• Under the Operational Demanded/ Social Security Program item are reported In Advance Amortization Contributions, paid by Banco do Brasil in accordance to a deal signed with PREVI on Dec. 24, 1997, for the cashing of retirement benefits of a group of the Bank’s employees hired until April 14th, 1967 and who retired after that date.

• Under the Contingencies Demanded item are reported provisions for values in legal disputes or risk of loss. These provisions are calculated based on internal and external legal evaluations, and are further detailed on the Explanatory Notes, item 7.2. Not to mention that there are other imparted losses on the Investments Program, also commented on the Explanatory Notes, items 6.2.1 and 6.2.2, reported under the internal accounts of the Investments Program and deducted from the portfolio balance.

• On the Actuarial Report it was pointed out the need for a modification on the Mortality Table, given the identification of a new surge of growth in the life expectancy of the associates. The research for implementation of a new Table will be carried on jointly with Banco do Brasil throughout 2005.

• Mathematic Provisions were calculated agreeing to the Actuarial Report. The most significant change on this item was the modification on the Plan’s indicator, which, from June 2004 onwards, started to be indexed by the INPC index.

• Plan 1 reached a positive result for the second year in a row, which resulted on an accumulated surplus of R$9,76 billion.

• The growth of liability has occurred within the regular and expected parameters.

• The 2004 accumulated surplus represents 22% of the total Mathematic Reserves.
  This means that the liability-ceiling index is of 122%.

• On the last 3 years, results have been the following: R$1.58 billion negative in 2002; R$7,67 billion positive in 2003; and R$5,71 in 2004.

• This year’s positive result came in due to the fair performance of fixed income bonds and valuation of assets of variable income, especially in the 2nd semester of 2004, when the Bovespa index reached 26.196 points. Among the Variable Income Assets we highlight the Cia. Vale do Rio Doce share, which total value in 2004 amounted to R$11,76 billion, showing an R$3,4 billion growth in contrast to the previous year.

	Evolution of Commitments – Plan 1

R$ billion	2002	2003	2004
Demanded and funds	11,12	13,77	16,44
Mathematic Provisions	36,06	40,21	44,24
TOTAL	47,18	53,98	60,68

Approval of Investment Conformity Plan

The Investment Portfolio of Plan 1 is, under many aspects, out of place with regards to the limitations imposed by Resolution CMN #3121, which regulates pension funds investments. The resolution proposed two alternative choices for the funds to conform to: either adequate to regulations by the end of 2005; or present a conformity Plan to be analyzed and approved by SPC ad CMN.
PREVI chose the 2nd option: to present the Conformity Plan; and also requested an extension of the deadline (up to 2012) to make all necessary adjustments, especially regarding percentage of share on some companies and investment funds. The longer deadline is essential in order to safeguard PREVI’S negotiation capacity and to allow certain investments to mature. The whole Plan has been based on the study of PREVI’s necessities, especially in what concerns the payment of benefits.
In the end of 2004 the Plan was approved, therefore PREVI has been in conformity to the legislation and fiscalization organ’s regulations ever since.
The Plan foresees the fulfillment of each step and achievement of annual targets, with results to be analyzed by the Fiscal Council.

Considering the Plan’s expiring date, each day it becomes more necessary to obtain resources from the Investments Plan to cover the payment of benefits, and it is demanded, then, that the Plan is monitored not only under a balance sheet point of view (which indicates the availability of assets to cover the total of liabilities), but under the light of cash flow, as well, in order to ensure liquidity to fulfill payments of benefits on the due dates. The Investments Program resources are obtained through rents/leases, interests and dividends received, sale of assets and redemption of investments.
In view of this need, PREVI has been developing an Integrated Management of Assets and Liabilities Project (AL&M), on which all cash in and outflow are foreseen for long terms, with specific annual budgets. This management calls for joint actions of the Planning, Security, Investments and Participations sectors.

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Re-evaluation of Cia. Vale do Rio Doce

A View on Assets Distribution

The Investments Portfolio is divided into several sub-portfolios, which is at the same time a compliance to legal regulations as well as a management strategy. The first big division can be noticed on the four macro-segments.
The distribution of resources among the several sectors follows a risk diversification strategy, based on the calculation of a better risk/return ratio related to each investment modal. The allowed percentage for each segment is described on the Investment Policy Guidelines, annually approved and disclosed. These guidelines are also available on PREVI's website. The defined strategy also needs to be in synchrony with the Conformity Plan and the management of portfolio liquidity.

	Transactions in the Year (R$ thousand) Investments Divest Trades (Shares and Bonuses) Investment Funds Redemptions Portfolio Variation Dividends / JCP 318.813 (1.102.875) (759.870) 8.335.183 1.325.854

Nevertheless, the actual result of portfolio composition also depends on market conditions. Even with the sales of variable income assets, the percentage in relation to the investments total has remained practically unchanged thanks to the valuation of the remaining assets, what is clearly a positive aspect.
Besides the macro-segments division, the portfolio may also be analyzed by means of its distribution regarding the several economy sectors. In this sense, PREVI also relies on a planning system that points the maximal and minimal percentages for resources allocations within each one of the major economy sectors.

	Portfolio Composition (Investment Assets: R$70,33 billion)

	Portfolio Distribution by Economic Sector (R$ Million) Sector Financial % of Portfolio Mining Financial Institutions Electricity Gas & Oil Beverages Steel Telecommunications Transportation / Aviation Pulp & Paper Food Auto-parts and vehicles Metallurgic Petrochemicals Others 12.725,99 6.974,35 5.284,81 3.809,81 2.580,70 2.367,27 2.363,50 2.205,24 844,76 769,22 481,98 443,97 382,10 1.304,90 29,92 16,40 12,42 8,96 6,07 5,56 5,56 5,18 1,99 1,80 1,13 1,04 0,90 3,07

Benefits Plan 1 profitability target is connected to the index that adjusts the Plan’s benefits, plus 6% y/y. Up until May 2004 the target was comprised of the IGPDI + 6%y/y/, and, from June on, it was changed to INPC + 6% y/y.
The profitability reached by Plan 1 was of 25,67% and has surpassed the actuarial target, as shown on the table.

	Profitability in 2004 (%) Fixed Income Variable Income Real Estate Operations with Associates 19,07 32,99 9,05 11,71 Plan 1 Profitability Actuarial Target IBX Selic Rate 25,67 15,70 29,85 16,25

Fixed Income

The fixed-income sector's profitability, 19,07%, besides surpassing the actuarial target, has left some of the main market indexes behind (Average Selic Rate and Interbank Deposit Certificate – CDI).

In 2004, PREVI started to set aside the titles/securities that will be included in the category “for negotiation”, and the ones that will be "carried on until maturity. In the first case, securities have to be accounted for the trading prices of their peers in the market, subjected to market oscillations. In the second case, securities are accounted for what is called “paper curve”, that is to say, by the monthly allocation of correction taxes and securities’ interests.

Variable Income

The profitability of the variable income sector has been the highest of the portfolio and also overperformed the top market indexes (IBX and IBOVESPA). PREVI’s variable income portfolio has a very particular characteristic, which is the strong presence of controlling stakes, and some stakes by unlisted intermediate companies. During the administration, profitability was impacted positively by the re-evaluation of Cia. Vale do Rio Doce. These issues are detailed on the Explanatory Notes, item 6.2.2.

Variable Income Portfolio Management

For the relevance and unique characteristics of this sector, as a part of Plan 1, PREVI is very careful to value and mitigate its share holding risks. Year after year, PREVI has developed its management methods, which involve the commitment of several Boards of Directors.

Corporate Governance

PREVI has standed out in the Corporate Governance scene, not only for the numbers, but also for the quality portrayed. PREVI’s Corporate Governance model entails the perfecting of the selecting and training of council members as well as the development of a system of follow-up of the affiliated companies’ performance. With these tools, PREVI manages to sustain a pro-active relationship with the companies, aiming on increasing its stakes and avoiding losses.
In 2004, PREVI disclosed its Best Corporate Governance Practices Code, publicly acclaimed as one of the most up-to-date guidelines on the subject. This way, all council members, partners and administrators have a chance to get acquainted to PREVI’s orientations and can rely on a guideline to work towards company management improvement.
Besides the annual council members assembly, where debates with experts on various areas of interest are held, PREVI also takes part on several national and international conventions, sometimes even as a lecturer. In 2004 we can highlight, for the first time happening in a developing country, the ICGN (International Corporate Governance Network) Convention, which gathered for the tenth time the world’s most important company administrators and resources managers.

Dividends Receiving

One of the main targets of PREVI’s Corporate Governance is to improve company’s performance, and, consequently, the receiving of dividends and interests over its own capital (JCP). In 2004 these values represented R$1,32 billion. The 10 top paying companies were:

	Dividends Received (R$ Million) Company Assets Dividends/JCP Vale Banco do Brasil Petrobras Ambev Embraer Itaubanco Bradesco Usiminas Belgo Mineira Telemar 12.364,50 3.677,10 3.356,39 2.579,87 2.205,24 1.749,32 959,06 924,61 854,27 833,06 315,81 164,66 183,47 47,96 87,47 46,60 42,46 46,75 29,85 38,59

Portfolio Management Diversification

Besides direct management, PREVI has also decided to look for partners to co-manage part of its portfolio. It has created an Administered Portfolio with a manager selected by means of a very strict process involving the largest top companies of the sector. Thus, besides increasing the action range and value creation within some companies, we have also consolidated a partnership to elevate our own level of action.

Corporate Risk Management

Another tool to monitor the main shareholders started to be developed under the Planning Sector Board of Directors, with the Corporate Risk Project. A specific methodology has been created to evaluate the stakes by its level of risk, with the indication of companies that offer more or less security with regards to growth or devaluation potential. This becomes an additional information for the Investment / Divest Plan and the internal evaluation of portfolio potential.

Shares’ Market Sales

In 2004, several market transactions were brought about with PREVI’s participation. These operations aimed on the selling of part of the portfolio, within the perspective of profit realization, reducing the variable income share, and obtaining liquidity for the payment of benefits. Transactions have amounted to a trading volume of R$1,10 billion.
It is correct to say that PREVI was one of the most active companies in the stock market and contributed to the market enhancement as a whole, with measures that have sported liquidity, transparency and progress of companies to higher levels of Corporate Governance (New Market, Level 2 and Level 1 of Bovespa).

Capital Closing

Bunge Brasil PREVI sold the total amount of its Bunge Brasil S.A. shares, aprox. R$380 million, or 7,10% of the capital. The purchase was carried through by the controlling company Bunge Limited and became effective by means of a public offer of share’s acquisition opportunity for closing of capital, which depends on the approval from the Estate Value Commission (CVM). The trade price was set at R$6.22/’000 shares plus correction by TR +6.6% y/y, pro rata until the auction date. Bunge has also committed to pay R$0,25 per share in dividends, and to distribute all profit in the form of dividends or capital interests until the offer's expiring date.

Electrolux AB Electrolux, as major shareholder of Electrolux, has acquired company’s shares in the market, envisioning capital closing. PREVI, that holds 10,70 billion PN shares (1,76% of the total capital or 2,64% of PN shares) has sold the entire stake it used to own. Trade price (R$1,19/’000 shares) represented the inflow of R$12,81 million to PREVI’s cash.

Secondary Offers

CPFL Shares Release PREVI took active part in the restructuring process of CPFL that culminated, in Septmeber 2004, in the realization of the public auction of shares in the domestic and international markets. This operation involved primary offer, in the value of US$250 million, through the release of new company’s shares; and the secondary offer, in the amount of US$50 million, through which the company’s major shareholders negotiated part of their shares, what has granted liquidity to their stakes. On the secondary offer, PREVI sold, through its 521 holders, an amount of shares in the total value of R$51,79 million.

Weg On the public auction of PN shares of southern company Weg, Latin America’s top electric engine producer, PREVI let go of 12,588 million PN shares, 33% of its total stake, which represented R$90,63 million.
Besides that, the remaining shares on PREVIs Portfolio, that represent 4,82% of Weg’s total capital, benefited from the share’s liquidity increase.

Suzano Petrochemical PREVI sold 6 million PN shares of Suzano Petrochemicals in public auction. These sales corresponded to 46,9% of the PREVI’s total stake on the company and a gross financial result of R$34,8 million.

Companies’ restructuring

Neoenergia (former Guaraniana) The holding Neoenergia , major shareholder of electricity generators Coelba, Cosem and Celpe, went through a restructuring process during which PREVI's role was essential. PREVI had active participation in the set-up of a new organizational model, on which the holding’s directors also head the controlled companies. PREVI also followed closely the rollover of the group’s debts. PREVI has a 49% stake on the company, equivalent to R$2,5 billion. Neoenergia’s market share growth was of 2% in 2004.

521 Participations / Stakes BB-BI was hired as the new manager of this Specific Purpose Society (SPE), through which PREVI holds stakes in the Electricity Sector.

Brasil Ferrovias S.A. The process of recovery of Grupo Brasil Ferrovias (that includes Ferronorte, Novoestes and Ferroban) gained motion with the hiring of consultancy agents Angra Partners to aid the company and its shareholders on the negotiations related to the financial restructuring facing BNDES and the Land Transportation National Agency (ANTT).

Banco do Brasil Bonuses PREVI joined in on Banco do Brasil's program of re-purchase of bonuses issued in 1996. With the sale, PREVI cashed in R$214,44 million. With such resources, PREVI took part in the operation of subscription of BB shares that took shape in the same period, in an attempt to keep its stake on the social capital of the company. The transactions had a positive outcome, since they increased the attractiveness of the Bank shares: from the publication date of the Relevant Fact communicating the transaction (Feb. 17, 2004) until Dec. 30, 2004, BB ON shares showed an increase in value of 47,5%. During this time, IBOVESPA valuation level stood at 16,8%.

Paranapanema The work developed by PREVI to improve Paranapanema’s performance showed good results. Some important changes came about, like: selection of new management team, relocation of the main office from Rio de Janeiro to the facilities of Eluma, in Santo André (SP), sale of non-current assets, among others. Besides that, the company sold to CVRD its bauxite exploitation rights on the Pitinga mine, in the Amazon.

Teletrust Teletrust was one of the portfolio assets with a projection for losses. Since 1999, PREVI has been fighting to recover the investment made in Teletrust’s receivables, injured due to the successive changes on the telecommunications legislation in Brazil. In 2004, at last, PREVI was able to get back something around R$5 million in credit related to debentures issued by Teletrust. This was a consequence of negotiations put forward by debenture holders – PREVI, Sistel, Funcef, Petros, Valia and Granpark – who unanimously decided to sign an agreement in order to ensure that they received part of the debenture’s total value. The agreement was upheld by the Attorney General office.

Real Estate Portfolio

PREVI’s Real Estate portfolio includes stakes in Shopping Malls, business buildings, hotel ventures and other smaller estates.

In 2004, the Real Estate Portfolio showed low profitability figures, mostly due to two factors: excessive demand in some of the core markets, generating vacancy and need for negotiation of more flexible rent/lease prices; and the re-evaluation of the Costa do Sauípe enterprise.

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Costa do Sauípe

Operations with Associates

Operations with associates encompass Simplified Loan Portfolio and Real Estate Financing Portfolio (Carim).
Simplified Loan Portfolio’, profitability was 17,62%, in line with predictions and the portfolio’s general characteristics.
As for Carim’s profitability, it remains affected by the high delinquency rates and by the frequent adjustments to Portfolio.

What is New about Simplified Loan

Simplified Loan offers the best interest rates available for PREVI associates. In 2004, the Board of Directors granted, to those interested, the option to suspend payment of Jan. and Feb. 2005 installments. Simultaneously, researches were conducted and culminated in the market release of a new Loan Option, called Série 10. On this new modal, it is possible to settle a loan in 10 installments per year. With this innovation the Board expects to address the concerns of those associates who would like to suspend loan pay-off in January and February to better accommodate their domestic budgets on the period, in face of incurring expenses with school registration fees and new supplies (in Brazil the school year starts in Feb/ March) and annual housing taxes due early in the year.
By the end of 2004, 68.040 Simplified Loan transactions were reported, related to Plan 1 associates, representing R$990,87 million allocated on this kind of operation.

Plenty of Progress on Carim Front

In 2004, The Real Estate Financing Portfolio (Carim) saw a lot of progress. Early in the year, a poll was conducted to survey associates’ expectations regarding the re-opening of the House Financing project. An independent Research Institution surveyed over 700 associates all over Brazil.
The use of FGTS, pointed on the poll as one of the associate’s major concerns, was dealt with as a priority. After months of negotiations, Caixa Econômica Federal (CEF) authorized the private use of the FGTS to rebate debt, properly observing CEF’s rules for the funds' use. The measure cold be a major benefit to approximately 12,000 house-financing debtors.

16,000 new joiners to Nova Carim program

The approval rate of the changes proposed by Nova Carim was 70%. 15,872 new joiners in the year. These debtors were able to count, then, on more adequate deal conditions: the guarantee of a smaller financing deadline (financing comes through faster), the percentage of gross income compromised is the same until the end of the contract, and, in the event they wish to liquidate the financing in advance, the calculations are done based on current value of installments still to be paid.
In order to properly explain to associates how the Nova Carim works, 22,672 informative kits were mailed to house financing debtors, and afterwards around 100mil newsletters were mailed to keep the associates informed on the operation’s progress, besides the frequent publicity about the necessary procedures to enroll on the program.

Benefits Settlement

Retired and pension fund associates were paid a total of R$4,24 billion complementary to their pension’s values. On the payment sheet were reported payments in the amount of R$5,67 billion, as PREVI also accounted the values under charge of INSS (R$1,09 billion) and Banco do Brasil (R$307,68 million).
The benefit payment volume is higher than tax collection, which totalized R$1,03 billion. Therefore it was necessary to dig into the Investments Program resources to complement benefit payments, a commonplace fact on the maturity curve of Benefit Plan 1. Nevertheless, this fact demands a great deal of attention from management, especially regarding the maintenance of liquidity to pay the benefits.
Since June, PREVI has adopted INPC as its actuarial index. This change took place after the approval by the Complementary Social Security Secretary of amendments on article#20 of Benefit Plan 1 guideline book, and of article #19 on the PREVI Futuro Plan guidebook.
The indicator change reflects directly on the updating of Conta CAPA(1) and Parity Funds(2).

Amount of Current Benefits

Plan 1 has seen the end of 2004 with a total of 76,420 associates, effectively and regularly receiving Benefits provisioned on the Plan.

	Plan 1 2004 2003 2002 Retired associates External retired Pension funds assoc. 55.298 3.062 18.060 51.665 3.021 17.653 50.085 2.922 17.246

In 2004, 4.142 new benefits were settled. Average value of paid benefits is depicted below:

	Commitments • Average Benefits INSS Retirement Pension / Annuity PREVI Complement Retirement Pension / Annuity R$ 1.354,41 1.146,08 R$ 4.795,32 2.984,75

	PREVI’s Share on Benefit’s Sector / Total

Benefits to be Settled

In December 2004, there were 49,733 Plan associates, working at Banco do Brasil, PREVI or under external (self-sponsored, not with the Bank anymore but maintaining their PREVI contributions).

Performance of Resources – Mathematic Provisions / Accruals

The Mathematic Provisions must be seen as one of the vital aspects of the Plan. They are the ones setting the dimensions of the Institution’s future obligations. Provisions are based on actuarial calculations that must be described on the Actuarial Report.
Mathematic Provisions can be roughly defined like this: they represent the current value of future benefits to which each associate is entitled, leaving out the contributions to be received by the bank and future valuation of investments.
By the end of 2004, Provisions were added up in the following manner:

	(R$ thousand) Settled Benefits Plan Benefits Sponsors Contributions on Benefits ( - ) Benefits to be Settled Plan Benefits with Current Generation Sponsors Contributions w/o Current Generation Benefits ( - ) Other Contributions From Current Generation ( - ) Mathematic Provision to Constitute ( - ) Past Administration ( - ) 45.323.166 48.079.255 (2.756.089) 8.657.902 11.003.903 (764.903) (1.581.098) (10.000.972) (10.000.972) Total 43.980.096

The Mathematic Provisions to Constitute represent the mathematic provision of the 67 Group, of the Bank’s responsibility, in the terms of the deal signed in 1997. The bank has made monthly payments in the shape of effective and in-advance amortization contributions.

(1) Conta CAPA reports amortization contribution paid in advance by Banco do Brasil, based on the Agreement signed with PREVI on Dec. 24, 1997.

(2) Paridade Funds report remaining values from the contingency reserves of years prior to the implantation of contributions parity in 2000, as well as values awaiting from a final court decision on the injunction issued in the interest of São Paulo’s Bankers Syndicate regarding use of the remaining administration funds at that same period.