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SABESP took import steps in 2009 in its mission to “to render sanitation services, contributing for a better life and environmental quality”. We prioritize five work fronts. 

The first was investment acceleration aiming universal services. In 2009, SABESP invested R$1.8 billion, a record level in the past ten years. The investment made in 2007-2009 was approximately R$4.5 billion, more than double the investment made in 2003-2005.

The investments made improved the quality of living of the population. We made roughly 201,000 new water connections and 184,000 new sewage connections. As a result, currently sewage collection increased to 80% and sewage treatment reached 74%. In 2007 2009, we started to treat the sewage to additionally 3 million people. We estimate that by the end of 2010, this number increases to 3.4 million people, a figure close to the entire population of Uruguay.

In addition to increase our investment, there was a visible improvement in project management. Investment acceleration was made using structuring programs, which facilitate planning and funds raising. We have enhanced project management with the use of a methodology based on the concepts and best practices of the Project Management Institute (PMI), one of the largest project management development centers in the world. Additionally, we created a streamlined structure, named Investment Executive Group (GEI).

The highlight is the Northern Coast Clean Wave Program (Onda Limpa Baixada Santista), which will increase sewage collection from 54 to 95%, and treat all collected wastewater. Investments in this program will total R$1.4 billion by 2011.

Four programs in the São Paulo Metropolitan Region should be specially highlighted. Firstly, Tietê Project, which second phase was completed in 2008, increasing sewage collection in the São Paulo Metropolitan Region from 80% to 84%, and treatment from 62% to 70%. Project continuity is ensured by the approval of a US$600 million loan from the IADB for the project’s Phase 3. This will allow increasing collection in the São Paulo Metropolitan Region to 87% and treatment to 84% by 2015. Secondly, the Metropolitan Water Program, with the confirmation of the first big investment under a public private partnership in the High Tietê Water Producing System, increasing water treatment capacity from 10 to 15 cubic meters per second. Thirdly, Program Vida Nova(New Life), focused on the conservation of watersheds, in particular around the Guarapiranga and Billings dams. Finally, Clean Stream Program (Córrego Limpo), which permitted

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decontaminating 42 streams in the city of São Paulo during stage 1, and will reach 58 streams by the end of 2010.

We prioritized the Water Loss Reduction Program as it should. In 2009, the loss to revenue ratio decreased to 26%. The goal for 2010 is to reduce loss ratio to 24%, a decrease of 8 percentage points over 2006, when losses reached 32%. If we reach this goal, in the 2007 2010 we will increase water supply capacity by 1.7 million inhabitants, equivalent to the population of Campinas and Osasco together, without the need to find new watersheds, and incurred in the related power and material costs.

The second work front was ensuring contract and market security, comprising the renewal of existing agreements and ensure closer cooperation with the city governments.

In fact, the universal sanitation services goal requires actions in the municipalities in addition to our investments. It is necessary that each party’s efforts be complementary. A municipal government can work to clear irregularly occupied, invaded and environmental preservation areas, eliminate unauthorized connections and make the connection to the sewage system mandatory, detect illegal sewage, etc.

During the year several city councils approved 40 authorization acts, including in the City of São Paulo. In 2009, we entered into 14 agreements, added to the 174 agreements entered into since 2007. By January 2010, 30 authorization acts had been approved that, in brief, permit the provision of sanitation services.

The third work front was build up sound pillars of economic and financial sustainability, to increase investment capacity and, therefore, the ability to serve better our customers. Note, to this regard, the R$1.4 billion net revenue obtained in 2009, the highest ever nominal net revenue in our history.

To ensure our economic and financial soundness, we have been working to obtain efficiency and productivity gains. One of the most important actions in this sense is the mentioned water loss reduction program. Note also the increase in productivity, from 684 connections by employee in 2006 to 837 connections by employee in 2009, a considerable 22% increase.

To reach these gains, we have made significant efforts in cutting costs, optimizing the asset base, and improving our financing structure. The reduction in personnel, telecommunications, electric power, and treatment material costs, among other, represent savings of approximately R$180 million in the 2010 budget. More than this, they create a continuous cost efficiency and control culture, which is crucial for a secure growth path. As part of the asset base reduction efforts, in 2009 we sold nonoperating properties worth R$27 million. As regards funds raising, the need for more funds to finance increased investments was covered together with an estimated two percentage point reduction in the average interest rate paid and an

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increase in the share of Government and multilateral funding. These funds bear lower interest rates, have longer terms, and are, therefore, more appropriate for the type of projects developed by SABESP.

We also progressed in the elimination of outstanding financial items, with the settlement of water and sewage bills owed by the State and the cities. There was equal progress in the actions taken to reduce water supply debts with wholesale municipalities.

Our financial soundness is confirmed by the increase in our rating awarded by Standard and Poors S&P, a sign of our capacity to honor our financial obligations. Additionally, SABESP is for the third consecutive year part of the Sustainability Index portfolio of the São Paulo Mercantile and Stock Exchange (BM&F Bovespa).

The fourth work front consisted on the corporate modernization process. In 2009, we worked intensely to renew our staff. We conducted an eight year comprehensive public contest to hire 1,771 new employees. To ensure new talents succeed current leads, we prepared a succession and career plan within SABESP, including special training consisting of MBA classes, language courses, and a mentoring program. Additionally, we started the scaled termination of retired, in compliance with a Public Prosecution Office resolution. With a headcount formed by staff that passed the public contest and trained and qualified new talent, we are ready to face the coming challenges and enter new markets and industries.

In the same line, it is important to emphasize the continuity of the pioneering implantation in a state owned company of the Value Added Management (VAM) model, which is crucial to steer the actions related to the optimization our asset base and improve the quality of investments, to strengthen SABESP and its long term sustainability.

Enhancing the corporate governance practices is also one of our priorities. Our Code of Ethics and Conduct of Company was widely disseminated, with a Q&A section, and practical examples to facilitate their understanding by our personnel. In order to consolidate the companywide implementation of strategic risk management, we formalized the formation of a Risk Committee.

The fifth work front was the Company’s strategic repositioning in view of the challenges of the new regulatory framework and the Company’s expectations as regards the water and waste services and the environmental conservation. After the creation of the environment and environmental management function in 2007 and the regulatory affairs function in 2008, we formalize the new businesses function in 2009.

The last one is devoted to ensuring the return on existing assets and developing environmentally sustainable solutions. Note, to this regard, that the publication in 2009 of the first bidding process for the concession to

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private sector companies of the right to exploit the energy potential of the Guaraú and Vertedouro Cascata Water Treatment Plants, by building small hydropower plants (SHPs).

Additionally, there was progress in the execution of arrangements and agreements. Domestically, we highlight the first loss reduction technology transfer agreement with Companhia de Saneamento de Alagoas – CASAL, and the technical cooperation agreements with Agbar from Barcelona, Mekorot from Israel, CAESB from Brasília, and CASAN from Santa Catarina.

Internationally, the consortium formed by SABESP and Latin Consult won the international bidding held by Instituto de Acueductos y Alcantarillados Nacionales (IDAAN), with the support of the Inter American Development Bank (IADB). This consortium will operate as consultant in a rational water use program and the implementation of a new commercial and operational management model in the central provinces of Panama.

In 2009, we progressed in actions to mitigate the impact of climate change by planting 582,000 trees, and reducing by 2.3% specific power consumption by cubic meter of water supplied. We also expanded partnering projects, such as the collection of frying oil in ten other cities, and the forestation of areas around company facilities, in 13 of our business units. In the environmental management area, we highlight the implementation of more detailed environmental clauses in supplier contracts, and the retaining of a consultant to implement an environmental accounting and balance sheet system.

After creating three new functions, the challenge for 2010 is strengthening the research, development & innovation (RD&I) function. The objective is to increase our efficiency and competitiveness. This area’s highlight was the cooperation agreement with the São Paulo State Research Support Foundation (FAPESP), which provides for joint investments totaling R$50 million, over a five year period, to fund research in water and waste areas.

As part of our concern for the quality of living of our employees, we implemented a partnership program with the community focused on cultural and sports activities. Also, SABESP was the first state owned company and the second company in general to receive the Tobacco Free Environment Gold Seal.

We opened the new Call Center, resulting from our concern to improve customer service, which will serve 10 million people, in the 328 municipalities in the countryside where we operate.

2009 was a year of great economic hardships, nationally and internationally. Despite the adverse scenario, we managed to maintain the level of investments. The goal for 2010 is to increase our investments by R$1.8

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billion. This will require maintaining the cost cutting program, the optimization our asset base, decreasing

even further the revenue loss ratio by utilizing existing assets, and finding new partners.

SABESP is in the right path to materialize our strategic vision of universal sanitation services in all the areas were we operate. In line with the guidelines of Governor José Serra administration, we have contributed for the economic and environmental development of the State of São Paulo, following best corporate governance practices.

Gesner Oliveira

CEO

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SABESP provides sanitation services to 366 of the 645 municipalities in the State of São Paulo, supplies water on wholesale¹ to six municipalities¹ and treats sewage in five of them, serving, directly or indirectly, over 26 million people, 67% of the State urban population.

SABESP is a mixed capital Company and our main shareholder is the São Paulo State Government. SABESP went public in 1994, 100% of our shares are common shares, and in 2002 we became the first mixed capital Company to join the BM&FBovespa’s Novo Mercado (New Market), the highest corporate governance level segment in Brazil. In the same year, we became a Securities and Exchange Commission (SEC) registrant, and our shares started to be traded in the New York Stock Exchange (“NYSE”), in the form of Level III American Depositary Receipts (“ADRs”). In 2007, we were included in the BM&FBovespa’s Corporate Sustainability Index (ISE), a portfolio that includes only companies that have a high level of commitment to sustainability and social responsibility, and we are until today the only water and waste company part of this index.

We are the biggest water and sewage service provider in the Americas and the fifth largest in the world based on the number of customer, according to the 11^th issue of the Pinsent Masons Water Yearbook. Our economic value and our environmental and social importance are recognized in Brazil and abroad. We were included in the Global Pact, a UN initiative that gathers the largest voluntary social responsibility groups in the world.

In addition to providing basic sanitation services in the State of São Paulo, we can also provide these services in other countries and operate in the urban rainwater management and drainage services, urban cleaning services, solid waste management services and related activities, including the planning, operation, maintenance and commercialization of energy, The broadening of our geographic and technical market creates development, qualification opportunities, adding new technologies, and increasing revenue.

Our focus, described in our Mission and our Vision, is provide universal sanitation services in the region were we operate, and contribute to the social, environmental, and economic development of the region.

¹ Municipalities served on wholesale are those where we only provide part of the services that form the entire sanitation cycle. Treated water is sold on wholesale and the City is responsible for its distribution. In case of sewage, the city collects wastewater and we treat it.

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Currently, 125 municipalities served by SABESP already have universal water and sewage services. To reach every household and industry in the municipalities where we operate in the State of São Paulo by 2018, in 2008 we doubled the annual investment volume and we are working to maintain this level in the coming years.

In addition, we are expanding our environmental solutions platform, offered to large customers that want to utilize SABESP’s knowledge and technology for rational water use and appropriate sewage disposal, thus contributing for the preservation of the environment.

Our mission and vision are fully aligned with our ethical values: respect for society and the customer, respect for the environment, integrity, competence, and citizenship.

These values guide the work of our 15,103 employees, working all over the State of São Paulo, and their focus and dedication of these employees have been recognized by SABESP. We received many awards in 2009, including:

• Intangibles Award Brazil 2009 – Utilities Industry, granted by the National Federation of the Marketing and Sales Managers Associations of Brazil (FENADVB), for considering SABESP the best manager of own intangible assets (trademark, corporate governance, sustainability, customers, innovation, information technology, talents, corporate knowledge, etc.);

• Metering International Latin America Excellence Award Category Best Advanced Metering Project, granted by Metering Magazine;

• São Paulo Management Quality Award PPQG 2009, granted by the São Paulo Management Excellence Institute (IPEG);

• Época Climate Changes Award, granted by Época magazine, which elected SABESP one of the 20 Climate Change Leading Companies for its environmental policy to reduce greenhouse gases;

• Best Company of Brazil Award Category Utilities, granted by Revista Isto É Dinheiro magazine;

• National Water & waste Quality Award PNQS 2009, granted by the Brazilian Sanitation and Environmental Engineering Association (Abes);

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• National Quality Award PNQ 2009 Category Customers, granted by the National Quality Foundation for our management of consumer relations;

• National Quality Award PNQ 2009 Category IGS (Water & waste Innovation Management), granted by the National Quality Foundation for case “Sustainable Partnership Program”, focused on the implementation of a service and product supplier management excellence model;

• Top Environmental Award granted by the Brazilian Association of Sales and Marketing Managers (ADVB), for case Environmental Solutions;

• E Learning Award National Reference to SABESP’s Corporate University by Micropower;

• Top Social granted by the Brazilian Association of Sales and Marketing Managers (ADVB), for case SABESP, in the Path of Sustainability;

• Top HR granted by the Brazilian Association of Sales and Marketing Managers, for case Knowledge Management; and

• São Paulo Diversity Seal granted by the São Paulo State Government.

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In 2009 we took important steps toward our future vision for 2018.

Firstly, the investment volume reached R$1.8 billion, a record level for the last 10 year.

Secondly, we took actions to cut costs and increase efficiency to ensure the economic and financial sustainability of SABESP, and sustain the progress made in the recovery of receivables.

Thirdly, contract and market stability progressed. Throughout the year, 40 authorization acts² were passed by city councils, including the São Paulo City Council.

Fourthly, we promoted a strategic repositioning in view of the new regulatory framework. We created an environmental function in 2007, a regulatory affairs function in 2008, and a new business function in 2009. The challenge for 2010 is to progress in the creation of a Research, Development & Innovation (RD&I) function.

Fifthly, the modernization of management is evolving within SABESP. We should highlight the qualification of our staff, with the first comprehensive public contest since 2001, the stated of the implementation of TAC³ to dismiss employees already retired by Social Security (INSS) and the preparation of a succession and career plan to train our new leads for the coming decade.

In 2009, we invested R$1.8 billion, approximately 11% above the initially budgeted investments.

 Table 3: Investment History

Note: 2003 –  does not include the transfer of sanitation services of the City of São Bernardo do Campo (R$415 million)
  2008 & 2009 ­ does not include commitments assumed regarding the program contracts (R$253 million and R$18 million, respectively)

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² An authorization act is a permit granted by the City Councils to the Mayor authorizing the City to enter into an agreement, under predefined terms and conditions.

³ Conduct Adjustment Term entered into with the State Public Prosecution Office.

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The table below shows the investments made in 2009 by region:

Table 4: Breakdown of Investments Made in 2009

In  2009, we completed the first investments funded by private sector capital, under a public private partnership and asset leases. These funding models allow us to access funds and accelerate investments.

Also in 2009, we completed approximately 201,000 new water connections and 184,000 sewage connections, the water supply service ratio remained at the universal service level, and sewage collection increase to 80%, and the sewage treatment ratio reached 74%. Approximately 23.4 million people receive water directly in their households (if we include the population of the cities that buy water on a wholesale from SABESP, this figure increases to over 26 million). At the same time, 19.6 million people have their sewage collected by us, and we treated the sewage generated by 14.4 million people.

The table below shows the 2009 results of operations and the summary of operational goals for2009 2018:

Table 5 Actual 2009 and 2009 2018 Goals

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Table 6 Water and sewage connections completed and population served

Investment acceleration was made using structuring programs, which facilitate planning and funds raising.

Clean Wave Program

Clean Wave Program will increase from 54 to 95% the sewage collection rate, and ensure the treatment of all sewage collected in Santos, São Vicente, Praia Grande, Guarujá, Itanhaém, Peruíbe, Mongaguá, Cubatão and Bertioga, benefiting approximately 3 million people (resident and seasonal population).

The program focuses on the decontamination of rivers and canals, which will improve swimming conditions on 82 beaches in the region, promoting tourism, job creation, and income generation in the Santos municipalities comprising the Baixada Santista metropolitan region. Additionally, it will reduce the number of hospital and clinic admissions due to water transmitted diseases, and the overall mortality rates, in particular the infant mortality rate.

Total investment to be made is R$1.4 billion through 2011. Total invested in the program by December 2009 was approximately R$960 million, equivalent to 67% of the works required.

Northern Coast Clean Wave Program

The program’s goal is to expand sewage system and collection the treatment capacity of sewage collected in São  Paulo State northern, benefiting 600,000 people. The program will increase the region's sewage collection and treatment from 30 to 85%, improving the population’s health and wellbeing, and boosting economic development while increasing the region’s tourism.  

Total investment in the program will amount to R$385 million by 2015. 

Coastal water Program 

The objective of the program is to increase production capacity, ensuring the supply of treated water to all municipalities served by SABESP on the coastal of São Paulo and eliminate discontinuous supply, especially during the summer. Approximately four million people will benefit, including and resident and seasonal population.

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By 2013, we expect to invest R$1.1 billion in production expansion, treated water quality improvement, treated water transmission and storage capacity, distribution system expansion, and the increase in the number of household connections.

Tietê Project

The Tietê Project is focused on improving better water quality in the Tietê River Basin, São Paulo Metropolitan Region, by expanding the sewage collection and treatment infrastructure. The project was initiated in 1992 and involves investments in the range of US$2.5 billion, divided throughout 23 years.

The first two stages of the program increased sewage collection in the São Paulo Metro Region from 70 to 84%, and sewage treatment leaped from 24 to 70%. These steps allowed reducing pollution in the Tietê river and contamination of the Billings dam watershed.

In 2009, we took important steps toward the third stage of Project Tietê. The objective of this stage is to increase the collection rate to 87% and the treatment rate to 84%. Investments for this stage are estimated at US$1.05 billion.

This Project will benefit approximately 1.5 million people with million people collection and approximately the 3 million people with sewage treatment.

Metropolitan Water Program

This program’s objective is to ensure regular supply of treated water to the São Paulo Metro Region municipalities served by us and the municipalities served on a wholesale,⁴ increasing water production capacity in the region by 13.2 cubic meters/s by 2014. Total program investments should reach R$2.7 billion over eight years and benefit 18.9 million people.

In 2009, we completed the transmission, storage and dam works. We should also highlight the start, in 2009, of the construction works of the Alto Tietê Public Private Partnership, which has already invested approximately R$126 million. After the works are completed, nominal capacity in the Alto Tietê System will increase to 15m³/s from 10m³/s, with direct benefits to 1.5 million people in the eastern region of the São Paulo Metropolitan Region, including the cities Arujá, Itaquaquecetuba, Poá, Ferraz de Vasconcelos, Suzano, Guarulhos and Mogi das Cruzes, in addition to increase the reliability, flexibility and was availability of the integrated system that supplies the Greater São Paulo.

New Life Program

The New Life Program, which includes the Watersheds Program, among other projects, consists of actions focused on the preservation of the watersheds in the São Paulo Metropolitan Region, especially the watersheds of the Guarapiranga and Billings dams. Its main objective is to recover the water in the reservoirs by organizing settlements around the dams and ensuring water supply to the São Paulo metropolitan region. Most of the funds will be invested in building sewage collection and treatment infrastructure. New Life also includes green area preservation projects and the urbanization of favelas (slums), with a direct benefit to 45,000 families.

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⁴ Municipalities served on wholesale are those where we only provide part of the services that form the entire sanitation cycle. Treated water is sold on wholesale and the City is responsible for its distribution. In case of sewage, the city collects wastewater and we treat it.

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In the whole, the program gathers investments of approximately R$1.2 billion from the São Paulo State Government, cities in the region, and the Federal Government. Our share totals R$300 million.

Clean Stream Program

Developed in association with the Municipal Government of São Paulo, this program focuses the decontamination of urbanstrems, including the improvement of the sewage system, the elimination of sewage discharges in streams and rainwater harvesting systems, cleaning the stream banks and beds, and removing and relocating houses built on stream banks. The Program started in 2007 and its objective is to decontaminate 100 streams, which will cost R$197.1 million, of which R$143.0 million will be defrayed by us. During the Program’s stage 1, completed in March 2009, we performed decontamination actions in 42 streams. The second stage stated right after the first stage and has the objective of cleaning 58 other streams by the end of 2010.

During stage 2, R$118.7 million more will be invested.

Corporate Water Loss Reduction Program

The program’s objective is to reduce the loss rate to 13% by 2019, a level consistent with international standards.

Budgeted investments from 2009 2019 total R$3.4 billion, which will be used especially in the replacement of water mains and service pipes, compartmentalization (reducing water pressure), and replacement of water meters.

In 2009, we invested approximately R$261 million in this program and the loss rate decreased to 26.0%(Dec 2009) from 27.9% (Dec 2008), a level significantly lower than the national average of 40%.

Countryside Investment Programs

The main investments in 2009 in the State countryside region were as follows: (i) the final stage of the universal sanitation service works in Presidente Prudente; (ii) the significant progress in the São José dos Campos and Taubaté Tremembé sewage system construction works; (iii) the structuring of an asset lease or the new Water Production System in Franca and the São José dos Campos Sewage Diversion and Treatment System, and the Campos do Jordão Sewage Diversion and Treatment System; and (iv) the completion of the sewage treatment plants in several municipalities, such as Monte Aprazível, Hortolândia, Caçapava, etc.

The maintenance of a high level of investments was accompanied by cost cutting, revenue increase, asset base optimization, improvement of credit profile and funds raising increasing steps, as well as resolving past due receivables with wholesale municipalities⁵ and the São Paulo State Government (GESP).

Cost cutting is indispensable at a time the water and waste industry is becoming more competitive and pressure for increasing expenses are also materializing due to new environmental, regulatory, and service quality standard requirements.

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⁵ Wholesale municipalities are those where we only provide part of the services that form the entire sanitation cycle. Treated water is sold on wholesale and the City is responsible for its distribution. In case of sewage, the city collects wastewater and we treat it.

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When we implement in 2010 the adjustment to 2009 expenses through the renegotiation of contracts, review of benchmark pricing, resource optimization, and other steps in several areas such as telecommunications, power, treatment materials and bank collection fees, the potential reduction may reach R$180 million and represent an efficiency and competitiveness gain for SABESP.

The efforts to ensure long term revenues from large consumers, through SABESP’s environmental solutions program, have already had a positive impact. The 159 loyalty contracts (firm demand) entered into in 2009 guarantee annual revenue of R$196 million. Another example is the Non Domestic Sewage (END) collection program, through which we receive industrial sewage and that generated R$125 million in revenue for 2009.

As regards assets reduction, we have structured an asset optimization program whose purposes are (i) sell nonoperating and unused areas and (ii) optimize operating areas, according to actual needs and the purposes for which they are intended. The focus of this work is on reducing the asset base and generate cash. Disposal in 2009 generated proceeds of R$27 million.

As regards funds raising, despite the credit crisis, in 2009 we raised R$1 billion with IADB and BNDES to finance our investment plan and R$900 million to rollover our debts. Even though 2009 was marked by the lowering of many companies’ ratings, our economic and financial soundness was acknowledged. The risk rating agency Standard and Poors S&P increase our rating to “BB” from “BB ” and the Brazilian scale rating to “brAA ” from “brA+”.

Another highlight in 2009 was the filing with the Pension Fund Authority of a proposal for the settlement of Sabesprev’s project deficit, in an effort to resolve a ten year dispute.

2009 is the year where we made considerable advance in our relations with the São Paulo State Government As follows:

i. Elimination of State Government’s practice of water and sewage bill default. The ratio of paid bill increased to 97.6% in 2009 from 90.7% in 2008;

ii. Late 2008, SABESP and the State Government reached an agreement for the reimbursement of R$915 million, i.e., approximately two thirds of total receivables related to the pensions and survivors’ pensions recognized in our financial statements. This amount was divided into installments that the State Government is regularly paying and represents cash inflows of R$27.5 million for SABESP since the agreement was executed. In addition, the State Government also assumed part of the monthly outflows of payments to beneficiaries (pensioners and survivors). This has allowed us to reimburse R$91.2 million since the agreement was executed late 2008. This represents approximately 48.9% of the total paid by us as pensions and survivors’ pensions. The agreement reached has allowed us to receive more than R$118.7 million since the end of 2008.

In 2009, there was progress in the steps taken to water supply debts of wholesale municipalities. These steps included:

a) We received under the claims filed against the Guarulhos water and waste authority (Serviço Autônomo de Água e Esgoto de Guarulhos – SAAE) approximately R$38 million related to water bills issued and unpaid bonds issued to pay court ordered debts;

b) We obtained an important favorable decision requiring the City of Santo André and the municipal water and waste authority (Serviço Municipal de Saneamento Ambiental de Santo André – SEMASA) to include in their budgets the full amounts owed to SABESP; and

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c) Extrajudicial negotiation initiatives with the wholesale to settle their debts to SABESP:

• We reschedule a debt of approximately R$8.5 million of the Mogi das Cruzes water and waste authority (Serviço Municipal de Água e Esgotos de Mogi das Cruzes – SEMAE), which is regularly paying SABESP. In addition, we initiated negotiations to create a SABESP SEMAE joint venture that will operate the city’s sewage system.

• There was considerable progress in the negotiations with the City of Diadema and the Diadema water and waste authority (Companhia de Saneamento de Diadema – SANED) for the creation of a SABESP City of Diadema water and waste joint venture. We expected to complete these negotiations in 2010 and settling all the debts of the City of Diadema currently being collected in courts.

During 2009, we entered into 14 contracts and several city councils approved 40 acts that authorize municipal governments to enter into contracts with us. The highlight was the authorization act passed by the São Paulo City Council in June. Thirty nine other authorization acts were enacted by the countryside cities councils. By the end of 2009, 202 authorization acts had been approved, which allowed entering into 174 contracts.

In December 2008, we entered into a contract for collecting and treating 20% of the sewage generated in the city of Guarulhos. Our total revenue over this contract’s five year term will increase by approximately R$58 million. In 2009, we made progress in the negotiation for sewage collection and treatment in the municipality’s central region, which we expect to complete in 2010.

The great challenge for 2010 is the contract between the State of São Paulo and the City of São Paulo, which is singlehandedly responsible for more than half our total revenue.

The implementation of a regulatory framework for the water and waste industry (Federal Law nº 11.445/07) and the creation of the São Paulo State Sanitation and Energy Regulatory Agency (ARSESP) radically change the regulatory environment where we operate, increasing competition in the industry, creating new changes and new opportunities for SABESP.

In addition, we have increasing expectations in relation to the water and waste and environmental preservation services, which require more investments, agility and innovation. To adjust SABESP to this new scenario, we have scheduled actions around four modernization pillars.

The Sabesp Environmental Solutions program consists of a platform of products and services offered to achieve customer loyalty and broaden our large customer base. By using our new services, customers benefit from our expertise and technology in sustainability, environmental preservation and water resources management areas. Therefore, we have been increasing, for example, our competitive capacity in the segments the most targeted by alternative water suppliers. The main results for 2009 are as follows:

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• Loyalty Contracts: Under a take or pay contract with SABESP, companies are entitled differentiated rates and consumption management systems, thus, cutting their costs. Companies may also count on a distinctive assistance and supply guarantees. In 2009, we entered into 56 new contracts which when added to the 103 existing contracts generate revenue of R$196 million/year.

• Non Domestic Sewage (END): one of our greatest concerns is the final destination of industrial sewage. To meet this need, we are prepared to receive and treat non domestic sewage. In 2009, we collected 16.9 million cubic meters of sewage, generating revenue of R$125 million.

• Program for the Rational Use of Water (PURA): a Program steered specifically for the State Departments and the Municipal Governments classified as public use, the solutions to reduce water consumption involve a number of actions, such as leak detection and repair, replacement of conventional equipment by water saving equipment, studies for water reuse, and educational lectures. In 2009, 644 public schools in the city of São Paulo joined the program, generating savings of 70 million liters of water per month (an average monthly reduction of 37%). 504 of these 644 schools have also entered into a Tariff Agreement for Public Entities, under which water and or sewage tariffs are 75% of the tariff charged to other public sector entities that do not have this type of agreement. To maintain eligibility to the benefit, the entity must have saved at least 10% of the water consumption and maintain this level of consumption.

• Reused water: treated sewage that can be used for used in equipment cooling, manufacturing processes, and in other non potable uses. The use of reused water helps broadening water offering for public supply and preserves the environment. Our reclaimed water production process is certified by ISO 9001/2000 quality management system in conformity with strict quality standards. Currently, our largest customers are Coats Corrente and Santher, which use reused water in manufacturing, and the City of São Paulo, which uses it in street and monument cleansing, garden irrigation, and unclogging rainwater harvesting systems. Annual revenue from reclaimed water reached R$ 182.4 thousand.

• Individualized water metering in condominiums: In 2008, we launched a technology that allows measuring separately the individual consumption of each apartment. Named “individual water metering”, the new technology meets an old request of many condominiums and may become an important economic incentive to rational water use. Individualized water metering can be purchased by any residential or commercial condominium in any municipality where we currently operate in the State of São Paulo. The model developed by ProAcqua, a partnership between SABESP and Cediplac, uses cutting edge technology that installs a concentrator developed exclusively for SABESP that allows distant reading and supply cut.

• Telemeter: this service allows web based tracking consumption registered in the water meter, in real time. Consumption history is presented in graphs according to the period requested by the custumer. Additionally, the system can send warning flags about leaks and consumption peaks, via e mail and cell phone messages. Real time consumption management results in faster decision making, increasing the logistics efficiency of required responses, while reducing water waste. In aggregate, since 2007 approximately 2,900 already use our Telemeters.

After structuring the Regulatory Affairs function in 2008, when we created a related Department and Committee, during 2009 we started to implement best regulation practices and disseminate a regulatory culture at SABESP.

There was considerable progress in terms of the challenges raised by the new regulatory framework, through the relations between the São Paulo State Sanitation and Energy Regulatory Agency (ARSESP) and SABESP.

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The highlights for 2009 were as follows:

• Freedom to negotiate with large customers: After preparing a technical study and several discussions with ARSESP, we were authorized to negotiate prices with large customers, above 500 m³/month, under specific contracts. This freedom is crucial to ensure we remain competitive in this market segment, where we face the competition of artesian wells, customized solutions, and water distribution using water trucks.

Tariff revision: In 2009, ARSESP proceeded with the revision process of the tariff criteria used and issued on July 22 a Technical Note on the Tariff Revision Process Methodology. On August 12, 2009, ARSESP informed us that the methodology adjustment will continue to be studied to be enhanced, and will be applied at the time of the tariff revision, in a process that should be completed in 2011.

According to the regulator, this future Tariff Revision will be steered to:

• Set the initial framework of periodic Tariff Revisions for all municipalities with a Program Contract entered into with SABESP, and receiving services regulated by ARSESP;

• Discuss once again all the criteria adopted to determine the cost of services, the tariff framework, the grant policy, etc.;

• Create a methodology, standards and procedures for future revisions and adjustments;

• Ensure the broad involvement of stakeholders, namely: the cities, the concessionaires, consumers, investors, etc.

• Regulatory standards: in 2009, ARSESP issued two important regulations. The first was the infringement and penalty regulation for water and waste service providers. The regulation basically sets out the penalty system and the amounts of fins to be imposed to the concessionaires in case of noncompliance with prevailing standards and legislations. The regulation preparation process involved public consultations, and we contributed with several inputs. The regulator also issued on November 13, standards that set out the general terms and conditions for the provisions and use of water and waste utility services. This basically addresses the standards that govern the business and operational relationship between utility operators and users.

2009 was very important for the New Businesses function, with the creation of a related Department and the signature of several cooperation and partnership agreements:

• Technical cooperation agreement with CAESB, Brasília’s water & waste authority, and CASAN, from Santa Catarina;

• Technology transfer agreement on water loss reduction with CASAL, from Alagoas. This agreement generated new orders to SABESP, and still in 2009 we initiated negotiations with Serviço Autônomo de Belém do Pará SAAEB (Belém water and waste authority) and the City of Toritama, Pernambuco;

• International cooperation agreements with Instituto Costarricense de Acuedutos y Alcantanrillados (AyA), from Costa Rica, Agbar, from Barcelona, and Mekorot, from Israel. These cooperation agreements proved to be quite effective to exchanging experiences and knowledge between different companies, and prospect new joint initiatives.

The increase of our activities abroad was not restricted to cooperation agreements. The consortium formed by SABESP and Latin Consult won the international bidding process held by Instituto de Acueductos y Alcantarillados Nacionales (IDAAN), with the support of the Inter American Development Bank (IADB). This consortium will operate as consultant in a program for the rational use of water and the implementation of a new commercial and operational management model in the central provinces of Panama. The agreement amounts approximately to US$8 million.

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The first tender notice for the concession to private sector companies of the right to exploit the energy potential of the Guaraú and Vertedouro Cascata Water Treatment Plants, by building small hydropower plants (SHPs) was published in 2009. These plants will generate approximately 7 MWh – the first time this power model will be applied in Brazil. The bidding process ended with the execution of the contract with the Sevtec/Tecniplan consortium in March 2010, and the project awaits the environmental permit.

As regards Project Aquapolo Ambiental, we also made significant progress with the definition of the main terms and conditions of the contracts to build, together with Foz do Brasil, the largest reused water project in South America. The Project plans to supply up to 1m³/s of reused water to the Quattor Petrochemical Group, with the possibility of extending supply to the other companies in the Capuava Petrochemical Hub, and companies located along the 16.5 km long watermain, that will cross the São Paulo, São Caetano do Sul and Santo André municipalities. We expect completing the negotiations and start construction works in the first half of 2010.

In addition, our entering into new segments has created new demands. In view of the interest shown by some cities, such as São João da Boa Vista, Mogi Mirim and Lins, the New Businesses function conducted several studies and analyses to bring solutions for the disposal of urban solid waste.

Three great accomplishments mark 2009 in our Research, Development & Innovation (RD&I) function. The first was the cooperation agreement with the São Paulo State Research Support Foundation (FAPESP) to develop “Joint Technology Innovation Research (PITE)” projects. This partnership provides for investments totaling R$25 million by SABESP and another R$25 million by FAPESP over five years.

In the context of this agreement, in December 2009, FAPESP published a tender invitation for the first round of water and waste research bids, which ill funds totaling R$10 million, R$5 million from SABESP and R$5 million from FAPESP, to be completed in 36 months.

The second accomplishment was the SABESP Creativity Award, which selects and rewards innovating ideas proposed by our employees to improve processes and cut costs. The first edition gathered 730 participants, and we rewarded 64.

The third accomplishment was our integration to the São José dos Campos Technology Center, in which other companies participate. The integration in the Technology Hub will allow us to share and develop technologies and knowledge with companies traditionally involved in research, development, and innovation, thus expanding the possibility of forming technology alliances and prospecting new businesses.

The main challenges of the RD&I function will be to inventory and disseminate existing proprietary technologies, develop an intellectual property protection policy, coordinating technological alliances and cooperation agreements for the development of research within our interests, and help in the making of products that we will be able to sell using technologies developed by us.

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We are undergoing a comprehensive human resources restructuring to increase productivity and change our staff’s profile.

After 8 years without a competitive public contest, we held in May 2009 a public contest to fill 1,771 jobs all over the State of São Paulo. We had over 190,000 applicants and among those selected, 379 were already working with us in December 2009. Also in 2009, we started to comply with the Conduct Adjustment Term signed in February 2009 with the Public Prosecution Office, which providers for the termination of INSS retirees.

In 2008 2009, terminations related to the 2% decrease in our headcount, permitted under the collective labor agreement, and the terminations related to the compliance with the TAC⁶ totaled 1,971 employees. When terminated, retirees are offered outplacement assistance under the Employee and Entrepreneurship Support Program.

The termination of a large number of employees highlights the importance of a corporate strategy to train new talent that can succeed current leads in the future. We have prepared, therefore, a succession and career plan, a structured, continuous training program offered to employees in managerial positions.

In 2009, we continued the implantation of the Value Added Management (VAM) model, which is crucial to steer the actions related to the optimization our asset base and improve the quality of investments, to strengthen SABESP and its long term sustainability.

The challenge for 2010 is to complete the implementation of the VAM in all business units, as part of the preparation of variable compensation proposal, pegged to value generation. The objective is to encourage and reward asset, expense and revenue management improvement efforts.

We were awarded the Tobacco Free Environment Gold Seal. We were the first state owned company and the second company in general to receive to receive this seal. To help those interested quit smoking, we paid, through the Employee Recovery and Care Program (Pare), for the treatment of 559 employees, of whom 177 actually quit smoking.

The corporate guideline “A proactive behavior in external relations” also sets the broadening of Corporate Governance, which should means a constant challenge for a Company that was the first state owned company in Brazil to join, in April 2002, the BM&FBovespa’s Novo Mercado, and simultaneously listed its shares in the New York Stock Exchange.

⁶ Conduct Adjustment Term entered into with the State Public Prosecution Office

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Governance structure

General Shareholders' Meeting: The highest decision making body, with the power to decide on all businesses conducted by SABESP and take all the actions it considers necessary to ensure SABESP’s protection and development. The shareholders' meeting is responsible for, but not limited to, electing or dismissing the member of the Board of Directors and the Supervisory board. All documents to be analyzed or discussed at a shareholders' meeting are available at our registered office and BM&FBovespa, from the call notice date.

A shareholder can evidence his or her condition as such at any time after the start of a shareholders' meeting, incompliance with the rules set forth in our bylaws social.

Board of Directors: Consists of 13 members with a two year term, and may be reelected. The positions chairperson of the board and president/CEO are filled by two different persons, and any president who is elected a board member cannot be hold the chair. Four of our directors are independent directors, in compliance with the Novo Mercado Listing Regulations, of whom one is elected by the non controlling shareholders. The Company’s bylaws provides for the participation of one representative of the employees in the Board of Directors, with a term of office similar to the other directors.

Audit Committee: The Board of Directors is assisted by an Audit Committee, consisting of three independent directors, of which one is specialized in finance and is the Committee’s Coordinator. The duties and functioning of this Committee are set out in its internal charter, which is available for consultation on our website, in a new version approved by the Board of Directors.

Fiscal Council: The supervisory board is established on permanent basis since our incorporation and currently consists of five members and five alternates, of whom one is the representative of non controlling shareholders.

Executive Committee: The executive committee consists of six members elected for a two year terms, who may be reelected. Officers are elected by the Board of Directors, and one is appointed as the President/CEO. The President/CEO is a member of the Board of Directors.

Governance Executive Departments: They advise on the governance processes, assisting the Chairman of the Board, the Audit Coordinator, the Fiscal Council, and our President/CEO to define meeting agendas, call and conduct the shareholders’ meeting, forward meeting agendas and supporting material, preparing minutes, and interacting with the member of the executive board committee and other management bodies to assist in the enhancement of governance.

Internal Audit: The Internal Audit department is an independent body whose purpose is to assess the completeness, accuracy, effectiveness, and efficiency of processes and information and internal control systems. The Internal Audit department has access to all documents, physical and logical records, system, facilities and individuals involved in the Company’s activities for the proper fulfillment of its duties. The Internal Audit department reports to the President/CEO and its activities are overseen by the Audit Committee.

External Audit: The Company follows the principles that maintain the independence of the external auditor, i.e., the auditor shall not audit his own work, function as client management, or act the client’s advocates. PricewaterhouseCoopers was our independent auditor for the annual period ended December 31, 2009 and they did not provide non audit services during this period.

Management Compensation: According to the Brazilian corporate law, the compensation paid to the members of the board of directors, the fiscal council, and the executive committee is set in aggregate by the Shareholders’ Meeting. The compensation of the members of the board of directors and the executive committee, in2009, including the benefits, totaled R$2.1 million. Additionally, approximately R$0.8 million was paid as bonus.

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Code of Ethics and Conduct

Our Code of Ethics and Conduct comprises the main guiding principles of our activities, such as respect for society and the customers, respect for the environment, respect for people, integrity, competence, and citizenship. The Code defines our relationship with our different stakeholders: directors, fiscal council members, officers, employees, customers, suppliers, shareholders, community, and society in general.

In 2009, we issued a manual with illustrative examples to build up awareness and disseminate the Code, which was made available to our employees in several formats. In addition, we restructured the Ethics and Conduct Committee, which is responsible for ensuring the employee’s commitment with the Code and the Code’s continuous relevance, updating, and appropriateness, as well as guiding and suggesting the actions necessary for the companywide disclosure and dissemination of its principles.

Adopting the Code of Ethics and Conduct is crucial for consolidating and expanding our conquered reputation of a socially responsible company.

Whistle­blowing Channel

To ensure compliance with the Code of Ethics and Conduct, we have an Ethics Committee and an internal Whistle blowing Channel, as well as a Corporate Accountability Procedure and an Ombudsman Office and a Customer Service that receive external complaints. The internal channel can receive anonymous whistle blowing. The results of the investigations are forwarded to the Audit Committee. Incidents are reported to the Ethics Committee, which takes preventive actions.

In 2009, 172 incidents were reported. The reported incidents were mapped to the Business Units, using an information system, to identify the major incidents. All incidents were investigated according to a specific procedure and the deployment of corrective action. As a result of the preventive actions, we note that in general there is a significant decrease in the number of incidents. This trend was stronger in processes involving suspected fraud in the commercial relationship with customers and cases of misconduct.

Internal Control and Risk Management

In 2009, we continued testing internal controls to maintain the certification that meets the US Sarbanes Oxley Act (SOx), since 2006. These controls cover the procedures that ensure the accuracy of accounting records; the preparation of statutory financial statements; and the proper authorization of transactions related to the purchase, use and disposal of Company assets.

Based on the assessment made, internal controls were considered effective and, therefore, we concluded that the main risks that might impact the financial statements were duly mitigated.

To improve organizational instruments and operational processes, in 2009 we ensured the continuity of performance indicator monitoring, focusing on the identification of critical points that require action to maintain and expand revenue, reduce expenses, and optimize the management of administrative, operational, and construction processes. The Company’s managers proposed Action Plans to improve internal controls, which were reported to the Audit Committee and the Top Management.

Risk Management

The implementation of companywide risk management was also consolidated, by identifying and assessing strategic risks and the main business processes of SABESP. The project also includes the assessment of Fundação de Seguridade Social Sabesprev’s strategic risks.

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We are aware that good risk management is important to ensure the continuity of our activities and accomplish our mission: provide water & sewage services, contributing for a better life and environment quality.

Previously, we used to perform various nonstandard risk management actions. In 2009, the process was made official and the management of strategic risks is now under the responsibility of two bodies: i) Risk Committee, consisting of President of SABESP/CEO, as coordinator, and a representative from each executive committee; and ii) the Risk Management Center, which report to Internal Audit. The Committee formally started its activities in January 2010.

Arbitration Clause

We, our shareholders, directors, officers and members of the fiscal council have agreed to solve through arbitration any dispute or controversy among them, whether related to or, in particular, arising from the enforcement, validity, effectiveness, interpretation, violation and effect therefrom of the provisions set forth in Law nº 6.404/76, our Bylaws, the rules issued by the National Monetary Council, the Central Bank of Brazil, and the Brazilian Securities and Exchange Commission CVM, as well as the other rules applicable to the operation of capital markets in general, in addition to those contained in Novo Mercado Listing Rules, the Novo Mercado Participation Agreement, and the Market Arbitration Chamber Regulation, to be brought before the Market Arbitration Chamber established by BM&FBovespa, in compliance with said Regulation, considering the exception applicable to the unavailable rights.

In 2009, we registered solid results, confirming our low exposure to the global crisis that affected the markets in 2008 and 2009. Net income in 2009 was R$1.4 billion, net revenue reached R$6.7 billion, a 6.0% increase compared to prior year, and EBITDA reached R$2.7 billion, a slight setback of 3.5% as compared to 2008.

Table 7: Profit History

2008 net income of R$1.0 billion decreased to R$64 million mainly due to the provision for losses of the disputed amount of the benefits paid by the Company as additional retirement payments and pensions envisaged in Law 4,189/58, in the amount of R$ 409.1 million and the respective actuarial commitment maintained with the beneficiaries, amounting to R$ 535.4 million.

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Gross operating revenue reached R$7.2 billion, a 5.8% increase as compared to the prior year, as a result of tariff revisions in September 2008 (5.10%) and September 2009 (4.43%), and the 2.1% growth of the water volume billed and the 3.2% increase in sewage billings.

Table 8: Gross Operating Revenue History

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Table 9 – Billed water and sewage volume per customer category and per region 

Net operating revenue reached R$6.7 billion, a 6.0% increase compared to 2008.

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Table 10: Net Operating Revenue History

Income as measured by EBITDA (Earnings before Interest, Taxes, Depreciation and Amortization) was of R$2.7 billion and EBITDA margin was 40.7%.

The EBITDA margin was impacted by some extraordinary events, mainly including the accrual for termination of retirees under the TAC.⁷ If we disregard this accrual, the EBITDA margin would be 42.9%.

Table 11: EBITDA History

⁷ Conduct Adjustment Term entered into with the State Public Prosecution Office

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In 2009, we incurred new debt, totaling R$2,239 million, and amortized R$1,896 million. Due to the amortizations and in particular the appreciation of the Brazilian real in relation to the US dollar, the net balance was a R$305 million decrease in total indebtedness.

Net debt at yearend was R$5,790.6 million, a 7.3% down as compared to 2008. At the end of 2009, foreign currency denominated debt was 26.6% of total debts, against 33.2% in 2008, of which 70.2% was owed to multilateral agencies against 69.5% in 2008. Despite the new borrowings that we have incurred to fund the investment program and the need to refinance debts, in 2009 the Net Debt to EBITDA ratio was 2.1 times, the same ratio of 2008.

In December 2009, we conducted the 4^th Issue of Promissory Notes, totaling R$900 million, maturing in May 2010, whose proceeds were used to fully redeem the 3^rd Issue Promissory Notes, totaling R$600 million, and reinforce cash.

On February 22, 2010 we filed with ANDIMA (National Association of Financial and Capital Market Institutions) for prior analysis the registration of the public offering of the 11^th Issue of Debentures totaling R$900 million, in two series, where series 1 totals R$600 million and matures in five years, and series 2 totals R$300 million and matures in three years.

We are in an advance negotiation and closing stage of the following financing lines that will make the programs of our Multiannual Investment Plan feasible:

Inter­American Development Bank (IADB)

We are negotiating with the IADB a US$600 million financing line for the 3^rd phase of Tietê Project. Our counterpart funding will be US$200.0 million, totaling an investment of US$800.0 million. We expect closing the deal in the first half of 2010.

International Reconstruction and Development Bank (IRDB)

In 2009, we closed with the IRDB a financing line for the Watersheds Program, which integrates the New Live Program. The Watersheds Program has the involvement of the State and several municipalities in addition to SABESP, and its general coordinator is the State Department of Sanitation and Energy. The Program’s investments amount to approximately US$281.8 million and we will have the largest share, U$125 million, out of which US$100 million is financed and US$25 million is our counterpart funding.

Japan International Cooperation Agency (JICA)⁸

We are negotiating with JICA new financing lines for three programs, as summarized below:

⁸ Since October 1, 2008, the Japan International Cooperation Agency (JICA) merged the Official Assistance for the Development (AOD) lending operations of the Japan Bank for International Cooperation (JBIC).

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• Clean Wave Program – Stage 2: financing complementary to the agreement entered into with JICA in 2004. The estimated financing amount is approximately US$190.0 million and funds will be used to perform the works and services in the Santos Metropolitan Region.

• Pro Billings Program: Part of the New Life Program, this program will be performed in the Billings Dam area, in São Bernardo do Campo. The estimated amount for the Program is of US$123 million, of which US$61.5 million is financed and US$61.5 million is our counterpart funding. We expect closing the deal in the first half of 2010.

• Water Loss Reduction Program – Stage 2: The estimated amount for this stage is US$572.0 million, of which US$366.0 million is financed and US$206.0 is our counterpart funding. The current stage of negotiations still does not allow us to estimate when the deal will be closed.

In addition to these negotiations, we also have with JICA a financing agreement—entered into with the Japan Bank for International Cooperation (JBIC) in 2004—totaling ¥ 21,320 million, to perform the Clean Wave Program, whose disbursements ended in 2009.

Caixa Econômica Federal ­ CEF

In 2009, we entered into a financing agreement for the construction of a landfill in the municipality of São João da Boa Vista. Total investment is R$8.5 million, of R$8.1 million is financed and R$424,000 is our counterpart funding.

We are negotiating with CEF the issue of public securities (debentures) to raise funds for the Water & Waste Portfolio of the Severance pay Fund (FGTS). The funds should be used to finance part of the Investment Plan. Total issuance should reach R$500.0 million and our counterpart funding will be US$50.0 million, totaling an investment of US$550.0 million.

National Bank for Economic and Social Development (BNDES)

In 2009, we filed with BNDES a simple debenture subscription agreement for private placement. The funds will be used for the following projects: Loss Reduction Program – Stage 1; Rio Grande Water Treatment Plant; North Shore; Vale do Paraíba and Mantiqueira and Bacia do Piracicaba, Capivari, and Jundiaí. The debentures will be subscribed in three issuances, each of which amounting to R$275.4 million, totaling R$826.1 million. The 1^st Issue was conducted in December 2009, and the 2^nd and 3^rd issues are scheduled for 2010 and 2011, respectively.

Early 2010, we entered into with BNDES a financing agreement for the Clean Wave Program – Stage 2. The financing amount is approximately US$294.0 million and funds will be used to perform the works and services in the Santos Metropolitan Region.

In a year of recovering share prices, our share trade on BM&FBovespa closed 2009 quoted at R$34.38, a 23.8% appreciation as compared to the end of 2008. The financial volume and the trading in our shares totaled R$2.5 billion in 2009 and an average daily trading 28% higher than in 2008 with 1,082 trades per day on average, and our papers were traded in all trading sessions.

Our market value in the end of 2009 was of R$7.8 billion, or 74% of the recorded shareholders' equity.

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The quotation of our American Depositary Receipts (ADRs) appreciated by 62% and closed at US$39.12, and financial volume traded on the NYSE in 2009 was US$2.5 billion.

Table 12 – Ownership Structure as of December 31, 2009

Our shares are traded on the São Paulo Stock Exchange with the code SBSP3 and on the NYSE with the code SBS and continue to integrate the main indices of the BM&FBovespa and, for the third consecutive year, they are part of ISE's theoretical portfolio.

In 2008, we paid R$296.2 million in dividends as interest on own capital, corresponding to R$1.30 per common share. As regards 2009, the Board of Directors approved the payment of interest on own capital totaling R$394.2 million, or R$1.73 per common share, to be paid within up to sixty days after the Annual Shareholders' Meeting, which will approve the 2009 accounts.

The guideline “Environmental Solutions” establishes that SABESP must incorporate in its presence dynamics the implementation of policies directed to environmental sustainability, the strengthening of the commitment to the environment before the society.

In this respect, in 2009, Sabesp operated in many fronts to improve environmental management, to achieve universal water and sewage services. The purpose was to ally, in line with the sustainability context, economic and financial results with environmental preservation and social development, in an integrated way and gaining synergies.

Our new Environmental Policy, in effect since January 2008, sets out the guidelines of SABESP’s environmental management. The file is available on the internet, at our website, www.sabesp.com.br, “Sustentabilidade” page, and is also exposed in controlled bulletin boards, in locations accessible to all employees, third parties and visitors to facilities with permanent personnel.

To process our environmental demands in an integrated way and is response to the specific needs of each SABESP location, we implemented from June 2007 to July 2008, 20 Environmental Management Centers (NGAs), reporting to the Environmental Management Department.

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During 2009, we invested in the qualification of the 31 professional team of the NGAs using courses, lectures, seminars, and technical visits. We covered subjects like enforced legislation— civil proceedings, environmental civil class actions, and Conduct Adjustment Term (TAC)—corporate wording, valuation of possible environmental damages, environmental licensing in the State of São Paulo, and environmental expert work, totaling 5,600 hours (including in house and outside sessions).

The program estimates the companywide regularization of approximately 2,700 use permits, including regulating dams, level increasing dams, river intakes, wells, and discharges of existing effluents. The ongoing program focuses on the High Tietê water resources management units (UGRHIs), comprising the isolated systems of the São Paulo metropolitan region. Another work front in progress comprises the Vale do Paraíba, North Shore and Mantiqueira UGRHIs. The Piracicaba/Capivari/Jundiaí and Santos Lowlands UGRHIs were included in contracts prior to 2008. The contracts for studies related to the other UGRHIs are at their completion stage, and will complete regularization in the State, scheduled to be completed by eh end of 2011. Permits for new projects are being obtained during the building stage.

One of our corporate goals is to obtain the ISO 14001 certification. The objective is to certify 65 facilities by December 2010. These facilities include Water Treatment Plants and Sewage Treatment Plants. In 2009, we implemented the Environmental Management System (SGA) in 26 operating units, with the involvement of the countryside and São Paulo metropolitan region business units. The SGA documentation was prepared based on the revision, adaptation and creation of new procedures, totaling 6 corporate procedures. To date, 920 employees were trained (10,300 hours) and we made a concentrated effort to ensure full legal and regulatory compliance of the plants selected during this stage. ISO 14001 is a tool that will permit a better control of the possible environmental impacts arising from our activities, products and services. It is also an incentive to provide environmentally sustainable sanitation services, and inputs for the change in the environmental culture, creating cost cutting opportunities through better performance, with ambitious environmental goals and targets.

Currently, approximately 150 SABESP employees participate directly in 2 federal committees, 21 state committees, and 5 statewide subcommittees. This representation is managed by the Environmental Management Department, which created corporate guidelines to appoint our representatives and their initiatives. We also promoted events and meetings to interchange information, leveling the knowledge and guidance for corporate alignment of our Business Units’ representatives. In first half of 2009, we changed the members of the management committees for the 2009 2011 term, an opportunity used to appoint professionals with the appropriate technical and people skills.

We are also members of the National Water Resources Council (CNRH), through the seats at the National Association of State Water & Waste Utilities (AESBE).

The matters discussed at the basin, CRH and CNRH committees and subcommittee are collated in reports and disclosed for the purpose of increasing the internal discussion of these issues. One of the discussed issues at the CRH, for example, is the preparation of specific watershed protection laws.

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We created a workgroup in March 2009 to follow up the collection process for the use of water resources. The workgroup has representatives from the operating, legal, financial, and integrated planning functions and is coordinated by the environmental management function. We prepared two guidelines to establish the general guidelines and principles for the actions of the representatives at the committees, especially on subjects such as implementation of collection and the collection of these funds for use is new projects.

In addition to the Paraíba do Sul and Piracicaba, Capivari and Jundiaí river basins, where we already pay for the use of water, we are implementing collection in the Sorocaba and Mid Tietê basins. In December 2009, we approved proposals for collection in for other four basins in the State, as follows: Low Tietê, starting 2010, and High Tietê, Santos Lowlands and Tietê Jacaré, starting 2011.

We conduct environmental and sanitation education activities for more than 20 years and, therefore, they are already part of our values, used in system operations and communication processes. However, since the enactment of Federal Law nº 9.795/99, which creates the National Environmental Education Policy, and more recently the enactment of State Law nº 12.780/07, which creates the São Paulo State Environmental Education Policy, we took environmental education as a crucial point of our activities, together with the sanitation, water resources and environmental policies.

To do so, we developed the companywide Environmental Education Program (PEA SABESP), which sets forth general guidance. Some of the main initiatives developed are the corporate procedure, the methodology and the mechanisms for the management of a set of ongoing Environmental Education actions and projects.

The PEA was launched in October 2009 in a large event attended by over 500 people, including several industry leads and experts, invited by us. To advance the qualification process, in 2009 we conducted 2,900 hours of in class Environmental Education courses and more than 950 employees have already attended Environmental Education distance learning courses offers by the SABESP’s Corporate University, totaling 10,500 class/hours. 

We are taking proactive actions, such as our first inventory of greenhouse gas emissions taken in 2008 (FY2007). Based on this inventory, we were able to start the design of an emissions management program and thus participle in the global effort to stabilize and even reverse greenhouse gas concentrations in the atmosphere. Approximately 92% of our direct and indirect emissions arise from the collection and treatment of sewage and 4% from the consumption of electric power. As the growth of these emissions is estimated for the medium term, we scheduled for 2010 inventories for FY2008 and FY2009 and the completion of the corporate emissions management program, which aims at improving the methodology for this important management tool.

Concurrently, we are preparing feasibility studies capable of reducing the emissions of greenhouse gases and generating carbon credits.  

This is an initiative created in October 2008 to promote the exchange of experiences and disseminate knowledge and know how on the most significant environmental issues that we are currently approaching.

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The events are part of an environmental management strategy that seeks a closer relationship with society in favor of the environment. We held nine conferences gathering approximately 1,700 participants from SABESP and guest attendants, which covered issues like climate change and carbon credits, water resource management, reclassification of bodies of water, monitoring and control of aquatic macrophytes, river bank reforestation, payment for environmental services, and environmental education.

Revitalization of springs

SABESP and the City of São José dos Campos entered into in September 2009 an agreement under which we join the Spring Revitalization Program, formalizing a partnership effective since 2006, a period during which we recovered the preservation areas around 38 springs (32,000 trees planted) in the urban area.

We donate 18 educational water analysis kits per year (parameters: pH, total coliforms, color and temperature) to be used by students to monitor water quality at the springs. This program involves 600 students who act as multipliers of the actions and knowledge acquires in 28 schools, 1 Fundhas (Hélio Augusto de Souza Foundation) unit and an NGO (Brasil Sokai Gakai Internacional – BSGI), reaching 5,000 youngsters. We will also make supplementary collections and analyses in our labs. This activity is disclosed by the Water Environment Federation and International Water Association (IWA) networks, through the World Water Monitoring Day.

Green Hug

This purpose of this project is to plant trees on the sidewalks of approximately 4,000 SABESP facilities, when feasible. The project was launched in September 2008. In 2009, we launched the project in 13 of our 16 Business Units, through the symbolic tree plantations, during the commitment events with management goals, several of which attended by guest such as students from neighboring schools, boys and girls scouts, and authorities, including local mayors.

One Million Trees in Cantareira

We are planting in association with several partners 313 hectares of trees around our dams.

Our partners are the NGOs The Nature Conservancy (TNC) and Instituto de Pesquisas Ecológicas (IPE), as well as companies in three municipalities in the Bragança Paulista region, and the objective of the program “One Million  Trees in Cantareira”  is to ensure the partnering and the support of the development of environmental sustainability projects that will contribute to the preservation of the quality and increase in the volume of water from these watersheds.

In 2009, the Desenvolvimento Rodoviário S.A. DERSA (State Road Authority) joined the program and proposed planting trees in 550 hectares around the Cantareira System dams.

These partnerships prescribed the plantation of native trees of the Atlantic Forest and the Cerrado savannah biomes, in approximately 1,000 hectares on the margins of the Jaguari Jacareí, Cachoeira, Atibainha, and Paiva Castro dams. In addition to these partnerships, we have the support of the State Environment Department and the local municipal governments.

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In 2009, 522,000 native seedlings were planted in 313 hectares, of which 21 hectares (35,000 seedlings) were planted by TNC on the banks of the Cachoeira dams, in the municipality of Piracaia, sponsored by DOW Brasil. The Instituto de Pesquisas Ecológicas (IPE) (Ecological Research institute) planted, with the support of the National Environment Fund 24 hectares (40,000 seedlings) in the Atibainha dam preservation areas, Nazaré Paulista, and in February 2009 it signed a contract amendment for the plantation of another 18 hectares.

DERSA planted 268 hectares (447,000 seedlings) on the banks of the Cachoeira dam, in Piracaia.

The areas chosen favor the formation of ecologic corridors, linking existing isolated forests and promoting natural regeneration in degrading areas. The program involves an environmental education component, where we discuss the subject with the neighboring communities and the region schools, promoting the plantation of legal, adjacent reserves in neighboring properties. It also has a social side, as most of the labor used in plantations consists of farmers from the region itself.

Social responsibility is our commitment to society. The most significant progresses in 2009 in this field have impacted our relations with our stakeholders, our employees, and quality management. To materialize this, many partnership and studies were made, in a transparent management, guided by our Code of Ethics and Conduct, in our search for sustainable development and improvement of quality of living. The living examples are the many voluntary adoption of international guidelines, like the United Nations Global Pact, which gathers several world corporate segments aligning their activities to the following principles: human rights, right to employment, environmental protection, and the fight against corruption.

We support and encourage the eight objectives of the United Nations that are part of our Corporate Volunteers Program.

Our Code of Ethics and Conduct comprises the main guiding principles of our activities, such as respect for society and the customers, respect for the environment, respect for people, integrity, competence, and citizenship. To ensure compliance with the Code of Ethics and Conduct, we have an internal Whistle blowing Channel, as well as a Corporate Accountability Procedure and an Ombudsman Office and a Customer Service that receive external complaints.

The form how we relate with our different stakeholders is the expression of what we believe. A relationship can only be sustainable if it carries the correct ethical and transparence principles with its different stakeholders. 

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In order to improve the satisfaction rate of our customers and create a new form of relationship, as well as expediting user service, we expanded our Call Center in the São Paulo Metropolitan region and the Bragança Paulista region, increasing its capacity by 70%, 100 to 170 service stations. We also initiated the web based, online customer support, where we offer all the services available at the call center. In 2009, we also entered into a Call Center contract for the customers of the Regional Systems, which centralizes the service in its 328 countryside municipalities, increasing operating control, optimizing costs, and contributing to the creation of jobs in the Itapetininga region, where the Call Center is located. In addition, the call center also started to offer communication channels for the hearing impaired.

In 2009, the Ombudsman Office received 68,500 calls and complaints, a considerably positive result as it reflects a 7.5% decrease in the number of complaints made. From the first to the second half of 2009, the number of calls decreased even further, by 17%. The analysis of these figures allows us to highlight the significant 7.7% reduction in the number of calls to the Ombudsman Office that are considered actual complaints. These results are considered groundbreaking as it was the first time we record a drop in these indicators, which noticeably highlights the improvement of our customer service.

The start of the migration from a self regulated environment to a regulated environment, with the creation of the São Paulo State Sanitation and Energy Regulatory Agency (ARSESP), pursuant to Decree nº 52.455, of December 7, 2007 – São Paulo State Gazette (DOE SP) of December 8, 2007, suggest a period of adjustment, with still undetermined impacts in service to our customers. 

In association with the Judiciary Branch, the Ombudsman Office is developing the JEC/Digital (a digital special court), which offers a differentiated customer service in the Special Civil Courts system by seeking customer friendly resolutions for customer complaints, thus avoiding litigation. In 2009, the JEC/Digital received complaints from 513 customers, and 568 hearings were held, resulting in the settlement of 78% of the complaints during conciliatory proceedings. As compared to prior year, there was a 30.1% decrease in the number of complaints and a 21% decrease in the number of hearings. Conciliatory settlements also dropped 12%. The Ombudsman Office follows up all manifestations registered by Procon (consumer protection agency). In 2009, we received 1,600 CIPs (Preliminary Information letters) from the Procon in São Paulo City and 756 from the municipalities, resulting in 2.3 customers served in the preliminary stages of analysis. A good result as regards Procon complaints was the 10% decrease in the total number of complaints considered evidenced (FAs): they totaled only 179 in 2009, over 197 in 2008. If we adopt the proportionality criterion, this represents a 36% decrease. This result shows that we have fully adopted the system of handling and prioritizing complaints sent by the consumer protection agency.

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Despite the global crisis that engulfed the markets in 2008 and 2009, we continued to attract market analysts (sell side) and, as a result, investors, resulting in a number of coverages that jumped from 11 in 2008 to 17 in 2009.

In order to keep our shareholders and investors always informed on our operations, strategies, and results, we adopt a consistent, clear and reliable communication policy with our shareholders, market analysts, financial institutions, rating agencies, and regulators. In addition to the public meeting and the traditional results conference calls, we held a meeting between the analysts and the Chairman of the São Paulo State Sanitation and Energy Regulatory Agency (ARSESP).

For purposes of ensuring more transparency and facilitating the access to information about SABESP, we have expanded information availability on the investor relations website and used mailing lists as a communication tool. Because of the increased transparence, there was a 34% increase in the number of individual shareholders in 2009 as compared to 2008.

The regulatory framework of the basic sanitation industry (Law 11445/07) places us in an environment in which business practices should take into consideration the provisions set forth in the competition protection legislation, in particular Law 8884/1994. SABESP widely disclosed its procurement plan to the market in order to encourage competition among suppliers. We designed our “Competition Guidelines for Public Procurement Processes”, which establishes the general guidelines to expand the portfolio of suppliers and encourage competition. Furthermore, it covers the authorizations in public biddings and the potential imposition of barriers to the entry of competitors in the market. Note also that in 2009 we conducted 870 e procurement processes, totaling R$1.15 billion, representing savings of R$116 million. We also set out in our Code of Ethics and Conduct the requirement that all suppliers comply with prevailing laws, in particular the laws against child labor and enslavement. This conduct is consistent with the obligations set forth by Fundação Abrinq, which for six years has awarded us the Children’s Friend Business seal.

We are undergoing a comprehensive human resources restructuring to increase productivity in terms of employees per connection, and the change our staff’s profile. In 2009, there were two core events: the public contest and the continuity of the termination of retirees, as imposed by the Conduct Adjustment Term (TAC).

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In 2009, the number of employees decreased 9.3%, to 15,103 from 16,649 in 2008. This, together with the increase in the number of connections, resulted in a productivity of 837 connections per employee in 2009 over 738 connections per employee in 2008.

Our headcount consists of 15,103 employees with employment contracts governed by the Labor Code (CLT), 931 interns, and in addition, we create work opportunities for 468 young apprentices, contributes to their development as citizens, their professional qualification, and insertion in the formal labor market, by creating job training opportunities. Note that we do not subcontract outside services and contract services as needed. We also count on a workforce of approximately 7,100 service providers included in these agreements. Our personnel are comprised of 81% male and 19% female employees, with an average period of 17.6 years working at SABESP, and 69.9% of our employees are over 40 years old. Note that 18.1% of our employees completed elementary school, 47.4% graduated from high school, and 34.5% are college graduates. The distribution of the employees by ethnic group is 12,822 Whites, 1,998 Multiracial/Blacks, 260 Asians, 2 Amerindians, and 23 undeclared.

We comply with Decree nº 3.298 of 1999, which requires the allocation of 5% of the positions offered through public selection processes to physically disabled individuals. In 2009, we held a public contest to fill 1,771 positions all over the State of São Paulo. Over 190,000 applicants enrolled for the three types of positions: operational, technical and college graduates. Among those selected, 379 were already working with us in 2009.

In February 2009, after the initiation of a civil investigation by the State Public Prosecution Office, we were compelled to sign a Conduct Adjustment Term (TAC). This TAC provides for the termination of 2,437 workers, of whom 1,388 are the retirees terminated in 2009. To ensure the quality of the services rendered to the population, the other terminations will be gradually made through 2012.

In 2008 - 2009, terminations related to the 2% decrease in our headcount, permitted under the collective labor agreement, and the terminations related to the compliance with the TAC totaled 1,971 employees.

We are structuring a benefit package that goes way beyond those required by law, to provide the employees and their dependents security and comfort that will meet their basic needs. The benefits are granted to all employees, regardless of their working hours, level or category, except for underage apprentices, whose benefits are governed by specific regulations. The benefits granted are as follows: Regular and Special (for employees with physically and or mentally disabled children) Child Care Allowance, Electronic Benefits and meal Card, Child Care Center, Basket of Food Staples, Salary Premium (for employees on sick or accident leave paid by Social Security), Drugstore, Meals/Snacks (in case of extraordinary service), Supermarket, Meal Ticket, and Transportation Ticket. We also subsidize healthcare and pension fund benefits, through Fundação Sabesp.

Our people management policy reflects our commitment to responsible operations and assuring the upholding of human rights in our relations with our internal stakeholders. These assumptions are put into practice in all our projects.

We encourage and support our employees to be involved in any type of entities and associations, as is their right, and help in their individual development and the improvement of the organizational climate. All our employees are entitled to freedom of association, are represented by a union, and are parties to collective labor agreements. Therefore, the collective bargaining process for 2009 2010, which is a major participative management tool, was completed in May with the main trade unions that represent our employees, resulting in the Collective Labor Agreement.

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In 2009 contributions to the Sabesprev pension plan amounted to 2.1% of the monthly payroll, thus ensuring employees the possibility of enjoying pension benefits supplementary to the benefits granted by the National Institute of Social Security

Changes in personnel, involving promotions, transfers and assignment of employees to their positions, are part of the people management model adopted, and are crucial to grant us the independence, flexibility and agility required to meet the employees’ career expectations, which result in modern and efficient service to our customers. In 2009, changes totaled 4,463.

The 2009 Profit Sharing Program (PPR) recognizes the efforts of our employees to attain the goals and indicators set out in the Corporate Strategic Planning. Structured with companywide indicators and indicators by business segment, profit sharing is divided into two groups, one for the back office and the other for the front office, with a weight of 50% each. Payment of up to one base salary is contingent to the attainment of these goals.

The Employee and Entrepreneurship Support Program (PAEE) was created in 2009 for the purpose of supporting our retired employees in their search for new work opportunities. When a retiree is terminated, we offer him or her outplacement assistance. Several actions were initiated, for example, the outplacement of 45 retirees in monitoring initiatives and the GB2 consortium, which manages the Clean Wave Program.

To respond to the countless challenges, people development at SABESP has been one of the crucial divers of our results and to boost the business. In 2009 the SABESP Corporate University (UES) focused its actions on contributing to disseminating the corporate sustainability vision, attaining our strategic objectives and professional development. It also steered efforts to technical, operating, and occupational safety and health demands, covering our different operating segments. The balance for 2009 of companywide in class and distance training and development achievements includes 123,600 attendances, reaching an average of 68 hours of training per capita, and an investment of R$8 million.

Sabesp Corporate University started in 2009 the implementation of the Succession Preparation and Career Program whose objective is to develop professionals with the profile and potential to manage our business by creating a bank of possible successions in the company.

It also intensified the implementation of Knowledge Management practices to cope with a possible knowledge evasion in view of the number of employees on the brink of retirement.

The Safety and Health Policy was revised in 2009 and we intensified the application of the risk analysis methodology, based on the current OHSAS 18001/2007 standard, with in class training and distance learning, and the enhancement of the environmental risk prevention programs (PPRA).

In 2009 the number of occupational accidents resulting in leave of absence dropped by 33% as compared to 2008, as a result of the development of several educational and prevention programs that embed the values of a safety and working conditions improvement culture.

In the last five years, we invested approximately R$47 million in personal and collective protection equipment. In 2009 alone, we invested R$11 million.

In the health area, we should highlight the information campaign on the Influenza A (H1N1), Dengue and Ergonomics. The Occupational Safety and Health Management System is certified by the OHSAS 18001 standard since June 2006, and was re certified in 2009, encompassing 100 locations within the services and digging and confined space works carried out in public ways scope. We created a specific communication channel for the outside stakeholders, covering occupational safety and health issues, available on our webpage.  

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In order to improve the quality of living of our employees, we created, together with the SABESP Association, the Quality of Living Program – Live Happy, whose main objective is to encourage employees and their families to make behavior changes that have a positive influence on their lives, such as engaging in physical and cultural activities that contribute to their wellbeing. In 2009, we retained an expert consultant to conduct a survey on our employees’ life style. As part of our concern for the health of our employees, we anticipated the enactment of State Anti Smoking Law, Law nº 13.541 of May 7, 2009, and implemented the Tobacco Free Environment policy that restricts smoking in indoor and outdoor areas since December 2008. In addition to restricting smoking, we also offer group or individual psychotherapeutic treatment to smokers, under the Employee Recovery and Care Program (Pare).

In 2009 we granted the “1^st SABESP Creativity Award” whose objective is to encourage generation of ideas, stimulating creativity and adopting actions that generate results for the company. We recognized 64 good ideas of 55 Company employees from 730 enrolled projects, from several units.

The Life Award is an employee appreciation and recognition program that paid homage to 2,500 employees in 2009.

SABESP was recognized the São Paulo Diversity Seal, for our commitment with the structuring of the inclusion program that we are developing. We set out in our code of ethics the diversity values and conducts, encompassing: discrimination, respect for people and, moral or sexual harassment. We are also developing several Human Resources practices that promote equality of opportunity and treatment. We have a census that monitors ethnic, gender, age, and disability issues, whose data is published herein. We have a partnership with AVAPE (Association for the Appreciation and Promotion of the Disabled), under which we offer social inclusion opportunities to 22 physically disabled professionals.

In 2009, our Quality Excellence Program focused on its integration into the SABESP Integrated System (SIS) and the ISO 14001 (environmental management) Certification.

Bureau Veritas Certification (BVC) recertified SABESP with the ISO 9001 (quality), OHSAS 18001 (occupational safety and health) and ISO 14001 (environmental management) certifications. In addition, we intensified the preparation for the extension of the ISO 14001 certification to 65 Water and Sewage Treatment Plants. Currently we also have 13 labs certified by the ISO/IEC 17025 standard, granted by INMETRO, which certifies that our water does not have any direct impacts on the health of our customers.

Currently we are working with the communities, together with local municipal governments and mainly in the city of São Paulo, where there is a higher concentration of lower income population. The programs implemented for this population include social technical work focused on the socioeconomic and environmental sustainability of our projects, including the involvement of the community and environmental education, taking into account the works characteristics and the profile of the beneficiary population.

We are the cosponsors of the Instituto Criança Cidadã – ICC (Citizen Child Institute), whose Mission is investing in the education and training of youngster from poor families, supporting education, culture and welfare in the São Paulo and Guarulhos Metropolitan Region. It grants free community and citizenship development to approximately 6,000 children and adolescents, reaching 3,500 families. 

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The mission of program “Our Agent” is to get SABESP closer to society, especially in lower income communities, through partnership with the community’s different segments (organized society, public institutions, businesses and population in general) to improve the quality of living. In São Paulo, we have approximately 50 agents that speak the communities’ language and create an important communication channel between the population and SABESP. In 2009, the program served a population of 1.3 million people, through 15,400 technical visits, 12,000 telephone calls, 1,000 events, 680 educational lectures, and 56 meetings with community leads, resulting in the regularization of 23,200 water connections and 10,000 sewage connections.

SABESP Corporate Volunteers Program: we use a large network of volunteers, from all our units and locations, in our relationship with the outside community, who work in social projects all over the State of São Paulo. They total more than 2,000 volunteers, who through their commitment to society and society progress have reached more than 11,000 people in 2009, in particular the neediest population and our neighboring communities. The work of the volunteers resulted in gathering and distributing 800 toys, the donation of 12,000 kg of food, the plantation of 3,000 seedlings, and the collection of more than 10,000 liters of cooking oil. An example of the strength of our volunteer work is the Winter Clothes Campaign, which collected and distributed among various charities 3.2 million clothes and blankets, and promoted 19 social inclusion and income generation actions.

The highlight in 2009 was also the annual Apprentice Program cycle, involving 468 youngsters and contributing to their development as citizens, their professional qualification, and insertion in the formal labor market, by creating education and job training opportunities. This Program is conducted as a SENAI (National Service for Industrial Training) SABESP partnership, which provides a vision both practical and theoretical of the administrative, accounting, financial and human resources processes.

In 2009 our visits program promoted 1,600 visits, totaling 63,100 visitors, focused on showing the sanitation cycle, at Water and Sewage Treatment Plants.

In order to create opportunities to those interested in providing institutional and financial support to environmental, social and cultural and sports projects, we offer a selection process, using tender invitations, to legal entities that engage in environmental preservation work and are aligned with the social responsibility principles, cultural incentive, partnerships with civil society organizations and the community.

In 2009 we invested, using tax incentives, R$3.3 million in the State Fund for the Children’s and Adolescents’ Rights, through CONDECA (State Council for Children’s and Adolescents’ Rights), whose mission is to “Encourage, decide and control the actions related to the Policies for the Ascertainment of Children’s and Adolescents’ Rights in the State of São Paulo”.

Our SABESP Program for Those Who Want Culture sponsors several literary, visual arts, music, dance, theater, circus, cinema, and preservation of cultural heritage projects. In 2009, we invested R$13.5 million in cultural projects using incentives under the Rouanet Act and Audiovisual Law. We also sponsored sports events and allocated R$3.3 million to water sports such as swimming, rowing and canoeing. We launched together with the São Paulo State Government the CEU (Unified Educational Centers) and Water Olympic project to encourage children from the Paraisópolis community to start swimming and contribute to their growth as citizens. The São Paulo sails project is a SABESP partnership with the São Paulo State Department of Sports, Leisure and Tourism. The objective is to create and sponsor sailing sports and leisure centers, to train students from public schools.

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The Editora Abril Initiative, which gathers companies, including SABESP, that sponsor the Sustainable Planet project, is a multimedia project that reaches more than 13 million readers all over Brazil.

We use this tool to disseminate our environmental sanitation culture.

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