Petrobras (PBR)

New benefits plan

On June 22, 2007, the Supplementary Pensions Office approved the introduction of Petros Plan 2. On July 1, 2007, Petrobras offered this new pension plan to the new employees as well as those who have joined the Company after September 2002, and had no Pension Plan.

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Table of Contents

16. Employees’ Postretirement Benefits and Other Benefits (Continued)

(b) Pension plan - Fundação Petrobras de Seguridade Social - Petros (Continued)

New benefits plan (Continued)

This Plan was formulated according to the Variable Contribution - VC, or mixed model, with the resources capitalized through particular accounts, retirement pensions established according to the account balances, in addition to the coverage for social security risks (disability and mortality before retirement) and the benefit payment options in case of perpetual assistance system, with estimated pension reversal for dependents after the death of the holder, or the quotas receiving regiment, for an unlimited period, in addition to the guarantee of a minimum benefit.

The Petros Plan 2 also includes a minimum benefit for payment of annuities which guarantees coverage of the benefit to ensure it does not have a monetary value of under 30% of the average contribution salary.

Petrobras and the other sponsors will fully assume the contributions corresponding to the period in which the new participants had no plan. This past service shall consider the period from August 2002 or the date of admission up to August 29, 2007.

The disbursements will be conducted over the first months of contributions up to the total months the participant had no plan, and shall cover the portion relating to the participants and sponsor.

The impacts related to the Petros Plan 2 were calculated by independent actuaries and were accounted for in accordance with the standards established in SFAS 87, 132 and 158, which increased “Employees’ postretirement benefit obligations - Pension” in the amount of US$136 and “Accumulated other comprehensive income, Postretirement benefit reserves adjustments, net of tax - pension cost”, in the amount of US$90.

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Table of Contents

16. Employees’ Postretirement Benefits and Other Benefits (Continued)

(b) Pension plan - Fundação Petrobras de Seguridade Social - Petros (Continued)

Plan assets

Plan assets are invested primarily in government securities, investment funds, equity instruments and properties.

The table below describes the types of plan assets:

Plan assets include the following securities of related parties:

Petros provided certain financing for the continued development of the Albacora oil and gas field located in the Campos basin, that is classified as securities of other related parties (see Note 14).

The Company uses 6.32% as the expected long-term rate of return over inflation on Petros’ assets. The Petros’ portfolio of investments as of December 31, 2007 was comprised of 74% securities, 41% of which were held-to-maturity government securities that earn interest at 6% annually plus the IPCA (Consumer Price Index) variation and 33% of which were Investments Funds that earn interest approximate to the CDI (Certificado de Depósito Interbancário, or Interbank Deposit Certificate), which has been yielding more than 6% annually. Thus, the Company considers a 6.32% long term interest rate appropriate to calculate the expected return on assets, as such aligns with the composition of the Petros’ asset portfolio.

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Table of Contents

16. Employees’ Postretirement Benefits and Other Benefits (Continued)

(b) Pension plan - Fundação Petrobras de Seguridade Social - Petros (Continued)

Plan assets (Continued)

Petros has a significant volume of investments in government securities, mainly NTN-B bonds, which by an agreement with the Supplementary Social Security Department will be held-to-maturity being recorded at fair value, for which a net present adjustment was required. Thus, the percentage of assets allocated in this investment will remain the same over the short term.

New benefits plan

In October 2006, the Petrobras Board of Directors approved the introduction of a new pension plan called Petros Plan 2 for employees currently with no plan.

A New Supplementary pension plan was formulated according to the Variable Contribution model - CV. or mixed with the resources capitalized through particular accounts, retirement established according to the account balances, besides the assurance for pension plan risks (handicapped and death during the contribution life) and the benefit payment options in case of perpetual assistance system, with estimated pension reversal for dependents after the death of the holder, or the quotas regime.

On January 19, 2007, the Petros Decision-making Board approved the Petros 2 Plan, which was referred for assessment and statement by the Supplementary Pensions Office - SPC, for the proper final approval, whereupon it may be offered to the employees who are not presently covered by a supplementary pension plan sponsored by the Company. Until the moment, the regulatory agency have not approved the mentioned plan yet.

The real impacts generated by implementing the Petros 2 Plan to serve employees with no supplementary pension coverage will be assessed by independent actuaries and accounted for by Petrobras and the other Plan’s sponsors, upon conclusion of the accession process.

New benefits plan

In May of 2001, the Board of Directors of Petrobras approved the creation of a mixed social security plan, for current and new employees, based on defined contribution formula for programmable benefits and a defined benefit formula for risk benefits. However, the migration of participants and beneficiaries of the previous plan (PETROS) to the new plan was suspended, pursuant to a Federal Judicial ruling arising from an injunction filed by the employee union. A court order in 2004 granted the injunction ruling against the new plan and invalidating any changes to the PETROS plan premised upon intended migration to a new plan. This court decision is under appeal.

In 2003, the Company formed a task force with representatives of the National Union of Oil Workers (FUP), unions and PETROS, among others, in order to evaluate alternatives to a new model for the Company’s supplementary pension plan, including analyses of negotiated arrangements for the settlement of actuarial deficits.

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Table of Contents

16. Employees’ Post-retirement Benefits and Other Benefits (Continued)

(b) Pension plan - Fundação Petrobras de Seguridade Social – PETROS (Continued)

New benefits plan (Continued)

On April 19, 2006, the Company, aiming to achieve an agreement regarding its Supplementary Pension Plan, presented to employee participants and retirees a proposal to bring equilibrium to the actual PETROS Plan and the implementation of a new plan, denominated PETROS Plan 2.

Execution of the proposal presented by the Company’s Executive Board was subject to a number of conditions, including the renegotiation of the PETROS Plan Regulations, in relation to the means of readjusting the benefits and pensions, considering a significant rate of individual accession of employees and dependants.

The overall renegotiation target previously set by the Company had not been achieved. As a result the proposal presented by Petrobras became null and void.

On January 08, 2007, the Petrobras Board of Directors approved the reopening of the PETROS Plan renegotiation process, in order to meet the claims of the trade unions, as most participants were in favor of the renegotiation.

The new target for the minimum accession number to the renegotiation was set at 2/3 (two-thirds) of the members and the final deadline for them to make their choice was February 28, 2007. The renegotiation target was met and the proposal submitted by the Company became effective, and PETROS is calculating the amounts to be funded by the sponsors, that will reduce the deficit of the PETROS Plan, as established by Brazilian pension law.

On October 20, 2006, the Board of Directors of Petrobras approved the introduction of PETROS Plan 2 for employees currently with no pension plan.

The New Supplementary pension plan was formulated according to the Variable Contribution model. In this model, the contributions are capitalized in individuals accounts, and the pension benefits are established according to the account balances. This plan also includes risk benefits with coverage for illness, incapacity and death, and a lifetime income.

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Table of Contents

16. Employees’ Post-retirement Benefits and Other Benefits (Continued)

(b) Pension plan - Fundação Petrobras de Seguridade Social – PETROS (Continued)

New benefits plan (Continued)

The PETROS Plan 2 also includes a minimum benefit for payment of annuities which guarantees coverage of the benefit to ensure it does not have a monetary value of under 30% of the average contribution salary.

On December 20, 2006 the Department for Coordinating and Controlling State Companies (DEST) decided to approve the proposed PETROS Plan 2, which was also approved on January 05, 2007 by the Ministry of Mines and Energy.

On January 19, 2007, the PETROS Decision-making Board approved the PETROS Plan 2, which will be referred for assessment and statement by the Supplementary Pensions Office - SPC, for the proper final approval, whereupon it may be offered to the employees who are not presently covered by a supplementary pension plan sponsored by the Company.

Petrobras and the other sponsors will fully assume the contributions corresponding to the period in which the new participants had no plan. This past service shall consider the period from the date of admission to the date enrolment commenced in the PETROS Plan 2. The disbursements will be conducted over the first months for contributions up to the total months the participant had no plan, and shall cover the portion relating to the participants and sponsor. The maximum estimated value of this actuarial commitment as of December 31, 2006 if the plan is approved by SPC and accepted by all new employees was US$109.

This New Plan also allows the Company to maintain the pension coverage it offers, mitigates the risks presented by the defined benefit model adopted and considerably reduces the possibility of future deficits. The impact of joining the new plan and its related benefit costs will be valued according to the standards established in SFAS 87, 132 and 158 and will only be computed and recognized in the accounts when the plan is implemented.

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Table of Contents

16. Employees’ Post-retirement Benefits and Other Benefits (Continued)

(b) Pension plan - Fundação Petrobras de Seguridade Social – PETROS (Continued)

New Benefits plan

In the year 2001, a mixed pension plan called PETROBRAS VIDA was created, intended for current and new employees. However, the process for participants and beneficiaries of the previous plan (Plano PETROS) to sign on to the new plan was suspended, due to a restraining order issued by a court pursuant to a suit for preliminary injunction filed by employee unions and subsequent court developments. A court order rendered in the year 2004 granted the injunction and annulled the act of the Supplementary Pension Secretariat of the Social Security Ministry approving the new plan, declaring invalid any alterations made in the PETROS plan based on such approval, under appeal at the second court level, awaiting judgment on the merits of the matter.

The PETROS Plan does not accept new employees of PETROBRAS. PETROBRAS took out a group life insurance policy to cover all employees beginning employment with the Company subsequent to the closure of the PETROS plan, this policy will remain in effect until a new private pension scheme is implemented.

In 2003, PETROBRAS formed a task force with representatives of the National Union of Oil Workers (FUP) and worker’s unions, in order to technically evaluate alternatives to a new model for the Company’s supplementary pension plan, including analyses of negotiated schemes to strengths its financial and economic position, analysis of the specific demands of these representative entities and the definitive balance of actuarial balance of PETROS pension plan.

On April 19, 2006, PETROBRAS, in order to achieve an agreement of its Supplementary Pension Plan, presented to employee participants and retirees, a proposal which sought to afford equilibrium to the actual PETROS plan and the implementation of a new Plan, which will be subject to the approval of the Board of Directors.

New Benefits plan

In the year 2001, a mixed pension plan called PETROBRAS VIDA was created, intended for current and new employees. However, the process for participants and beneficiaries of the previous plan (Plano PETROS) to sign on to the new plan was suspended, due to a restraining order issued by a court pursuant to a suit for preliminary injunction filed by employee unions and subsequent court developments. A court order rendered in the year 2004 granted the injunction and annulled the act of the Supplementary Pension Secretariat of the Social Security Ministry approving the new plan, declaring invalid any alterations made in the PETROS plan based on such approval, under appeal at the second court level.

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The PETROS Plan does not accept new employees of PETROBRAS. PETROBRAS took out a group life insurance policy to cover all employees beginning employment with the Company subsequent to the closure of the PETROS plan, this policy will remain in effect until a new private pension scheme is implemented.

In 2003, PETROBRAS formed a task force with representatives of the National Union of Oil Workers (FUP), in order to technically evaluate alternatives to a new model for the Company’s supplementary pension plan, including analyses of negotiated schemes for the settlement of actuarial deficits.

On April 19, 2006, PETROBRAS, in order to achieve an agreement of its Supplementary Pension Plan, presented to employee participants and retirees, a proposal to bring equilibrium to the actual Petros plan and the implementation of a new Plan, which will be subject to the approval of the Board of Directors.

The conditions to implement and operate the proposal presented by the Executive Directors of the Company are the following:

1) Agreement with Workers Union to liquidate and extinguish the items presented in the law suits, specially at the Public Civil Action lodged by FUP and Oil Unions related to Petrobras supplementary pension plan. Requests related to those items would be accomplished by the calculation of its actuarial value and payment by Petrobras, during 20 years, as far as the liquidity conditions of the plan are followed.

2) Revision of Petros plan costing method, according to the legal criteria of contribution parity, in order to make the sponsors and the participants employees and retirees contributions equivalent.

3) Negotiation of financial incentive to the participants employees and retirees, pledged by the Workers Union, to reward them for the benefits adjustments mentioned at the renegotiation of the actual plan.

The obligatory conditions to implement and operate the actions and commitments proposed by Petrobras are the following:

a) Implementation of the new plan PETROS-2 following the variable contribution model;

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b) Participants commitment, seeking the completion among employees and retirees, to:

b.1) Revision of the criteria to adjust the benefits, pensions and retirements of Plano Petros;

b.2) Extinguishment and liquidation of the law suits on items under consensus agreements.

The adherence of the employees to the new plan will not generate the transference of the assets that guarantee the old pension plan to the new one., Once the employees adhere to the Plano Petros 2 will have guarantees of an Optional Proportional Benefit – BPO, that will be calculated considering the incurred period and the estimated total period to accomplish the eligible conditions of Petro’s actual pension plan.

New Supplementary pension plan was formulated according to the Variable Contribution model – CV. In this model, the resources are capitalized through particular accounts, retirement is established according to the account balances, besides the assurance for pension plan risks (handicapped and death during the contribution life) and the benefit payment options in case of perpetual assistance system, with estimated pension reversal for dependents after the death of the holder, or the quotas regime for undetermined term.

This proposal intends to strengthen the Company’s Supplementary Pension Plan Model and present to and be approved by the Company Board of Directors and the regulatory departments, after the negotiation process and the communication to the employees.

In order to keep this Model attractive, self-sustaining and a powerful instrument to manage the employees related to Petrobras System, it is essential to propose the modification of it.

According to the actual negotiation phase, it is not possible to determine if there will be any relevant changes at the actuarial commitments and at Petrobras’ income statements. As soon as the proposal is defined, the impacts will be measured, recorded at the accounting registers and notified to the Market.

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The new plan called “PETRO-2” presents actuarial and financial risks, as a result, according to CVM Resolution No. 371, the obligation value must be calculated by an independent actuarial and recognized in the sponsors’ financial statements.

The impacts of adherence and the cost of benefits provided for by the new plan will be evaluated based on the concepts established in CVM Resolution No. 371/00 and will only be determined and provided for when implemented.

New benefits plan

In October of 2001, the Board of Directors of PETROBRAS approved the creation of a mixed social security plan, for current and new employees, based on a defined contribution formula for programmable benefits and a defined benefit formula for risk benefits.

The joining process of members and beneficiaries of the PETROS Plan to the new plan, PETROBRAS VIDA, was suspended on November 27, 2001 as a result of an injunction granted as a result of a writ of security filed by unions. On January 13, 2003, after several court rulings on the continuity of the new Plan, the Regional Federal Court of the 1st Region granted PETROBRAS relief suspending the effects of the injunction that prevented joining the new plan. In addition to this case, on January 17, 2003, the judge of the 7th Federal Court of Rio de Janeiro granted another injunction to suspend the joining process, as a result of a class action filed by another union.

On April 30, 2004, the judge of the 14th Federal Court of the Federal District, who had granted the aforementioned injunction (later cancelled by the Federal Regional Court of the 1st Chapter), granted a writ of security nullifying the legal act performed by the Supplementary Pension Secretariat of the Ministry of Social Security (MPAS) that authorized the new Plan, and annulled any changes made to the PETROS Plan based on that approval. This decision is subject to appeals by the Federal Government, PETROBRAS and PETROS. The sentence is under appeal at a second instance.

At December 31, 2004, the balance of advances for the pension plan recorded by PETROBRAS amounted to R$ 1.217.612 (R$ 1.193.322 in 2003). The impact of joining the new plan and the cost of the benefits stipulated in the new plan will be valued according to the standards established in CVM Resolution No. 371/00 and will only be computed and recognized in the accounts when the litigation has been resolved.

The PETROS Plan still does not accept new employees of PETROBRAS. Pursuant to the closure of the PETROS Plan, PETROBRAS took out a group life insurance policy to cover all employees beginning employment with the Company subsequent to the closure of the PETROS plan, this policy will remain in effect until a new private pension scheme is implemented.

In 2003, PETROBRAS formed a task force with representatives of the National Union of Oil Workers (FUP), unions and PETROS, among others, in order to technically evaluate alternatives to a new model for the Company’s supplementary pension plan, including analyses of negotiated schemes for the settlement of actuarial deficits.