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1 PRIVATE PLACEMENT MEMORANDUM U.S.$40,000,000 DOLLAR DIVERSIFIED PAYMENT RIGHTS FINANCE COMPANY 7.89% Notes, Series BANCO DO BRASIL S.A., as the Originator of Diversified Payment Rights and as the Servicer Each 7.89% Note, Series (each a Series Note ) offered by this private placement memorandum (the Private Placement Memorandum ) will evidence secured indebtedness of Dollar Diversified Payment Rights Finance Company, a limited liability company incorporated under the laws of the Cayman Islands (the SPC ). The Series Notes are being offered for sale in the United States in reliance upon the exemption from registration contained in Section 4(2) (the Offering ) of the United States Securities Act of 1933 (the Securities Act ) and will be eligible for resale in the United States in reliance upon Rule 144A under the Securities Act ( Rule 144A ). The Series Notes (or beneficial interests therein) are not being offered or sold outside the United States, but may be resold outside the United States to non-u.s. persons pursuant to Regulation S under the Securities Act ( Regulation S ). The Series Notes will be secured by substantially all of the assets of the SPC, consisting primarily of the SPC s rights and interests in the Diversified Payment Rights existing on or generated after the date of the initial issuance of the Series Notes (i.e., September 11, 2002, the Closing Date ). The Diversified Payments Rights were purchased from Banco do Brasil S.A., a Brazilian banking institution organized as a sociedade de economia mista and, accordingly, a sociedade anônima under Brazilian law (with its successors, Banco do Brasil or the Bank ), on December 27, 2001 (the Initial Issuance Date ). Interest will accrue on the Series Notes from the Closing Date at the rate of 7.89% per annum (the Series Rate ). Interest will be paid on the 15th day of each March, June, September and December, commencing on December 15, 2002 (or, if any such date is not a New York Business Day, on the next New York Business Day) (each a Payment Date ). Principal of the Series Notes will be distributed in quarterly installments on each Payment Date commencing with the September 15, 2004 Payment Date, but may be paid earlier or later under certain circumstances as described herein. The expected final Payment Date with respect to the Series Notes is the September 15, 2009 Payment Date (the Series Expected Final Payment Date ). The Series Notes initially will be sold to investors at a price equal to 100% of the principal amount thereof. It is a condition to the issuance of the Series Notes that they be rated at least BBB by Standard & Poor s Ratings Services, a division of The McGraw-Hill Companies, Inc. ( S&P ), and Baa2 by Moody s Investors Service, Inc. ( Moody s ) (the Rating Agencies ). A rating is not a recommendation to buy, sell or hold a Series Note (or beneficial interests therein) and is subject to revision or withdrawal in the future by any Rating Agency. Prospective Investors should consider the factors set forth under Risk Factors beginning on page 68 of this Private Placement Memorandum. CERTAIN INFORMATION IN THIS PRIVATE PLACEMENT MEMORANDUM REGARDING THE BANK AND THE SPC IS INCLUDED HEREIN AS OF JUNE 26, NEITHER THE BANK, THE SPC NOR THE PLACEMENT AGENT TAKE ANY RESPONSIBILITY FOR UPDATING SUCH INFORMATION. FOR A LIST OF THOSE SECTIONS OF THIS PRIVATE PLACEMENT MEMORANDUM WHICH INCLUDE INFORMATION SOLELY AS OF JUNE 26, 2002, SEE THE TABLE OF CONTENTS CONTAINED HEREIN. The Series Notes are being placed by ING Financial Markets LLC (the Placement Agent ). It is expected that delivery of the Series Notes will be made in book-entry form only through the facilities of The Depository Trust Company ( DTC ) in New York, New York against payment therefore in immediately available funds. ING Financial Markets The date of this Private Placement Memorandum is September 11, 2002.

2 GENERAL The Series Notes have not been and will not be registered under the Securities Act or under the securities or blue sky laws of any State of the United States or any other United States, Brazilian, Cayman Islands or other jurisdiction. Each Investor, by purchasing the Series Notes (or beneficial interests therein), agrees that the Series Notes (or beneficial interests therein) may be reoffered, resold, pledged or otherwise transferred only upon registration under the Securities Act or pursuant to an exemption therefrom. Any resale or other transfer, or attempted resale or other attempted transfer, that is not made in accordance with the transfer restrictions may subject the transferor and transferee to certain liabilities under applicable securities laws. It is expected that delivery of the Series Notes will be made against payment therefor on or about the Closing Date. The Series Notes offered and sold in reliance upon the exemption from registration contained in Section 4(2) of the Securities Act will be eligible to be resold in the United States to Qualified Institutional Buyers ( QIBs ) in reliance upon Rule 144A and will be represented by beneficial interests in a single, permanent global certificate in fully registered form without interest coupons (the Rule 144A Note ). The Series Notes will be eligible to be resold outside the United States to non-u.s. persons pursuant to Regulation S and any Notes so sold pursuant to Regulation S will be represented by beneficial interests in a single, permanent global note in fully registered form without interest coupons (the Permanent Regulation S Note and, with the Rule 144A Note, the Global Notes ). The Global Notes will be deposited on or about the Closing Date with the Indenture Trustee as custodian for (and registered in the name of a nominee of) DTC. This Private Placement Memorandum has been prepared based upon information supplied by the SPC and Banco do Brasil or obtained from Brazilian authorities or published sources. Certain of such information regarding the SPC and the Bank is included herein as of June 26, Neither the Bank, the SPC nor the Placement Agent or any of its affiliates take any responsibility for updating such information. The Table of Contents included herein identifies those sections of this Private Placement Memorandum which include information solely as of June 26, In addition, each section includes a notice to such effect. Neither the Placement Agent nor any of its affiliates make any representation or warranty as to the accuracy or completeness of the information in this Private Placement Memorandum, and nothing herein shall be deemed to constitute such a representation or warranty by the Placement Agent or any of its affiliates or a promise or representation as to the future performance of the Series Notes, Banco do Brasil, the SPC or the Diversified Payment Rights. This Private Placement Memorandum contains descriptions of certain provisions of the Transaction Documents and various other related documents. This Private Placement Memorandum does not purport to contain complete summaries of the terms of such documents, and all information herein about such documents is qualified in its entirety by reference to such documents. No person has been authorized to give any information or to make any representation other than those in this Private Placement Memorandum and, if given or made, such information or representations must not be relied upon as having been authorized by Banco do Brasil, the SPC, the Indenture Trustee, the Placement Agent or any affiliate or representative of any such person. The delivery of this Private Placement Memorandum at any time does not imply that information herein is correct as of any time after June 26, 2002 or the date hereof, as the case may be. No Series Note (or beneficial interests therein) may be sold without delivery of this Private Placement Memorandum. There is currently no market for the Series Notes being offered hereby and there can be no assurance that one will develop or, if one develops, that it will continue. No application is being made to list the Series Notes on any securities exchange. This Private Placement Memorandum is personal to each prospective Investor and does not constitute an offer to any other person or to the public generally to subscribe for or otherwise acquire the Series Notes (or beneficial interests therein). Distribution of this Private Placement Memorandum to any person i

3 other than the prospective Investors and those persons, if any, retained to advise such prospective Investors with respect hereto is unauthorized, and any disclosure of any of the contents hereof without the prior written consent of Banco do Brasil, the SPC, and the Placement Agent is prohibited. Prospective Investors are not to construe the contents of this Private Placement Memorandum or any previous or subsequent communications from Banco do Brasil, the SPC, the Indenture Trustee, the Placement Agent or any of their respective officers, employees or agents as investment, legal, accounting, regulatory or tax advice. Before investing in any Series Note, a prospective Investor should consult with its own business, legal, accounting, regulatory and tax advisers to determine the appropriateness and consequences of an investment in the Series Notes in such prospective Investor s specific circumstances and arrive at an independent evaluation of the investment based upon, among other things, its own views as to the risks associated with the Series Notes, Banco do Brasil, the SPC and the Diversified Payment Rights. Investors whose investment authority is subject to legal restrictions should consult their legal advisors to determine whether and to what extent the Series Notes constitute legal investments for them. As noted above, it is expected that prospective Investors interested in investing in the Series Notes will conduct their own independent investigation of the risks posed thereby. Officers of Banco do Brasil and the SPC will be available to answer any questions concerning Banco do Brasil, the SPC, the Transaction Documents, the Diversified Payment Rights and the servicing thereof and will make available such other information as such prospective Investors may reasonably request. The Series Notes represent obligations of the SPC, the repayment of which is secured by and limited to substantially all of the SPC s assets, and, except for Banco do Brasil s obligation to pay any Repurchase Price and any Additional Amounts, do not represent interests in or obligations of Banco do Brasil or any other person, including the Placement Agent, the Indenture Trustee and any of their respective affiliates. Neither the Series Notes nor the Diversified Payment Rights are insured or guaranteed by any governmental agency in the United States, the Federative Republic of Brazil ( Brazil ), the Cayman Islands or elsewhere. The Series Notes have not been approved or disapproved by the U.S. Securities and Exchange Commission (the SEC ), any State securities commission or any other United States, Brazilian, Cayman Islands or other regulatory authority, nor have any of the foregoing authorities passed upon or endorsed the merits of this offering or the accuracy or adequacy of this Private Placement Memorandum. Any representation to the contrary is a criminal offense. The distribution of this Private Placement Memorandum and the offering of the Series Notes (and beneficial interests therein) in certain jurisdictions may be restricted by law. Persons that come into possession of this Private Placement Memorandum are required by Banco do Brasil, the SPC and the Placement Agent to inform themselves about and to observe any such restrictions. This Private Placement Memorandum does not constitute an offer to sell or the solicitation of an offer to buy the Series Notes (or beneficial interests therein) in any jurisdiction in which such offer or solicitation is unlawful. In particular, there are restrictions on the distribution of this Private Placement Memorandum and the offer and sale of the Series Notes in the United States. ii

4 FORWARD-LOOKING STATEMENTS This Private Placement Memorandum contains statements that constitute forward-looking statements. These statements appear in a number of places in this Private Placement Memorandum and include statements regarding the intent, belief or current expectations of Banco do Brasil and its officers with respect to (among other things) the financial condition of Banco do Brasil, the volume and characteristics of Diversified Payment Rights and the extent of Banco do Brasil s relationships with Payors. Such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and actual results may differ from those in the forward-looking statements as a result of various factors. The information in this Private Placement Memorandum, including the information under Risk Factors, Banco do Brasil s Payment Order Business, Management s Discussion and Analysis of Financial Condition and Results of Operations, Results and Analysis For The Three-Month Periods Ended March 31, 2002 and 2001, Recent Developments and Analysis For The Six-Month Periods Ended June 30, 2002 and 2001 and Business of Banco do Brasil S.A. identifies important factors that could cause such differences (including a change in overall economic conditions in Brazil, a change in Banco do Brasil s financial condition or its Payment Order business, the change in value of the Brazilian Real relative to the U.S. Dollar and the effect of new legislation or government directives in Brazil). Moreover, no assurances can be given that any of the historical information, data, trends or practices mentioned and described in this Private Placement Memorandum are indicative of future results or events. iii

5 FINANCIAL INFORMATION The financial statements of Banco do Brasil for the years ended December 31, 2001, 2000 and 1999, the six-month periods ended June 30, 2002 and 2001 and the three-month periods ended March 31, 2002 and 2001 included in this Private Placement Memorandum have been prepared in accordance with the Lei das Sociedades por Ações (Law 6,404/76, as amended), the corporate law of Brazil, which sets forth the accounting method (the Corporation Law Method ) required to be followed by all Brazilian corporate entities, and the rules and regulations of Banco Central do Brasil (the Central Bank ) and the CVM (together, with the Corporation Law Method, Brazilian Corporate Legislation ). Brazilian Corporate Legislation differs from generally accepted accounting principles in the United States ( U.S. GAAP ) and SEC guidelines applicable to banking institutions. See Principal Differences in Accounting Principles Between Brazil and The United States of America in Appendix B of this Private Placement Memorandum. No reconciliation to U.S. GAAP of any of the financial statements presented in this Private Placement Memorandum has been prepared for the purposes of this Private Placement Memorandum or for any other purposes. There can be no assurance that a reconciliation would not identify material quantitative differences between the financial statements of Banco do Brasil as prepared on the basis of the Brazilian Corporate Legislation and such financial statements as prepared on the basis of U.S. GAAP. The annual financial statements included in this Private Placement Memorandum for the years ended December 31, 2000 and 1999 have been audited by Trevisan Auditores ( Trevisan ), a member of Grant Thornton International Public Accountants. As of January 1, 2001, Banco do Brasil appointed PricewaterhouseCoopers Auditores Independentes ( PricewaterhouseCoopers ) as its independent accountants in accordance with Instruction No. 308 of May 14, 1999 issued by the CVM requiring corporate entities to change independent auditors every four years. Accordingly, the annual financial statements included herein for the year ended December 31, 2001 and the interim financial statements for the six-month periods ended June 30, 2002 and 2001 have been audited by PricewaterhouseCoopers. The financial statements for the three-month periods ended March 31, 2002 and 2001 included herein have been reviewed by PricewaterhouseCoopers in accordance with Brazilian standards for a limited review of interim financial statements. Unless otherwise indicated, the financial information presented herein is based upon Banco do Brasil s financial statements for: (a) the fiscal years ended December 31, 2001 and 2000 and the six-month periods ended June 30, 2002 and 2001 (the Audited Financial Statements ) and (b) the three-month periods ended March 31, 2002 and In addition, information derived from the financial statements as of and for (a) the three-month periods ended March 31, 2002 and 2001 are set forth in Results and Analysis For The Three-Month Periods Ended March 31, 2002 and 2001 and (b) the six-month periods ended June 30, 2002 and 2001 are set forth in Recent Developments and Analysis For The Six-Month Periods Ended June 30, 2002 and Certain names in the line items in the financial statements for the periods ended December 31, 2001, March 31, 2002, March 31, 2001, June 30, 2002 and June 30, 2001 and attached as appendices in this Private Placement Memorandum are different from the analogous terms used in the financial statements for the years ended December 31, 2000 and 1999 due to the review of such terms by Banco do Brasil after the change in independent auditors as of the beginning of References to Brazilian Real, Brazilian Reais, Real, Reais or R$ in this Private Placement Memorandum are to Brazilian Reais, references to U.S.$, $, U.S. Dollar or Dollars in this Private Placement Memorandum are to United States Dollars. Certain figures included in this Private Placement Memorandum have been subject to rounding adjustments. Accordingly, figures shown for the same category presented in different tables may vary slightly and figures shown as totals in certain tables may not be an arithmetic aggregation of the figures that precede them. iv

6 ENFORCEMENT OF JUDGMENTS AND SERVICE OF PROCESS Banco do Brasil is a sociedade de economia mista and, accordingly, a sociedade anônima under Brazilian law. All of the directors and officers of Banco do Brasil named herein reside outside the United States and all or a significant portion of the assets of such persons may be, and substantially all of the assets of Banco do Brasil are, located outside the United States. As a result, it may not be possible for Investors to effect service of process upon Banco do Brasil or such persons in the United States or elsewhere outside Brazil or to enforce against them in the courts of jurisdictions other than Brazil any judgments obtained in such courts, including judgments predicated upon the civil liberties provisions of the securities laws of the United States or that are predicated upon the laws of such other jurisdictions outside Brazil. Judgments of U.S. courts for civil liabilities predicated upon the federal securities laws of the United States, subject to certain requirements described below, may be enforced in Brazil. A judgment against Banco do Brasil or the persons described above obtained outside of Brazil would be enforceable in Brazil against Banco do Brasil or such person without reconsideration of the merits upon confirmation of that judgment by the Brazilian Federal Supreme Court. That confirmation, generally, will occur if the foreign judgment: (a) fulfills all formalities required for its enforceability under the laws of the country where the foreign judgment is granted, (b) is issued by a competent court after proper service of process, (c) is not subject to appeal, (d) is authenticated by a Brazilian consular office in the country where the foreign judgment is issued and is accompanied by a sworn translation into Portuguese and (e) is not contrary to Brazilian national sovereignty, public policy or public morality (as set forth in Brazilian law). Notwithstanding the foregoing, no assurance can be given that confirmation will be obtained, that the process described above can be conducted in a timely manner or that a Brazilian court would enforce a monetary judgment for violation of the U.S. securities laws with respect to the Series Notes. Banco do Brasil has been advised by its Brazilian counsel that original actions predicated upon the federal securities laws of the United States may be brought in Brazilian courts and that, subject to Brazilian public policy and national sovereignty, Brazilian courts may enforce civil liabilities in such actions against Banco do Brasil, its directors, certain of its officers and the advisors named herein. Pursuant to Article 835 of the Brazilian Code of Civil Procedures, a plaintiff (whether Brazilian or non-brazilian) who resides outside Brazil during the course of litigation in Brazil (and who does not have immovable assets in Brazil to assure payment) must give a pledge to cover court costs and legal fees of the defendant (unless excepted in certain limited circumstances under Article 836 of such code). This requirement does not apply to enforcement of foreign judgments which have been duly confirmed by the Brazilian Federal Supreme Court. AVAILABLE INFORMATION The SPC and the Bank will furnish, upon the request of any registered or beneficial owner of a Series Note (a Series Noteholder or Series Note Owner, respectively), such information as is specified in paragraph (d)(4) of Rule 144A: (a) to such Series Noteholder or Series Note Owner, (b) to a prospective purchaser of such Series Note (or beneficial interests therein) who is a QIB designated by such Series Noteholder or Series Note Owner or (c) to the Indenture Trustee for delivery to such Series Noteholder or Series Note Owner or such prospective purchaser so designated, in each case in order to permit compliance by such Series Noteholder or Series Note Owner with Rule 144A in connection with the resale of such Series Note (or beneficial interests therein) in reliance upon Rule 144A unless, at the time of such request, the SPC is subject to the reporting requirements of Section 13 or 15(d) of the U.S. Securities Exchange Act of 1934 (the Exchange Act ), or is included in the list of foreign private issuers that claim exemption from the registration requirements of Section 12(g) of the Exchange Act (and therefore is required to furnish to the SEC certain information pursuant to Rule 12g3-2(b) under the Exchange Act). A Series means a Note (or series of Notes issued under a common Indenture Supplement) (including the Series Notes) and any corresponding Certificates. An Investor means each Noteholder, Certificateholder and Beneficial Owner. Noteholder means a registered holder of any Notes (e.g., a Series v

7 Noteholder). Certificateholder means a registered holder of any Certificates. Certificates means each certificate issued under a trust agreement with respect to which the trust is the registered holder of one or more Note(s). Beneficial Owner means a holder of a beneficial interest in a Certificate or a Note (e.g., the Series Note Owners). vi

8 TABLE OF CONTENTS 1 GENERAL... i FORWARD-LOOKING STATEMENTS...iii FINANCIAL INFORMATION... iv ENFORCEMENT OF JUDGMENTS AND SERVICE OF PROCESS... v AVAILABLE INFORMATION... v SUMMARY *... 1 Banco do Brasil S.A. *...1 Diagrams of the Transaction... 6 Summary of Terms PRESENTATION OF FINANCIAL INFORMATION AND SUMMARY FINANCIAL INFORMATION BANCO DO BRASIL S.A. CONSOLIDATED FINANCIAL INFORMATION AS AT AND FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND BANCO DO BRASIL S.A. CONSOLIDATED CAPITALIZATION RISK FACTORS Risk Factors Relating to the Diversified Payment Rights Risk Factors Relating to Banco do Brasil * Risk Factors Relating to Brazil * Risk Factors Relating to the Series Notes Certain Other Risk Factors THE SPC BANCO DO BRASIL S PAYMENT ORDER BUSINESS * USE OF PROCEEDS MATURITY ASSUMPTIONS FOREIGN EXCHANGE RATES AND EXCHANGE CONTROLS * MANAGEMENT S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION * RESULTS AND ANALYSIS FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2002 AND 2001 * RECENT DEVELOPMENTS AND ANALYSIS FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 2002 AND BUSINESS OF BANCO DO BRASIL S.A. * SUBSIDIARIES * MANAGEMENT AND EMPLOYEES * OWNERSHIP OF BANCO DO BRASIL * DESCRIPTION OF THE SERIES NOTES AND THE TRANSACTION DOCUMENTS CERTAIN LEGAL ASPECTS RELATING TO THE DIVERSIFIED PAYMENT RIGHTS UNDER BRAZILIAN AND NEW YORK LAW TAXATION CERTAIN ERISA CONSIDERATIONS PLAN OF DISTRIBUTION TRANSFER RESTRICTIONS LEGAL MATTERS GENERAL INFORMATION INDEPENDENT ACCOUNTANTS INDEX OF DEFINED TERMS Page 1 Those sections listed in this Table of Contents that are followed by an asterisk contain information as of June 26, Neither the Bank, the SPC nor the Placement Agent take any responsibility for updating such information. vii

9 APPENDIX A: AUDITORS REPORTS AND FINANCIAL STATEMENTS OF BANCO DO BRASIL S.A...A-1 APPENDIX A-1: AUDITORS REPORT AND FINANCIAL STATEMENTS OF BANCO DO BRASIL S.A. FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 2002 AND A-1-1 APPENDIX A-2: REPORT AND FINANCIAL STATEMENTS OF BANCO DO BRASIL S.A. FOR THE THREE MONTH PERIODS ENDED MARCH 31, 2002 AND A-2-1 APPENDIX A-3: AUDITORS REPORT AND FINANCIAL STATEMENTS OF BANCO DO BRASIL S.A. AUDITED FOR THE YEARS ENDED DECEMBER 31, 2001 AND A-3-1 APPENDIX A-4: AUDITORS REPORT AND FINANCIAL STATEMENTS OF BANCO DO BRASIL S.A. AUDITED FOR THE YEARS ENDED DECEMBER 31, 2000 AND A-4-1 APPENDIX B: PRINCIPAL DIFFERENCES IN ACCOUNTING PRINCIPLES BETWEEN BRAZIL AND THE UNITED STATES OF AMERICA *... B-1 APPENDIX C: DESCRIPTION OF THE FEDERATIVE REPUBLIC OF BRAZIL *... C-1 APPENDIX D: THE BRAZILIAN FINANCIAL SYSTEM *...D-1 1 Those sections listed in this Table of Contents that are followed by an asterisk contain information as of June 26, Neither the Bank, the SPC nor the Placement Agent take any responsibility for updating such information. viii

10 SUMMARY The following summary should be read in conjunction with, and is qualified in its entirety by, the detailed information and the financial statements and notes thereto appearing elsewhere in this Private Placement Memorandum. Prospective Investors should see Risk Factors for a discussion of certain factors that should be considered in connection with an investment in the Series Notes. Reference is made to the Index of Defined Terms for the location of the definitions of certain capitalized terms. Banco do Brasil S.A. This section of the Private Placement Memorandum contains information as of June 26, Neither the Bank, the SPC nor the Placement Agent take any responsibility for updating such information. Introduction Banco do Brasil, a banking institution, is a corporation (sociedade anônima) duly incorporated with unlimited duration under the laws of Brazil. It is organized as a sociedade de economia mista (a company with government-owned and privately-owned shares). Banco do Brasil has been for many years the largest commercial bank in Brazil ranked by consolidated assets. Banco do Brasil had, as at December 31, 2001, 8,468 outlets (of which 3,045 were full-service branches) located throughout Brazil and 31 branches, agencies and representative offices outside Brazil. In addition, at December 31, 2001, Banco do Brasil was the largest asset manager in Brazil with R$61.4 billion in assets under management (R$48.2 billion at December 31, 2000 and R$33.5 billion at December 31, 1999). The head office of Banco do Brasil is located at SBS Edifício Sede III, CEP , Brasília, DF, Brazil ( Head Office ). Banco do Brasil and its subsidiaries provide a full range of banking products and financial services, including rural, industrial, commercial and consumer lending; the taking of deposits; trade financing, leasing, foreign exchange brokerage, credit card and travelers check services; investment banking, funds management, insurance, pension funds management, capital markets services, and insurance brokerage. At the general meeting of Banco do Brasil s shareholders on April 30, 2001, the shareholders voted to change Banco do Brasil from a commercial bank to a multiple banking institution, thus permitting Banco do Brasil to directly, as opposed to through subsidiaries and other affiliates, participate in securities, leasing and other markets outside of commercial banking. This conversion was already approved by the Central Bank. Between 1996 and 1998 Banco do Brasil restructured its asset portfolio and reorganized its infrastructure (the Restructuring Program ). This restructuring included an upgrade of the technology utilized by Banco do Brasil and automation of various processes, allowing Banco do Brasil to manage more than 13.8 million accounts. Banco do Brasil acts as a financial agent of the Brazilian Federal Government (the Federal Government ) and its agencies in carrying out fiscal and social programs. Banco do Brasil has historically been a significant source of credit for Brazilian industry, and has acted as a financial intermediary and as a collection agent for the Brazilian National Social Security Institute (Instituto Nacional de Seguridade Social, the INSS ) and for the Federal Government in relation to taxes, and as the Federal Government s agent in international trade. Banco do Brasil is also the Federal Government s principal channel for providing credit to the Brazilian agricultural sector and continues to have strong links to the Federal Government and the public sector. In particular, Federal Government payments to contractors are made through Banco do Brasil and approximately 1.5 million Federal Government employees (except those related to government-owned companies), 550 thousand state employees and 1.6 million municipal employees salaries are paid via direct deposit to retail customer accounts maintained at Banco do Brasil. 1

11 At December 31, 2001, Banco do Brasil had total consolidated assets of R$165.1 billion (R$138.4 billion at December 31, 2000 and R$126.5 billion at December 31, 1999) and total shareholders equity of R$8.7 billion (R$8.0 billion at December 31, 2000 and R$7.3 billion at December 31, 1999). For the year ended December 31, 2001 Banco do Brasil recorded a net profit of R$1.1 billion (R$974.2 million at December 31, 2000 and R$843.1 million at December 31, 1999). Certain information included in this section is derived from unaudited management accounting records. See Risk Factors Risk Factors Relating to Banco do Brasil Presentation of Financial Information. Ownership The Brazilian National Treasury (Tesouro Nacional, the National Treasury ) owned 71.8% of Banco do Brasil s aggregate share capital at December 31, The balance is owned by public and private sector shareholders. As part of continuing efforts to make Banco do Brasil more commercially competitive, on April 11, 2002 the National Treasury determined to sell at least 16% of its current equity holdings in Banco do Brasil in order to allow Banco do Brasil to list its securities on the Novo Mercado segment (the Novo Mercado ) of the Bolsa de Valores de São Paulo (the São Paulo Stock Exchange ) for purposes of public trading and liquidity. The Novo Mercado rules require Banco do Brasil to maintain a minimum public float equivalent of 25% of its capital. The sale of the National Treasury s stake is expected to take place by September In connection with the sale, Banco do Brasil plans to conduct an exchange offer to convert its shares of preferred stock into common shares. Each holder of preferred shares will receive 1.1 common shares for every preferred share owned. The National Treasury will retain control of Banco do Brasil following the sale of at least 16% of its stake. At an extraordinary shareholders meeting held on June 7, 2002, the shareholders of Banco do Brasil voted to approve the conversion of preferred shares into common shares. At December 31, 2001, Banco do Brasil had approximately 399,198 million common shares and approximately 312,798 million preferred shares outstanding. Banco do Brasil s common shares have been traded publicly on Brazilian stock exchanges since 1906; its preferred shares have been traded on those exchanges since At December 31, 2001, Banco do Brasil had 349,838 common and preferred shareholders. As at December 31, 2001, of Banco do Brasil s aggregate share capital, 71.8% was owned by the National Treasury, 13.7% was owned by PREVI, a private pension fund whose members are the employees of Banco do Brasil, 5.8% was owned by BNDES Participações S.A. ( BNDESpar ) and other investors owned the remaining 8.7% (71.8%, 13.7%, 5.9% and 8.6%, respectively, at December 31, 2000 and 71.8%, 13.6%, 5.6% and 9.0%, respectively, at December 31, 1999). The following table sets out the principal shareholders of each class of Banco do Brasil s shares at December 31, Common Shareholders December 31, 2001 % Tesouro Nacional (National Treasury) PREVI BNDESpar Other Pension Funds Individuals

12 December 31, 2001 Foreign Capital Other Legal Entities Preferred Shareholders December 31, 2001 % Tesouro Nacional (National Treasury) PREVI BNDESpar Other Pension Funds Individuals Foreign Capital Other Legal Entities Brazilian banking and corporate laws and the bylaws of Banco do Brasil require that a compulsory minimum dividend of 25.0% of net income for the prior year, adjusted for certain inclusions and exclusions as permitted by Brazilian Corporate Legislation, be distributed to shareholders semi-annually. Pursuant to Banco do Brasil s bylaws, dividends are determined on the basis of Banco do Brasil s semi-annual results. The National Treasury and other public sector shareholders are treated in the same manner as private shareholders with respect to dividend/interest on equity investment payments. Strategy Banco do Brasil s strategy is to operate a full service bank that provides its customers with high quality services and its shareholders with an acceptable return on their investments, all contributing to Brazil s development. In accordance with this strategy, Banco do Brasil has focused its operations on responding to the changing needs of its clients and has concentrated on activities in which Banco do Brasil enjoys competitive advantage supported by its technological investments and the modernization of its services. Banco do Brasil continues to place emphasis on its retail banking activities with the intention of providing its retail clients with a full range of retail banking services, including insurance and asset management services. Banco do Brasil s asset management activities are carried out through its subsidiary BB Distribuidora de Titulos e Valores Mobiliários S.A. ( BB DTVM ). Banco do Brasil s activities are primarily focused on meeting the needs and requirements of its clients. In 2001, Banco do Brasil invested R$600.1 million in technology and infra-structure (R$695.0 million for the year ended December 31, 2000). Banco do Brasil has budgeted investments of R$969.6 million for these purposes in Banco do Brasil views such investments as essential to enable it to compete with private sector retail and commercial banks. See Business of Banco do Brasil S.A. Technological Resources. Relationship with the Government Since its foundation in 1808, Banco do Brasil has been controlled by the Federal Government. At December 31, 2001, the National Treasury owned 71.8% of its aggregate share capital (see Ownership ). As part of continuing efforts to make Banco do Brasil commercially more competitive, in April 11, 2002 the National Treasury determined to sell at least 16% of its current equity holdings in the Bank in order to allow 3

13 Banco do Brasil to list its securities on the Novo Mercado for purposes of public trading and liquidity. The sale of the National Treasury s stake is expected to take place by the end of 2002 (see Summary Banco do Brasil Ownership ). In 1990, the Federal Government instituted a policy of reducing its participation in the economy and began privatizing certain state enterprises. However, Law No. 8,031 of April 12, 1990, which established the privatization program, specifically excluded Banco do Brasil from privatization and Banco do Brasil is not aware of any official proposals to change this law. As a result of the measures negotiated with the International Monetary Fund ( IMF ) (see Risk Factors Relating to Brazil IMF Financial Package and Management s Discussion and Analysis of Results of Operations and Financial Condition Brazilian Economic Conditions IMF Financial Package ), the Federal Government has agreed to review the role of all Federal Government financial institutions, including Banco do Brasil, in the economy of Brazil and has established a special commission within the Ministry of Finance for this purpose. Banco do Brasil cannot predict the ultimate outcome of this review, the recommendations to be put forward by the special commission or whether the Federal Government will choose to implement these recommendations. The Minister of Finance, acting for the Federal Government, is responsible for overseeing Banco do Brasil s operations on behalf of the controlling shareholder, the National Treasury, and the Federal Government exercises control over the composition of Banco do Brasil s most important governing bodies. The Minister of Finance nominates the chairman and two other members of the seven-member Administrative Council. The Chairman of Banco do Brasil, who also serves as Chairman of the Board of Directors, is appointed by the President of Brazil. The remaining members of the Board of Directors are elected by the Administrative Council. See Management and Employees. Prior to 1965, Banco do Brasil performed the functions of Brazil s central bank. Between 1965 and 1986, while increasing its role as a commercial and development bank, it continued to act as an arm of the monetary authorities, with its credit operations being funded substantially by expansion of the monetary base through the movement of an open account with the Central Bank. With the closing of this account in February 1986 and the termination of Banco do Brasil s role as an arm of the monetary authorities, Banco do Brasil was obliged to become more self-sufficient in attracting funding. The change did not, however, diminish Banco do Brasil s strategic importance within the financial system in Brazil. As well as being a primary banker to the Federal Government, Banco do Brasil participates in the process of tax collection on behalf of the Federal Government and serves as paying agent for the INSS. Moreover, because of its size and extensive branch network, Banco do Brasil was, and continues to be, able to exercise considerable influence over the banking system as a whole. In several markets, particularly commercial foreign exchange, time deposits and short-term commercial lending, Banco do Brasil s decisions, including those regarding rate setting, have traditionally influenced the entire Brazilian financial market. Banco do Brasil continues to play a significant role in the Brazilian economy and to perform its historic social and developmental functions, but with a view to being selective in choosing the transactions in which it wishes to participate in order to select those from which satisfactory earnings can be obtained. Such transactions have included and will in the future likely include acting as an agent of: (a) the National Treasury and the INSS in the collection of Federal Government and state taxes and the payment of state pension benefits; and (b) for the National Treasury and other Federal Government agencies in connection with a number of lending programs, each with specific funding directed towards particular regions or sectors of economic activity; providing basic banking services to remote areas of Brazil in order to ensure that all areas of the country have some form of banking services; and assisting the Federal Government in implementing the privatization of formerly state-owned banks by managing their securities portfolios and acquiring assets which may not be attractive to potential investors until these assets are ultimately purchased by the Federal Government. In addition, Banco do Brasil continues to play a key role in the implementation of rural policy in Brazil, primarily through the financing of some rural lending on preferential terms, but also by acting as an agent of the Federal Government in implementing crop stabilization policies and by redirecting funds deposited with other banks which are required by the Federal Government to be lent to the rural sector; and formulating and 4

14 implementing lending programs directed to particular economic sectors, such as small and very small businesses or regions which have traditionally experienced difficulties in obtaining access to credit. Management On August 27, 2001, a shareholders meeting of Banco do Brasil approved the new management structure of Banco do Brasil with a view to increase its compliance with corporate governance rules and adjust Banco do Brasil s structure to its client segmentation (retail, wholesale, government and asset management). Under this new structure, Banco do Brasil is managed by up to 30 directors: one president, up to seven vice-presidents and up to twenty-two directors. The directors (presently 16) are each responsible for one of the former UENs, UAs and UFs. Throughout the document we will call each area of Banco do Brasil that was formerly one of the UENs, UAs or UFs a Division or Unit of Banco do Brasil. The Divisions of Banco do Brasil are: Distribution Channels, Retail, Commercial, International, Infrastructure, Technology, Government, Agribusiness, Credit, Human Resources, Finance, Capital Markets and Investments, Controlling, Internal Controls, Marketing and Communication and Legal. Banco do Brasil has also 8 Units: Internal Audit, Executive Secretariat, Strategy and Organization, Risk Management, Accounting, Restructuring of Operational Assets, IT and Software Development (the latter under Technology). See Business of Banco do Brasil S.A. Organizational Structure. Banco do Brasil s New York Branch Banco do Brasil opened its New York Branch (the New York Branch ) in 1969 initially because of the concentration of Banco do Brasil s financial and commercial transactions abroad therein and for the purpose of providing banking services to Brazilian diplomats and other Brazilian customers in the United States. As Brazilian entities became larger participants in international trade, the New York Branch s business expanded to the point that its primary operations today are related to trade, foreign exchange and other commercial transactions. To support these important businesses, Banco do Brasil is the only Brazilian bank with direct access to both the Fedwire and CHIPS payment systems. Banco do Brasil is one of the few Brazilian banks with a branch office in the United States and, in addition to its New York Branch, currently operates in North America through its Miami agency and its Chicago, Los Angeles and Washington, D.C. representative offices (each of which is managed from the New York Branch). Banco do Brasil s U.S. operations represent a stable and low cost source of foreign currency funding for Banco do Brasil, and the New York Branch is among the top three sources of such amounts for Banco do Brasil along with its London and Japanese offices. Banco do Brasil is able to use the Dollars obtained from its deposit and payment order businesses in the United States and apply these funds to providing export-related financing to Brazilian exporters and otherwise to fund the operations of Banco do Brasil. 5

15 Diagrams of the Transaction The diagrams on the following pages illustrate (in simplified form) the structure of the transactions effected by the Transaction Documents. Of particular note, the diagrams reflect how Collections on the Diversified Payment Rights are paid into the Collateral Account for further payment to Investors. A more detailed description of the transactions effected by the Transaction Documents, the Payment Orders and the Diversified Payment Rights is found in Summary of Terms and Banco do Brasil s Payment Order Business. Potential Investors are advised to review such sections in order to understand more fully the characteristics of the transactions effected by the Transaction Documents, the Payment Orders and the Diversified Payment Rights. Transaction Structure The transaction involves: (1) the sale of Banco do Brasil s right, title and interest in and under (but none of its obligations under) the Diversified Payment Rights to the SPC and (2) the purchase of which the SPC finances, in part, by issuing the Series Notes to the Series Noteholders. Banco do Brasil has retained all of its obligations to make applicable payments to the Payment Order beneficiaries. Sale of Diversified Payment Rights 1 The SPC Diversified Payment Rights US$ Cayman Islands 2 Banco do Brasil Brazil Series Series Notes, Series Notes and Notes Series Notes US$ Multi-Country Investors 1. Pursuant to the Sale Agreement, Banco do Brasil has sold to the SPC all its current and future Diversified Payment Rights in consideration for cash (in the form of the Initial Payment from the proceeds of 6

16 the issuance of $450,000,000 aggregate principal amount of 7.89% Notes, Series on the Initial Issuance Date and the issuance of $300,000,000 aggregate principal amount of Floating Rate Notes, Series on July 3, 2002), a promise by the SPC (evidenced by the Originator Note) to pay to Banco do Brasil the amount of Collections on Payment Orders in excess of the SPC s debt service and other obligations and a promise of the SPC to pay to Banco do Brasil any Additional Payments (including the proceeds of this Offering). The sale of the Diversified Payment Rights was effected pursuant to the Bill of Sale. The Sale Agreement is governed by New York law and the Bill of Sale is governed by Brazilian law. See Description of the Series Notes and the Transaction Documents Sale Agreement. 2. Pursuant to the Indenture and an Indenture Supplement, the SPC will issue the Series Notes to Investors. See Description of the Series Notes and the Transaction Documents Series Notes, Series Indenture Supplement and Indenture. Servicing and Cash Flow Pursuant to a servicing agreement, dated as of the Initial Issuance Date, among Banco do Brasil, the SPC and the Indenture Trustee (the Servicing Agreement ), Banco do Brasil has agreed to process the Collections on the Diversified Payment Rights and otherwise service the Payment Orders. 7

17 Diversified Payment Rights Cash Flow 1 Payors Multi-Country US$ US$ 3 Payor Bank, as a Designated Depositary Bank Concentration Account Banco do Brasil, New York Branch, as a Designated Depositary Bank Concentration Account Head Office Nostro Account at Designated Depositary Bank Banco do Brasil United States Funds in Excess of Required Amount United States 2 US$ US$ Daily Up Sweep to Required Up Amount to Required Amount Cayman Islands Series Series Series Notes Notes, Series Notes Notes and Series Notes Multi-Country The SPC Collateral Account & Series Accounts of Indenture Trustee 5 Quarterly US$ Debt Service Payments Head Office & Branches Brazil 4 R$ Amounts Paid to Beneficiaries by Crediting Account, Cash or Check Investors Brazilian Beneficiaries 8

18 1. In the normal course of business, companies and other payors outside of Brazil initiate transactions in the financial markets for the payment of amounts to beneficiaries in Brazil through Banco do Brasil, thereby generating Payment Orders. See Banco do Brasil s Payment Order Business Diversified Payment Rights. 2. Pursuant to the Servicing Agreement, the Servicer is responsible for: (a) receiving Payment Orders, (b) recording all pertinent information relating to the Payment Orders in the same fashion that it currently handles its Payment Order flows (sender, beneficiary and local account number, amount, timing, etc.) and (c) otherwise servicing the Diversified Payment Rights for the SPC. Pursuant to an Acknowledgment, the New York Branch, during the course of each New York Business Day, wires all amounts in its Concentration Account to the Collateral Account until the Required Amount for the next Payment Date has been accumulated therein (and/or in the applicable Series Accounts). Within one Business Day of receipt, without setoff or counterclaim on account of claims against Banco do Brasil, the SPC, the Indenture Trustee or any other person, each Designated Depositary Bank (other than the New York Branch), unless instructed otherwise by the Indenture Trustee, transfers all amounts received in such bank s Concentration Account in respect of Diversified Payment Rights to Banco do Brasil s own account at such Designated Depositary Bank (which payment will be a payment to Banco do Brasil under the Originator Note). If, by the fifth Business Day of any Interest Period (or, during the Controlled Amortization Period with respect to any Series, the tenth Business Day), at least the Required Amount for the next Payment Date (or Early Amortization Payment Date, if applicable) is not on deposit in the Collateral Account and the Series Accounts (in the aggregate), then the Indenture Trustee will promptly (and, in any event, by no later than the next Business Day) deliver notice thereof to each rating agency rating any Series and any entity providing a financial guaranty insurance policy (each, an Enhancer ) for such Series and instruct each Designated Depositary Bank (other than the New York Branch which is already sending funds from the Concentration Account to the Collateral Account as set forth above) to, by no later than the next Business Day, begin transferring all amounts received in such bank s Concentration Account to the Collateral Account until such time as the Indenture Trustee notifies such Designated Depositary Bank otherwise. On each New York Business Day, the Indenture Trustee allocates the amounts in the Collateral Account to pay the various components of the Required Amount, including depositing the appropriate amounts payable to each Series into the applicable Series Account. See Description of the Series Notes and the Transaction Documents Indenture Application of Collections. An Interest Period means, for each Series: (a) initially, the period from and including the related Issuance Date to but excluding the first Payment Date (or, if so indicated in the applicable Indenture Supplement, second Payment Date) thereafter, and (b) thereafter, the period from and including the preceding Payment Date to but excluding the following Payment Date. A Business Day means a day other than a Saturday, Sunday or other day on which banking institutions in New York, New York or São Paulo, Brazil are permitted or required by applicable law to remain closed; provided that, with respect to any actions taken or to be taken by the Indenture Trustee, such term means a day in the Cayman Islands other than a Saturday, Sunday or other day on which the Indenture Trustee is not open for business. A New York Business Day means a day other than a Saturday, Sunday or other day on which banking institutions in New York, New York are permitted or required by applicable law to remain closed. An Issuance Date means, with respect to any Series, the date of the issuance of the applicable Note(s). 3. Collections other than the amounts transferred to the Collateral Account (as described above in paragraph 2) will be applied as a payment by the SPC to Banco do Brasil under the Originator Note. See Description of the Series Notes and the Transaction Documents Indenture Application of Collections. 4. Banco do Brasil, from its own funds, pays to each beneficiary an amount equal to the Reaisequivalent of the Dollar value of the applicable Payment Order (less the commission retained by Banco do Brasil). See Summary Summary of Terms Covenants of Banco do Brasil, clause (e). Banco do Brasil generally does so by crediting the account of the beneficiary maintained with Banco do Brasil. If the 9