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

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INFORMATION ON THE SPECIAL AND ANNUAL SHAREHOLDERS’ MEETINGS TO BE HELD ON MARCH 10, 2011, INCLUDING THE INFORMATION REQUIRED BY CVM RULES #480 AND #481

Publicly-Held Company

Salão Nobre

Special and Annual Shareholders’ Meetings to be held on March 10, 2011

.2.

1.     Message of the Board of Directors’ Chairman and of the Chief Executive Officer

Cidade de Deus, Osasco, SP, February 8, 2011

Dear Shareholders,

We are pleased to invite you to participate in the Annual and Special Shareholders’ Meetings of Banco Bradesco S.A., to be held on March 10, 2011, at 4:30 p.m., at our headquarters, in Cidade de Deus, Prédio Vermelho, Salão Nobre do 5^o andar, Vila Yara, Osasco, São Paulo.

Thus, we are making available this manual with all necessary information for the examination of the matters to be resolved, as well as the guidelines to exercise your voting right. It is an extremely important event in our annual calendar, in which you will have the opportunity to take part in the discussion of matters relevant to the Company.

As it has been occurring yearly, the Annual Shareholders’ Meeting is characterized as one of the first Shareholders’ Meeting to be held in the market, which happens approximately two months before the deadline set forth by the Brazilian legislation.

Moreover, in order for shareholders to have enough time to examine all documents related to the Shareholders’ Meetings, we have been making all the necessary efforts to make them available approximately thirty days before the Meetings take place.

Before the analysis of the matters to be discussed and voted, the Management’s Comments on the Company is available in item 2 herein, pursuant to CVM Rule #480.

Confident that we will continue receiving your support, we remain at your disposal to provide any other additional information.

Sincerely,

Special and Annual Shareholders’ Meetings to be held on March 10, 2011

.4.

Network operating in all Brazilian municipalities through the opening of 178 new Branches; c) reorganization of facilities abroad to meet properly the demands of the international market; d) Bradesco presence as the leading coordinator of Petrobras capitalization process, the greatest operation of the kind in Brazilian and world stock markets; e) acquisition of the whole capital stock of Ibi Services in Mexico, where partnership with C&A in that country made part of the deal; f) partnership with Banco do Brasil and Caixa Econômica Federal for creation and management of a Brazilian card brand - ELO; g) Bradesco permanence in Dow Jones Sustainability World Index and in the Corporate Sustainability Index - ISE; h) and from socioenvironmental liability standpoint, the launch of the Corporate Code of Ethics of Bradesco Organization in Braille.

Book Net Income was R$ 10.022, corresponding to earnings per share of R$ 2.66 and an annualized Return on Shareholders’ Equity of 22.7%. The annualized Return on Average Total Assets stood at 1.7%, and remained stable in relation to the previous year. The Consolidated Shareholders’ Equity amounted to R$ 48.043 billion, while the total balance of assets amounted to R$ 637.485 billion.

Credit Operations

Supported by the credit democratization strategy and the continuing expansion and diversification of its funding, Bradesco increased its volume of operations, including through direct financing and partnerships with market agents, as well as individual lines, such as payroll-deductible loans through its extensive branch, service points and Banco Postal network, and the Customer Service Center 0800 Loans.

·           R$ 274.227 billion in consolidated loan operations at year-end, including advances on exchange contracts, sureties and guarantees, credit card receivables and leasing, up 20.23% in the period.

·           R$ 16.290 billion in the allowance for loan losses.

Funding and Asset Management

At the close of the year, funds raised and managed totaled R$ 872.514 billion, 24.3% more than the previous year, as follows:

·           R$ 364.698 billion in demand deposits, time deposits, interbank deposits, other deposits, open market and savings accounts;

·           R$ 295.708 billion in assets under management, comprising investment funds, managed portfolios and third-party fund quotas, 19.4% up on the same period in the previous year;

·           R$ 114.495 billion in the exchange portfolio, borrowing and onlending, working capital, tax payment and collection and related charges, funds from the issue of securities and subordinated debt in Brazil, and other funding;

·           R$ 87.177 billion in technical provisions for insurance, private pension plans and savings bonds, a 15.4% improvement over the year before; and

·           R$ 10.436 billion in foreign funding, through public and private issues, subordinated debt and the securitization of future financial flows, equivalent to US$ 6.263 billion.

On December 31, 2010 market capitalization of Bradesco was R$ 109.759 billion, with emphasis on preferred share valuation of 12.1% in the year, as compared to 1.0% valuation of Ibovespa.

·      2009

In 2009, the real appreciated by 25.5% in relation to the U.S. dollar, reaching R$ 1.7412 per US$ 1.00 on December 31, 2009 as compared to R$ 2.3370 per US$ 1.00 on December 31, 2008. The Central Bank gradually decreased the base interest rate from 13.75% in December 2008 to 8.75% in December 2009.

The fiscal year of 2009, began with the worst possible forecasts for the global economy, but ended with consistent signs of recovery. The actual pace of recovery varied from country to country, accompanied by a lingering degree of uncertainty regarding the developed world, where the adjustments in progress may impose reduced consumption growth over the previous years’ levels. At the same time, we see challenges ahead related to the strong fiscal deterioration in these nations as part of the anti-cyclical response to the risk of an economic depression.

Brazil has successfully overcome the challenges imposed by the crisis. The adoption of anti-cyclical policies resulted in a decline in household consumption, the main component of GDP, but not nearly to the same extent as in previous periods of major turbulence. The decline in

investments – temporarily interrupting the expansion cycle of the previous five years – is already showing unmistakable signs of a reversal thanks to reduced idle capacity, the favorable outlook for domestic demand and the opportunities arising from the World Cup and the Olympic Games, as well as from pre-salt oil exploration. At that occasion, Brazil was already one of the main destinations for direct investments by foreign companies.

Book Net Income was R$ 8.012 billion, corresponding to earnings per share of R$ 2.34 and an annualized Return on Shareholders’ Equity of 21.4%. The annualized Return on Average Total Assets stood at 1.7%, compared to 1.9% in the previous year. Total Consolidated Shareholders’ Equity amounted to R$ 41.754 billion, the balance of total assets amounted to R$ 506.223 billion.

Special and Annual Shareholders’ Meetings to be held on March 10, 2011

.8.

Credit Operations

Supported by the credit democratization strategy and the continuing expansion and diversification of its funding, Bradesco increased its volume of operations, including through direct financing and partnerships with market agents, as well as individual lines, such as payroll-deductible loans through its extensive Branches Network, Service Stations and Banco Postal, and the Customer Service Center 0800 Loans.

·           R$ 228.078 billion in consolidated loan operations at year-end, including advances on exchange contracts, sureties and guarantees, credit card receivables and leasing, up 6.78% in the period.

·           R$ 16.313 billion in the allowance for loan losses.

Funding and Asset Management

All in all, the Bank managed R$ 20.910 million in checking accounts and was responsible for 17.73% of the Brazilian Savings and Loan System - SBPE.

At the close of the year, funds raised and managed totaled R$ 702.065 billion, 17.48% more than the previous year, as follows:

·           R$ 284.346 billion in demand deposits, time deposits, interbank deposits, other deposits, open market and savings accounts;

·           R$ 247.700 billion in assets under management, comprising investment funds, managed portfolios and third-party fund quotas, 32.35% up on the same period in the previous year;

·           R$ 86.411 billion in the exchange portfolio, borrowing and onlending, working capital, tax payment and collection and related charges, funds from the issue of securities and subordinated debt in Brazil, and other funding;

·           R$ 75.572 billion in technical provisions for insurance, supplementary private pension plans and savings bonds, a 17.01% improvement over the year before; and

·           R$ 8.036 billion in foreign funding, through public and private issues, subordinated debt and the securitization of future financial flows, equivalent to US$ 4.615 billion.

•     2008

In 2008, Brazilian GDP increased by 5.1%, and the real depreciated by 31.9% in relation to the U.S. dollar, reaching R$ 2.3370 per US$ 1.00 on December 31, 2008, as compared to R$ 1.7713 per US$ 1.00 on December 31, 2007. The Central Bank gradually increased the base interest rate from 11.25% in December 2007 to 13.75% in December 2008.

The fiscal year of 2008 was marked by a variation in the robust expansion cycle of global growth initiated in 2004, a period of several structural changes that benefited emerging economies like Brazil’s. This change occurred with the onset of the most severe crisis of the past 70 years, basically characterized by a strong deleveraging process that intensified in September and has affected several interconnected markets. The most relevant outcomes of this process were noticeable in the financial volatility, the banking system became unstable in various economies, credit constraints and reduced capital flows, changes in asset and commodity prices and higher risk aversion.

Notwithstanding an unfavorable international scenario, the Brazilian economy behaved well most of the year, with growth around 5%, a level achieved for the second consecutive year.

Household consumption and investments are still the main drivers of economic expansion, benefited by an environment of higher confidence among consumers and businessmen and by credit and income growth. Inflationary pressures deriving from a disparity between supply and demand and intensified by high commodity prices by mid–2008, resulted in monetary tightening, which decisively contributed to Brazil avoiding an acceleration of inflation as strong as that verified in several economies. Within this scenario, Brazil obtained the coveted investment grade in the first half of 2008 amid high volatility in the global markets. It is also worth mentioning a significant inflow of foreign direct investments, which reached the level of US$ 40 billion for the first time in history.

The Net Income for the year was R$ 7.620 billion, corresponding to R$ 2.48 per share and annualized return on average Shareholders’ Equity of 23.76%. The annualized Return on Average Total Assets stood at 1.93%, compared to 2.67% in the previous year. Consolidated Shareholders’ Equity amounted to R$ 34,257 million, while the balance of total assets amounted to R$ 454,413 million.

Credit Operations

An increased volume of Bradesco loan operations, both in financing directly made and partnerships with market agents, and in other lines focused on Individuals, such as Payroll Deductible Loans, is based on the credit democratization strategy and on the continuous expansion and diversification of financing by means of its extensive Branches Network, Service Stations and Banco Postal as well as several alternative channels, such as Bradesco Dia&Noite ATMs, Internet Banking, Fone Fácil, Bradesco Celular and on Customer Service Center 0800 Loan.

·           R$ 213.602 billion in consolidated loan operations at year-end, including advances on exchange contracts, sureties and guarantees, credit card receivables and leasing, up 34.2% in the period.

·           R$ 10.263 billion in the allowance for loan losses

Funding and Asset Management

The Bank managed, together, 20.081 million checking accounts and held 18.0% of the Brazilian Savings and Loan System - SBPE.

At the end of the year, the total volume of funding and assets managed by the Organization stood at R$ 597.615 billion, a 23.74% growth compared to the previous year:

·           R$ 244.470 billion in Demand Deposits, Time Deposits, Interbank Deposits, Other Deposits, Open Market and Saving Accounts;

·           R$ 187.151 billion in assets under management, comprising Investment Funds, Managed Portfolios and Third-Party Fund Quotas, with a 5.45% growth compared to the same period of the previous year;

·           R$ 92.944 billion recorded at the Exchange Portfolio, Borrowing and Onlending, Own Working Capital, Tax Payment and Collection and Related Taxes, Funds From Issuance of Securities, Subordinated Debt in the Country and Other Funding;

·           R$ 64.587 billion in Technical Provisions for Insurance, Private Pension Plan and Savings Bonds, with a 10.36% increase when compared to the previous year; and

·           R$ 8.463 billion in foreign funding, through public and private issues, subordinated debt and the securitization of future financial flows, equivalent to US$ 3.621 billion.

b)   Capital structure and possibility of share or quotas redemption, indicating: i) possibility of redemption; ii) formula for redemption price calculation

•     Capital Structure

P.S.: It does not consider bonuses and developments in the periods.

On December 31, 2010, Bradesco Capital Stock amounted to R$ 28.5 billion divided into 3,762,450 thousand book shares, being 1,881,225 thousand common shares and 1,881,225 thousand preferred shares with no face value.

Capital stock in 2009 amounted to R$ 26.5 billion, divided into 3,427,086 thousand book shares, being 1,713,543 thousand common shares and 1,713,543 thousand preferred shares with no face value.

In 2008 the Capital Stock amounted to R$ 23 billion divided into book 3,069,869 shares, being 1,534,935 common shares and 1,534,934 preferred shares with no face value.

There is no expected redemption of shares issued by the Company other than the legal redemptions.

c)   Capacity to pay financial commitments

Bradesco has full ability to pay all its financial commitments, because it daily reviews its asset and liability management policy to ensure sufficient liquidity to honor withdrawals, deposits, repay other obligations at maturity, extend loans or other forms of credit to its customers and meet its own needs of working capital for investment. The following table presents our consolidated balance sheet by maturity:

Consolidated Balance Sheet by maturity:

(1)    Investments in investments funds are classified as up to 30 days;

(2)       Operations related to repurchase commitments are classified per term of operation; and

(3)     Demand and savings deposits and technical provisions for insurance, private pension plans and savings bonds comprising VGBL and PGBL products are classified as up to 30 days, without considering average historical turnover.

Subordinated debt – 2010

(1)   Upon including the cost of dollar swap, rate increases to 10.15% per annum;

(2)  In June 2005, a perpetual subordinated debt was issued in the amount of US$ 300,000,000, with exclusive full redemption option by the issuer upon prior  authorization of Bacen, provided that: (i) after the period of five years from the issuance date and after each interest payment date; and (ii) at any time, upon the occurrence of any change to the fiscal law in Brazil or abroad, which is likely to increase costs for the issuer, and the issuer is notified in writing by Bacen that such securities can no longer be included in the consolidated capital stock for the purposes of solvency rate calculation. On April 14, 2010, Bacen approved an advanced redemption request for that financing, which took place on June 3, 2010, in the amount of R$ 556,834,000;

(3)   It refers to subordinated CDB operations linked to credit/other operations that, according to the Circular Letter No. 2,953/01, do not integrate the level II of    reference assets;

(4)    In August 2010, a subordinated debt in the amount of US$ 1,100,000,000 was issued abroad, at the rate of 5.90% p.a. and due in 2021; and

(5) It refers to advanced redemptions on subordinated CDB linked to credit/other operations occurred on December 21, 2010.

Subordinated debt – 2009

(1)  Upon including the cost of dollar swap, rate increases to 10.15% per annum;

(2)  In June 2005, a perpetual subordinated debt was issued in the amount of US$ 300,000,000, with exclusive full redemption option by the issuer upon prior authorization of Bacen, provided that: (i) after the period of five years from the issuance date and after each interest payment date; and (ii) at any time, upon the occurrence of any change to the fiscal law in Brazil or abroad, which is likely to increase costs for the issuer, and the issuer is notified in writing by Bacen that such securities can no longer be included in the consolidated capital stock for the purposes of solvency rate calculation; and

(3)   It refers to subordinated CDB operations linked to credit/other operations that, according to the Circular Letter No. 2,953/01, do not integrate the level II of reference assets.

d)   Funding sources used for working capital and investments in non-current assets

e)   Funding sources for working capital and investments in non-current assets that it intends to use to cover liquidity deficits

f)     Indebtedness levels and characteristics of related debts, also describing: i) relevant loan and financing contracts; ii) other long-term relationships with financial institutions; iii) level of subordination among debts.

Main Funding Sources

Liquidity and Financing

Central Bank requirements for compulsory deposits determine our minimum liquidity levels. We review our asset and liability management policies from time to time to ensure that we have sufficient liquidity available to honor withdrawals, deposits, repay other liabilities at maturity, extend loans or other forms of credit to our customers and meet our own working capital needs.

The treasury department acts as a support center for our business segments by managing our funding and liquidity positions and executing our investment objectives in accordance with our asset and liability management policies. It is also responsible for setting the rates for our different products, including exchange and interbank transactions. The treasury department covers any funding shortfall through borrowing in the interbank market. It seeks to maximize efficient use of our deposit base by investing any surpluses in liquid instruments in the interbank market.

We have used our excess liquidity to invest in Government bonds and expect to continue doing so, subject to regulatory requirements and investment considerations. Our principal sources of financing are:

·           demand deposits, savings deposits and term deposits; and

·           debentures, borrowing and onlending, funds from issuance of securities and subordinated debts.

·           Deposits

Deposits are our most important source of funding. Our deposits balance over these years progressed in the following manner:

·           in 2010, the balance of our deposits increased approximately 13% as compared to 2009, mainly due to the increase in time and saving deposits; and

·           in 2009, the balance of our deposits increased approximately 4% as compared to 2008, mainly due to the increase in demand and savings deposits.

Deposits accounted for approximately 60% of total liabilities at December 31, 2010. Our deposits consist primarily of real-denominated, interest-bearing time and savings deposits and real-denominated, non-interest-bearing demand deposits. The increase in the balances of our savings and demand deposits from December 31, 2010 through December 31, 2009 was due basically to the increase in our client base. At December 31, 2010, we had 23.1 million checking accounts and 41.1 million savings accounts, compared to 20.9 million checking accounts and 37.7 million savings accounts at December 31, 2009.

·           Debentures

Positive variation recorded between 2010 and 2009 basically refers to the placement of such papers, with are used to  back purchase and sale commitments that are impacted by the maintenance of the economic activity pace.

In 2009 x 2008 comparison, the positive variation observed basically reflects: a) the placement of these securities, which are used to back purchase and sale commitments; and b) the better rates of these operations in relation to those practiced for time deposits, which suffered contraction due to the return of liquidity in the market.

·           Borrowing and Onlending

Variation in the year of 2010, as compared to 2009 balance, is mainly due to the increased volume of loans and onlending in the country, basically from Finame and BNDES operations.

The reduction in the comparative between the fiscal years of 2009 and 2008 was basically due to: a) the 25.5% negative exchange rate variation, which directly impacted borrowing and onlending denominated and/or indexed in foreign currency, which was partially offset by: b) the increase in the volume of funds from borrowing and onlending in the country, especially through Finame and BNDES operations.

·           Funds from Issuance of Securities

The variation in the fiscal year of 2010 compared to 2009, mainly derives from: a) new issuances of Financial Bonds in the market, occurred in the 2^nd quarter of 2010, the balance of which in December 2010 amounted to R$ 7,820 million; b) the increased volumes of securities issued abroad in the amount of R$ 1,100 million; c) the increased operations of Real Estate Exchange Bills in the amount of R$ 777 million; and d) the greater volume of Mortgage-Backed Securities in the amount of R$ 379 million.

In the comparison between fiscal years of 2009 and 2008, the reduction was mainly due to: a) the negative exchange rate variation of 25.5%, which directly impacted operations with MT100; b) the reduction in funds from Debentures, due to repurchase by third parties in 2^nd quarter of 2009; which was offset by: c) new operations with Agribusiness Mortgage Letters.

•     Subordinated debt

In December 2010, Bradesco’s Subordinated Debt totaled R$ 26.315 million (R$ 5.079 million abroad and R$ 21.236 million in Brazil).

In 2010, there was an issuance of R$ 2,026 million of Subordinated Debts (R$ 193 million locally and R$ 1,833 million abroad), being this total is eligible to compose Level II of Basel Index, due between 2016 and 2021. Issuance of subordinated notes in August 2010, in the amount of US$ 1.1 billion, stands out.

It is worth mentioning that only R$ 8.051 million of the total subordinated debt are used in the calculation of the Basel Index, given the respective maturity.

Additionally, it should be pointed out that on January 13, 2011, Bradesco issued subordinated notes in the total amount of US$ 500 million, which will be submitted to Bacen to compose Level II of Basel Index.

In December 2009, Bradesco’s Subordinated Debt totaled R$ 23,104 million (R$ 3,779 million abroad and R$ 19,325 million in Brazil). In this period, Bradesco issued R$ 1,295 million in Subordinated CDB in Brazil, with maturities in 2015. Overseas, Bradesco concluded its US$ 750 million funding operation through the issuance of subordinated notes.

It is worth mentioning that only R$ 10,951 million of the total subordinated debt are used in the calculation of the Basel Index, given the maturity of each subordinated debt operation.

In the fiscal year of 2008, Bradesco issued R$ 1,575 million in Subordinated CDB in Brazil.

·           Sources of Additional Liquidity

In some limited circumstances we may obtain emergency funds from the Central Bank through a transaction referred to as “redesconto.” A redesconto is a loan from the Central Bank to a financial institution, that loan being guaranteed by federal government securities owned by the financial institution. The amount of federal government securities held by the financial institution as trading securities limits the amount of redesconto transactions. Banco Bradesco did not enter into redesconto transactions for liquidity purposes.

iv) Eventual restrictions to the issuer, in particular with respect to limits of indebtedness and taking on new debts, distribution of dividends, sale of assets, issuance of new securities, and sale of shareholding control

There are no restrictions imposed to Bradesco.

g)   Limits for use of contracted financing

Minimum short-term liquidity limits are established by Internal Committees, Executive Board and Administrative Board. Such limits are intended to ensure a sufficient liquidity and meet the minimum expected needs. Bradesco reviews periodically such limits, on which projected cash needs are based.

h)   Significant changes to each item of financial statements

There are no significant changes to items of the Organization’s financial statements.

10.2. The Board should comment on:

a)     Results of issuer’s operations, in particular: i) description of important income components; ii) factors that materially affected the operating results

The financial information of the fiscal years ended December 31, 2010, 2009 and 2008 are presented below. It is worth mentioning that, in order to enhance understanding, comparability and analysis of results, we are using the Managerial Statement of Income. For more information regarding the managerial adjustments, we suggest that you refer to the Announcement to the Market sent on July 3, 2009.

In 2010, we started to exclude extraordinary events from our managerial statement of income, and adjusted accordingly the year of 2009 for a better comparison with 2010.

We provide below a comparison between the major extraordinary events that impacted the Net Book Profit in the following periods:

(*)    Annualized;

(1)   Gross earnings from investments: In 2010 - BM&F Bovespa and CPM Braxis; 2009 - Cielo and Cetip; and 2008 – Visa Inc.
(2)   Considers R$ 1,303 million in 2Q09; and R$ 177 million in 1Q09, relating to credit cards; and

(3)  In 2010: refers to Fidelity capital gain of R$ 86 million; and expenses from asset recovery analysis – impairment in the amount of R$ 27 million. In 2009: gain related to Laboratório Fleury IPO obtained by our affiliate Integritas Participações, in the amount of R$ 60 million; expenses from asset recovery analysis – impairment in the amount of R$ 64 million; and provision for loss of investments in the amount of R$ 26 million. In 2008: basically effects from adoption of Law No. 11,638/07 in the amount of R$ 60 million and premium amortization in the amount of R$ 53 million. Net effect of tax payment under the tax debt repayment program – Law No. 11,941/09 (REFIS), in the amount of R$ 388 million (2009) and R$ 18 million (2010).

(*)   Income from Insurance, Private Pension Plans and Savings Bond = Insurance, Private Pension Plans and Savings Bond Premiums - Variation in the Technical Provisions of Insurance and Private Pension Plans – Retained Claims – Drawings and Redemption of Savings Bonds – Selling Expenses with Insurance, Private Pension Plans and Savings Bonds.

Adjusted Net Income for the year of 2010 amounted to R$ R$ 9,804 million, corresponding to an increase of 29.2%, or R$ 2,218 million, over the previous year. Consequently, the Return on Average Shareholders’ Equity (ROAE) reached 22.2%. The Return on Average Assets (ROAA) was 1.7% in the fiscal year of 2010.

Adjusted Net Income in 2009 was R$ 7,586 million with a decrease of 0.5% compared to 2008, due to the negative impact of economic retraction observed in 1st quarter of 2009.The Return on Average Shareholders’ Equity (ROAE) reached 20.3%. The Return on Average Assets (ROAA) was 1.6% in the fiscal year of 2009.

Below, we comment the substantial accounts that affected the results of the last three fiscal years:

•    Financial Margin

Financial margin in 2010 amounted to R$ 33,056 million, increasing by R$ 3,302 million in relation to 2009, or 11.1%, as a result of the following factors: a) an increase of R$ 4,297 million in results of remunerated operations, mostly derived from the increased credit results, which had been impacted by the increase volume of operations; and offset by: b) lower result obtained from “non-interest” margin in the amount of R$ 995 million, derived from lower treasury gains as a result of the return of internal and external marks to normality, which provided significant gains in 2009.

In the comparison between the fiscal years of 2009 and 2008, financial margin improved by R$ 6,611 million, which corresponds to an increase of 28.6%, driven by the following factors: a) the increase of R$ 4,290 million in the result of interest-earning operations, basically due to the higher average business volume; and b) the increase in non-interest income of R$ 2,321 million, basically derived from higher treasury/securities gains.

•    Provision for Loan Losses

In 2010, Provision for Loan Losses amounted to R$ 8,703 million, decreasing by 24.2% in relation to the previous year, as a result of lower default and higher credit recovery, which increased by 57.9% in the period to R$ 2,677 million. Credit operations increased by 23.0% in the same period, showing that Bradesco credit portfolio increased with quality.

In the comparison between the fiscal years of 2009 and 2008, Provision for Loan Losses shows a variation of R$ 4,561 million, essentially due to the constitutions required to adjust provisioning levels in view of the weak economic performance, especially in the first six months of 2009, in addition to additional efforts in PDD resulting from rating revisions.

•     Income from Insurance, Private Pension Plans and Savings Bonds

Until December 2010, the income from Insurance, Private Pension Plans and Savings Bonds increased by 39.8% over the same period of the previous year. That increase was due to the performance of Saving Bonds, Car, Health and Life products.

It should be highlighted that, with respect to the adjusted net income for 2010 compared to the same period of 2009, the Insurance Group recorded an expansion of 16.3%, reaching in 2010 R$ 2,904 million, derived from the following factors: (i) 18.0% increase in sales; (ii) improved financial income; and (iii) 2.6% fall in casualties.

The Insurance Group’s technical provisions represented 30.6% of the insurance industry in November 2010, according to Susep and the National Supplementary Health Agency (ANS).

Book Net Income in fiscal year 2009 was R$ 2,723 billion (R$ 2,648 billion in 2008), with a Return on Equity of 27.1%.

Revenue in fiscal year 2009 was R$26.3 billion, an increase of 13.8% on the prior year. Meanwhile, Net Income was 2.8% higher than in 2008, due to: a) the better financial result, despite the reduction in interest rates; b) the net effect from the payment of taxes through the program for settlement of tax debits through cash and installment payments under Law No. 11,941/09 (REFIS); c) the higher equity income; which was partially offset by:

d) the constitution of the technical provisions described above; and e) the increase of 6% in the CSLL tax rate.

In November 2009, Net Income at Bradesco Insurance Group accounted for 36.5% of net income in Brazil’s entire insurance industry (Source: Insurance Superintendence – Susep). The Insurance Group’s technical provisions represented 31.8% of the insurance industry in November 2009, according to Susep and the National Supplementary Health Agency (ANS).

•    Fee and Commission Income

In 2010, Fee and Commission Income  increased by R$ 1,756 million, as a result, especially from: (a) the good performance of credit card segment derived from the increase of card/client base, revenues from Banco Ibi, and effects of changes in equity capital of Visavale and Cielo; (b) the increase of current account revenues, derived from the expansion of  operations and account holder base, which recorded a net increase of some 2.2 million new accounts in the period; (c) the increase of revenues from credit operations; (d) the increase of revenues from fund management; (e) the increase of revenues from collections and taxes; and (f) the increase of revenues from consortium management.

In the comparison between the fiscal years of 2009 and 2008, fee and commission income presented an increase of R$ 872 million, mainly due to the growth in credit card operations and the strong performance of underwriting operations, as well as by the larger business and client base, which expanded some 4.0% over the last 12 months.

•    Personnel Expenses

In the comparison of the fiscal years of 2010 and 2009, there was an increase of R$ 1,335 million principally explained by: a) the amount of R$ 900 million in “structural” portion related to: (i) increase of wage levels; and (ii) net staff increase of 7,574 employees; and (iii) incorporation of Banco Ibi occurred in November 2009; and b) the “non-structural” portion in the amount of R$ 435 million, basically derived from: (i) higher expenses related to profit sharing by officers and employees (PLR); and (ii) higher expenses related to provision for labor proceedings.

In the comparison of the fiscal years of 2009 and 2008, there was an increase of R$ 577 million principally explained by: a) the R$ 505 million in “structural” expenses, which were basically related to higher expenses with share-based compensation and charges; and b) R$ 72 million in "non-structural expenses”, which was basically due to the build in the provision for employee profit sharing (PLR).

•    Administrative Expenses

The comparison between the year of 2010 and the year of 2009 shows that the 21.5% increase is basically due to: (i) the impact of incorporation of Banco Ibi occurred in November 2009 (should this effect have been excluded, administrative expenses would have increased by 15.6%); (ii) higher costs of advertising  and  publicity  in  2010,  as in  2009  that  expense recorded a significant reduction in relation to its history; (iii) increase of volume of business and services; (iv) increase of variable expenses associated with revenues (e.g., Bradesco Expresso and Banco Postal); (v) higher costs of legal advice, mainly related to credit recoveries that increased by 60% in 2010; and (vi) expansion of Customer Service Network by 10,307 outlets, including 174 branches, 368 PAB/PAE/PAA, 5,904 Bradesco Expresso, and other 3,861 other facilities totaling 54,884 customer service outlets on December 31, 2010.

In 2009, in comparison with the fiscal year of 2008, administrative expenses presented an increase of R$ 1,186 million, mainly due to the expansion in the Customer Service Network, the higher business volume and the expansion in the client base.

•    Tax Expenses

The comparison between the year of 2010 and the year of 2009 shows that tax expenses increased by R$ 585 million, which was basically an effect from increased expenses related to ISS/PIS/Cofins derived from increased tax revenues, especially the financial margin and revenues from services provided.

In 2009, presented an evolution of R$ 305 million compared to the fiscal year of 2008, mainly derived from the higher expenses with PIS/Cofins taxes due to an increase of taxable revenue from the higher financial margin and fee  and  commission  income  in  the  period.

•    Other Operating Income and Expenses

In 2010, the increase of other operating expenses net of other operating income, in the amount of R$ 433 million, derives mainly from higher expenses related to: (i) constitution of operating provisions, with emphasis on civil contingencies; (ii) premium amortization; and (iii) operating expenses incurred with the incorporation of Banco Ibi in November 2009.

In the comparison between the fiscal years of 2009 and 2008, the increase in operating expenses net of other operating income of R$ 645 million basically results from the builds in operating provisions and premium amortization.

b)    Variations in income from price changes, foreign exchange rates, inflation, changes in volumes and introduction of new products and services

c)    Impact of inflation, variation of prices of main inputs and products, and foreign exchange and interest rates on the issuer’s operating income and financial income

•     Sensitivity Analysis

Trading Portfolio is also monitored on a daily basis by sensitivity analysis, which measures the effects of market and price curves variations on our positions. In addition, a sensitivity analysis of the Organization’s financial exposures (Trading and Banking Portfolios) is performed on a quarterly basis, as established by CVM Directive 475/08.

It should be pointed out that the financial exposure impacts of the Banking Portfolio (mainly interest rates and price indexes) do not necessarily represent an accounting loss for the Organization. This occurs because part of loan operations held in the Banking Portfolio is funded by demand deposits and/or savings deposits, which provides a natural hedge for eventual interest rate fluctuations, and because interest rates fluctuations do not necessarily have a material impact on the Organization’s results, since the intention is to hold the loan operations until their maturity.

Tables below show the sensitivity analysis of financial exposures (Trading and Banking Portfolios)

(*) Amounts net of tax effects

We present below, the sensitivity analysis of the Trading Portfolio, which represents exposures that might cause material impacts on the Organization’s results. It is worth mentioning that results show the impacts for each scenario for a static portfolio position. The market dynamism results in continuous changes in these positions and does not necessarily reflect the current position. In addition, as mentioned previously, the Organization has in place a continuous market risk management process that pursues, according to the market dynamism, ways to mitigate the associated risks, according to the strategy established by the Top Management. This way, upon any signs of deterioration of a specific position, proactive measures are taken to minimize potential negative impacts and maximize the risk/return ratio for the Organization.

(*) Amounts net of tax effects

(*) Amounts net of tax effects

Sensitivity analyses were based on scenarios prepared for the relevant dates, always taking into account the market information at the time, as well as scenarios that would adversely affect our positions, as shown by the following examples:

·           2010

Scenario 1: Based on market information (BM&F Bovespa, Anbima etc), one base point stress was applied for interest rates and 1% variation for prices. For example: for scenario applied to positions on December 31, 2010, Real/US$ rate was R$ 1.68. For interest scenario, 1-year fixed rate applied to positions on December 31, 2010 was 12.05% p.a.

Scenario 2: 25% stresses were determined based on the market. For example: for scenario applied to positions on December 31, 2010, Real/US$ rate was R$ 2.08. For interest scenario, 1-year fixed rate applied to positions on December 31, 2010 was 15.05% p.a. The fluctuations of other risk factors also represented a 25% stress in the corresponding curve or prices.

Scenario 3: 50% stresses were determined based on the market. For example: for scenario applied to positions on December 31, 2010, Real/US$ rate was R$ 2.49. For interest scenario, 1-year fixed rate applied to positions on December 31, 2010 was 18.06% p.a. The fluctuations of other risk factors also represented a 50% stress in the corresponding curve or prices.

·           2009

Scenario 1: based on market information of December 31, 2009 (BM&F Bovespa, Anbima, etc), one base point stress was applied for interest rates and 1% variation for prices. For example: the Real/Dollar quotation was R$ 1.76 and the 1-year prefixed interest rate was 10.51% p.a.

Scenario 2: 25% stresses were determined based on the market at December 31, 2009. For example: the Real/Dollar quotation was R$ 2.18 and the 1-year prefixed interest rate was 13.13% p.a., and fluctuations of other risk factors represented a 25% stress in the corresponding curve or prices.

Scenario 3: 50% stresses were determined based on the market at December 31, 2009. For example: the Real/Dollar quotation was R$ 2.62 and the 1-year prefixed interest rate was 15.75% p.a., and fluctuations of other risk factors represented a 50% stress in the corresponding curve or prices.

·           2008

Scenario 1: consists of the probable scenario for risk factors and is based on market information (BM&F Bovespa, Anbima, etc), such as the future interest rate curve. For example: the Real/Dollar quotation was R$ 2.35 and the 1-year fixed interest rate was 11.60% p.a.

Scenario 2: 25% stresses were determined based on the market at December 31, 2008 and applied on Scenario 1. For example: the Real/Dollar quotation was R$ 2.93 and the 1-year prefixed interest rate was 14.64% p.a., and fluctuations of other risk factors represented a 25% stress in the corresponding curve or prices.

Scenario 3:  50% stresses were determined based on the market at December 31, 2008 and applied on Scenario 1. For example: the Real/Dollar quotation was R$ 3.52 and the 1-year prefixed interest rate was 17.68% p.a., and fluctuations of other risk factors represented a 50% stress in the corresponding curve or prices.

Liquidity Risk

The Liquidity Risk is the possibility of the Organization not having enough financial funds to honor its commitments due to the mismatch between payments and deposits, taking in consideration different currencies and the settlement terms of its rights and obligations.

The Organization has a liquidity policy that establishes both the minimum levels to be considered, while taking into account stress scenarios, and to which types of financial instruments the funds should remain applied, and also establishes the operation strategy to be adopted when necessary.

Liquidity risk management process includes the daily monitoring of composition of available funds, the observance of the minimum liquidity level and the contingency plan applicable to stress conditions. Position control and monitoring is centralized.

Operational Risk

The operational risk is represented by loss derived from internal processes, people and inadequate or defective systems, and external events. This definition includes the legal risk, but excludes the Strategic and Goodwill risk.

The Organization considers operational risk management activity to be indispensable for added value generation. The control of that risk is centralized by identification, measurement, mitigation plans and consolidated management of its operational risks at company level.

Among the operational risk mitigation plans, emphasis is given to the management of business continuity, which consists of formal plans scheduled to be adopted at crisis circumstances, to ensure business recovery and continuation and prevent or mitigate losses.