This excerpt taken from the PBR 6-K filed Mar 31, 2009.
24.4 Profit reserves
a) Legal reserve
The legal reserve is formed through the appropriation of 5% of the net income for the year, not exceeding 20% of capital, as required by article 193 of the Brazilian Corporation Law.
b) Statutory reserve
The statutory reserve is formed through the appropriation from the net income of each year of an amount equivalent to at least 0,5% of paid-in capital at year-end. This reserve is used to fund research and technological development programs. In accordance with article 55 of the Companys By-laws the accumulated balance of the reserve cannot exceed 5% of paid-in capital.
c) Tax incentive reserve
It is formed through the allocation of the portion of tax incentives resulting from government donations or subsidies, allocated to the results for the year in conformity with article 195-A of the Corporation Law, included by Law 11.638/07, as from January 1, 2008.
In fiscal year 2008, the amount of R$ 557,185 was distributed to the results related to the incentive for investments in the Northeast in the ambit of SUDENE, with a 75% reduction in income tax due, calculated on the working profit from the activities receiving incentives.
d) Profit retention reserve
It is earmarked for capital budget investments, mainly in exploration activities and developement of oil and gas production, pursuant to article 196 of the Brazilian Corporation Law.
In the proposal for distribution of net income for the year ended December 31, 2008, the retention of profits is forecast in the amount of R$ 25.217.273, with the amount of R$ 23.779.347, arising from net income for the year, and R$ 1.437.926 from the remaining balance of retaining earnings, which is earmarked to partially meet the annual investment program established in the 2009 capital budget, subject to approval by the General Shareholders Meeting on April 8, 2009.