ITEM 4. INFORMATION ON THE COMPANY

4.A. HISTORY AND DEVELOPMENT OF THE COMPANY

Overview

Founded in 1924 as a correspondent bank, Unibanco is Brazil’s oldest private sector bank. From our longstanding position as one of the nation’s leading wholesale banks, we have expanded our operations to become a full service financial institution providing a wide range of financial products and services to a diversified individual and corporate customer base throughout Brazil. Our businesses comprise Retail Banking, Wholesale Banking, Insurance and Pension Plans and Wealth Management. See Note 32 to our consolidated financial statements in Item 18 for additional information on our four reportable segments.

We are one of the largest private-sector financial institutions in Brazil and have grown substantially both through organic growth and acquisitions. As of December 31, 2003, on a consolidated basis, we had:

• R$66 billion in total assets;

• R$26.0 billion in total lending, leasing and other credits (including off-balance items);

• R$25.7 billion in total deposits; and

• R$6.8 billion in stockholders' equity.

Our consolidated net income for the year ended December 31, 2003 was R$873 million, representing a return on average equity of 13.4% and a return on average assets of 1.4%.

Our equity securities have been publicly traded on the Bolsa de Valores de São Paulo (São Paulo Stock Exchange), or Bovespa, since 1968. In 1997, we became the first Brazilian bank to list its equity securities on The New York Stock Exchange, or NYSE. As of December 31, 2003, the total market value of our equity securities, based on the closing price of our global depositary shares, was R$9.7 billion.

Our legal name is Unibanco- União de Bancos Brasileiros S.A. Our address is Avenida Eusébio Matoso 891, zip code 05423-901, São Paulo, SP, Brazil. Our telephone number is (5511) 3097-1313. Our web site is www.unibanco.com.br . We are a corporation ( “sociedade anônima” ) and were incorporated on May 27, 1967, in accordance with Brazilian law. Our agent in the United States of America is our Representative Office of New York, which is located at 65 East 55 ^th Street, 29 ^th Floor; New York, NY; Zip Code 10022; USA; telephone number (1-212) 832-1700.

Unibanco Holdings’ legal name is Unibanco Holdings S.A. Its address and telephone number are the same as ours. Unibanco Holdings is a corporation (“ sociedade anônima ”) and it was incorporated on June 20, 1994, in accordance with the Brazilian law. Unibanco Holdings’ agent in the United States of America is our Representative Office of New York.

Our Businesses

The following diagram shows our principal lines of business:

Retail Banking

Through our Retail Banking business we provide a wide variety of credit and non-credit products, and services to individuals of all income brackets and to small companies with annual revenues of up to R$40 million. We offer traditional deposit, investment, and credit products under the Unibanco brand. We have also developed a strong presence in the consumer finance sector through our subsidiaries Fininvest and Banco Dibens S.A.; our strategic partnership with Magazine Luiza, LuizaCred; and our strategic alliance with Ponto Frio, PontoCred (formerly named InvestCred). As of December 31, 2003, we had approximately 6.0 million retail banking customers and approximately 8.1 million consumer finance customers. We believe we are one of Brazil’s largest credit card issuers in terms of cards issued, primarily through our subsidiaries Fininvest and Unicard Banco Múltiplo S.A., or Unicard, and our affiliate Credicard S.A.

For the year ended December 31, 2003, we had total loans (including insurance) of R$10.3 billion, fees and commissions of R$1,613 million, and net income of R$470 million from our Retail Banking segment.

Wholesale Banking

Through our Wholesale Banking business we provide, as of December 31, 2003, approximately 400 institutional investors and 2,850 large- and mid-size companies with a broad array of products and services, including: general and specialized corporate lending; capital markets and investment banking services; cash management and payroll services; investment and brokerage services; project finance; and mergers and acquisitions advice. We service these clients through an extensive network of regional offices combined with a presence in major financial centers.

For the year ended December 31, 2003, we had total loans (including private banking) of R$15.7 billion, fees and commissions of R$329 million and net income of R$172 million from our Wholesale Banking segment.

Insurance

We provide life, auto, health and property and casualty insurance coverage, as well as pensions and retirement plans, and related products and services, to individuals and businesses primarily through Unibanco AIG Seguros S.A., or UASEG, our joint venture with American International Group, Inc. As part of the joint venture, we also hold approximately 50% equity interests in AIG’s Brazilian insurance business, which we refer to as AIG Brasil.

For the year ended December 31, 2003, UASEG had insurance premiums and private retirement plans premiums of R$1,468 million. Our insurance segment had a total net income of R$258 million. Based on our proportionate share of the joint venture, net income from our Insurance segment was R$125 million in 2003.

Wealth Management

In March 2002, the private banking and asset management businesses were combined to form the Wealth Management division. The asset management business is conducted primarily through our subsidiary Unibanco Asset Management, or UAM. UAM offers fixed income and equity mutual funds to individual customers, and manages portfolios on behalf of corporations, pension funds and private banking clients. Through Unibanco Private Bank, we provide wealth management services targeted to high net worth individuals with potential investment portfolios of over R$1 million.

For the year ended December 31, 2003, UAM had R$23,168 million in assets under management and fees and commissions of R$295 million. Net income from our Wealth Management segment was R$106 million in 2003.

As of December 31, 2003 we held the following positions in the Brazilian financial services market, based on our consolidated results for 2003 computed in accordance with Brazilian GAAP:

• One of the largest aggregate number of credit cards issued in Brazil, with 17.4 million cards through Unicard, Fininvest's private label cards and credit cards, and our proportional share of Credicard cards;

• fourth largest private sector pension fund manager in terms of assets under management, according to data prepared by ANBID (Brazil's National Association of Investment Banks);

• second largest issuer of private pension plans in terms of consolidated corporate sales, according to data prepared by ANAPP (National Association of Private Pension Plans); and

• fourth largest insurance and pension funds provider in terms of net premiums written and gross revenues, according to SUSEP and ANAPP (UASEG and AIG Brasil on a combined basis).

Recent Acquisitions

We have built our competitive position in the Brazilian financial services market and significantly increased our scale through consistent organic growth and carefully chosen strategic transactions and alliances. We believe that each of our four business segments provides a solid platform for carefully managed future growth. Following is a summary of our recent important acquisitions and joint ventures.

Retail and Wholesale Banking

Credibanco

In April 2000, we acquired Credibanco, a small wholesale bank with R$1.8 billion in assets. In particular, the acquisition bolstered our project finance and Banco Nacional de Desenvolvimento Econômico e Social, or BNDES (the Brazilian development bank), onlendings portfolio and staff expertise in the large corporate segment.

Banco Bandeirantes

In December 2000, we acquired 100% of Banco Bandeirantes, a São Paulo-based retail bank with assets of R$4.7 billion. The acquisition expanded our retail customer base by 22%, increased our number of small business customers by 23%, and strengthened our presence in key cities. In April 2003, we merged Credibanco-Cartão Unibanco (previously known as Cartão Unibanco) with Banco Bandeirantes. This business is now known as Unicard Banco Múltiplo S.A., or Unicard.

Investshop

In December 2001, Banco1.net entered into a strategic alliance with Investshop, Brazil’s second largest provider of financial services through the Internet. As a result of this strategic alliance, Banco1.net clients gained access to Investshop investment products and we expanded our presence in on-line banking. As of December 31, 2003 we had a 65.9% interest in Bancol.net. and Portugal Telecom, Investshop Brasil and third party investors held 20.5%, 5.9% and 7.7% interests, respectively.

BNL

In June 2004, we announced the acquisition of the total capital of Banco BNL do Brasil ("BNL Brasil"), from Banca Nazionale del Lavoro S.p.A. ("BNL"). BNL will receive 1,000,000,000 of Units (one billion Units) from Unibanco and Unibanco Holdings. Thus, after the conclusion of the transaction, BNL will own, directly and indirectly, 1.43% of Unibanco's capital. BNL Brasil stockholders' equity to be incorporated by Unibanco was evaluated in R$ 178.5 million. BNL Brasil owns a credit portfolio of R$ 698.5 million plus a credit card and consumer finance operation with some 107,000 clients and 96,000 cards issued.

Consumer Finance

Fininvest

In December 2000, we acquired the remaining 50% of Fininvest that we did not already own. Fininvest had 64 branches and was present in over 6,000 retailers throughout Brazil.

Ponto Frio/PontoCred

In August 2001, we announced a strategic alliance with Globex, the owner of the nationwide chain of Ponto Frio household appliance stores. Pursuant to this transaction, we purchased a 50% interest in Globex’s subsidiary InvestCred, renamed PontoCred, which provides credit for Ponto Frio’s customers.

Magazine Luiza/LuizaCred

In September 2001, Fininvest established a strategic partnership with Magazine Luiza, a Brazilian chain of department stores located primarily in São Paulo State countryside, western Paraná State and southern Minas Gerais State. Unibanco and Magazine Luiza founded LuizaCred to provide financing to Magazine Luiza customers.

Grupo Martins/Tricard

In July 2003, our subsidiary Unicard and Tribanco, the financial arm of the Martins Group, Brazil’s largest wholesale distributor, according to their website, entered into a partnership to manage Tricard, Tribanco affiliate company. The main product is the Super Compras card, the private label card offered to the clients of retailers served by the Martins Group. At the close of 2003, approximately 268,000 Tricard cards were issued and offered through a network of 1,562 retailers.

Ford Credit Brazil

In January 2002, Unibanco Rodobens, our lay-away finance arm, and Ford Credit Brazil established a joint venture for the sale of cars and management of groups of the National Ford Consortium, a system for financing goods on an installment plan basis.

Creditec

In May 2004 we acquired Creditec – Crédito Financiamento e Investimento S/A, or Creditec, from Grupo BBM for a purchase price of R$49.9 million. Creditec has a significant presence in the Brazilian personal loans and consumer finance sector among middle and lower income customers. Creditec had around 600,000 registered clients and operates throughout Brazil, with a strong presence in the states of Rio de Janeiro and São Paulo, as well as the northeastern Brazil. The acquisition does not include Creditec’s credit portfolio.

HiperCard

On March 1, 2004, we announced the acquisition of HiperCard Administradora de Cartão de Credito Ltda., or Hipercard, from Koninklijke Ahold N.V., or Royal Ahold, for R$630 million. HiperCard started as a private label credit card company for the Bompreço chain of supermarkets and is now a full independent credit card company with cards presently accepted in more than 60,000 points-of-sale in Northeastern Brazil. As of December 31, 2003, HiperCard had 2.3 million cards issued and a credit portfolio of R$737 million. The transaction is subject to the approval of the CADE — Conselho Administrativo de Defesa Econômica, the Brazilian antitrust authority. Simultaneous with this transaction, Royal Ahold sold the BomPreço Supermarket chain to Wal Mart. Pursuant to the agreement, the purchase price is subject to adjustment based upon the finalization of an audited closing statement which we expect to be completed in the second half of 2004.

Insurance and Pension Plans

Cigna

In April 2003, Unibanco AIG acquired Cigna Seguradora S.A., private pension portfolio, adding 120 corporate plans (10,000 participants) and R$149 million in reserves.

Phenix

On October 31, 2003, UASEG entered into an agreement to acquire the insurance company Phenix Seguradora SA from Toro Targa Assicurazioni SpA. and Fiat do Brasil S.A.. The closing of the acquisition is subject to regulatory approval of the CADE – Conselho Administrativo de Defesa Econômica, the Brazilian Antitrust Authority. Phenix reported sales of R$73 million in the first half of 2003. We expect this transaction will enhance our insurance presence in the southeastern state of Minas Gerais and the southern state of Rio Grande do Sul. In connection with this acquisition, UASEG also entered into a strategic partnership with Fiat, a large automobile manufacturer in Brazil. This relationship will give UASEG preferred access to new corporate insurance contracts arranged by Fiat and some of its affiliates in Brazil and to its employees’ pension fund.

Wealth Management

Unicorp

In April, 2002, the Central Bank approved the acquisition by our subsidiary, Unipart Participações Internacionais Ltd., of the remaining 24.5% of the total share capital of Unicorp from the Moreira Salles Group for US$36 million.

Pictet Modal

In January 2003, we entered into an agreement pursuant to which the administration and management of the funds managed by Pictet Modal were transferred to Unibanco and Unibanco Asset Management, respectively. The transfer involved nine fixed income funds and three equity funds with aggregate total assets under management of approximately R$267 million as of January 17, 2003.

Capital Expenditures

During the period from 2001 to 2003, our capital expenditures consisted primarily of expenditures for data processing to automate our branch network and for computer systems, communication equipments and other technology tools designed to increase the efficiency of our operations, the services offered to our customers and our productivity. For further details regarding the amount and nature of our capital expenditures, see “Item 5.B. Liquidity & Capital Resources – Uses of Funding.”

4.B. BUSINESS OVERVIEW

Our Business Strategy

Guiding Principles

Our objective is to maintain and enhance our position as a leading Brazilian full service financial institution. To achieve this objective, we have developed strategies tailored to each of our business areas based on the Balanced Scorecard Methodology; a model designed to translate strategy into operational terms. Our business strategies reflect three institution-wide guiding principles: continuous pursuit of scale gains; continuous efficiency maximization; and accelerated personnel development.

In August 2003 Unibanco became the first and only Latin American institution to appear in the Balanced Scorecard Hall of Fame, which recognizes companies that excel in the implementation of the Balanced Scorecard model.

Continuous Pursuit of Scale Gains

We believe that to maintain competitive scale we must grow our customer base and expand our product and service offerings in each of our business segments. We seek to do this through organic growth, acquisitions, and strategic alliances.

Continuous Efficiency Maximization

We focus on controlling our costs as well as our investments across all areas of our business to help maximize returns. For example:

• When we make an acquisition, we analyze the opportunities for increasing revenues, reducing expenses, and realizing other cost savings in connection with the integration of the newly acquired business. We have a team of employees dedicated to this task. When we integrated Fininvest in 2003, operations such as buying, security, legal, card processing, data processing, system development, credit and credit recovery were integrated into our existing structures. In addition, we are currently analyzing the integration of the recently acquired Creditec and HiperCard businesses.

• We reviewed certain of our expenses including policies for travel, reimbursements, use of telephone services, meal expenses, and parking. We believe these policies can be revised to promote savings and to establish a greater commitment to efficiency in our corporate environment.

• We have identified potential internal synergies between our consumer finance businesses and the Insurance segment that will enable us to simplify the sale of foreclosed assets, controls, and the processing of documents.

• We have established a unique credit concession and recovery unit for all retail linked units called "Fabrica de Credito" (Credit Factory) and consolidated all call centers of the group.

Accelerated Personnel Development

We need highly qualified, well-trained employees in order to compete successfully. Over the last several years, we have introduced increasingly demanding hiring standards and have implemented a variety of tools to identify and measure employee potential, performance and individual contribution to the company’s strategy. We believe our commitment to hiring and developing talented employees has fostered a high quality work environment that has engendered a high degree of employee satisfaction. In each year since 1997, we have commissioned an independent survey of our employees. As measured by this survey, employee satisfaction has increased, from 69% in 1997 to 86% in 2003.

Retail Banking Strategy

Achieve Scale Through Organic Growth and Strategic Transactions

We believe that our ability to maintain our position as a leading full service financial institution depends in part on maintaining and increasing scale in our retail business. Our retail banking customer base grew from 3.0 million in 1997 to 6.0 million in December 2003. We have increased scale in part through organic growth initiatives. For example, in October 2000, we launched our ContAtiva initiative, which markets Unibanco’s retail banking services to individuals with monthly income above R$1,000. The initial goal of the ContAtiva program was to add 1.8 million new accounts by the end of 2003. We achieved this target in February 2003, well ahead of schedule. Following the initial ContAtiva program, we launched ContAtiva2 in 2003, aimed at attracting new accounts through 2008. In addition, we have identified several new cross-selling opportunities through our subsidiaries and strategic partners.

We also seek to increase our scale through carefully chosen acquisitions and strategic alliances. We believe the consumer finance sector is one of the most rapidly growing and most profitable segments of the Brazilian retail financial services market. Achieving a strong presence in consumer finance is central to our strategy of gaining scale in our retail business and reaching the lower income segment of the market.

Most recently, in March 2004, we announced our acquisition of HiperCard, from Royal Ahold. HiperCard started as a private label credit card company for the Bompreço chain of supermarkets and it is now an independent credit card company with cards presently accepted in more than 60,000 points of sale in the Northeastern of Brazil. At December 31, 2003, HiperCard had 2.3 million cards issued.

Enhance sales to existing customer base through innovative products and service offerings

We view scale not only in terms of the size of our customer base, but also as a function of the number of products we are able to sell per customer. Since it is generally less expensive to sell an additional product to an existing customer than to acquire a new customer, improving our product per client ratio has a positive impact on profitability. We believe that continually developing and marketing tailored, innovative products to serve the needs of specifically identified customer segments increases our ability to sell multiple products per client. We have increased our average products outstanding per bank client to 6.0 as of December 31, 2003 from 2.6 as of March 31, 1997.

We have increased our market penetration through cross selling, and launching new products such as Conta Sob Medida (Tailored Account), which permits clients to set their fees based on their historical relationship with Unibanco and 30 Hour Protection, a service that notifies clients, through their cell phones, of transactions with their credit or debit cards, and informs balances in their current accounts and investment portfolios.

Wholesale Banking Strategy

Enhance Our Market Position in Brazilian Wholesale Banking

Unibanco’s Wholesale Bank seeks to be the bank of choice for Brazilian and foreign clients and corporations and investors with interests in Brazil. Our strategy combines the strength of a commercial bank with the agility of a leading investment bank. Our deep knowledge of our clients and their business coupled with financial capabilities allows us to establish credit limits and to structure transactions in a differentiated way. In 2003, we maintained our position as the leading Brazilian bank in the mergers and acquisitions advisory business, acting as financial advisor in 13 completed transactions, with an aggregate market value of more than US$ 950 million. Among other indicators of our market leadership, Unibanco had a 7.3% market share and ranked second among private sector banks in terms of total BNDES (the Brazilian development bank) disbursements, with a total amount of R$1.3 billion in 2003.

Insurance Strategy

Focus on Offering High Profitability Insurance Products

We believe that Brazilian economic growth will present opportunities for the country’s insurance industry, as Brazilians’ spending on insurance products currently lags that of many other countries. We intend to take advantage of this growing market by using our sophisticated product development capability to focus our insurance offerings on value-added products that are more profitable than the relatively commoditized, market-standard products offered by many of our competitors. We believe that our Insurance business has the best mix of products among the five largest insurers in Brazil. In developing insurance products for corporate clients, we have achieved leading market positions in a variety of specialized areas, including directors and officers (D&O), and insurance and coverage products for the petrochemical and aeronautic sectors. Our focus on developing and offering value-added insurance products is supported by our joint venture with AIG, which gives Unibanco access to AIG’s expertise in product development and reinsurance, as well as a valuable brand name.

Enhance Profitability in Our Insurance Business through Cost Control and Underwriting Expertise

The profitability of our Insurance business depends in part on our ability to minimize expenses and losses. We have taken significant steps to reduce expenses in our Insurance operations, including the merger of several companies into AIG Brasil Cia de Seguros, and the introduction of an Internet portal to communicate with our brokerage force.

Wealth Management Strategy

Be the leading provider of Wealth Management services in Brazil.

The mission of the Wealth Management division is to provide proactive advice to help our clients to accumulate, preserve and transfer their wealth. We offer integrated financial solutions through our three main areas of expertise: asset management, private banking and advisory services. Our tailored and value-added products are targeted to companies and individuals positioned in the top end of the wealth pyramid distribution, typically middle to large companies, pension funds and affluent to high net worth individuals, thus leveraging our unique position in those market segments. To be able to provide these differentiated services we have developed a strong local and international network of wealth management specialists in the areas of succession advice, tax advice, and real state among others. In the area of financial investments we developed an open architecture model that further differentiates our offerings. Through this model, our clients have access to our best investment products and also to the best investment products of third party asset managers. According to data prepared by ANBID, at the end of 2003, the asset management division had a 9% market share in the Brazilian private pension funds market while the private banking division had a 6% market share of assets under management.

Principal Business Activities

Retail Banking

Overview

Our Retail Banking business primarily serves upper and middle income individuals (excluding private banking customers) and companies with annual sales up to R$40 million. For purposes of internal analysis, we separate both individuals and companies into smaller groups according to income brackets to enable us to offer differentiated products and services to these clients. While we traditionally have focused on middle and upper income clients, we have begun to market services to lower-income individuals. We believe this market segment will be a significant source of future growth in our retail business. Those lower income individuals are served through our consumer finance businesses, including Fininvest, PontoCred and LuizaCred.

As of December 31, 2003, we had approximately 6.0 million customers, comprising current accounts, savings account clients and retirees, compared to 5.6 million as of December 31, 2002. Including approximately 4.0 million customers from Fininvest, 1.1 million customers from LuizaCred and 3.0 million customers from PontoCred, we had a total of approximately 14.1 million retail customers as of December 31, 2003. We also use our retail banking operations as a distribution channel for products and services developed by our non-banking subsidiaries and affiliates, including mutual funds and automobile and life insurance products.

Distribution Channels

As of December 31, 2003, our retail network, including Fininvest, LuizaCred, PontoCred and Banco 24 Horas had a total of 11,884 points of sale throughout Brazil, including: branches; corporate-site branches (branch located in the premises of corporate clients of Unibanco); and in-store branches (branches located inside large retailers, such as supermarkets).

Branches

The branch system serves as a distribution network for all of the products and services offered to our retail customers. Our 796 full-service branches accept deposits, disburse cash and offer the full range of our retail banking products, such as checking accounts, consumer loans, automobile financing, credit cards, loans to small-sized companies, leasing, insurance, asset management services and payment of bills.

Corporate-Site Branches

We offer retail banking services to corporate customers and their employees through special banking branches located in the premises of corporate customers. Our network consists of 406 corporate-site branches. In the case of retail and smaller corporate customers, corporate-site branches may consist solely of an automated branch. In the case of large corporate customers, corporate-site branches consist of an average of four employees dedicated to serving the corporation and its employees.

In-Store Banking

Our search for alternative distribution channels led to our introduction in 1998 of in-store banking, at that time a new concept in Brazil. By December 31, 2003, we had 77 in-store branches in many of Brazil’s principal retail chains, such as Carrefour, Pão de Açúcar, Sendas, Wal-Mart and Sonae.

ATMs

We operate 7,115 ATMs for the use of our customers. In addition to our proprietary network, we participate in the shared ATM network operated by our affiliate, Tecnologia Bancária S.A., or Tecnologia Bancária. The ATM network of Tecnologia Bancária has 2,020 machines throughout the country, and serves clients of 45 banks.

“30 Hour” Services and Branches

As part of our effort to provide customers with faster and more efficient modes to complete banking transactions, we introduced the “30 Hour” branch concept in 1992. This is a service that provides clients with electronic banking services such as cash withdrawal, pre-printed checkbooks, account statements, and investment services 24 hours a day. As a result of “30 Hours” services, we have been able to provide our clients with increasingly convenient services while improving our own cost structure, by transferring to electronic channels transactions formerly conducted at branches.

Internet Banking

We provide a variety of retail banking services, including opening accounts, utility bill payment, wire transfers, and mutual funds, through our web site. Since April 2000, we have also offered a variety of mobile “30 Hours” services, enabling clients to access their banking information from their cellular phones, palm-tops or e-mail. As of December 31, 2003, we had 1.3 million registered users of our Internet Banking. In 2003, we processed approximately 101.5 million Internet transactions, an increase of 41% over the same period in 2002. Use of our Internet banking services has continued to grow rapidly in 2003; customers accessed our website a total of 56 million times.

Phone

Over the last decade, Unibanco led innovations in distribution and remote banking, using the telephone initially as a banking instrument, and now turning it into a sales tool. The original concept of the call center has been transformed into contact centers, with Telefone 30 Horas functioning as a relationship and sales platform. Most calls are answered, and the customer’s banking transaction carried out, through our electronic voice response system. The system identifies potential buyers of additional products and transfers the call to a live operator. This is possible due to utilization of customer relationship management and data based marketing tools. In 2003, we processed approximately 188 million phone banking transactions as a result of 86 million calls received by our call center, an average of approximately 7.2 million calls per month, as compared to an average of approximately 3.1 million calls per month in 1995. According to research conducted by Instituto Brasileiro de Opinião Pública e Estatística — IBOPE (Brazilian Statistical Public-Opinion Institute) in 2003, Unibanco received a score for personal service of 6.45 out of a possible 7 points.

Client Base

Individuals

We provide our individual customers with fee-based products and services, including use of ATMs, phone and personal computer banking and fund transfers. We also make secured and unsecured personal loans in reais with maturities ranging mostly from one to 36 months for short term overdraft facilities, loans for consumer purchases, leasing and individual lines of credit. Individuals are segmented into three different groups: those earning more than R$4,000 per month ( UniClass ); those earning from R$1,301 to R$4,000 per month ( Exclusivo ); and those earning from R$350 to R$1,300 per month ( Especial ).

In the UniClass group, we believe we differentiate ourselves from competitors by providing our customers with:

• products and services tailored to their needs;

• a specialized call center with what we believe are higher quality levels including dedicated customer service representatives;

• specialized branches for UniClass customers, called "Espaco UniClass";

• a specialized team of account officers within our extensive distribution network; and

• a website specially designed for this segment.

In the Exclusivo group, we believe we differentiate ourselves from competitors by providing services and products, which substantially reduce the time spent by our clients in their basic banking transactions, such as withdrawals and payment of bills, as well as personalized service inside the branch. In particular, we provide customers of this segment more convenient banking through access to our “30 Hours” services.

In the Especial group, we focus on retired individuals and employees of companies to which we provide payroll services. We believe that our relationships with companies in our Wholesale Banking segment give us a competitive advantage to offer payroll services. We have designed and implemented special services and products tailored for retired customers, such as personal appointments, and pre-approved credit lines.

We also classify clients into 32 groups, or DNAs, based upon their income and spending levels. DNA is a simple and powerful analytical tool that we use internally to refine and customize solutions for different clients, optimize service costs, and help avoid occasional pricing glitches.

Small Companies

We serve approximately 500,000 small companies, consisting primarily of retailers. For companies with annual sales up to R$5 million, we offer products and services through branch account officers dedicated to this segment. Companies with annual sales ranging from R$5 million to R$40 million, which tend to require customized products and services, are served by a group of account representatives separated from our branch network.

Our loan portfolio for small companies consists of loans with maturities of up to 3 months for unsecured loans, such as overdrafts on checking accounts, up to twelve months for working capital loans, and up to three years for lease financing. Loans to small companies totaled approximately R$2.8 billion, or approximately 10.7% of our total loan portfolio, at December 31, 2003. Our retail banking business also offers small companies various fee-based services, such as cash management, payroll, and receivables collection.

Consumer Finance

We provide consumer finance products and services directly and through:

• our Fininvest subsidiary;

• Banco Dibens, in which we have a 51% voting interest;

• our automobile financing portfolio;

• PontoCred, in which we have a 50% equity interest;

• LuizaCred, in which we share joint control with Magazine Luiza; and

• Unibanco Rodobens, which entered into a joint venture with Ford Credit Brazil in January 2002.

In addition, the consolidation of the recently acquired Creditec and HiperCard businesses is scheduled to occur in the second quarter and the second half of 2004, respectively.

At December 31, 2003, Fininvest loans had an average maturity of three months, and primarily bore fixed rates of interest. At December 31, 2003, Fininvest had total assets of R1.8 billion. Its loans portfolio stood at R$1.2 billion at December 31, 2003. We have focused a significant portion of our acquisition and joint venture activity on the consumer finance segment of the retail market. For information on these transactions, see “Recent Acquisitions – Consumer Finance.”

For information on these transactions, see “ Recent Acquisionts – Consumer Finance.”

Credit Cards

The market for consumer credit has grown as declining inflation in Brazil has led to increased consumption and increased acceptance of credit cards by merchants. From 1995 to 2003, the number of credit cards issued in Brazil tripled, according to ABECS.

We believe we are among the largest participants in the credit card business in Brazil. We offer Visa, MasterCard and Diners Club credit card products to our customers through the following companies:

• our Unicard subsidiary;

• Credicard, in which we own a 33.3% stake; and

• our Fininvest subsidiary.

All three of these companies employ modern credit review procedures. Each credit card application is reviewed based on credit scoring and consumer behavior scoring systems. Our associated credit card companies offer cardholders revolving lines of credit, requiring a minimum payment of the outstanding account balance as well as credit in installments.

As of December 31, 2003, Unicard had issued 4.4 million credit cards, making it one of the largest issuers of credit cards in Brazil, with an approximate 9.3% market share, calculated based on ABECS data regarding the total number of credit cards issued in Brazil. The majority of Unicard’s customers are Unibanco’s customers, but Unicard also aggressively markets co-branded credit cards to non-customers. For example, Unicard issues co-branded cards for Varig Airlines and certain Brazilian newspapers. During 2003, Unicard had total billings of R$5.4 billion and total fees of R$226 million.

Fininvest distributes credit cards, including private label cards, to low-income customers. During 2003, it financed a total volume of R$1.2 billion in lending, leasing and other credits and had total billings of R$3.6 billion and total fees of R$233 million.

We have a one-third interest in Credicard, as do Citibank N.A. and Banco Itaú. Citibank is responsible for the management of Credicard. Unibanco and its fellow shareholders receive profit sharing from Credicard that are based on the net profitability of cardholders referred by each shareholder. As a result, our participation in the earnings of Credicard varies from period to period. As of December 31, 2003, Credicard had 7.0 million cards issued. During 2003, Credicard Group had total billings of R$38.9 billion. Cardholders include our customers and customers of other banks, as well as direct customers of Credicard.

In May 2000, Credicard created Orbitall, a service and commercial information processing company. Orbitall services clients in the business to business, or B2B, market in the areas of credit and debit cards, vouchers, and also direct consumer loans. Credicard transferred to Orbitall its physical assets, client portfolio and the employees that worked in Credicard’s processing departments. In August 2003, Credicard decreased its capital through transfer of its investment in Orbitall to its shareholders. During 2003, Orbitall processed 16.4 million cards, which corresponded to some 650 million transactions.

Established in 1996, Redecard is responsible for the capture and transmission of credit and debit transactions of the MasterCard, MasterCard Electronic, Maestro, Diners Club International and RedeShop brands in Brazil. Redecard also provides some products and services for their customers, such as leasing to retailers machines used for the processing of debit and credit transactions. Debit card use has been increasing in Brazil. We have a 31.9% interest in Redecard, and Citibank N.A., Banco Itaú and Mastercard also hold interests in the company. Citibank is responsible for the management of Redecard.

Banco1.net

We were one of the first Brazilian banks to offer virtual banking services. The original services, which we introduced in 1995 under the name “Banco1,” allowed individuals to conduct virtually all of their banking transactions without using a traditional branch office. Banco1 provided its customers, generally individuals earning in excess of R$1,000 per month, with banking services 24 hours a day, seven days a week by phone, fax and personal computer. In May 2000, we, together with PT Multimedia, controlled by Portugal Telecom, transformed “Banco1” into Banco1.net.

In December 2001, Banco1.net entered into a strategic alliance with Investshop, Brazil’s second largest homebroker through the Internet. The integration of the operational structures was concluded in April 2002. At the conclusion of this integration, Bancol.net became the holder of 100% of the capital of Investshop and Investshop Participações S.A.; Investshop’s parent acquired an 8% participation interest in Bancol.net. This strategic alliance expanded our presence in on-line banking. We presently have a 65.9% interest in Bancol.net. Portugal Telecom, Investshop Brasil and third party investors hold 20.5%, 5.9% and 7.7%, respectively.

Loans

Loans to retail customers are an important part of our retail banking operations. At December 31, 2003, retail loans, including loans by our subsidiaries and affiliates, were 38.3% of our total loan portfolio. To facilitate our retail lending, we have developed mathematical models for credit and risk analysis that are designed to reduce the risk inherent in our retail loan operations. We believe we are well positioned to expand our retail loan assets when Brazil’s trends are for declining interest rates and unemployment. See “Item 11. Quantitative and Qualitative Disclosures About Market Risk – Retail Portfolio.”

Funding

Retail banking is an important source of funding for us. Our extensive distribution network and strong deposit base support our retail banking operations. Retail banking deposits were R$12,630 million at December 31, 2003, or 49.1% of deposits.

Savings and Annuities Product

Our wholly owned subsidiary, Unibanco Companhia de Capitalização, or Unibanco Capitalização, offers savings and capitalization products. Unibanco Capitalização’s products consist primarily of savings account-type products, which also provide incentives to depositors through a special weekly lottery award. Unibanco Capitalização’s business net income during 2003 amounted to R$125 million.

Wholesale Banking

Overview

Our Wholesale Banking business serves medium- and large-sized corporations. Our large corporate customers include domestic and multinational companies with annual sales of more than R$150 million. Middle market customers have annual sales between R$40 million and R$150 million. We have designed our Wholesale Banking operations to respond to the specific needs of our corporate clients by offering a diversified portfolio of products and services, including working capital loans, cash management, import and export financing, investment banking, corporate finance and advisory services. Our Wholesale Banking business has a network of offices and facilities from which we provide support to our clients’ operations both in Brazil and abroad.

Large and Middle Market Corporations

We maintained lending or service relationships with approximately 2,850 large and medium-sized companies in Brazil as of December 31, 2003. Loans to large corporate customers were approximately R$13.8 billion at December 31, 2003 (approximately 53% of our total loan portfolio) as compared to approximately R$14.6 billion at December 31, 2002 (approximately 58% of our total loan portfolio).

In the middle market segment we had approximately 1,600 customers at December 31, 2003. Loans to middle market corporations were approximately R$1.6 billion at December 31, 2003 (approximately 6% of our total loan portfolio), as compared to approximately R$1.2 billion at December 31, 2002 (approximately 5% of our total loan portfolio).

A substantial portion of our loans to middle market customers is fully collateralized. Loans to large corporate customers may be collateralized in accordance with the guidelines of our internal credit rating system. Consistent with customary lending practices in Brazil, our portfolio of loans to large and middle market customers is predominantly up to 3 years.

We have adopted both sector and regional coverage strategies to serve our wholesale clients. Certain industries, such as infrastructure, automotive, retail and pulp & paper are assigned a specialized team of account officers, which is led by a sector head. Japanese, German and Portuguese companies that have operations or do business in Brazil and Brazilian companies with interests in Japan, Germany or Portugal are attended by our Japan, German and Portuguese Desks. We believe that our knowledge of the Brazilian financial market, combined with the strong relationships that our bankers have with important companies in Brazil, give Unibanco a competitive advantage.

Wholesale Network

We have account officers located at our centralized 3 regional offices (in São Paulo, Rio de Janeiro and Belo Horizonte) and 18 regional branches. Each of our corporate customers is assigned a dedicated banker, who is responsible for the day-to-day relationship with the customer and responsible for assisting our clients’ operations throughout Brazil. These customers also benefit from our offices abroad.

Our international network consists of the following:

• branches in Nassau and the Cayman Islands;

• representative offices in New York;

• banking subsidiaries in Luxembourg, the Cayman Islands, and Paraguay; and

• a brokerage firm in New York (Unibanco Securities Inc.)

Since the beginning of 2004 the activities of our brokerage firm in London have been transferred to our subsidiary in Luxembourg. Our international subsidiaries and branches obtain trade and general purpose funding for onlending to our Brazilian clients, either directly or through our head office. Our international network also supports our clients’ operations abroad by providing capital markets and corporate finance services. As deposit-takers, our offshore subsidiaries and branches offer demand and time deposit facilities. Unibanco Cayman is particularly active in obtaining funding in the Euro-dollar market for purposes of onlending to our Brazilian clients. Unibanco Cayman is an issuer under our medium-term note program of US$2.0 billion, and it maintains a trade note program, under which collectively an aggregate principal amount of approximately US$811 million was outstanding at December 31, 2003. Unibanco Cayman also establishes trade lines with correspondent banks and plays an active role in the syndicated loan market as syndicate arranger, agent, manager, and participant.

Through our international network we provide investment banking services to Brazilian companies. We place a great emphasis on developing our capital markets services, including underwriting and the distribution of securities and secondary trading, as well as providing advisory services on the structuring of these transactions. In recent years we participated in underwriting syndicates for several bond issues by major Brazilian companies.

Our international assets decreased by 10.3% to R$13.1 billion at December 31, 2003, from R$14.6 billion at December 31, 2002. Of these assets:

• R$2.2 billion were credit operations directly provided to our clients;

• R$6.1 billion were assets we borrowed for purposes of onlending to our Brazilian clients; and

• R$4.8 billion were other assets, including securities and available funds abroad.

International Trade Finance and Correspondent Banking

We provide import and export financing and services to our corporate customers. At December 31, 2003, we had funding from 96 of our more than 350 correspondent banks, as well as medium- and long-term import financing funded or insured by over 25 export credit agencies and multilateral agencies. Our extensive network of correspondent banks and our own international operations help us provide our customers with foreign exchange and international trade support worldwide.

At December 31, 2003, we had R$2,505 million in trade finance, and our outstanding import and export financing, on a consolidated basis, stood at R$3,277 million. Our shares of the Brazilian export financing and import financing markets stood at 5.8% and 8.1%, respectively, according to the Central Bank.

Corporate Finance and Brokerage

We provide corporate finance services to a diverse group of Brazilian companies. We have structured our operations to seek synergies from our various product areas:

• the account managers or bankers are responsible for developing and maintaining strong relationships with our corporate customers;

• our equity and debt capital markets and our mergers and acquisitions groups bring product expertise and innovation focused on the ever-changing needs of Brazilian companies; and

• the brokerage and distribution groups are responsible for understanding the needs of Brazilian and international investors in order to offer suitable investment options.

During 2003, we were the fourth largest private sector bank in terms of origination and distribution of fixed income securities, with an 8.5% market share in origination and 8.5% in distribution for the year ended December 31, 2003 according to data prepared by ANBID.

Our mergers and acquisitions advisory team successfully completed 13 transactions over the course of 2003, giving the bank the top position among Brazilian banks in the Thomson Financial ranking.

Our Brazilian brokerage operation, Unibanco Corretora de Valores Mobiliários S.A. (UCVM), offers equity and debt securities and derivatives products, and provides trading services on Brazilian exchanges for more than 95 institutional customers. UCVM provides research on over 100 listed companies. In 2003, UCVM had 2.8% market share in number of futures contracts negotiated with the Bolsa de Mercadorias e Futuros (Brazilian Merchantile & Futures exchange) or BM&F, based on BM&F data. We maintain securities brokerage and distribution operations in Europe, through Unibanco Luxembourg, and in the United States through Unibanco Securities Inc.

Project Finance and Privatization

Our project finance group is responsible for structuring and financing infrastructure and industrial projects, such as projects related to toll roads, ports, railroads, energy and telecommunications. Our activities include advising our corporate customers about the economic and financial feasibility of proposed projects, as well as project structuring and long-term financing. This combination of investment banking advisory services and commercial lending represents an important source of revenue for us. During 2003, we completed 11 project finance advisory mandates involving total investments of over R$1 billion. Unibanco’s strength in project finance was reflected in the range of industries covered, with mandates in transportation, logistics, power generation and transmission, agribusiness, oil, gas and sewage treatment.

Unibanco ranked first in Brazil in the ANBID project finance advisers list, by number of projects, in 2003. The assessment is based upon the investment value of assisted projects.

BNDES and its affiliates provide special purpose funding to targeted groups of domestic borrowers. In Brazil, funding from government sources is a method of providing long-term loans with attractive interest rates. Loans from these funds are directed by government agencies through private banks. We borrow funds from BNDES or FINAME, the equipment financing subsidiary of BNDES, and then we onlend these funds at our own risk to the borrowers. These loans are mostly real -denominated and are generally secured or guaranteed. BNDES onlendings, excluding Finame, reached R$1.3 billion in 2003, a 7.3% of the total, according to BNDES data.

Treasury, Trading and Derivatives Activities

Our treasury unit conducts financial transactions for our corporate customers as well as for its own account. Our treasury group:

• trades fixed income Brazilian government securities, derivative financial instruments, and bank and corporate debt securities;

• prices loans and investment products for the Retail and Wholesale Banking business segments;

• engages in foreign currency trading transactions; and

• engages in derivative transactions, such as swaps for hedging and arbitrage purposes.

Our treasury unit carries out both domestic and international functions. Our domestic treasury unit works as a centralized pool of liquidity for us. This department determines base rates and prices of investments. Two important subdivisions of our domestic treasury unit are the local money market and the foreign exchange desks. They carry out all our trading and arbitrage activities in the domestic financial market. In addition, they manage all portfolios denominated in local currency that are originated from our interbank and client transactions.

Our international treasury function consists primarily of accessing offshore funding sources.

We carry out our trading activities within clearly defined limits determined by our financial committee, which establishes and reviews monthly the exposure limits. This committee consists of members of our board of directors and our senior officers. Our risk management unit monitors positions, ensures compliance with limits, and makes recommendations to the financial committee.

Cash Management

Our cash management unit advises our clients and provides products relating to cost reduction, productivity increases and better administrative control over their cash flows. We also maintain, with eight other banks, the Extrato Multinacional, which offers integrated cash-management services in Latin America. At the end of 2003, approximately 85,100 customers used our cash management services, such as payments and credit, a 6.4% increase compared to 2002. The volume of collections accounts payable and payrolls in 2003 increased by 5.6% compared to the previous year, to 152.1 million transactions.

Insurance and Related Activities

Overview

We engage in insurance and related activities mainly through our joint venture with AIG. This joint venture consists primarily of UASEG, which is owned substantially in equal parts by Unibanco and AIG, and managed by us. According to data released by SUSEP and ANAPP, in December 2003, UASEG’s insurance, pension and retirement plan companies combined with AIG Brasil were the fourth largest insurance provider in Brazil, based on gross premiums written and pension plans contributions.

For the year ended December 31, 2003, UASEG had insurance premiums and private retirement plans premiums of R$1,468 million.

Insurance

UASEG has the exclusive right to distribute insurance products through our branch network to our Retail and Wholesale Banking customers. We believe that this distribution channel gives it a competitive advantage over many insurance companies that are not affiliated to financial institutions. Because approximately half of UASEG’s insurance premiums are generated through customers of our network we benefit from significant cost savings and marketing synergies. UASEG also markets its insurance products through approximately ten thousand independent brokers and Unibanco’s call center, website and in-store branches. AIG Brasil distributes products through, banks, financial institutions and mass marketing programs to affiliated groups.

We believe that UASEG is strategically positioned in the product segments that are most profitable and that have the greatest growth potential, such as home insurance, individual life insurance and personal accident insurance. For example, the warranty extension program for household appliances, marketed by Garantech, our joint venture with Multibrás, as of December 31, 2003, sold R$96.7 million in extended warranty contracts.

We have achieved leading market positions in a variety of specialized areas for commercial lines, including directors and officers (D&O), and insurance and coverage products for the petrochemical and aeronautic sectors.

At the end of 2003, we launched D&O insurance for listed companies, in association with the São Paulo Stock Exchange (Bovespa). The product was developed recently by AIG in conjunction with the New York, Tokyo, and Mexico City stock exchanges.

The following graph, based on information by SUSEP and ANS, illustrates the 7.1% market share of UASEG and AIG Brasil (on a combined basis) of total premiums for the year ended December 31, 2003.

Market Share –Year ended December 31, 2003

Although UASEG is a joint venture between Unibanco and AIG, we hold the majority of the voting shares of UASEG and therefore control the company. As a result, we consolidate the results of UASEG into our consolidated financial statements. AIG Brasil is jointly owned by Unibanco and AIG, but we do not control it. Accordingly, we do not consolidate the results of AIG Brasil into our consolidated financial statements. Instead, we account for the results of AIG Brasil under the equity method. Our net income reflects approximately 50% of the combined operations.

The following table shows the premiums earned by UASEG for 2002 and 2003.

UASEG reinsures a portion of the risks that it underwrites, particularly large property and casualty risks, in excess of the retention limits defined by Brazilian legislation. The risks that exceed the retention limit must be ceded to IRB Brasil Resseguros S.A., formerly known as Instituto de Resseguros do Brasil , or IRB, which is controlled by the Brazilian Government.

On October 31, 2003, UASEG entered into an agreement to acquire the insurance company Phenix Seguradora SA from Toro Targa Assicurazioni SpA. and Fiat do Brasil S.A. Phenix reported sales of R$73 million in the first half of 2003. We expect that this transaction will enhance our insurance presence in the southeastern state of Minas Gerais and the southern state of Rio Grande do Sul. In connection with this acquisition, we have also entered into a strategic partnership with Fiat. This relationship will give UASEG preferred access to new corporate insurance contracts arranged by Fiat and its affiliates in Brazil.

Pension and Retirement Plans

Unibanco AIG Previdência S.A. (Prever), our subsidiary, manages reserves, that consist of pension and retirement contributions made by institutional clients and individuals. According to ANAPP, Prever was the second largest private pension and retirement plans company in Brazil in 2003, in the corporate segment.. Prever services approximately 648,500 individual and 1,112 corporate clients. At December 31, 2003, technical reserves were R$3.1 billion, an increase of 53.3% compared to December 31, 2002.

Prever sells the main following products to Brazilian private pension plans.

• Plano Gerador de Beneficios Livres, or PGBL, enables customers to save for retirement with a tax-deductible feature and may include insurance coverage for death, accident or disability. PGBL plans are suitable for middle and higher income customers.

• Vida Gerador de Beneficio Livre, known as VGBL, combines life insurance with investment, enabling the insured party to redeem the invested amount at any time, while still offering coverage in case of death, accident or disability. Contributions to VGBL are not tax deductible to investors. VGBL is suitable for the segment of the population with income around R$2,000 per month (approximately 12 million people).

In 2003, total reserves of PGBL plans reached R$1,216 million, while VGBL plans totaled R$439 million, a 88.9% and 377.2% growth, respectively, compared to 2002.

Wealth Management

In March 2002 we focused on the strategy design of the recently combined Unibanco Asset Management (UAM) and the Private Bank businesses. In 2003 we focused on improving the businesses offering, leveraging the synergies of both operations as well as developing the technological tools and processes required of the new organization.

Assets under Management as of December 31, 2003

As of December 31, 2003, UAM had R$23.2 billion in assets under management (including R$479 million under the management of Banco Dibens), an increase of 26.0% compared to 2002. In December 2003, the Financial Accounting Standards Board (“FASB”) issued interpretation No. 46 (“FIN 46R”), “Consolidation of Variable Interest Entities” , an interpretation of Accounting Research Bulletin No. 51. FIN 46R is a revision to the original FIN 46 that addresses the consolidation of certain variable interest entities (VIEs). As a result of the application of the interpretation, we consolidated in our assets R$3.8 billion of funds managed by Unibanco Asset Management in 2003 of which we are the sole beneficiary through our insurance companies. For further discussion of the effect of the application of FIN 46R on our consolidated financial statements, see note 2 (y) to our consolidated financial statements.

UAM generally charges fees for its mutual funds based on the average net asset value of the funds, which is calculated on a daily basis. UAM also manages portfolios for pension funds, corporations, private banking customers and foreign investors. For these services, UAM generally negotiates fees that are based on a percentage of assets under management, on investment benchmarks and on performance. In 2003, asset management fees averaged approximately 1.3% per year. UAM uses our branch network as one of its principal distribution channels.

Since July 2001, UAM has held Standard & Poor’s “AMP-1” rating (“very sound”) with respect to its practices in managing third parties’ funds. This is the highest of five possible ratings. In May 2003, Unibanco was awarded the “Top Manager 2003” prize in the category “Great Equity Managers,” granted jointly by Standard & Poor’s and the newspaper Valor Econômico . Also in 2003, UAM received from Fitch Atlantic Ratings, one of the major Brazilian risk rating companies, the highest rating in the national scale: aaa (am) (bra).

Private Bank

Our private banking unit targets high net worth individuals with potential investment portfolios of over R$1 million. Many of our private banking clients are major shareholders or senior executives of our corporate clients. The Private Bank reinforced and segmented its team of managers, allowing for a deeper involvement with the needs of clients with diverse profiles. Moreover, the Wealth Management division started centralizing the coordination and delivery of advisory services in succession, tax, and real estate planning, among others.

Other Information about Unibanco

Risk Management

Given the nature of Unibanco’s business as a financial institution, risk management practices play an important role in the way our financial institution is managed. Risk management practices have been integrated into various levels of our organization. A separate department unit is responsible for identifying, measuring and managing market, credit and operational risk on an institution-wide basis. In addition, certain business divisions, owing to their particular risk exposures, are equipped with their own dedicated risk management staff. We have also formed several committees, composed of Unibanco’s senior management, whose task is to evaluate the risks inherent in our activities on an ongoing basis and update our risk management policies accordingly. See “Item 11. Quantitative and Qualitative Disclosures About Market Risk – Risk Management” for a more detailed discussion of our risk management policies.

Funding

Our principal source of funding is deposits from the Brazilian public, including individuals and businesses. At December 31, 2003, our total deposits were R$25.7 billion, representing 38.9% of our total liabilities.

We provide four types of deposit accounts:

• demand accounts, which do not bear interest;

• saving accounts, which earn approximately 6% per annum (or 0.5% per month) plus the Taxa Referencial (Reference rate), an interest rate established by the Central Bank;

• time deposits, which earn interest; and

• interbank deposits from financial institutions, which earn the interbank rate of interest.

Savings deposits with banks in Brazil typically only pay interest after funds have been left on deposit for at least one calendar month by individuals and 90 days by corporations. Interest earned by individuals on all savings accounts is income tax free. Time deposits either pay a fixed interest rate or a floating rate. The breakdown between fixed and floating rate deposits varies from time to time, depending on the interest rate expectations of the market. At December 31, 2003, most of our time deposits carried a floating interest rate.

The following table sets forth our total deposits, by type and source, as of December 31, 2001, 2002 and 2003:

The following table sets forth the mix of the retail and wholesale deposits at our domestic offices as of December 31, 2001, 2002 and 2003:

Other Sources

We have obtained US dollar-denominated lines of credit with our correspondent banks to provide a source of trade finance funding for Brazilian companies. As of December 31, 2003, our total import and export funding was approximately R$2.5 billion, compared to R$4.1 billion in December 31, 2002.

We borrow foreign currency in the international markets either by borrowing privately or issuing debt securities for the specific purpose of onlending such funds in Brazil to Brazilian corporations and financial institutions. These onlendings take the form of loans denominated in Brazilian currency indexed to the US dollar. We believe we are one of the most active Brazilian financial institutions in the Eurobond market. As of December 31, 2003, we had approximately R$2.6 billion of securities outstanding in the Eurobond market, compared to R$2.2 billion as of December 31, 2002.

In 2003, Unibanco raised approximately US$1.4 billion in funding abroad through eight Eurobond issues, two securitization transactions, and one Tier II subordinate note offering.

At December 31, 2003, we had outstanding R$5.9 billion in local and foreign onlendings, which consist primarily of real-denominated amounts borrowed from BNDES, and FINAME, for loans extended to Brazilian clients for investments mainly in fixed assets, such as premises and equipment.

Technology

Technology is important to the execution of several components of our business strategy. We have invested heavily, and we will continue to do so in new technology to enable us to retain and enhance our competitive position in various markets, improving the quality of our services and controlling costs.

During 2003, Unibanco invested a total of R$143 million on technology. Principal projects included:

• investing in Unicard and Fininvest projects (basically in new technology, organic growth and in integration of acquired company);

• increasing the capacity of our central computer systems;

• improving our management information system;

• upgrading our ATMs and call center;

• product development, aimed at satisfying the growing demand from our customers; and

• back-office upgrading, business support areas, and processing.

Competition

Retail and Wholesale Banking

Since 1990, the banking industry in Brazil experienced a period of consolidation. A number of banks were liquidated, many important state banks were privatized and many medium-sized private sector banks were also sold. Nevertheless, the market for financial services in Brazil, including banking, insurance and asset management, remain highly competitive. As of December 31, 2003, there were 141 multiple-service banks, 23 commercial banks, 21 investment banks, and numerous savings and loan, brokerage, leasing and other financial institutions.

Banco Bradesco and Banco Itaú are the two largest private sector banks in Brazil in terms of assets, followed by Unibanco, Banco Santander-Banespa, Banco ABN AMRO Real, Banco Safra and HSBC Bamerindus. We expect that the recent acquisition activity in the Brazilian banking market will increase competition in the retail sector.

We also face competition from public sector banks, some of which have a larger distribution network and larger customer base than we do. Public sector banks, the largest of which are Banco do Brasil S.A., or Banco do Brasil and Caixa Econômica Federal, or CEF accounted for 29.1% of total lending in the Brazilian banking system as of December 31, 2003, compared to 24.6% as of December 31, 2002. Public-sector banks operate within the same legal and regulatory framework as the private sector banks with stronger presence in markets such as residential mortgage and agricultural lending, than private sector banks.

See Item 3.D. Risk Factors — Risks Relating to the Brazilian Banking Industry — The increasingly competitive environment in the Brazilian financial services market may negatively affect our business prospects.

Credit Cards & Consumer Finance

The Brazilian credit card market is highly competitive, consisting of approximately 33 credit card issuers of varying sizes. The primary competitors of Unicard and Credicard are Banco Itaú, Banco do Brasil, Banco Bradesco, Santander and Banco ABN AMRO Real. We believe that the primary competitive factors are price (interest rate, cardholder fees and merchant fees), card distribution network, card acceptance and name recognition.

Co-branded cards, particularly with companies that offer rewards, discounts or mileage programs, such as airline companies, are increasingly being adopted by credit card companies to expand their client base.

Post-dated checks also compete with credit cards. They are a popular means of term payment in Brazil by which customers pay for merchandise and services with future dated bank checks, effectively allowing payment over a longer term. However, we believe that credit cards will gradually replace post-dated checks as the primary method of term payment because of their convenience, safety and growing acceptance.

Consumer finance companies, while targeting different economic segments of the population than banks generally do, are likely to continue expanding their credit card activities. We believe the major competitor for Fininvest are Losango, Banco Zogbi and Finasa, which were acquired by Bradesco, and many small independent companies.

Insurance and Pension Plans

The Brazilian insurance market is highly competitive. The 10 largest insurance groups represented 78% of the insurance market as of December 2003. Our primary competitors are the Sul América Group, Banco Bradesco, Porto Seguro, Banco do Brasil and Banco Itaú. For the year ended December 31, 2003, these companies together accounted for R$26 billion of premiums written (based on information provided by SUSEP, ANAPP and ANS) in the Brazilian insurance & Pension Plans markets, or 58%. As of December, 2003 UASEG and AIG Brasil, on a combined basis, had a 7.1% insurance market share, (8.3% in the pension plans), representing a total market share of 7.5% in insurance and pension plans. See “-- Insurance and Related Activities — Insurance.” Although companies that operate nationwide underwrite the majority of the business, we also face competition from certain local or regional companies in various markets that may have a relatively cheaper cost structure or specialization in certain niches. We believe that our main competitive factors are our strength, strong pathernership with international company brand name recognition, quality of services, and competitive rates.

Asset Management & Private Bank

The asset management industry in Brazil has been dominated by commercial banks offering fixed-income funds to retail bank customers. Competition in the sector includes such traditional competitors as Banco do Brasil, Banco Itaú, Banco Bradesco, HSBC, Citibank, CEF and BankBoston. Unibanco Asset Management has several competitive advantages, particularly its ability to offer a wide product range and a strong brand. In addition, UAM has differentiated itself due to the quality of its investment process, which includes credit analysis, macroeconomic and company research, asset allocation models and risk control. An important trend has emerged in the last couple of years. Increasingly funds of funds is becoming an important product, especially for the high net worth segment. This trend has fueled the emergence of small asset managers specialized in multi-markets high risk products, a trend that resembles the global movement toward hedge funds and funds of hedge funds. These managers have been able to gather significant volumes, despite their poor proprietary distribution capabilities. In this regard, UAM has positioned itself in a very good competitive position. Among the big asset managers UAM was the first to offer its own product in this category of multi-markets high risk products and also manage to create a leading operation in the fund of funds business.

The private banking industry in Brazil is divided in two segments, one dealing with the domestic market and another one with the international markets. In the local arena, key competitors are Citibank, Banco Itaú, Banco Bradesco, Banco Safra, HSBC, ABN, BankBoston and Banco Santander, while in the offshore segment, in addition to the local competitors, banks such as JP Morgan Chase, UBS, Merrill Lynch, Morgan Stanley, Crédit Suisse First Boston and the Swiss private banks (Lombard Odier Darier Hentsch, Mirabaud, Julius Baeur, Pictet, among others) also have a strong presence in Brazil. Both markets are very competitive, and margins are very thin as a consequence. A recent trend in the Brazilian domestic was initiated by Unibanco in 2002, when it started offering wealth management services to its clients, including management of real estate assets and tax advice. Today, other local players also have such services in their offerings.

THE BRAZILIAN BANKING INDUSTRY

General

The federal government controls some commercial banks and other financial institutions. Government-owned banking institutions play an important role in the Brazilian banking industry. These institutions hold a significant portion of the banking system’s total deposits and total assets and they have a stronger presence in markets such as residential mortgage and agricultural lending than private sector banks. In addition, the development banks act as regional development agencies.

Public Sector

The federal governments controls some commercial banks and other financial institutions. Government-owned banking institutions play an important role in the Brazilian banking industry. These institutions hold a significant portion of the banking system’s total deposits and total assets and they have a stronger presence in markets such as residential mortgage and agricultural lending than private sector banks. In addition, the development banks act as regional development agencies.

The three main public financial institutions controlled by the Brazilian government are:

• Banco do Brasil, which provides a full range of banking products to both the public and private sectors. Banco do Brasil is the largest commercial bank in Brazil and the primary financial agent of the Brazilian government;

• BNDES, a development bank which provides medium- and long-term financing to the Brazilian private sector, mainly in the industry sector. BNDES provides funding both directly and indirectly through onlending by other public and private sector financial institutions; and

• Caixa Econômica Federal, which is involved principally in deposit-taking and provides financing for housing and urban infrastructure.

Private Sector

The following are the most important types of private sector financial institutions:

• multiple-service banks, such as Unibanco, which are licensed to provide a full range of commercial banking, investment banking (including securities underwriting and trading), consumer finance and other services;

• commercial banks, which are primarily engaged in wholesale and retail banking. They are particularly active in taking demand and time deposits and lending for working capital purposes; and

• investment banks, which are principally engaged in underwriting securities and structured transactions.

REGULATION AND SUPERVISION

Principal Regulatory Bodies

        The National Financial System is composed of the following regulatory and inspection bodies:

• the National Monetary Council ( Conselho Monetário Nacional-CMN );

• the Central Bank ( Banco Central );

• the Securities Commission ( Comissão de Valores Mobiliários-CVM );

• the Private Insurance Superintendency (“SUSEP”); and

• the Complementary Pension Secretariat.

        The CMN, the Central Bank and the CVM regulate the Brazilian banking industry.

        We summarize below the main functions and powers of each of these regulatory bodies:

        Brazilian Financial System Legal Reform - Amendment to the 1988 Brazilian Constitution

        In May 2003, an Amendment to the Brazilian Constitution (“EC 40/03”) was enacted to replace the existing restrictive constitutional provisions with a general permission to regulate the Brazilian financial system through specific laws. The enactment of EC 40/03 will allow the legislature to focus more closely on the different issues affecting the regulation of the financial system. The timely focus on these issues will hopefully lead to greater efficiencies within the financial system. The Brazilian Congress may now vote on several bills dealing with the regulation of the financial system. Congress would have been unable to do this absent the enactment of this constitutional amendment.

Principal Limitations and Restrictions on Activities

        Restrictions on the Extension of Credit

        Financial institutions may not grant loans to, or guarantee the transactions of, their affiliates, except in some limited circumstances. For this purpose, the law defines an affiliate as:

• any company which holds more than 10% of the share capital of the financial institution;

• any company in which the financial institution holds more than 10% of the share capital; or

• managers of the financial institution (executive officers, directors and their family members), and any company in which these persons hold more than 10% of the share capital or in which they are also managers.

        Moreover, there are currently certain restrictions imposed on financial institutions limiting the extension of credit to public-sector entities, such as government-owned companies and governmental agencies, which are in addition to certain limits on indebtedness to which these public sector entities are already subject.

        Restrictions on Risk Concentration

        Brazilian law prohibits financial institutions from concentrating risks in only one person or group of related persons. The law prohibits a financial institution from extending credit to any person or group of related persons in an aggregate amount equivalent to 25% or more of the financial institution’s adjusted shareholders’ equity. This limitation applies to all transactions involving extension of credit, including those involving:

• loans and advances;

• guarantees; and

• the underwriting, purchase and renegotiation of securities.

        Restrictions on Investments

        Financial institutions may not:

• hold, on a consolidated basis, permanent assets in excess of 50% of their adjusted shareholders’ equity;

• own real property, other than real property for its own offices and branches; or

• acquire equity investments in other financial institutions abroad, without prior approval by the Central Bank.

        When a bank receives real estate in satisfaction of a debt, such property must be sold within one year. Such one-year limit may be extended for two additional periods of one year, subject to the Central Bank’s approval.

        Repurchase Transactions

        Repurchase transactions (“ operações compromissadas ”) are transactions involving assets that are sold or purchased subject to the occurrence of certain conditions. Upon the occurrence of any such conditions, and depending on the terms of the particular agreement, the seller or the buyer may be obligated to repurchase, or resell the assets, as the case may be. The conditions triggering the repurchase or resale obligation vary from one transaction to the other, and typically must occur within a particular time frame.

        Repurchase transactions executed in Brazil are subject to operational capital limits based on the financial institution’s shareholders’ equity, as adjusted in accordance with Central Bank regulations. A financial institution may only hold repurchase transactions in an amount up to 30 times its adjusted shareholders’ equity. Within that limit, repurchase transactions involving private securities may not exceed twice the amount of adjusted shareholders’ equity. Limits on repurchase transactions involving securities backed by Brazilian governmental authorities vary in accordance with the type of security involved in the transaction and the perceived risk of the issuer as established by the Central Bank.

        Foreign Currency Loans

        Upon registering with the Central Bank, financial institutions may borrow foreign currency-denominated funds in the international markets for any reason whatsoever without the prior written consent of the Central Bank, including on-lending such funds in Brazil to Brazilian corporations and other financial institutions. Banks make those on-lending transactions through loans denominated in Brazilian currency and indexed to the foreign currency in which the original loan was denominated.

        The Central Bank may establish limitations on the term, interest rate and general conditions of foreign-currency loans. It frequently changes these limitations in accordance with the economic environment and the monetary policy of the Brazilian government.

        Foreign Currency Position

        Only those institutions authorized by the Central Bank to operate in the foreign exchange markets may purchase and sell foreign currency in Brazil. The Central Bank imposes a limit on the net exposure of Brazilian financial institutions and their affiliates to assets and debt subject to foreign currency and gold fluctuation. The limit is currently equivalent to 30% of the institution’s adjusted shareholders’ equity.

        Management of Third Party Assets

        Asset management is regulated by the CMN, the Central Bank and the CVM.

        Only individuals or entities authorized by the Securities Commission may act as managers of third party assets.

        Financial institutions must segregate the management of third party assets from their other activities. These institutions must appoint an officer as the agent responsible for the management and supervision of the third party assets.

        The Central Bank, except in very specific circumstances, has prohibited institutions that manage third party assets and their affiliated companies from investing in fixed rate income funds which they also manage. The Securities Commission allows investments in equity funds. There are some rules regarding mutual funds portfolio diversification and composition, which aim to reduce exposure to certain types of risk.

        Pursuant to a change introduced by the Central Bank in February 2002, fund managers are required to mark their fixed-income securities to market and results in such fund’s portfolio assets must be accounted for at their fair market value.

        Micro-credit Regulation

        The Brazilian government has taken several measures intended to encourage lower-income individuals to have greater access to the Brazilian financial system. Such measures include the requirement for credit allocation, the simplification of banking procedures, and the liberalization of credit union ( cooperativas de crédito ) regulations.

        Since 2003, commercial banks, full service banks licensed to provide commercial banking services, the Caixa Econômica Federal and credit unions must allocate 2% of their cash deposits to low-interest-rate loan transactions designated for lower-income individuals, small companies and informal entrepreneurships, following a specific methodology. Interest rates on these loans cannot exceed 2% per month, the repayment term cannot be less than 120 days, and the principal amount of the loan cannot exceed R$600 for individuals and R$1,000 for micro-enterprises.

        Credit upon Payroll Discount

        Since December 2003, employees regulated by the Consolidation of Labor Laws (“CLT”) are entitled to authorize employers to discount directly from employees’ payroll amounts due under loans, financing and lease transactions, when the respective agreements permit such procedure. The employers shall transfer the amounts discounted from employees’ payroll to the institutions which have granted the credits to the employees, in accordance with the terms and conditions set forth in the respective loan, financing and/or lease agreements.

Regulations Intended to Ensure the Safety and Soundness of Financial Institutions and the Financial System

        Internal Compliance Procedures

        All financial institutions must establish internal policies and procedures to control their:

• activities;

• financial, operational and management information systems; and

• compliance with all applicable regulations.

        The board of executive officers of a financial institution is responsible for implementing an effective structure of internal controls by defining responsibilities and control procedures and establishing corresponding goals at all levels of the institution. The board of executive officers is also responsible for verifying compliance with internal procedures.

        Either an internal audit department, which reports directly to the board of directors of the institution, or the institution’s external auditors, must be responsible for monitoring the internal control system.

        Independent Accountants and Audit Committee

        Regulations enacted by the CMN on May 30, 2003, as amended on January 30, 2004, established certain requirements in respect of financial institutions’ independent accountants and required financial institutions to have an Audit Committee.

        All financial institutions must be audited by independent accountants. Independent accountants can only be hired if they are registered with the Securities Commission, certified in specialized banking analysis by the Federal Board of Accounting ( Conselho Federal de Contabilidade ) and the Institution of Brazilian Independent Auditors ( Instituto dos Auditores Independentes do Brasil ) and if they meet several strict requirements that assure their independence. Moreover, financial institutions must replace their independent accounting firm at least every five consecutive fiscal years and former accountants can be rehired only after three complete fiscal years have passed since their prior service. The financial institutions must designate a senior manager to be responsible for compliance with all regulations regarding financial statements and auditing.

        In addition to preparing an audit report, the independent accountants must report:

• an evaluation of the financial institution’s internal controls and risk management procedures, including its electronic data processing system, showing all deficiencies found; and

• a description of the financial institution’s non-compliance with applicable regulation material to the financial institution’s financial statements or activities.

        All financial institutions with a reference capital or a consolidated reference capital equal to or greater than R$1 billion must create, by July 1, 2004, an internal audit committee. The audit committee must be created pursuant to the financial institution’s by-laws and must be composed of, at a minimum, 3 individuals, at least one of whom is an expert in accounting and auditing. In accordance with the Brazilian law, the members of the audit committee may also be members of the board of directors of the institution and must meet certain requirements that ensure their independence. The audit committee must report directly to the board of directors and its main functions include:

• appointing the independent accountants to be elected by the board of directors;

• supervising the independent accountants’ work;

• requesting the independent accountants’ replacement when it deems necessary;

• reviewing the financial statements for each semester, the management and the audit reports;

• supervising the accounting and auditing departments, including their compliance with internal procedures and applicable regulation;

• evaluating the management’s compliance with the independent accountants’ recommendations;

• receiving and publishing information regarding non-compliance with internal procedures or applicable regulation;

• advising management on the adoption of internal controls and procedures; and

• meeting with management, independent accountants and internal accountants to verify their compliance with the audit committee’s recommendations

        Furthermore, it is permitted under Brazilian law, to create a sole audit committee for the whole group of companies. In this particular case, the audit committee shall be responsible for every and each institution pertaining to the same group which falls within the requirements set forth in the paragraph above.

        The independent accountants and the audit committee must immediately communicate to the Central Bank any event that may materially adversely affect the financial institution’s status, including material non-compliance with applicable regulation and fraud.

        Auditing Requirements

        Brazilian law requires financial institutions to prepare their financial statements in accordance with certain standards set forth by Brazilian corporation law and other applicable regulations.

        Capital Adequacy Guidelines

        Brazilian financial institutions must comply with guidelines similar to those of the Basle Accord on risk-based capital adequacy. The requirements imposed by the Central Bank differ from the Basle Accord in a few aspects. Among other differences, the Central Bank:

• imposes a minimum capital requirement of 11% in lieu of the 8% minimum capital requirement of the Basle Accord;

• requires an additional amount of capital with respect to off-balance sheet interest rate and foreign currency swap operations; and

• assigns different risk weights to certain assets and credit conversion amounts, including a risk weight of 300% on deferred tax assets relating to income and social contribution taxes.

        Under the Central Bank regulation, the net worth (or Reference Capital) of Brazilian financial institutions is represented by the sum of Tier 1 and Tier 2 capital and is taken into consideration for the purposes of defining their capital adequacy.

• Tier 1 capital corresponds to net worth plus positive result account minus (1) negative result account, excluding revaluation reserves, contingency reserves and special profit reserves related to mandatory dividends not yet distributed, and (2) the amounts related to preferred cumulative stock and preferred redeemable stock.

• Tier 2 capital corresponds to revaluation reserves, contingency reserves, special profit reserves related to mandatory dividends not yet distributed, preferred cumulative stock, preferred redeemable stock, subordinated debt and hybrid instruments. The total amount of Tier 2 capital may not exceed the total amount of Tier 1 capital, provided that: (i) the total amount of revaluation reserves in Tier 2 capital may not exceed 25.0% of the Reference Capital; (ii) the total amount of subordinated debt in Tier 2 capital plus the amount of preferred redeemable stock, in each case originally maturing in less than 10 years, may not exceed 50.0% of the Tier 1 capital amount; and (iii) a 20.0% reduction shall be applied to the amount of the subordinated debt and preferred redeemable stock in Tier 2 capital every year for the 5 years immediately preceding the respective maturity.

        The Reference Capital shall be taken into consideration for the purpose of defining the capital adequacy of financial institutions, except for the permanent assets limit, which is defined pursuant to certain legal provisions.

        Capital Structure

        Financial institutions must be organized as corporations. As corporations, they are subject to all the provisions of Brazilian Corporate Law and, if they are registered as public companies, to the supervision of the Securities Commission.

        Financial institutions may divide their capital into voting and non-voting shares, although, non-voting shares may only represent up to 50% of their total capital.

        Treatment of Overdue Debts

        Under Central Bank regulations, banks have to classify their loan transactions with companies into 9 categories, ranging from AA to H, in accordance with their risk. Risk assessment includes an evaluation of the borrower, the guarantor and the relevant loans. Credit classifications are determined in accordance with Central Bank criteria relating to:

• characteristics of the debtor and the guarantor, such as their economic and financial situation, level of indebtedness, capacity for generating profits, cash flow, delay in payments, contingencies and credit limits; and

• characteristics of the transaction, such as its nature and purpose, the sufficiency of the collateral, the level of liquidity and the total amount of the loan.

        The regulations specify, for each category of loans, a minimum provision, as follows:

        In general, banks must review the loan classifications annually. However, banks must review loans:

• semi-annually in any case where the aggregate amount of loans extended to a single borrower or economic group exceeds 5% of the bank’s adjusted shareholders’ equity; and

• monthly in the case of loans that become past due.

        A loan may be upgraded if it has a credit support or downgraded if in default. Banks must write-off loans 6 months after they are ranked H.

        In the case of loan transactions with individuals, there is a similar nine-category ranking system. The loan is graded based on data including the individual's income, net worth and credit history (as well as other personal data).

        For loans that are past due, the regulations establish maximum classifications, as follows:

         Banks are required to determine, on a monthly basis, whether any loans must be reclassified as a result of these maximum classifications, and, if so, must adjust their provisions accordingly.

        Finally, banks are required to make their lending and loan ranking policies available to the Central Bank and to their independent accountants. They must also provide information relating to their loan portfolio along with their financial statements, including:

• breakdown of activities and nature of the borrower;

• maturity of the loans;

• amounts of rolled-over, written-off and recovered loans;

• loan portfolio diversification in accordance with the loan classification; and

• overdue loans – divided between loans past due up to 15 days and loans past due over 15 days.

        Central Credit Risk System

        Financial institutions are required to provide information to the Central Bank concerning the extension of credit and guarantees rendered to clients. The information is used to:

• strengthen the Central Bank’s supervisory capacity;

• make information concerning debtors available to other financial institutions (however, other institutions can only access information subject to client’s authorization); and

• prepare macroeconomic analyses.

        If the aggregate amount of a client’s transactions exceeds R$20,000.00, the financial institution must provide the Central Bank with:

• the identity of such customer;

• a breakdown of such customer’s transactions, including any guarantees rendered by the bank with respect to his obligations; and

• information regarding the client’s credit risk classification based on the credit risk classification policy described above.

        For transactions that, in the aggregate, are below or equal to R$20,000.00, the financial institution must only report the total amount of transactions per client.

        Anti-Money Laundering Law

        Pursuant to the Brazilian anti-money laundering law, financial institutions must:

• identify and maintain up-to-date records regarding their customers;

• maintain internal controls and records;

• record, for a five-year period, any transaction or set of transactions performed by individuals or entities pertaining to the same economic group involving Brazilian and foreign currency, securities, metals or any other asset which may be converted into money that exceeds R$10,000;

• review transactions or proposals with characteristics which may indicate the existence of a crime;

• keep records of transactions involving checks for a period of 5 years;

• inform the appropriate authorities (without the customer’s knowledge) of any transaction or set of transactions performed by individuals or entities pertaining to the same group of companies, which involves amounts exceeding R$10,000.00; and

• communicate to the appropriate authorities, within 24 hours, any suspicious transaction.

        In addition, the Brazilian anti-money laundering law created the Financial Activity Control Council. The main role of the Council is to promote cooperation among the Brazilian governmental bodies responsible for implementing national anti-money laundering policies, in order to avoid the performance of illegal acts and frauds.

        Anti-Tax Evasion Law

        The Brazilian Central Bank is authorized to require financial institutions to provide information generally protected by bank secrecy without judicial authorization, as long as they have strong circumstantial evidence that a customer has engaged in tax evasion. Such evidence may be represented by, among others:

• declarations by the customer of transactions with a value lower that their market value;

• loans acquired from sources outside the financial system;

• transactions involving “tax havens”;

• expenses or investments which exceed the declared available income;

• overseas currency remittances through non-resident accounts in amounts which exceed the declared available income; and

• legal entities which have their registration with the General Taxpayers Registry cancelled or declared null.

        Other than in the circumstances described above, information protected by bank secrecy laws can only be furnished in compliance with a court order or an order by a Congress Inquiry Committee (CPI).

Regulations Affecting Liquidity in the Financial Market

        Reserve Requirements

        The Central Bank currently imposes several compulsory reserve requirements on financial institutions. Financial institutions must deposit those reserves with the Central Bank. The Central Bank uses reserve requirements as a mechanism to control the liquidity of the financial system. The reserves imposed on demand deposits, savings deposits and time deposits account for substantially all amounts required to be deposited with the Central Bank. For further discussion of reserve requirements, please see “Item 5. Operating and Financial Review and Prospects – Macroeconomic Factors Affecting Our Financial Condition and Result of Operations – Effect of Government Regulation on Our Financial Condition and Results of Operations – Compulsory Deposit Requirements”.

Taxation of Financial Transactions

        Temporary Contribution on Financial Transactions (CPMF)

        The Temporary Contribution on Financial Transactions ( Contribuição Provisória sobre Movimentações Financeiras – CPMF ) is a tax imposed on any type of financial transaction, with certain limited exemptions. The current rate of the CPMF is 0.38%. Most recently, on December 19, 2003, a Constitutional Amendment extended the period for the collection of the CPMF until December 31, 2007. On April 1st, 2004, a provisional measure created the so called “Investment Deposit Accounts”, which is an investment account that allows the investors to make money transfers without paying CPMF.

        The Brazilian government may change the applicable rate at any time, subject to the limits established by the Federal Constitution.

        The CPMF is generally levied upon any debit to bank accounts. This creates an incentive for clients to reduce transactions in the financial system and short-term investments.

Regulations Affecting Our Relationship with Our Clients

        The relationship between financial institutions and their clients is regulated in general by laws applicable to all commercial transactions, and by the Brazilian Civil Code in particular. However, regulations established by the CMN and the Central Bank address specific issues relating to banking activity and contracts, complementing the general regulation.

        The Consumer Defense Code and the Banking Client Defense Code

        In 1990, the Brazilian Consumer Defense Code was enacted to establish rigid rules to govern the relationship between product and service providers and consumers and to protect final consumers. On May, 2004 the Brazilian Supreme Court of Justice ruled that the Brazilian Consumer Defense Code also applies to transactions between financial institutions and their clients. We are not in a position, at this stage, to predict the impact that this will have on the Brazilian banking system. Financial institutions are also subject to specific regulation of the National Monetary Council, which specifically regulates the relationship between financial institutions and their clients.

        The New Civil Code

        Law No. 10,406 instituted a new Brazilian Civil Code (the “New Civil Code”), which took effect on January 11, 2003 and replaced the prior Civil Code and substantial parts of the Commercial Code. The New Civil Code is wide-ranging in application, governing individuals, corporations and other legal entities, and has provisions which affect, among others, contracts, including guarantees, property, family and succession law.

        Contractual obligations and guarantees entered into before January 11, 2003 will remain governed by the prior Civil Code solely in relation to their existence and validity; although the effects of such agreements as of January 11, 2003 will be governed by the New Civil Code. The changes under the New Civil Code have not had a material impact on our current business.

        Banking Secrecy

        Financial institutions must maintain the secrecy of their banking operations and services provided to their customers. Certain exceptions apply to this obligation, however, such as the sharing of information on credit history, criminal activity and violation of bank regulations or disclosure of information authorized by interested parties. Bank secrecy may also be breached when necessary for the investigation of any illegal act.

Bank Failure

        Intervention, Administrative Liquidation and Bankruptcy

        The Central Bank may intervene in the operations of a bank if there is a material risk for creditors. The Central Bank may intervene if liquidation can be avoided or it may perform administrative liquidation or, in some circumstances, require the bankruptcy of any financial institution except those controlled by the federal government.

        Extrajudicial Liquidation

        An extrajudicial liquidation of any financial institution (with the exception of public financial institutions controlled by the Federal Government) may be carried out by the Central Bank if it can be established that:

• debts of the financial institution are not being paid when due; or

• the financial institution is deemed insolvent; or

• the financial institution has incurred losses that could abnormally increase the exposure of the unsecured creditors; or

• management of the relevant financial institution has materially violated Brazilian banking laws or regulations; or

• upon cancellation of its operating authorization, a financial institution's ordinary liquidation proceedings are not carried out within 90 days or are carried out with delay representing a risk to its creditors, at the Central Bank's discretion. Liquidation proceedings may otherwise be requested, on reasonable grounds, by the financial institution's officers or by the intervener appointed by the Central Bank in the intervention proceeding.

        Extrajudicial liquidation proceedings may cease:

• at the discretion of the Central Bank if the parties concerned assume the administration of the financial institution after having provided the necessary guarantees; or

• when the liquidator's final accounts are rendered and approved, and subsequently filed with the competent Public Registry; or

• when converted to an ordinary liquidation; or

• when the financial institution is declared bankrupt.

        Temporary Special Administration Regime

        In addition to the aforesaid procedures, the Central Bank may also establish the Temporary Special Administration Regime (" Regime de Administração Especial Temporária " or "RAET"), which is a less severe form of Central Bank intervention in private and non-federal public financial institutions and which allows institutions to continue to operate normally.

        The RAET may be imposed by the Central Bank in the following circumstances:

• continuous practice of transactions contrary to the economic and financial policies established by federal law;

• the institution fails to comply with the compulsory reserves rules;

• the institution has operations or circumstances which call for an intervention;

• illegal or management misconduct; and

• the institution faces a shortage of assets.

        The main object of the RAET is to assist with the recovery of the financial conditions of the institution under special administration. Therefore, the RAET does not affect the day-to-day business operations, liabilities or rights of the financial institution, which continues to operate in its ordinary course.

        Repayment of Creditors in a Liquidation

        In the liquidation of a financial institution, employees’ wages and indemnities and tax claims enjoy the highest priority of any claims against the bankrupt estate. The Credit Insurance Fund is a deposit insurance system which guarantees a maximum amount of R$20,000 of deposits and credit instruments held by an individual against a financial institution (or against financial institutions of the same financial group). The Credit Insurance Fund is funded principally by mandatory contributions from all Brazilian financial institutions that work with customer deposits. The payment of unsecured credit and customer deposits not payable under the Credit Insurance Fund is subject to the prior payment of all secured credits and other credits to which specific laws may grant special privileges.

        Brazilian Payment and Settlement System

        In December 1999 the Brazilian government released new rules for the settlement of payments in Brazil, based on the guidelines adopted by the Bank of International Settlements (BIS). After a period of tests and gradual implementation, the Brazilian Payment and Settlement System began operating in April 2002. The Central Bank and CVM have the power to regulate and supervise this system. Pursuant to these rules, new clearing houses may be created and all clearing houses are required to adopt procedures designed to reduce the possibility of systemic crises and to reduce the risks currently borne by the Central Bank. The most important principles of the new Brazilian Payment and Settlement System are:

• The existence of two main payment and settlement systems: real time gross settlements, using the reserves deposited with the Central Bank; and deferred net settlements, through the clearing houses;

• The clearing houses, with some exceptions, will be liable for the payment orders they accept; and

• Bankruptcy laws do not affect the payment orders made through the credits of clearing houses, nor the collateral granted to secure those orders. However, clearing houses have ordinary credits against any participant under bankruptcy laws.

Foreign Investment and the Federal Constitution

        Foreign Banks

        The Federal Constitution prohibits foreign financial institutions from establishing new branches in Brazil, except when duly authorized by the Brazilian government. A foreign financial institution duly authorized to operate in Brazil through a branch or a subsidiary is subject to the same rules, regulations and requirements that are applicable to any Brazilian financial institution.

        Foreign Investment in Brazilian Financial Institutions

        The Federal Constitution permits foreign individuals or companies to invest in the voting shares of Brazilian financial institutions only if they have specific authorization from the Brazilian government.

        Foreign investors may acquire publicly traded non-voting shares of Brazilian financial institutions or depositary receipts offered abroad representing non-voting shares without specific authorization.

Supervision in Other Jurisdictions

        We have branches, subsidiaries and representative offices in several foreign jurisdictions, including New York, Miami, London, Luxembourg, Paraguay, Cayman Islands and the Bahamas.

        The Central Bank exercises global consolidated supervision over such branches, subsidiaries and representative offices. Furthermore, in most cases, we had to obtain governmental approvals from local central banks and monetary authorities in such jurisdictions before commencing business and in all cases we are subject to local authorities’ supervision.

Insurance Market

        Principal Regulatory Entities

        Two regulatory agencies oversee the Brazilian insurance system: the National Private Insurance Council ( Conselho Nacional de Seguros Privados – CNSP ), and the Private Insurance Superintendency ( Superintendência de Seguros Privados – SUSEP ). The SUSEP is responsible for implementing and supervising the CNSP’s policies and ensuring compliance by insurance companies and brokers.

        Insurance

        Insurance companies require government approval to operate, as well as specific approval from the SUSEP for each of their products. Insurance companies may sell policies only through qualified brokers.

        Insurance companies must set aside reserves, funds and provisions in accordance with the criteria established by the CNSP. The investments backing up the reserves must be diversified. Securities comprise a substantial portion of the assets in which insurance companies can invest. As a result, insurance companies are major investors in the Brazilian financial markets and are subject to a series of rules and conditions imposed by the CMN regarding the investment of technical reserves.

        Insurance companies, subject to certain specific exceptions, are prohibited from:

• acting as financial institutions by extending credit or issuing guarantees;

• trading in securities; or

• investing outside of Brazil.

        Insurance companies must operate within technical limits set forth by SUSEP pursuant to rules established by the CNSP. The rules take into account the economic and financial situation of the insurance companies, the technical conditions of their respective portfolios and the results of their operations with IRB (as defined below).

        Reinsurance

        The regulation of reinsurance transactions in Brazil has traditionally been the domain of IRB-Brasil Resseguros S.A. – IRB , a government-controlled entity which enjoyed a monopoly over the Brazilian reinsurance market from 1932 through 1996. In 1996, the monopoly was formally eliminated. Pursuant to a law enacted in 1999, the IRB was to be privatized and its regulatory powers transferred to SUSEP. However, the constitutionality of this law is being challenged before the Supreme Court. As a result, until the Supreme Court renders a final decision in this matter, the IRB will not be privatized and shall remain as the reinsurance regulatory body in Brazil. All risks in excess of the companies’ maximum retention limits established by the SUSEP must be compulsorily reinsured or co-insured. According to industry practice, insurance companies also voluntarily reinsure or co-insure a portion of their exposure, regardless of whether they meet the maximum retention limits.

        Reporting Requirements

        Insurance companies must file unaudited monthly and audited semiannual and annual reports with the SUSEP.

        Liquidation

        Insurance companies are exempt from ordinary bankruptcy procedures and instead follow a special procedure administered by the SUSEP. Liquidation may be either voluntary or compulsory. The Minister of Finance has the authority to institute compulsory liquidation.

        Foreign Participation in the Insurance Market

        There is currently no rule restricting foreign investment in insurance companies. The direct participation of foreign companies (as well as those of private Brazilian companies) in the reinsurance market is pending regulation by an implementing law.

Securities Market

        The Brazilian securities market is regulated by the CMN and the Securities Commission. Current regulations impose several obligations on publicly traded corporations, such as:

• registration requirements;

• disclosure obligations;

• insider trading prohibitions;

• special qualification requirements for managers; and

• rules protecting minority shareholders.

        On October 31, 2001 Law No. 10,303 amended the Corporate Law, granting new protection to minority shareholders and imposing new requirements on publicly traded corporations. (For a discussion on the main provisions of this amendment, see Item 10.B. Memorandum and Articles of Association).

4.C. ORGANIZATIONAL STRUCTURE

The following chart sets forth information, as of April 30, 2004, regarding our significant subsidiaries, or Group:

4.D. PROPERTY, PLANT AND EQUIPMENT

Our principal executive offices are located in São Paulo, Brazil. We own a portion of these offices and lease the remainder. The three main offices, which we own, and the main activities carried on in each of them are:

• Unibanco Building (total area of 32,093 m ² ): Principal executive offices and main administrative offices;

• CAU (Unibanco Administrative Center-- total area of 45,673 m ² ): Data Processing Center, Information Technology, Accounting and Human Resources; and

• Barão de Iguape building (total area of 25,886 m ² ): Back-offices and 30 Hours Telephone Center.

We have also a number of other administrative offices, in the main Brazilian cities, most of which are also leased.

Of our total branches, 10% are owned by our Group and 90% are leased. We lease most of our branches under renewable leases with terms averaging five years.