 2,1x 66,8% 4,4% 28,2% 109,2% 33,4% 20,2%

Moody's

Not Rated

S&P

LT Foreign Iss. LT Local Iss. Outlook Natl LT Iss. BBBBStable brA

Fitch

LT FC Issuer LT LC Issuer Outlook Natl LT BB BB Stable A+(bra)

Key Ratios 2006

EBITDA Margin EBITDA Growth Net Revenues Growth % External market ROA ROE EBITDA/ Net Int Expenses Total Debt/EBITDA S-Term Debt/EBITDA Net Debt/EBITDA FC Debt/ Total Debt Net Debt/ Assets Net Debt/ Equity

Source: Votorantim, BIE

Rating Votorantim Participações 2007

27,8% -1,6% 5,0% 60,0% 4,1% 18,0% nm 2,9x 1,0x 2,6x 64,3% 19,3% 83,6%

20,5% 15,5% 26,9% 0,0% 1,6% 3,5% 12,8x 2,2x 2,5x 0,5x 0,1x 27,1% 20,9% 0,9% 1,9% 45,8% 8,3%

2008

20,9% -13,4% 15,3% na 0,0% 0,1% 1,2x 5,5x 2,3x 4,7x 67,6% 26,0% 132,9%

Moody's

LC Iss FC Iss Outlook Nat LT

S&P

BBB BBB Negative brAAA

Fitch

Moody's

Not Rated

Global FC Ratings Evolution S&P

May-08 BBMay-08

Fitch

BB

Moody's

Not Rated

Local Rating Evolution S&P

Apr-06 brA May-08

Fitch

A+(bra)

29,6% 34,3% 22,4% 22,9% 4,4% 20,1% nm 2,2x 0,4x 1,1x 81,5% 9,8% 44,5%

Issuer Rat. Outlook Nat LT

Baa3 Negative Aa1.br

Not Rated

Moody's

Aug-07 Baa3

Global FC Ratings Evolution S&P

May-07 BBB Not Rated

Fitch

Amount

250 mn USD

Coupon

8,750%

Liquid Issues Call/Put Issue Date

05-29-2008 Call 05/13

Maturity

05-29-2008

Ratings

BB-/BB

Moody's 2006

99.569,4 8.776,5 21.857,8 3.040,8 18.494,7 9.718,2 28.977,9 8.588,8 4.399,6

Local Rating Evolution S&P

Not Rated

Fitch

MN BRL

Total Assets Cash ex- Bank Equity Short Term Debt ex-Bank Total Debt ex-Bank Net Debt ex-Bank Net Revenues EBITDA Net Income

Source: Votorantim, BIE

2007

116.022,1 2.555,9 27.168,5 8.147,4 24.890,5 22.334,6 30.416,2 8.448,7 4.805,2

2008

132.996,5 5.915,2 26.041,4 16.993,6 40.535,0 34.619,8 35.082,7 7.317,1 14,2

Aug-07 May-09

Aaa.br Aa1.br

MN BRL

Total Assets Cash Equity Short Term Debt Total Debt Net Debt Net Revenues EBITDA Net Income Funds from Operations Capex Dividends

Source: DASA, BIE

2006

1.018,7 332,7 469,2 65,8 341,7 9,0 670,5 137,4 16,5 156,5 127,7 0,5

2007

1.218,5 46,4 512,4 103,5 406,3 359,9 858,8 179,5 56,6 90,4 173,9 13,4

2008

1.852,0 492,2 478,9 189,5 1.015,0 522,8 1.137,5 245,4 -13,0 338,6 133,2 0,0

Source: Bloomberg, BIE

Revenues Profile by Segment

1500 1250 (MN USD) 1000 750 500 250 0 2006 Public Sector

Source: DASA, BIE

Amount

208.22 mn USD 400 mn USD

Coupon

7,875% 7,750%

Liquid Issues Call/Put Issue Date

01-23-2004 06-24-2005 na 100% or MW+50

Maturity

01-23-2014 06-24-2020

Ratings

Baa3/BBB/BBB BBB/BBB

CAGR

: 30.9%

Source: Bloomberg, BIE

Debt Maturity Schedule 2008

9% 20000 (MN BRL) 15000 10000 5000 0 Standard Premium & Executive 2009

Source: Votorantim, BIE

Revenues Composition 2008

3% 2% 1% 20% Metals Energy Finance Cement P&P Steel Agro News bus. Chemicals

2007 Lab Support

2008 Clinical Analyses and Imaging Tests

9%

5%

Debt Maturity Schedule 2008

600 500 400 (MN BRL) 300 200 100 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Source: DASA, BIE

Clinical Analyses & Imaging Tests Revenues by Brand

26% 2010 2011 2012 2013

Source: Votorantim, BIE

25%

36%

64%

Risk policy: The financial committee of the industrial segment of the group, formed by financial directors of Votorantim Industrial and other business units, decides about risk management, procedures and applicable practices. According to the financial risk management policy, risk protection focuses on the following issues: (i) cash flow protection through the use of instruments that minimize the impact of short and medium term fluctuations of foreign exchange, interest rates and commodity prices, and (ii) balance sheet protection through the use of instruments that minimize the impact of foreign exchange variations. Credit risk is also an issue closely monitored and Votorantim tries to diversify clients and receivables while monitoring financing terms, segment sales and individual exposures. Votorantim also follows closely its liquidity position in order to comply with short-term liabilities. Interest rate market risk is managed in an integrated way across all industrial segments. Foreign exchange risk is evaluated through the assessment of foreign currency cash flow generation capacity in comparison with foreign exchange denominated net debt and investment position. Commodity price risk is managed through the use of derivative instruments negotiated in stock exchanges, linked to aluminum, nickel, steel, iron and orange juice according to the limits approved by the company taking in consideration its annual production. Credit positives: (i) leader in most of its business areas, namely in the cement, pulp & paper and metals & mining industries, (ii) business diversification, with low correlation among segments reducing vulnerability to economic cycles, (iii) commodity sector momentum, (iv) solid growth strategy, supported by strong cash generation, business diversification and effort to increase USD-linked revenues, through exports and focus on expanding abroad, that serves partially as a hedge for foreign currency debt, (v) overall cost efficiency and vertical integration leading to high margins, despite recent erosion, (vi) strong cash flow generation to partially compensate a challenging working capital management environment, (vii) large capital base, (viii) asset sales generating cash (VBC, Banco Votorantim and extraordinary dividend payment by the later), (ix) easy access to capital markets. Credit negatives: (i) information disclosure is low, (ii) potential revenue and margin volatility caused by the commodity nature of the products, negatively affected by falling commodity prices, (iii) rising competition in some segments where it operates, (iv) proneness to make acquisitions and aggressive capex plan, (v) debt concentration in the short-term, (vi) weaker liquidity position and leverage metrics deterioration, (vii) cement operations in North America could suffer with the construction crisis, albeit mitigated by the Brazilian pipeline. Outlook: The Votorantim Group is an organization focused on growth. It stimulates systemic operation of the business units to identify organic projects and acquisition projects that allows it to expand in a sustainable way its operations, combining creation of value, environmental preservation and social inclusion. The aspiration is to double the value of the business by 2012, supported by its main competitive advantages. Operating in different segments of the economy ­ from traditional sectors of industry, to technology businesses and essential service companies, or services that are complementary to the productive sector (energy, information technology and finance) ­ allows cost management, synergy gains, and profitability. This strategy, along with geographic diversification, enables the company to face market volatility and increase gains of scale. To execute its expansion plan, in 2007 the company announced an investment of 25.7 bn BRL over the next five years as a way of attaining the following strategic objectives at the business units: (i) in cement, Votorantim should seek international expansion and growth in the Brazilian market, (ii) in metals, the company plans to become a leader in integrated aluminum in Latin America, consolidate leadership in metallic zinc in the Americas and as one of the three largest producers in the world, focus on organic growth in nickel with quality mineral reserves to be among the five largest global producers and position the company as one of the major players in steel in the Americas, (iii) in pulp and paper, Votorantim aims to triple market pulp production by 2012, (iv) in energy, Votorantim seeks to reach 70% self-sufficiency in energy for the metals area, (v) in agribusiness, the group will invest in the expansion of orchards to meet growing demand, expand production capacity and change the energy matrix, (vi) in chemicals, it should consolidate the export market, seeking global leadership in nitrocellulose, (vii) in finance, it plans to invest in strong organic expansion in all areas of Banco Votorantim (see file), (viii) for new businesses, Votorantim will invest in new projects and acquisition of assets related to the current portfolio. Execution is a key risk going forward. Votorantim plans to invest in all lines of business around 25.7 bn BRL, with a particular focus on metals, receiving 43% and cellulose with 37% of the total. In cement, Votorantim will increase total installed capacity by 30% to 33 mn tons p.a., both in Brazil and US. The group also aims to increase aluminium installed capacity to 570 mn tons p.a. by 2009. In Celulose, Votorantim plans to triple the current production capacity of 1.4 mn tons p.a. by 2012. In agro industry (concentrated orange juice) Votorantim will invest 800 mn BRL in the next 5 years to expand capacity, logistics, energy efficiency (biomass) and increase own production of orange. In chemical products Votoramtim plans to expand nitrocellulose production capacity from 33 thousand tons p.a. to 40 thousand tons p.a. by 2010. Votorantim plans to invest around 9 bn BRL in 2009, a lower figure than previously anticipated due to the current international environment. In cement, Votorantim plans to conclude the investment in new factories such as Xambioá (TO) and Porto Velho (RO), create new facilities in Nobres (MT) and Sepetiba (RJ). In metals, the main projects for 2009 are to integrate operations and double production capacity of Cajamarquilla zinc plant , to 320 mn tons p.a.. Votorantim aims to further increase in 2009 energy production for internal use in order to reduce costs and increase operating efficiency, by 265,10 MW average, with the start up of operations at Salto do Rio Verdinho (58,2 MW average), Salto Pilão (64,4 MW average), and Três Lagoas (142,5 MW average). In steel, new operating facilities will be opened during 2009 as well as new logistics and distribution centers both in Brazil, Argentina and Colombia. Capacity expansions are also on the pipeline for agro industry and chemical segments. Nevertheless, a more adverse economic cycle could increase the implementation challenge of the projects.

Source: DASA, BIE

Risk policy: DASA has internal control procedures to monitor risks and assure liquidity, security and profitability of assets. The control of those internal procedures is done by the Administration, following guidelines set by the Board and the company's statutes. The company does not use derivatives with speculative purposes, but with the unique objective of hedging foreign exchange and interest rate risks. The majority of the principal of the foreign currency bond is covered by cash and equivalents and financial applications denominated in USD. Interest payments are hedged through swap operations. Credit positives: (i) leadership in the Brazilian medical diagnostics industry, (ii) presence in various segments of the diagnostic healthcare market, (iii) multi-brand focus, (iv) exposure to multiple counterparties, which reduces payment risk, (v) high quality standards and reputation, (vi) diversification by region and income class, (vii) increasing EBITDA margin as scale reduces unit diagnostic costs, (viii) sound cash position and generation, (ix) conservative credit profile. Credit negatives: (i) increase in leverage, (ii) short term refinancing risk, although covered by sound cash position, (iii) aggressive expansion strategy through organic growth and acquisitions, financed with debt, (iv) risk to integrate acquisitions, (v) potential for counterparty payment risk to increase during an economic crisis. Outlook: DASA's strategy is based on five pillars, which are multi-product, multi-brand, multi-region, multi-payer and multi-market. The company is focused on (i) providing the highest quality services through the application of exigent control procedures, the implementation of advanced medical diagnostic technologies and IT and responding to the demands of patients and physicians, (ii) growth, expanding in markets where it is present and to new ones, and introducing new and complementary services, (iii) decreasing costs by improving efficiency through management processes, logistics and information technology. As the industry is going through a rapid consolidation phase, DASA should continue to buy companies in the next two to three years, which could lead to a deterioration of its credit profile, especially if M&A activity increases acquisition prices.

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GLOSSARY

Accounting principles: BIE Capitalization (banks): Capitalization (corporates): Cash: Cost: Income: Deposits: Dividends: EBITDA: Brazilian; Banco Itaú Europa; Total capital BIS ratio; Net debt/equity; Money, deposits and short term securities; (Personnel and administrative costs) / (operating income + personnel and administrative costs); Total deposits less inter-bank deposits; Dividends paid in the year including share buybacks; Operating income plus depreciation and amortization, or, operating income plus net interest expenses less net equity gains plus amortizations/depreciations, when using CVM data; Revenues excluding funding costs; Foreign currency; Free cash flow: FFO less capex less dividends; Funds from operations and working capital investment; Only derivative hedging, unless stated; Resolution nr 2682/99 of Brazil Central Bank;

Loan type Time overdue Provisions

Gross Revenues (banks): FC FCF FFO Hedge: Loans and provisions:

AA A B C D E F G H

0 days up to 14 days 15 - 30 days 31 - 60 days 61 - 90 days 91 - 120 days 121 - 150 days 151 - 180 days +180 days

0.0% 0.5% 1.0% 3.0% 10.0% 30.0% 50.0% 70.0% 100.0%

Loans charged against payrolls

Credit granted to individuals that is carried out with the commitment of reimbusement by direct deduction of the installment owed at the source of payment of the borrower's salary ­ traditionally, the borrowers are civil servants and the intervening payers are the government offices by which they are employed. Not applicable; Total debt less cash; Period end net intermediation income / (Total loans and securities);

na Net debt: Net intermediation margin:

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Net interest expenses: nm NPL: ON PN Ranking (banks): Ratings ROA: ROE: Securities: Short-term debt: Total debt:

Financial revenues less financial costs including foreign exchange variations; Meaningless; Loans classified as D, E, F, G and H type; Ordinary shares; Prefered shares; Bank's positioning calculations based on BCB data as of December 2007; As of August 4th, 2009; Period end net income / period end total assets; Period end net income / period end shareholders' equity; Short-term and long-term bonds, equities, repos and other derivatives; Short-term loans, eurobonds and debentures; Short-term debt plus long-term loans, eurobonds and debentures.

IMPORTANT GENERAL DISCLOSURES

For disclosure statements associated with the companies discussed in this report, please contact Banco Itaú Europa S.A. at (+351-21-381-1000) or e-mail [email protected] itaueuropa.pt. 1. This report has been produced by Banco Itaú Europa, S.A., and/or by one of its branches or subsidiaries (together, referred to as "Banco Itaú Europa"), supervised by both Banco de Portugal (Central Bank of Portugal) and CMVM (Securities and Exchange Commission of Portugal) and distributed by Banco Itaú Europa or one of its affiliates (altogether, "Itaú Unibanco Group"). Unless governing law provides otherwise, all transactions should be executed through the Itau Unibanco Group entity in the investor's home jurisdiction. 2. This report is provided for informational purposes only and does not constitute or should not be construed as an offer to buy or sell or solicitation of an offer to buy or sell any financial instrument or to participate in any particular trading strategy in any jurisdiction. The information herein is believed to be reliable as of the date in which this report was issued and has been obtained from public sources believed to be reliable. Itaú Unibanco Group does not make any representation or warranty, express or implied, as to the completeness, reliability or accuracy of such information, nor is this report intended to be a complete statement or summary of the investment strategies, markets or developments referred to herein. Opinions, estimates, and projections expressed herein constitute the current judgment of the analyst responsible for the substance of this report as of the date on which it was issued and are therefore subject to change without notice. Prices and availability of financial instruments are indicative only and subject to change without notice. Banco Itaú Europa has no obligation to update, modify or amend this report and inform the reader accordingly, except when terminating coverage of the issuer of the securities discussed in this report. 3. The analyst responsible for the production of this report hereby certifies that the views expressed herein accurately and exclusively reflect his or her personal views and opinions about any and all of the subject issuers or securities and were prepared independently and autonomously, including from Banco Itaú Europa. Because personal views of analysts may differ from one another, Banco Itaú Europa, its subsidiaries and affiliates may have issued or may issue reports that are inconsistent with, and/or reach different conclusions from, the information presented herein. The analyst responsible for the preparation of this report is not registered and/or qualified as a research analyst with the NYSE or FINRA, and is not associated with Itaú USA Securities Inc. and, therefore, may not be subject to Rule 2711 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account. 4. An analyst's compensation is determined based upon total revenues of Banco Itaú Europa, a portion of which is generated through investment banking activities. Like all employees of Banco Itaú Europa, its subsidiaries and affiliates, analysts receive compensation that is linked by overall profitability. For this reason, analyst's compensation can be considered to be indirectly related to this report. However, the analyst responsible for the content of this report hereby certifies that no part of his or her compensation was, is, or will be directly or indirectly related to any specific recommendation or views contained herein or linked to the pricing of any of the securities discussed herein. The analyst declares that (s)he does not maintain any relationship with any individual who has business of any nature with the companies and does not receive any compensation for services rendered to or have any commercial relationship with the companies or any individual or entity representing the interests of the companies. According to Banco Itaú Europa compliance policy, the analyst(s) and any member of his/her household do not hold, directly or indirectly, any securities issued by the companies analyzed in this report in his/her personal investment portfolio, nor is (s)he personally involved in the acquisition, sale or trading of such securities in the market. Neither the analyst nor any member of the analyst's household serves as an officer, director or advisory board member of the companies analyzed in this report. Itau Unibanco Group and the funds, portfolios and securities investment clubs managed by Itaú Unibanco Group may have direct or indirect stake equal to, or higher than, 1% (one percent) of the capital stock of the companies, and may have been involved in the acquisition, sale or trading of such securities in the market. 5. Itaú Unibanco Group may have a position in the financial instruments analyzed in this report from time to time, but does not have any conflict of interest in relation to the companies analyzed herein. 6. The financial instruments discussed in this report may not be suitable for all investors. This report does not take into account the investment objectives, financial situation or particular needs of any particular investor. Any investors wishing to purchase or otherwise deal in the securities covered in this report should obtain relevant documents from financial instruments and exchange institutions and confirm its contents. Investors should obtain independent financial advice based on their own particular circumstances before making an investment decision based on the information contained herein. Final decision on investments must be made by you considering various risks, fees and commissions. If a financial instrument is denominated in a currency other than an investor's currency, a change in exchange rates may adversely affect the price or value of, or the income derived from, the financial instrument, and the reader of this report assumes any currency risk. Income from financial instruments may vary, and their price or value, either directly or indirectly, may rise or fall. Past performance is not necessarily indicative of future results, and no representation or warranty, express or implied, is made herein regarding future performances. Itaú-Unibanco Group does not accept any liability whatsoever for any direct or consequential loss arising from any use of this report or its content. 7. This report may not be reproduced or redistributed to any other person, in whole or in part, for any purpose, without the prior written consent of Banco Itaú Europa. Additional information on the financial instruments discussed in this report is available upon request. Additional Note to reports distributed in: (i)U.K. and European: Banco Itaú Europa, S.A., London Branch, that is authorized by Banco de Portugal and authorized and subject to limited regulation by the Financial Services Authority (FSA), is distributing this report to investors who are Eligible Counterparties and Professional Clients, pursuant to FSA rules and regulations. If you do not, or cease to, fall within the definition of Eligible Counterparty or Professional Client, you should not rely upon the information contained herein and should notify Banco Itaú Europa S.A. London Branch immediately. The information contained herein does not apply to, and should not be relied upon by, retail customers; (ii) U.S.: Itaú USA Securities Inc., a FINRA/SIPC member firm, is distributing this report and accepts responsibility for the content of this report. Any US Person receiving this report and wishing to effect any transaction in any security discussed in this report should do so with Itaú USA Securities Inc. at 540 Madison Avenue, 23rd Floor, New York, NY; (iii) Asia: This report is distributed in Hong Kong by Itau Asia Securities Limited, which is licensed in Hong Kong by the Securities and Futures Commission for Type 1 (dealing in securities) regulated activity. Itau Asia Securities Limited accepts all regulatory responsibility for the content of this report. In Hong Kong, any investors wishing to purchase or otherwise deal in the securities covered in this report should contact Itau Asia Securities Limited at 18th Floor, One IFC, Hong Kong, Central; (iv) Japan: This report is distributed in Japan by Itau Asia Securities Limited ­ Tokyo Branch, Registration Number (FIEO) 2154, Director, Kanto Local Finance Bureau, Association: Japan Securities Dealers Association; (v) Middle East: This information has been distributed by Itaú Middle East Securities Limited. Related financial products or services are only available to wholesale clients with liquid assets of over $1 million, and who have sufficient financial experience and understanding, to participate in financial markets in a wholesale jurisdiction. Itaú Middle East Securities Limited is regulated by the Dubai Financial Services Authority (DFSA). In Middle East, any investors wishing to purchase or otherwise deal in the securities covered in this report should contact Itaú Middle East Securities Limited, at Park Place, 10th Floor (1005), Sheikh Zayed Road, Dubai, United Arab Emirates; (vi) Brazil: Itaú Corretora de Valores S.A., a subsidiary of Banco Itaú S.A authorized by the Central Bank of Brazil and approved by the Securities and Exchange Commission of Brazil, is distributing this report. If necessary, contact the Client Service Center: 4004-3131* (capital and metropolitan areas) or 0800-722-3131 (other locations) (during business hours, from 9:00 a.m. to 8:00 p.m.). If you wish to revaluate the presented solution, after utilizing these channels, talk to Itaú's Corporate Complaints Office: 0800-570-0011 (on business days from 9:00 a.m. to 6:00 p.m.) or Caixa Postal 67.600, São Paulo-SP, CEP 03162-971. * Local call cost

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BBA

São Paulo ­ Head Office

Itaú BBA S.A. Av. Brigadeiro Faria Lima, 3400 ­ 3º ao 8º andar São Paulo, SP, Brazil, 04538-132 Tel.: +55 11 3708 8000

Europa

Lisbon ­ Head Office

Banco Itaú Europa S.A. Rua Tierno Galvan, Torre 3, 11º piso Lisbon, PT, 1099-048 Tel.: +351 21 381 1000

Frankfurt

Banco Itaú Europa ­ Rep. Office Mainzer Landstrasse 47 D-60329, Frankfurt am Main, Germany Tel.: +49 69 9592 5365

London

Banco Itaú Europa ­ London Branch 6th Floor, 17 Dominion Street London, UK, EC2M 2EF Tel.: +44 207 663 7830

Madrid

Banco Itaú Europa ­ Rep. Office Calle Pinar 7, 2º Derecha 28006, Madrid, Spain Tel.: +34 91 411 7867

Paris

Banco Itaú Europa ­ Rep. Office 68 Rue du Faubourg Saint-Honoré 75008, Paris, France Tel.: +33 1 5343 2750

Securities

São Paulo ­ Head Office

Itaú Corretora de Valores S.A. Av. Brigadeiro Faria Lima, 3400 ­ 9º andar São Paulo, SP, Brazil, 04538-132 Tel.: +55 11 3708 8000

Dubai

Itaú Middle East Securities Ltd. Park Place Sheikh Zayed Road Dubai, U.A.E. Tel.: +971 4 381 0650

Hong Kong

Itaú Asia Securities Ltd. Regulated by the Securities and Futures Commission in Hong Kong Two International Finance Centre 8 Finance Street, Central, Hong Kong Tel.: +852 3657 2388

London

Banco Itaú Europa ­ London Branch 6th Floor, 17 Dominion Street London, UK, EC2M 2EF Tel.: +44 207 663 7830

New York

Itaú USA Securities Ltd. 540 Madison Avenue, 23rd Floor New York, NY 10022 Tel.: +1 212 710 6701

Tokyo

Itaú Asia Securities Ltd. - Tokyo Branch Yamato Life Bldg. 5F 1-1-7 Uchisaiwai-cho, Chyioda-ku Tokyo, 100-0011, Japan Tel.: +81 3 3539 3838

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