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I.

H I S TO RY

Fibra ranks amongst the top 20th largest banks in the country, by total assets. Its core business is to service middle and upper middle market clients, with tailormade products and solutions. The bank's activities comprise among others credit and treasury products, capital markets, trade finance and consumer financing through GVI Promotora de Vendas. Fibra has a team of highly qualified and experienced professionals, able to meet all the needs of its clients, and focused in building up long term relationships. The Bank is faithful to the following principles - professionalism, transparency and ethics and applies high levels of corporate governance. Banco Fibra has successfully sailed through the ever-changing economic and business environments of recent years. The boldness inherited from its industrial origin combined with the banking proficiency of its managers, made Fibra a profitable and solid institution, promoting the growth and development of the companies in the country. Established in 1987 as a brokerage firm, to manage the financial assets of its owners, since 1989 Banco Fibra acts as a Multiple Bank. The bank is part of one of the largest industrial conglomerates in Brazil. The most relevant companies of this conglomerate owned by the Steinbruch Family comprises CSN - Companhia SiderĂşrgica Nacional and Vicunha TĂŞxtil.

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S T E I N B RU C H

GROUP

II.

The group's history began in 1966, when the Steinbruch and the Rabinovich families joined forces in creating a textile company named Brasibel. In the following year, the purchase of Lanifício Varam, Latin America's biggest woolproducer and owner of the Vicunha brand, has opened the way for a continuous flow of acquisitions and partnerships, that led Vicunha to the prominent position in textile segment, that they have today. In 1993, the group has foreseen a possibility of expanding and diversifying its businesses, and has acquired, through the privatization process, a relevant participation in the capital of Companhia Siderúrgica Nacional - CSN, (a) leader in the steel segment in Brazil. In the year 2000, the group became the main shareholder of CSN. In March 2005, the Steinbruch family has agreed to acquire the Rabinovich family's stake in Vicunha Têxtil and in Vicunha Siderurgia, the company that holds the control of CSN. As a consequence, the Steinbruch family holds today the control of the above mentioned companies.

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III.

E CO N O M I C

O U T LO O K

- 2006

The Brazilian economy presented a modest GDP growth in 2006, with an annual rate lower than 3% for the second year in a row.The good news came from the inflationary front. The consumer price index accumulated 3.14% in 2006, the lowest rate since the adoption of the inflation target system. In this benign inflationary scenario, the Central Bank reduced interest rates in all monetary policy meetings of the year, from 18% by the end of 2005 to 13.25% by the end of 2006. Brazilian external accounts showed another year of very positive results, contributing to the fourth consecutive year of BRL appreciation against the US Dollar and reduction of the country's external vulnerability. The trade balance surplus reached US$ 46 billion and its international reserves surpassed US$ 85 billion by the end of 2006. On the fiscal side, the increase of federal government expenses (in part due to several decisions taken in the context of presidential elections) reduced the primary surplus, but not in the amount necessary to jeopardize the accomplishment of the target of 4.25% of GDP. In this context, the public debt, as a percentage of GDP, fell from 51.7% by the end of 2005 to 50.0% by the end of 2006. Based on the maintenance of a favorable international environment and a responsible domestic economic policy, the perspectives for 2007 aim to a more robust growth (around 3.5%), stimulated by the monetary policy easing process, additional fiscal stimuli, income gains and credit incentives.

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MAIN

D E V E LO P M E N TS

IV.

Established as a wholesale bank since 2000, Fibra has sought to become more agile, dynamic and well-structured, in a powerful effort to achieve excellence in meeting the needs of its clients. It offers a wide range of products and services to service its clientele broadly and competitively. The bank has defined to keep its staff highly qualified in the market segment it has chosen to work in - middle market segment of clients. In 2006, the bank has consolidated the three pillars of its activities: commercial banking, consumer financing, and treasury, by expanding its regional presence, its product and client portfolios. Due to the expansion of the Direct consumer credit market, and to allow a more agile distribution of Banco Fibra's financial products, the Steinbruch group has acquired in the beginning of 2006, a company named Portocred. This company was renamed as GVI Promotora de Vendas, late in the same year. Fibra has strengthened its activities in the International market, through new bond issuances, and the expansion of the base of correspondent banks financing its trade finance transactions. While many institutions focus on specific markets, Banco Fibra has chosen to focus on its clients, their needs and expectations. With headquarters in São Paulo and acting also in Rio de Janeiro, Belo Horizonte, Curitiba, Fortaleza, Guarulhos, São Bernardo, Campinas, Ribeirão Preto and São José do Rio Preto, Fibra is prepared add value to the decision making process. Fibra has also consolidated its overseas strategy with the flexibility granted by its Cayman Islands full branch. A flexible structure, offering fast and qualified solutions Those are the key factors leading Banco Fibra's to obtain improved ratings from the most prestigious rating agencies in the world.The bank is frequently considered as an example of transparency and determination in carrying out operational strategies.

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V.

PERSPECTIVES

Fibra has consolidated its business strategy in the middle and upper middle market segments in 2005 and 2006, and has expanded its regional presence in the country. The access to new markets is one of the bank's main objectives. In 2007, IT and operational skills of a business unit acquired in the south of Brazil will boost the operations of the consumer finance activity of the bank. Treasury, always focused and agile, will work with a wider range of products to its clientele, and will carry on new alternatives of funding and transactions.

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CO R E B U S I NE S S A R E A S

VI.

Treasury The Treasury area is responsible for the management of the banks' liquidity. This area has is very well recognized in the local market in the trading of government securities, in both primary and secondary markets, as well as in the foreign exchange market. During the last couple of years, Fibra has also being dedicated to the derivatives market (swaps and hedges ). The diversification of the sources of funding has played a key role in 2006. Fibra has ended 2006 with USD 245 MM in bonds issued abroad, with tenors ranging from 18 to 36 months, and a 10 years, USD 30 MM subordinated debt bond. Commercial Banking This area is dedicated to service mostly medium-sized companies, through a wide range of products. Fibra offers to its clientele from trade finance to working capital loans, including financing through on-lending of resources from the BNDES and longterm investment structures. One of Fibra's main advantages is the competence in creating solutions that cater to all the capital needs of its clients, taking into consideration its production cycle, growth potential and competitiveness. The bank is also engaged in financing the industrial supply chain of its clients Fibra aims to establish long term and long lasting relationships with its clients. By the end of 2006, the commercial Bank portfolio has reached R$ 2,6 billion, distributed among a client base of 920 active clients. Financing Company This activity was started in mid-2005 and further developed in 2006, with three main business lines: • Consumer credit loans, personal loans and payroll deduction loans through agreements with retail stores and independent distributors, with approximately 620,000 active clients and 3,000 sales points; • Structured consumer loans; • Payroll deduction loans for social security beneficiaries, public servers and autarchies. The consumer financing portfolio which has began 2006 with R$ 95 MM has ended the year with R$ 320 MM, more then tripling its market participation.

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VII.

HUMAN

RESOURCES

During the year Banco Fibra has established as one of its top priorities, the revision of its Human resources policies and the improvement of its team skills. Fibra kept the focus in the individual development of its employees, and has also reactivated its training program for graduated college students, allocating them in different areas as commercial division, credit and IT. The employees training programs have been enhanced, and a new evaluation method was implemented, generating a new model of bonus distribution, based on meritocracy. The human resources division seeks to align the interests of its 315 employees with the ones of the bank's shareholders, and also to value and keep the best standards and market practices.

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SOCIAL RESPONSABILIT Y

VIII.

Social responsibility means first of all acting with ethics and transparency in the communities where the bank is represented, and more then that, contributing with the development of the country. Fibra has chosen to support projects involving children and teenagers of less privileged communities. The bank sponsored 4 projects in 2006 and made donations to institutions as Instituto Brasil Voluntário, linked to the Projeto Faça Parte; Projeto Cisternas do Fome Zero, arranged by FEBRABAN; Projeto Travessia and Instituto Reciclar. Two other projects should be highlighted: • Fibra has sponsored the book “Estrada Real - Brasil”, a collection of memories of the golden period of the “Gold Cicle” in Brazil, during the Brazilian empire, in the form of pictures and drawings of the route traced by the adventurers through Rio de Janeiro, Minas Gerais and São Paulo. • Donation to “Associação Beneficente Chabad Itaim” , an entity whose main purpose is to strengthen the jewish culture and values, and the assistance to the less privileged, without any distinction. Fibra adopted as a criteria to support and sponsor projects taking into consideration the competence of those institutions, as well as to do a follow up of the use of proceeds and the social and professional insertion of the projects' participants into the community and society.

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IX.

52

BALANCES


BALANCE SHEETS FOR THE PERIODS ENDED DECEMBER 31, 2006 AND 2005 In thousands of R$ Banco Fibra S.A. Fibra Consolidated 2006 2005 2006 2005 7.930.443 8.849.101 7.608.772 8.956.746 34.482 19.226 34.690 19.358 1.204.671 6.924.010 1.207.362 6.924.010 1.168.368 6.803.907 1.171.059 6.803.907 14.914 14.709 14.914 14.709 21.389 105.394 21.389 105.394

ASSETS CURRENT ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash and Cash Equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interbank investments (Note 5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Open Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interbank Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Investments in Foreign Currencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Securities and Derivative Financial Instruments (Note 6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.319.341 518.866 3.958.532 575.962 Own Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 700.931 294.604 338.893 351.700 Subject to Repurchase Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.575.607 175.438 3.575.607 175.438 Derivative Financial Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.507 39.053 8.736 39.053 Subject to Guarantees Provided . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32.873 9.771 32.873 9.771 Securities Subject to Repurchase Commitments and Free Transactions . . . . . . 2.423 2.423 Interbank Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41.223 761 41.223 761 Collections in transit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 3 Term deposits - Deposited with the Central Bank of Brazil . . . . . . . . . . . . . . . . . . . 39.827 401 39.827 401 Correspondents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.396 357 1.396 357 Loans (Note 8 and 9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.917.885 1.124.116 1.917.395 1.124.116 Public Sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35.625 2.503 35.625 2.503 Private Sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.936.293 1.153.242 1.935.803 1.153.242 Provision for Doubtful Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (54.033) (31.629) (54.033) (31.629) Lease Operations (Note 8 and 9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 183 727 183 727 Lease Receivable - Private Sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 185 1.159 185 1.159 Overdue Lease Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (176) (176) Unearned lease income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (230) (230) Provision for Doubtful Lease Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2) (26) (2) (26) Other Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 397.724 251.410 433.490 300.593 Guarantees Honored . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 15 Foreigh Exchange Portfolio (Note 16) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 351.099 230.536 351.099 230.536 Income Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.040 632 2.241 868 Securities Clearing Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 612 4.130 5.562 5.613 Other (Notes 17.a and 18) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47.759 19.340 78.864 67.775 Provision for Doubtful Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3.786) (3.243) (4.276) (4.214) Other Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.934 9.985 15.897 11.219 Other Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.066 8.621 3.149 8.621 Provision for Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1.540) (4.284) (1.540) (4.284) Prepaid Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.408 5.648 14.288 6.882

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BALANCE SHEETS FOR THE PERIODS ENDED DECEMBER 31, 2006 AND 2005 In thousands of R$ Banco Fibra S.A. 2006 2005 646.982 781.820

Fibra Consolidated 2006 2005 710.051 430.835

LONG TERM RECEIVABLES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . SECURITIES AND DERIVATIVE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . FINANCIAL INSTRUMENTS (NOTE 6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.456 351.105 7.458 120 Own Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 351.105 Derivative Financial Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.456 7.458 120 Loans (Note 8 and 9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 478.642 298.545 479.131 298.545 Public Sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.438 13.521 17.438 13.521 Private Sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 461.204 285.024 461.693 285.024 Lease Operations (Note 8 and 9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 197 197 Leasing Operation Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 197 437 197 437 Unearned Lease Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (437) (437) Other Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150.927 131.840 207.505 131.840 Income Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 139 9 139 Other (Notes 17.a and 18) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150.918 131.701 207.496 131.701 Other Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.760 330 15.760 330 Prepaid Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.760 330 15.760 330 PERMANENT ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133.953 154.625 20.628 20.719 Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125.354 144.992 6.560 5.750 Shareholding Interest in Subsidiaries - In Brazil (Note 10) . . . . . . . . . . . . . . . . . . . . 119.363 126.536 Shareholding Interest in Subsidiaries - Abroad (Note 10) . . . . . . . . . . . . . . . . . . . . 13.272 Other Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.991 5.184 6.560 5.750 Premises and Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.651 4.805 3.918 4.999 Other fixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.251 12.118 9.582 12.339 Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5.600) (7.313) (5.664) (7.340) Deferred Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.948 4.828 10.150 9.970 Deferred charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.307 8.023 13.515 13.165 Accumulated Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3.359) (3.195) (3.365) (3.195) TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.711.378 9.785.546 8.339.451 9.408.300

55


BALANCE SHEETS FOR THE PERIODS ENDED DECEMBER 31, 2006 AND 2005 In thousands of R$

LIABILITIES CURRENT LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deposits (Note 12) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Demand deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interbank Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Time Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Money market repurchase commitment (Note 13) . . . . . . . . . . . . . . . . . . . . . . Own Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Third Party Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Free Transaction Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Acceptances and Endorsements (Note 14) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Notes and bonds issued abroad . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interbank accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interbank Repasses (Note 17.b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interbranch accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Own funds in transit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Foreign currency trade finance borrowings (Note 15.a) . . . . . . . . . . . . . . . . . . . . . . Repass borrowings from public sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . BNDES / FINAME (Note 15.b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Derivative Financial Instruments (Note 6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . Derivative Financial Instruments (Note 6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Collection of Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Foreign Exchange Portfolio (Note 16) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Due in connection with securities dealing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Subordinate Debts (Note 20) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other (Note 17.c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

56

Banco Fibra S.A. Fibra Consolidated 2006 2005 2006 2005 7.433.997 8.827.718 7.059.375 8.463.346 1.943.595 1.477.068 1.671.788 1.170.673 62.668 65.242 60.868 52.672 431.391 418.650 167.285 134.277 1.448.319 992.820 1.442.418 983.368 1.217 356 1.217 356 4.501.957 6.889.531 4.501.957 6.889.531 3.453.389 165.006 3.453.389 165.006 967.561 6.466.522 967.561 6.466.522 81.007 258.003 81.007 258.003 153.239 5.859 153.239 5.859 153.239 5.859 153.239 5.859 148.735 82.300 148.735 82.300 20.126 3.497 20.126 3.497 20.126 3.497 20.126 3.497 396.367 200.862 396.367 200.862 396.367 200.862 396.367 200.862 135.414 56.462 135.414 56.462 135.414 56.462 135.414 56.462 2.328 46.313 8.808 38.117 2.328 46.313 8.808 38.117 132.236 65.826 171.676 98.345 540 143 540 143 35.474 29.831 35.474 29.831 60.061 12.807 94.455 16.125 7.278 3.614 9.678 5.094 1.577 1.577 27.306 19.431 29.952 47.152


BALANCE SHEETS FOR THE PERIODS ENDED DECEMBER 31, 2006 AND 2005 In thousands of R$

LONG TERM LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deposits (Note 12) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interbank Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Time Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Money Market Repurchase Commitment (Note 13) . . . . . . . . . . . . . . . . . . . . . Own Portfolio ........................................................... Acceptances and Endorsements (Note 14) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Notes and Bonds Issued Abroad (Note 15.a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Foreign Currency trade finance Borrowings (Note 15.a) . . . . . . . . . . . . . . . . . . . . . . Repass Borrowings from Public Sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . BNDES / FINAME (Note 15.b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Derivative Financial Instruments (Note 6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Derivative Financial Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Subordinate Debts (Note 20) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other (Note 17.c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . DEFERRED INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . MINORITY INTEREST IN SUBSIDIARIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Minority Interest in Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . SHAREHOLDERS' EQUITY (Note 21) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Share Capital - Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Capital Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Profit Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Adjustment to Market Value - Securities and Derivatives (Note 4.c) . . . . . . . . . . Retained Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . TOTAL LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Banco Fibra S.A. 2006 2005 833.938 558.187 177.081 90.502 1.201 177.081 89.301 32.224 1.236 32.224 1.236 365.963 282.772 365.963 282.772 54.125 34.319 54.125 34.319 120.426 144.748 120.426 144.748 10.112 4.610 10.112 4.610 74.007 64.140 9.867 2.794 2.317 2.794 2.317 440.649 397.324 350.000 236.470 6.611 5.804 30.814 27.243 273 238 52.951 127.569 8.711.378 9.785.546

Fibra Consolidated 2006 2005 836.608 545.291 172.097 82.006 1.201 172.097 80.805 32.224 1.236 32.224 1.236 365.963 282.772 365.963 282.772 54.125 34.319 54.125 34.319 120.426 144.748 120.426 144.748 210 210 91.773 64.140 27.633 2.794 2.317 2.794 2.317 25 22 25 22 440.649 397.324 350.000 236.470 6.611 5.804 30.814 27.243 273 238 52.951 127.569 8.339.451 9.408.300

57


STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005 AND THE HALF YEAR ENDED DECEMBER 31, 2006 (In thousands of Reais)

FINANCIAL OPERATIONS INCOME ......................... Loans ........................................................................................... Leases ......................................................................................... Securities Income ................................................................... Financial Derivative Instruments ..................................... Trade finance and foreign exchange income (losses) ................................................ FINANCIAL OPERATIONS EXPENSES ..................... Deposits, Money Market and Interbank Funds ............ Borrowings and Repasses ................................................... Leases ......................................................................................... Allowance for Losses on Doubtful Receivable ............. GROSS INCOME ON FINANCIAL OPERATIONS ....... OTHER OPERATING INCOME (EXPENSES) .............. Service Fee Income................................................................. Equity in Earnings (Losses) of Subsidiaries ................... Personnel Expenses ............................................................... Other Administrative Expenses.......................................... Tax Expenses ............................................................................ Other Operating Income ..................................................... Other Operating Expenses .................................................. OPERATING INCOME................................................ NON-OPERATING INCOME ..................................... INCOME BEFORE INCOME AND SOCIAL CONTRIBUTION TAXES ........................... INCOME AND SOCIAL CONTRIBUTION TAXES ....... Provision for Income Tax ..................................................... Provision for Social Contribution Tax ............................. Deferred Tax Assets ................................................................ STATUTORY PROFIT SHARING ............................... NET INCOME ............................................................ NET INCOME PER LOT OF A THOUSAND SHARES - R$ See the accompanying notes to the financial statements

58

2nd Half 844.966 243.723 700 582.844 (1.185)

Banco Fibra S.A. 2006 2005 Year Year 1.706.567 1.522.492 398.314 231.259 1.938 18.915 1.154.440 1.132.438 99.867 57.375

18.885 52.009 82.505 (748.188) (1.544.367) (1.475.993) (602.520) (1.331.319) (1.386.641) (117.404) (167.521) (55.492) (163) (692) (50) (28.102) (44.836) (33.810) 96.778 162.200 46.499 (35.125) (61.942) (10.246) 10.221 16.350 10.953 1.517 3.399 45.253 (21.409) (40.797) (33.962) (18.314) (28.807) (29.424) 122 (3.583) (5.999) 1.473 2.642 5.514 (8.735) (11.146) (2.581) 61.653 100.258 36.253 191 (3.680) 401 61.844 (3.007) (7.852) (2.919) 7.764 (14.845) 43.992 42,47

96.578 (7.319) (16.114) (5.821) 14.616 (17.843) 71.416 68,94

36.654 9.697 (5.658) (1.895) 17.250 (6.075) 40.276 38,88

2nd Half 736.590 236.753 700 433.922 38.294

Fibra Consolidated 2006 2005 Year Year 1.614.832 1.500.348 403.502 240.212 1.938 20.174 1.078.789 1.202.207 131.318 (35.953)

26.921 (715) 73.709 (639.404) (1.446.992) (1.403.377) (579.175) (1.298.357) (1.318.303) (32.045) (103.588) (25.017) (163) (692) (27.062) (28.021) (44.355) (32.995) 97.186 167.840 96.971 (34.675) (64.450) (62.001) 11.774 19.236 13.507 (25.033) (45.726) (35.628) (13.815) (25.061) (30.737) (1.062) (5.566) (9.645) 1.231 2.814 6.557 (7.770) (10.147) (6.055) 62.511 103.390 34.970 147 (4.442) 381 62.658 (3.854) (9.077) (3.200) 8.423 (14.812) 43.992

98.948 (9.179) (18.513) (6.910) 16.244 (18.353) 71.416

35.351 11.112 (3.372) (2.375) 16.859 (6.187) 40.276


STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005 AND THE HALF YEAR ENDED DECEMBER 31, 2006 (In thousands of Reais)

Paid in Capital

Capital Increase

Capital Reserves

Adjustment to Market Value Profit Reserves

236.470

-

5.190

25.229

(346)

159.144

Circulars 3068/01 and 3082/02

-

-

-

-

584

(137)

447

Subsidies for Investments

-

-

(767)

-

-

-

(767)

Membership Certificates

-

-

1.381

-

-

-

1.381

Dividends from Prior Years

-

-

-

-

-

(69.700)

(69.700)

Net Income for the Year

-

-

-

-

-

40.276

40.276

BALANCES AT DECEMBER 31, 2004

Securities and Derivatives

Retained Earnings

Total 425.687

Adjustments due to

Price Level Restatement of

Distribution to Legal Reserve BALANCES AT DECEMBER 31, 2005 Prior Year Adjustments (note 4.k)

-

-

-

2.014

-

(2.014)

-

236.470

-

5.804

27.243

238

127.569

397.324

-

-

-

-

-

(19.063)

(19.063)

Adjustments due to Circulars 3068/01 and 3082/02 Capital Increase from Subscription Capital Increase from Reserves

-

-

-

-

35

-

35

21.030

34.900

-

-

-

-

55.930

-

57.600

-

-

-

(57.600)

-

Price Level Restatement of Membership Certificates

-

-

807

-

-

-

807

-

-

-

-

-

(65.800)

(65.800)

Net Income for the Year

-

-

-

-

-

71.416

71.416

Distribution to Legal Reserve

-

-

-

3.571

-

(3.571)

-

Interest on Shareholders' Equity

BALANCES AT DECEMBER 31, 2006

257.500

92.500

6.611

30.814

273

52.951

440.649

BALANCES AT JUNE 30, 2006

236.470

14.730

6.459

28.614

1.291

136.293

423.857

-

-

-

-

-

(19.063)

(19.063)

Prior Year Adjustments (note 4.k) Adjustments due to Circulars 3068/01and 3082/02 Capital Increase from Subscription Capital Increase from Reserves

-

-

-

-

(1.018)

-

(1.018)

21.030

20.170

-

-

-

-

41.200

-

57.600

-

-

-

(57.600)

-

-

-

152

-

-

-

152

-

-

-

-

-

(48.471)

(48.471)

Price Level Restatement of Membership Certificates Interest on Shareholders' Equity Net Income for the Half Year

-

-

-

-

-

43.992

43.992

Distribution to Legal Reserve

-

-

-

2.200

-

(2.200)

-

257.500

92.500

6.611

30.814

273

52.951

440.649

BALANCES AT DECEMBER 31, 2006

59


STATEMENTS OF CHANGES IN FINANCIAL POSITION FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005 (In thousands of Reais)

SOURCE OF FUNDS .............................................. Net Income for the Period ......................................... Adjustments to Net Income for the Half Year ...... Depreciation and Amortization ........................... Equity in Earnings (Losses) of Subsidiaries ....... Prior Year Adjustments ................................... Adjustments due to Circulars 3068/01 and 3082/02 ...................... Funds from Shareholders - Realization of Capital ......................................................... Variation of Minority Interests ....................... Valuation of Membership Certificates ........... Donations and Subsidies for Investments .... Variation in Deferred Income for Half Years .. Funds from Third Parties: ............................... - Increase in Liabilities ................................... Deposits ..................................................................... Money Market Repurchase Commitments .... Acceptances and Endorsements ......................... Interbank and Interbranch Accounts ............... Borrowings and Repass Borrowings ................. Derivative Financial Instruments ....................... Other Liabilities ........................................................ - Decrease in Assets ...................................... Short-term Interbank Investments .................... Securities .................................................................... Interbank and Interbranch Accounts ............... Lease Operations ..................................................... Other Receivable ...................................................... Other Assets .............................................................. - Disposal of Assets and Investments: ........... Investments ................................................................ Shareholding Interests ............................................ Premises and Equipment ......................................

60

2nd Half 4.323.240 43.992 (298) 1.219 (1.517) (19.063) (1.018) 41.200 152 (203) 4.258.478 776.314 376.817 153.386 17.840 196.941 31.330 3.471.084 3.471.084 11.080 10.948 132

Banco Fibra S.A. 2006 2005 Year Year 7.127.983 3.752.883 71.416 40.276 (1.034) (42.966) 2.365 2.287 (3.399) (45.253) (19.063) 35

447

2nd Half 4.321.911 43.992 1.234 1.234 (19.063) (1.018)

Fibra Consolidated 2006 2005 Year Year 7.102.429 3.707.440 71.416 40.276 2.380 2.287 2.380 2.287 (19.063) 35

447

55.930 41.200 55.930 3 22 807 1.381 152 807 1.381 (767) (767) 477 (203) 477 7.019.416 3.754.512 4.255.617 6.990.444 3.663.794 1.277.096 2.942.958 787.224 1.273.449 3.084.905 553.106 368.846 591.206 209.405 - 2.548.223 - 2.548.223 230.571 288.631 153.386 230.571 288.631 83.064 60.329 8.300 16.629 1.955 269.941 37.299 196.941 269.941 36.691 8.476 140.414 59.751 165.102 5.719.686 809.031 3.468.393 5.716.995 576.562 5.719.339 3.468.393 5.716.648 714.231 485.451 305 305 347 347 795 94.495 89.962 49 22.633 2.523 2.327 2.523 2.327 21.479 1.154 -


STATEMENTS OF CHANGES IN FINANCIAL POSITION FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005 (In thousands of Reais)

APPLICATIONS OF FUNDS ................................ Variation In Deferred Income .......................... Interest on Shareholders' Equity ..................... Prior Year Adjustments .................................... Dividend Distributions .................................... Investments in: ................................................ Corporate Interests .................................................. Investments .................................................................. Premises and equipment ........................................ Deferred Charges ............................................. - Increase in Assets ......................................... Short-term Interbank Investments ...................... Securities ...................................................................... Interbank and Interbranch Accounts ................. Loans .............................................................................. Lease Operations ....................................................... Other Receivable ........................................................ Other Assets ................................................................ - Decrease in Liabilities ................................. Deposits ........................................................................ Money Market Repurchase Commitments ....... Borrowings and Repass Borrowings ................... Derivative Financial Instruments ......................... INCREASE IN CASH AND CASH EQUIVALENTS CHANGES IN FINANCIAL POSITION: ................. Cash and Cash Equivalents ...................................... Beginning of the Period ........................................ End of the Period ..................................................... Increase in Cash and Cash Equivalents ...........

2nd Half 4.311.328 48.471 152 152 311 1.876.092 1.274.712 36.011 474.265 380 77.131 13.593 2.386.302 2.266.760 119.542 11.912

22.570 34.482 11.912

Banco Fibra S.A. 2006 2005 Year Year 7.112.728 3.751.495 2.552 65.800 69.700 807 31.049 28.020 807 1.381 1.648 121 2.261 4.650.931 3.464.081 - 2.791.191 3.450.826 40.462 973.865 672.113 727 165.401 20.377 50 2.395.069 181.852 14.410 2.356.586 38.483 167.442 15.256 1.388

19.226 34.482 15.256

17.838 19.226 1.388

2nd Half 4.309.852 48.471 1.247 152 1.095 (287) 1.881.948 1.266.171 36.011 474.264 380 91.701 13.421 2.378.473 2.266.760 111.713 12.059

22.631 34.690 12.059

Fibra Consolidated 2006 2005 Year Year 7.087.097 3.705.953 2.552 65.800 - 69.700 2.109 3.222 810 1.381 1.299 1.841 181 7.404 4.632.902 3.463.308 - 2.791.195 3.389.908 40.462 973.865 672.113 208.562 20.105 2.386.105 159.767 2.356.586 1.944 29.519 157.823 15.332 1.487

19.358 34.690 15.332

17.871 19.358 1.487

See the accompanying notes to the financial statements

61


X.

62

N OT E S

TO T H E

F I N A N C I A L S TAT E M E N TS


NOTES TO THE FINANCIAL STATEMENTS AS ON DECEMBER 31, 2006 AND 2005 (In thousands of Reais) 1. OPERATIONS Banco Fibra S.A.is a multiple service bank,operating through commercial,exchange,investment,credit and finance portfolios as well acting as an intermediary for its subsidiaries in securities brokerage activities, securitization of real estate credits as well as portfolio and investment fund management. 2. PRESENTATION OF THE FINANCIAL STATEMENTS The financial statements of Banco Fibra S.A. include operations conducted by its branch located abroad (Note 11) and are presented together with the consolidated financial statements (Fibra Consolidated) which include the Bank and its subsidiaries. 3. CONSOLIDATED FINANCIAL STATEMENTS The consolidated financial statements include Banco Fibra S.A., its branch overseas and interests held in its subsidiaries, Fibra Asset Management Distribuidora de Títulos e Valores Mobiliários Ltda. (99.99%), Fibra Companhia Securitizadora de Créditos Financeiros (99.99%), Fibra Companhia Securitizadora de Créditos Imobiliários (99.94%), Fibra Projetos e Consultoria Econômica Ltda. (99,99%) and RTSPE Empreendimentos e Participações Ltda. (99.99%). The income and expenses and asset and liability operating balances between the consolidated companies have been eliminated from the consolidated financial statements.(Note 22). 4. SIGNIFICANT ACCOUNTING PRACTICES The accounting practices for recording and preparing the financial statements are derived from Brazilian Corporation Law, in conjunction with Central Bank of Brazil (BACEN) regulations and instructions and the most significant accounting practices are listed below:a.Statement of Income: Income and expenses arising from asset and liability operations are recognized on a accrual basis and take into account the effects of operations subject to price level restatement on a daily pro-rata basis.Asset and liability operations that carry exchange variation clauses are price level restated according to the buy or sell rate of the foreign currency on the balance sheet dates according to the contractual provisions.b.Short-term Interbank Investments: These are valued at the cost of acquisition plus interest incurred up to the balance sheet dates and,when applicable,are adjusted to market value.Investments in foreign currency are shown at the cost of acquisition plus accrued income calculated on a daily pro rata basis and the foreign exchange variations are recorded up to the balance sheet dates. c. Securities:These are classified into three categories:“trading securities ”,“securities available for sale” and “securities held to maturity”. Securities classified as “trading securities” are valued at their market value and their adjustments are offset and recorded in the appropriate income or expense account for the period. Securities classified as “securities available for sale”are valued at their market value and adjustments to them are recorded in an appropriate account in shareholders' equity, less tax effects and transferred to income for the period in which they were effectively sold. Securities, classified as "held to maturity" are valued at their cost of acquisition plus interest earned up to the balance sheets dates. Classification in this category depends upon the financial capacity of the institution to hold them until redemption and Management's decision to rule out any possibility of selling these securities.(Note 6a).d.Derivative Financial Instruments: According to Central Bank of Brazil Circular Letter 3082, derivative financial instruments are valued and recorded at market value and classified as either hedge or non hedge. Hedge instruments are classified as:(i)“market risk hedge”or (ii)“cashflow hedge”. The criteria for recording them are as follows:for derivative financial instruments which are not intended to be used as a hedge as well as those classified as market risk hedge, adjustments to market value are recorded and offset in the appropriate income or expense account under income for the period. For derivative financial instruments classified as "cash flow hedge," the effective portion of the hedge must be recorded and offset in a special

63


NOTES TO THE FINANCIAL STATEMENTS AS ON DECEMBER 31, 2006 AND 2005 (In thousands of Reais) account in Shareholders' Equity and any variation is offset in the appropriate income or expense account under income for the period. In the event of derivative financial instruments which are intended to protect securities classified in the category "securities held to maturity" both the security and the derivative financial instrument are valued and recorded in compliance with the intrinsic contracted terms and are not recorded at market value. With the advent of the changes introduced by Central Bank Circular Letter 3150,this treatment is also given to derivative instruments traded in association with fund raising operations or fund investments and market value may be disregarded under the terms therein specified. (Note 6b). e. Provisions for Doubtful Loans, Doubtful Lease Receivable and Doubtful Receivable: These provisions are recorded at an amount considered sufficient to cover any losses arising on their collection .The Central Bank of Brazil established regulations through Resolution 2682/99,which are based on risk analyses of clients with asset operations and past experience as well as specific sector or portfolio risks. (Note 9) f. Assets not for Use: Goods received in lieu of payment are recorded in the account “Other Assets� and include provisions recorded in an amount considered sufficient to cover any losses arising on collection. g. Investments - Interests held in subsidiaries are valued according to the equity method of accounting.The other investments are valued according to the cost of acquisition, price level restated up to December 31, 1995, less provisions for losses when applicable. The book balances of the entities headquartered abroad, which are prepared according to international accounting standards (IFRS), were translated into the local currency the real,using the US dollar quotation on the closing date of the period. For the purposes of calculating equity pick up and consolidation, these balances were adjusted to the accounting practices derived from Brazilian corporation law. h. Property, plant and equipment and Deferred charges Depreciation of property, plant and equipment and amortization of deferred charges are calculated using the straight line method,according to the following annual rates and terms: (i) property,plant and equipment:vehicles and computer system,20%; other assets 10%; (ii) differed charges: expenses for acquisition and development of computer software, 20% and improvements toleasehold properties - according to the term of the lease. i. Income and social contribution taxes: The provision for income tax is recorded at a rate of 15% plus a 10% surcharge on the portion of annual taxable income that exceeds R$ 240.The provision for social contribution taxes is recorded at a rate of 9% in compliance with prevailing legislation. Details of the effects of these taxes are shown in Note 18. j. Other Current Assets and Long Term Receivables: These are shown at their cost values, including, when applicable, accrued income and price level restatement less the corresponding provisions for losses or adjustments to the realization value. k. Contingencies and legal obligations: Recognition, measurement and disclosure of asset and liability contingencies and legal obligations are carried out according to the criteria defined in CVM (Brazilian Securities and Exchange Commission) Determination 489/05, which came into effect on January 1, 2006: i) Contingent assets: are not recognized in the accounting, except in the event of a favorable judicial decision, considered practically certain, which does not permit any appeals. Assets with chances of success considered as probable are only disclosed only in a note to the financial statements (note 19). ii) Contingent liabilities: They are recorded when,in the opinion of legal counsel, the chances of loss are probable. The cases where the chances of loss are classified as possible are only disclosed in a note to the financial statements (note 19). iii) Legal obligations:These are recognized and provisions are recorded in the balance sheet,regardless of the probabilities of success of the legal suit.During 2006,as a result of full compliance of the financial statements with the new regulations, the legal and administrative processes were reviewed and reclassified and tax and social security legal obligations were recorded in the amount of R$ 25,070 (R$ 19,918, net of tax credits) and the amount of R$ 19,062 was recognized as a prior period adjustment in retained earnins and the amount of R$ 856 was recorded as operating expenses for the period. l. Current Liabilities and Long Term Liabilities: These are shown at the known values or at values that can be calculated and include charges and price level restatement or exchange variations incurred up to the balance sheet dates. m. Accounting Estimates: The preparation of the financial statements in accordance with accounting practices adopted in Brazil requires that the Management uses its judgment when determining and recording accounting estimates. Significant assets and

64


NOTES TO THE FINANCIAL STATEMENTS AS ON DECEMBER 31, 2006 AND 2005 (In thousands of Reais) liabilities subject to these estimates and assumptions include the residual value of a property, plant and equipment, provision for doubtful accounts, provision for devaluation of certain assets and deferred income tax, provision for contingencies and valuation of derivative instruments. The settlement of transactions involving these estimates may result in amounts different to those estimated due to the lack of precision inherent to the process for determining them.The Bank periodically reviews estimates and assumptions. 5.SHORT-TERM INTERBANK INVESTMENTS:Short-term Interbank investments are represented by the main by investments in the open market, guaranteed by i federal public securities in the Banco Fibra and Fibra Consolidated statements. 6. SECURITIES AND DERIVATIVE FINANCIAL INSTRUMENTS a. Classification of the Securities and Derivative Financial Instruments Portfolio, according on the business strategy:

Curve Value Trading Securities (1) .............................................. Financial Treasury Bill - LFT .................................................. National Treasury Bill - LTN................................................... National Treasury Notes - NTN............................................ Fixed Income Private Securities ........................................ Stocks .......................................................................................... Euronotes and Commercial Papers (3)............................ Other............................................................................................ Investment Fund Quotas: ..................................................... Repurchase Commitments ................................................. National Treasury Bills - LTN................................................. Central Bank Notes - NBC ..................................................... National Treasury Notes - NTN............................................ Fixed Income Private Securities ........................................ Stocks........................................................................................... Swap Differences Payable ................................................... Other Investment Fund Securities (2).............................. Securities Held to Maturity ................................................ Euronotes and Commercial Papers (3)............................ Securities Available for Sale (1) ............................. National Treasury Notes - NTN............................................ Stocks .......................................................................................... Other ........................................................................................... Derivative Financial Instruments .......................... Swap Receivable Differences ............................................. Total Securities Portfolio ..............................

4.248.026 24.366 3.615.627 90.692 13.763 19.482 398.951 -

Banco Fibra S.A. 2006 2005 Book Book Value/ Book Market Value (4) 4.304.602 470.450 24.368 2.475 3.616.121 28.362 91.177 153.064 14.531 10.674 34.959 6.429 439.530 53.683 6.052

10.955 10.955 65.372 65.372 3.028 3.028 231 231 3.207 3.207 2.352 1.123 6.819 7.232 4.418 4.688 2.401 2.544 6.339 8.963 6.339 8.963 4.261.184 4.320.797

Curve Value 3.925.141 24.473 3.615.627 90.692 13.763 19.482 71.161 -

Fibra Consolidated 2006 2005 Book Value/ Market Market Value (4) 3.942.564 535.308 24.475 3.279 3.616.121 28.362 91.177 154.405 14.531 28.847 34.959 6.429 72.582 53.683 6.052

10.955 10.955 184.962 - 199.894 17.514 17.514 4.093 65.372 65.372 4.093 3.007 3.028 3.028 6.181 13.080 231 231 13.140 4.436 4.436 (12.945) 5.921 4.697 13.429 358.868 358.868 1.600 6.819 7.232 1.600 4.418 4.688 1.562 2.401 2.544 1.562 38 38 39.053 8.652 16.194 39.173 39.053 8.652 16.194 39.173 869.971 3.940.612 3.965.990 576.081

65


NOTES TO THE FINANCIAL STATEMENTS AS ON DECEMBER 31, 2006 AND 2005 (In thousands of Reais) (1) The book value of the securities for the categories "Securities Available for Sale" and "Trading Securities" was calculated based on the following criteria: a) government securities and operations conducted on the futures, forward and options markets based on the pricing model described in Note 7; b) Publicly traded company stocks and forward operations guaranteed by these securities,according to the average quotation available from the last trading floor session of the month or in the absence thereof,the most recent trading floor sessions published in the Daily Bulletin for each Exchange and; c) Swaps, based on the notional values of each one of the parameters of the contracts,considering the cash flow discounted to the present value by the futures market interest rates calculated on the pricing model described in Note 7,in compliance with the terms of each contract;(2) Other Investment Fund securities are represented by quotas in Credit Rights funds (FIDC) in the amount of R$ 2,122 and other accounts payable in the amount of R$ 999. In the Fibra Consolidated statements, they are basically represented by quotas in other Financial Investment Funds in the amount of R$ 4,798.(3) In the Banco Fibra S.A. statements, in 2005, R$ 358,868, in relation to Euro Medium Term Notes, the liability of Fibra Asset Management Distribuidora de TĂ­tulos e Valores MobiliĂĄrios Ltda. was eliminated from the consolidated statements.In view of the fact that the aforementioned securities were issued by a company that is part of the group and that there are derivative financial instruments which mitigate market risks, both in relation to the asset operation as well as the liability operation and that these are eliminated in the Fibra Consolidated statements and therefore a position is not recorded in the group's own portfolio, Management reclassified these securities which totaled R$ 327,791 from the category "Securities Held to Maturity" to the category "Trading Securities". In the Banco Fibra S.A. statements, the isolated effect of this reclassification resulted in market valuation income in the amount of R$ 39,157, offset by the expenses involved in the market value adjustments of the underlying derivative of R$ 32,072 and by the equity adjustment expenses from the compensating adjustments in the related company Fibra Asset Management in the amount of R$ 7,085.As aresult of these adjustments,the total effect in the results and shareholders' equity in Banco Fibra S.A., and the Fibra Consolidated statements was null. (4) The book value shown in this column refers to the market value of the securities. b.Derivative Financial Instruments: Banco Fibra S.A.and its subsidiaries conducted operations with derivatives to attend its own needs and those of its clients, with respect to reducing exposure to market, currency and interest risks. Management of these risks is conducted through determining limits and establishing strategies for operations.Derivatives are recorded according to their nature and specific legislation in equity and/or contra accounts.As of December 31,2006,the market value of the derivative financial instruments according to the balance sheet can be broken down as shown below: Derivative Financial Instruments - Swap and Similar Contracts ASSET POSITION PRE vs. DOLLAR ....................................................................... CDI vs. DOLLAR ........................................................................ PRE vs. CDI ................................................................................. CDI vs. PRE ................................................................................. DOLLAR vs. PRE ...................................................................... IGPM vs. CDI .............................................................................. OTHER ...................................................................... TOTAL - Market Value Amounts Receivable calculated according to the operation curves

66

2006 Assets Liabilities Receivables Assets 367.720 65.113 59.782 5.331 18.446 128.952 126.649 2.303 3.134 978.231 41.500 40.177 1.323 33 27 6 3.481 235.598 226.635 8.963 1.371.012 6.339

Banco Fibra S.A. 2005 LiabilitiesReceivables 354.945 12.775 16.705 1.741 3.132 2 957.177 21.054 3.481 1.331.959 39.053 40.592


NOTES TO THE FINANCIAL STATEMENTS AS ON DECEMBER 31, 2006 AND 2005 (In thousands of Reais) Swap and Similar Contracts ASSET POSITION PRE vs. DOLLAR CDI vs. DOLLAR PRE vs. CDI DOLLAR vs. CDI DOLLAR vs. PRE CDI vs. IGPM IGPM vs. CDI OTHER TOTAL - Market Value Amounts receivable calculated according to the operation curves

Assets Liabilities 73.094 66.534 128.952 126.649 84.497 77.173 33 26 286.576 270.382

Fibra Consolidated 2006 2005 Receivables Assets Liabilities Receivables 367.720 354.945 12.775 6.560 18.446 16.705 1.741 2.303 3.134 3.132 2 7.027 6.934 93 978.231 957.177 21.054 32.133 32.106 27 7.324 7 3.481 3.481 16.194 1.410.172 1.370.999 39.173 8.652

40.633

2006 Assets Liabilities Payables 463.806 469.196 (5.390) 215.283 219.545 (4.262) 40.207 42.995 (2.788) 719.296 731.736 (12.440)

Banco Fibra S.A. 2005 Liabilities Payables 984.226 (21.342) 375.887 (12.474) 143.701 (686) 1.501 (322) 367.721 (12.776) 3.323 (3.323) 1.876.359 (50.923)

Swap and Similar Contracts ASSET POSITION PRE vs. DOLLAR CDI vs. DOLLAR PRE vs. CDI DOLLAR vs. CDI DOLLAR vs. PRE CDI vs. IGPM OTHER TOTAL - Market Value Amounts receivable calculated according to the operation curves

Assets 962.884 363.413 143.015 1.179 354.945 1.825.436

22.793

(53.209)

2006 Assets Liabilities Payables 7.277 8.767 (1.490) 77.176 84.494 (7.318) 84.453 93.261 (8.808)

Fibra Consolidated 2005 Liabilities Payables 983.786 (20.902) 25.880 (291) 143.701 (686) 1.501 (322) 367.721 (12.776) 32.133 (27) 3.323 (3.323) 1.558.045 (38.327)

Swap and Similar Contracts LIABILITY POSITION PRE vs. DOLLAR CDI vs. DOLLAR PRE vs. CDI DOLLAR vs. CDI DOLLAR vs. PRE CDI vs. IGPM IGPM vs. CDI OTHER TOTAL - Market Value Amounts receivable calculated according to the operation curves

(2.742)

Assets 962.884 25.589 143.015 1.179 354.945 32.106 1.519.718

(41.065)

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NOTES TO THE FINANCIAL STATEMENTS AS ON DECEMBER 31, 2006 AND 2005 (In thousands of Reais) c. Securities and Derivative Financial Instruments - maturity terms: up to 31 to 91 to 181 to Banco Fibra S.A. 30 days 90 days 180 days 360 days Categories Trading securities ............................................... 4.304.602 Securities Held to Maturity ........................... Securities Available for Sale .......................... 7.232 Derivative Financial Instruments (ASSETS)..................................... 673 4.367 666 1.801 Total ......................................................... 4.312.507 4.367 666 1.801 Derivative Financial Instruments (LIABILITIES) ............................ (27) (3.806) 878 627 up to 30 days

Fibra Consolidated Categories Trading Securities............................................... 3.942.564 Securities Available for Sale .......................... 7.232 Derivative Financial Instruments (ASSETS).................................... 1.902 Total ......................................................... 3.951.696 Derivative Financial Instruments (LIABILITIES) ............................ (1.256)

31 to 90 days

91 to 181 to 180 days 360 days

-

-

-

4.367 4.367

690 690

1.777 1.777

(53)

(78)

(102)

over 360 days

Total 2006

Total 2005

-

4.304.602 7.232

470.450 358.868 1.600

1.456 8.963 1.456 4.320.797

39.053 869.971

(10.112)

(12.440)

(50.923)

over 360 days

Total 2006

Total 2005

-

3.942.564 7.232

535.308 1.600

7.458 16.194 7.458 3.965.990

39.173 576.081

(7.319)

(8.808)

(38.327)

The total nominal values of Swap contracts recorded at CETIP (Clearing House for the Custody and Financial Settlement of Securities) as of December 31, 2006 was R$ 785,755 in Banco Fibra and R$ 863,530 in Fibra Consolidated.The margins deposited in guarantee of the derivative financial instruments totaled R$ 90,263 for the Banco Fibra S/A and the Consolidated statements,of which R$ 62,838 refers to margins deposited by ValĂŞncia Fundo de Investimento Multimercado. 7. RISK MANAGEMENT: Market Risks: The management of the risk positions assumed by the Financial Group involve a set of controls that include the Value at Risk (VaR) concept, whereby the model used is the parameter and the volatility model is the EWMA (Exponentially Weighted Moving Average), a generalization of the Moving Average model whereby greater weights are assigned to the most recent data, thereby enabling quicker reactions to market fluctuations and the Crash Scenario analysis which serves to assess the maximum potential loss of each portfolio taking into account extreme scenarios. In conjunction with other risk assessment instruments, they are intended to present the risks assumed by the Bank. The risk exposure policy is regarded as conservative and the VaR limits and stress scenarios are periodically reviewed by the Market Risk Committee, which includes members of the Executive Board.The Company has invested in the development of control systems, for the purpose of regularly monitoring risks. The pricing models used by the Bank were developed internally and the calculation of curves and reference prices are operations under the responsibility of the Risk Management Area, whose methodology has been approved by senior Bank management and takes into consideration the nature of each financial instrument traded. Liquidity Risks: For the purpose of managing liquidity risk exposure, the bank has adopted instruments to control cash flow and forecast needs or

68


NOTES TO THE FINANCIAL STATEMENTS AS ON DECEMBER 31, 2006 AND 2005 (In thousands of Reais) excess funds in a timely manner to enable it to implement preventive measures beforehand. These instruments include projected cashflow, stress scenarios and simulations of payment events or renewal of operations. Credit Risks: Management adopts as a basic premise for extending credit the capacity of the company to present an adequate cashflow, so as to enable normal continuity to its operations, complying with its credit line access capacity. Loan decisions are taken at a committee level on four levels of authority, which include members of the Executive Board and the Board of Directors, according to each level. The Bank has credit risk controls which enable it to monitor the quality of its portfolio and foresee any problems which might occur in relation to its clients. 8. LOAN PORTFOLIO (CONSOLIDATED) a. Breakdown of Operations:

Loans .................................................................................... Working Capital and Secured Account ...................................... Retail portfolio ................................................................................... Acquired Credit - Other Banks ..................................................... Resolution 2770 repasses .............................................................. Foreign Currency Financing (Imports/Exports)..................... BNDES (National Bank for Economic and Social Development) Repasses ................................................... "Vendor" and "Compror" ................................................................ Other ...................................................................................................... Lease Operations ................................................................. Advances on Exchange and Export Contracts - ACC/ACE .... Other receivable ................................................................. Total Portfolio - Credit Extended ....................................... Guarantees provided - BNDES............................................ Bonds and Guarantees Plrovided ...................................... Total Portfolio .....................................................................

R$ 2.450.559 1.234.625 313.033 334.743 144.847 94.047

2006 % R$ 75,5 1.454.290 38,1 796.691 9,7 133.047 10,3 165.698 4,5 81.524 2,9 34.725

2005 % 69,1 37,9 6,3 7,9 3,9 1,6

257.801 68.391 3.072 382 333.072 14.500 2.798.513 115.497 329.675 3.243.685

7,9 2,1 0,1 10,3 0,4 86,3 3,5 10,2 100,0

194.068 48.492 45 753 201.528 3.841 1.660.412 99.085 344.586 2.104.083

9,2 2,3 9,6 0,2 78,9 4,7 16,4 100,0

R$ 2.450.559 1.073.683 431.021 745.277 88.532 34.650 53.062 346.398 471.062 3.243.685

2006 % 75,5 33,1 13,3 23,0 2,7 1,1 1,6 10,7 14,5 100,0

R$ 1.454.290 828.539 303.640 511.462 71.550 7.764 16.024 191.821 173.283 2.104.083

2005 % 69,1 39,4 14,4 24,3 3,4 0,4 0,8 9,1 8,2 100,0

b. Breakdown per Sector of Activity:

Loans .................................................................................... Industry ...................................................................................................... Commerce................................................................................................. Services ...................................................................................................... Rural............................................................................................................. Housing ...................................................................................................... Public Sector ........................................................................................... Financial Intermediaries ...................................................................... Individuals ................................................................................................ Total Portfolio .....................................................................

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NOTES TO THE FINANCIAL STATEMENTS AS ON DECEMBER 31, 2006 AND 2005 (In thousands of Reais) c. Concentration of Main Debtors: 1) With interbank market operations: In R$ 104.120 481.111 760.855

Main Debtors 10 Largest Debtors 20 Largest Debtors

% of Portfolio 3,2% 14,8% 23,5%

2006 % of shareholders‘ equity 23,6% 109,2% 172,7%

% of Portfolio 1,7% 10,9% 18,8%

2006 % of shareholders‘ equity 12,3% 80,2% 138,4%

2) Without interbank market operations: In R$ 54.071 353.401 609.995

Main Debtors 10 Largest Debtors 20 Largest Debtors

In R$ 55.202 364.147 552.251

In R$ 50.878 321.059 494.037

d. Breakdown by Maturity: Overdue .............................................................................................. Falling due in 30 days..................................................................... Falling due fin 31 to 60 days ........................................................ Falling due in 61 to 90 days .......................................................... Falling due in 91 to 180 days ....................................................... Falling due in 181 to 360 days ..................................................... Falling due in over 360 days ........................................................ Total Portfolio ....................................................................................

R$ 36.498 566.674 407.447 350.495 680.497 609.403 592.671 3.243.685

% of Portfolio 2,6 17,3 26,2

2005 % of shareholders‘ equity 13,9% 91,7% 139,0%

% of Portfolio 2,4 15,3 23,5

2005 % of shareholders‘ equity 12,8% 80,8% 124,3%

2006 % 1,1 17,5 12,6 10,8 21,0 18,7 18,3 100,0

R$ 23.955 402.782 245.567 197.670 381.719 300.928 551.462 2.104.083

2005 % 1,1 19,1 11,7 9,4 18,1 14,3 26,2 100,0

9. CLASSIFICATION OF LOANS PER RISK LEVEL a. Loan Portfolio according to risk levels - retail operations: Risk Levels AA . . . . . . . . . . . . . . . . A .................. B .................. C .................. D ................. E .................. F .................. G ................. H ................. Total in 2006 . . . . . % Portfolio . . . . . . . . Total in 2005 . . . . . % Portfolio . . . . . . . .

70

% Minimum 0,5 1,0 3,0 10,0 30,0 50,0 70,0 100,0

Performing loans In R$ Provisions 233.217 1.166 233.217 1.166 7,2% 113.720 569 5,4%

Non-performing loans Overdue Falling due Provisions 2.424 27.426 298 1.990 11.207 396 1.944 4.783 673 2.186 3.300 1.646 2.158 2.166 2.162 2.086 1.460 2.482 13.495 3.191 16.686 26.283 53.533 24.343 0,8% 1,7% 11.475 7.852 10.731 0,5% 0,4%

Total Total Loans Provisions 233.217 1.166 29.850 298 13.197 396 6.727 673 5.486 1.646 4.324 2.162 3.546 2.482 16.686 16.686 313.033 25.509 9,7% 133.047 11.300 6,3%


NOTES TO THE FINANCIAL STATEMENTS AS ON DECEMBER 31, 2006 AND 2005 (In thousands of Reais) b. Loan Portfolio, according to risk levels - wholesale operations: Risk % Performing loans Non-performing loans Total Total Levels Minimum In R$ Provisions Overdue Falling due Provisions Loans Provisions AA ................................. 149.364 149.364 A .................................... 0,5 1.160.289 5.801 - 1.160.289 5.801 B .................................... 1,0 809.247 8.092 246 5.158 54 814.651 8.146 C .................................... 3,0 338.505 10.155 991 2.844 115 342.340 10.270 D .................................... 10,0 1.400 140 4.412 555 497 6.367 637 E ..................................... 30,0 3.650 1.095 149 373 156 4.172 1.251 F ..................................... 50,0 315 1.429 873 1.744 873 G .................................... 70,0 535 1.897 1.702 2.432 1.702 H .................................... 100,0 71 71 3.567 483 4.050 4.121 4.121 Total Portfolio - Loans Extended ............... 2.462.526 25.354 10.215 12.739 7.447 2.485.480 32.801 Bonds and Guarantees Provided 445.172 Total in 2006 ......... 2.462.526 25.354 10.215 12.739 7.447 2.930.652 32.801 % Portfolio ............... 75,9% 0,3% 0,4% 90,3% Total in 2005 ......... 1.955.546 14.509 12.480 3.010 10.060 1.971.036 24.569 % Portfolio ............... 92,9% 0,6% 0,1% 93,7% c. Total Loan Portfolio according to the risk levels: Risk % Performing loans Levels Minimum In R$ Provisions AA ................................. 149.364 A .................................... 0,5 1.393.506 6.967 B .................................... 1,0 809.247 8.092 C .................................... 3,0 338.505 10.155 D .................................... 10,0 1.400 140 E ..................................... 30,0 3.650 1.095 F ..................................... 50,0 G .................................... 70,0 H .................................... 100,0 71 71 Total Portfolio - Loans Extended ............... 2.695.743 26.520 Bonds and Guarantees Provided Total in 2006 ......... 2.695.743 26.520 % Portfolio ................ 83,1% Total in 2005 ......... 2.069.266 15.078 % Portfolio ................ 98,3%

Non-performing loans Overdue Falling due Provisions 2.670 32.584 352 2.982 14.051 511 6.356 5.338 1.170 2.336 3.673 1.803 2.472 3.595 3.034 2.621 3.357 4.184 17.062 3.674 20.736 36.498

66.272

36.498 1,1% 23.955 1,1%

66.272 2,0% 10.862 0,5%

Total Total Loans Provisions 149.364 1.393.506 6.967 844.501 8.444 355.537 10.666 13.094 1.310 9.659 2.898 6.067 3.034 5.978 4.184 20.807 20.807

31.790 2.798.513 445.172 31.790 3.243.685 100,0% 20.791 2.104.083 100,0%

58.310 58.310 35.869

71


NOTES TO THE FINANCIAL STATEMENTS AS ON DECEMBER 31, 2006 AND 2005 (In thousands of Reais) d. Provision for Doubtful Loans - Consolidated 2006 2005 Retail Wholesale Total Retail Wholesale Total Opening Balance........................................................... 11.300 24.569 35.869 3.007 17.577 20.584 Write-offs against provision ..................................... (13.203) (8.711) (21.914) (6.812) (10.898) (17.710) Provision recorded for the year................................ 27.413 16.942 44.355 15.105 17.890 32.995 Closing Balance ............................................... 25.510 32.800 58.310 11.300 24.569 35.869 The total loans renegotiated during the year was R$ 89,245 (in 2005, R$ 676) and the total recovery of loans written off from prior years was R$ 728 in the Fibra Consolidated statements (in 2005, R$ 522). e. Loans Extended: consolidated During 2006 loans were extended to financial institutions of the "Payroll guaranteed loan" type and the "Bank Credit Note" type in the amount of R$ 157.584, with co-obligation of Banco Fibra S.A.The positive result of the aforementioned loans was R$ 2.504 net of taxes. 10. SHAREHOLDING INTEREST IN SUBSIDIARIES

Interest held Shareholders' Companies by the Bank Equity Fibra Asset Management Distribuidora de Títulos e Valores Mobiliários Ltda. . . . . . . . . . . . . . . . . . . . 99,9989% 66.044 RTSPE Empreendimentos e Participações Ltda. (b) . . . . . . . . . . . . . . 99,9990% 211 Fibra Projetos e Consultoria Econômica Ltda. (a) . . . . . . . . . . . . . . . . 99,9998% 5.564 Fibra Cia. Securitizadora de Créditos Financeiros . . . . . . . . . . . . . . . . . . . . . . . . 99,9899% 3.908 Fibra Cia. Securitizadora de Créditos Imobiliários . . . . . . . . . . . . . . . . . . . . . . . . 99,9533% 43.658 Banco Fibra International Ltd. (c) . . . . . 100,0000% – Totais . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net Income Equity in (Loss) for Earnings of for the Year the Subsidiary

2006 Book Value of the Investment

2005 Book Value of the Investment

(3.039)

(3.037)

66.044

81.894

(1)

(1)

211

412

164

165

5.564

4.400

2.728

2.728

3.907

1.179

4.986 –

4.987 (1.443) 3.399

43.637 – 119.363

38.651 13.272 139.808

Notes (a) The capital of Fibra Projetos e Consultoria Econômica Ltda., which was in the pre-operating stage until April 2006, was fully paid in during the first half of the year in the total amount of R$ 1,000, as follows: R$ 330 in January, R$ 330 in February and R$ 340 in March. (b) On September 27, 2006 RTSPE Empreendimentos e Participações Ltda distributed profits in the amount of R$ 200. (c) On June 29, 2006 Banco Fibra International Ltd., a wholly-owned subsidiary of Banco Fibra S.A. closed down operations and the capital was repatriated.

72


NOTES TO THE FINANCIAL STATEMENTS AS ON DECEMBER 31, 2006 AND 2005 (In thousands of Reais) 11. AGENCIES ABROAD Assets Cash and Cash Equivalents..................................... Short-term Interbank Investments ..................... Securities and Derivative Financial Investments ............................................................... Loans ............................................................................. Other Receivable Credits ........................................ Other Assets ................................................................ Liabilities Demand deposits ..................................................... Time Deposits ............................................................. Repurchase Agreements......................................... Acceptances ................................................................ Borrowings and Repass Borrowings ................... Derivative Financial Instruments.......................... Other Liabilities .........................................................

Intercompany balances Third party balances 2006 2005 2006 2005 175 83.135 4.896 10.348 286.967 128.739 21.389 110.557 366.948 85.669 -

366.814 65.368 -

92.301 83.730 4 1.007

58.771 54.698 3.293 1.483

9

194.107 -

10.664 93.283 28.813 519.202 88.860 71.567

17.696 173.742 26.267 148.599 3.936 5.657

On June 29, 2006, Banco Fibra S.A repatriated capital from its branch in Nassau-Bahamas and shut down its operations. 12. INTERBANK DEMAND AND TIME DEPOSITS a. Maturity Terms Banco Fibra S.A.

up to 30 days . . . . . . . . . . . . . . . . . . . . 31 to 60 days . . . . . . . . . . . . . . . . . . . . 61 to 90 days . . . . . . . . . . . . . . . . . . . . 91 to 180 days . . . . . . . . . . . . . . . . . . . 181 to 360 days . . . . . . . . . . . . . . . . . . over 360 days . . . . . . . . . . . . . . . . . . Total in 2006 . . . . . . . . . . . . . . . . . . . Total in 2005 . . . . . . . . . . . . . . . . . . .

Demand Demand and Other Time Total and Other Deposits deposits Interbank Deposits Deposits 63.885 496.727 83.048 643.660 62.085 351.416 13.830 365.246 386.812 24.938 411.750 139.381 42.234 181.615 73.983 267.341 341.324 177.081 - 177.081 63.885 1.625.400 431.391 2.120.676 62.085 65.598 1.082.121 419.851 1.567.570 53.028

Fibra Consolidated Time Total deposits Interbank Deposits 496.727 83.048 641.860 350.306 10.682 360.988 386.808 24.938 411.746 139.381 42.234 181.615 69.196 6.383 75.579 172.097 - 172.097 1.614.515 167.285 1.843.885 1.064.173 135.478 1.252.679

73


NOTES TO THE FINANCIAL STATEMENTS AS ON DECEMBER 31, 2006 AND 2005 (In thousands of Reais) 13. MONEY MARKET REPURCHASE COMMITMENTS: This refers to securities put operations on the market carrying repurchase commitments, backed by government or third party securities according to the following terms: Up to in 31 to in 61 to in 91 to in 181 to Over 360 Total in Total in 30 days 60 days 90 days 180 days 360 days days 2006 2005 Banco Fibra S.A. and 4.222.422 277.836 1.335 302 62 32.224 4.534.181 6.890.767 Fibra Consolidated....................... 14. ACCEPTANCES AND ENDORSEMENTS - CONSOLIDATED: This refers to issuances of securities abroad, based on A program of total issues of up to US$ 500 million. Banco Fibra S.A, through its branch located in Grand Cayman placed three series in dollars at rates of 6.5% to 8% p.a. and a series in reais at a rate of 17.85% p.a., as shown below: Up to in 31 to in 61 to in 91 to in 181 to Over 360 Total in Total in 30 days 60 days 90 days 180 days 360 days days 2006 2005 Series in US$ ...................................... 3.059 2.101 - 365.963 371.123 142.627 Series in R$ ........................................ - 148.079 - 148.079 146.004 Total .......................................... - 151.138 2.101 - 365.963 519.202 288.631 15. FOREIGN LOANS AND DOMESTIC REPASS BORROWINGS a. Foreign Loans: These are represented by funds in foreign currency on which financial charges are levied i.e., LIBOR plus interest ranging from 0.15% to 0.5% p.a. or pre-fixed interest from 4.05% to 7.82% p.a. in the following terms: Up to in 31 to in 61 to in 91 to in 181 to Over 360 Total in Total in 30 days 60 days 90 days 180 days 360 days days 2006 2005 Banco Fibra S.A. and Fibra Consolidated Statements........ 46.259 63.173 37.863 132.410 116.662 54.125 450.492 235.181 b. Domestic Repasses: Domestic repass obligations are the funds repassed by BNDES and FINAME (Government Agency for Machinery and Equipment Financing) and price level restated according to the TJLP (Long Term Interest Rate) and interest that ranges from 5.75% to 11% p.a., according to the following terms: Up to in 31 to in 61 to in 91 to in 181 to Over 360 Total in Total in 30 days 60 days 90 days 180 days 360 days days 2006 2005 Banco Fibra S.A. and Fibra Consolidated .................... 5.037 12.817 6.168 33.040 78.352 120.426 255.840 201.210 16. EXCHANGE PORTFOLIO Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . Purchased Exchange Pending Settlement . . . . . . . . . . . . . . . Rights on Exchange Sale . . . . . . . . . . . (-) Advances in Local Currency . . . . . . Income Receivable . . . . . . . . . . . . . . . . . Liabilities . . . . . . . . . . . . . . . . . . . . . . . Liabilities for Exchange Purchases . . Sold Exchange Pending Sales Settlement . . . . . . . . . . . . . . . . . . (-) Advances on Exchange Contracts

74

Banco Fibra S.A. and Fibra Consolidated 2005 Interbank Clients Total 8.632 221.904 230.536

Interbank 1.870

2006 Clients Total 349.229 351.099

165 7.209 (5.504) 7.331 167

341.315 341.480 8.190 15.399 (8.190) (13.694) 7.914 7.914 28.143 35.474 345.115 345.282

3.388 9.778 (4.534) 11.956 3.402

7.164 -

8.186 15.350 (325.158) (325.158)

9.730 (1.176)

217.742 1.235 (1.183) 4.110 17.875 214.043

221.130 11.013 (5.717) 4.110 29.831 217.445

1.250 10.980 (197.418) (198.594)


NOTES TO THE FINANCIAL STATEMENTS AS ON DECEMBER 31, 2006 AND 2005 (In thousands of Reais) 17. BREAKDOWN OF OTHER ACCOUNTS WITH SIGNIFICANT BALANCES a. Current Assets and Long Term Receivables - Other Receivable - Other: This refers mainly to guarantee deposits in the amount of R$ 32,702 in the Banco Fibra S.A. statements (in 2005, R$ 23,181) and R$ 55,260 in the Fibra Consolidated statements(in 2005, R$ 35,081), recoverable taxes in the amount of R$ 35,288 in the Banco Fibra statements (in 2005, R$ 18,312) and R$ 46,479 in the Fibra Consolidated statements(in 2005, R$ 30,277), advances to suppliers of our account in the amount of R$ 5,626 (in 2005 R$ 10,092) in Banco Fibra and R$ 13,461 (in 2005 R$ 23,264) in the Fibra Consolidated statements, tax credits in the amount of R$ 107,990 (in 2005 R$ 91,864) for Banco Fibra and R$ 113,523 (in 2005, R$ 92,686) in the Fibra Consolidated statements, credits arising from export note contracts in the amount of R$ 12,494 in Banco Fibra and Fibra Consolidated and real estate receivables of R$ 39,801 in the Fibra Consolidated statements. b. Current Liabilities - Interbank Accounts - Interbank Repasses: This refers to the lines supported by Brazilian Central Bank Resolution 2770 repassed by Fibra Asset Management Distribuidora de TĂ­tulos e Valores MobiliĂĄrios Ltda. to Banco Fibra S.A., at normal market rates and used to peg foreign currency repasses. c. Current Liabilities and Long Term Liabilities - Other Liabilities - Other: This refers mainly to the provisions for contingent liabilities, which totaled R$ 9,867 in the Banco Fibra S.A. statements (in 2005, R$ 8,994) and R$ 10,828 in the Fibra Consolidated statements (in 2005, R$ 10,053), provision for payments to be made R$ 13,960 - Banco Fibra S.A. (in 2005, R$ 5,816) and R$ 14,460 - Fibra Consolidated (in 2005, R$ 6,140), Certificates of Real Estate Receivables - R$ 18,502 (in 2005, R$ 25,589) in the Fibra Consolidated statements. d. Other Operating Income: This refers mainly to the price level restatement of judicial deposits in the amount of R$ 1,858 (in 2005, R$ 682) - Banco Fibra S.A and Fibra Consolidated. e. Other Operating Expenses: This refers mainly to expenses incurred in the repossession of assets in the amount of R$ 335 (in 2005, R$ 548) - Banco Fibra S.A and R$ 354 (in 2005, R$ 573) - Fibra Consolidated, expenses for civil contingencies in the amount of R$ 1,723 (in 2005, R$ 252) - Banco Fibra S.A. and R$ 1.736 (in 2005, R$252) - Fibra Consolidated, charges on tax collections in the amount of R$ 5,703 (in 2005, R$ 7,201) - Banco Fibra and R$ 7,123 (in 2005, R$ 7,208) - Fibra Consolidated and credit life insurance for loans discounted directly in the payroll and guarantee expenses in the amount of R$ 891 in Banco Fibra and Fibra Consolidated. f. Non-operating result: This item refers mainly to the gains and losses in the sale of assets not for own use and the recording of provisions for potential losses on assets of this nature.

75


NOTES TO THE FINANCIAL STATEMENTS AS ON DECEMBER 31, 2006 AND 2005 (In thousands of Reais) 18. INCOME AND SOCIAL CONTRIBUTION TAXES: As of December 31, 2006, the Bank had income and social contribution tax credits, calculated according to the prevailing rates as shown below. These credits are recorded under assets as "Other Receivable - Other" considering the estimates for realization in light of forecasts for taxable income based on a technical study. Banco Fibra S.A. Fibra Consolidated Balance at Formation/ Balance at Balance at Formation/ Balance at TAX CREDITS 12/31/2005 (Realization) 12/31/2006 12/31/2005 (Realization) 12/31/2006 Total Tax Credits from Temporary Differences . . . . . . . . . . 22.528 26.997 49.525 23.003 23.954 46.957 Provision for Doubtful Loans . . . . . . . 18.598 15.245 33.843 18.928 15.081 34.009 Provision for Profit Sharing . . . . . . . . . 3.347 3.347 3.347 3.347 Labor Provision . . . . . . . . . . . . . . . . . . . . . 1.911 (46) 1.865 1.911 (46) 1.865 Provision for Contingencies . . . . . . . . . 3.626 3.626 7.089 7.089 Provision for Valuation of Securitiesand Investments . . . . . . . . . 562 5.758 6.320 707 (584) 123 Provision for Valuation of Goods Not of Own Use . . . . . . . . . . . . 1.457 (933) 524 1.457 (933) 524 Tax Losses and Negative Base of Social Contribution Tax . . . . . . . . . 53.832 (10.871) 42.961 54.179 (3.117) 51.062 Social Contribution Tax - M P 2158-35 issued 08/24/2001 . . 15.504 15.504 15.504 15.504 Total Tax Credits . . . . . . . . . . . . . . . . . 91.864 16.126 107.990 92.686 20.837 113.523 Deferred Tax Liabilities . . . . . . . . . . (7.725) 3.283 (4.442) (7.725) 3.283 (4.442) Net Tax Credits . . . . . . . . . . . . . . . . . . 84.139 19.409 103.548 84.961 24.120 109.081 Net Tax Credits on Shareholders' Equity . . . . . . . . . . . . 21,2% 23,5% 21,4% 24,8% Net Tax Credits on Total Assets . . . 0,9% 1,2% 0,9% 1,3%

76


NOTES TO THE FINANCIAL STATEMENTS AS ON DECEMBER 31, 2006 AND 2005 (In thousands of Reais) During 2006, provisions for contingencies were reviewed and reclassified as a result of fully adapting the financial statements to the regulations in force and as a result tax credits were generated in the amount of R$1,510 - Banco Fibra S.A and R$ 4,593 - Fibra Consolidated, which were offset and recognized as prior year adjustments to retained earnings. Based on a technical study prepared on December 31, 2006, which took past realization and a future profitability forecast into consideration, the annual expectation for realization of the tax credits on temporary differences, tax losses and the negative base of social contribution and the respective present value, calculated according to the average rate of funding, is shown below: Year to be Realized Banco Fibra S.A. Fibra Consolidated Face Value Present Value Face Value Present Value 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23.130 20.745 25.201 22.627 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21.232 17.332 21.232 17.332 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21.774 16.372 21.774 16.372 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22.647 15.837 22.647 15.837 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.759 8.993 13.759 8.993 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.448 3.342 8.910 5.467 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107.990 82.621 113.523 86.628 Statement of the calculation of income and social contribution tax charges of Banco Fibra S.A.: 2006 2005 IRPJ CSLL IRPJ CSLL Income before Income Taxes and Profit Sharing . . . . . . . . . . . . . . . . . . . . . . . 96.578 96.578 36.654 36.654 Payment of Interest on Shareholders' Equity (65.800) (65.800) Profit sharing . . . . . . . . . . . . . . . . . . . . . . . . . . . . (17.843) (17.843) (6.075) (6.075) Income before Income and Social Contribution Taxes . . . . . . . . . . . . . . . . . . 12.935 12.935 30.579 30.579 Income Tax (25%) and Social Contribution Tax (9%) Charges . . . . . . . . . . . . . . . . . . . . (3.234) (1.164) (7.621) (2.752) Effect of Additions and Exclusions on Tax Calculations: . . . . . . . . . . . . . . . . . . . . . Exclusion of Excess Depreciation . . . . . . . . . 116 4.417 Nondeductible expenses net of nontaxable income . . . . . . . . . . . . . . . . . . . . . (3.083) (1.110) 197 71 Shareholding interest in subsidiaries . . . . . 850 306 11.313 4.072 Income and Social Contribution Taxes for the Year . . . . . . . . . . . . . . . . . . . (5.351) (1.968) 8.306 1.391

77


NOTES TO THE FINANCIAL STATEMENTS AS ON DECEMBER 31, 2006 AND 2005 (In thousands of Reais) 19. CONTINGENT ASSETS AND LIABILITIES AND LEGAL LIABILITIES - TAX AND SOCIAL SECURITY: Banco Fibra and its subsidiaries are involved in legal suits and administrative processes arising during the normal course of operations concerning issues of a civil, labor, tax and social security nature. a) Contingent Assets: There are no contingent assets recorded in the books. There are legal processes, however that have good chances of success, the most significant are: COFINS (Tax for Social Security Financing ) - R$ 17,369 and PIS - R$ 3,350: petition for restitution of values paid from July 2001 to June 2006, which exceed the calculation effected on the basis of Complementary Law 7/70 and in view of the unconstitutionality of the expansion of the calculation base provided in Law 9.718/98; CSLL Isonomy: lodged to suspend the CSLL requirement applicable to financial institutions at rates higher than those applicable to other legal entities, in view of the noncompliance with the principle under which no new tax may be collected during the year in which it is created during the 90 days after issue of the law instituting the tax. b) Liabilities of a labor and civil nature: The Company, based on the information provided by their legal counsel and on a review of the pending legal matters, which involve suits calling for indemnity of material losses and damages, pain and suffering especially arising from the collection of debts, has established provisions based on the history of losses verified in similar cases. In relation to labor suits, based on prior experience related to amounts demanded and in accordance with the status of each one of the processes, the Company has established a provision in an amount deemed sufficient to cover any estimated losses involved in the pending suits. c) Legal liabilities and contingent liabilities:Legal liabilities and contingent liabilities classified as probable losses have been fully provisioned. the most relevant issues are:CSLL Isonomy:lodged to suspend the CSLL requirement applicable to financial institutions at rates higher than those applicable to other legal entities in view of the disregard to the constitutional principle of isonomy. COFINS and PIS: petitions payment of the contributions beginning June 2006 on the basis of the calculation stipulated by Complementary Law 7/70, in and in view of the unconstitutionality of the expansion of the calculation base provided in Law 9.718/98. d) Contingent liabilities and possible loss risks: The contingent liabilities classified as possible losses are monitored by the institution and are based on reports issued by its legal counsel in relation to each one of the legal measures and administrative processes. Therefore, according to prevailing regulations, the contingencies classified as possible losses have not been recognized in the accounting; these contingencies mainly comprise the following issues: a) R$ 11,708 for ISS (Services tax) collection in several periods and by several municipalities in Brazil on leasing operations, since the same tax had been collected in the city in which the now defunct company was located, and b) R$ 12,666 in Corporate Income Tax - IRPJ on the non deductibility of losses incurred in variable income in 1995. Fibra Consolidated e) Contingent liability provision transactions 2005 2006 Civil and Labor Initial balance Transactions Final Balance Civil Suits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.433 909 5.342 Labor Suits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.621 (135) 5.486 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.054 774 10.828 Tax - Legal Liabilities - CSLL Isonomy 1996 to 1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . - CSLL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - INSS Educational Salary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - Finsocial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - ISS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - PIS Law 9.718 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - Cofins Law 9.718 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

78

86 701 1.161 1.948

25.070 15 172 796 4.899 30.952

25.070 86 716 1.161 172 796 4.899 32.900


NOTES TO THE FINANCIAL STATEMENTS AS ON DECEMBER 31, 2006 AND 2005 (In thousands of Reais) 20. SUBORDINATE DEBTS ELIGIBLE FOR CAPITAL On October 14, 2005, o Banco Fibra S/A, through its branch in Grand Cayman and in compliance with Central Bank of Brazil Resolution 2837 dated May 30, 2001, initiated a subordinate securities program and the first funds were raised on March 2, 2006 in the amount of US$ 30,000,000 with maturity on March 2,2016 and interest of 7.5% p.a.paid every six months for the first five years and amortization of the principle only on maturity. According to the terms of the issue of this instrument, for this debt to be eligible as Level II regulatory capital, the payment of the principal and interest is contingent on compliance with the operational limits established by the Brazilian Central Bank, or, in the event that this redemption would result in noncompliance these limits, the payment may be postponed until it duly complies with these limits. On June 30, 2006, the Central Bank of Brazil ratified the terms of the first issue of subordinate debt securities. For the purpose of calculating the minimum capital and shareholders' equity established by the Central Bank these debt securities were regarded as Level II regulatory capital. At December 31, 2006, the subordinate debt balance eligible as capital totaled R$ 65,717. 21. CAPITAL Share capital is divided into 1,035,887,231 shares, of which 517,943,617 are common nominative shares and 517,943,614 are preferred shares,with no par value and yield based on the distribution of the minimum obligatory dividend provided for in the bylaws of 25% of net profits for the year, adjusted according to prevailing legislation.The distribution of the dividends by the Executive Board is subject to the Shareholders Annual General Meeting, which can decide whether to fully or partially retain profits for the period.On June 29,September 27 and December 28,2006,it was decided to pay interest on shareholders' equity in accordance with article 9 of Law 9249/95, in the amounts of R$ 17,329,R$ 7,412 and R$ 41,059,respectively,reducing income and social contribution taxes for the period by R$ 22.372. For the purpose of the presentation of these financial statements, these interest payments were reclassified from "Other Operating Expenses" to "Retained Earnings." At the Extraordinary General meetings held on June 29, September 27 and December 28, 2006, it was decided to increase paid in capital in the amounts of R$ 14,730, R$ 6,300 and R$ 34,900, without issuing new shares. On December, 28, the Meeting also decided to increase capital by using retained earnings from prior years in the amount of R$ 57,600, without issuing new shares. 22. RELATED PARTY TRANSACTIONS: Transactions with related were conducted under normal market terms and conditions, taking into account the absence of risks and are shown below: Assets (liabilities) Income (expenses) 2006 2005 2006 2005 Securities and Derivative Financial Instruments 376.339 358.868 66.042 92.076 Other Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . 178 2.636 Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (264.106) (314.676) (36.433) (45.178) Interbank Accounts . . . . . . . . . . . . . . . . . . . . . . . (148.735) (5.826) Loans and Repass Borrowings . . . . . . . . . . . . . . (82.300) (1.850) Derivative Financial Instruments . . . . . . . . . . . (12.723) (56.126) (18.266) Other Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . (1.622) (633) 23. FUND MANAGEMENT: Fibra Consolidated is responsible for the management of a number of investment funds and portfolios, the assets of which as of December 31, 2006 totaled R$ 937,423 (in 2005, R$ 2,623,004). 24. OPERATING LIMITS: a. Basel Agreement: Financial institutions must maintain shareholders' equity that is compatible with the degree of risk of the structure of its assets weighted by factors ranging from 0 to 300%, in accordance with BACEN Resolution 2099/94 and subsequent amendments. The Shareholders' Equity as of December 31, 2006, in compliance with prevailing regulations corresponds to 13.7% (14.7% in December 2005) of the total weighted assets, when currently 11.0% is the minimum limit required. ADMINISTRATIVE BOARD

BOARD OF DIRECTORS

CONTROLLER - SÉRGIO FERRAZ DOS SANTOS - Accountant - CRC SP179881/O-5

79


XI.

80

CO M MI T T E E ' S R E P O R T I N D E P E N D E N T A U D I TO R S ’ R E P O R T


AUDIT COMMITTEE REPORT SUMMARY In the course of its duties, the Banco Fibra S.A. Audit Committee established on the basis of statutory provisions in the appropriate segment of Resolution 3.198 issued by the National Monetary Counsel on May 27, 2004, has performed its assignments and conducted its business in compliance with the Audit Committee Internal Regulations, approved by the Board of Directors. The Fibra Conglomerate has opted to use the sole Audit Committee created by Banco Fibra S.A., the lead institution of the financial conglomerate and which is made up of three directors appointed by the Board of Directors to hold office for three years. It is the responsibility of the Committee to assess the reliability of existing controls procedures and verify compliance of the operations and business of the Fibra Conglomerate with the regulatory provisions and it is also its duty to make the results of this work available to the members of the Board of Directors, which must also include information regarding the results arising from the Internal and External, Operations and Compliance Audits and the their conclusions and recommendations regarding the status of the implementation and improvement of them. In the course of 2006, in line with the expansion of the institution, the Committee undertook a number of activities which detected opportunities for improvement and which are currently in an advanced stage of implementation; however, no significant events occurred which could jeopardize the control environment. Based on the foregoing statements and on the results of the external audit work and the efficiency of the operations processes of the Fibra Conglomerate, we believe that the quality and integrity of the financial statements presented for the half-year and year ended on December 31, 2006 are satisfactory and recommend that the Board of Directors approve them. São Paulo, February 9, 2007

INDEPENDENT AUDITORS’ REPORT To The Managers and Shareholders Banco Fibra S.A. São Paulo - SP We have examined the balance sheets of Banco Fibra S.A. and the consolidated balance sheets of Banco Fibra S.A. and its subsidiaries as of December 31, 2006 and 2005 and the related statements of income, changes in shareholders’ equity, and changes in financial position for the years then ended, which are the responsibility of its management. Our responsibility is to express an opinion on these financial statements. Our examinations were conducted in accordance with auditing standards applied in Brazil and included: (a) planning of the audit work, considering the materiality of the balances, the volume of transactions and the accounting systems and internal accounting controls of the Bank and its subsidiaries; (b) verification, on a test basis, of the evidence and records which support the amounts and accounting information disclosed; and (c) evaluation of the most significant accounting policies and estimates adopted by management of the Bank and its subsidiaries, as well as the presentation of the financial statements taken as a whole. In our opinion, the aforementioned financial statements present fairly, in all material respects, the financial position of Banco Fibra S.A. and the consolidated financial position of Banco Fibra S.A. and its subsidiaries as of December 31, 2006 and 2005, the results of its operations, changes in its shareholders’ equity and changes in its financial position for the years then ended, in conformity with accounting practices adopted in Brazil. February 9, 2007 Auditores Independentes CRC 2SP014428/O-6

Zenko Nakassato Accountant CRC 1SP160769/O-0

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Banco Fibra - Annual Report 2006  

Banco Fibra - Annual Report 2006

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