-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RAvIoE+QZmYEzrfcs4U+WPVZHYRz1q9X+k31T6n6pVxAztjbOvoSe8TWd8rjOf7a kDnryVIVCmA6Dri0kQss6Q== 0001292814-08-001598.txt : 20080528 0001292814-08-001598.hdr.sgml : 20080528 20080528154623 ACCESSION NUMBER: 0001292814-08-001598 CONFORMED SUBMISSION TYPE: 6-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20061231 FILED AS OF DATE: 20080528 DATE AS OF CHANGE: 20080528 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BANK BRADESCO CENTRAL INDEX KEY: 0001160330 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 000000000 FILING VALUES: FORM TYPE: 6-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-15250 FILM NUMBER: 08863535 BUSINESS ADDRESS: STREET 1: CIDADE DE DEUS S/N VILA YARA STREET 2: 06029-900 OSASCO CITY: SP BRAZIL STATE: D5 ZIP: 00000 6-K 1 bbd-20070813.htm FINANCIAL STATEMENTS 4Q06 Provided by MZ Data Products
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM 6-K
 
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 UNDER THE
SECURITIES EXCHANGE ACT OF 1934
 
For the month of May, 2008

Commission File Number 1-15250
 
 

BANCO BRADESCO S.A.
(Exact name of registrant as specified in its charter)
 

BANK BRADESCO
(Translation of Registrant's name into English)
 

Cidade de Deus, s/n, Vila Yara
06029-900 - Osasco - SP
Federative Republic of Brazil
(Address of principal executive office)
 

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F. 

Form 20-F ___X___ Form 40-F _______

 Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.  

Yes _______ No ___X____

.

 

TABLE OF CONTENTS

Other Events
Signatures
Index to Exhibits


Table of Contents

Other Events

     Attached as Exhibit 100 to Form 6-K are the following materials from the Report on Form 6K of BANCO BRADESCO S.A. for the year of 2006, formatted in XBRL (Extensible Business Reporting Language): (i). Consolidated Balance Sheets as of December 31, 2005 and 2006, (ii). Consolidated Statements of Income  for the Years ended December 2004, 2005 and 2006, (iii). Consolidated Statements of Cash Flows for the Years ended December 31, 2004, 2005 and 2006, (iv). Consolidated Statement of Changes in Shareholders’ Equity for the Years ended December 31, 2004, 2005 and 2006.

     The financial information contained in the XBRL is not the official publicly filed financial statements of BANCO BRADESCO S.A.. The purpose of submitting these XBRL formatted documents is to test the related format and technology and, as a result, investors should continue to rely on the official filed version of the furnished documents and not rely on this information in making investment decisions.

     In accordance with Rule 402 of Regulation S-T, the information in this Form 6-K, including Exhibit 100 shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

Table of Contents

 
SIGNATURES
 
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: May 28, 2008

 
BANCO BRADESCO S.A.
By:
  
/S/  Milton Almicar Silva Vargas
   
Milton Almicar Silva Vargas
Executive Vice-President and
Investor Relations Director
 

 
FORWARD-LOOKING STATEMENTS

This press release may contain forward-looking statements. These statements are statements that are not historical facts, and are based on management's current view and estimates of future economic circumstances, industry conditions, company performance and financial results. The words "anticipates", "believes", "estimates", "expects", "plans" and similar expressions, as they relate to the company, are intended to identify forward-looking statements. Statements regarding the declaration or payment of dividends, the implementation of principal operating and financing strategies and capital expenditure plans, the direction of future operations and the factors or trends affecting financial condition, liquidity or results of operations are examples of forward-looking statements. Such statements reflect the current views of management and are subject to a number of risks and uncertainties. There is no guarantee that the expected events, trends or results will actually occur. The statements are based on many assumptions and factors, including general economic and market conditions, industry conditions, and operating factors. Any changes in such assumptions or factors could cause actual results to differ materially from current expectations.

Table of Contents

     
Exhibit No: 100   Exhibit Description
     
 
           The following materials from the Report on Form 6K of BANCO BRADESCO S.A. for the year of 2006, formatted in XBRL (Extensible Business Reporting Language): (i). Consolidated Balance Sheets as of December 31, 2005 and 2006, (ii). Consolidated Statements of Income  for the Years ended December 2004, 2005 and 2006, (iii). Consolidated Statements of Cash Flows for the Years ended December 31, 2004, 2005 and 2006, (iv). Consolidated Statement of Changes in Shareholders’ Equity for the Years ended December 31, 2004, 2005 and 2006.
EX-100.INS 2 bbd-20070813.xml TAXONOMY EXTENSION INSTANCE DOCUMENT 0001160330 2004-12-31 0001160330 2005-12-31 0001160330 2004-01-01 2004-12-31 0001160330 2005-01-01 2005-12-31 0001160330 2003-12-31 0001160330 2004-01-01 0001160330 2005-01-01 0001160330 2006-12-31 0001160330 2006-01-01 2006-12-31 0001160330 2006-01-01 iso4217:USD xbrli:shares 3447 13119 10985 21686 40948 14710 4121 82689 4964 77725 397 2721 332 1294 15109 206594 16223 26201 32837 146 75407 22886 7066 23316 57612 186375 6497 6503 83 1809 4945 20219 206594 88 412 12812 17236 2738 2018 5330 7251 408 1364 659 495 161 722 73 61 23723 31307 1654 2028 3327 4895 14 21 2390 3862 -83 -187 1617 1822 8919 12441 13375 17043 1429 1823 14804 18866 4310 5137 433 747 269 294 6764 7805 374 377 14216 17370 1236 2428 4864 5198 4057 4447 278 302 4822 5501 4326 3939 751 505 907 1041 2923 4202 23717 25847 789 712 3874 8566 1081 1222 -480 1209 601 2431 12 11 3273 6135 3327 6310 1595 3010 1732 3300 1.67 1.84 3.08 3.39 957064460 944327192 977180608 973893242 13 17 789 712 66 186 -33 35 1 -12 -480 1209 20 110 1312 2114 510 319 -3749 5624 4423 4655 13496 7567 4435 3290 5034 72 31 313 171 -9287 -20169 195 80 9 35 501 583 17 305 198 167 21 20 -15815 -20423 9395 6397 -11328 6354 7313 11133 7796 7602 27 24 2 737 49 225 1273 1559 -3285 13909 -5604 -2307 278 302 -433 -747 5 350 57 35 4207 20 110 -2023 -787 8409 12123 926 1248 1575 1445 117 78 3525 3475 7 56 681 13592 958728072 953405316 979828608 944327232 944327184 979877676 -689760 -928600 -48 -5322756 35167428 -9474152 34832572 730016 -5148 689760 -928600 358 2614 354 2674 49 225 -56 -195 2 25 147 315 12 -281 5862 -1325 -1881 -56 -147 -5603 -195 -49 225 -1325 -1881 712 3525 958728072 3475 944327232 56 5862 681 13592 3525 953405316 3475 944327184 58 7808 693 15559 30 7 -689760 4748 8918 14649 23461 62735 23879 3265 97935 6552 91383 3000 667 1623 527 20416 259271 21081 27613 290 34941 83925 42875 5709 30122 70083 93 232807 7095 7105 101 2061 8992 50 1145 26464 259271 15 21281 5705 2490 324 2177 541 59 34575 1542 2160 1998 1909 4301 19 3762 54 2824 12869 21706 3767 17939 6610 1157 2360 791 43 19860 8121 6087 5223 343 6124 4199 560 852 534 5351 3167 -894 29273 8526 2273 6253 224 15 6462 3075 3387 3.14 3.45 980383482 981672582 534 343 -15 32 -894 17 236 46 -1157 -318 35076 611 832 7363 -14974 -3183 -6891 -491 -1449 8796 224 190 7019 978 64 -17394 140 727 199 1448 -21828 19557 13133 6546 1218 23 10 3334 6639 29203 -7599 26884 21280 21280 18973 2559 12037 74 180 979828608 1001646912 21818304 979877676 1001635736 21818060 -60000 -928600 -575400 -12800 -1516800 3525 3475 58 7808 693 15559 3339 6029 6497 598 6503 602 30 23 -3 83 18 6754 -2160 -3 -252 412 733 20219 1218 -23 7195 -2160 830 582 778 478 -1302 -1431 18973 11374 723068 On November 6, 2003, we signed an agreement with the controlling shareholders of Banco Zogbi S.A.(“Zogbi”) to acquire all of its capital and all of the capital of its affiliates, which was approved by the Central Bank on February 4, 2004. Zogbi was acquired for R$681 in cash, on February 16, 2004. In October 2004, all of Zogbi’s assets and liabilities were transferred to Banco Finasa at book value. On February 10, 2004, we acquired 89.957% of BEM’s capital and of its affiliates through an initial cash payment of R$8 and R$70 in government securities. The fair value of the government securities as of the date that the terms of the acquisition were agreed was R$42. Subsequently, on March and July, 2004, we acquired a remaining minority interest through the additional payment of R$9. In our shareholders’ general meeting held on March 10, 2005, we received the approval to acquire the shares held by the minority shareholders of Bradesco Seguros S.A. (“Bradesco Seguros”) through the issuance of shares in the amount of R$12, which was approved by the Central Bank on July 18, 2005. On April 15, 2005, through Banco Finasa, we acquired from Banco Morada S.A. and Morada Investimentos S.A. (“Grupo Morada”), the total capital stock of Morada Serviços Ltda. (“Morada Serviços”) for the total amount of R$80 paid in cash. On July 26, 2005, we acquired 50% of the total capital of União de Lojas Leader S.A. (“Leader Magazine”), for the total amount of R$47 in cash. On January 3, 2006, we acquired 89.35% of Banco do Estado do Ceará – BEC’s voting capital and 89.17% of BEC’s total capital for the amount of R$700, with R$458 paid in cash and R$242 paid in government securities, the market value of which was equivalent to R$134 as of the date of the transaction. BEC’s total capital was acquired afterwards at the São Paulo Stock Exchange - BOVESPA for the amount of R$ 86. In November, 2006, BEC was merged by Alvorada Cartões, Crédito, Financiamento e Investimento S.A.. On March 20, 2006, we signed an agreement with the controlling shareholders of American Express Company to acquire the total capital of its subsidiaries in Brazil (Banco American Express S.A., American Express Banco Múltiplo S.A., American Express do Brasil Tempo Ltda. and Inter American Express Arrendamento Mercantil S.A., together referred as “Amex”). The transaction was concluded upon Central Bank approval on June 30, 2006 and upon payment of US$468, equivalent to R$1,001 paid in cash. On May 15, 2006, we acquired the total capital of Bradesplan Participações S.A. (“Bradesplan”) for the amount of R$308 paid in cash. We present below the condensed balance sheets for the recent acquisitions: The total consideration given for acquisitions in 2004, 2005 and 2006 was R$740, R$139 and R$1,987 respectively, and is comprised as follows: These acquisitions were accounted for under the purchase method of accounting and the companies acquired were thus consolidated as from the date of acquisition. In conjunction with these acquisitions, finite-lived intangible assets of R$106 in 2004, R$28 in 2005 and R$672 in 2006 were recorded and are related principally to the client deposit and relationship portfolios, being amortized over the period in which the assets are expected to contribute directly or indirectly to the future cash flows (between five and ten years). In addition, we recorded a goodwill balance of R$262 in 2004, related to the credit operation of Zogbi, R$70 in 2005, related to Morada and Leader transactions and R$ 335 in 2006 related to Amex transaction. For further details: Notes 2 (o) and 11. We have not assumed any future contingent payments, options, or commitments, in connection with these acquisitions. The net carrying amount of finite-lived intangible assets related to existing client deposit and relationship portfolios and subject to amortization was R$1,294 and R$1,623 at December 31, 2005 and 2006, respectively. The changes in the net carrying amount of finite-lived intangible assets for the year ended December 31, 2005 and December 31, 2006 are as follows: The finite-lived intangible assets subject to amortization acquired during 2005 and 2006 are as follows (Note 1 (b)): The following table presents the gross carrying value and accumulated amortization for finite-lived intangible assets subject to amortization: The aggregate amortization expense was R$278, R$302 and R$343 for 2004, 2005 and 2006, respectively. Estimated amortization expense for the next five years is as follows: 1987 We present below the condensed balance sheets for the recent acquisitions: 2004 Zogbi BEM Total Cash and cash equivalents 55 444 499 Loans 403 90 493 Securities 96 102 198 Goodwill 262 - 262 Intangible assets – client portfolio 106 - 106 Other assets 132 282 414 Deposits (254) (280) (534) Borrowings (45) (4) (49) Other liabilities (74) (575) (649) Total consideration and fair value of net assets acquired 681 59 740 2005 Morada Leader Bradesco Seguros Total Cash and cash equivalents - 47 - 47 Goodwill 50 20 - 70 Intangible assets – client portfolio 28 - - 28 Other assets 2 7 - 9 Other liabilities - (27) - (27) Minority shareholders - - 12 12 Total consideration and fair value of net assets acquired 80 47 12 139 2006 BEC Amex Bradesplan Total Cash and cash equivalents 503 50 - 553 Securities 724 189 10 923 Loans 261 155 - 416 Goodwill - 335 - 335 Intangible assets – client portfolio 398 274 - 672 Other assets 662 1,726 398 2,786 Deposits (982) (166) - (1,148) Loans - (31) - (31) Other liabilities (888) (1,531) (100) (2,519) Total consideration and fair value of net assets acquired 678 1,001 308 1,987 1623 On November 6, 2003, we signed an agreement with the controlling shareholders of Banco Zogbi S.A.(“Zogbi”) to acquire all of its capital and all of the capital of its affiliates, which was approved by the Central Bank on February 4, 2004. Zogbi was acquired for R$681 in cash, on February 16, 2004. In October 2004, all of Zogbi’s assets and liabilities were transferred to Banco Finasa at book value. On February 10, 2004, we acquired 89.957% of BEM’s capital and of its affiliates through an initial cash payment of R$8 and R$70 in government securities. The fair value of the government securities as of the date that the terms of the acquisition were agreed was R$42. Subsequently, on March and July, 2004, we acquired a remaining minority interest through the additional payment of R$9. In our shareholders’ general meeting held on March 10, 2005, we received the approval to acquire the shares held by the minority shareholders of Bradesco Seguros S.A. (“Bradesco Seguros”) through the issuance of shares in the amount of R$12, which was approved by the Central Bank on July 18, 2005. On April 15, 2005, through Banco Finasa, we acquired from Banco Morada S.A. and Morada Investimentos S.A. (“Grupo Morada”), the total capital stock of Morada Serviços Ltda. (“Morada Serviços”) for the total amount of R$80 paid in cash. On July 26, 2005, we acquired 50% of the total capital of União de Lojas Leader S.A. (“Leader Magazine”), for the total amount of R$47 in cash. On January 3, 2006, we acquired 89.35% of Banco do Estado do Ceará – BEC’s voting capital and 89.17% of BEC’s total capital for the amount of R$700, with R$458 paid in cash and R$242 paid in government securities, the market value of which was equivalent to R$134 as of the date of the transaction. BEC’s total capital was acquired afterwards at the São Paulo Stock Exchange - BOVESPA for the amount of R$ 86. In November, 2006, BEC was merged by Alvorada Cartões, Crédito, Financiamento e Investimento S.A.. On March 20, 2006, we signed an agreement with the controlling shareholders of American Express Company to acquire the total capital of its subsidiaries in Brazil (Banco American Express S.A., American Express Banco Múltiplo S.A., American Express do Brasil Tempo Ltda. and Inter American Express Arrendamento Mercantil S.A., together referred as “Amex”). The transaction was concluded upon Central Bank approval on June 30, 2006 and upon payment of US$468, equivalent to R$1,001 paid in cash. On May 15, 2006, we acquired the total capital of Bradesplan Participações S.A. (“Bradesplan”) for the amount of R$308 paid in cash. We present below the condensed balance sheets for the recent acquisitions: The total consideration given for acquisitions in 2004, 2005 and 2006 was R$740, R$139 and R$1,987 respectively, and is comprised as follows: These acquisitions were accounted for under the purchase method of accounting and the companies acquired were thus consolidated as from the date of acquisition. In conjunction with these acquisitions, finite-lived intangible assets of R$106 in 2004, R$28 in 2005 and R$672 in 2006 were recorded and are related principally to the client deposit and relationship portfolios, being amortized over the period in which the assets are expected to contribute directly or indirectly to the future cash flows (between five and ten years). In addition, we recorded a goodwill balance of R$262 in 2004, related to the credit operation of Zogbi, R$70 in 2005, related to Morada and Leader transactions and R$ 335 in 2006 related to Amex transaction. For further details: Notes 2 (o) and 11. We have not assumed any future contingent payments, options, or commitments, in connection with these acquisitions. Net unrealized gains included in trading assets at December 31, 2005 and 2006 were R$105 and R$23, respectively. The net change in the unrealized gains (losses) on trading securities held as of December 31, 2004, 2005 and 2006, included in non-interest income, were R$(319), R$90 and R$82, respectively. Trading securities presented above include securities pledged as collateral that amounted to R$698 and R$821 at December 31, 2005 and 2006, respectively. Derivative positions presented above represent the fair values of interest rate, foreign exchange, equity and commodity-related products, including financial forward settlement and option contracts and swap agreements associated with our financial derivative instruments trading activities. We enter into financial derivative instruments contracts with various counterparties to manage our overall exposures as well as to assist customers in managing their exposures. Such derivatives are summarized as follows: Interest rate, currency and cross-currency interest rate swaps are contracts in which a series of interest rate cash flows of a single currency or interest or principal payments in two different currencies are exchanged for a contractual period. The notional amount represents the basis on which the cash flows are determined. The risks associated with swaps relate to the potential inability or unwillingness of the counterparties to perform according to the contractual terms and the risk associated with changes in market conditions due to changes in interest rates and the exchange rate of currencies. The total credit exposure associated with interest rate and currency swaps was R$303 and R$359 at December 31, 2005 and 2006, respectively. Interest rate and currency futures and interest rate forwards are contracts for the delayed delivery of an instrument at a specified price or yield. The notional amounts represent the face value of the underlying instrument for which daily cash settlements of the price changes are made. The credit risk associated with futures contracts is minimized due to daily cash settlements. Futures contracts are also subject to the risk of changes in interest rates or the value of the underlying instruments. The total credit exposure associated with interest rate forwards was R$107 at December 31, 2005. As part of our lending operations, we enter into various off-balance sheet credit instruments with our customers which are summarized as follows: Unfunded commitments to extend credit including credit cards are contracts for a specified time period and at variable rates to lend to a customer who has complied with predetermined contractual conditions. The guarantees are conditional commitments issued by us to assure the performance of a customer to a third party in borrowing arrangements. The maximum potential credit risk on undrawn commitments, standby and commercial letters of credit is equal to the contractual amounts shown above if the counterparty does not perform under the contract. Generally, these contracts expire without being drawn upon; therefore, the contractual amounts are not indicative of the actual credit exposure or future cash flow requirements for such commitments. The fair value of the obligation undertaken in issuing the guarantee at inception is typically equal to the net present value of the future amount of premium receivable under the contract. To mitigate credit risk, we may require the counterparty to pledge collateral in the form of cash, securities or other assets to support the extension of credit similar to the collateral required for our lending operations. Significant Accounting Policies The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The primary estimates used are: accounting for allowance for loan losses, estimates of the fair value of certain financial instruments, depreciation and amortization, asset impairments, useful lives of intangible assets, tax valuation allowances, assumptions used for calculation of insurance reserves and pension plans and contingencies. Actual results could differ from those estimates. We have over the years acquired a number of Brazilian financial institutions in order to expand our business and customer base. The effects of acquisitions made in 2004, 2005 and through 2006, either individually or on a combined basis, were not significant to us. We have prepared these financial statements in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"), which differ in certain respects from accounting principles we apply in accordance with accounting practices adopted in Brazil (“Brazilian GAAP”) including the rules and regulations of the National Monetary Council (“CMN”), Banco Central do Brasil ("Central Bank") and the Insurance Superintendency (“SUSEP”). Shareholders' equity and net income included in these financial statements differ from those included in the statutory accounting records prepared in accordance with Brazilian GAAP as a result of adjustments made to reflect the requirements of U.S. GAAP. Appropriated reserves under Corporate Law available for distribution, net of treasury shares, were R$4,830 and R$7,449 at December 31, 2005 and 2006, respectively. Cash and cash equivalents For purposes of the statement of cash flows, cash and cash equivalents include cash and due from banks, interestearning deposits in other banks and federal funds sold and securities purchased under agreements to resell, that have original maturities of three months or less and present insignificant risk of changes in value because of interest rate changes. December 31, 2005 2006 Cash and due from banks 3,389 4,747 Interest-earning deposits in other banks 5,491 2,968 Federal funds sold and securities purchased under agreements to resell 10,093 3,659 Total 18,973 11,374 Federal funds and securities purchased under agreements to resell are treated as collateralized financial transactions and are recorded at the amounts at which the federal funds and securities were acquired or sold plus accrued interest. This classification also includes securities pledged under repurchase agreements mainly comprising Brazilian federal government securities. These securities present insignificant risk of changes in interest rates and may be subject to repledge agreements by the relevant counterparties. Trading securities, including derivatives Instruments utilized in trading activities include securities stated at fair value in accordance with Statement of Financial Accounting Standards (“SFAS”) 115, "Accounting for Investments in Debt and Equity Securities." Fair value is generally based on quoted market prices. If quoted market prices are not available, fair values are estimated based on dealer quotes, pricing models or quoted pricing models or quoted prices for instruments with similar characteristics. Realized and unrealized gains and losses are recognized as trading income. Derivatives entered into for trading purposes with our customers or which do not qualify as hedges (primarily derivatives used to manage our overall exposure to changes in interest rates and foreign currencies) are carried at fair value with realized and unrealized gains (losses) recognized in trading income (Non-interest income). All our derivatives were accounted for under Trading Derivatives, as disclosed in Note 22 (b). Derivatives other than trading Derivative instruments are recognized as assets or liabilities in the balance sheet and measured at fair value, regardless of the purpose or intention to hold them in accordance with SFAS 133, “Accounting for Derivative Financial Instruments and Hedging Activities”, as amended by SFAS 137, 138 and 149. Changes in the fair values of an instrument are recognized in income or equity, depending on its designation and qualification as a fair value, cash flow or foreign currency hedge. In order to qualify as a hedge, the derivative must be: (i) designated as hedge of a specific financial asset or liability at the inception of the contract, (ii) effective at reducing the risk associated with the exposure to be hedged, and (iii) highly correlated with respect to changes in its fair value or in the related cash flows in relation to the fair value of or cash flows related to the item to be hedged both at inception and over the life of the contract. Available for sale securities Debt securities are classified based on management's intention at the date of purchase. Securities that are bought and held principally for the purpose of resale in the near term are classified as trading assets and are stated at fair value. Securities are classified as available for sale when, in management’s judgment, they may be sold in response to or in anticipation of changes in market conditions, being carried at fair value with net unrealized gains and losses included in shareholders' equity on an after-tax basis. Marketable equity securities, which are included as available for sale, are carried at fair value with net unrealized gains and losses included in shareholders' equity on an after-tax basis, until realization at which time the net realized gains (losses) are included in non-interest income (expenses). Held to maturity securities The debt securities for which there is intention and financial capacity for maintenance in portfolio through to maturity are classified as held to maturity securities and recorded at purchase cost, plus interest at the contractual rates. The transfers of investments from trading and available for sale categories to the held to maturity category were accounted at fair value on the date of the transfer: - - in the case of trading securities, prior gains and losses were previously recorded in the consolidated income statement; - - in the case of available for sale securities, unrealized gains/losses are recorded within “Unrealized gains/losses on available for sale securities” directly in shareholders’ equity at the time of the transfer and are subsequently amortized over the period from the date of the transfer to the maturity of the security. Other than temporary impairment In determining whether or not impairment of a security is other than temporary, we use a combination of factors aimed at determining whether recovery of the value of a security is likely. These factors include, besides the duration and magnitude of impairment, a number of other unrelated factors, such as the likelihood, based on the historical behavior of the value of particular securities and our experience with them, that a decline in value will be recovered, as well as the likelihood that we will be unable to collect either principal or interest, due to: (i) filing by the issuer of a bankruptcy or debtor workout procedure; (ii) deterioration of the issuer’s credit risk rating; or (iii) financial difficulties of the issuer, whether or not related to the market conditions in the industry in which it operates. In addition to the disclosures already required by SFAS 115, we have followed the policies determined by Emerging Issues Task Force (“EITF”) Issue 03-1, “The Meaning of Other Th an Temporary Impairment and Its Application to Certain Investments”, FASB Staff Position (“FSP”) EITF 03-1, which was replaced by FSP FAS 115-1 and FAS 124-1. Loans and leases Loans and leases reflect principal plus accrued interest receivable and monetary adjustments. Interest income is recorded on an accrual basis and is added to the principal amount of the loan in each period. The accrual of interest is generally discontinued on all loans that are not considered collectible as to principal or interest and for all loans 60 days or more overdue. Interest collections on such loans are recorded as reductions of the principal balance when collectibility is uncertain, otherwise income is recognized on a cash basis. We provide equipment financing to our customers through a variety of lease arrangements. Direct financing leases are carried at the aggregate of lease payments receivable plus estimated residual value of the leased property, less unearned income. Also, we have followed the policies prescribed by Statement of Position 03-3, “Accounting for Certain Loans or Debt Securities Acquired in a Transfer”, which addresses accounting for differences between contractual and expected cash flows from the purchaser’s initial investment in loans or debt securities acquired in a transfer, if those differences are attributable, at least in part, to credit quality. Allowance for loan losses and non-performing loans The allowance for loan losses is the amount that has been provided for probable losses in the loan portfolio. The allowance is increased by provisions for loan losses and by recoveries of loans previously charged-off, being reduced by charged-off loans and deemed uncollectible. Our evaluation of the adequacy of the allowance is based on regular reviews of individual loans, recent loss experience, current economic conditions, the risk characteristics of the various classifications of loans, the fair value of the underlying collateral and other factors directly influencing the potential collectibility of loans. Loans are considered subject to impairment when in our judgment all amounts due, including accrued interest, are no longer considered collectible in accordance with SFAS 114, "Accounting for Impairment of a Loan by a Creditor," as amended by SFAS 118. We consider loans 60 days or more overdue to be nonperforming and subject to review for impairment. We then measure impaired loans based on (i) the discounted cash flow value of the loan at the loan's stated rate; (ii) the observable market rate of the loan; or (iii) the realizable value of the underlying collateral for collateral-dependent loans. A valuation allowance is established through the allowance for loan losses for the difference between the carrying value of the impaired loan and its value determined as described above. Loans are charged-off against the allowance when the loan is not collected or is considered permanently impaired. The allowance is adjusted in future periods for changes in the determined value. Development and acquisition costs of software, included within premises and equipment, net relate to costs of internal use software capitalized, in accordance with Statement of Position 98-1 “Accounting for computer software developed or obtained for internal use.” Foreclosed assets Assets are classified as foreclosed assets and are included in other assets upon actual foreclosure or when physical possession of the collateral is taken, through agreement on court action. Foreclosed properties are carried at the lower of the recorded amount of the loan or lease for which the property previously served as collateral, or the fair value of the property less estimated costs to sell. Prior to foreclosure, any write-downs, if necessary, are charged to the allowance for loan losses. Subsequent to foreclosure, gains or losses on the sale of and losses on the periodic revaluation of foreclosed properties are recorded in income. Net costs of maintaining and operating foreclosed properties are expensed as incurred. Goodwill and other intangible assets SFAS 141, “Business Combinations,” requires accounting for business combinations determining whether an acquired intangible asset should be recognized separately from goodwill, as well as additional disclosures relating to the primary reason for a business combination and the allocation of the purchase price by major balance sheet captions. SFAS 142, “Goodwill and Other Intangible Assets” requires that goodwill, including that acquired before initial application of the standard, is no longer amortized but is tested for impairment at least annually, using a two-step approach that involves the identification of “reporting units” and the estimation of fair value. The fair value of each reporting unit was estimated using the market value. Finite-lived intangible assets are generally amortized on a straight-line basis over the estimated period benefited. The client portfolios intangible asset is recorded and amortized over a period in which the asset is expected to contribute directly or indirectly to the future cash flows (between five and ten years). We review our intangible assets for events or changes in circumstances that may indicate that the carrying amount of the assets may not be recoverable, in which case its impairment charge is recognized on income immediately. Also, we have followed the policies prescribed by SFAS 147, “Acquisitions of Certain Financial Institutions”, which requires that business combinations involving depositary financial institutions within its scope, except for combinations between mutual institutions, be accounted for under SFAS 141. Income taxes We account for income taxes in accordance with SFAS 109, “Accounting for income taxes.” SFAS 109 is an asset and liability approach that requires the recognition of deferred tax assets and liabilities for temporary differences between the amounts included in the financial statements and tax returns. In estimating future tax consequences, SFAS 109 generally considers all expected future events other than enactments of changes in the tax law or rates. If we believe that the carrying value of any deferred tax asset is “more likely than not” unrealizable, then we establish a valuation allowance equal to that amount. Foreign currency translation For the majority of our foreign operations, the functional currency is the Brazilian real, in which case the assets and liabilities are translated, for consolidation purposes, at current exchange rates from the local currency to the Brazilian real and the results of operations are translated at the average rate for the period. Losses and gains arising from the translation process are included in current income. Employee benefits We are required to make employer contributions to INSS, a Brazilian Government Agency that manages social securities, retirement pension and other benefits. Such contributions, which are expensed as incurred, totaled R$624 in 2004, R$647 in 2005 and R$716 in 2006. In addition, we make contributions to defined-benefit plans for our employees coming from acquired institutions. We account for these plans in accordance with SFAS 87 "Employers Accounting for Pensions". For financial statements of annual periods ending after December 15, 2003, we adopted the revised SFAS 132 (“SFAS 132R”) that retains the disclosure requirements in the original statement and requires additional disclosures about pension plan assets, expected benefit obligations, cash flows for future contributions and benefit payments and other relevant information. SFAS 132R provides that disclosures of information about estimated future benefit payments shall be effective for fiscal years ending after June 15, 2004. Note 26 to the Consolidated Financial Statements for these disclosures. Earnings per share Earnings per share are presented based on the two classes of shares issued. Both classes, common and preferred, participate in dividends on substantially the same basis, except that preferred shareholders are entitled to dividends per share 10% higher than common shareholders (Note 17). Earnings per share are computed based on the distributed dividends or interest on shareholders’ capital and undistributed earnings of Bradesco after giving effect to the 10% preference, as though all earnings will be distributed. Weighted average shares are computed based on the periods for which the shares are outstanding. In addition, on November 11, 2005, our Board of Directors approved a split of our capital stock, in which our shareholders were entitled to one new share for each existing share of the same class. On March 12, 2007, our Board of Directors approved a split of our capital stock, in which our shareholders were entitled to one new share for each existing share of the same class. Therefore, all related share amounts have been retroactively adjusted for all periods presented to reflect the stock split, whereby one new share was received in exchange for each share held. Also, we considered the policies prescribed by EITF Issue 03-6,"Participating Securities and the Two-Class Method under SFAS 128, Earnings per Share." However, the effects of the adoption of EITF Issue 03-6 were not significant. Recent accounting developments In September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans - an amendment of the FASB Statements No. 87, 88, 106, and 132(R)” (SFAS No. 158), requires the funded status of pension and other postretirement plans to be recorded on the balance sheet as of December 31, 2006 with a corresponding offset, net of tax effects, recorded in accumulated other comprehensive income (loss) within shareholder’s equity. The requirement to recognize the funded status of a benefit plan and the disclosure requirements are effective as of the end of the fiscal year ending after December 15, 2006. The effect of adopting SFAS No. 158 is presented in note 26. SFAS No. 158 also requires the measurement of the plan assets and benefit obligations as of the date of the employer’s fiscal year-end statement of financial position, effective for fiscal years ending after December 15, 2008. We do not expect the adoption of this requirement to have a material impact on our consolidated financial position or results of operations. In September 2006, the SEC released Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements” (SAB 108), which is effective for fiscal years ending on or after November 15, 2006. SAB 108 provides guidance on how the effects of prior-year uncorrected financial statement misstatements should be considered in quantifying a current year misstatement. SAB 108 requires public companies to quantify misstatements using both an income statement and balance sheet approach and evaluate whether either approach results in a misstatement that, wh en all relevant quantitative and qualitative factors are considered, is material. If prior year errors that had been previously considered immaterial now are considered material based on either approach, no restatement is required so long as management properly applied its previous approach and all relevant facts and circumstances were considered. Adjustments considered immaterial in prior years under the method previously used, but now considered material under the dual approach required by SAB 108, are to be recorded upon initial adoption of SAB 108. The adoption of SAB 108 did not have a material effect on our consolidated financial position or results of operations. In September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans - an amendment of the FASB Statements No. 87, 88, 106, and 132(R)” (SFAS No. 158), require the funded status of pension and other postretirement plans to be recorded on the balance sheet as of December 31, 2006 with a corresponding offset, net of tax effects, recorded in accumulated other comprehensive income (loss) within shareholder’s equity. The requirement to recognize the funded status of a benefit plan and the disclosure requirements are effective as of the end of the fiscal year ending after December 15, 2006. The effect of adopting SFAS No. 158 is presented in note 26. SFAS No. 158 also requires the measurement of the plan assets and benefit obligations as of the date of the employer’s fiscal year-end statement of financial position, effective for fiscal years ending after December 15, 2008. We do not expect the adoption of this requirement to have a material impact on our consolidated financial position or results of operations. In September 2006, the SEC released Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements” (SAB 108), which is effective for fiscal years ending on or after November 15, 2006. SAB 108 provides guidance on how the effects of prior-year uncorrected financial statement misstatements should be considered in quantifying a current year misstatement. SAB 108 requires public companies to quantify misstatements using both an income statement and balance sheet approach and evaluate whether either approach results in a misstatement that, when all relevant quantitative and qualitative factors are considered, is material. If prior year errors that had been previously considered immaterial now are considered material based on either approach, no restatement is required so long as management properly applied its previous approach and all relevant facts and circumstances were considered. Adjustments considered immaterial in prior years under the method previously used, but now considered material under the dual approach required by SAB 108, are to be recorded upon initial adoption of SAB 108. The adoption of SAB 108 did not have a material effect on our consolidated financial position or results of operations. Banco Bradesco S.A. (also referred as "we," the "Company" or "Bradesco"), a publicly traded company organized under the laws of the Federative Republic of Brazil, has its headquarters in Osasco, State of São Paulo, Brazil. We are a multiple service bank under Brazilian banking regulations, operating principally in two segments. The Banking segment includes a wide variety of banking activities, servicing both retail and corporate customers and engaging in investment banking, international banking, consortia administration and asset management operations. The Insurance, Pension Plan and Certificated Savings plans segment relates to auto, health, life, casualty and property insurance, pension and certificated savings plans. Our retail banking products include demand deposits, savings deposits, time deposits, mutual funds, foreign exchange services and a variety of financing operations including overdraft facilities, credit cards, installment loans and consortia administration. Corporate services include cash management and treasury services, foreign exchange operations, corporate finance and investment banking services, hedging programs and financing operations including working capital loans, leasing and installment loans. Such services are conducted primarily in Brazilian markets but also include, to a lesser extent, cross-border services. The consolidated financial statements include the accounts of Banco Bradesco S.A. (parent company), its foreign branches and all direct or indirect majority-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. In addition, the consolidated financial statements include account balances of Special Purpose Financing ("SPF") entities in which we have a controlling financial interest through arrangements that do not involve voting interests. Notes 2 (bb) and 14 (d). On November 6, 2003, we signed an agreement with the controlling shareholders of Banco Zogbi S.A.(“Zogbi”) to acquire all of its capital and all of the capital of its affiliates, which was approved by the Central Bank on February 4, 2004. Zogbi was acquired for R$681 in cash, on February 16, 2004. In October 2004, all of Zogbi’s assets and liabilities were transferred to Banco Finasa at book value. On February 10, 2004, we acquired 89.957% of BEM’s capital and of its affiliates through an initial cash payment of R$8 and R$70 in government securities. The fair value of the government securities as of the date that the terms of the acquisition were agreed was R$42. Subsequently, on March and July, 2004, we acquired a remaining minority interest through the additional payment of R$9. In our shareholders’ general meeting held on March 10, 2005, we received the approval to acquire the shares held by the minority shareholders of Bradesco Seguros S.A. (“Bradesco Seguros”) through the issuance of shares in the amount of R$12, which was approved by the Central Bank on July 18, 2005. On April 15, 2005, through Banco Finasa, we acquired from Banco Morada S.A. and Morada Investimentos S.A. (“Grupo Morada”), the total capital stock of Morada Serviços Ltda. (“Morada Serviços”) for the total amount of R$80 paid in cash. On July 26, 2005, we acquired 50% of the total capital of União de Lojas Leader S.A. (“Leader Magazine”), for the total amount of R$47 in cash. On January 3, 2006, we acquired 89.35% of Banco do Estado do Ceará – BEC’s voting capital and 89.17% of BEC’s total capital for the amount of R$700, with R$458 paid in cash and R$242 paid in government securities, the market value of which was equivalent to R$134 as of the date of the transaction. BEC’s total capital was acquired afterwards at the São Paulo Stock Exchange - BOVESPA for the amount of R$ 86. In November, 2006, BEC was merged by Alvorada Cartões, Crédito, Financiamento e Investimento S.A. On March 20, 2006, we signed an agreement with the controlling shareholders of American Express Company to acquire the total capital of its subsidiaries in Brazil (Banco American Express S.A., American Express Banco Múltiplo S.A., American Express do Brasil Tempo Ltda. and Inter American Express Arrendamento Mercantil S.A., together referred as “Amex”). The transaction was concluded upon Central Bank approval on June 30, 2006 and upon payment of US$468, equivalent to R$1,001 paid in cash. On May 15, 2006, we acquired the total capital of Bradesplan Participações S.A. (“Bradesplan”) for the amount of R$308 paid in cash. We have over the years acquired a number of Brazilian financial institutions in order to expand our business and customer base. The effects of acquisitions made in 2004, 2005 and through 2006, either individually or on a combined basis, were not significant to us. Loans and leases reflect principal plus accrued interest receivable and monetary adjustments. Interest income is recorded on an accrual basis and is added to the principal amount of the loan in each period. The accrual of interest is generally discontinued on all loans that are not considered collectible as to principal or interest and for all loans 60 days or more overdue. Interest collections on such loans are recorded as reductions of the principal balance when collectibility is uncertain, otherwise income is recognized on a cash basis. We account for income taxes in accordance with SFAS 109, “Accounting for income taxes.” SFAS 109 is an asset and liability approach that requires the recognition of deferred tax assets and liabilities for temporary differences between the amounts included in the financial statements and tax returns. In estimating future tax consequences, SFAS 109 generally considers all expected future events other than enactments of changes in the tax law or rates. If we believe that the carrying value of any deferred tax asset is “more likely than not” unrealizable, then we establish a valuation allowance equal to that amount. Premises and equipment are recorded at cost (plus price-level restatements through December 31, 1997). Depreciation is computed on the straight-line method at the following annual rates: premises – 4%; data processing equipment – 20% to 50%; and other assets – 10% to 20%. Development and acquisition costs of software, included within premises and equipment, net relate to costs of internal use software capitalized, in accordance with Statement of Position 98-1 “Accounting for computer software developed or obtained for internal use.” We recognize an impairment loss only if the carrying amounts of long-lived assets to be held and used are not recoverable from their expected undiscounted future cash flows, pursuant to SFAS 144 “Accounting for the Impairment or Disposal of Long-Lived Assets”. Fixed assets, mainly comprising certain bank branches, which were sold and subsequently leased by us for the purposes of continuing our operations, were recorded pursuant to SFAS 13 and SFAS 98, “Accounting for Leasing” and SFAS 28 “Accounting for Sales Subject to Rental Contracts.” For transactions classified as operating leases, relating to property sold for cash, only the portion corresponding to: (i) the positive difference between revenue determined at the time of the sale and the present value of the future lease to be paid is recognized immediately in income for the period, whereas (ii) the remaining portion is deferred over the corresponding rental contract terms, and (iii) exclusively in cases of loss, the amounts are recognized immediately. In cases where the sale is financed, income will be determined only as from the final maturity of the corresponding financing (Note 10) and subsequently recorded in accordance with the criteria described above. Gain or loss on cash sales not subject to lease contracts was recognized immediately in income for the year as “Other non-interest income”. We recognize an impairment loss only if the carrying amounts of long-lived assets to be held and used are not recoverable from their expected undiscounted future cash flows, pursuant to SFAS 144 “Accounting for the Impairment or Disposal of Long-Lived Assets”. Fixed assets, mainly comprising certain bank branches, which were sold and subsequently leased by us for the purposes of continuing our operations, were recorded pursuant to SFAS 13 and SFAS 98, “Accounting for Leasing” and SFAS 28 “Accounting for Sales Subject to Rental Contracts.” The costs that vary with and are related to the production of new insurance business are deferred to the extent that such costs are deemed recoverable from future profits. Such costs include mainly commissions, cost of policy insurance and variable support service costs and are amortized over the expected life of the contracts in proportion to the premium income. Deferred acquisition costs are subject to recoverability testing at the end of each accounting period and, if not recoverable, are charged to expense. ff) Future accounting pronouncements In September 2006, the FASB issued SFAS No. 157 (“SFAS 157”), “Fair Value Measurements.” The Statement defines fair value, establishes a framework for measuring fair value in accordance with GAAP, and expands disclosure requirements regarding methods used to measure fair value and the effects on earnings. SFAS 157 clarifies that fair value is the amount that would be exchanged to sell an asset or transfer a liability, in an orderly transaction between market participants on the measurement date. SFAS 157 is effective for the Company’s financial statements issued for the year beginning on January 1, 2008, with earlier adoption permitted. We are currently evaluating the impact of SFAS 157, since we expect to adopt it on January 1, 2008. In February 2007, the FASB issued SFAS No. 159 (“SFAS 159”), “The Fair Value Option for Financial Assets and Financial Liabilities.” SFAS 159 provides companies with an option to repo rt selected financial assets and liabilities at fair value and to provide additional information that will help investors and other users of financial statements to understand more easily the effect on earnings of the company’s choice to use fair value. SFAS 159 is effective as of the first quarter of 2008. We are currently evaluating the impact of the adoption of SFAS 159 which depends on the nature and extent of items elected to be measured at fair value, upon initial application of the standards in 2008. In June 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109” (“FIN 48”), which prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, ac counting in interim periods, disclosure, and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006. We are currently evaluating the impact of the adoption of FIN 48, however the adoption of this accounting pronouncement is not expected to have a significant impact on our financial condition and results of operations. At December 31, 2005 and 2006 there were no securities of a single issuer, or group of related companies, the fair value of which exceeded 10% of shareholders' equity. Fair values were estimated for groups of similar loans based upon type of loan, credit quality and maturity. The fair value of fixed-rate loans was determined by discounting estimated cash flows using interest rates approximating our current origination rates for similar loans. Where quoted market prices were available, such market prices were utilized as estimates for fair values. For most variable-rate loans, the carrying amounts were considered to approximate fair value. Where credit deterioration has occurred, estimated cash flows for fixed and variable-rate loans have been reduced to incorporate estimated losses. The fair values for performing loans are calculated by discounting scheduled principal and interest cash flows through maturity using market discount rates and yield curves that reflect the credit and interest rate risk inherent in the loan type at each reporting date. The fair values for non-performing loans are based on discounting estimated cash flows using a rate commensurate with the risk associated with the estimated cash flows, the loan's quoted rate, if available, or the value of any underlying collateral. Assumptions regarding cash flows and discount rates are determined using available market information and specific borrower information. Credit risk is the risk arising from the possibility of loss resulting from the non-receipt from counterparties or creditors of the amounts they have contracted with us to pay. Credit risk management requires a high level of discipline and control in terms of the analyses and operations conducted, and the preservation of the integrity and independence of processes. Credit policy is designed to provide security, quality and liquidity in asset investments, and speed and profitability in our operations, minimizing the risks inherent to any credit operation. It also provides guidelines for the establishment of operational limits and/or the extension of the Company’s credit. The Credit Department and Committees located in our Corporate Head Office assume a fundamental role in the execution of our Credit Policy, deciding on transactions which exceed branch limits and monitoring this core strategic activity. Transactions are diversified and focused on creditworthy individuals and companies in good standing, and our transactions are typically supported by guaranties that are consistent with the risks assumed, with consideration given to purposes and terms of the credit extended. Automated credit approval systems were developed and are constantly being improved with the objective of facilitating and expediting the entire credit process as well as the analysis and issuance of opinions. The analysis of transactions involving less significant sums is conducted by “credit scoring” systems. Risks and Risk Management The main risks related to financial instruments, which result from the Company’s and its subsidiaries’ business are: credit risk; market risk and; liquidity risk. Management of these risks is a process that involves different levels of the Company and covers several policies and strategies. Risk management policies are, in general, conservative, seeking to limit absolute losses to a minimum. Credit Risk Credit risk is the risk arising from the possibility of loss resulting from the non-receipt from counterparties or creditors of the amounts they have contracted with us to pay. Credit risk management requires a high level of discipline and control in terms of the analyses and operations conducted, and the preservation of the integrity and independence of processes. Credit policy is designed to provide security, quality and liquidity in asset investments, and speed and profitability in our operations, minimizing the risks inherent to any credit operation. It also provides guidelines for the establishment of operational limits and/or the extension of the Company’s credit. The Credit Department and Committees located in our Corporate Head Office assume a fundamental role in the execution of our Credit Policy, deciding on transactions which exceed branch limits and monitoring this core strategic activity. Transactions are diversified and focused on creditworthy individuals and companies in good standing, a nd our transactions are typically supported by guaranties that are consistent with the risks assumed, with consideration given to purposes and terms of the credit extended. Automated credit approval systems were developed and are constantly being improved with the objective of facilitating and expediting the entire credit process as well as the analysis and issuance of opinions. The analysis of transactions involving less significant sums is conducted by “credit scoring” systems. Market Risk Market risk is linked to the possibility of loss due to rate fluctuations relating to unhedged terms, currencies and indices in the Company’s portfolio. The Company seeks to maintain a conservative policy with respect to exposure to market risks. The observance of the VAR (Value at Risk) limits set by senior management is monitored daily by an area that is independent from portfolio management. The models use volatilities and correlations that are calculated using statistical bases. These models are used in processes applied prospectively, in accordance with economic studies. The methodology applied and existing statistical models are validated daily using “backtesting” techniques. Additionally, a daily “Gap Analysis” is undertaken, which measures the effect on the portfolio of changes in the internal interest rate curve and foreign exchange coupon curve (difference in interest paid over and above the foreign exchange variation). In addition to the monitoring, control and manage ment of market risks, in compliance with Central Bank Regulations, the value at risk of fixed rate and foreign exchange positions of the Company’s total portfolio, as well as the resulting capital requirement, is verified daily. Our analysis covers all financial assets and liabilities held in treasury, including our derivative instruments. Liquidity Risk Liquidity risk management is designed to control risk relating to the different unhedged settlement terms of the Company’s rights and obligations. Knowledge and monitoring of this risk are crucial to enable the Company to settle transactions in a timely and secure manner. At Bradesco, liquidity risk management involves a set of controls, principally relating to the establishment of technical limits, and the positions assumed are constantly evaluated. We operate primarily in the banking, insurance, pension plan and certificated savings plans business. Banking operations include retail and corporate banking, leasing, international banking, private banking and investment banking activities. We carry out our banking operations through our own operations located in Brazil, foreign branches and majority-owned subsidiaries as well as equity investments in other companies. Additionally, we engage in insurance, pension plan and certificated savings plans activities through our majority-owned subsidiary, Bradesco Seguros S.A. and its affiliates. The following segment information was compiled based on reports used by Senior Management to evaluate the segment performance and make decisions as to the allocation of resources for investment and other purposes. Our Senior Management uses a variety of information for such purposes including financial and non-financial information measured on different bases. In accordance with SFAS 131 “Disclosures about Segments of an Enterprise and Related Information,” the information included below has been compiled from that prepared on the basis which is most consistent with that used in measuring the amounts included in the financial statements in accordance with Brazilian GAAP. Principal segment assumptions for revenues and expenses include: (i) cash surpluses generated by the insurance, pension plan and certificated savings plans segment are retained by that segment resulting in an increased net interest income, (ii) salaries and benefits and administrative costs included within the insurance, pension plan and certificated savings plans segment consist of only costs directly related to those operations, and (iii) costs incurred in the Banking segment relating to branch network infrastructure and other overheads are not allocated. In January 2007, we entered into an agreement with the controlling shareholders of Banco BMC S.A. (“BMC”), for the acquisition of BMC and its subsidiaries BMC Asset Management Ltda. - Distribuidora de Títulos e Valores Mobiliários, BMC Previdência Privada S.A. and Credicerto Promotora de Vendas Ltda. The operation comprises the transfer of 100% of the shares representing BMC’s capital stock to us. The payment will be made upon the delivery, to BMC’s shareholders, of shares issued by us corresponding to approximately 0.94% of our capital stock, which will be increased by R$800. On December 31, 2006, BMC had total assets in the amount of R$2,394 and shareholder’s equity of R$285. This transaction is still pending approval by the Central Bank. On March 12, 2007, our Board of Directors approved a split of our capital stock, in which our shareholders were entitled to one new share for each existing share of the same class. Therefore, all related share amounts have been retroactively adjusted for all periods presented to reflect the stock split, whereby one new share was received in exchange for each share held. Amortized Gross Gross Fair Cost unrealized unrealized value gains losses December 31, 2005 Brazilian government securities 5,902 277 (33) 6,146 Brazilian sovereign bonds 3,948 365 4,313 Corporate debt securities 1,689 65 (10) 1,744 Bank debt securities 296 13 309 Marketable equity securities 1,257 980 (39) 2,198 Total 13,092 1,700 (82) 14,710 December 31, 2006 Brazilian government securities 15,644 1,068 16,712 Brazilian sovereign bonds 1,312 237 1,549 Corporate debt securities 2,048 83 (1) 2,130 Bank debt securities 45 9 54 Foreign government securities 9 9 Marketable equity securities 2,549 1,035 (159) 3,425 Total 21,607 2,432 (160) 23,879 Fair value December 31, 2005 Brazilian government securities 6,146 Brazilian sovereign bonds 4,313 Corporate debt securities 1,744 Bank debt securities 309 Marketable equity securities 2,198 Total 14,710 December 31, 2006 Brazilian government securities 16,712 Brazilian sovereign bonds 1,549 Corporate debt securities 2,130 Bank debt securities 54 Foreign government securities 9 Marketable equity securities 3,425 Total 23,879 Available-for-Sale-Securities 1157 21607 Year ended December 31, 2004 2005 2006 Gross gains 484 833 1,338 Gross losses (51) (86) (181) Net gains 433 747 1,157 December 31, 2005 2006 Amortized Fair Amortized Fair Cost Value Cost Value Due in one year or less 352 352 294 323 Due after one year through five years 4,205 4,227 7,619 7,907 Due after five years through ten years 3,209 3,422 10,275 10,531 Due after ten years 4,069 4,511 870 1,693 No stated maturity (marketable equity securities) 1,257 2,198 2,549 3,425 Total 13,092 14,710 21,607 23,879 Amortized Gross Gross Fair cost unrealized unrealized value December 31, 2005 gains losses Brazilian government securities 3,137 514 - 3,651 Brazilian sovereign bonds 909 223 - 1,132 Financial institutions bonds 44 1 - 45 Foreign government securities 31 - 31 Total 4,121 738 - 4,859 December 31, 2006 Brazilian government securities 2,188 736 - 2,924 Brazilian sovereign bonds 1,040 263 - 1,303 Foreign government securities 37 - 37 Total 3,265 999 - 4,264 December 31, Amortized Fair Amortized Fair cost value cost value Due in one year or less 1,074 1,076 37 37 Due after five years through ten years 913 1,124 966 1,205 Due after ten years 2,134 2,659 2,262 3,022 Total 4,121 4,859 3,265 4,264 Held to Maturity Securities 4264 999 3265 Amortized Gross Gross Fair cost unrealized unrealized value December 31, 2005 gains losses Brazilian government securities 3,137 514 - 3,651 Brazilian sovereign bonds 909 223 - 1,132 Financial institutions bonds 44 1 - 45 Foreign government securities 31 - 31 Total 4,121 738 - 4,859 December 31, 2006 Brazilian government securities 2,188 736 - 2,924 Brazilian sovereign bonds 1,040 263 - 1,303 Foreign government securities 37 - 37 Total 3,265 999 - 4,264 December 31, Amortized Fair Amortized Fair cost value cost value Due in one year or less 1,074 1,076 37 37 Due after five years through ten years 913 1,124 966 1,205 Due after ten years 2,134 2,659 2,262 3,022 Total 4,121 4,859 3,265 4,264 December 31, 2005 2006 Commercial: Industrial and others 28,690 32,604 Import financing 1,100 1,465 Export financing 10,067 12,934 Leasing 2,491 3,842 Construction 523 519 Individuals: Overdraft 1,572 1,263 Real estate 832 1,326 Financing (1) 24,565 28,039 Credit card 1,830 2,652 Rural credit 6,369 7,399 Foreign currency loans 1,900 1,546 Public sector 49 62 Non-performing loans 2,701 4,284 Total loans 82,689 97,935 Year ended December 31, 2004 2005 2006 At beginning of year 3,846 4,063 4,964 Provision for loan losses 1,429 1,823 3,767 Loan charge-offs (1,824) (1,603) (2,816) Loan recoveries 612 681 637 Net charge-offs (1,212) (922) (2,179) At end of year 4,063 4,964 6,552 Year ended December 31, 2004 2005 2006 At beginning of year 3,846 4,063 4,964 Provision for loan losses 1,429 1,823 3,767 Loan charge-offs (1,824) (1,603) (2,816) Loan recoveries 612 681 637 Net charge-offs (1,212) (922) (2,179) At end of year 4,063 4,964 6,552 December 31, 2005 2006 Furniture and equipment 1,504 1,770 Leased equipment 1,606 1,690 Data processing equipment 1,659 1,581 Buildings 883 822 Development and acquisition costs of software 457 565 Land 471 496 Leasehold improvements 350 453 Vehicles 18 28 Others 8 7 Less: accumulated depreciation and amortization (4,235) (4,412) Total 2,721 3,000 Depreciation and amortization expense were R$789, R$712 and R$534 for the years ended December 31, 2004, 2005 and 2006, respectively. We have entered into leasing agreements, principally related to data processing equipment, which are accounted for as capital leases. Under this accounting method both an asset and an obligation are recorded in the financial statements and the asset is depreciated in a manner consistent with our normal depreciation policy of owned assets. In 2002 and 2003, certain bank branches were sold through public auctions as part of a disposal program. These comprised cash transactions or installment sales financed by the Bank. There were no sales of bank branches through public auctions in 2005 and 2006. At the same time, these branches were leased to us for the purpose of continuing our business operations and were accounted for mostly as operating leases. Only the financed sales were maintained as fixed assets, reflecting the possibility of repossession in the event of default by the purchaser. Future liabilities for the payment of leases related to financings for the following five years are as follows: For the year ending December 31, Lease expense 2007 6 2008 6 2009 6 2010 6 2011 6 Total 30 For the year ended December 31, Amortization Expense 2007 ........................................................ 327 2008 ........................................................ 274 2009 ........................................................ 251 2010 ........................................................ 238 2011 ........................................................ 194 667 667 3281 2609 1658 1315 278 302 343 (a) Breakdown of other assets December 31, 2005 2006 Deferred tax assets, net (Note 16) 3,673 4,759 Credit card operations 2,847 5,215 Restricted escrow deposits for taxation and labor matters 2,275 3,542 Taxes available for offset 1,619 1,395 Insurance premiums receivable 1,148 1,328 Securitization of credit card bill receivables (Note 14 (d) 485 372 Prepaid expenses(1) 357 608 Commission on the placement of financing(2) 622 789 National property system 399 405 Deferred policy acquisition costs(3) 258 565 Foreclosed assets, net 166 161 Postal Service prepayment 121 101 Other 1,139 1,176 Total 15,109 20,416 (1) Prepaid expenses amounts comprise R$ 139 and R$ 439 at December 31, 2005 and 2006, respectively, related to amounts paid in order to acquire exclusive rights for rendering banking services (Note 12(b)). (2) Commissions paid to storekeepers and car dealers. (3) Commissions paid to insurance brokers on trade of insurance products, private pension plans and certificated savings plans. (b) Prepaid expenses – acquisition of exclusive rights for rendering banking services December 31, 2005 2006 Initial balance 83 139 Acquired during the year. 87 367 Amortization for the year (1) (31) (67) Final balance 139 439 (1) Amortization expenses recorded as “other non-interest expenses” on a straight line basis over the period between five and ten years. (a) Breakdown of other assets December 31, 2005 2006 Deferred tax assets, net (Note 16) 3,673 4,759 Credit card operations 2,847 5,215 Restricted escrow deposits for taxation and labor matters 2,275 3,542 Taxes available for offset 1,619 1,395 Insurance premiums receivable 1,148 1,328 Securitization of credit card bill receivables (Note 14 (d) 485 372 Prepaid expenses(1) 357 608 Commission on the placement of financing(2) 622 789 National property system 399 405 Deferred policy acquisition costs(3) 258 565 Foreclosed assets, net 166 161 Postal Service prepayment 121 101 Other 1,139 1,176 Total 15,109 20,416 (1) Prepaid expenses amounts comprise R$ 139 and R$ 439 at December 31, 2005 and 2006, respectively, related to amounts paid in order to acquire exclusive rights for rendering banking services (Note 12(b)). (2) Commissions paid to storekeepers and car dealers. (3) Commissions paid to insurance brokers on trade of insurance products, private pension plans and certificated savings plans. (b) Prepaid expenses – acquisition of exclusive rights for rendering banking services December 31, 2005 2006 Initial balance 83 139 Acquired during the year. 87 367 Amortization for the year (1) (31) (67) Final balance 139 439 (1) Amortization expenses recorded as “other non-interest expenses” on a straight line basis over the period between five and ten years. bb) Special Purpose Financing entities The Company utilizes certain financial arrangements to meet its funding and liquidity management through SPF entities. These SPF entities are generally funded with long-term debt (Note 14 (d)) and are paid down through the future cash flow of the underlying assets. The underlying assets are essentially current and future flows of (i) payment orders from individuals and corporations outside Brazil to individuals and corporations in Brazil on which we act as the paying bank and (ii) credit card bill receivables from purchases in Brazil from foreign cardholders. We consolidated these SPF entities based on the policies issued by FASB Interpretation Nº 46 ("FIN 46") "Consolidation of Variable Interest Entities", revised in December 2003 ("FIN 46R"). Proceeds from sale of current and future flows of payment orders and credit cards bills received by the SPF entities are required to be maintained in a specified bank account until a certain minimum level is achieved. The amount subject to restricted withdrawal in the amount of R$1 (2005 – R$58) is considered as "Restricted Cash" and presented as “Cash and due from banks” in our consolidated balance sheet as of December 31, 2006. The following table summarizes the main characteristics of debts issued by the SPF entities: December 31, Asset securitized Maturity/date Currency Rate - % 2005 2006 Payment orders 2010 US$ 6.75 483 331 Payment orders(1) 2012 US$ 4.69 235 206 Credit card bills(2) 2011 US$ 5.69 1,058 807 Total 1,776 1,344 (1) If the SPF entity fails to make a timely payment of accrued interest and/or principal, the investors have the benefit of a financial guaranty insurance policy provided by an unrelated insurance company. (2) 44.618488% of the securities issued will be repaid through the future flows of credit card bills provided by the secondary beneficiary designated bank (Banco do Brasil S.A.). Therefore, since the SPF entity was consolidated in our financial statements, we have recorded R$372 as securitization of credit card bill receivables in “Other assets” as of December 31, 2006 (2005 – R$ 485). We enter into financial derivative instruments contracts with various counterparties to manage our overall exposures as well as to assist customers in managing their exposures. Such derivatives are summarized as follows: Notional amounts December 31, 2005 2006 Interest rates futures contracts: Purchases 1,920 765 Sales 19,128 37,457 Foreign currency futures contracts: Purchases 5,560 3,959 Sales 12,217 14,439 Interest rates – others: Sales - 54 Foreign currency option contracts: Purchases 199 540 Sales 220 472 Forward contracts on interest rates: Purchases 107 - Forward contracts - others: Sales - 369 Foreign currency forward contracts: Purchases 781 1,243 Sales 501 475 Swap contracts: Asset Position: Interest rate swaps 10,703 9,237 Currency swaps 5,216 4,070 Liability Position: Interest rate swaps 2,211 2,408 Currency swaps 13,369 10,775 Interest rate, currency and cross-currency interest rate swaps are contracts in which a series of interest rate cash flows of a single currency or interest or principal payments in two different currencies are exchanged for a contractual period. The notional amount represents the basis on which the cash flows are determined. The risks associated with swaps relate to the potential inability or unwillingness of the counterparties to perform according to the contractual terms and the risk associated with changes in market conditions due to changes in interest rates and the exchange rate of currencies. The total credit exposure associated with interest rate and currency swaps was R$303 and R$359 at December 31, 2005 and 2006, respectively. Interest rate and currency futures and interest rate forwards are contracts for the delayed delivery of an instrument at a specified price or yield. The notional amounts represent the face value of the underlying instrument for which daily cash settlements of the price changes are made. The credit risk associated with futures contracts is minimized due to daily cash settlements. Futures contracts are also subject to the risk of changes in interest rates or the value of the underlying instruments. The total credit exposure associated with interest rate forwards was R$107 at December 31, 2005. (c) Off-balance sheet credit instruments As part of our lending operations, we enter into various off-balance sheet credit instruments with our customers which are summarized as follows: Contractual amounts December 31, 2005 2006 Commitments to extend credit, including credit cards 31,705 38,482 Financial guarantees 9,630 14,791 Other letters of credit 137 242 Unfunded commitments to extend credit including credit cards are contracts for a specified time period and at variable rates to lend to a customer who has complied with predetermined contractual conditions. The guarantees are conditional commitments issued by us to assure the performance of a customer to a third party in borrowing arrangements. The maximum potential credit risk on undrawn commitments, standby and commercial letters of credit is equal to the contractual amounts shown above if the counterparty does not perform under the contract. Generally, these contracts expire without being drawn upon; therefore, the contractual amounts are not indicative of the actual credit exposure or future cash flow requirements for such commitments. The fair value of the obligation undertaken in issuing the guarantee at inception is typically equal to the net present value of the future amount of premium receivable under the contract. To mitigate credit risk, we may require the counterparty to pledge collateral in the form of cash, securities or other assets to support the extension of credit similar to the collateral required for our lending operations. (d) Financial guarantees The following is a summary of the carrying values for the financial guarantees and other letters of credit, mentioned before: December 31, 2005 2006 Maximum carrying value maximum carrying value payout/notional payout/notional Financial guarantees 9,630 2 14,791 6 Other letters of credit 137 1 242 1 The carrying value includes amounts deferred and to be recognized in income over the life of the contract and amounts accrued for inherent losses in accordance with SFAS 5, “Accounting for Contingencies” and FIN 45. Financial guarantees are conditional loan commitments issued by us to guarantee the performance of a particular customer in relation to a third party. In general, we are guaranteed the right of return against the customer to recover any amounts paid under these guarantees. In addition, we may retain amounts in cash or other highly liquid guarantees to secure the commitments. The contracts are subject to the same credit rating process used to grant other credits. Year ended December 31, 2004 Banking Insurance, Other operations, USGAAP pension plan and adjustments, consolidated certificated reclassifications savings plans and eliminations Interest income 19,532 4,937 (746) 3,723 Interest expense (9,954) - 1,035 (8,919) Net interest income 9,578 4,937 289 14,804 Provision for loan losses (1,429) - - (1,429) Insurance premiums - 9,542 (2,778) 6,764 Pension plan income - 2,456 (2,082) 374 Certificated saving plans - 1,358 (1,358) - Equity in earnings (losses) of unconsolidated companies 60 180 (174) 66 Other income 6,197 601 280 7,078 Salaries and benefits (4,338) (480) (46) (4,864) Administrative expenses (3,793) (457) 193 (4,057) Insurance claims - (6,045) 1,223 (4,822) Changes in provisions related to insurance, pension plan, certificated savings plans and pension investment contracts - (7,526) 3,200 (4,326) Pension plan operating expenses - (2,083) 1,332 (751) Insurance and pension plan selling expenses - (907) - (907) Other expense (3,656) (614) 280 (3,990) Income before income taxes and minority interest 2,619 962 359 3,940 Identifiable assets 145,661 40,236 (8,818) 177,079 Year ended December 31, 2005 Banking Insurance, Other operations, USGAAP pension plan and adjustments, consolidated certificated reclassifications savings plans and eliminations Interest income 25,441 5,939 (73) 31,307 Interest expense (12,786) - 345 (12,441) Net interest income 12,655 5,939 272 18,866 Provision for loan losses (1,823) - - (1,823) Insurance premiums - 9,928 (2,123) 7,805 Pension plan income - 2,386 (2,009) 377 Certificated saving plans - 1,420 (1,420) - Equity in earnings (losses) of unconsolidated companies 176 81 (71) 186 Other income 7,829 1,143 216 9,188 Salaries and benefits (4,824) (359) (15) (5,198) Administrative expenses (4,219) (463) 235 (4,447) Insurance claims - (6,730) 1,229 (5,501) Changes in provisions related to insurance, pension plan, certificated savings plans and pension investment contracts - (6,841) 2,902 (3,939) Pension plan operating expenses - (2,507) 2,002 (505) Insurance and pension plan selling expenses - (1,055) 14 (1,041) Other expense (4,446) (678) (92) (5,216) Income before income taxes and minority interest 5,348 2,264 1,140 8,752 Identifiable assets 164,821 49,295 (7,522) 206,594 Year ended December 31, 2006 Banking Insurance, Other operations, USGAAP pension plan and adjustments, consolidated certificated reclassifications savings plans and eliminations Interest income 28,075 6,476 24 34,575 Interest expense (13,039) - 170 (12,869) Net interest income 15,036 6,476 194 21,706 Provision for loan losses (3,770) - 3 (3,767) Insurance premiums - 11,212 (3,091) 8,121 Pension plan income - 2,650 (1,859) 791 Certificated saving plans - 1,418 (1,418) - Equity in earnings (losses) of unconsolidated companies 296 106 (178) 224 Other income 9,474 1,258 216 10,948 Salaries and benefits (5,543) (504) (40) (6,087) Administrative expenses (4,962) (498) 237 (5,223) Insurance claims - (7,347) 1,223 (6,124) Changes in provisions related to insurance, pension plan, certificated savings plans and pension investment contracts - (7,904) 3,705 (4,199) Pension plan operating expenses - (2,164) 1,604 (560) Insurance and pension plan selling expenses - (1,140) 288 (852) Other expense (5,296) (651) (281) (6,228) Income before income taxes and minority interest 5,235 2,912 603 8,750 Identifiable assets 206,349 61,021 (8,099) 259,271 (a) Goodwill The changes in the carrying amount of goodwill as a result of our acquisitions (Note 1 (b)) for the years ended December 31, 2005 and 2006 are as follows: Banking Segment Balance as of December 31, 2004 262 Morada acquisition 50 Leader acquisition 20 Balance as of December 31, 2005 332 Amex acquisition 335 Balance as of December 31, 2006 667 The banking segment, in which we allocated the Zogbi, Morada, Leader and Amex acquisitions, is tested annually for impairment of goodwill. We did not identify the need of recording impairment losses in 2005 and 2006. (b) Other intangible assets The net carrying amount of finite-lived intangible assets related to existing client deposit and relationship portfolios and subject to amortization was R$1,294 and R$1,623 at December 31, 2005 and 2006, respectively. The changes in the net carrying amount of finite-lived intangible assets for the year ended December 31, 2005 and December 31, 2006 are as follows: Segments Banking Insurance Total pension plans, and certificated savings plans Balance as of January 1, 2005 1,552 16 1,568 Acquired during the year 28 - 28 Amortized during the year (298) (4) (302) Balance as of December 31, 2005 1,282 12 1,294 Acquired during the year 672 - 672 Amortized during the year (338) (5) (343) Balance as of December 31, 2006 1,616 7 1,623 These acquisitions were accounted for under the purchase method of accounting and the companies acquired were thus consolidated as from the date of acquisition. In conjunction with these acquisitions, finite-lived intangible assets of R$106 in 2004, R$28 in 2005 and R$672 in 2006 were recorded and are related principally to the client deposit and relationship portfolios, being amortized over the period in which the assets are expected to contribute directly or indirectly to the future cash flows (between five and ten years). In addition, we recorded a goodwill balance of R$262 in 2004, related to the credit operation of Zogbi, R$70 in 2005, related to Morada and Leader transactions and R$ 335 in 2006 related to Amex transaction. For further details: Notes 2 (o) and 11. We have not assumed any future contingent payments, options, or commitments, in connection with these acquisitions. 789 712 534 -4235 -4412 471 496 457 565 883 822 1504 1770 Year ended December 31 2004 2005 2006 Ownership - % Equity in earnings ( losses ) Investments Equity in earnings ( losses ) Shareholders' Equity (1) Net income ( losses)(1) Investments Equity in earnings ( losses ) December 31, 2005 Total Voting American BankNote Company Gráfica e Serviços LTDA (2) 7 38 12 2 Áurea Serviços 27.50 27.50 3 17 -2 5 BES Investimentos do Brasil S.A 20.00 20.00 1 19 4 114 25 23 5 Celta Holdings S.A. 36.26 36.26 268 266 97 Cia. Brasileira de Meios de Pagamento - VISANET 39.67 39.67 40 148 162 435 593 173 236 CIa. Brasileira de Soluções e Serviços Visavale 34.33 34.33 8 3 50 26 17 9 CPM Holding Ltd. 49.00 49.00 -3 33 -19 5 -163 2 -80 Serasa S.A. 26.41 26.41 21 54 24 229 108 61 29 Others 23 Total investments accounted for using the equity method of accounting 66 303 186 378 224 94 149 Other investments recorded at cost 66 397 186 527 224 (1) Amount derived from the financial statements in accordance with Brazilian GAAP adjusted to U.S. GAAP, when applicable. There are no material restrictions upon the ability of such companies to remit funds to Bradesco. Additionally, there are no significant differences between our investment and our proportionate share of the investee’s equity. (2) Investment partially sold in 2006 and subsequently changed to the available for sale securities portfolio. Dividends, including interest on shareholders’ capital, received from the investments above were as follows: Year ended December 31, 2004 2005 2006 Companhia Brasileira de Meios de Pagamento - Visanet 3 89 211 Serasa S.A. 14 16 22 Others 3 5 3 Total 20 110 236 As of December 31, 2006, the above investments were not regularly traded on any stock exchange. -1824 -1603 -2816 612 681 637 3846 4063 4964 1429 1823 3767 -1824 -1603 -2816 612 681 637 -1212 -922 -2179 2491 3842 523 519 832 1326 1830 2652 1900 1546 49 62 518 584 Fair value December 31, 2005 Brazilian government securities 6,146 Brazilian sovereign bonds 4,313 Corporate debt securities 1,744 Bank debt securities 309 Marketable equity securities 2,198 Total 14,710 December 31, 2006 Fair value Brazilian government securities 16,712 Brazilian sovereign bonds 1,549 Corporate debt securities 2,130 Bank debt securities 54 Foreign government securities 9 Marketable equity securities 3,425 Total 23,879 4 Trading Securities Fair value December 31, Average balance 2005 2006 Mutual funds 21,420 28,549 Brazilian government securities 17,142 31,150 Corporate debt securities 901 1,040 Brazilian sovereign bonds 521 55 Bank debt securities 324 1,263 Foreign government securities 122 94 Total 40,430 62,151 Derivative financial instruments 518 584 Total trading account assets 40,948 62,735 Net unrealized gains included in trading assets at December 31, 2005 and 2006 were R$105 and R$23, respectively. The net change in the unrealized gains (losses) on trading securities held as of December 31, 2004, 2005 and 2006, included in non-interest income, were R$(319), R$90 and R$82, respectively. Trading securities presented above include securities pledged as collateral that amounted to R$698 and R$821 at December 31, 2005 and 2006, respectively. Derivative positions presented above represent the fair values of interest rate, foreign exchange, equity and commodity-related products, including financial forward settlement and option contracts and swap agreements associated with our financial derivative instruments trading activities. 5 Available for Sale Securities, at Fair Value Fair value December 31, 2005 Brazilian government securities 6,146 Brazilian sovereign bonds 4,313 Corporate debt securities 1,744 Bank debt securities 309 Marketable equity securities 2,198 Total 14,710 December 31, 2006 Fair value Brazilian government securities 16,712 Brazilian sovereign bonds 1,549 Corporate debt securities 2,130 Bank debt securities 54 Foreign government securities 9 Marketable equity securities 3,425 Total 23,879 In 2004, 2005 and 2006, we recorded R$41, R$49 and R$64 as other than temporary losses, respectively. No other than temporary losses have been identified for the remaining gross unrealized losses as of December 31, 2006 and 2005. At December 31, 2005 and 2006 there were no securities of a single issuer, or group of related companies, the fair value of which exceeded 10% of shareholders' equity. Realized gains and losses on securities are primarily calculated based on the average cost method. The components of gains and losses realized on available for sale securities were as follows: Year ended December 31, 2004 2005 2006 Gross gains 484 833 1,338 Gross losses (51) (86) (181) Net gains 433 747 1,157 The amortized cost and fair value of available for sale securities, by maturity, were as follows: December 31, 2005 2006 Amortized fair Amortized Fair cost value cost value Due in one year or less 352 352 294 323 Due after one year through five years 4,205 4,227 7,619 7,907 Due after five years through ten years 3,209 3,422 10,275 10,531 Due after ten years 4,069 4,511 870 1,693 No stated maturity (marketable equity securities) 1,257 2,198 2,549 3,425 Total 13,092 14,710 21,607 23,879 Available for sale securities presented above include securities pledged as collateral that amounted to R$298 and R$12 at December 31, 2005 and December 31, 2006, respectively. 6 Held to Maturity Securities The amortized cost and fair value of held to maturity securities were as follows: Amortized Gross Gross Fair cost unrealized unrealized value gains losses December 31, 2005 Brazilian government securities 3,137 514 - 3,651 Brazilian sovereign bonds 909 223 - 1,132 Financial institutions bonds 44 1 - 45 Foreign government securities 31 - - 31 Total 4,121 738 - 4,859 December 31, 2006 Brazilian government securities 2,188 736 - 2,924 Brazilian sovereign bonds 1,040 263 - 1,303 Foreign government securities 37 - - 37 Total 3,265 999 - 4,264 The amortized cost and market value of held to maturity securities, by maturity, were as follows: December 31, 2005 2006 Amortized fair Amortized Fair cost value cost value Due in one year or less 1,074 1,076 37 37 Due after five years through ten years 913 1,124 966 1,205 Due after ten years 2,134 2,659 2,262 3,022 Total 4,121 4,859 3,265 4,264 At December 31, 2005 and 2006, no securities pledged as collateral were recorded in our portfolio of held to maturity securities. In addition, held to maturity securities recorded as “Federal funds sold and securities purchased under agreements to resell” in a amount of R$217 at December 31, 2005, with a market value of R$272 comprise mainly Brazilian sovereign bonds (maturities from 5 to 10 years) and Brazilian government securities (maturity due in one year or less). At December 31, 2006, there were no securities recorded as “Federal funds sold and securities purchased under agreements to resell” in our held to maturity securities portfolio. The following table sets out our securities by denomination: December 31, 2005 2006 Amortized Percentage Amortized Percentage cost cost Brazilian currency (reais) 3,137 76% 2,188 67% Indexed to and denominated in foreign currency 984 24 1,077 33 4,121 100% 3,265 100% 3281 3281 December 31, 2005 2006 Import and export financings 4,405 4,440 Commercial paper 2,661 1,225 Other - 44 Total 7,066 5,709 Import and export financings represent credit lines available to finance imports and exports by Brazilian companies, typically denominated in foreign currency. At December 31, 2006 interest rates applicable to short-term borrowings were between 4.87% and 5.83% per annum (2005 – 4.84% and 4.94%) for import and export financings, and 5.06% and 7.11% per annum (2005 – 3.11% and 7.30%) for commercial paper. Average borrowing rates in 2005 and 2006 were 4.97% and 5.53% per annum, respectively. December 31, 2005 2006 Local onlendings 9,429 11,642 Subordinated notes 6,719 11,949 Non-convertible debentures 2,625 2,603 Debt issued under securitization of payment orders and credit card bill receivables (Note 14 (d)) 1,776 1,344 Euronotes 1,503 1,235 Mortgage notes 827 841 Obligations under capital leases 368 430 Others 69 78 Total 23,316 30,122 (a) Local onlendings Local onlendings represent amounts borrowed from Brazilian agencies for loans to Brazilian entities that invest primarily in premises and equipment. Such amounts are due in monthly installments through 2025 and bear fixe interest between 3% and 18% per annum, plus variable interest based on the Taxa de Juros de Longo Prazo (Federal Government long-term interest rate determined on a quarterly basis, or "TJLP") and Taxa Referencial de Juros (reference interest rate, or “TR”) respectively. These borrowings are primarily from Banco Nacional de Desenvolvimento Econômico e Social - BNDES (National Economic and Social Development Bank) and Fundo de Financiamento para Aquisição de Máquinas e Equipamentos Industriais - FINAME (National Industrial Equipment Finance Authority) in the form of credit lines. (b) Subordinated notes December 31 Maturity/date Original term Currency Interest - % 2005 2006 years 2008 7 R$ 100% CDI (1) + 0.75% 627 619 2011 5 R$ 102.5% CDI (1) – 104% CDI (1) - 4,995 2011 10 US$ 10.25% 349 319 2012 10 R$ 100% CDI (1) + 0.75% 2,909 3,360 100% CDI (1) + 0.87% 100% CDI (1) – 102.5% CDI (1) 2012 10 Yen 4.05 318 291 2013 10 US$ 8.75 1,182 1,080 2014 10 US$ 8.00 627 639 No stated maturity(2) US$ 8.87 707 646 Total 6,719 11,949 (1) Brazilian benchmark interest rate. (2) On June 3, 2005, perpetual subordinated debt was issued in the amount of US$ 300,000 thousand, with an option for exclusive redemption by us for the full amount and upon prior authorization by BACEN provided that: (i) after a period of 5 years counted from the date of issuance and subsequently on each date on which interest is due; or (ii) at any time if there is a change in Brazilian or foreign tax legislation which could bring about an increase in costs for us and when we have been notified in writing, by BACEN, that the securities may no longer be considered for capital adequacy calculation purposes. Interest is paid quarterly as from September 3, 2005. We classify our perpetual bonds as a liability, since in the case of non-payment of interest, based solely on a management decision not to pay, it would result in the bond holder right to request liquidation of the bank. (c) Non-convertible debentures December 31, Maturity/Date Original termyears Currency Interest % 2005 2006 2011 6 R$ 102% - CDI 2,625 2,603 Total 2,625 2,603 TAG 104 As from 2003, we securitize current and future flows of (i) payment orders from individuals and corporations outside Brazil to individuals and corporations in Brazil on which we act as the paying bank and (ii) credit card bill receivables from purchases in Brazil by foreign cardholders. The long-term debt issued by the SPF entities and sold to investors is expected to be repaid through the future flows of funds provided by both payment orders and credit card bills. We are obligated to redeem the debt if certain specified events of defaults or of early termination occur. Proceeds from sale of current and future flows of payment orders and credit cards bills received by the SPF entities are required to be maintained in a specified bank account until a certain minimum level is achieved. The amount subject to restricted withdrawal in the amount of R$1 (2005 – R$58) is considered as "Restricted Cash" and presented as “Cash and due from banks” in our consolidated balance sheet as of December 31, 2006. The following table summarizes the main characteristics of debts issued by the SPF entities: December 31, Asset securitized Maturity/date Currency Rate - % 2005 2006 Payment orders 2010 US$ 6.75 483 331 Payment orders(1) 2012 US$ 4.69 235 206 Credit card bills(2) 2011 US$ 5.69 1,058 807 Total 1,776 1,344 (1) If the SPF entity fails to make a timely payment of accrued interest and/or principal, the investors have the benefit of a financial guaranty insurance policy provided by an unrelated insurance company. (2) 44.618488% of the securities issued will be repaid through the future flows of credit card bills provided by the secondary beneficiary designated bank (Banco do Brasil S.A.). Therefore, since the SPF entity was consolidated in our financial statements, we have recorded R$372 as securitization of credit card bill receivables in “Other assets” as of December 31, 2006 (2005 – R$ 485). (e) Euronotes Maturity/date Currency Range of annual coupons rates - % 2005 2006 2006 US$ 4.12 - 12.29 302 - 2007 US$/R$ 4.26 – 17.50 473 1,006 2008 US$ 4.38 - 206 2010 US$/R$ 14.80 - 14 After 2010 US$ 5.39 – 5.77 728 9 Total 1,503 1,235 (f) Mortgage notes Mortgage notes are generally issued with maturities up to one year and bear interest rates of TR plus interest between 11.0% and 14.5% p.a. (g) Long-term debt maturity December 31, 2005 2006 Due within one year 4,672 6,660 From 1 to 2 years 3,200 5,211 From 2 to 3 years 3,462 2,091 From 3 to 4 years 1,223 1,319 From 4 to 5 years 874 5,920 Over 5 years 9,178 8,275 No stated maturity 707 646 Total 23,316 30,122 (g) Long-term debt maturity December 31, 2005 2006 Due within one year 4,672 6,660 From 1 to 2 years 3,200 5,211 From 2 to 3 years 3,462 2,091 From 3 to 4 years 1,223 1,319 From 4 to 5 years 874 5,920 Over 5 years 9,178 8,275 No stated maturity 707 646 Total 23,316 30,122 15 Other Liabilities (a) Breakdown of other liabilities December 31, 2005 2006 Pension plan investment contracts 25,457 31,846 Insurance claims and pension plans reserves 10,695 11,889 Litigation (Note 23 (b)) 4,860 7,125 Credit card operations 2,162 4,482 Certificated savings plans 2,139 2,307 Unpaid claims and claim adjustment reserves 2,383 2,821 Payment orders to be settled 1,643 2,039 Interest on shareholders’ capital payable 1,251 187 Taxes on income 424 1,031 Labor related liabilities 801 900 Foreign exchange portfolio, net 746 428 Taxes other than on income 342 275 Derivative liability 211 435 Collection of third-party taxes, social contributions and other 172 196 Others 4,326 4,122 Total 57,612 70,083 Changes in unpaid claims and claim adjustment reserves December 31, 2004 2005 2006 Balance at the beginning of the year 1,251 1,838 2,383 ( - ) Reinsurance recoverables(*) (35) (62) (53) Net balance at January 1 1,216 1,776 2,330 Incurred related to: current year 5,009 5,705 5,963 prior years 244 279 396 Total incurred 5,253 5,984 6,359 Payments related to: current year 4,509 5,004 5,442 prior years 184 426 461 Total payments 4,693 5,430 5,903 Net balance at December 31 1,776 2,330 2,786 ( + ) Reinsurance recoverables(1) 62 53 35 Balance at the end of the year 1,838 2,383 2,821 (1) Reinsurance recoverables are recorded as “Insurance premiums receivable” in “Other assets”. 16 Income Tax and Social Contribution We and each of our subsidiaries file separate company tax returns for each fiscal year. Income taxes in Brazil comprise federal income tax (rate of 15% plus an additional of 10%) and social contribution (rate of 9%), which is an additional federal tax, applicable to all periods presented. The amounts reported as income tax expense in the consolidated financial statements are reconciled to the statutory rates as follows: Years ended December 31, 2004 2005 2006 Income before income tax and social contribution 3,940 8,752 8,750 Adjusted for: equity in earnings of unconsolidated companies (66) (186) (224) Adjusted tax basis 3,874 8,566 8,526 Tax expense at statutory rates (1,317) (2,912) (2,899) Non deductible expenses/(non-taxable income) (79) 29 (35) Tax benefit on interest attributed to shareholders’ capital paid 449 522 523 Non-taxable/(non-deductible) exchange gains (losses) on foreign assets 55 (165) (171) Reversal of prior year allowance for non-realization of deferred tax assets 64 17 116 Deferred tax assets acquired from purchase of a non operating entity 189 - 53 Others 38 78 140 Income tax expense (601) (2,431) (2,273) The major components of the deferred tax accounts in the consolidated balance sheet are as follows: December 31, 2005 2006 Provisions not currently deductible, mainly allowance for loan losses 3,876 5,924 Tax loss carryforwards 547 618 Other temporary differences 156 215 Total gross deferred tax assets 4,579 6,757 Allowance for non-realization (169) (98) Total deferred tax assets 4,410 6,659 Effect of differences between indices used for prior-period price-level restatement purposes for tax and U.S. GAAP purposes, mainly relating to premises and equipment 46 45 Temporary non-taxable gains, mainly relating to leasing and derivative financial instruments 600 1,277 Other temporary differences 91 578 Total deferred tax liabilities 737 1,900 Net deferred tax asset, included in other assets (Note 12) 3,673 4,759 Net deferred income tax assets include Brazilian tax loss carryforwards, which have no expiration dates, available for offset against future taxable income. Carryforward losses are available for offset within any year up to 30% of annual income before tax, determined in accordance with Brazilian Tax Rules. 17 Shareholders' Equity (a) Capital and shareholders' rights (i) Capital On November 11, 2005, our Board of Directors approved a split of our capital stock, in which our shareholders were entitled to one new share for each existing share of the same class. On March 12, 2007, our Board of Directors approved a split of our capital stock, in which our shareholders were entitled to one new share for each existing share of the same class. Therefore, all related share amounts have been retroactively adjusted for all periods presented to reflect the stock split, whereby one new share was received in exchange for each share held. At December 31, 2006, Bradesco's outstanding capital, adjusted by the stock split approved on March 12, 2007, consists of 1,000,142,912 voting common shares and 1,001,622,936 non-voting preferred shares with no par value. Preferred shares carry no voting rights but have priority over common shareholders in the reimbursement of capital in the case of liquidation, up to the amount of capital represented by such preferred shares, and the right to receive a minimum dividend per-share 10% greater than that distributed per-share to common shareholders. All shareholders are entitled to receive, in total, a mandatory dividend of at least 30% of Bradesco's annual net income as stated in the statutory accounting records adjusted for transfers to and from reserves. None of our outstanding obligations are exchangeable or convertible into equity securities and as a result, diluted earnings per share do not differ from net income per share. (ii) Treasury shares Treasury shares are recorded at cost, which approximates market prices at the date of purchase. Treasury shares cancelled are recorded as a reduction of unappropriated retained earnings. Treasury shares are held for subsequent sale or cancellation. (iii) Additional paid-in capital Additional paid-in capital consists of premium on the initial issuance of shares less capitalization of such amounts. (b) Appropriated retained earnings Statutory reserve Under the Corporate Law, Bradesco and its Brazilian subsidiaries are required to appropriate 5% of their annual statutory earnings, after absorbing accumulated losses, to a legal reserve, which is restricted as to distribution. The reserve may be used to increase capital or absorb losses, but may not be distributed as dividends. (c) Unappropriated retained earnings Any income remaining after the distribution of dividends on the statutory records of the Company and appropriations to statutory reserves is transferred to the reserve for future investments. Such reserve may be distributed in the form of dividends upon approval of the shareholders. Accordingly, the difference as compared to retained earnings in the U.S. GAAP financial statements represents the effect of interperiod differences between U.S. GAAP and Brazilian GAAP, which will become distributable only when recognized under Corporate Law. (d) Dividends (including interest on shareholders' capital) Dividends are calculated on net income as determined by the financial statements prepared in accordance with Brazilian GAAP. Dividends are payable in Brazilian reais and may be converted into United States dollars and remitted to shareholders abroad provided that the non-resident shareholder's ownership is registered with the Brazilian Central Bank. (e) Comprehensive Income Year ended December 31, 2004 2005 2006 Net income reported in statement of income 3,327 6,310 6,462 Unrealized holding gains arising during the period: Unrealized gains on available for sale securities 451 322 2,267 Less reclassification adjustment for (gains) losses on available for sale securities included in net income (433) (747) (1,157) Other comprehensive income before tax 18 (425) 1,110 Income tax related to items of other comprehensive income (loss) (6) 144 (377) Other comprehensive income (loss), net of tax 12 (281) 733 Comprehensive income 3,339 6,029 7,195 Accumulated other comprehensive income is as follows: Year ended December 31, 2004 2005 2006 Balance at the beginning of the year 681 693 412 Current period change: Unrealized gains (losses) on available for sale securities, net of taxes 12 (281) 733 Adjustment upon adoption of SFAS 158, net of taxes - - 15 Balance at the end of the year 693 412 1,160 (e) Comprehensive Income Year ended December 31, 2004 2005 2006 Net income reported in statement of income 3,327 6,310 6,462 Unrealized holding gains arising during the period: Unrealized gains on available for sale securities 451 322 2,267 Less reclassification adjustment for (gains) losses on available for sale securities included in net income (433) (747) (1,157) Other comprehensive income before tax 18 (425) 1,110 Income tax related to items of other comprehensive income (loss) (6) 144 (377) Other comprehensive income (loss), net of tax 12 (281) 733 Comprehensive income 3,339 6,029 7,195 20 Other Non-Interest Income and Expenses Years ended December 31, 2004 2005 2006 Other non-interest income: Recovery of expenses 74 77 122 Rental income 20 22 21 Other (2) 736 483 635 Total non-interest income 830 582 778 Years ended December 31, 2004 2005 2006 Other non-interest expense: Taxes on services, income and other taxes 1,354 1,753 2,042 Commission on placement of auto sales financing 228 397 535 Litigation(1) 216 344 324 Monetary variation and exchange loss, net 240 562 608 Branch network losses 202 291 265 Loss (gain) on sale of foreclosed assets, unconsolidated investments and premises and equipment, net 52 9 (27) Credit card bonus 52 50 67 Asset management expenses 37 44 38 Postal service expenses 25 20 20 Other (2) 517 732 1,479 Total non-interest expenses 2,923 4,202 5,351 (1) Includes only those items not recognized specifically in personnel or tax expenses, registered in specific accounts. (2) None of the items included in “other” is significant on an individual basis. 38482 31705 (d) Financial guarantees The following is a summary of the carrying values for the financial guarantees and other letters of credit, mentioned before: December 31, 2005 2006 Maximum carrying value maximum carrying value payout/notional payout/notional Financial guarantees 9,630 2 14,791 6 Other letters of credit 137 1 242 1 The carrying value includes amounts deferred and to be recognized in income over the life of the contract and amounts accrued for inherent losses in accordance with SFAS 5, “Accounting for Contingencies” and FIN 45. Financial guarantees are conditional loan commitments issued by us to guarantee the performance of a particular customer in relation to a third party. In general, we are guaranteed the right of return against the customer to recover any amounts paid under these guarantees. In addition, we may retain amounts in cash or other highly liquid guarantees to secure the commitments. The contracts are subject to the same credit rating process used to grant other credits. Standby letters of credit are primarily issued to support public and private borrowing arrangements, including commercial paper, bond financing and similar transactions. Standby letters of credit are subject to management's credit evaluation of the customer. Letters of credit are conditional commitments issued by us to guarantee the performance of a customer to a third party. We issue commercial letters of credit to facilitate foreign trade transactions. These instruments are short-term commitments to pay a third-party beneficiary under certain contractual conditions for the shipments of goods. The contracts are subject to the same credit evaluations as other extensions of credit. (a) Assets under management We manage a number of assets and customer portfolios that are available to institutional investors and the general public. These assets are not included in our consolidated balance sheet. Fees are generally charged monthly, representing approximately 0.89% (2005 – 0.97%) per annum of the market value of the assets under management. The total assets under management, at December 31, 2005 and 2006 were R$112,643 and R$139,905, respectively, in investment fund portfolios and R$8,539 and R$7,203, respectively, in customer portfolios. In the normal course of business, we are involved in various legal proceedings arising out of our operations. We are subject to challenges from tax authorities regarding amounts of tax due. These challenges may alter the timing or amount of taxable income or deductions, or the allocation of income among tax jurisdictions. The probable losses recognized in our consolidated financial statements are related to litigation matters related to (i) inflation adjustments and (ii) legality of certain taxes and contributions. The remaining litigation matters, considered as possible under our judgment based on information available, are related to tax assessments in the amount of R$103 as of December 31, 2006 (R$56 in 2005), which we believe are inconsistent with existing law and, therefore, are not recognized in our consolidated financial statements. Resolution of these issues is not expected to have a significant impact on our financial position or results of operations. Like many other Brazilian banks, we are defendants in various labor suits by employees, which suits are related to compensation and indemnification for employees who have been laid off as a result of our recent acquisitions of financial institutions and their integration into our structure. Management continually monitors and evaluates the impact of current events and circumstances on the estimates and assumptions used in the recognition of probable losses. We also face a number of civil matters, which primarily consist of claims for pecuniary damages, such as (i) to collect on unpaid financial instruments, (ii) in relation to returned checks and (iii) in reporting adverse claims arising from credit information to credit reporting agencies. None of these claims is individually significant. The other labor suits and civil matters, to which we are a party, are subject to many uncertainties and the outcome of any individual matter is not predictable with assurance. Although the final resolution of any such matters could have a material effect on the consolidated operating results for a particular reporting period, we believe that it would not materially affect our consolidated financial position. The changes in the provision during the periods were as follows: Year ended December 31, Tax litigation 2004 2005 2006 At beginning of year 2,791 3,003 3,540 Business combinations 44 - 275 Indexation charges 149 224 509 Provisions 66 434 815 Reversal (96) (49) (51) Payments (51) (72) (42) At end of the year 3,003 3,540 5,046 Year ended December 31, Labor litigation 2004 2005 2006 At beginning of year 816 835 814 Business combinations 85 - 190 Provisions 319 406 726 Reversal. (7) (51) (50) Payments (378) (376) (421) At end of the year 835 814 1,259 Year ended December 31, Civil litigation 2004 2005 2006 At beginning of year 333 460 506 Business combinations 59 - 153 Provisions 145 179 427 Reversal. (6) (14) (61) Payments (71) (119) (205) At end of the year 460 506 820 Total provision 24 Regulatory Matters The Bank is subject to regulation by the Central Bank, which issues directions and instructions regarding currency and credit policies for financial institutions operating in Brazil. The Central Bank also determines minimum capital requirements, fixed asset limits, lending limits, accounting practices and compulsory deposit requirements, and requires banks to comply with regulations, based on the Basel Accord as regards capital adequacy. The Basel Accord requires banks to have a ratio of capital to risk-weighted assets of a minimum of 8%. At least half of total capital must consist of Tier I Capital. Tier I, or core capital, includes equity capital less certain intangibles. Tier II Capital includes, subject to certain limitations, asset revaluation reserves, general loan loss reserves and subordinated debt, and is limited to the amount of Tier I Capital. However, Brazilian banking regulations: (i) require a minimum capital ratio of 11%, (ii) do not permit general loan loss reserves to be considered as Capital, (iii) specify different risk-weighted categories, and (iv) impose a deduction from Capital corresponding to possible excess in fixed assets over the limits imposed by the Central Bank. The following table sets forth our required capital ratios (in percentages) based on the Brazilian GAAP financial statements. December 31, 2004 2005 2006 In accordance with the Basel Accord applicable to Brazil Tier I Capital 11.72% 11.50% 11.58% Tier II Capital 4.36 3.73 4.90 Total Capital 16.08 15.23 16.48 Minimum required by Brazilian Central Bank 11.00% 11.00% 11.00% Currently, the Central Bank does not limit the amount of dividends that may be paid subject to the capital requirements set forth above. As of each reporting date, we were in compliance with all capital requirements imposed by the Central Bank. Actual 16.08 11.58 26 Pension Plans We sponsor defined-benefit pension plans, which supplement benefits that the Brazilian government social security system provides to employees of Bradesco and its Brazilian subsidiaries. The pension plans were established solely for the benefit of eligible employees and directors, and their assets are held independently of Bradesco. During 2001, participants of the defined benefit plan for Bradesco employees joined a new defined contribution plan (PGBL). Our plan for the year ended December 31, 2004 and 2006 includes BEM and BEC defined benefit pension plans as a resul of their acquisitions on February 10, 2004 and January 3, 2006, respectively. Our contributions to the PGBL plan in 2006 totaled R$ 316 (2005 - R$250). Our policy is to fund the pension plans through contributions based on payroll, adjusted periodically pursuant to recommendations of the Fund’s external actuary. At December 31, 2006 our contribution represents 5.2% (2005 – 4.8% and 2004 – 4.4%) of payroll, and employees and directors contribute amounts of at least 4% (2005 – 4% and 2004 – 4%) of their salaries. The pension plan’s assets are mainly invested in government and private securities, marketable equity securities and properties. Employees and directors who withdraw from the pension plans for any reason receive the minimum benefit based on past contributions in a single lump sum installment. We use October 31 of each year as the annual measurement date for the BEC, BEM and Banco Alvorada plans. As discussed in Note 2(ee), in September 2006 the FASB issued SFAS Nº 158. This statement requires an employer on a prospective basis to recognize the overfunded or underfunded status of its defined benefit pension and postretirement plans as an asset or liability in its statement of financial position and to recognize changes in that funded status in the year in which the changes occur through comprehensive income. We adopted this requirement, along with the required disclosures, on December 31, 2006. The effects of the adoption as well as the related disclosure requirements are presented below: Alvorada, BEM and BEC plans Year ended 2006 Before application of SFAS 158 Prepaid pension cost 55 Accrued pension liability (65) Adjustments Prepaid pension cost 14 Accrued pension liability 8 Deferred tax liability (7) Accumulated other comprehensive income 15 After aplication of SFAS 158 Prepaid pension cost 69 Accrued pension liability (57) Deferred tax liability (7) Accumulated other comprehensive income 15 Based upon the report of the pension plan’s external actuary, changes in the benefit obligation and plan assets and the amounts recognized in the consolidated financial statements are as follows: Alvorada, BEM and BEC Plans Year ended 2004 2005 2006 (i) Projected benefit obligation: At beginning of year 281 442 454 Business acquisition 133 - 240 Service cost 2 1 1 Benefits paid (24) (36) (38) Interest cost 30 48 49 Plan changes - - 2 Actuarial loss (gain) 20 (1) 4 At end of year 442 454 712 (ii) Plan assets at market value: At beginning of year 315 448 486 Business acquisition 114 - 194 Contributions received: Employer 1 1 2 Employees 1 1 1 Return on plan assets 41 72 79 Benefits paid (24) (36) (38) At end of year 448 486 724 (iii) Funded status: Excess of plan assets over projected benefit obligation acquired (6) (32) (12) Unrecognized net gain (loss) (26) (1) - Amounts recognized in the balance sheet, net (32) (33) (12) Net pension (benefit) cost includes the following components: Alvorada, BEM and BEC Plans Year ended 2004 2005 2006 Projected benefit obligation: Service cost 2 1 5 Interest cost 30 48 70 Amortization of prior service cost - - 1 Expected return on assets (34) (51) (72) Expected participant contribution - - (2) Net periodic pension cost (benefit) (2) (2) 2 Prepaid pension costs and accrued pension liabilities are included in “Other assets” and “Other liabilities” respectively, in our Consolidated Statements of Financial Position. The amounts recognized in our balance sheets are as follows: 2006 2005 Assets Prepaid pension cost 69 55 Liabilities Accrued pension liability 57 19 Net asset recognized, end of year 12 36 The amount recognized in accumulated other comprehensive income, which totaled R$ 15 at December 31, 2006 as a result of the implementation of SFAS 158, relates to actuarial gains. The amount in accumulated other comprehensive income expected to be recognized as a component of a net periodic cost in 2007 total R$1 and refers to amortization of prior services cost. Assumptions used to determine our benefit obligation and net periodic benefit cost at and for the years ended October 31 were (*): Percentage Alvorada Plan BEM Plan BEC Plan 2005 2006 2005 2006 2006 Assumed discount rate 11.3% 10.2% 11.3% 10.2% 10.2% Expected long-term rate of return on assets 11.3 10.2 11.3 10.2 10.2 Rate of increase in compensation levels 8.2% 7.1% 8.2% 7.1% 7.1% (*) Including a 4.0% p.a. inflation rate and an actual discount rate of 6.0% p.a. The rationale behind the used long-term rate of return on plan assets is the following: (a) Based on the asset managers mid to long-term expectations. (b) Private and Brazilian Government bonds, which are a very significant segment of the invested portfolio of Alvorada, BEM and BEC, earn interest above inflation plus interest of 8% p.a. and maturities from short to long-term. (c) The asset mix of Alvorada Plan is of more than 80% and 71% in government bonds at October 31, 2005 and 2006, respectively, and more than 68% and 80% in government bonds in the case of the BEM Plan at October 31, 2005 and 2006, respectively and more than 76% in government bonds in the case of BEC plan at October 31, 2006 and the remainder assets in stocks for all the plans. Our pension plan weighted-average asset allocations at October 31, 2005 and 2006, by asset category are as follows: Percentage Alvorada Plan BEM Plan BEC Plan 2005 2006 2005 2006 2006 Equity securities 0.6% 0.6% 1.3% 1.6% 6.3% Debt securities 94.6 94.0 96.1 95.5 84.7 Real estate 3.5 3.9 0.6 0.8 5.4 Other 1.3 1.5 2.0 2.1 3.6 Total 100.0% 100.0% 100.0% 100.0% 100.0% The benefit payments, which reflect expected future services projected, to be made by us are: For the year ended December 31, Pension Plan Benefits 2007 54 2008 48 2009 47 2010 47 2011 46 2012 - 2016 222 Total 464 The contributions related to the private pension plans of Alvorada, BEM and BEC, to be made by us in 2006, are estimated at R$0.5, R$1.5 and R$2.9, respectively. Alvorada, BEM and BEC Plans Year ended 2004 2005 2006 (i) Projected benefit obligation: At beginning of year 281 442 454 Business acquisition 133 - 240 Service cost 2 1 1 Benefits paid (24) (36) (38) Interest cost 30 48 49 Plan changes - - 2 Actuarial loss (gain) 20 (1) 4 At end of year 442 454 712 (ii) Plan assets at market value: At beginning of year 315 448 486 Business acquisition 114 - 194 Contributions received: Employer 1 1 2 Employees 1 1 1 Return on plan assets 41 72 79 Benefits paid (24) (36) (38) At end of year 448 486 724 (iii) Funded status: Excess of plan assets over projected benefit obligation acquired (6) (32) (12) Unrecognized net gain (loss) (26) (1) - Amounts recognized in the balance sheet, net (32) (33) (12) Alvorada, BEM and BEC Plans Year ended 2004 2005 2006 Projected benefit obligation: Service cost 2 1 5 Interest cost 30 48 70 Amortization of prior service cost - - 1 Expected return on assets (34) (51) (72) Expected participant contribution - - (2) Net periodic pension cost (benefit) (2) (2) 2 The benefit payments, which reflect expected future services projected, to be made by us are: For the year ended December 31, Pension Plan Benefits 2007 54 2008 48 2009 47 2010 47 2011 46 2012 - 2016 222 Total 464 The contributions related to the private pension plans of Alvorada, BEM and BEC, to be made by us in 2006, are estimated at R$0.5, R$1.5 and R$2.9, respectively. Depreciation is computed on the straight-line method at the following annual rates: premises – 4%; data processing equipment – 20% to 50%; and other assets – 10% to 20%. Fair value December 31, 2005 Brazilian government securities 6,146 Brazilian sovereign bonds 4,313 Corporate debt securities 1,744 Bank debt securities 309 Marketable equity securities 2,198 Total 14,710 December 31, 2006 Fair value Brazilian government securities 16,712 Brazilian sovereign bonds 1,549 Corporate debt securities 2,130 Bank debt securities 54 Foreign government securities 9 Marketable equity securities 3,425 Total 23,879 a) In common with other Brazilian financial institutions, we are required to maintain deposit funds with the Central Bank or to purchase and hold Brazilian federal government securities, in the form of compulsory deposits which are as follows: December 31, 2005 2006 Non-interest earning(1) 5,269 6,446 Interest-earning (2) 11,177 12,219 Interest-earning (3) 5,240 4,796 Total 21,686 23,461 (1) Related to demand deposits. (2) Mainly related to saving deposits. (3) Time deposits deposited with the Central Bank in the form of Brazilian government securities. b) The Brazilian government securities related to the compulsory deposits and accounted for under SFAS 115, were as follows: Trading securities Available for sale securities 2005 2006 2005 2006 Amortized cost 3,400 4,795 1,820 - Gross unrealized gains 7 1 14 - Gross unrealized losses - - (1)(1) - Fair value 3,407 4,796 1,833 - Average balance 4,353 4,875 (1) No other than temporary losses have been identified for the gross unrealized loss amount. The amortized cost and the fair value of the securities, by maturity, were as follows: December 31, 2005 2006 Amortized cost Fair Value Amortized cost Fair Value Due in one year or less 383 383 4,572 4,572 Due after one year through five years 3,756 3,778 223 224 Due after five years through ten years 1,081 1,079 - - Total 5,220 5,240 4,795 4,796 2005 2006 Industrial and others 28,690 32,604 Import financing 1,100 1,465 Export financing 10,067 12,934 11949 6719 Until December 31, 1997, Brazil was considered to be a highly inflationary environment and accordingly all balances and transactions prior to that date were remeasured at December 31, 1997 price levels. The index selected for this remeasurement was the General Price Index - Internal Availability (IGP-DI), which we consider to be the most appropriate index due to its independent source, long history of publication and its mix of wholesale, consumer and construction prices. As from January 1, 1998, Brazil was no longer a highly inflationary environment, since the cumulative rate of inflation over preceding three-year period was below 100% without any indication of a return to the high rates prevailing prior to June 30, 1994. Accordingly, balances and transactions as from January 1, 1998 are expressed in nominal reais, as required by U.S. GAAP and the guidelines of the U.S. Securities and Exchange Commission – (“SEC”). Interest earning assets and interest bearing liabilities are presented in the consolidated balance sheet at the principal amount outstanding plus accrued interest and monetary and exchange variation incurred. Such presentation is required since accrued interest and monetary (indexation) variations and exchange gains/losses are added to the outstanding principal each period for substantially all Brazilian real-based assets and liabilities. The total interest and monetary and exchange variations accrued on the outstanding principal of assets was R$7,298 and R$7,909 at December 31, 2005 and 2006, respectively. Total interest and monetary and exchange variation accrued on outstanding principal of liabilities was R$4,003 and R$4,835 at December 31, 2005 and 2006, respectively. Equity investees and other investments, where we own between 20% and 50% of voting capital, are accounted for using the equity method of accounting. Under this method our share of results of the investee, as reported under U.S. GAAP, is recognized in the statement of income as "Equity in earnings (losses) of unconsolidated companies" and dividends are credited when declared to the "Equity investees and other investments" balance sheet account (Note 9). Interests in companies of less than 20% with no readily determinable market value are recorded at cost (unless we have the ability to exercise significant influence over the operations of the investee, in which case we use the equity method) and dividends are recognized in income when received. None of our investments in unconsolidated companies, analyzed on an individual or aggregated basis, are considered significant for additional disclosures in our consolidated financial statem ents. According to SFAS 5 “Accounting for Contingencies” and Interpretation Nº 14 (“FIN 14”) “Reasonable Estimation of the Amount of a Loss,” we recognize accruals in determining loss contingencies when the conditions known before the issuance of the financial statements show that: (i) it is probable that losses had been incurred at the date of the financial statements; and (ii) the amount of such losses can be reasonably estimated. We accrue our best estimate of probable losses. We constantly monitor litigation in progress to evaluate, among other things: (i) its nature and complexity; (ii) the evolution of the proceedings; (iii) the views of our legal advisors; and (iv) our experience with similar proceedings. We also consider in determining whether a loss is probable and in estimating its amount: a) The probability of loss from claims or events that have occurred on or before the date of the financial statements, but which come to our attention only after the date of the financial statements, but before the financial statements are issued; and b) The need to disclose claims or events occurring after the date of the financial statements but before they are issued. We earn fee income from investment management, credit card, investment banking and certain commercial banking services. Such fees are recognized when the service is performed (investment and commercial banking) or over the life of the contract (investment management and credit card). Substantially all of our insurance contracts are considered short-duration insurance contracts. Premiums from shortduration insurance contracts are recognized over the related contract period. Premiums from long-duration contracts are recognized when due from the policyholders. Reserves for insurance claims are established based on historical experience, claims in process of payment, estimated amount of claims incurred but not yet reported, and other factors relevant to the level of reserves required. Reserves are adjusted regularly based upon experience, with the effects of changes in such estimated reserves included in the results of operations in the period in which the estimated reserves were changed, and include estimated reserves for reported and unreported claims incurred. Reserves for private pension plan are established based on actuarial calculations. Certain products offered by us, such as pension investment contract s and funds where the investment risk is for the account of policyholders, are considered investment contracts in accordance with the requirements of SFAS 97, “Accounting and Reporting by Insurance Enterprises for Certain Long Duration Contracts and For Realized Gains and Losses from Sale of Investments,” (“SFAS 97”). During the accumulation phase of the pension investment contracts, when the investment risk is for the account of policyholders, the contracts are treated as an investment contract. During the annuity phase the contract is treated as an insurance contract with mortality risk. Funds related to pension investment contracts where the investment risk is for the account of policyholders are equal to the account value. Account values are not actuarially determined. Rather, account values are increased by the deposits received and interest credited (based on contract provisions) and are reduced by redemptions at the policyholders option. Also, as from 2004, we determine the need to record an additional liability for the contract feature when the present value of expected annuitization payment at the expected annuitization date exceeds the expected account balance at the annuitization date, in accordance with SOP 03-1 “Accounting and Reporting by Insurance Enterprises for Certain Non-traditional Long-Duration Contracts and for Separate Accounts” (“SOP 03-1”). The securities related to these pension investment contracts are classified as “trading securities” and “available for sale securities” in the Consolidated Financial Statements. The liability for future compensation for employee vacations is accrued and expensed as earned by the employees. The liability for unpaid claims and claim adjustment expenses represents the amounts needed to provide for the estimated ultimate cost of settling claims relating to insured events that have occurred on or before the balance sheet date. The estimated liability includes the amount of money that will be required for future payments of (a) claims that have been reported to the insurer, (b) claims related to insured events that have occurred but that have not been reported to the insurer as of the date the liability is estimated, and (c) claim adjustment expenses. Claim adjustment expenses include costs incurred in the claim settlement process such as legal fees; outside adjuster fees; and costs to record, process, and adjust claims. Premium deficiency reserves are established, if necessary, when the liability for future policy benefits plus the present value of expected future gross premiums are determined to be insuffi cient to provide for expected future policy benefits and expenses and to recover any unamortized policy acquisition costs. During the regular course of our insurance activities, we reinsure a portion of the underwritten risk with IRB Brasil Resseguros S.A., a government controlled entity which has a monopoly in Brazil. This monopoly will effectively come to an end in 2007. The reinsurance agreement permits a recovery of a portion of losses from the reinsurer, although it does not discharge our primary liability as direct insurer of the risks reinsured. Reinsurance receivables as of December 31, 2005 and 2006 amounted to R$53 and R$35, respectively, and are included in "Other assets". Brazilian corporations are permitted to attribute a tax-deductible interest charge on shareholders' equity. The notional interest charge is treated as though it was a dividend and is accordingly shown as a direct reduction of retained earnings in these financial statements. The related tax benefit is recorded in the income statement. Credit card fees, periodically charged to cardholders, net of related issuance costs, are deferred and recognized on a straight-line basis over the period that the fee entitles the cardholder to use the card. We adopted the provisions issued by FASB Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, including Indirect Guarantees of Indebtedness of Others (FIN 45).” The FIN 45, which clarifies previously issued accounting guidance and disclosure requirements for guarantees, expands the disclosures to be made by a guarantor in its financial statements about obligations under certain guarantees and requires the guarantor to recognize a liability for the fair value of an obligation assumed under a guarantee. The new requirements include the disclosure of the nature of the guarantee, the maximum potential amount of future payments that we could be required to make under the guarantee, and the current amount of the liability, if any, for the guarantor’s obligations under the guarantee. Significant guarantees that have been provided by us are disclosed in Note 22 (d). In July 2003, the FASB issued SFAS 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.” SFAS 150 establishes standards for how an issuer measures certain financial instruments with characteristics of both liabilities and equity and classifies them in its statement of financial position. It requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances) when that financial instrument embodies an obligation of the issuer. This standard is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective July 1, 2003. We classify our perpetual bond as a liability, since in the case of non-payment of interest, based solely on a management decision not to pay, it would result in the bond holder right to request liquidation of the bank. The Company utilizes certain financial arrangements to meet its funding and liquidity management through SPF entities. These SPF entities are generally funded with long-term debt (Note 14 (d)) and are paid down through the future cash flow of the underlying assets. The underlying assets are essentially current and future flows of (i) payment orders from individuals and corporations outside Brazil to individuals and corporations in Brazil on which we act as the paying bank and (ii) credit card bill receivables from purchases in Brazil from foreign cardholders. We consolidated these SPF entities based on the policies issued by FASB Interpretation Nº 46 ("FIN 46") "Consolidation of Variable Interest Entities", revised in December 2003 ("FIN 46R"). In common with other Brazilian financial institutions, we are required to maintain deposit funds with the Central Bank or to purchase and hold Brazilian federal government securities, in the form of compulsory deposits which are as follows: December 31, 2005 2006 Non-interest earning (1) 5,269 6,446 Interest-earning (2) 11,177 12,219 Interest-earning (3) 5,240 4,796 Total 21,686 23,461 (1) Related to demand deposits. (2) Mainly related to saving deposits. (3) Time deposits deposited with the Central Bank in the form of Brazilian government securities. b) The Brazilian government securities related to the compulsory deposits and accounted for under SFAS 115, were as follows: Trading securities Available for sale securities 2005 2006 2005 2006 Amortized cost 3,400 4,795 1,820 - Gross unrealized gains 7 1 14 - Gross unrealized losses - - (1)* Fair value 3,407 4,796 1,833 - Average balance 4,353 4,875 (*) No other than temporary losses have been identified for the gross unrealized loss amount. The amortized cost and the fair value of the securities, by maturity, were as follows: December 31, 2005 2006 Amortized cost Fair Value Amortized cost Fair Value Due in one year or less 383 383 4,572 4,572 Due after one year through five years 3,756 3,778 223 224 Due after five years through ten years 1,081 1,079 - - Total 5,220 5,240 4,795 4,796 Years ended December 31, 2004 2005 2006 Fees charged on checking account services 1,225 1,563 1,879 Asset management fees 879 1,070 1,245 Collection fees 630 718 751 Credit card fees 452 562 929 Interbank fees 261 271 290 Fees for receipt of taxes 189 190 237 Financial guarantees provided on loans 118 125 374 Consortium management 87 149 202 Other(1) 469 489 703 Total 4,310 5,137 6,610 Years ended December 31, 2004 2005 2006 Third-party services 863 1,049 1,343 Financial system services 585 624 634 Communication 578 644 738 Transport 382 409 523 Rents 290 319 343 Advertising and publicity 286 342 443 Maintenance and repairs 266 291 312 Data processing 238 240 329 Office supplies 151 171 165 Water, electricity and gas 128 141 158 Other 290 217 235 Total 4,057 4,447 5,223 Fair Value of Financial Instruments SFAS 107 "Disclosures About Fair Value of Financial Instruments," requires disclosure of the estimated fair values of financial instruments. The fair value of a financial instrument is the amount at which instrument could be exchanged in a current transaction between willing parties other than in a forced or liquidation sale. Quoted market prices, if available, are utilized as estimates of the fair value of financial instruments. Because no quoted market prices exist for certain of our financial instruments the fair values have been derived based on management's assumptions, the amount, timing of future cash flows and estimated discount rates. The estimation methods for individual classifications of financial instruments are described more fully below. Different assumptions could significantly affect these estimates. Accordingly, net realizable values could be different from the estimates presented below. In addition, the estimates are only indicative of the value of individual financial instruments and should not be considered an indication of the fair value of the Company. Cash and cash equivalents The carrying amounts reported in the consolidated balance sheet for cash, due from banks and short-term investments approximate their fair values. Short-term investments include: interest-earning deposits in other banks and federal funds sold and securities purchased under resale agreements, all of which generally have original maturities of 3 months or less and present insignificant risk of changes in value because of interest rate changes. Trading assets, including derivatives and available for sale securities These assets are reported in the consolidated balance sheet at fair value estimated principally based on quoted market prices, when available, or quoted market prices for similar instruments. Held to maturity securities Held to maturity securities are carried at amortized cost. Fair values are based on quoted market prices of comparable securities. Note 6 for further details regarding the amortized cost and fair values of held to maturity securities. Loans Fair values were estimated for groups of similar loans based upon type of loan, credit quality and maturity. The fair value of fixed-rate loans was determined by discounting estimated cash flows using interest rates approximating our current origination rates for similar loans. Where quoted market prices were available, such market prices were utilized as estimates for fair values. For most variable-rate loans, the carrying amounts were considered to approximate fair value. Where credit deterioration has occurred, estimated cash flows for fixed and variable-rate loans have been reduced to incorporate estimated losses. The fair values for performing loans are calculated by discounting scheduled principal and interest cash flows through maturity using market discount rates and yield curves that reflect the credit and interest rate risk inherent in the loan type at each reporting date. The fair values for non-performing loans are based on discounting estimated cash flows using a rate commensurate with the risk associated with the estimated cash flows, the loan's quoted rate, if available, or the value of any underlying collateral. Assumptions regarding cash flows and discount rates are determined using available market information and specific borrower information. The following table presents the carrying amounts and estimated fair values for loans, excluding leases: December 31, 2005 2006 Carrying Fair Carrying Fair amount value amount Value Commercial: Industrial and others 28,690 29,146 32,604 33,014 Import financing 1,100 1,100 1,465 1,465 Export financing 10,067 10,067 12,934 12,934 Real estate construction 523 523 519 519 Individuals: Overdraft 1,572 1,572 1,263 1,263 Real estate 832 832 1,326 1,327 Financing (1) 24,565 24,382 28,039 27,934 Credit card 1,830 1,830 2,652 2,652 Rural credit 6,369 6,371 7,399 7,394 Foreign currency loans 1,900 1,888 1,546 1,542 Public sector 49 49 62 62 Non-performing loans 2,701 726 4,284 1,033 Total loans excluding leases 80,198 78,486 94,093 91,139 (1) Consists primarily of automobile financing and direct consumer financing. Deposits The fair value of fixed-rate deposits with stated maturities was calculated by discounting the difference between the cash flows on a contractual basis and current market rates for instruments with similar maturities. For variable-rate deposits, the carrying amount was considered to approximate fair value. The following table presents the carrying amounts and estimated fair values for deposits: December 31, 2005 2006 Carrying Fair Carrying Fair amount value amount Value Deposits from customers: Demand deposits 16,223 16,223 21,081 21,081 Savings accounts 26,201 26,201 27,613 27,613 Time deposits 32,837 32,817 34,941 34,922 Deposits from financial institutions 146 146 290 290 Total deposits 75,407 75,387 83,925 83,906 Short-term borrowings The carrying values of federal funds purchased and securities sold under repurchase agreements, commercial paper, import and export financing and other short-term borrowings, approximate the fair values of these instruments. Long-term debt Fair values for long-term debt were estimated using a discounted cash flow calculation that applies interest rates offered in the market for similar maturities and terms. The following table presents the carrying amounts and estimated fair values for long-term debt: December 31, 2005 2006 Carrying Fair Carrying Fair amount value amount Value Local onlendings 9,429 9,366 11,642 11,605 Subordinated notes 6,719 7,344 11,949 12,562 Non-convertible debentures 2,625 2,625 2,603 2,603 Debt issued under securitization of payment orders and credit card bill receivables 1,776 1,776 1,344 1,344 Euronotes 1,503 1,475 1,235 1,249 Mortgage notes 827 827 841 841 Obligations under capital lease 368 368 430 430 Other 69 71 78 78 Total 23,316 23,852 30,122 30,712 Off-balance sheet financial instruments The fair value of commitments to extend credit is estimated based on the fees currently charged to enter into similar agreements taking into account the remaining terms of the agreements and the present credit quality to the counterparties. The fair values of standby and commercial letters of credit are based on fees currently charged for similar agreements or on the estimated cost to terminate the agreements or otherwise settle the obligations with the counterparties. The fair value of derivatives is included with trading assets. Note 22(b) for the notional value and estimated fair value of our off-balance sheet derivative financial instruments. On March 12, 2007, our Board of Directors approved a split of our capital stock, in which our shareholders were entitled to one new share for each existing share of the same class. Therefore, all related share amounts have been retroactively adjusted for all periods presented to reflect the stock split, whereby one new share was received in exchange for each share held. At December 31, 2006, our capital were represented by 500,823,456 voting common shares with no par value, 500,817,868 non-voting preferred shares with no par value, 752,000 treasury common shares and 6,400 treasury preferred shares. On March 12, 2007, our Board of Directors approved a split of our capital stock, in which our shareholders were entitled to one new share for each existing share of the same class. Therefore, all related share amounts have been retroactively adjusted for all periods presented to reflect the stock split, whereby one new share was received in exchange for each share held. At December 31, 2006, our capital were represented by 500,823,456 voting common shares with no par value, 500,817,868 non-voting preferred shares with no par value, 752,000 treasury common shares and 6,400 treasury preferred shares. On March 12, 2007, our Board of Directors approved a split of our capital stock, in which our shareholders were entitled to one new share for each existing share of the same class. Therefore, all related share amounts have been retroactively adjusted for all periods presented to reflect the stock split, whereby one new share was received in exchange for each share held. At December 31, 2006, our capital were represented by 500,823,456 voting common shares with no par value, 500,817,868 non-voting preferred shares with no par value, 752,000 treasury common shares and 6,400 treasury preferred shares. On March 12, 2007, our Board of Directors approved a split of our capital stock, in which our shareholders were entitled to one new share for each existing share of the same class. Therefore, all related share amounts have been retroactively adjusted for all periods presented to reflect the stock split, whereby one new share was received in exchange for each share held. At December 31, 2006, our capital were represented by 500,823,456 voting common shares with no par value, 500,817,868 non-voting preferred shares with no par value, 752,000 treasury common shares and 6,400 treasury preferred shares. On March 12, 2007, our Board of Directors approved a split of our capital stock, in which our shareholders were entitled to one new share for each existing share of the same class. Therefore, all related share amounts have been retroactively adjusted for all periods presented to reflect the stock split, whereby one new share was received in exchange for each share held. At December 31, 2006, our capital were represented by 500,823,456 voting common shares with no par value, 500,817,868 non-voting preferred shares with no par value, 752,000 treasury common shares and 6,400 treasury preferred shares. On March 12, 2007, our Board of Directors approved a split of our capital stock, in which our shareholders were entitled to one new share for each existing share of the same class. Therefore, all related share amounts have been retroactively adjusted for all periods presented to reflect the stock split, whereby one new share was received in exchange for each share held. At December 31, 2006, our capital were represented by 500,823,456 voting common shares with no par value, 500,817,868 non-voting preferred shares with no par value, 752,000 treasury common shares and 6,400 treasury preferred shares. EX-100.SCH 3 bbd-20070813.xsd TAXONOMY EXTENSION SCHEMA DOCUMENT EX-100.CAL 4 bbd-20070813_cal.xml TAXONOMY EXTENSION CALCULATION LINKBASE DOCUMENT EX-100.LAB 5 bbd-20070813_lab.xml TAXONOMY EXTENSION LABELS LINKBASE DOCUMENT Brazilian Central Bank Compulsory Deposits Interest Expense - From Financial Institutions Pension Plan Income Pension Plan Operating Expenses Insurance and Pension Plan Selling Expenses Net Income Applicable to Each Class Of Shares Net income - Common shares Net income - Preferred shares Basic Earning Per Share - Common Shares Basic Earning Per Share - Preferred Shares Weighted-Average Shares Outstanding - Common Shares Weighted-Average Shares Outstanding - Preferred Shares Insurance Premiums Other Non-Interest Income Other Trading Revenues Depreciation and Amortization - Other Common Stock Issued - Shares Preferred Shares Issued - Pursuant to Acquisitions - Shares Treasury Stock Cancelled - Value Common and Preferred Stock Issued - Additional Paid in Capital Cash Dividend - Common and Preferred Stock Common and Preferred Stock Purchased and Retired - Retained Earnings Other Increase/(Decrease) in Unappropriated Retained Earnings Common and Preferred Dividends Paid - Cash Common and Preferred Stock Issued Intangible Assets Amortization A recognized intangible asset shall be amortized over its useful life to the reporting entity unless that life is determined to be indefinite. If an intangible asset has a finite useful life, but the precise length of that life is not known, that intangible asset shall be amortized over the best estimate of its useful life. The amortization expense for intangible assets shall be presented in income statement line items within continuing operations. Loss on Foreclosed Assets, Net The gains and losses included in earning resulting from the sale of foreclosed assets. Net Realized Gains on Available for Sale Securities The gains and losses included in earning resulting from the sale of available-for-sale securities Net Increase/(Decrease) in Foreign Exchange Portfolio The net change in foreign exchange portfolio used for operating activities during an accounting period. Cash Dividends Received Cash receipts from equity securities Net Increase/(Decrease) in Brazilian Central Bank Compulsory Deposits Increase/(Decrease) in Others Short-Term Borrowings The net change in reporting entity's short-term borrowings (due within one year or one operating cycle) during an accounting period excluding Increase/(Decrease) in Securities Sold Under Agreements to Repurchase. Loans Transferred to Foreclosed Assets The net value for assets obtained through foreclosure (to possess collateral when the loan borrower defaults) Other Increase/(Decrease) in Stockholders' Equity Interest on Brazilian Central Bank Compulsory Deposits Adjustment Upon Adoption of SFAS158, Net of Taxes Business Acquisitions - Cost of Acquired Company The cost to acquire the company Average Reserve Required by Federal Reserve Average balance to be maintained to satisfy Federal Reserve requirements Loans - Commercial and Industrial The total amount of commercial (money lent to commercial entities rather than consumers) and industrial loans. Constant Currency Remeasurement Presentation of Interest Earning Assets and Interest Bearing Liabilities Equity Investees and Other Investments Litigation Asset management and comission fees Insurance and pension plans policyholders Liability for unpaid claims and claim adjustment expenses Compensated Absences Interest on shareholders' capital Credit card fees Guarantees Provision Perpetual bonds Special-purpose financing entities Brazilian Central Bank Compulsory Deposits Fee and Comission Income Administrative Expenses Fair Value of Financial Instruments EX-100.PRE 6 bbd-20070813_pre.xml TAXONOMY EXTENSION PRESENTATION LINKBASE DOCUMENT -----END PRIVACY-ENHANCED MESSAGE-----