Retail Debt Program – Tesouro Direto

David Athayde Investor Relations Office

Brasília

June-2013

2

Guidelines

» Launched in 2002, as a partnership between the Treasury and BM&FBovespa (stock

exchange)

» Treasury: in charge of bond offering and pricing

» BM&Fbovespa: responsible for the electronic system that supports the negotiations

through Tesouro Direto

» Objectives (from the Treasury point of view):

» To offer another savings product alternative

» To increase the investors base

» Didactic purposes – transparency and financial education

Main Features

3

Characteristics

» Interned Based

» Individuals need one agent (bank or broker) to link them into the system, but the decision over the

portfolio composition is theirs.

» Minimum/Maximum amount per operation:

» Min: Regular Purchases: 10% of a bond unit => around US$ 35 / Programmed : around US$ 15

» Max: US$ 500,000

» Offers regular government securities through the internet

» Uses roughly the same on-the-run instruments for debt roll-over

» One exception tailored for retailers: Zero-coupon inflation-linked bonds

Main Features

4

Characteristics

» Consulting the system

» The system can be accessed for consulting purposes 24 hours a day, 7 days a week

» Buying Bonds

» It is possible to buy Bonds on weekdays, weekends and holidays

» Except from 5am to 9am on weekdays – system maintenance

» Selling Bonds to the Brazilian Treasury

» The selling of Bonds to the Brazilian Treasury can be done every Wednesday – at market prices

» Weekly liquidity

Main Features

5

Competitive Costs

» Financial Institution Fee (vary a lot, some have zero fee) – from 0 to 1%per year.

» Custody Fee (BM&FBovespa – Brazilian Stock Exchange) – 0.3% per year.

» Investment Funds usually have higher fees, which are inversely proportional to the volume

available for investment (low-income investors pay more)

» As the investor is responsible for his portfolio allocation, there are no costs related to the asset

manager role.

Advantages

6

7

Flexibility – Customized Portfolio

» Maturities range from 2 to 40 years

» Three types of bonds: fixed rate / inflation-linked / floating rate

» Two available flows:

» LTN, LFT and NTN-B Principal: the principal and interests are paid only when the bond is

redeemed;

» NTN-B and NTN-F: there are also semi-annual coupon payments.

Advantages

8

Available Prices and Rates

List of Bonds Offered

Security Maturity Rate(p.y.) Unitary Price

ASK BID ASK BID

Inflation (CPI) Linked

NTNB Principal 150519

15/05/2019 3,74% - R$ 1.812,02 -

NTNB 150820 15/08/2020 3,78% - R$ 2.598,45 -

NTNB Principal 150824

15/08/2024 4,09% - R$ 1.438,68 -

NTNB 150535 15/05/2035 4,23% - R$ 2.882,62 -

NTNB Principal 150535

15/05/2035 4,35% - R$ 886,35 -

NTNB 150850 15/08/2050 4,40% - R$ 2.939,24 -

Fixed Rate

LTN 010116 01/01/2016 9,12% - R$ 784,98 -

LTN 010117 01/01/2017 9,43% - R$ 711,97 -

NTNF 010123 01/01/2023 9,79% - R$ 1.036,38 -

Floating Rate (Selic)

LFT 070317 07/03/2017 -0,03% - R$ 5.541,15 -

As of: 25-Apr-2013 14:20:56

9

Simple Purchase Procedure

Advantages

10

Clearing Process

» After the purchase is confirmed, a protocol number and the payment due date are displayed.

» The financial resources should be made available to the Custodian on the week day that

follows the purchase date.

» The investor is responsible for :

» Contacting the Custodian to obtain its banking details

» Transferring the money to the appropriate account

Purchase Procedure

11

Competitive Returns

» Public bonds usually are the safest financial investment in a country

» Once purchased, the bond is registered as a property of the investor

» If the financial institution goes bankrupt, the investor just have to transfer his bonds to

another institution.

Advantages

Safety

» Lower Costs

» Considering the declining trend of interest rates in Brazil, investors can guarantee an high yield

bond for a long period.

12

IOF and Withholding

» The securities offered at Tesouro Direto are subject to the same taxes of any fixed Income

investments:

» The regressive IOF tax (for investments below 30 days)

» Withholding tax :

» 22.5% up to 180 days;

» 20.0% from 181 to 360 days;

» 17.5% from 361 to 720 days;

» 15.0% above 720 days.

» The withholding tax is only charged at the moment of selling, previous redemption and when

the bond have coupon payments – semi-annually.

Taxation

13

BM&FBovespa and the Financial Institution

» BM&FBOVESPA charges 0.30% per year over the total value of the stock

» Each financial institution has a different fee:

» This fee is freely agreed with the investor

» Induce market competition

Fees

14

Improvements

» Home-Broker integration

» Investor can operate through his financial institution’s web site

» Cost Reduction

» There was also a negotiation fee that was abolished

» “Scheduled Sales”

» Periodical purchase and sales programming

» Re-investment

» Incentive to retailers

» Fee draw-backs conditional on performance

Recent Developments

15

# of Operations by Financial Volume – Mar 13

Recent Numbers

31.8%

12.5%

7.7%

5.0% 4.4%

12.5%

19.6%

3.7%2.6%

0.2%

Up to 1

k

1 to 2

k

2 to 3

k

3 to 4

k

4 to 5

k

5 to 1

0 k

10 to 5

0 k

50 to 1

00

k

100 t

o

500 k

500 k

a 1

M

Sales by Maturity – Mar 13

1-5 years

28,4%

5-10 years

25,4%

> 10years

46,2%

16

Outstanding – Mar 13

Recent Numbers

Fixed 23.8%

Inflation 67.4%

Selic 8.8%

Total = R$ 9.5 bn / US$ 4.8 bn

17

Return – Feb 13

Recent Numbers

Bond Maturity

In February In the Year In 12 Months

LTN 1/1/2016 0.28% -0.30% 14.78%

LTN 1/1/2017 -0.06% - -

NTN-F 1/1/2023 -1.48% -1.56% -

NTN-B 8/15/2020 0.33% -1.01% 18.94%

NTN-B 5/15/2035 -3.00% -2.01% 23.73%

NTN-B 8/15/2050 -6.01% -5.68% -

NTN-B Principal 5/15/2019 0.15% - -

NTN-B Principal 8/15/2024 -1.02% -2.27% 25.10%

NTN-B Principal 5/15/2035 -6.25% -2.61% 32.78%

LFT 3/7/2017 0.43% 1.57% 7.39%

Gross Return

18

Enrolled Investors

Recent Numbers

4,496 4,042

287,273

342,092

2,000

4,000

6,000

8,000

10,000

12,000

230,000

250,000

270,000

290,000

310,000

330,000

350,000

Feb

-12

Mar

-12

Ap

r-1

2

May

-12

Jun

-12

Jul-

12

Au

g-1

2

Sep

-12

Oct

-12

No

v-1

2

Dec

-12

Jan

-13

Feb

-13

Mar

-13

Monthly Variation (RHS) Total

19

Share of Retail Investors through TD is not Representative (% of Overall Debt)

Cross-Country Comparison

0101

05

15

17

0

2

4

6

8

10

12

14

16

18

Brazil USA Sweden Ireland UK

20

Great Increase Potential

Looking Ahead

» Computers base-> 99 mn (2012)

» 1 Computer out of 2 inhabitants

» 94 mn internet users

» 71.43% of households have Internet

» E-commerce traded R$22.5 bn in 2012

» Internet Banking -> 42 mn people in 2011.

» 24% of banking transactions

» 15.7 bn transactions

» 46% of active accounts

» 572 thousand investors with homebroker (2012)

» 15% of BM&FBOVESPA trades

21

Main Challenges

Looking Ahead

» Work on distribution channels

» Banks are not interested in selling Tesouro Direto bonds. They prefer to sell their own

financial products, through which they raise capital. Tesouro Direto only gives operational

fees.

» Identify the investor needs

» The Treasury is hiring a survey company in order to understand the main difficulties faced

by the potential investors.

» Invest on advertising and financial education

22

For additional information access the National Treasury website:

https://www.tesouro.fazenda.gov.br/en

Or contact Institutional Relations area:

brazildebt@fazenda.gov.br

The information on this presentation is issued by the Brazilian Debt Management Office (DMO) for informational purposes. It does not contain and is not an invitation or offer to buy or sell securities. Translation of the original text of this document is provided only for the convenience of the reader. While reasonable care has been taken to ensure the authenticity of the translation, its accuracy cannot be guaranteed. Reliance upon this translation shall be at the reader's own risk. Under no circumstances, shall the Brazilian National Treasury, its officers, employees or agents be liable to the reader or anyone else for any inaccuracy, error, inconsistency, omission, deletion, defect or alteration of the content of the translation from the original Portuguese text, regardless of cause, or for any damages resulting therefore. The original Portuguese text of this document is the only official version, which can be found in http://www.stn.fazenda.gov.br/index.asp. In the event of any discrepancy or contradiction between the Portuguese and translated version, the Portuguese version shall prevail.