Explanatory Notes to the Financial Statements

 
EXPLANATORY NOTE TO THE FINANCIAL STATEMENTS - on March 31, 2003
FISCAL RESPONSIBILITY LAW – INFORMATION REQUIRED
 
(a) Impact and fiscal cost of its operations – Fiscal Responsibility Law, Article 7, paragraph 2 and Budget Guidelines Law, Article 95 (Law 10,524/2002):
 
Paragraph 1 of Article 8 of Law no. 4,595/64, as amended by Decree-Law no. 2,376/87, provides that “results achieved by the Banco Central do Brasil, considering revenues and expenses from all its operations, shall be, effective from January 1, 1988, assessed on an accrual basis and transferred to the National Treasury, after compensated for any losses from previous fiscal years”.
 
This provision was partially changed by Article 7, and its Paragraph 1, of the Fiscal Responsibility Law:
 
“Article 7.            The Banco Central do Brasil results, which are determined after the constitution or reversal of reserves, are classified as National Treasury revenue and must be transferred within ten-business day after the approval of the half-year balance sheets.
Paragraph 1.            The negative results must be classified as a Treasury liability to the Banco Central do Brasil and must be stated in a specific budget allocation account.”
 
According to Article 2(II) of Provisional Measure no. 2,179/2001, this negative result shall be paid up by the tenth business day of the fiscal year subsequent to the year of approval of the balance sheet by the National Monetary Council.
 
Therefore:
I. the result of the Banco Central do Brasil considers revenues and expenses related to all Banco Central operations;
II. positive results are transferred as revenues to, and negative results are covered as expenses by, the National Treasury;
III. such results are recorded in the Fiscal Budget to the National Treasury account.
 
Thus the Bank recorded a superavit of R$8,189,020 thousand in the first quarter of 2003 and that, with the result of the second quarter, will compose the result to be covered by the National Treasury. According to Article 9, Paragraph 5 of  the Fiscal Responsibility law, within ninety days from the closing of the half-year, the Banco Central do Brasil shall submit, at a joint meeting of the National Congress thematic commissions, an assessment of fulfillment of objectives and targets of monetary, credit and foreign exchange policies, providing evidence  of the impact and fiscal cost of its operations and results shown in appropriate balance sheets;
 
(b) cost of remunerating National Treasury available cash – Fiscal Responsibility Law , Article 7, Paragraph 3:
 
The Federal Government’s available cash are deposited with the Banco Central and remunerated, according to Article 1 of Provisional Measure no. 2,179, by the weighted arithmetic average rate of the intrinsic yield of federal domestic public debt securities issued by the National Treasury held by the Banco Central do Brasil.
The cost of remunerating National Treasury deposits reached, in the first quarter of 2003, the sum of R$4,006,816;
 
(c) cost of maintaining foreign exchange reserves – Fiscal Responsibility Law , Article 7, paragraph 3:
 
In the quarter extending from January to March 2003, exchange reserves deposited at Banco Central do Brasil, expressed in national currency, came to R$ 136.995.785 thousand, calculated according to the criterion of daily average balances. Earnings on these reserves closed in  a negative position of 2.6% in the period. Once the median cost of the liabilities of the institution (4.7%) is excluded, international reserves generated negative profitability of R$ 10.006.446 thousand, corresponding to 7.3%, taking due account of the impacts of exchange indexing in the same period.
 
(d) Yield of Banco Central securities portfolio, with emphasis on Government issued securities – Fiscal Responsibility Law, Article 7, Paragraph 3:
 
  (In R$ thousand)
  1st Quarter/2003
REVENUES
27.466.166
Federal Government Securities
23.650.555
Banco Central Securities
3.815.611
 
EXPENSES
(8.973.715)
Federal Government Securities
(6.688.973)
Banco Central Securities
(2.284.742)
 
NET RESULT
18.492.451
In the quarter, the net result was due mainly to the following reasons:
 
I – Government Securities – the net result of the Government Securities was positive in R$26,996,065 resulted from net revenues from foreign exchange indexing, monetary restatement and interest, compared with the net expenses from adjustment to market value;
II – Banco Central Securities – the net result from own securities was negative in R$27,339,082 and resulted, to a large extent, from net expenses from foreign exchange indexing and NBC interest expenses.
 
 
President: HENRIQUE DE CAMPOS MEIRELLES
 
Directors: BENY PARNES, CARLOS EDUARDO DE FREITAS, ILAN GOLDFAJN, JOÃO ANTÔNIO FLEURY TEIXEIRA, LUIZ AUGUSTO DE OLIVEIRA CANDIOTA, PAULO SÉRGIO CAVALHEIRO, SÉRGIO DARCY DA SILVA ALVES.
 
Chief of the Financial Administration Department:JEFFERSON MOREIRA
Accountant - CRC-DF 7333