BHG Quarterly information (ITR) Report by MZ .

Financial Statements BHG S.A. - Brazil Hospitality Group December 31, 2011 with Independent Auditorâ&#x20AC;&#x2122;s Reports on Financial Statements

BHG S.A. - Brazil Hospitality Group Financial statements December 31, 2011

Contents

Independent auditorÂ´s report on financial statements ........................................................... 1 Audited financial statements Balance sheets ..................................................................................................................... 4 Income statements ............................................................................................................... 6 Statements of changes in equity........................................................................................... 7 Cash flow statements ........................................................................................................... 8 Statements of value added ................................................................................................... 9 Notes to financial statements.............................................................................................. 10 Annex.................................................................................................................................. 63

A free translation from Portuguese into English of Independent Auditor's Report on individual financial statements in accordance with accounting practices adopted in Brazil and on consolidated financial statements in accordance with IFRS and also with accounting practices adopted in Brazil

Independent auditorÂ´s report on financial statements The Board of Directors, Shareholders and Officers

BHG S.A. - Brazil Hospitality Group Rio de Janeiro - RJ We have audited the accompanying individual and consolidated financial statements of BHG S.A. - Brazil Hospitality Group ("Company"), identified as Company and Consolidated, respectively, which comprise the balance sheets as at December 31, 2011 and the related income statements, statements of changes in equity and cash flow statements for the year then ended, and a summary of significant accounting practices and other explanatory information. Management's responsibility for the financial statements Management is responsible for the preparation and fair presentation of the individual financial statements in accordance with the accounting practices adopted in Brazil, and of the consolidated financial statements in accordance with the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and in conformity with the accounting practices adopted in Brazil, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditorâ&#x20AC;&#x2122;s responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the Brazilian and International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company's preparation and fair presentation of the Companyâ&#x20AC;&#x2122;s financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control. An audit also includes evaluating the appropriateness of accounting practices used and the reasonableness of accounting

Auditorâ&#x20AC;&#x2122;s responsibility (Continued) estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion on individual financial statements In our opinion, the individual financial statements referred to above present fairly, in all material respects, the financial position of BHG S.A. - Brazil Hospitality Group as at December 31, 2011, and its financial performance and cash flows for the year then ended, in accordance with accounting practices adopted in Brazil. Opinion on consolidated financial statements In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of BHG S.A. - Brazil Hospitality Group as at December 31, 2011, and its consolidated financial performance and consolidated cash flows for the year then ended, in accordance with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and accounting practices adopted in Brazil. Emphasis of matter As mentioned in Note 2, the individual financial statements were prepared in accordance with the accounting practices adopted in Brazil. In the case of BHG S.A. - Brazil Hospitality Group, these practices differ from IFRS â&#x20AC;&#x201C; applicable to individual financial statements â&#x20AC;&#x201C; solely with respect to the measurement of investments in subsidiaries, affiliates and joint owned subsidiaries, under the equity method, while such investments would be measured at cost or fair value for IFRS purposes. Our opinion is not qualified because of this matter.

Other matters Statements of value added We have also audited the individual and consolidated statements of value added for the year ended December 31, 2011, the presentation of which is required by Brazilian Corporation Law for publicly held companies, and as supplementary information under the IFRS, whereby no statement of value added presentation is required. These statements have been subject to the same auditing procedures previously described and, in our opinion, are presented fairly , in all material aspects, in relation to the overall financial statements. Rio de Janeiro, March 8, 2012 ERNST & YOUNG TERCO Auditores Independentes S.S. CRC - 2SP 015.199/O-6 - F - RJ

Mauro Moreira Accountant CRC - 1SP 072.056/O-2

BHG S.A. - Brazil Hospitality Group Balance sheets At December 31, 2011 and 2010 (In thousands of reais)

Note Assets Current assets Cash and cash equivalents Cash Short-term investments Trade accounts and other accounts receivable Trade accounts receivable Sundry receivables Restricted deposits Receivables from investments disposed of Advances Prepaid expenses Inventories Total current assets Non-current assets Trade accounts receivables Sundry receivables Receivables from investments disposed of Judicial deposits Taxes recoverable Deferred taxes Other Advances for future capital increase Related parties Inventories of properties for sale Investments Recorded by cost method Investment in subsidiaries, jointly controlled subsidiaries and affiliate companies Interest in subsidiaries - goodwill Property and equipment Intangible assets Undefined useful life Defined useful life Total noncurrent assets Total assets

5 5 6

23 9 14 8 9 9 9 10 11 9/11 11

Company 2011 2010

Consolidated 2011 2010

358 275 83 5,792 5,792 411 4,712 669 6,150

100,876 242 100,634 49,988 49,988 2,234 45,370 1,863 521 150,864

28,985 6,650 22,335 51,588 31,150 20,438 411 2,114 15,920 1,993 1,603 82,176

121,708 6,423 115,285 79,888 24,981 54,907 2,303 45,370 6,269 965 1,873 203,469

325,747 11,180 314,567 15,981 40,765 318,455 -

172,465 352 10,503 161,610 9,773 40,765 245,682 -

46,530 13,529 2,816 17,490 12,690 5 1,889 158,173 4,320 4,320

460 21,572 352 1,487 19,733 1,163 157,679 4,320 4,320

294,294 24,161 46,632 3,027 3,027 750,607

221,521 24,161 20,894 3,558 3,558 493,137

677,817 45,197 35,169 10,028 933,926

359,553 53,124 44,910 8,214 597,871

756,757

644,001

1,016,102

801,340

Note Liabilities Current liabilities Trade accounts payable Loans and financing Taxes, fees and contributions Payables for share acquisition Tax and labor liabilities Other Total current liabilities Non-current liabilities Loans and financing Advances for future capital increase Related parties Other Total noncurrent liabilities

Equity Capital Capital reserve Treasury stocks Accumulated losses Non-controlling interest Total Equity

Total liabilities and net equity

See accompanying notes.

Company 2011 2010

Consolidated 2011 2010

3,754 15,355 145 2,600 3,968 25,822

5,654 76 5,310 489 4,255 15,784

19,662 102,419 7,400 8,543 9,872 3,251 151,147

16,534 19,903 7,158 13,290 5,631 4,740 67,256

5,990 5,990

133,228 275 573 134,076

94,803 896 186 95,885

725,775 93,717 (8,225) (86,322) 724,945

640,775 93,164 (9,756) (95,966) 628,217

725,775 93,717 (8,225) (86,322) 5,934 730,879

640,775 93,164 (9,756) (95,966) 9,982 638,199

756,757

644,001

1,016,102

801,340

13 12

16 15

BHG S.A. - Brazil Hospitality Group Income statements Years ended December 31, 2011 and 2010 (In thousands of reais)

Note

Company 2011 2010

Consolidated 2011 2010

Gross revenue

207,247

137,364

Deductions from gross income

(20,316)

(12,861)

Net revenue

186,931

124,503

Cost of services provided and products sold

(81,733)

(55,154)

105,198

Gross profit Operating income (expenses) General and administrative Administrative expenses Selling expenses Taxes and charges Depreciation and amortization Financial income (expenses), net Financial income Financial expenses Other operating income (expenses), net Earnings (losses) on equity investment Income before taxes/profit sharing Income and social contribution taxes Earnings attributable to non-controlling shareholders Net income (loss) for the year

See accompanying notes.

20 21

7 9

9,644 (20,592) (18,849) (290) (1,453) 7,451 13,047 (5,596) 7,030 15,755 9,644

(6,172) (26,795) (25,688) (72) (1,035) 17,192 17,636 (444) 3,431 (6,172)

69,349

(85,022) (80,657) (52,042) (9,981) (673) (17,961) (11,746) 19,425 (31,171) 7,381 20,176

(73,704) (78,847) (58,927) (7,317) (474) (12,129) 5,143 17,654 (12,511) (4,355)

(12,219)

(3,408)

1,687

1,591

9,644

(6,172)

9,644

(6,172)

BHG S.A. - Brazil Hospitality Group Statement of changes in equity Years ended December 31, 2011 and 2010 (In thousands of reais)

Capital stock At December 31, 2009 Exercised share options Repurchase of Companyâ&#x20AC;&#x2122;s shares Stock option plan Loss for the year Non-controlling shareholders interest At December 31, 2010 Capital increase Cost with share issuance Exercised share options Repurchase of Companyâ&#x20AC;&#x2122;s shares Stock option plan Net income for the year Non-controlling shareholders' interest At December 31, 2011

See accompanying notes.

Capital reserve

Treasury stocks

Accumulated losses

Noncontrolling interest

Total

640,775

91,568

(9,906)

(89,794)

7,720

640,363

336 1,259 -

715 (564) -

(6,172) -

2,262

1,051 (564) 1,259 (6,172) 2,262

640,775

93,163

(9,755)

(95,966)

9,982

638,199

85,000 -

(1,933) 1,227 1,260 -

1,530 -

9,644 -

(4,048)

85,000 (1,933) 2,757 1,260 9,644 (4,048)

725,775

93,717

(8,225)

(86,322)

5,934

730,879

BHG S.A. - Brazil Hospitality Group Cash flow statements Years ended December 31, 2011 and 2010 (In thousands of reais) Company 2011 Cash flows from operating activities Cash from operations Net income (loss) before IR and CS Depreciation and amortization Disposal of P&E Options granted Equity Pickup Changes in assets and liabilities Trade accounts receivable Restricted deposits Inventories Taxes recoverable Deferred taxes Judicial deposits Other receivables Trade accounts payable Taxes, charges and contributions Payables for acquisition of investments Social, labor and social security obligations Contingent liabilities Other liabilities Paid income and social contribution taxes

Consolidated 2010

2011

2010

(10,567) (3,400) 9,642 1,453 1,260 (15,755) (7,167) 1,823 (676) (2,997) (1,900) 69 (2,170) 3,479 (4,255)

(2,467) (7,165) (6,172) 1,035 144 1,259 (3,431) 4,698 873 (106) (315) (2,333) 4,267 (240) 5,310 (3,944) 1,186 -

17,888 54,352 20,176 17,961 14,955 1,260 (24,245) (5,709) 1,892 270 (2,676) (7,645) (1,329) (10,684) 3,128 242 (4,514) 4,241 28 (1,489) (12,219)

(10,539) 9,610 (4,355) 12,129 577 1,259 (16,741) (10,092) (175) (831) (1,965) (214) (4,419) 6,561 2,044 (4,093) (3,791) 234 (3,408)

Cash flow from investing activities Loan Interest received Receivable from disposal of investments Investment sale Acquisition of property and equipment Acquisition of intangible (except for goodwill) Acquisition of investments/goodwill Advances for future capital increase Inventories of properties for sale Bonus from stock option grant Non-controlling interest

(191,619) 45,722 (27,191) 532 (57,018) (152,957) (707) -

(119,472) (20,215) 661 (37,921) (60,324) (2,724) 1,051 -

(317,359) 30,079 6,874 (340,701) (4,701) (3,040) (621) (494) (707) (4,048)

(162,346) (7,060) 2,610 (145,916) (3,773) (8,814) (3,711) (586) 1,051 3,853

Cash flow from financing activities Credit with affiliated parties Loan Interest Paid Debit with affiliated parties Treasury stocks Other capital transactions Capital increase

101,668 (218) 10,919 4,436 1,531 85,000

(5,045) (2,544) (1,937) (564) -

206,748 (726) 129,753 (8,810) 1,531 85,000

48,289 56 59,570 (8,773) (2,000) (564) -

Increase (decrease) in cash and cash equivalents Initial cash and cash equivalent balance Final cash and cash equivalent balance

(100,518) 100,876 358

(126,984) 227,860 100,876

(92,723) 121,708 28,985

(124,596) 246,304 121,708

See accompanying notes.

BHG S.A. - Brazil Hospitality Group Statements of value added Years ended December 31, 2011 and 2010 (In thousands of reais) Company 2011 Revenues Sales of goods, products and services Deductions from gross income Input acquired from third parties Cost of goods, products and services sold Materials, energy, third-party services and others Loss/recovery of asset values Other

Gross added value Withholding Depreciation, amortization and depletion

Net value added produced by entity Added value Received in Transfer Reversal of operating provisions Equity pickup Financial income

Total added value to be distributed Distribution of added value Personnel Direct remuneration FGTS

Taxes, fees and contributions Federal Local

Remuneration of third-party capital Interest Rental Remuneration from own capital Profit retention/loss for the year Non-controlling interest

See accompanying notes.

2010

Consolidated 2011 2010

(8,250) -

(21,889) -

207,247 (20,316) (116,784) (81,733)

137,364 (12,861) (93,512) (55,154)

(7,960) (290) -

(14,470) (7,419) -

(33,159) (1,890) 186,931

(50,504) 12,146 124,503

(8,250)

(21,889)

70,147

30,991

(1,453) (1,453)

(1,035) (1,035)

(17,961) (17,961)

(12,129) (12,129)

(9,703)

(22,924)

52,186

18,862

606 15,755 13,047 29,408

2,700 3,431 17,636 23,767

1,804 19,425 21,229

3,472 17,654 21,126

19,705

843

73,414

39,988

4,940 4,760 180 9,880

6,562 6,398 164 13,124

31,703 29,148 2,555 63,406

29,359 27,766 1,593 58,718

292 292 292

96 72 24 192

12,892 12,219 673 25,784

5,614 3,427 2,187 11,228

17,491 15,930 1,561 11,327 9,644 1,685

12,778 11,216 1,562 (7,763) (6,172) 1,591

4,828 4,436 392 9,644 9,644 -

357 17 340 (6,172) (6,172) -

BHG S.A. - Brazil Hospitality Group Notes to financial statements December 31, 2011 (Amounts in thousands of reais, except when otherwise mentioned)

1. Operations BHG S.A - Brazil Hospitality Group (“Company” or “BHG”), Rio de Janeiro, state of Rio de Janeiro, was established on March 14, 2007 and began operating in August 2007, with conclusion of the public offer of primary distribution of shares. The Company is engaged in the planning, investment, development and exploration of real estate in the leisure and business sectors; investment in acquisition of properties, land, buildings and real estate in rural and/or urban areas for tourism purposes and activities aiming at sale, exploration or lease; ownership interest as a partner in other entities, business or non-business, and in business ventures of any nature, in Brazil and/or abroad, directly or indirectly related to the above-mentioned objectives. At December 31, 2011, the Company has 6,704 rooms ( 6,312 at December 31, 2010) of which 3,152 are Company owned (2,888 at December 31, 2010), distributed in 35 hotels, of which 15 are owned, 15 belong to third parties and 5 are joint interest, in addition to 3 other hotels through non-controlling shareholding. Considering non-consolidated acquisitions of 2 of the 5 hotels in Belém that will be inaugurated during the first half of 2012, of the Rio Palace Hotel property, whose favorable judicial ruling is expected to take place in the first half of 2012 (Note 10), as well as the management of the hotel in Goiânia, which began in January 2012, and the hotels which are currently managed by the Solare Group, which will be merged to BHG in April 2012, the Company will reach the end of 2012 with a total number of 8,711 rooms, of which 3,867 are company-owned, distributed in 47 hotels, of which 16 are Company-owned and 22 belong to third parties, 9 with joint interest, and other 3 hotels through non-controlling interest, without considering any new hotel or third-party hotel management acquisitions. At December 31, 2011, the Company presents negative current net capital, basically as a result from short term loans and financings in the amount of R$ 71,209 thousand. The Company is currently in the final stages of negotiating addendums to extend the maturity dates of loans and financings, to level the Company's current equity and financial situation, allowing it to meet its short term liabilities.

BHG S.A. - Brazil Hospitality Group Notes to the financial statements (Continued) December 31, 2011 (Amounts in thousands of reais, except where otherwise mentioned)

2. Accounting policies The conclusion of the preparation of these financial statements was authorized in the executive board meeting held on March 8, 2012. Therefore, they include subsequent events which may affect them up to said date. The individual financial statements of the Company for the years ended December 31, 2011 and 2010 were prepared in accordance with the accounting practices adopted in Brazil, which comprise the regulations of the Brazilian SEC (CVM) and the pronouncements issued by the Brazilian FASB (CPC). The consolidated financial statements were prepared in accordance with the accounting practices adopted in Brazil, which comprise the regulations of CVM and CPC, which are in line with the International Financial Reporting Standards - IFRS, issued by the International Accounting Standards Board - IASB. The financial statements were prepared in accordance with various evaluation bases used in the accounting estimates. The accounting estimates involved in the preparation of the financial statements were based on objective and subjective factors, which were based on the Management's judgment to determine the appropriate value to be recorded in the financial statements. Significant items subject to these estimates and assumptions include the selection of usable lives of fixed assets and their recoverability in operations, financial asset evaluation according to fair value and present value adjustment methods, credit risk analysis to determine the provision of risks to determine other provisions, including contingencies. Settlement of transactions involving these estimates may result in values which are significantly divergent from those recorded in the financial statements due to the probable treatment inherent to the estimate process. The Company revises its estimates and assumptions periodically, in no more than one year. See Note 2.17, with estimate details. The Company adopted all regulations, regulation reviews and interpretations issued by the CPC, IASB and regulatory bodies which were in force at December 31, 2011. The financial statements were prepared using the historical cost as a base value, except for the appreciation of certain financial assets and liabilities which are measured at fair value.

BHG S.A. - Brazil Hospitality Group Notes to the financial statements (Continued) December 31, 2011 (Amounts in thousands of reais, except where otherwise mentioned)

2. Accounting policies (Continued) The individual financial statements present the evaluation of investments in subsidiaries through the equity method, as per the Brazilian Law in force, and for IFRS purposes these investments must be evaluated at cost or fair value. Therefore, the individual financial statements are not considered as compliant with IFRS. 2.1. Bases for consolidation Consolidated financial statements include the Company's operations and that of the following subsidiaries, jointly controlled companies and affiliates, whose percentage of interest at the balance date, is summarized as follows: % of interest Name BHG Participações Ltda. Tx Empreendimento Imobiliário SPE S.A. Onda Azul Empreendimento Hoteleiro Ltda. Tx Santa Catarina SPE Empreendimento Turístico Ltda. BHG Centro-oeste Empreendimentos Ltda. Nossa Senhora da Vitória Empreendimento Hoteleiro Ltda. Kino Empreendimento Hoteleiro Ltda. Salvador Downtown Empreendimentos Hoteleiros Ltda. Ilha de Canavieiras Empreendimentos S.A. Ilha de Canavieiras Resort S.A. Nossa Senhora da Vitória Empreendimentos Turísticos e Imobiliários S.A. Camocim Empreendimentos Turísticos e Imobiliários S.A. Marsala Incorporações SPE S.A. (*) Praia da Ponta Empreendimento Imobiliário SPE Ltda. Tx Paraty SPE Empreendimentos Imobiliários Ltda Carro Quebrado SPE Empreendimentos Turísticos e Imobiliários Ltda. Deep Beach SPE Empreendimentos Turísticos e Imobiliários Ltda. Tx Salvador SPE Empreendimentos Turísticos Ltda. Ilha do Atalaia SPE Empreendimentos Turísticos e Imobiliários Ltda. Tucurui Empreendimentos Imobiliários S.A. (*) Tx Salvador SPE Empreendimentos Imobiliários Ltda. Port Beach Empreendimento Turístico e Imobiliário Ltda. Onda Azul Empreendimentos Imobiliários Ltda. Onda Azul Empreendimentos Turísticos Ltda. Tx Onda Azul Empreendimento Imobiliário Ltda. Tx Onda Azul Empreendimentos Turísticos Ltda Conde Residence Empreendimento Imobiliário SPE Ltda. Terravista Investimentos S.A.

2011

2010

100% 100% 100% 100% 100% 100% 100% 100% 70% 70%

99.90% 100% 99.90% 100% 100% 100% 100% 100% 70% 70%

100% 66.67% 50% 100% 100%

100% 66.67% 66.50% 100% 100%

100%

100% 100%

100% 49% 100% 100% 100% 100% 100% 100% 62% 87.75%

100% 49% 100% 100% 99.90% 99.90% 99.90% 99.90% 62% 87.80%

BHG S.A. - Brazil Hospitality Group Notes to the financial statements (Continued) December 31, 2011 (Amounts in thousands of reais, except where otherwise mentioned)

2. Accounting policies (Continued) 2.1. Bases for consolidation (Continued) % of interest Name Wind Beach Empreendimentos Turísticos e Imobiliários Ltda. Camaragibe Empreendimento Imobiliário Ltda. Marina Camaragibe Empreendimento Náutico Ltda. LAHotels Empreendimentos 1 Ltda. Hotel Della Volpe Ltda. LAHotels Serviços Ltda. LAHotels Nordeste Ltda. LAHotels Sul Ltda. Melongena Participações Ltda. Merak Empreendimentos e Participações Ltda. BHG Mato Grosso Empreendimento Hoteleiro Ltda. BHG Norte Empreendimento Hoteleiro Ltda. Collezioni Participações Ltda. Tx Agropecuária e Turismo S.A. Tx Assessoria e Gerenciamento de Hotéis S.A. Conduru Empreendimentos Imobiliários S.A. Bonaparte Hotéis Ltda. Terravista Boutique Empreendimento Imobiliário SPE S.A. BT Salvador Empreendimentos Ltda. BHG Imobiliária Hotelaria e Turismo S.A. Melongena Empreendimentos 1 Ltda. Melongena Empreendimentos 2 Ltda. Tulip Itaguai Hotelaria SPE S.A. Hotel HSC Ltda.

2011

2010

100% 100% 99.90% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 94% 100% 81.67% 100% 100% 100% 100% 53.33% 100.00%

100% 99.90% 99.90% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 70.62% 30.01% 94% 100% 81.67% 100% -

(*) Affiliate Companies

As provided for in Technical Pronouncement CPC 19 (IAS 31) - Investments in Joint Ventures, the consolidation of Marsala Incorporações SPE S.A. and Tucurui Empreendimentos Imobiliários S.A., were carried out in proportion to the interest of the Company in the capital of these companies (50% and 49%, respectively), as they are joint ventures, as defined in a Shareholders' agreement of the jointly controlled subsidiaries. Subsidiaries and joint ventures are fully consolidated as of the acquisition date, with this being the date on which BHG obtained control, and continue to be consolidated up to the date in which this control no longer exists. The financial years of the subsidiaries included in consolidation coincide with that of the Company and the accounting policies were applied uniformly and consistently with those used in the previous year.

BHG S.A. - Brazil Hospitality Group Notes to the financial statements (Continued) December 31, 2011 (Amounts in thousands of reais, except where otherwise mentioned)

2. Accounting policies (Continued) 2.1. Bases for consolidation (Continued) The consolidation of equity accounts and company results, corresponds to the horizontal summary of balances of assets, liabilities, revenues and expenses, according to their nature, complemented with the elimination of: interest of Company in the capital, reserves, accumulated results of consolidated companies; (ii) balances of bank accounts and other balances which are part of assets and/or liabilities, held between Companies; and (iii) balance of revenues and expenses, as well as unrealized profits, when applicable, from business carried out between consolidated companies. 2.2. Functional and presentation currency of the financial statements The functional currency of the Company is the Brazilian real, which is the same currency of preparation and presentation of the financial statements. The financial statements of each subsidiary included in the consolidation of the Company, and those used as a basis for evaluation of investments through the equity method, are prepared based on the functional currency for each entity and expressed in Reais. 2.3. Cash and cash equivalents These include cash, bank account balances and short-term investments redeemable within 90 days from the transaction dates, subject to insignificant risk of change in their market value. The short-term investments included as cash equivalents are mostly classified as â&#x20AC;&#x153;financial assets at fair value through profit or lossâ&#x20AC;?. The breakdown of these investments by type is shown in Note 5. 2.4. Trade accounts receivable These are stated at realizable values. An allowance for doubtful accounts was set up in an amount considered sufficient by management to cover any losses on collection of receivables, based on an individual assessment of each nonperforming client for over 180 days. Information relative to the opening of accounts receivable in values which have matured and will mature, in addition to the changes in provision for doubtful accounts, are stated in Note 6.

BHG S.A. - Brazil Hospitality Group Notes to the financial statements (Continued) December 31, 2011 (Amounts in thousands of reais, except where otherwise mentioned)

2. Accounting policies (Continued) 2.5. Inventories of properties for sale These are represented by land intended for development of real estate projects, recognized at historical cost of acquisition, plus directly-related expenses incurred, which are measurable and contribute to the project development. The historical cost is periodically compared with the market value, with adoption of the lower of the two values. 2.6. Investments in subsidiaries, joint ventures, and affiliates Investments in subsidiaries, joint ventures and affiliates are recorded by the equity method of accounting, in accordance with CPC 18 (IAS 28) - Investments in Subsidiaries and Affiliates, for purposes of the Company’s financial statements. Investments in subsidiaries and joint ventures are eliminated for purposes of the consolidated financial statements. Based on the equity method, investment in subsidiaries and affiliates is recorded in the balance sheet of the Company at cost, added of changes after the acquisition of interest in subsidiary, joint venture or affiliate. Goodwill referring to the investee is included in the investment’s book value, and is not amortized. The interest in the investee is presented in the Company’s operations statement as equity pickup, representing net income or loss attributed to shareholders. After application of the equity pickup method for purposes of the Company’s financial statements, the Company determines whether it is necessary to recognize additional loss in the recoverable value of the investment in the investee. At each balance sheet date, the Company determines if there is objective evidence of impairment of the investments. If so, the impairment loss is calculated as the difference between the investment’s recoverable amount and the book value, recognized in the Company’s operations statement.

BHG S.A. - Brazil Hospitality Group Notes to the financial statements (Continued) December 31, 2011 (Amounts in thousands of reais, except where otherwise mentioned)

2. Accounting policies (Continued) 2.7. Business Combinations Business combinations are recognized by the acquisition method. The cost of an acquisition is measured by addition of the transferred consideration, valued considering the fair value on the acquisition date, and the value of noncontrolling interest held in the acquired entity. For every business combination, the acquirer measures the non-controlling interest in the acquiree at fair value or based on its share in such entityâ&#x20AC;&#x2122;s net assets. Costs directly attributed to the acquisition are recognized as expenses when incurred. In acquiring a business, the Company values financial assets and liabilities assumed in order to classify and allocate them in accordance with the contractual terms, the economic circumstances and the conditions effective on the acquisition date, including segregation, by the acquiree, of embedded derivatives existing in the acquireeâ&#x20AC;&#x2122;s host contracts. If the business combination occurs in stages, the fair value on the date of acquisition of the interest previously held in the acquireeâ&#x20AC;&#x2122;s capital is revalued at fair value on the acquisition date, and any impacts are recognized in P&L. Any contingent considerations to be transferred by the acquirer are recognized at fair value on the acquisition date. Subsequent changes in the fair value of the contingent consideration in the form of asset or liability are recorded in accordance with CPC 38 (IAS 39) in P&L or in other comprehensive income. Recognition and Measurement in the financial statements or in other comprehensive P&L. If the contingent consideration is classified as equity, it should not be revalued until its final settlement in equity. Goodwill is initially measured as the excess consideration transferred in relation to net assets acquired (net identifiable assets and liabilities assumed). If the consideration is lower than the fair value of net assets acquired, the difference is recognized as a gain in P&L.

BHG S.A. - Brazil Hospitality Group Notes to the financial statements (Continued) December 31, 2011 (Amounts in thousands of reais, except where otherwise mentioned)

2. Accounting policies (Continued) 2.7. Business Combinations (Continued) After initial recognition, goodwill is measured at cost, less any accumulated loss in the recoverable value. For purposes of testing of the recoverable value, the goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Companyâ&#x20AC;&#x2122;s cash generating units expected to benefit from the synergies arising from the combination, regardless of attribution of other acquiree assets or liabilities to such units. If the goodwill is part of a cash generating unit and a portion of such unit is disposed of, the goodwill related to such disposed of portion is included in the cost of the operation, when determining gain or loss from disposal. The goodwill disposed of in such circumstances is determined based on amounts proportional to the disposed of portion in relation to the cash generating unit maintained. Goodwill and other intangible assets with an indefinite useful life are not amortized, but impairment is tested at least annually. 2.8. Property and equipment Property and equipment are stated at cost, net of accumulated depreciation and/or accumulated losses from impairment, if this is the case. Depreciation is calculated on a straight-line basis and takes into consideration the rates mentioned in Note 10 and the estimated useful life of assets. Expenses with repairs and maintenance are accounted for only when the economical benefits associated to these items are likely and the values are measured in a trustworthy manner, when the other expenses are recorded directly in P&L when incurred. A property and equipment item is written of when disposed of or when no future economic benefit is expected from its use or disposal. Any gain or loss from the asset write-off (calculated as the difference between the assetâ&#x20AC;&#x2122;s net sales value and its book value) is recognized in P&L for the year in which the asset is written off. The net book value and useful life of assets and depreciation methods are reviewed at each balance sheet date and adjusted prospectively, if necessary.

BHG S.A. - Brazil Hospitality Group Notes to the financial statements (Continued) December 31, 2011 (Amounts in thousands of reais, except where otherwise mentioned)

2. Accounting policies (Continued) 2.9. Intangible assets Intangible assets acquired separately are measured at cost at their initial recognition. The cost of intangible assets acquired in a business combination corresponds to the fair value at the acquisition date. After initial recognition, intangible assets will be presented at cost, minus accumulated amortization and impairment. Intangible assets generated internally, excluding capitalized development costs, are not capitalized, and the expense is reflected in the operations statement in the year in which it incurs. Intangible assets with defined useful lives are amortized throughout their useful economic lives and evaluated in relation to impairment losses, whenever there are indications of losses in impairment. The period and method of amortization for an intangible asset with defined useful life are revised at least at the end of each financial year. Changes in the estimated useful lives or in the expected consumption of future economical benefits of these assets are accounted for through changes in the period, or amortization method, according to the case, being treated as changes in accounting estimates. The amortization of intangible assets with defined useful lives, are recognized in the statement of operations in the expense category consistent with the use of the intangible asset. Intangible assets with indefinite useful live are not amortized, but they are tested on an annual basis with regards to impairment, individually or at cash generation unit levels. The assessment of indefinite useful life is revised annually to determine if this evaluation is still justifiable. On the other hand, changes in indefinite useful economical lives to definite are carried out prospectively. Profit and losses from write-offs of intangible assets are measured as the difference between net value from sale and accounting value of the asset, are being recognized in the statement of operations at the moment of the asset is written off.

BHG S.A. - Brazil Hospitality Group Notes to the financial statements (Continued) December 31, 2011 (Amounts in thousands of reais, except where otherwise mentioned)

2. Accounting policies (Continued) 2.10. Provision for impairment of non-financial assets Management reviews the net book value of assets on an annual basis, in order to assess any events or changes in economic, operating or technological circumstances that could indicate impairment or loss of recoverable value. When such evidence is found, and net book value exceeds recoverable amount, a provision for impairment is recorded so as to adjust the net book value to the recoverable amount. The recoverable value of an asset or of a given cash generating unit is defined as the highest between the value in use and net sales value. In assessing an assetâ&#x20AC;&#x2122;s value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects the weighted average cost of capital for the industry where the cash-generating unit operates. The net sales value is determined considering, whenever possible, firm sale agreements between knowledgeable and willing parties in armâ&#x20AC;&#x2122;s length transactions, less costs of disposal; if no outright sale agreements can be identified, this will be based on the market price of an active market or the price of the most recent transaction involving similar assets. 2.11. Loans and financing After initial loan and financing recognition subject to interest are measured subsequently by amortized cost, using the effective interest rate. Income and losses are recognized in the statement of operations through the write off of liabilities, as well as during the amortization process through the effective interest rate method.

BHG S.A. - Brazil Hospitality Group Notes to the financial statements (Continued) December 31, 2011 (Amounts in thousands of reais, except where otherwise mentioned)

2. Accounting policies (Continued) 2.12. Other assets and liabilities An asset is recognized in the balance sheet when it refers to resources controlled by the Company arising from past events and from which future economic benefits are likely to be generated. Liabilities are recognized in the balance sheet when the Company has a legal or constructive obligation arising from past events, the settlement of which is expected to result in an outflow of economic benefits. Assets and liabilities are classified as current whenever their realization or settlement is likely to occur within the following twelve months. Otherwise, they are stated as non-current. 2.13. Accounts payable and advances from clients for acquisition of properties For property acquisition operations, the Company may engage in commitments for payment in kind or with future delivery of units, in the case of property development of land. 2.14. Taxation Taxes on sales and services Selling and service revenues are subject to the following taxes and contributions, at the rates shown below: â&#x2013;ş â&#x2013;ş â&#x2013;ş

Social Contribution Tax on Gross Revenue for Social Integration Program (PIS) - 0.65% and 1.65%; Social Contribution Tax on Gross Revenue for Social Security Funding (COFINS) - 3.0% and 7.65%; Service Tax (ISS) - from 2% to 5%.

These charges are shown as sales deductions in P&L.

BHG S.A. - Brazil Hospitality Group Notes to the financial statements (Continued) December 31, 2011 (Amounts in thousands of reais, except where otherwise mentioned)

2. Accounting policies (Continued) 2.14. Taxation (Continued) Income and social contribution taxes - current Income taxes comprise both income and social contribution taxes. Income tax is calculated at a rate of 15%, plus a surtax of 10% on taxable income exceeding R$ 240 over 12 months, whereas social contribution tax is computed at a rate of 9% on taxable profit, both recognized on an accrual basis; therefore additions to book income of temporarily non-deductible expenses or exclusions of temporarily non-taxable income upon determination of current taxable profit generate deferred tax assets or liabilities. Tax prepayments or amounts subject to offset are stated as current or non-current assets, according to estimated realization. Income and social contribution taxes - deferred Deferred income and social contribution tax assets are recognized only to the extent in which it is likely that there will be a positive taxable base for which the temporary differences may be used and tax losses offset. Recovery of deferred tax assets balance is reviewed at the end of each year, and, when it is no longer likely that future taxable income will be available to recover the balance of the asset, it is adjusted according to the amount that is expected to be recovered. Significant judgment of the Administration is required to determine the value of deferred tax assets that can be recognized, based on the probable term and level of future taxable income, jointly with strategies of future tax planning.

BHG S.A. - Brazil Hospitality Group Notes to the financial statements (Continued) December 31, 2011 (Amounts in thousands of reais, except where otherwise mentioned)

2. Accounting practices (Continued) 2.15. Share-based payments The Company granted eligible officers and employees of the Company or of subsidiaries call options that are settable in shares and that may only be exercised after specific grace periods. Cost of equity-settled transactions with employees is measured considering the fair value on the grant date, determined based on the binomial valuation method. The cost of equity-settled transactions is recognized together with a corresponding increase in equity, during the period in which the performance and/or service conditions are met, ending on the date on which the relevant employees become fully entitled to the award (“vesting date”). The cumulative expense recognized for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Company’s estimate of the number of shares that will be acquired. The income or expense in P&L is recognized under “personnel expenses” and represents the changes in accumulated expenses recognized at the beginning and end of that period. 2.16. Other employee benefits Benefits granted to Company employees and officers include, in addition to fixed compensation (salaries and contributions to the National Social Security Institute (INSS), vacation pay and 13th monthly salary), variable compensation, such as profit sharing and bonus payments. Such benefits are stated in P&L for the year, when the Company has an obligation under the accrual regime, as incurred.

BHG S.A. - Brazil Hospitality Group Notes to the financial statements (Continued) December 31, 2011 (Amounts in thousands of reais, except where otherwise mentioned)

2. Accounting policies (Continued) 2.17. Significant judgments, accounting estimates and assumptions Judgments Preparation of the financial statements requires that management make professional judgments, estimates and assumptions that impact the amounts presented in income, expenses, assets and liabilities reported in the financial statements on the base date. However, the uncertainty relative to these assumptions and estimates may lead to results that require a significant adjustment of the book value of the asset or liability affected in future periods. Estimates and assumptions The main assumptions relative to the sources of uncertainty in the future estimates and other important sources of uncertainty in estimates on the date of the balance sheet involving significant risk of causing a significant adjustment in the accounting value of the assets and liabilities in the next financial year are: (i) provision for impairment of non-financial assets; (ii) taxes; (iii) fair value of financial instruments; and (iv) provisions. 2.18. Provisions Provisions are recognized when the Company has a present obligation (legal or constructive) arising from past events, the settlement of which is expected to result in an outflow of economic benefits and a reliable estimate of its value may be made. When the Company expects that the provision amount will be reimbursed, whether fully or partially, the reimbursement is recognized as a separate asset, but only when it is practically certain that it will occur. Expenses referring to provisions are recorded in P&L, net of reimbursement.

BHG S.A. - Brazil Hospitality Group Notes to the financial statements (Continued) December 31, 2011 (Amounts in thousands of reais, except where otherwise mentioned)

2. Accounting policies (Continued) 2.18. Provisions (Continued) Provisions for tax, civil and labor risks Provision for contingencies is set up for cases in which it is probable that an outflow of resources will be necessary to settle the contingency and a reasonable estimate may be made. Assessment of the likelihood of loss includes an analysis of available evidence, hierarchy of laws, available case laws, recent court rulings and their relevance in the Brazilian legal system, in addition to assessment by outside lawyers. The provisions are reviewed and adjusted to take into consideration changes in circumstances, such as applicable statute of limitations, conclusions of tax audits or additional exposures identified based on new matters or court decisions. 2.19. Financial instruments Financial instruments are only recognized when the Company becomes a party to the contractual provisions of said instruments. They are initially recognized at fair value plus transaction costs directly attributable to their acquisition or issue, except for financial assets and liabilities classified at fair value through profit or loss, when such costs are directly charged to P&L for the year. Their subsequent measurement is determined by their classification as financial assets and liabilities at each balance sheet date. Financial assets are classified as follows according to the purpose for which they were acquired or issued i.

Financial assets measured at fair value through income or loss These include financial assets for trading and assets designated in the initial recognition at fair value through P&L. They are classified as kept trading if they were originated for short-term sale or repurchase. Interest, monetary restatement, foreign exchange variation and variations arising out of valuation at fair value are recognized in P&L when incurred in financial revenues or expenses account.

BHG S.A. - Brazil Hospitality Group Notes to the financial statements (Continued) December 31, 2011 (Amounts in thousands of reais, except where otherwise mentioned)

2. Accounting policies (Continued) 2.19. Financial instruments (Continued) ii.

Receivables Lending and receivables are non-derivative financial assets, with payments that are fixed or subject to determination, but not quoted in an active market. Interest, monetary restatement and foreign exchange variation, less impairment, where applicable, are recognized in P&L when incurred, under financial income or expenses account. Main financial assets recognized by the Company are: cash and cash equivalents, trade accounts receivables and occasionally, receivables from sale of investments. These are classified among the categories below, according to the nature of the financial instruments taken out or issued:

iii. Financial liabilities measured at fair value through P&L Including derivatives. When the balance is closed, it is measured at fair value. Interest, monetary restatement, foreign exchange variation and variations arising out of fair value adjustment, where applicable, are recognized in P&L. iv. Financial liabilities not measured at fair value Non-derivative financial liabilities which are not usually traded before maturity. Interest, monetary restatement and foreign exchange variation, where applicable, are recognized in P&L. Main financial liabilities recognized by the Company are: suppliers, payables for acquisition of investments and financings.

BHG S.A. - Brazil Hospitality Group Notes to the financial statements (Continued) December 31, 2011 (Amounts in thousands of reais, except where otherwise mentioned)

2. Accounting policies (Continued) 2.20. Treasury shares Own equity instruments that are repurchased (treasury shares) are recognized at cost and deducted from equity. No gains or losses are recognized in P&L upon purchase, sale, issue or cancellation of the Company's own equity instruments. The difference between book value and the consideration is recognized as other capital reserves. 2.21. Earnings per share In accordance with accounting pronouncement CPC 41 (IAS 33)earnings per share are calculated and presented in the basic and diluted format, as per Note 26. 2.22. Information by business segment Reporting of operating segments is consistent with the organizational structure and with internal reports provided to the major decision maker (Chief Operating Decision Maker - CODM, identified as the Company’s CEO), responsible for allocating resources and assessing the Company’s performance. For management purposes, the Company is divided into business units, based on the services, and the two operating segments subject to disclosure of information are as follows: ► ► ►

Hospitality; Real estate; Corporate.

BHG S.A. - Brazil Hospitality Group Notes to the financial statements (Continued) December 31, 2011 (Amounts in thousands of reais, except where otherwise mentioned)

2. Accounting policies (Continued) 2.23. Cash flow statements and statement of value added Cash flow statements were prepared and are presented in accordance with CPC 03 Cash Flow Statements. Cash flow statements were prepared and are presented in accordance with CPC 09 - Statement of Value Added. The purpose of the statements of value added is to state the wealth created by the Company and its subsidiaries as well as its distribution within a certain period, and these are presented by the Company pursuant to the Brazilian corporation law, as a part of its individual financial statements and as supplementary information to the consolidated financial statements, since the SVA is not compulsory under the IFRS.

3. New standards and interpretations of regulations not yet in force The following regulations, amendments and interpretations were issued by IASB, but they are not effective for 2011. The early adoption of these regulations, despite being encouraged by the IASB, was not allowed in Brazil by the CPC. IFRS 9 - "Financial Instruments" - Classification, measurement and recognition of financial assets and liabilities. IFRS 9 was issued on November 2009 and October 2010 and replaces parts of IAS 39 related to the classification and measurement of financial instruments. IFRS 9 requires the classification of financial assets in two categories: measured at fair value and measured at amortized cost. The determination is carried out upon initial recognition. The basis for classification depends on the Company's business models and on the contractual characteristics of the cash flow of financial instruments. Regarding financial liabilities, the regulation maintains most of the requirements of IAS 39. The main change is that in the cases in which the fair value option is adopted for financial liabilities, the portion of change in fair value due to the risk of credit of the entity is recorded in other comprehensive results and not in financial statements, except when this results in accounting mismatch. BHG is evaluating the total impact of IFRS 9. The regulation is applicable as of January 1, 2013.

BHG S.A. - Brazil Hospitality Group Notes to the financial statements (Continued) December 31, 2011 (Amounts in thousands of reais, except where otherwise mentioned)

3. New standards and interpretations of regulations not yet in force (Continued) IFRS 10 - "Consolidated Financial Statements" is based on existing principles, identifying the concept of control as a main factor to determine if an entity must or must not be included in the Company's consolidated financial statements. The norm allows for additional guidance to determine control. BHG is evaluating the total impact of IFRS 10. The regulation is applicable as of January 1, 2013. IFRS 11 - "Joint Agreements" issued in May 2011. The regulation provides for a realistic approach on joint agreements by focusing on rights and obligations instead of their legal form. There are two types of joint agreements: joint operations - which takes place when an operator has rights over contractual assets and liabilities and as a consequence will record its part in assets, liabilities, revenues and expenses; and (ii) joint control - this takes place when an operator has rights over net assets in the contract and records investments through the equity method. The proportional consolidation method will not be allowed for joint control. The norm is applicable as of January 1, 2013. IFRS 12 - "Disclosures on Interest in Other Entities", regards disclosure demands for all forms of interest held in other entities, including joint agreements, associations, specific purpose interest and other interest not recorded in accounting. BHG is evaluating the total impact of IFRS 12. The regulation is applicable as of January 1, 2013. IFRS 13 - "Fair Value Measurement", issued in May 2011. The objective of the IFRS 13 is to improve the consistency and reduce the complexity of fair value measurement, offering a more precise definition and a sole source of fair value measurement and demanding the disclosure for use in IFRS. The demands, which are quite aligned with IFRS and US GAAP, do not increase the use of fair value accounting, but offer guidance on how to apply it when its use is required or allowed by IFRS or US GAAP regulations. The Group is evaluating the total impact of IFRS 13. The regulation is applicable as of January 1, 2013. There are no other IFRS regulations or IFRIC interpretations that are still not effective which could significantly impact the financial statements.

BHG S.A. - Brazil Hospitality Group Notes to the financial statements (Continued) December 31, 2011 (Amounts in thousands of reais, except where otherwise mentioned)

4. Business combinations On March 22, 2011, the Company, through its subsidiary BHG Mato Grosso Empreendimento Hoteleiro Ltda., entered into a Purchase and Sale Agreement with which it acquired all shares representing the capital of Brascan ImboliĂĄria Hotelaria e Turismo S.A. ("Intercontinental), the sole owner of the property located in the neighborhood of SĂŁo Conrado, city and state of Rio de Janeiro, where the Hotel Intercontinental is located. Consideration transferred for the acquisition of Intercontinental totaled R$ 93,918 thousand in demand payments. The Company evaluates on the acquisition date, the assets and liabilities acquired, taken on by their fair values, whose details are described below: Acquisition date Net assets acquired at accounting value Adjustments at fair value recorded in assets and liabilities Deferred income tax, net (i) Other assets (ii) Net assets acquired at fair value (i) (ii)

101,308 (3,343) (4,047) 93,918

The Company reevaluated assets and liabilities deferred on tax losses and temporary bases in the extent considered sufficient for realization; Assets considered to be non-realizable for the Company's Management.

5. Cash and cash equivalents Cash and cash equivalent balances are held so as to meet short-term cash commitments, and not for investment or other purposes. Company 2011 Cash FIM Beach Fund (Pactual) {a} CDB/RDB Government bonds Repurchase agreements/debentures Other investments Total cash and cash equivalents

275 83 358

2010 242 81,357 19,277 100,876

Consolidated 2011 2010 6,650 13,017 8,105 1,213 28,985

(a) Investment made by means of Exclusive Investment Fund structures, seeking income linked to the CDI.

6,423 59,724 6,657 47,604 1,300 121,708

BHG S.A. - Brazil Hospitality Group Notes to the financial statements (Continued) December 31, 2011 (Amounts in thousands of reais, except where otherwise mentioned)

5. Cash and cash equivalents (Continued) The Companyâ&#x20AC;&#x2122;s short-term investments have the following characteristics: (i)

Credit risk The Companyâ&#x20AC;&#x2122;s Investment Policy provides for allocation in A-Rated, or higher (national scale), private securities only, in addition to considering instruments that avoid concentration of more than 30% of equity on a single issuer.

(ii) Market risk At December 31, 2011 and 2010, allocation of the exclusive fund securities was only made in assets linked to the CDI variation. The financial statements of the exclusive fund are regularly examined by independent auditors. The exclusive fund is subject to obligations restricted to payment of services rendered by the asset manager, such as custody charges, audit and other expenses, thus there is no link to commitments.

6. Trade accounts receivable The aging list of accounts receivable as of December 31, 2011 and 2010 is shown below: Consolidated Billing and credit cards receivable Not yet due Overdue From 1 to 30 days From 31 to 60 days From 61 to 90 days From 91 to 180 days From 181 to 360 days Over 360 days Accommodated guests (a) Billings in process (b) (-) Allowance for doubtful accounts

(a) (b)

2011

2010

19,389

14,269

2,760 804 569 798 441 1,195 25,956 1,032 4,762 (600) 31,150

1,339 1,588 639 846 756 950 20,387 1,814 2,929 (149) 24,981

Refers to guests who have already generated income to the Company (rates incurred), but are still accommodated in the Company hotels at the year end. Refers to guests who have already left the hotels, but the related billing processes have not yet been concluded. Said billing is basically relative to corporate clients whose bureaucratic demands cause delays in the process.

BHG S.A. - Brazil Hospitality Group Notes to the financial statements (Continued) December 31, 2011 (Amounts in thousands of reais, except where otherwise mentioned)

6. Trade accounts receivable (Continued) The Management believes that the risk relative to accounts receivables is minimized by the fact that the Company's client composition is greatly made up of large companies/travel agencies, and maturities in 360 days. Total overdue for over 360 days do not represent isolated the aging of accounts receivable, as most are regular clients with which we are dealing with and negotiating amounts individually, with good chances of receipt. We had a reduction in balances in all items, except for the values overdue between 1 and 30 days which is explained by the larger recent base of recent hotels added to the Company's portfolio. Changes in allowance for loan losses are as follows: Consolidated 2011 2010 Balance at the beginning of the year Complement of provision in year Amounts written-off from the provision Balance at the end of year

(149) (451) (600)

(164) 15 (149)

For purposes of recognizing the Provision for Doubtful Accounts (PDA) the Company analyzes each overdue item and after exhausting all collection attempts the provision is recognized, considering that said provision may be reversed if clients settle their debts to be able to use the Company's services again in the future.

7. Receivables from investments disposed of Receivables from investments disposed of At December 31, 2009 and 2010 (+) Additions (-) Write offs (+/-) Transfers Balances at December 31, 2011 Current assets Non-current

Company

Consolidated

45,722 7,030 (52,752) -

45,722 26,030 (56,109) 15,643

2,114 13,529

BHG S.A. - Brazil Hospitality Group Notes to the financial statements (Continued) December 31, 2011 (Amounts in thousands of reais, except where otherwise mentioned)

7. Receivables from investments disposed of (Continued) On July 27, 2009, the Company transferred shares representing the totality of the capital of Kino Empreendimento Imobiliário SPE S.A. to BramexRealty S.A., Ermenouville Participações Ltda. and SDI Desenvolvimento Imobiliário Ltda. Pursuant to the agreement, as a trade-off, the Company would participate in a portion of the result of sales of a real estate project to be implemented in the area owned by Kino, corresponding to 29.75% of the overall sales value of such project. As the agreement establishes that the receipts will begin after a two-year period, accounts receivable was initially recognized under non-current assets. On December 23, 2010, the Company signed a Memorandum of Understanding with a view to anticipating the receipt of its share in the referred to project. The objective of this Memorandum is to establish the relationship between the Company and its subsidiary Invest Tur Participações Ltda. and STAN Empreendimentos e Participações Ltda. (“STAN”), whereby at least 75% to 100% of credit rights regarding the mentioned project, jointly held by BHG and its subsidiary, will be assigned and transferred, the trade-off of which is payment of R$ 52.4 million by STAN for 100% of such rights. At January 21, 2011, the Company signed the Private Instrument of Purchase and Sale of Credits and Other Covenants with STAN, therefore concluding the operations object of the Memorandum of Understandings. With the conclusion of negotiations, BHG received, from the advance of receivables, the amount of R$ 52,400 thousand, fully received in five monthly installments. The Company had a revenue of R$ 7,030 from the operation recorded under "Other operating revenues (expenses)" in the financial statements. At June 30, 2011, the Company sold all of its Tx Agropecuária e Turismo S.A. and Tx Assessoria e Gerenciamento de Hotéis S.A. controlled indirectly by Tx Empreendimentos, for R$ 19,000, of which R$ 2,350 were paid in cash, R$ 1,850 in a 180-day deadline and R$ 14,800 in seven equal successive installments, with annual maturities between 2012 and 2018. The values of the installments receivables will suffer a 100% restatement of the Interbank Deposit Certificates added of 1% per year, up to the date of its effective payment. The Company had a revenue of R$ 350 from the operation recorded under "Other operating revenues (expenses)" in the financial statements.

BHG S.A. - Brazil Hospitality Group Notes to the financial statements (Continued) December 31, 2011 (Amounts in thousands of reais, except where otherwise mentioned)

7. Receivables from investments disposed of (Continued) BHG will continue to manage Txai Resort ItacarĂŠ for a minimum period of 10 years, in addition to maintaining rights over the use of the Txai brand for future launches in the landbank, such as the Txai Ganchos Project, in Governador Celso Ramos (SC) and also Txai Terravista Trancoso, located in the Tourist Complex Terravista, in Trancoso (BA).

8. Inventories of properties for sale â&#x20AC;&#x201C; non-current Company

Consolidated

70,086 2,724 72,810 72,810

282,773 586

(32,045) (32,045) -

(125,680) (125,680) 5,355 -

(32,045)

(120,325)

40,765 40,765

158,173 157,679

Land for development of projects and initial expenses Balances at December 31, 2009 (+) Additions (-) Write Offs (+/-) Transfers Balances at December 31, 2010 (+) Additions (-) Write Offs (+/-) Transfers Balances at December 31, 2011

283,359 612 (5,473) 278,498

Provision for impairment Balances at December 31, 2009 (+) Additions (-) Write Offs (+/-) Transfers Balances at December 31, 2010 (+) Additions (-) Write Offs (+/-) Transfers Balances at December 31, 2011 Net value Balances at December 31, 2011 Balances at December 31, 2010

These refer to expenses with acquisition of land, mostly along the Brazilian coast, intended for real estate property development in the hospitality segment and of residential condos, substantially for tourism and leisure purposes.

BHG S.A. - Brazil Hospitality Group Notes to the financial statements (Continued) December 31, 2011 (Amounts in thousands of reais, except where otherwise mentioned)

8. Inventories of properties for sale - non-current (Continued) In order to be carried out, the real estate projects are subject to approvals from public authorities, such as Local and State Governments, the Brazilian Institute of the Environment and Renewable Natural Resources (IBAMA), among others. The Company is following the normal course for project feasibility purposes, and there are no known restrictions for their development. Once the project licenses, grants and economic feasibility are approved, the construction phase begins. At least once a year, the Company carries out the analysis of the indicators relative to the capacity of recovery of the values recorded, as regulated by CPC 01 - Reduction of Asset Recovery. At December 31, 2011, the Company engaged a company specializing in the evaluation of assets to determine the sufficient amount of provisions for reduction at recoverable value of land and did not identify the need for complement or reversal of amounts formerly recorded in these provisions.

9. Investments Company

2011

2010

Equity pickup Goodwill

294,294 24,161

221,521 24,161

Total

318,455

245,682

BHG S.A. - Brazil Hospitality Group Notes to the financial statements (Continued) December 31, 2011 (Amounts in thousands of reais, except where otherwise mentioned)

9. Investments (Continued) a)

Information on the investment in directly controlled subsidiaries

Interest % BHG Participações TX Emp. Imobiliário SPE S.A. Onda Azul Emp.Hot.Ltda. TX Sta Catarina SPE Emp. Turís. BHG Centro-Oeste Empreendimentos Ltda. Nossa Senhora de Vitória Emp.Hot. Kino Empreendimento Hoteleiro Ltda. Salvador Downtown Emp. Hot. Ilha de Canavieiras Emp. Imob. Ltda. Ilha de Canavieiras Resort Ltda. Nsa Sra da Vitoria Emp.Tur.Imob. S.A. Camocim Emp. Tur. Imob. S.A. Marsala incorporação SPE S.A. Praia da Ponta Emp. Imob. SPE Ltda. Tx Paraty SPE Empreendimentos Imob Ltda. Carro Quebrado SPE Emp.TurImob. Deep Beach SPE Emp.Tur e Imob Tx Salvador SPE Emp. Tur. Ilha do Atalaia SPE Emp. Tur. Imob. Tucurui Empreendimentos Imob. Tx Salvador Empr. Imobiliários Port Beach Empreend. Turístico. Onda Azul Emp. Imob. Onda Azul Emp Turísticos. TX Onda Azul Emp Imob Ltda.

Summarized financial information of affiliates and subsidiaries at December 31, 2011 Future capital P&L for the contribution Assets Liabilities Equity period

Equity pickup (Company)

Goodwill from Asset appreciation

Investments balance

2011

100.00% 100.00% 99.90% 100.00% 100.00% 100.00% 99.90% 99.90% 70.00% 70.00% 100.00% 66.67% 50.00% 100.00% 100.00%

61 3,936 109 8 30 50 49,278 11,011 30 817 60 243

6,634 16,130 4 8 24 12 100,191 23,920 166 529 4,591 9,702 4,031 8,202 4,805

98 3,936 117 13 33 50 94,650 16,668 644 2,777 964 7,251 2,881 66 271

6,975 11,236 (20) 3 19 6 722 7,539 (359) (1,888) 3,810 3,969 1,810 8,204 4,792

(439) 958 (93) (8) (28) (44) 4,819 (287) (119) (360) (183) (1,518) (660) (68) (258)

(439) 958 (93) (8) (28) (44) 4,814 (287) (83) (252) (183) (1,012) (659) (68) (258)

169 3,165 4,376 2,876 -

6,536 12,194 (113) (5) (9) 131 5,535 7,245 2,830 2,802 3,627 4,510 1,150 8,136 4,534

100.00% 100.00% 100.00% 100.00% 49.00% 100.00% 100.00% 100.00% 100.00% 100.00%

37 54 1,169 65 1,377 6 4,704 108 106 98

7,662 12,300 2,705 1,318 25,196 19 5,902 229 41 343

37 339 1,186 73 1,646 12 4,704 117 116 108

7,657 12,023 1,622 1,302 23,646 13 1,207 208 18 327

(32) (62) (103) (57) (96) (6) (9) (96) (93) (92)

7,625 11,961 1,519 1,245 23,550 7 1,198 112 (75) 235

BHG S.A. - Brazil Hospitality Group Notes to the financial statements (Continued) December 31, 2011 (Amounts in thousands of reais, except where otherwise mentioned)

9. Investments (Continued) a)

Information on the investment in directly controlled subsidiaries (Continued)

Interest % TX Onda Azul Emp Tur. Ltda. Conde Residence Emp. Imob. SPE Terravista Investimentos Ltda. Wind Beach Empreend. Tur.Imob. Camaragibe Empreend.Imob. Marina Camaragibe Emp. Náutico LA Hotels Empreendimentos1Ltda. Hotel Della Volpe Ltda. LA Hotels Serviços Ltda. LA Hotels Nordeste LA Hotels Sul Ltda. Melongena Participações Ltda. Merak Empreendimentos e Part. BHG Norte Emp. Hoteleiro Ltda. BHG Mato Grosso SPE Tulip Inn Itaguaí Melongena Empreendimentos 1 Ltda. Melongena Empreendimentos 2 Ltda. Hotel HSC Ltda Total

100.00% 62.00% 87.75% 100.00% 100.00% 99.90% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 53.33% 100.00% 100.00% 100.00%

Summarized financial information of affiliates and subsidiaries at December 31, 2011 Future capital P&L for the contribution Assets Liabilities Equity year 117 30 73 113 44 3,640 21,818 10,430 4,702 934 9,161 246 60,108 275 126,049 3,044 425

2 10,583 13,723 5,403 185 189 12,292 134,982 9,013 15 4,474 99,099 59,112 13,065 99,248 1,986 197,360 3,045 6,721

127 221 6,967 73 121 65 5,451 85,671 12,167 4,728 22,866 18,654 7,183 96,229 277 197,314 3,044 5,017

(23) 10,842 7,319 5,411 167 143 6,253 40,684 (1,695) 16 36 73,796 39,566 3,788 2,467 1,800 1 1 1

(102) (480) (563) (81) (103) (19) 588 8,627 (1,459) (1) (290) 2,437 892 2,094 552 (91) 45 1,704

Equity pickup (Subsidiary) at the year ended Goodwill from December 31, Asset 2011 appreciation 2011 (102) (298) (494) (81) (103) (19) 588 8,627 (1,459) (1) (290) 2,437 892 2,094 553 (49) 45 1,704 15,755

2011 622 12,953 24,161

Investments balance 2011 (125) 6,363 4,821 5,330 64 124 6,840 49,323 (3,154) 15 (254) 76,233 40,458 6,504 15,972 1,709 46 1 1,704 318,455

BHG S.A. - Brazil Hospitality Group Notes to the financial statements (Continued) December 31, 2011 (Amounts in thousands of reais, except where otherwise mentioned)

9. Investments (Continued) a)

Information on the investment in directly controlled subsidiaries (Continued)

Summarized financial information of affiliates and subsidiaries at December 31, 2010 Future capital P&L for the contribution Assets Liabilities Equity year

Equity pickup (Company) for the year Goodwill from ended asset 12/31/2010 appreciation 2010

2010

Investments balance 2010

100.00% 100.00% 99.90% 100.00%

9,180 7,100 1,225 897

7,594 18,679 2 10

9,286 7,442 1,247 905

(1,692) 11,237 (1,245) (895)

1,189 (1,368) (45) (214)

(1,187) (1,368) (45) (214)

(1,690) 11,237 (1,243) (895)

100.00% 100.00% 99.90% 99.90% 70.00% 70.00% 100.00% 66.67% 50.00% 100.00%

428 45,750 4,092 423 887 18,301

22 6 81,622 16,980 115 64 423 9,670 4,074 8,210

431 423 88,690 9,341 475 1,953 4,588 5,701 2,264 18,307

(409) (417) (7,069) 7,639 (359) (1,888) 779 3,969 1,810 (10,096)

7 10 (6,233) (340) (110) (304) (123) (1,185) (729) (40)

7 10 1,720 (439) (77) (213) (123) (790) (798) (40)

169 3,165 4,376 2,876 -

(409) (417) 884 7,532 (252) (1,322) 3,810 2,646 1,770 (10,096)

100.00% 100.00% 100.00% 100.00% 100.00% 49.00% 100.00% 100.00% 100.00% 100.00% 100.00%

744 14,095 1,015 1,077 278 1,824 416 4,694 1,385 1,572 1,549

4,807 7,657 12,300 2,713 1,308 25,059 19 5,901 243 41 351

760 14,095 1,300 1,091 285 1,413 422 4,694 1,418 1,596 1,573

4,047 (6,437) 11,000 1,622 1,024 23,646 (402) 1,207 (1,175) (1,555) (1,222)

(68) (2) (392) (68) (36) (109) (27) (52) (46) (69)

4,047 (6,437) 11,000 1,622 1,024 23,645 (402) 1,207 (1,174) (1,553) (1,221)

BHG S.A. - Brazil Hospitality Group Notes to the financial statements (Continued) December 31, 2011 (Amounts in thousands of reais, except where otherwise mentioned)

9. Investments (Continued) a)

Information on the investment in directly controlled subsidiaries (Continued) Summarized financial information of affiliates and subsidiaries at December 31, 2010 Interest % TX Onda Azul Emp Tur. Ltda. Conde Residence Emp. Imob. SPE Terravista Investimentos Ltda. Wind Beach Empreend. Tur.Imob. Camaragibe Empreend.Imob. Marina Camaragibe Emp. Náutico LA Hotels Empreendimentos1Ltda. Hotel Della Volpe Ltda. LA Hotels Serviços Ltda. LA Hotels Nordeste LA Hotels Sul Ltda. Melongena Participações Ltda. Merak Empreendimentos e Part. BHG Norte Emp. Hoteleiro Ltda. BHG Mato Grosso SPE Tulip Inn Itaguaí Melongena Empreendimentos 1 Ltda. Melongena Empreendimentos 2 Ltda. Hotel HSC Ltda Total

100.00% 62.00% 87.75% 100.00% 100.00% 99.90% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 53.33% 100.00% 100.00% 100.00%

AFCI 1,714 30 749 1,005 208 5,471 18,867 3,368 3,135 470 8,811 850 -

Assets 1 10,780 6,162 5,412 189 158 12,317 114,047 2,117 15 4,683 82,687 53,228 10,237 3,616 -

Liabilities 1,738 32 105 750 1,027 228 6,874 73,311 3,825 4,636 26,545 13,663 6,504 1,155 -

Equity (1,737) 10,748 6,056 4,662 (838) (70) 5,443 40,736 (1,708) 15 47 56,142 39,566 3,733 2,461 -

P&L for the period (80) 490 (773) (96) (82) 5 1,645 2,758 (1,663) (1) 45 (4,633) 1,017 (104) 918 -

Equity pickup (Company)

Goodwill from asset appreciation

Investments balance

2010

(80) (304) (678) (96) (82) 5 1,742 2,718 (1,662) (1) 45 4,419 1,017 (104) 918 3,431

622 12,953 24,161

(1,736) 6,664 5,314 4,662 (837) (70) 5,632 40,696 (1,708) 15 47 73,864 39,566 3,638 2,461 245,682

BHG S.A. - Brazil Hospitality Group Notes to the financial statements (Continued) December 31, 2011 (Amounts in thousands of reais, except where otherwise mentioned)

10. Property and equipment Details of the Company's P&E are as follows:

IT Equipment

Machinery and equipment

Building

Company Furniture and Leasehold fixtures improvements

Land

Advances

Total

Cost or evaluation Balances at December 31, 2009 (+) Additions (-) Write Offs Balances at December 31, 2010 (+) Additions (-) Write Offs Balances at December 31, 2011

985 1,315 (376) 1,924 452 2,376

71 7 (3) 75 11 86

18,696 18,696 4,753 23,449

1,032 63 (63) 1,032 1,032

1,381 25 (25) 1,381 20 1,401

8 8 (8) -

21,405 21,405

3,469 20,114 (467) 23,116 26,641 (8) 49,749

Depreciation Balances at December 31, 2009 Depreciation for the year (-) Write Offs Balances at December 31, 2010

(303) (840) 388 (782)

(16) (6) 3 (19)

(193) (136) 63 (266)

(1,126) (53) 24 (1,155)

(1,638) (1,035) 451 (2,222)

Depreciation for the year (-) Write Offs Balances at December 31, 2011

(406) 28 (1,160)

(7) (26)

(377) (377)

(104) (370)

(29) (1,184)

(923) 28 (3,117)

Residual value Balances at December 31, 2011 Balances at December 31, 2010 Useful life in years

1,216 1,142 10

60 56 20

23,072 18,696 10 to 62

662 766 15

217 226 10

8 -

21,405 -

46,632 20,894 -

BHG S.A. - Brazil Hospitality Group Notes to the financial statements (Continued) December 31, 2011 (Amounts in thousands of reais, except where otherwise mentioned)

10. Property and equipment (Continued) Machinery and IT Equipment equipment

Building

Consolidated Furniture and Leasehold fixtures improvements Land

Construction in progress

Other

Advances

(37,004) 21,784

1,130 192 1,322 34,150 35,472

24,444 24,444

270,619 145,916 (577) (13,418) 402,540 373,239 (69,218) 743,565

(125) (210) (3,718) (3,928)

(44,276) (11,146) 523 (42,987) (16,920)

15,126 12,944 -

21,784 49,609 -

30,502 1,112 10

24,444 -

677,817 359,553 -

Cost or evaluation Balances at December 31, 2009 (+) Additions (-) Write Offs (+/-) Transfers Balances at December 31, 2010 (+) Additions (-) Write Offs (+/-) Transfers Balances at December 31, 2011

2,616 2,319 (53) 4,882 2,811 7,693

9,028 17,511 (78) 26,461 2,780 (12,415) 16,826

205,350 92,011 (358) (11,912) 285,091 290,895 (15,524) 37,004 597,466

10,911 2,121 (63) 12,969 6,717 (2,076) 17,610

8,082 1,205 (25) 9,262 73 (2,191) 7,144

12,336 608 12,944 2,190 (8) 15,126

Depreciation Balance at December 31, 2009 Depreciation for the year (-) Write Offs (+/-) Transfers Balances at December 31, 2010 Depreciation for the year (-) Write Offs (+/-) Transfers Balances at December 31, 2011

(1,550) (740) 35 (2,255) (170) (2,425)

(8,201) (1,672) 78 (9,795) 8,155 (1,640)

(27,214) (7,632) 358 (22,576) (12,853) (15,447) (50,876)

(2,641) (984) 46 (3,579) 74 (3,505)

(4,460) (118) 6 (4,572) (179) 2,377 (2,374)

Residual value Balances at December 31, 2011 Balances at December 31, 2010 Annual rate

5,268 2,627 10

15,186 16,666 20

546,590 262,515 10 to 62

14,105 9,390 15

4,770 4,690 10

21,166 29,949 (1,506) 49,609 9,179

Total

(65,748)

BHG S.A. - Brazil Hospitality Group Notes to the financial statements (Continued) December 31, 2011 (Amounts in thousands of reais, except where otherwise mentioned)

10. Property and equipment (Continued) The Company evaluates the useful life of these assets on a regular basis, reaching the conclusion that no significant changes were necessary at December 31, 2011, in relation to the useful lives at December 31, 2010. In 2011, we engaged a specialized company to evaluate the hotels acquired more than three years ago in Rio de Janeiro (Golden Tulip Regente, Golden Tulip Continental e Tulip Inn Copacabana) and São Paulo (Golden Tulip Belas Artes), whose operations are relatively mature, recorded in P&E for R$ 133.5 million. The specialists evaluated these assets at R$ 465.9 million (unaudited). The difference of R$ 332.4 million was recognized due to the prohibitions from Technical Pronouncements CPC 27 - Property and Equipment. The property where Tulip Inn São José dos Pinhais, Tulip Inn Santa Felicidade, Tulip Inn Campo Largo, Tulip Inn Batel, Golden Tulip Regente (bloco “c”), Golden Tulip Porto Bali, Golden Tulip Continental, Golden Tulip Belas Artes, Golden Tulip Rio Vermelho, Golden Tulip Recife and Golden Tulip Foz do Iguaçu are located were given in guarantee to the loans of the Company (Note 13). There is no property and equipment under financial lease contracts at December 31, 2011 and 2010. On august 25, 2011, the Company signed the agreement for acquisition and operations of 1010 suites between company-owned and managed, from the MB Capital group, distributed across 5 hotels in Belém, capital of the state of Pará. The total value of the contract is R$ 76,500 thousand whose payment is conditioned to compliance of conditions. From this total, the amount of R$ 13,282 thousand was paid as an advance for P&E acquisition. In August 2011 the Company signed the contract for the acquisition of 60 units located in Minas Gerais, relative to the future Tulip Inn Savassi Hotel. The Company carried out an advance of R$ 1,948 thousand, for the acquisition of referred properties. The construction is expected to be concluded in March 2014.

BHG S.A. - Brazil Hospitality Group Notes to the financial statements (Continued) December 31, 2011 (Amounts in thousands of reais, except where otherwise mentioned)

10. Property and equipment (Continued) In early July 2011, the 4th Civil Chamber of the Appellate Court of the State of Rio de Janeiro recognized unanimously the validity of the Private Purchase and Sale Commitment Agreement, signed on August 26, 2010 between BHG and Veplan Hotéis e Turismo S.A. ("Veplan"), company in judicial recovery, for BHG's acquisition of Rio Palace located at Av. Atlântica no. 4.240, Rio de Janeiro. In mid July, one of the creditors approved in the judicial recovery of Veplan presented a stay against the decision of the 4th Civil Chamber of the Appellate Court of the State of Rio de Janeiro, whose provision was unanimously denied in the judgment which took place on August 10, 2011. On August 17, 2011 BHG signed the definitive purchase and sale deed with Veplan for the Rio Palace hotel, upon payment of R$ 184 million. Such decision was subject to appeals requesting clarification in mid-July; one of the creditors licensed in the judicial recovery process of Veplan lodged appeals requesting clarification against the decision issued by the 4th Civil Chamber of the Court of Justice of the State of Rio de Janeiro, which were not approved unanimously in a judgment held on August 10, 2011. However, the 6th Corporate Court of the Circuit Court of Rio de Janeiro recognized an alleged preemptive right of Nova Riotel Empreendimentos Hoteleiros Ltda. (“Nova Riotel”), as a tenant, for the acquisition of the Hotel, even though the acquisition by BHG was carried out legally. By virtue of such decision issued by a lower court, the Company filed, on January 9, 2012, a bill of review before the 4th Civil Chamber of the Court of Justice of Rio de Janeiro in order to reverse the decision issued by a lower court on the alleged preemptive right of Nova Riotel. Rio Palace Hotel is one of the main hotels in the city with a total built-up area of 57,811 m², 388 apartments, ten event rooms for up to 2,000 people and 13 meeting rooms in the business center, two restaurants, bar, gym, and a parking lot in the basement. In 2011, depreciation amounted to R$ 17,961 thousand, an increase of 48% in comparison with R$ 12,129 thousand accounted for in 2010, particularly by virtue of the latest acquisitions.

BHG S.A. - Brazil Hospitality Group Notes to the financial statements (Continued) December 31, 2011 (Amounts in thousands of reais, except where otherwise mentioned)

10. Property and equipment (Continued) In accordance with Accounting Pronouncement CPC 01 (IAS 36), fixed and intangible assets that present evidence that their recorded costs exceed their recoverable amounts are revised annually to decide whether a provision for impairment is needed. The smallest cash-generating unit determined by the Company to assess the impairment of tangible and intangible assets corresponds to each of its hotels. Management did not identify any changes in circumstances or indication of technological obsolescence, as well as evidence that its assets used in its operations are not recoverable upon its operational and financial performance, concluding at December 31, 2011 that there was no need to set up any provision for impairment.

11. Intangible assets 11.1. Software Company

Consolidated

Cost or assessment Balances at December 31, 2009 (+) Additions (-) Write-offs Balances at December 31, 2010 (+) Additions Balances at December 31, 2011

4,682 322 5,004 5,004

5,429 4,756 (124) 10,061 2,855 12,916

Amortization Balances at December 31, 2009 (+) Additions (-) Write-offs Balances at December 31, 2010 (+) Additions Balances at December 31, 2011

(463) (983) (1,446) (531) (1,977)

(988) (984) 125 (1,847) (1,041) (2,888)

Net amount Balances at December 31, 2011 Balances at December 31, 2010

3,027 3,558

10,028 8,214

(a)

Useful life from 5 to 10 years calculated using the straight-line method.

BHG S.A. - Brazil Hospitality Group Notes to the financial statements (Continued) December 31, 2011 (Amounts in thousands of reais, except where otherwise mentioned)

11. Intangible assets (Continued) 11.2. Intangible assets identified in business combinations 2010 Goodwil SPE Nossa Sra Vitória SPE Marsala SPE Camocim Total (-) Impairment SPE Marsala Total Subtotal Company Goodwil Merak Della Volpe La Hotels1 Tx Turismo Tx Assessoria Collezione BHG Mato Grosso (-) Impairment Tx Turismo Total Total goodwill by future profitability

Additions

Write-offs

2011

169 1,728 2,876 4,773

(1,728) (1,728) 3,045

14,446 11,894 1,290 11,493 1,032 606 4,494 45,255

(11,493) (1,032) (606) (13,131)

14,446 11,894 1,290 4,494 32,124

(3,390) (3,390) 44,910

3,390 3,390 (9,741)

35,169

Balances of goodwill on acquisitions of equity interest are supported by technical studies grounded on expected future profitability of the companies and were amortized up to December 31, 2008 within 5 to 10 years, as the proportion of expected future income from these investees. As of January 1, 2009, this goodwill is only subject to annual impairment test, as provided for by Accounting Pronouncement CPC 01 (IAS 36) - Impairment of Assets (“CPC 01”), which is not applicable to its respective amortization anymore. At December 31, 2008, goodwill was tested for impairment and a provision was needed to be set up, as described in Note 18. At December 31, 2011, the Company performed an impairment test of the goodwill referred to above based on projected future income, concluding that no adjustment for additional loss should be recorded.

BHG S.A. - Brazil Hospitality Group Notes to the financial statements (Continued) December 31, 2011 (Amounts in thousands of reais, except where otherwise mentioned)

11. Intangible assets (Continued) 11.2. Intangible assets identified in business combinations (Continued) Assessing the recoverable amount of goodwill involves use of assumptions, judgments and estimates of cash flows, such as revenue growth rates, costs and expenses, future investments and working capital and discount rates. Assumptions on forecast growth, cash flow and future cash flows are based on the Company’s business plan, approved by management, as well as on market comparables, whenever possible, and reflect the best estimate of management and of economic conditions related to Company’s assets. Future cash flows were discounted based on the rate corresponding to the capital cost.

12. Accounts payable for investment acquisition Company 2011 2010 Kino Emp. Imobiliário BHG Norte Maringa Flat Other Total

2,600 2,600

126 5,184 5,310

Consolidated 2011 2010 4,826 2,600 1,117 8,543

5,191 1,501 5,184 1,414 13,290

BHG S.A. - Brazil Hospitality Group Notes to the financial statements (Continued) December 31, 2011 (Amounts in thousands of reais, except where otherwise mentioned)

13. Loans and financing Type

Guarantees Assignment in trust of receivables, pledge of units of interest and real estate Assignment in trust of receivables, pledge of units of interest and real estate Assignment in trust of receivables, pledge of units of interest and real estate Assignment in trust of receivables, pledge of units of interest and real estate BHG surety BHG surety BHG surety Assignment in trust of receivables, pledge of units of interest and real estate BHG surety Assignment in trust of receivables, pledge of units of interest and real estate BHG surety BHG surety BHG surety Assignment in trust of real estate

Banking credit bonds - real estate financing

(a)

TR + 10.70 % p.a.

Banking credit bonds – real estate financing

(b)

TR + 11.27% p.a.

Banking credit bonds

(b)

TJLP + 10 % p.a.

Banking credit bonds

(b)

TJLP + 10.15 % p.a.

Banking credit bonds Banking credit bonds Banking credit bonds Banking credit bonds – real estate financing

(b) (b) (b) (b)

TJLP + 10.80 % p.a. TJLP + 10.80 % p.a. TJLP + 10.80 % p.a. TR + 11.5% p.a.

Banking credit bonds Banking credit bonds

(b) (b)

TJLP + 10.80 % p.a. TJLP + 10.15% p.a.

Banking credit bonds – real estate financing Banking credit bonds - working capital Banking credit bonds - working capital Agreement for purchase and sale

(b)

TR + 11.25 % p.a. CDI + 3.00% p.a. CDI + 3.00% p.a. INPC + 10 % p.a.

(a) (b)

Charges

(b)

The Agreement establishes payment performance provisions whereby the abovementioned interest may be reduced by 15% Such loans contain amendments under negotiation for long term in order to support the reversal of the net working capital.

Year of maturity

Consolidated 2011

2010

2018

32,423

2,594

2019

36,766

35,198

2019

5,343

39,504

2016 2018 2018 2018

8,704 7,700 208 1,423

6,158 2,849 16,417 11,986

2017 2018

14,874 1,126

2016 2021 2012 2012 2017

2,992 34,000 71,209 15,355 3,524 235,647

114,706

Current Non-current

102,419 133,228

19,903 94,803

BHG S.A. - Brazil Hospitality Group Notes to the financial statements (Continued) December 31, 2011 (Amounts in thousands of reais, except where otherwise mentioned)

13. Loans and financing (Continued) Long-term maturities: 2011

2010

18,213 19,603 21,133 21,083 20,885 32,311 133,228

2012 2013 2014 2015 2016 2017 As of 2018 Total

16,262 17,037 17,257 16,352 7,845 7,771 12,279 94,803

Covenants Certain financing of subsidiaries contains covenants determining maximum debt and leverage ratio, minimum debt coverage ratio for the installments due, maintenance of minimum balances receivable in a checking account, and Ebitda/Net Debt ratio. Company management constantly monitors such covenants, all of which have been complied with to date.

14. Related parties a)

Loan agreements/related party receivables Company Assets Ilha de Canavieiras Resort S.A. Camocim Empreend.Turísticos Imobiliários Ilha de Canavieiras Emp.Imob. S.A. Nsa Sra Vitória Emp. Imobiliários S.A. TX Ass. e Ger. de Hotéis S.A. Terravista Boutique Emp. Imob. Tucuruí Empreendimentos Della Volpe BHG Sudeste Condominio Alvorada Terravista Investimentos Conduru Marsala Incorporações Condominio Porto Vitoria Total assets

2011

2010

Consolidated 2011 2010

2,251 5,547 578 922 5,764 14 258 531 105 11 -

1,878 4,266 474 771 1,806 11 491 76 -

288 7 115 1,479

25 695 443 -

15,981

9,773

1,889

1,163

Intercompany loans result from specific cash needs, subject to CDI-based restatement and with no defined maturity.

BHG S.A. - Brazil Hospitality Group Notes to the financial statements (Continued) December 31, 2011 (Amounts in thousands of reais, except where otherwise mentioned)

15. Non-controlling interest 2011 % Noncontrolling interest Canavieiras Empreendimentos Canavieiras Resort SPE Conduru SPE Conde Residence SPE Camocim Terravista Investimentos Terravista Boutique Txai Agropecuรกria Total

30.00% 30.00% 6.00% 38.00% 33.33% 12.25% 18.33% -

2010

Total (143) (674) 99 3,900 817 672 1,263 5,934

% Noncontrolling interest 30.00% 30.00% 6.00% 38.00% 33.33% 12.25% 18.33% 29.38% -

Total (107) (565) 145 4,084 1,324 743 1,384 2,974 9,982

16. Equity a)

Capital Capital may be increased by the Board of Directors, regardless of any amendment to the Articles of Incorporation, up to the limit of R$ 2,000,000. At December 31, 2011, capital amounting to R$ 725,775 (at December 31, 2010, R$ 640,775) is represented by 41,066,754 common shares (at December 31, 2010, 36,472,160 common shares), registered and with no par value, fully paid up, as follows: 12/31/2011 Shares %

12/31/2010 Shares %

GP Investimentos BES Treasury Other

18,974,680 2,277,980 771,133 19,042,961

46.2% 5.5% 1.9% 46.4%

18,952,315 2,277,980 914,669 14,327,196

52.0% 6.2% 2.5% 39.3%

Total

41,066,754

100%

36,472,160

100%

On May 9, 2011, the Company approved a capital increase within the limit of its authorized capital, totaling R$ 85,000, upon the issuance of 4,594,594 common and registered shares with no par value.

BHG S.A. - Brazil Hospitality Group Notes to the financial statements (Continued) December 31, 2011 (Amounts in thousands of reais, except where otherwise mentioned)

16. Equity (Continued) b)

Treasury shares At December 31, 2011, the balance of Companyâ&#x20AC;&#x2122;s treasury shares is R$ 8,225 (R$ 9,756 at December 31, 2010) corresponding to 771,133 shares (914,669 shares at December 31, 2010). As described in Note 17, part of the treasury shares may be used for meeting the stock option plan. From January to December 2011, the Company received R$ 2,757 (R$ 1,051 at December 31, 2010) and delivered 143,536 shares (67,531 shares at December 31, 2010) as bonus payment, R$ 19.21 per share (R$ 15.56 per share at December 31, 2010). As the average price of treasury shares was R$ 10.67 (R$ 10.58 at December 31, 2010), the Company realized a gain of R$ 1,227 (R$ 336 at December 31, 2010) recorded as â&#x20AC;&#x153;Capital Reserveâ&#x20AC;?.

17. Stock option plan On June 25, 2007, a stock option plan was approved at the General Meeting, consisting of granting the option to purchase common shares issued by the Company to officers and employees holding management positions in the Company or other entities under its control, not including, under no circumstances, the founding shareholders. This plan was amended at the Special Meeting of November 13, 2009 and, under the terms of the new plan, the Board of Directors may grant stock options at their own discretion. The Board of Directors may assign its roles and responsibilities to a committee comprised by the Chairman and two other directors thereof. It is incumbent upon the Board of Directors to determine the strike price of options to be granted, observing the following rules: the minimum price must be equal to or higher than the average quotation of common shares of the Company at BOVESPA in the last 25 auctions in which the negotiation of the shares take place, prior to the granting date, weighted according to the volume of negotiation. The options granted to the beneficiary may be exercised, fully or partially, during the exercise term and in the periods set by the Board of Directors upon their grant and in the related Options Contracts.

BHG S.A. - Brazil Hospitality Group Notes to the financial statements (Continued) December 31, 2011 (Amounts in thousands of reais, except where otherwise mentioned)

17. Stock option plan (Continued) In the event of termination of an officer or employee of the Company or subsidiary, under the hypotheses provided for in the plan, the options that cannot be exercised at the time of termination will be automatically forfeited or the grace period will be granted in advance, and any options that are still effective may be exercised within the term indicated in the plan, depending on the reason for termination. The plan is valid for 10 years, subject to the total limit of granting of option on 5% of the common shares of the Company and limited to the authorized capital amount. In order to satisfy the exercise of stock options granted under the Plan, the Company may, at the discretion of the Board of Directors: (a) issue new shares limited to the authorized capital amount; or (b) sell treasury shares. The fair value of granted options is recorded as an expense over the maturity period. For the year ended December 31, 2011, the Company recognized in its P&L, under "General and administrative expenses", R$ 1,256 (R$ 1,256 at December 31, 2010) in connection with the stock option plan. The options granted under the stock option plan and issued in 2010 and 2009 may be exercised after three years. There was no granting of stock options for 2011. The weighted average fair value of the options was calculated using the binomial method for the 1,536,469 shares granted up to December 31, 2011.

18. Income Reconciliation of gross income to net income is as follows: Consolidated 2011 2010 Services rendered Real estate sold Goods sold Other income Gross income (-) Income tax Net income

161,510 1,453 24,910 19,374 207,247 (20,316) 186,931

105,622 807 18,486 12,449 137,364 (12,861) 124,503

BHG S.A. - Brazil Hospitality Group Notes to the financial statements (Continued) December 31, 2011 (Amounts in thousands of reais, except where otherwise mentioned)

19. Cost of services rendered and goods sold Consolidated 2011 2010 Salaries and social charges Third-party services Costs of supplies and services Costs of goods sold Other Total

(34,929) (2,707) (8,802) (6,602) (2,114) (55,154)

(49,952) (8,710) (11,941) (7,839) (3,291) (81,733)

20. General and administrative expenses Company

Maintenance Utilities and essential services Property expenses Salaries and social charges Other Total

2011

2010

(617) (240) (852) (12,687) (4,453) (18,849)

(821) (334) (513) (13,374) (10,646) (25,688)

Consolidated 2011 2010 (6,695) (10,914) (10,648) (13,958) (9,827) (52,042)

(4,746) (8,745) (7,626) (15,496) (22,314) (58,927)

21. Selling expenses Consolidated 2011 2010 Sales commissions Marketing Commissions to credit card service providers

(4,295) (4,545) (1,151) (9,981)

(3,026) (3,445) (846) (7,317)

BHG S.A. - Brazil Hospitality Group Notes to the financial statements (Continued) December 31, 2011 (Amounts in thousands of reais, except where otherwise mentioned)

22. Financial income (expenses) Company Financial Income Income from short-term investments Interest receivable Other

Financial expenses Interest payable Discounts granted Monetary variation losses Other Financial income (expenses), net

Consolidated 2011 2010

2011

2010

9,657 3,390 -

15,659 1,959 18

11,995 3,851 3,579

16,905 653 96

13,047

17,636

19,425

17,654

(4,436) (1,079) (81) (5,596) 7,451

(17) (184) (243) (444) 17,192

(23,241) (5,132) (1,848) (950) (31,171) (11,746)

(6,814) (4,402) (499) (796) (12,511) 5,143

23. Income and social contribution taxes Income and social contribution tax expenses for the years ended December 31, 2011 and 2010 is as follows: Deferred Income tax Social contribution tax Current Income tax Social contribution tax Income and social contribution tax expenses

2011

2010

(536) (523) (1,059)

(8,146) (3,014) (11,160) (12,219)

(2,488) (920) (3,408) (3,408)

Deferred income and social contribution taxes accounted for totaling R$ 12,690 thousand arise from income and social contribution tax losses of Intercontinental acquired in March 2011. The deferred tax asset is recognized as considered recoverable within the next 10 years by management, according to projected future taxable profit.

BHG S.A. - Brazil Hospitality Group Notes to the financial statements (Continued) December 31, 2011 (Amounts in thousands of reais, except where otherwise mentioned)

23. Income and social contribution taxes (Continued) Reconciliation of income and social contribution taxes at statutory and effective rates Company Description Net income (loss) before income and social contribution taxes Income and social contribution taxes at statutory rate 34% Statement of origin of effective income tax expenses Exclusions (CPC 01) Permanent differences â&#x20AC;&#x201C; non-taxable income and nondeductible expenses Equity pick-up Other permanent differences Income and social contribution tax loss offsetting, unrecorded Deferred income and social contribution taxes unrecorded due to uncertainties as to their realization Income and social contribution taxes for the year

Consolidated

2011

2010

9,644

(6,172)

20,176

(2,764)

(3,279) -

2,098 -

(6,860) -

940 (1,666)

206 5,357 (98)

(2,626) 3,431 (2,626)

244 (541)

(2,718) (3,046)

235

2,215 -

638 -

2011

1,030

(6,028) (12,219)

2010

364

(1,666) (3,408)

24. Management fees The Company and its subsidiaries recorded for 2011 and 2010 expenses inherent in management fees as follows, stated under "General and administrative expenses". Company

Management fees

2011

2010

7,029

5,088

Consolidated 2011 2010 7,841

5,966

The Company does not provide post-employment benefits, employment contract termination benefits, or other long-term benefits for management and its employees.

25. Financial instruments The Company and its subsidiaries engage in operations involving financial instruments, all recorded in balance sheet accounts. Risks are managed through definition of conservative strategies, aiming at safety, profitability, and liquidity.

BHG S.A. - Brazil Hospitality Group Notes to the financial statements (Continued) December 31, 2011 (Amounts in thousands of reais, except where otherwise mentioned)

25. Financial instruments (Continued) In accordance with CVM Rule No. 550, of October 17, 2008, which requires disclosure of information on derivative financial instruments in the notes to financial statements, the Company informs that it does not have any policy on the use of derivative financial instruments. Accordingly, no risks arising from possible exposure associated with these instruments were identified. a)

Valuation of financial instruments The market value of financial assets and liabilities was determined based on available market information and appropriate valuation methodologies. However, market data interpretation and the selection of valuation methods require considerable judgment and estimates to best determine fair value. As a result, the estimates presented herein are not necessarily indicative of the amounts that could be realized in a current market exchange. Use of different market hypotheses and/or methodologies can have a significant impact on estimated fair value. The financial instruments of the Company and its subsidiaries are presented in compliance with CVM Rule No. 604, of November 19, 2009, which approved CPC Accounting Pronouncements No. 38 (IAS 39), 39 (IAS 32), and 40 (IFRS 7), and with CVM Ruling No. 475, of December 17, 2008. The table below presents a comparison between the book and fair values of the Companyâ&#x20AC;&#x2122;s financial instruments, recorded in the financial statements: Book value 2011 2010

Fair value 2011

2010

Financial assets Cash and cash equivalents Accounts receivable, net Taxes recoverable Other assets Total

28,985 31,150 17,490 35,621 113,246

121,708 24,981 19,733 65,162 231,584

28,985 31,150 17,490 35,621 113,246

121,708 24,981 19,733 65,162 231,584

Financial liabilities Loans and financing Trade accounts payable and others Taxes payable Other liabilities Total

235,647 28,438 7,400 13,123 284,608

114,706 16,408 7,158 24,557 162,829

235,647 28,438 7,400 13,123 284,608

114,706 16,408 7,158 24,557 162,829

BHG S.A. - Brazil Hospitality Group Notes to the financial statements (Continued) December 31, 2011 (Amounts in thousands of reais, except where otherwise mentioned)

25. Financial instruments (Continued) a)

Valuation of financial instruments The fair value of financial assets and liabilities is included in the amount for which a financial instrument could be exchanged in a current transaction between willing parties, other than a forced sale or settlement. The following methods and assumptions were used for the fair value estimate: cash and cash equivalents, trade accounts receivable, trade accounts payable, and other short-term liabilities, which approximate their related book value mostly because of the short-term maturity of these instruments.

Sensitivity analysis of financial assets and liabilities CVM Rule No. 550 of October 17, 2008 provides for that publicly-traded companies must disclose in a specific note qualitative and quantitative information on all of their financial instruments, whether or not recognized as assets or liabilities in their balance sheet. The Company's financial instruments are represented by cash and cash equivalents, accounts receivable, accounts payable, loans and financing, and are recorded at cost plus earnings or charges incurred, which approximate market value for 2011 and 2010. The major risks to which the Companyâ&#x20AC;&#x2122;s operations are subject refer to variation of the Benchmark Rate (TR) and CDI for loans and financing, and CDI for shortterm investments. Loans and financing are pegged to benchmark rates adopted in the market. In such conditions, the amount recorded is the one closest to the market value of such financial instruments. CDI investments are recorded at market value, according to quotes published by financial institutions, and others mostly refer to bank deposit certificates and repurchase agreements, so the recorded amount of these securities approximates market value.

BHG S.A. - Brazil Hospitality Group Notes to the financial statements (Continued) December 31, 2011 (Amounts in thousands of reais, except where otherwise mentioned)

25. Financial instruments (Continued) b)

Sensitivity analysis of financial assets and liabilities (Continued) In an attempt to check the sensitivity of the short-term investment index to which the Company was exposed at December 31, 2011 and 2010, three different scenarios were defined. On the basis of projections provided by financial institutions, CDI projection was obtained for the next 12 months, average of which was 10.48% for the next 12 months and which was defined as the probable scenario; based thereon, 25% and 50% variations were calculated. “Gross financial income” was calculated for each of the scenarios, excluding the effect of taxes on income from short-term investments. The portfolio base date used was December 31, 2011, with a one-year projection to check the CDI’s sensitivity to each scenario. Operation Short-term investments Position at December 31, 2011 - R$ 22,335

Risk CDI

Scenario I (probable) 9.40% 2,099

Scenario II 7.05% 1,575

Scenario III 4.70% 1,050

In order to check the sensitivity of the debt index to which the Company was exposed at December 31, 2011, three different scenarios were defined. In accordance with the TR in force at December 31, 2011, the probable scenario was defined for 2011; based thereon, 25% and 50% variations were calculated. Gross financial expense was calculated for each scenario, excluding the effect of taxes and the maturities of each contract scheduled for 2011. The financing base date used was December 31, 2011, with a one-year projection to check the sensitivity to each scenario. We use 11% as spread above the TR, generating the following amounts: Operation Loans and financing Position at December 31, 2011 - R$ 235,647

Risk TR

Scenario I (probable) 11.45% 26,982

Scenario II 11.56 27,241

Scenario III 11.67 27,500

BHG S.A. - Brazil Hospitality Group Notes to the financial statements (Continued) December 31, 2011 (Amounts in thousands of reais, except where otherwise mentioned)

25. Financial instruments (Continued) The Company has loan and financing agreements with covenants usually applicable to these kinds of operations, inherent in compliance with economic-financial indices, cash generation, among others. The main market risks faced by the Company and its subsidiaries in the normal course of their businesses are as follows: a)

Liquidity risk Liquidity risk consists in the possibility that the Company and its subsidiaries may not have sufficient funds to comply with their financial commitments due to the different currencies and time for the settlement of their rights and obligations. The Companyâ&#x20AC;&#x2122;s and its subsidiariesâ&#x20AC;&#x2122; liquidity and cash flow control is monitored on a daily basis by the Companyâ&#x20AC;&#x2122;s financial management department, in order to assure that cash flow from operations and the previous funding, when necessary, are sufficient to meet their commitment schedule, not generating liquidity risks for the Company and its subsidiaries.

Credit risk This arises from any difficulties in collecting amounts for services rendered to customers. The Company and its subsidiaries are also subject to credit risk from their shortterm investments. In connection with credit risk relating to financial institutions, the Company and its subsidiaries seek to diversify such exposure by investing in first-rated financial institutions.

Market risk i)

Interest rate and inflation risk The interest rate risk arises from the portion of debt pegged to the TR and short-term investments pegged to the CDI, which could adversely impact financial income or expenses in the event of an unfavorable change in interest rates and inflation.

BHG S.A. - Brazil Hospitality Group Notes to the financial statements (Continued) December 31, 2011 (Amounts in thousands of reais, except where otherwise mentioned)

25. Financial instruments (Continued) c)

Market risk (Continued) ii)

Currency risk This risk arises from the possibility of losses due to fall in Brazil’s attractiveness as a leisure or business destination in the international scenario. The Company and its subsidiaries did not enter into derivative agreements (exchange hedge) for purposes of protection against currency gains or losses, as they do not conduct significant operations with foreign currencies.

Derivative operations The Company does not engage in derivatives operations.

Capital management The objective of the Company’s capital management is to ensure maintenance of a strong credit rating with institutions and an optimum capital relationship in order to support Company’s business and maximize shareholder value. The Company controls its capital structure through adjustments and adaptation to current economic conditions. The procedures adopted to maintain an adjusted structure include payment of dividends, capital return to shareholders, new loans, issue of debentures, issue of promissory notes, and engaging in operations with derivatives. There have been no changes in the capital structure objectives, policies, or processes. The Company’s net debt structure includes loans and financing, less cash and cash equivalents. Consolidated 2011 2010 Loans and financing (-) Cash and cash equivalents Net debt/(cash)

235,647 (28,985) 206,662

114,706 (121,708) (7,002)

BHG S.A. - Brazil Hospitality Group Notes to the financial statements (Continued) December 31, 2011 (Amounts in thousands of reais, except where otherwise mentioned)

26. Insurances The Company and its subsidiaries adopt a risk management policy seeking to engage insurance coverage that is more compatible with their size and operations. In this regard, civil liability insurance is taken out for involuntary damage caused to third parties and material damage caused to tangible items, such as fire, lightning, electric damages and natural phenomena. At December 31, 2011, insurance taken out by the Company is as follows: a)

Civil liability: Coverage for hospitality facilities, extended to excursions, sport events and leisure activities in and outside Company premises, covering bodily injuries and/or material damage caused to third parties - limit: R$ 10,000

Multiperil policy: Insurance policy that covers damages to the insured facilities,

such as fire, lightning and explosion, limited to R$ 50,000, and other risks with lower limits, for example electrical damage, windstorm, falling aircraft, theft, among others. c)

D&O (Directors and Officers) insurance to cover possible labor, civil and other claims that may affect the Company's management - Limit: R$ 20,000.

27. Information by business segment Management monitors business units operating results separately, which allows decision making regarding allocation of funds and performance assessment. Performance by segment is assessed based on operating income or loss, which, in some cases, as shown below, is measured differently from operating income or loss of the consolidated financial statements. Company financing (including financing income) and income taxes are managed at the entity level, thus not allocated to operating segments.

BHG S.A. - Brazil Hospitality Group Notes to the financial statements (Continued) December 31, 2011 (Amounts in thousands of reais, except where otherwise mentioned)

27. Information by business segment (Continued) Balance sheets Ended December 31, 2011 Hospitality

Real estate

Corporate

Combined

Elimination

Total

Assets Current assets Non-current assets

557,645 69,537 488,108

347,519 10,686 336,833

756,757 6,150 750,607

1,661,921 86,373 1,575,548

(645,819) (4,197) (641,622)

1,016,102 82,176 933,926

Liabilities

557,645

347,519

756,757

1,661,921

(645,819)

1,016,102

Current liabilities Non-current liabilities Equity

51,743 312,803 193,099

77,585 162,805 107,129

25,822 5,990 724,945

155,150 481,598 1,025,173

(4,003) (347,522) (294,294)

151,147 134,076 730,879

Income statements Ended December 31, 2011

Gross revenue from sales and services Deductions from gross income Net revenue on sales and services Cost of goods and services sold Gross income Operating income (expenses) General and administrative expenses Financial Other operating income Equity pickup Income before taxes/profit sharing Income and social contribution taxes Non-controlling shareholders Income/Loss for the period

Hospitality

Real estate

202,815

10,636

(19,571)

(745)

Corporate

Combined

213,451

(20,316)

Elimination

(6,204) -

Total

207,247 (20,316)

183,244

9,891

193,135

(6,204)

186,931

(78,216) 105,028

(3,517) 6,374

(81,733) 111,402

(6,204)

(81,733) 105,198

(73,061)

(12,096)

9,642

(75,515)

(9,508)

(85,023)

(58,487) (14,447) 16 (143)

(7,782) (4,750) 336 100

(20,594) 7,451 7,030 15,755

(86,863) (11,746) 7,382 15,712

6,204 (15,712)

(80,659) (11,746) 7,382 -

31,967

(5,722)

9,642

35,887

(15,712)

20,175

(12,086) 19,881

(133) 1,686 (4,169)

9,642

(12,219) 1,686 25,354

(15,712)

(12,219) 1,686 9,642

BHG S.A. - Brazil Hospitality Group Notes to the financial statements (Continued) December 31, 2011 (Amounts in thousands of reais, except where otherwise mentioned)

28. Earnings per share In compliance with CPC 41 (IAS 33) - Earnings per Share, approved by CVM Resolution No. 636, the Company disclosed below information on earnings per share for the years ended December 31, 2011 and 2010. Basic earnings per share is calculated by dividing net income for the year attributed to common shareholders by the weighted average of number of common shares available in the year. The table below shows P&L and share data used in calculating basic earnings per share: Consolidated 2011 2010 Basic earnings per share Numerator Net income (loss) for the year attributed to Companyâ&#x20AC;&#x2122;s shareholders Denominator (in thousands of shares) Weighted average number of common shares Basic earnings per share

9,644

(6,172)

37,923 0.25

35,542 (0.17)

P&L diluted per share is calculated including stock purchase plan for executives and key personnel, using the method of treasury stock for a dilution effect. The anti-diluter effect of all potential shares are ignored in the calculation of diluted earnings per share. At December 31, 2011 and 2010 the potential shares did not present a significant dilution. As per our Bylaws, minimum Company dividends are 25% of net income in the year, adjusted according to the requirements of legal reserve constitution, totaling 5% of net income in the year. However, despite the assessment of net income for the year ended December 31, 2011, there was no minimum mandatory dividend distribution, due to the accumulated losses at December 31, 2010 of R$ 95,966 thousand. The total use of net income for the year to offset the balance of accumulated losses reduced it to R$ 86,322 thousand at December 31, 2011.

BHG S.A. - Brazil Hospitality Group Notes to the financial statements (Continued) December 31, 2011 (Amounts in thousands of reais, except where otherwise mentioned)

29. Subsequent events In January 2012 the following events took place: ►

Beginning of operations in the Address West Side development, resulting from the management contract of a four-star hotel with 130 rooms in Goiânia, capital of the state of Goiás. ►

Signing of a contract to acquire the hotel administrator of the Solare Group, which currently operates 8 hotels, with a total of 1,100 rooms in the state of Maranhão, the second largest state in the Northeast region. As of April 1, 2012 the Company took on Solare's operations, maintaining its structure and operating base, continuing with the expansion strategy in the North and Northeast regions of Brazil.

►

Signature of a protocol of intent with Cesto Participações S.A. for the sale of 24.5% of the interest held by the Company in the entity that was constituted for the development of the Singlehome Trancoso project, a real estate and tourism/hotel development, located in Trancoso, south of Bahia. On the other hand, Grupo Cesto will transfer the property of 41 units of the hotel development being built in Belo Horizonte (MG), whose management contract was signed by the Company during 3Q11.

►

Considering the acquisitions which are not yet consolidated for 2 of the 5 hotels in Belém, which will be ready during the first half of 2012, the property in Rio Palace Hotel, for which we expect a judicial outcome favorable to BHG in the first half of 2012, as well as the management of the hotel in Goiânia that we began in January 2012, and the hotels managed by the Solare Group which will be merged into BHG in April 2012, we will reach the end of the year, without considering new acquisitions or management of third-party hotels, with 8,711 rooms, of which 3,867 are Company-owned, distributed in 47 hotels, of which 16 are Company-owned, 22 belong to third parties, 9 are joint ventures and 3 others in which the Company holds non-controlling interest.

►

On January 30, 2012 we started the ADR Level I program, under ticker BZHGY, enabling the report of Company shares in the over-the-counter market in New York, United States of America. BHG's program was idealized as a tool to optimize the entry of new investors, among individual and institutional investors, which do not have access to BM&FBovespa, in addition to increasing visibility of our shares. Each ADR corresponds to 1 (one) common Company-issued share, with The Bank of New York Mellon as the depository bank.

BHG S.A. – BRAZIL HOSPITALITY GROUP Companhia Aberta NIRE 35.300.340.540 CNPJ/MF 08.723.106/0001-25

ANNEX Management Report and Earnings Release

MANAGEMENT REPORT 2011 BHG S.A. – BRAZIL HOSPITALITY GROUP The Management of BHG S.A. – Brazil Hospitality Group (“BHG” or “Company”), in accordance with the legal and statutory provisions, submits for the appreciation of the market and its shareholders the Standard Financial Statements ("SFS") for the fiscal year ended December 31, 2011, accompanied by the Independent Auditor's Report. MESSAGE FROM THE CEO DEAR SHAREHOLDERS, With its focus on consolidating the industry and breaking paradigms, BHG became the first Brazilian company to operate in the real estate segment specializing in business travel hotels, as well as the only company in the sector to be listed in BM&F BOVESPA’s Novo Mercado segment and New York’s Over the Counter (OTC) market, providing investors with greater security. The company, based around LAHotels, was founded in 2009 and brought innovation through the acquisition and management of third-party hotels, and recently the development of threeand four-star hotels. It was based on this growth strategy that we achieved our third place ranking, (as of April 2012) of more than 8,300 rooms distributed among 45 owned and managed hotels. I now proudly offer our key results from 2011.

Net Operating Revenue (NOR) reached R$ 176.6 million in 2011, up 45.0% over 2010, adding an additional R$ 54.8 million for the period. Hotel EBITDA totaled R$ 58.2 million in 2011, reaching a 33.0% EBITDA margin from hotel operations. The Company’s Consolidated EBITDA totaled R$ 41.9 million in 2011, reaching a 23.7% EBITDA margin, which is approximately four (4) times higher than the R$ 10.7 million presented in 2010. Last year, the Company posted its first net operating profit since its inception, totaling R$ 9.6 million, an improvement over the loss of R$ 6.2 million during the same period in 2010. This was due to operational improvements and the growth of the company, as well as nonoperational income from the sale of land in the region of Avenida Faria Lima, in São Paulo. Excluding this non-operational income, the Company’s Net Income totaled R$ 2.6 million for the year, a significant improvement over 2010. In 2011, we proceeded with our corporate plan to add at least 1,500 rooms per year, through acquisitions and the management of third-party hotels. The year was marked by the acquisition and launch of operations at the current Royal Tulip Rio de Janeiro, as well as by the signing of the deed of purchase for the Rio Palace Hotel, a property located in Copacabana, Rio de Janeiro. Proceeding with our aggressive plan for growth, we signed a contract for the acquisition of 1,010 rooms, distributed among five hotels in Belém, Pará. We also signed new management 1

contracts. In addition to the future Golden Tulip Belo Horizonte (Minas Gerais), forecast to open in the beginning of 2013, on January 1, 2012 we introduced our first project in Goiânia, known as Address West Side. In January 2012, we announced the acquisition of the hotel management group Grupo Solare, with eight hotels located in Maranhão, adding a total of 1,100 managed rooms to the portfolio. The Company will take over the network’s operations as of April 2012, maintaining its structure and operational base, with a strategy of expansion into Northern and Northeastern Brazil. With respect to the greenfield projects, in 2011 we signed memoranda of understanding for the construction of six owned and managed hotels, distributed in the cities of Angra dos Reis (Rio de Janeiro), Sobral (Ceará), Belo Horizonte (Minas Gerais), Maringá (Paraná) and Palmas (Tocantins). In March 2012, we signed a memorandum of understanding for the development of a 140-room hotel in Campo Grande (Mato Grosso do Sul). We are also proceeding with our Policy for the Divestment of the Company’s Land Bank – considered to be non-core assets – in order to strengthen investments in hotels focused on business travel. In December 2011, we launched Txai Terravista Trancoso, located within the Terravista tourism complex in Bahia, and we signed a letter of intent for the sale of 25% of the equity interest held in the Pontal do Camaragibe project, which includes a tourism hotel project and second homes, located in Passo de Camaragibe, in Northern Alagoas. On January 30, 2012, we signed a letter of intent for the sale of 24.5% of the equity interest in the Singlehome Trancoso project, which includes a tourism hotel project and real estate, located in Trancoso, in Southern Bahia. I would also like to mention the operation approved by the Board of Directors in May 2011, which allowed us to increase the Company’s capital by approximately R$ 85 million, by issuing 4,594,594 common shares. BHG also launched the ADR Level 1 Program on the OTC market in New York, which positions us as the first Brazilian company from the hotel sector to trade shares on an American OTC market. Today, we are a company recognized for its efficient management model, with clearly defined goals and constant monitoring of results. We are focused on rapid, sustainable growth, with well-located, up-to-date products, always emphasizing our biggest star: the Client. Over the years we have created and consolidated a unique corporate culture, as well as a pattern of behavior that orients all BHG employees. We are guided by our obsession with quality, results and the ongoing improvements needed to transform BHG into a unique, robust and enduring company in this segment. In 2012, we will continue with our growth strategy and, as we find new opportunities, we will not hesitate to grow in an even more determined manner. I thank you for your support in 2011 and I can assure you that our goal is to be the best of the best! Pieter Jacobus Franciscus van Voorst Vader 2

CEO of BHG S.A. - Brazil Hospitality Group

BHG’S BUSINESS MODEL BHG operates in the business travel market (3, 4 and 5 star hotels) in regions with significant economic activity. The Company’s growth takes place through acquisitions, new hotel management agreements and the development of select-service hotels in cities with great economic growth potential that are currently undersupplied. BHG seeks an ideal mix of owned hotels (results scale) and managed hotels (return on capital employed), attributing the same priority to both of these enterprises. It is very important for the Company to have both owned and managed hotels in its portfolio, given the scale and synergy gains. In keeping with the Company’s strategic plan to develop, in the next five years, 40 selectservices hotels in Brazilian cities with high levels of economic growth, strong demand and major potential for growth in the business travel sector, we current have approximately 1,500 rooms under development, distributed among nine owned and managed hotels, in the following cities: Maringá (Paraná), Palmas (Tocantins), Belo Horizonte (Minas Gerais), Sobral (Ceará), Angra dos Reis (Rio de Janeiro), Itaguaí (Rio de Janeiro), Campos de Goytacazes (Rio de Janeiro) e Campo Grande (Mato Grosso do Sul). Four of the projects are already under construction, with the other projects expected to begin work in 2012. In the land bank segment, BHG is seeking to monetize its land through sale, exchange or enhancement with licenses and/or partnerships to finance company growth.

BRAZIL’S TOURISM AND HOTEL INDUSTRY Tourism has been one of the sectors of the economy most benefited by the expansion of the middle class in Brazil. And we cannot forget other factors, such as the stronger local currency, the growing access to credit, the increased competition between airlines and Brazil’s economic situation, which are of fundamental importance to the sector's growth. Studies have shown that leisure travel is third on the wish list of Brazilian consumers. Moreover, the growth in Brazil's GDP is fueled by business travel, with both domestic travel and arrivals in Brazil by international travelers. In recent years, the industry has received even greater attention from the Brazilian government. Since the creation of the Ministry of Tourism in 2003 until the recent approval of special credit lines from the Brazilian Development Bank for the tourism industry in light of the country's hosting of the 2014 FIFA World Cup, the market has registered constant growth in key indicators: foreign-denominated revenue, international and domestic arrivals, and job creation. Brazil’s hotel industry is highly fragmented. According to a recent survey conducted by Jones Lang LaSalle, a consulting firm, around 92.5% of the country’s 9,524 hotels and inns are not owned by large chains. This is a scenario that offers opportunities for consolidating the sector, mainly because many family-run hotels have problems. For example, the founders are able to 3

live well off the income from the hotels, but their children and grandchildren also want a good quality of life. This results in a cash withdrawal from the hotel, with a failure to reinvest in necessary maintenance and modernization. STRATEGIC PARTNERSHIPS BHG selects experienced and highly respected business partners. The Company has an exclusive agreement with Golden Tulip that provides access to an international distribution network and guarantees the operating standards of its hotels. The agreement gives BHG several advantages, including exclusivity in the use of the Golden Tulip brands in Latin America, special royalty and international marketing fees, access to an international distribution network and call centers around the world, the use of value drivers (Golden Tulip commercial tools) and access to Golden Tulip’s loyalty network (Flavours program). NET INCOME FOR THE FISCAL YEAR BHG presents its 2011 financial statements in accordance with generally accepted accounting practices in Brazil and the changes introduced by Federal Law 11,638/07 and by Provisional Measure 449/08, the rules issued by the Brazilian Securities and Exchange Commission (CVM) and the pronouncements, instructions and interpretations issued by the Accounting Pronouncements Committee (CPC). BHG's consolidated income statement for the period ended December 31, 2011 presents operating data for all hotels in the Chain, as well as for its subsidiaries, affiliated companies and property development projects. Moreover, in accordance with accounting rules, we used the financial statements of the subsidiaries with a base date of December 31, 2011. In the fiscal year ended December 31, 2011, BHG recorded a net income of R$9.6 million.

CORPORATE GOVERNANCE BHG carried out its IPO on July 16, 2007, when it was listed on the Novo Mercado segment of the BM&FBovespa S.A. - Securities, Commodities and Futures Exchange (“BMF&BOVESPA”), effectively committing to the highest standards of corporate governance. On December 31, 2011, the Company's Board of Directors was formed by seven (7) members, who included two independent members, as follows: Octávio Cortes Pereira Lopes (chairman of the board), Fersen Lamas Lambranho (member), Horácio Lafer Piva (independent member), Ricardo Abecassis Espírito Santo (independent member), Francisco Ribeiro de Magalhães Filho (member), Antonio Carlos A. Ribeiro Bonchristiano (member) and Daniel Cunha (member). There is also one alternate independent member, Miguel Garcia Rugeroni Ahlers. More information on the education and professional experience of the members of the board is available on BHG’s investor relations website (www.bhg.net/ri). HUMAN RESOURCES At the end of 2011, the Company had 3,290 employees, including the Corporate Office and all hotels in the Chain. BHG's corporate office has a lean and highly qualified team, formed by 4

professionals with an average age of 34 years. The Company has a meritocratic policy that contributes to a more dynamic environment with growth opportunities for employees. SERVICES OF THE INDEPENDENT AUDITOR BHG contracts independent audit services from Ernst & Young Terco Auditores Independentes S.S. During the fiscal year, no services were contracted from the company that were not related to accounting audits, which prevents the occurrence of any type of conflict of interest. REPORT OF THE INDEPENDENT AUDITORS We have revised, discussed and agreed with the opinions expressed in the independent auditor's report regarding the financial statements for fiscal year ended December 31, 2011, dated March 15, 2012. FINANCIAL STATEMENTS We have revised, discussed and agreed with the financial statements for fiscal year ended December 31, 2011. ACKNOWLEDGEMENTS In closing, we express our appreciation for the confidence and support of our shareholders, as well as the dedication and commitment of all those who directly or indirectly contributed to the company's operations in this fiscal year. S達o Paulo, March 15, 2012.

4Q11 AND 2011 EARNINGS RELEASE

Hotel Net Operating Revenue totaled R$176.6 million in 2011, up by 45.0% on 2010 In 2011, hotel EBITDA reached R$58.2 million, with an impressive margin of 33.0%, while consolidated EBITDA came to R$41.9 million, with a margin of 23.7%, due to greater operational scale associated with strict cost control.

Rio de Janeiro, March 15, 2012 - BHG S.A. – Brazil Hospitality Group (Novo Mercado of the BM&FBovespa: BHGR3 and OTC: BZHGY) ("BHG" or the "Company"), a company operating in the urban hotel sector, focusing on the acquisition, management and development of 3-, 4- and 5-star hotels, hereby announces its results for the fourth quarter and full year of 2011. The following financial and operational information are presented in IFRS, in Brazilian reais (R$), and in compliance with the standards set forth by the CVM and the pronouncements, instructions and interpretations issued by the Accounting Pronouncements Committee (CPC). The comments herein cover the Company’s quarterly and annual results and comparisons are made between the fourth quarter of 2010 (4Q10) and third quarter of 2011 (3Q11), and between the consolidated result of 2011 with 2010.

Investor Relations Contacts (IR):

BHGR3 Information

Conference Call Data – 03/16/2012 – 11:00 a.m. EST (NY)

Ricardo Levy CFO and IRO

Share Price: R$15.50 Market Capitalization: R$636.5 million Base Date: 12/31/2011 Number of Common Shares: 41,066,754 Free Float: 50,8%

Connection Numbers

Bruno Priuli IR Coordinator Email: ri@bhg.net

Participants: +1 (412) 317-6776 Code: BHG

Link to webcast platform http://webcast.mz-ir.com/publico.aspx?codplataforma=3622

4Q11 AND 2011 EARNINGS RELEASE

4Q11 and 2011 Highlights and Recent Events: Financial  The 2011 fiscal year was marked by the expansion of the Company’s operating metrics, with RevPar growing by 23.0% over 2010. The 4Q11 numbers followed the same trend, increasing by 24.7% and 4.2% over 4Q10 and 3Q11, respectively. On a same store sales basis, RevPar increased by a significant 31.3% year over year.  Hotel gross operating revenue reached R$197.1 million in 2011, up by 46.4% on the 2010 total of R$134.7 million. The same figure came in at R$60.2 million in 4Q11, up by 48.5% and 27.0% on 4Q10 and 3Q11, respectively.  Hotel EBITDA totaled R$58.2 million in 2011, a 76.7% increase over 2010. In the quarter, hotel EBITDA stood at R$18.8 million, up by 74.5% on 4Q10 and 33.6% on 3Q11. On a same store sales basis, hotel EBITDA came to R$14.1 million in 4Q11, up by 23.5% year over year.  The hotel EBITDA margin came to 33.0% in the year, a 5.9 p.p. increase over 2010, while reaching 35.0% in the quarter, a 5.6 p.p. upturn over 4Q10 and a 1.7 p.p. gain over 3Q11. On a same store sales basis, the hotel EBITDA margin was 33.3% in 4Q11.  In 2011, consolidated EBITDA stood at R$41.9 million, approximately four times greater than the 2010 figure of R$10.7 million. In the quarter, consolidated EBITDA totaled R$16.7 million, up by 196.1% and 58.6% over 4Q10 and 3Q11, respectively.  The consolidated EBITDA margin reached 23.7% in 2011, while the same figure was even greater in 4Q11, at 31.1%, proof of the Company’s constant growth, resulting from an increase in revenue and continuing dilution of corporate costs, thanks to greater operational scale and strict cost control.  In 2011, the Company posted net operational income for the first time since its creation, totaling R$9.6 million, an exponential improvement over the R$6.2 million net loss posted in 2010. The main factors contributing to this positive result were: (i) hotel operational scale gains, with the dilution and control of fixed costs and general and administrative expenses; (ii) the For further information, please access www.bhg.net

4Q11 AND 2011 EARNINGS RELEASE acquisition of new hotels; (iii) the termination of the agreement with GR Capital; and (iv) the non-operating revenue gain from the sale of the lot located in the Avenida Faria Lima region, in São Paulo. Excluding this non-operating gain, the Company’s net income came to R$2.6 million in the year.  Cash and cash equivalents stood at R$44.6 million at the close of 2011, with debt of R$244.2 million, totaling a net debt of R$199.6 million.

M&A  In 2011, the Company continued with its corporate strategy to add at least 1,500 rooms per year through the acquisition and management of third-party hotels. In March, BHG completed the acquisition of the Royal Tulip Rio de Janeiro, in São Conrado, with 418 high-end rooms, starting its operation in October. In August, the Company signed a deed of purchase and sale for the Rio Palace Hotel in Copacabana, with 388 high-end rooms, in addition to signing an agreement for the acquisition of 1,010 rooms, both owned and managed, distributed among 5 hotels in Belém, the state capital of Pará. In September, the Company signed an agreement for the management of a hotel project with 396 rooms, currently under development in Belo Horizonte, Minas Gerais, set for operational startup in 1Q13.  In 4Q11, BHG signed an agreement for the management of a four-star hotel, with 130 rooms, in Goiânia, the state capital of Goiás. The Company started operating the hotel, known as Address West Side, in January 2012.  On January 26, 2012, the Company signed an agreement for the acquisition of the hotel management group Grupo Solare, which currently operates 8 hotels with a total of 1,100 rooms in the state of Maranhão, the second largest in Northeastern Brazil. As of April 1, 2012, the Company will incorporate Solare’s operations, maintaining its structure and operational base, thereby continuing with its strategy of expansion in Northern and Northeastern Brazil.

Hotel Development  In line with the Company’s strategic plan to develop 40 selected-service hotels over the next five years in Brazilian cities with high economic expansion rates, strong demand and substantial potential for business tourism growth, in 2011, BHG signed memorandums of understanding to For further information, please access www.bhg.net

4Q11 AND 2011 EARNINGS RELEASE build 6 hotels - including owned and managed hotels - in cities such as: Maringá (PR), Palmas (TO), Belo Horizonte (MG), Sobral (CE) and Angra dos Reis (RJ). Together with the 2 hotels announced during 2010 to be developed in Itaguaí (RJ) and Campos de Goytacazes (RJ), we currently have approximately 1,300 rooms under development, with four hotels currently under construction, while the other projects are expected to begin in 2012.  In march 2012, the Company signed a memorandum of understanding to develop a 140-rooms hotel in Campo Grande (MS), with estimated date of completion for the end of 2013.

Landbank  Txai Terravista Trancoso, located inside the Terravista tourism complex in Bahia, was launched in December 2011. The complex will feature 69 units divided in bungalows, villages and residences, with a total built-up area of 71,794 m², dedicated to golf practice.  In December 2011, the Company signed a Letter of Intent with Cesto Participações S.A. for the sale of a 25% interest held by the Company in the entity incorporated to develop the Pontal do Camaragibe project, a tourism-hotel and second-home undertaking, located in the city of Passo de Camaragibe, in Northern Alagoas. The Cesto Group will develop the area where Txai Camaragibe will be built, bearing all the costs relating to the projects and infrastructure works necessary for the implementation of the undertaking. The agreement also establishes an option for the purchase of the remaining 75% interest of the company.  On January 30, 2012, the Company signed a Letter of Intent with Cesto Participações S.A. to sell the Company’s 24.5% interest in the company constituted to develop Singlehome Trancoso, a real estate and tourism hotel project in Trancoso, in Southern Bahia. In return, The Cesto Group will transfer the ownership of 41 units of a hotel project that is being built in downtown Belo Horizonte, Minas Gerais, whose management agreement was signed by the Company in 3Q11.  All of the transactions related to the Company’s landbank are part of its Policy for the Divestment of all non-core assets, reaffirming BHG’s focus on the hotel business in urban areas for business tourism.

For further information, please access www.bhg.net

4Q11 AND 2011 EARNINGS RELEASE Corporate  In May 2011, the Company’s Board of Directors approved a capital increase of R$85 million, through the issue of 4,594,594 common shares at the price of R$18.50 per share.  The Company closed 2011 with 6,704 hotel rooms, of which 3,152 were owned rooms, distributed among 35 hotels, of which 15 are wholly-owned by the Company, 15 are owned by third parties, 5 are hotels partially owned, as well as 3 hotels in which the Company holds a minority interest. The Rio Palace Hotel in Copacabana, with 388 rooms, was not included in this total, as the Company is awaiting a judicial ruling on the possible right of preference held by the property’s former operator.  Considering the acquisition of 2 of 5 hotels in Belém that are pending consolidation, set for completion in the first half of 2012; the Rio Palace Hotel, for which the Company expects a judicial ruling in the first half of 2012; the management of the hotel in Goiânia, which started in January 2012; and the hotels currently managed by Grupo Solare, which will be incorporated in April 2012, by the end of the year – excluding any new acquisitions of hotels or management of third-party hotels - the Company will reach a total of 8,711 rooms, 3,867 of which owned, distributed through 47 hotels, of which 16 are wholly-owned by the Company, 22 are owned by third parties, 9 are hotels partially owned, besides 3 hotels in which the Company holds a minority interest.  With the selected-service hotels currently under development, as well as 1 of the 5 hotels in Belém and the four-star hotel under development in Belo Horizonte, the Company will reach a total of approximately 10,800 rooms under management by the end of 2014, of which 4,466 will be owned, distributed through 58 hotels, of which 16 are wholly-owned by the Company, 24 are owned by third parties, 18 are hotels partially owned, as well as 3 hotels in which the Company holds a minority interest.  On January 30, 2012, BHG began its Level I ADR Program, under the ticker BZHGY, allowing the Company’s shares to be traded on the over-the-counter market (OTC) in New York, USA. The program was created as a tool to increase the inflow of new investors, including institutional and individual investors that normally would not have access to the BM&FBovespa, while also increasing the visibility of the Company's stock. Each ADR corresponds to one (1) common share issued by the Company, with The Bank of New York Mellon acting as the depository bank. For further information, please access www.bhg.net

4Q11 AND 2011 EARNINGS RELEASE  In accordance with the Company’s Bylaws, its minimum dividend for fiscal years stands at 25.0% of net income, which totaled R$9.6 million in 2011. Nonetheless, the minimum dividend, which would have been R$2.4 million, was allocated to offsetting losses accumulated up to 2010, which totaled R$96.0 million. In allocating all of net income to offsetting accumulated losses, the Company decreased these losses to R$86.3 million at the end of 2011.  At the end of 2011, the Company reappraised hotels acquired more than three years ago in Rio de Janeiro (Golden Tulip Regente, Golden Tulip Continental and Tulip Inn Copacabana) and São Paulo (Golden Tulip Belas Artes), which are recorded under property, plant and equipment in the amount of R$133.5 million. Upon reappraisal by the consulting firm APSIS, a specialist in the reappraisal of assets, the properties were valued at R$465.9 million. Even so, the difference of R$332.4 million was not recorded in the Company’s balance sheet, due to technical pronouncement CPC 27 – Property, Plant and Equipment, which forbids the restatement thereof. When considering only the calculation of Net Asset Value (NAV) using the new market value of the Company’s assets, it is clear that BHG is undervalued, with a difference between NAV in 2011 without and with adjustments of 48.5%. Annual Data Indicators

2011 - Unadjusted

2011 - Adjusted

Portfolio

R$ million

885.5

1,217.8

Hotel

R$ million

727.3

1,059.7

Landbank

R$ million

158.2

Net debt

R$ million

(199.6)

NAV

R$ million

685.9

1,018.2

No. of shares

R$ million

41.1

NAV/share

16.70

24.79

Share price

15.50

% of NAV

92.8%

62.5%

2011 = Price on December 31, 2011;

For further information, please access www.bhg.net

4Q11 AND 2011 EARNINGS RELEASE Main indicators: Annual and Quarterly Data - Consolidated Results Indicators

4Q11

3Q11

4Q10

2011

4Q11 vs. 3Q11

4Q11 vs. 4Q10

2011 vs. 2010

Δ%

2010

Net revenue

R$ million

53,760

42,269

36,676

176,578

121,800

27.2%

46.6%

45.0%

Hotel EBITDA

R$ million

18,818

14,083

10,784

58,224

32,954

33.6%

74.5%

76.7%

1.7 p.p.

5.6 p.p.

5.9 p.p.

58.6%

196.1%

293.2%

8.7%

6.1 p.p.

15.7 p.p.

15,0 p.p.

(6,172)

462.8%

607.3%

256.3%

-7.5%

-73.3%

Hotel EBITDA margin

(%)

Consolidated EBITDA

R$ million

Consolidated EBITDA margin

35.0% 16,736

(%)

33.3%

29.4%

10,552

31.1%

33.0%

5,652

25.0%

27.1%

41,888

15.4%

10,654

23.7%

Net income

R$ million

3,668

(1,011)

Cash and cash equivalents

R$ million

44,628

48,229

167,430

(723)

44,628

9,644

167,430

Debt

R$ million

(244,190)

(226,001)

(127,996)

(244,190)

(127,996)

8.0%

90.8%

Net cash

R$ million

(199,562)

(177,772)

39,434

(199,562)

39,434

12.3%

-606.1%

Hotel Indicators Annual and Quarterly Data - Consolidated Results Indicators

4Q11 vs. 3Q11

4Q11 vs. 4Q10

2011vs. 2010

4Q11

3Q11

4Q10

2011

2010

Δ%

Average occupancy rate

(%)

67.0%

66.9%

64.1%

66.9%

64.2%

0.1 p.p.

2.9 p.p.

2.7 p.p.

Average room rate

239.2

230.1

200.4

229.9

194.5

4.0%

19.4%

18.2%

RevPar²

160.2

153.8

128.5

153.8

125.0

4.2%

24.7%

23.0%

RevPar¹ = Revenue per available room (division of room revenue by the number of available rooms).

During 2011, BHG continued its commercial strategy of progressively increasing average room rates at its hotels, up by 18.2% year on year, impacting RevPar, which reached R$153.8 in 2011, up by 23.0% on the 2010 total of R$125.0. While increasing average room rates, the Company also maintained high average occupancy rates, up by 2.7 p.p., from 64.2% in 2010 to 66.9% in 2011. In 4Q11, RevPar reached R$160.2, up by 24.7% on 4Q10 and 4.2% on 3Q11, driven by increases in average room rates of 19.4% and 4.0%, respectively. The increase in the operating result was driven by investments made in the structural improvements of the Company’s hotels, which enabled better market positioning, allowing for significant increase in room rates and improving sales scope and customer mix. Furthermore, economic growth (GDP) and its effect on business travel had a positive impact on the Company’s operating result.

For further information, please access www.bhg.net

4Q11 AND 2011 EARNINGS RELEASE The Company’s growth and expansion of its activities have contributed to significant scale gains in its hotel operations, seen through the comparison of growth of net revenue, which increased by 45.0% in the year (from R$121.8 million in 2010 to R$176.6 million in 2011), with hotel EBITDA, which increased by 76.7% in the same period, from R$33.0 million in 2010 to R$58.2 million in 2011.

Main indicators - Same Store Sales:

Quarterly Data - Same Store Sales¹ Indicators

4Q11

3Q11

4Q11 vs. 3Q11

4Q11 vs. 4Q10

Δ%

4Q10

Net revenue

R$ million

42,480

39,340

33,766

8.0%

25.8%

Hotel EBITDA

R$ million

14,128

13,238

11,444

6.7%

23.5%

(%)

33.3%

33.7%

33.9%

-0.4 p.p.

-0.6 p.p.

Hotel BITDA margin

Same Stores Sales¹ = Considers only the Company's 2,320 owned rooms based on December 2010. ¹ Hotels considered in Same Store Sales: Golden Tulip Regente (RJ), Golden Tulip Continental (RJ), Tulip Inn Copacabana (RJ), Golden Tulip Porto Bali (RJ), Golden Tulip Belas Artes (SP), Tulip Inn Santa Felicidade (PR), Tulip Inn Campo Largo (PR), Tulip Inn Batel (PR), Tulip Inn São José dos Pinhais (PR), Golden Tulip Internacional Foz (PR), Tulip Inn Centro Histórico (RS), Golden Tulip Rio Vermelho (BA), Golden Tulip Recife Palace (PE) and Golden Tulip Pantanal.

Hotel indicators – Same Store Sales Quarterly Data - Same Store Sales¹ Indicators

4Q11

3Q11

4Q10

Average occupancy rate

(%)

67.5%

66.8%

65.0%

Average room rate

240.6

226.9

RevPar²

162.3

151.6

4Q11 vs. 3Q11

4Q11 vs. 4Q10

Δ%

0.7 p.p.

2.5 p.p.

190.0

6.0%

26.6%

123.6

7.1%

31.3%

Same Store Sales¹ = Considers only the Company's 2.320 owned rooms based on December 2010. RevPar* = Revenue per available room (division of room revenue by the number of available rooms).

The Company uses the same store sales concept to show the effects of the operating improvements that were implemented in its hotels throughout the year. The Company’s operational model, which involves initial investments in all acquired hotels, with structural improvements to assets, For further information, please access www.bhg.net

4Q11 AND 2011 EARNINGS RELEASE substantially reducing the cost of operations and enabling better market positioning, which supports significantly higher room rates. This turnaround process takes, on average, 18 months to complete, counted from the moment a hotel is acquired. Thus, by comparing the same hotels in the end of 2011 that were in operation in the end of 2010, the result of the Companyâ&#x20AC;&#x2122;s hotel operations was very positive, with RevPar growth of 31.3% in the period. Improvements to BHGâ&#x20AC;&#x2122;s hotels, coupled with the favorable economic environment in Brazil, led to a 26.6% increase in the average room rates, much higher than any measurement of inflation in the period. Furthermore, even while increasing room rates significantly, average occupancy rates remained high, at 67.5% in 4Q11, a 2.5 p.p. increase over 4Q10 and a 0.7 p.p. upturn over 3Q11. With structural improvements to its hotels, which allowed for a significant increase in RevPar year over year, BHG managed to maximize its results without compromising the quality of its customer services. This allowed the Company to achieve an EBITDA margin of 33.3% in 4Q11, in line with the respective 4Q10 and 3Q11 totals of 33.9% and 33.7%.

For further information, please access www.bhg.net

4Q11 AND 2011 EARNINGS RELEASE Financial Performance Annual and Quarterly Data - Consolidated Results (In thousands of Reais)

4Q11

3Q11

4Q10

2011

4Q11 vs. 3Q11

4Q11 vs. 4Q10

2011 vs. 2010

Δ%

2010

Hotel activities Gross operating revenue

60,231

47,431

40,563

197,078

134,661

27.0%

48.5%

46.4%

Room revenue

43,149

34,584

27,725

143,412

91,848

24.8%

55.6%

56.1%

F&B and other revenue

14,780

10,354

10,213

44,673

32,931

42.7%

44.7%

35.7%

2,302

2,493

2,625

8,993

9,882

-7.7%

-12.3%

-9.0%

(6,471)

(5,162)

(3,887)

(20,500)

(12,861)

25.4%

66.5%

59.4%

Management fee revenue Taxes and deductions Net revenue

53,760

42,269

36,676

176,578

121,800

27.2%

46.6%

45.0%

(16,065)

(12,722)

(11,486)

(53,877)

(38,859)

26.3%

39.9%

38.6%

Room

(7,699)

(6,193)

(5,269)

(26,302)

(17,760)

24.3%

46.1%

48.1%

F&B and others

(8,366)

(6,529)

(6,217)

(27,575)

(21,099)

28.1%

34.6%

30.7%

37,695

29,547

25,190

122,701

82,941

27.6%

49.6%

47.9%

Cost of services

Result from activities Gross margin

62.6%

62.3%

62.1%

62.3%

61.6%

0.3 p.p.

0.5 p.p.

0.7 p.p.

(18,877)

(15,464)

(14,406)

(64,477)

(49,987)

22.1%

31.0%

29.0%

(13,370)

(10,406)

(9,463)

(43,754)

(33,732)

28.5%

41.3%

29.7%

Maintenance

(1,814)

(1,774)

(1,775)

(7,283)

(6,416)

2.3%

2.2%

13.5%

Marketing and advertising

(3,693)

(3,283)

(3,168)

(13,440)

(9,839)

12.5%

16.6%

36.6%

18,818

14,083

10,784

58,224

32,954

33.6%

74.5%

76.7%

35.0%

33.3%

29.4%

33.0%

27.1%

1.7 p.p.

5.6 p.p.

5.9 p.p.

SG&A expenses - Hotel General and administrative

Hotel EBITDA Hotel EBITDA margin Real estate development activities Revenue - Launched sites

250

834

1,472

834

n.m.

76.5%

(354)

(257)

(524)

(2,093)

(524)

37.7%

-32.4%

299.4%

Landbank expenses - Non-launched sites

(1,216)

(1,163)

(2,437)

(5,235)

(8,158)

4.6%

-50.1%

-35.8%

Real estate EBITDA

(1,570)

(1,170)

(2,127)

(5,856)

(7,848)

34.2%

-26.2%

-25.4%

-2.9%

-2.8%

-5.8%

-3.3%

-6.4%

-0.1 p.p.

2.9 p.p.

3.1 p.p.

Expenses - Launched sites

Real estate EBITDA margin¹

Consolidated Revenue from non-operated properties²

5,004

2,518

9,394

1,868

98.7%

811.5%

402.9%

SG&A expenses - Corporate

(5,516)

(4,879)

(3,554)

(19,874)

(16,320)

13.1%

55.2%

21.8%

Consolidated EBITDA

16,736

10,552

5,652

41,888

10,654

58.6%

196.1%

293.2%

31.1%

25.0%

15.4%

23.7%

8.7%

6.1 p.p.

15.7 p.p.

15,0 p.p.

(1,937)

(7,748)

n.m.

Depreciation and amortization

(4,039)

(6,128)

(3,446)

Net financial result

(6,444)

(3,849)

Consolidated EBITDA margin GR Capital

549

(17,961)

(12,129)

-34.1%

17.2%

48.1%

351

(11,746)

5,143

67.4%

-1935.9%

-328.4%

Other

1,180

(312)

(377)

7,995

(275)

n.m.

Income before income tax

7,433

263

243

20,176

(4,355)

2726.2%

2958.8%

563.3%

318

669

1,685

1,591

-52.5%

1414.3%

5.9%

Minority interest Income tax and social contribution Net income/loss

(4,085)

(1,943)

(989)

(12,219)

(3,408)

110.2%

313.0%

258.5%

3,668

(1,011)

(723)

9,644

(6,172)

462.8%

607.3%

256.3%

Real estate EBITDA margin¹ = impact of real estate development on the Company's net revenue. Revenue from non-operated properties² = In 4Q11, it includes R$4.6 million related to judicial compensation for the acquisition of Rio Palace Hotel. n.m. = not measured

For further information, please access www.bhg.net

4Q11 AND 2011 EARNINGS RELEASE

Quarterly Data - Same Store Sales¹ (In thousands of Reais)

4Q11

3Q11

4Q10

4Q11 vs. 3Q11

4Q11 vs. 4Q10

Δ%

Hotel activities Gross operating revenue

47,180

43,417

37,133

8.7%

27.1%

Room revenue

34,642

31,431

25,487

10.2%

35.9%

F&B and other revenue

10,236

9,493

9,021

7.8%

13.5%

2,302

2,493

2,625

-7.7%

-12.3%

Taxes and deductions

(4,700)

(4,077)

(3,367)

15.3%

39.6%

Net revenue

42,480

39,340

33,766

8.0%

25.8%

(12,625)

(11,499)

(10,510)

9.8%

20.1%

Room

(6,099)

(5,466)

(4,622)

11.6%

32.0%

F&B and other

(6,526)

(6,033)

(5,888)

8.2%

10.8%

29,856

27,841

23,257

7.2%

28.4%

63.3%

64.1%

62.6%

-0.8 p.p.

0.7 p.p.

(15,728)

(14,603)

(11,813)

7.7%

33.1%

(10,844)

(10,062)

(7,376)

7.8%

47.0%

Maintenance

(1,445)

(1,624)

(1,279)

-11.0%

13.0%

Marketing and advertising

(3,439)

(2,917)

(3,158)

17.9%

8.9%

14,128

13,238

11,444

6.7%

23.5%

33.3%

33.7%

33.9%

-0.4 p.p.

-0.6 p.p.

Management fee revenue

Cost of services

Result from activities Gross margin SG&A expenses - Hotel General and administrative

Hotel EBITDA Hotel EBITDA margin

Quarterly Data - Same Stores Sales¹ = Considers only the Company's 2,320 owned rooms based on December, 2010.

Gross Operating Revenue Hotel gross operating revenue reached R$197.1 million in 2011, up by 46.4% on the 2010 total of R$134.7 million. Gross revenue growth was driven by the operational improvements to the hotel base, streamlining operations and aligning the hotels with the Company’s operational standards. The larger number of hotels in the base, resulting from acquisitions in the period, contributed to an increase in the overall result, even though they are not yet operating in accordance with our standards. In the quarter, hotel operations totaled R$60.2 million, a 48.5% increase over the 4Q10 total of R$40.6 million and a 27.0% upturn over the 3Q11 total of R$47.4 million. This increase was the result of For further information, please access www.bhg.net

4Q11 AND 2011 EARNINGS RELEASE operations at the Royal Tulip Rio de Janeiro, which began in October 2011 and contributed R$11.8 million in 4Q11. On a same store sales basis, gross revenue reached R$47.2 million in 4Q11, up by 27.1% on 4Q10 and 8.7% on 4Q10, thanks to the improved operational performance of hotels in the period.



Room Revenue: Revenue from room rates at our owned hotels accounted for 72.8% of gross revenue in 2011, at R$143.4 million, representing a 56.1% increase year on year. The year-over-year increase in room revenue was the result of the Company’s effective sales strategy, which sought sustainable increases in RevPar, with price adjustments and customer focus, aided by a favorable economic scenario that had a positive impact on demand. In 4Q11, room revenue accounted for 71.7% of gross revenue, at R$43.1 million, up by 55.6% and 24.8% on 4Q10 and 3Q11, respectively. In comparison with 4Q10, the R$15.4 million upturn was driven by increased RevPar, while the R$8.6 million gain over 3Q11 was the result of the startup of operations at the Royal Tulip Rio de Janeiro. On a same store sales basis, room revenue corresponded to 73.4% of gross revenue in the 4Q11, at R$34.6 million, up by 35.9% on 4Q10 and 10.2% on 3Q11, demonstrating the operational improvement of hotels after the turnaround period.



F&B and Other Revenue: Revenue from the sale of food and beverages (F&B), events and services in general provided in owned hotels corresponded to 22.6% of gross revenue in 2011, at R$44.7 million, up by 35.7% on 2010. In 4Q11, F&B revenue accounted for 24.5% of gross revenue, at R$14.8 million, up by 44.7% and 42.7% on 4Q10 and 3Q11, respectively. On a same store sales basis, this revenue accounted for 21.7% of gross revenue, at R$10.2 million, up by 13.5% on 4Q10 and 7.8% on 3Q11.

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4Q11 AND 2011 EARNINGS RELEASE ď&#x201A;ˇ

Management Fees: In addition to owned hotels, the Company obtains revenue from managed hotels, which totaled 15 hotels in 4 states and the Federal District at the end of 2011. Revenue from third-party hotel management is the result of management fees on the gross revenue of managed hotels and an incentive rate on the gross operating result of these hotels. In 2011, management fees totaled R$9.0 million, accounting for 4.6% of gross revenue, down by 9.0% on 2010. In 4Q11, management fees amounted to R$2.3 million, corresponding to 3.8% of gross revenue, down by 12.3% on 4Q10 and 7.7% on 3Q11. The decrease in management fees from 2010 was the result of a decline in hotel management revenue and a reduction in the number of hotels managed by the Company, by four - resulting from BHGâ&#x20AC;&#x2122;s decision to forego renewal of management agreements with smaller hotels, which are difficult to manage and do not provide relevant returns. In comparison with 4Q11, the 7.7% decrease was due to the concentration of hotels in SĂŁo Paulo, which suffered from seasonality in the period, leading to a decline in business in comparison with the third quarter. On a same store sales basis, this revenue accounted for 4.9% of gross revenue, at R$2.3 million, down by 12.3% on 4Q10 and 7.7% on 3Q11.

Hotel Gross Operating Revenue by Revenue Segment (R$ million and %)

197.1

134.7

60.2 47.4

40.6 72.8%

68.2%

71.7%

72.8%

68.4%

24.5%

22.6%

25.2%

21.9%

7.3%

4.6%

6.4 %

5.3%

2010

2011

4Q10

3Q11

Management fees

For further information, please access www.bhg.net

F&B

24.5% 3.8% 4Q11

Room

4Q11 AND 2011 EARNINGS RELEASE

Net Operating Revenue (NOR)

Net Operating Revenue (R$ million)

176.6

42,3

121.8

2010

53,8

36.7

2011

4Q10

3Q11

4Q11

NOR reached an all-time high of R$176.6 million in 2011, posting a substantial 45.0% increase over 2010. In absolute terms, revenue grew by R$54.8 million, R$37.7 million from the improvement of operations in hotels acquired between 2010 and 2009 and R$17.1 million from the acquisition of hotels. NOR came in at an all-time quarter high of R$53.7 million in 4Q11, up by 46.6% and 27.2% on 4Q10 and 3Q11, respectively. The R$17.1 million and R$11.5 million increases over 4Q10 and 3Q11, respectively, were driven by the positive impact of the Royal Tulip Rio de Janeiro, contributing R$7.3 million in 4Q11.

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4Q11 AND 2011 EARNINGS RELEASE Costs and Expenses – Hotel Annual and Quarterly Data - Consolidated Results (In thousands of Reais)

4Q11

3Q11

4Q10

2011

4Q11 vs. 3Q11

4Q11 vs. 4Q10

2011 vs. 2010

Δ%

2010

Hotel Activities Net revenue Total hotel costs and expenses % of NOR Cost of services

53,760

42,269

36,676

176,578

121,800

27.2%

46.6%

45.0%

(34,942)

(28,186)

(25,892)

(118,354)

(88,846)

24.0%

35.0%

33.2%

65.0%

66.7%

70.6%

67.0%

72.9%

-1.7 p.p.

-5.6 p.p.

-5.9 p.p.

(16,065)

(12,722)

(11,486)

(53,877)

(38,859)

26.3%

39.9%

38.6%

% of NOR

29.9%

30.1%

31.3%

30.5%

31.9%

-0.2 p.p.

-1.4 p.p.

Room

(7,699)

(6,193)

(5,269)

(26,302)

(17,760)

24.3%

46.1%

48.1%

F&B and other SG&A expenses - Hotel % of NOR

(8,366)

(6,529)

(6,217)

(27,575)

(21,099)

28.1%

34.6%

30.7%

(18,877)

(15,464)

(14,406)

(64,477)

(49,987)

22.1%

31.0%

29.0%

35.1%

36.6%

39.3%

36.5%

41.0%

-1.5 p.p.

-4.2 p.p.

-4.5 p.p.

(13,370)

(10,406)

(9,463)

(43,754)

(33,732)

28.5%

41.3%

29.7%

Maintenance

(1,814)

(1,774)

(1,775)

(7,283)

(6,416)

2.3%

2.2%

13.5%

Marketing and advertising

(3,693)

(3,283)

(3,168)

(13,440)

(9,839)

12.5%

16.6%

36.6%

General and administrative

Quarterly Data - Same Store Sales¹ (In thousands of Reais )

4Q11

3Q11

4Q11 vs. 3Q11

4Q11 vs. 4Q10

Δ%

4Q10

Hotel activities Net revenue

42,480

39,340

33,766

8.0%

25.8%

(28,353)

(26,102)

(22,323)

8.6%

27.0%

66.7%

66.3%

66.1%

0.4 p.p.

0.6 p.p.

(12,625)

(11,499)

(10,510)

9.8%

20.1%

% of NOR

29.7%

29.2%

31.1%

0.5 p.p.

-1.4 p.p.

Room

(6,099)

(5,466)

(4,622)

11.6%

32.0%

F&B and other

(6,526)

(6,033)

(5,888)

8.2%

10.8%

(15,728)

(14,603)

(11,813)

7.7%

33.1%

37.0%

37.1%

35.0%

-0.1 p.p.

2,0 p.p.

(10,844)

(10,062)

(7,376)

7.8%

47.0%

Maintenance

(1,445)

(1,624)

(1,279)

-11.0%

13.0%

Marketing and advertising

(3,439)

(2,917)

(3,158)

17.9%

8.9%

Total hotel costs and expenses % of NOR Cost of services

SG&A expenses - Hotel % of NOR General and administrative

Quarterly Data - Same Store Sales¹ = Considers only the Company's 2,320 owned rooms based on December 2010.

In 2011, hotel costs and expenses as a percentage of net operating revenue fell by 5.9 p.p., from 72.9% in 2010 to 67.0% in 2011, while the hotel EBITDA margin reached 33.0%, versus 27.1% in 2010. Strict cost control measures implemented by the Company, the standardization of operations in hotels For further information, please access www.bhg.net

4Q11 AND 2011 EARNINGS RELEASE acquired in 2010 and 2009 and the increase in room revenue were the main factors leading to the improvement in the hotel EBITDA margin in 2011. The Company also posted operational improvements in the quarter. In comparison with 4Q10 and 3Q11, hotel costs and expenses as a percentage of net operating revenue decreased by 5.6 p.p. and 1.7 p.p., respectively. These improvements had a direct impact on the hotel EBITDA margin in the period, increasing by the same 5.6 p.p. and 1.7 p.p. between the quarters, with a hotel EBITDA margin of 35.0% in 4Q11, versus 29.4 % in 4Q10 and 33.3% in 3Q11. In same store sales terms, hotel cost and expenses as a percentage of net operating revenue remained stable in comparison with 4Q10 and 3Q11. By continuing to standardize the operations of hotels acquired by the Company and expanding its sales strategy, focusing on corporate clients, BHG expects the hotel EBITDA margin from recently acquired hotels to reach the same level as hotels that have been operational for some time, thereby further improving the Company's consolidated numbers.

Cost of Services In 2011, through scale gains from greater revenue generation, continued improvement of hotels acquired in the last few years, the constant quest for operational improvement and the strict control of operating costs, BHG was able to decrease the cost of services to 30.5% of net operating revenue in the year, versus the 2010 total of 31.9%. In 4Q11, the cost of services as a percentage of NOR was 29.9%, down by 1.4 p.p. and 0.2 p.p. on 4Q10 and 3Q11, respectively. On a same store sales basis, the cost of services was 29.7% of NOR in 4Q11, an efficiency gain of 1.4 p.p. over 4Q10, while remaining in line with the 29.2% posted in 3Q11, due to the same reasons mentioned above.

Selling, General and Administrative Expenses Despite a 29.0% increase in hotel selling, general and administrative expenses over 2010, as a percentage of NOR, these expenses decreased by 4.5 p.p. (41.0% of NOR in 2010 to 36.5% of NOR in 2011). For further information, please access www.bhg.net

4Q11 AND 2011 EARNINGS RELEASE These expenses are related to the number of hotels in the network and vary in accordance with operational growth and demand for the Companyâ&#x20AC;&#x2122;s hotels. For this very reason, BHG incurred greater general, administrative and maintenance expenses in the period. Furthermore, marketing and selling expenses increased as a result of the fees charged by Golden Tulip, which are a percentage of room revenue and increase when room revenue grows. The decrease in expenses as a percentage of NOR is a very interesting metric, as this reduction essentially demonstrates the Companyâ&#x20AC;&#x2122;s efficiency in hotel management, with regards to controlling maintenance, utility and administrative labor costs in the hotels acquired in 2010 and 2009, which grew less than revenue in the period (45.0% increase year over year). In 4Q11, hotel selling, general and administrative expenses accounted for 35.1% of NOR, down by 4.2 p.p. on 4Q10 and 1.5 p.p. on 3Q11, respectively. In same store sales terms, as a percentage of NOR, these expenses increased by 2.0 p.p. over 4Q10, coming to 37.0% in 4Q11. This upturn was the result of an increase in operations and demand for the Company's hotels, which directly impacted the result. In comparison with 3Q11, the figure remained stable with the 37.1% presented earlier.

Hotel EBITDA In 2011, hotel EBITDA totaled R$58.2 million, up by 76.7% on 2010, while the hotel EBITDA margin increased by 5.9 p.p. over 2010, reaching a total of 33.0% in the period. In 4Q11, hotel EBITDA totaled R$18.8 million, up by 74.5% on 4Q10, while the hotel EBITDA margin increased by 5.6 p.p. over 4Q10, reaching 35.0% in the quarter. In comparison with 3Q11, hotel EBITDA increased by 33.6%, while the hotel EBITDA margin increased by 1.7 p.p. Hotel EBITDA moved up by R$8.0 million from 4Q10 and R$4.7 million from 3Q11, due to the positive impact of the Royal Tulip Rio de Janeiro, which contributed R$3.0 million to hotel EBITDA in 4Q11.

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4Q11 AND 2011 EARNINGS RELEASE

EBITDA (R$ million) and EBITDA Margin (%) - Hotel

35.0 33.3

33.0

29.4

58.2

10.8

2011

4Q10

18.8

27.1 14.1

33.0

2010

3Q11

4Q11

The expansion in hotel EBITDA and the hotel EBITDA margin was the result of the maturation of the hotels acquired over the last few years, in addition to the new acquisitions in the third quarter of 2010 and the first half of 2011, which fueled the Companyâ&#x20AC;&#x2122;s impressive growth in the segment. More importantly, strict and efficient compliance with the Companyâ&#x20AC;&#x2122;s strategy, its focus on controlling costs and finding synergies and economies of scale, together with a segmented commercial strategy focused on the corporate market, allowed the Company to increase its level of operations to further stand out as one of the premier hotel networks in the world.

Real Estate Development Expenses with real estate properties in the landbank are essential to the development of future partnerships or sale. The goal is to monetize the Companyâ&#x20AC;&#x2122;s non-urban landbank in order to invest the proceeds in its core business, the hotel segment in areas with elevated economic activity. During 2011, the Company strengthened its strategy to reduce expenses with real estate development not related to its core business, working to reduce the relevance of these activities in its results, which led to the outsourcing of real estate development activities. This has allowed the Company to activate certain project-related costs, further reducing the relevance of these numbers. Furthermore, 2011 marked the first year in which there was no impact from the GR Capital agreement, which ended in 2010 and used to cost the Company approximately R$7.7 million per year.

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4Q11 AND 2011 EARNINGS RELEASE In addition to expenses with maintenance and licensing for non-urban properties, which include everything from property maintenance (security and IPTU tax) to meeting certain conditions for obtaining environmental licenses and paying taxes to environmental entities, the Company also incurred revenue and expenses from the launch of Txai Ganchos, whose sales are currently suspended, and Txai Terravista, both in 2011. So far, neither of these projects have provided a relevant inflow of funds. Therefore, operations related to real estate development currently generate deficits. In 2011, the result of the Company’s real estate development activities was negative by R$5.9 million, despite a 25.4% improvement over 2010. This result had a negative impact on consolidated EBITDA of 3.3% and, while being negative, its effect on the EBITDA margin was reduced by 3.1 p.p. in comparison with the 2010 figure of 6.4%. In 4Q11, the result of the Company’s real estate development activities was a negative R$1.6 million, a 26.2% improvement over 4Q10 and a deterioration of 34.1% in comparison with 3Q11, resulting from the impact of expenses related to the pre-launch of property, particularly Txai Terravista.

Revenue from Non-Operated Properties This represents revenue from hotel properties that are not currently operated by the Company. Even though for every hotel acquisition the Company’s strategy calls for the beginning of management and turnaround of the property, in some cases, due to agreements between the hotel's former owners and its current management, BHG must comply with certain clauses regarding breach of contract with the current manager. During 2011, the Company invested in the acquisition of two hotels that did not come under BHG management upon completion of the acquisition. In March 2011, the Company acquired the hotel currently known as the Royal Tulip Rio de Janeiro, located in São Conrado, in Rio de Janeiro, starting its operation only in October 2011. Therefore, revenue from the hotel in 2Q11 and 3Q11 was recorded under revenue from non-operated properties. During 4Q11, with the startup of the hotel’s operations, the Company began to record revenue like that of other owned hotels in the BHG network. Similarly, even though the Company acquired the Rio Palace Hotel in August 2011, which is currently awaiting registration with the competent real estate notary office, due to an agreement signed by the property's former owner and its current management, the Company must comply with the terms of the agreement with regards to the management of the hotel by its current operator. While this

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4Q11 AND 2011 EARNINGS RELEASE question is still subject to discussion, BHG has already requested the removal of the current management, in accordance with the terms of the agreement. Nonetheless, a first instance ruling by the 6th Corporate Court of the Rio de Janeiro Judicial District recognized the supposed right of preference of Nova Riotel Empreendimentos Hoteleiros Ltda. (“Nova Riotel”), as lessee, to acquire the hotel, even though BHG’s acquisition took place within the judicial sphere. Given the aforementioned first instance ruling, on January 9, 2012, the Company filed an interlocutory appeal with the 4th Civil Chamber of the State Appellate Court of Rio de Janeiro to appeal the decision on Nova Riotel’s alleged right of preference. The Company believes it has strong arguments in its favor, including the support of reports from renowned legal experts in the domestic scenario and manifestations by the Public Prosecutor’s Office against the right of preference alleged by Nova Riotel on a number of opportunities throughout the proceedings. We will continue taking all the necessary measures to appeal the decision that recognized Nova Riotel’s supposed right of preference and ensure that the validity and legitimacy of the Hotel’s acquisition by Grupo BHG is confirmed. The discussions of the right of preference have, among other practical effects, led to the failure to receive – up to the current date – values due to the Company, since August 17, 2011, in regards to the management of the Rio Palace Hotel by said operator. As soon as the situation is rectified, the Company should receive retroactive rent payments. Considering the terms above, during 4Q11, the Company began recording the compensation of amounts deposited by BHG in an judicial account as revenue from non-operated properties, currently paying 6% plus the reference interest rate (TR), for the payment of the property’s acquisition. Therefore, in 2011, revenue from non-operated properties totaled R$9.4 million, of which R$4.6 million were from the Rio Palace Hotel, while the remaining R$2.9 million were from the Royal Tulip Rio de Janeiro, related to the period before we initiated the management of the property (March to September 2011). During 4Q11, the R$5.0 million result was mostly related to the legal compensation of the Rio Palace Hotel, which was nine times the 4Q10 result. In comparison with 3Q11, the R$2.5 million increase was the result of the difference between the inflow of compensation from the Rio Palace Hotel, minus funds from the Royal Tulip Rio de Janeiro.

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4Q11 AND 2011 EARNINGS RELEASE General and Administrative Expenses – Corporate In 2011, general and administrative expenses related to the corporate segment totaled R$19.9 million, up by R$3.6 million, or 21.8%, on 2010, due to a larger number of employees and non-recurring expenses related to consultancy and audit services. Despite this increase, what is most important is the fact that gross revenue grew faster than corporate expenses, up by 46.4%, totaling R$197.1 million in the period. Therefore, there was a 2.0 p.p. drop, from 12.1% to 10.1%, in corporate expenses as a percentage of gross revenue. The decrease in corporate expenses as a percentage of gross revenue is fundamental for the growth of the Company, whose strategy is to consolidate the domestic hotel sector, allied with cost control, will lead to the dilution of corporate expenses by the continual increase in operating revenue generation by the hotels.

Consolidated EBITDA The Company's consolidated EBITDA includes hotel EBITDA, real estate development activities, revenue from non-operated properties and corporate expenses. Consolidated EBITDA totaled R$41.9 million in 2011, up by R$31.2 million, or 293.2%, on 2010. This increase was driven by: 

A R$25.3 million year-over-year gain in hotel EBITDA, driven by the improved performance of the Company`s hotels and Brazilian GDP growth, which led to an uptick in business travel, as well as the beginning of management of the Royal Tulip Rio de Janeiro in 4Q11, contributing R$3.0 million to hotel EBITDA in the year;



Revenue from non-operated properties contributed R$7.5 million to EBITDA over 2010, R$4.6 million of which related to the Rio Palace Hotel, while the remaining R$2.9 million were related to the Royal Tulip Rio de Janeiro, which, despite being acquired in 2011, the start of operations by the Company only began in October 2011. In the six months prior, BHG received rent from the former operator;



Partially offset by the R$3.6 million upturn in corporate expenses, driven by an increase in staff and non-recurring spending with consultancy and audit services, even though corporate expenses as a percentage of gross revenue fell by 2.0 p.p., from 12.1% in 2010 to 10.1% in 2011;

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4Q11 AND 2011 EARNINGS RELEASE 

And through control of expenses with real estate development, which fell by R$2.0 million, having less of an impact on the Company’s consolidated EBITDA.

The consolidated EBITDA margin was 23.7% in 2011, a 15.0 p.p. increase over the 2010 total of 8.7%. The exponential increase in the margin demonstrates that the Company`s strategy of growth, through the expansion of its hotel operations, while maintaining strict control of corporate and landbank expenses (generating scale gains), is the correct path for the continued development of BHG. In 4Q11, consolidated EBITDA was R$16.7 million, up by R$11.1 million, or 196.1%, on 4Q10, while the EBITDA margin reached 31.1%, a 15.7 p.p. increase over the same period in 2010. This growth was the result of the same factors that influenced the 2011 fiscal year. In comparison with 3Q11, the R$6.2 million increase was mainly due to the operation of the Royal Tulip Rio de Janeiro. The quarterover-quarter increase in the EBITDA margin was 6.1 p.p. EBITDA (R$ million) and EBITDA Margin (%) - Consolidated 23.7 41.9

31.1 25.0

15.4

8.7

16.7

10.6

5.7 10.7 2010

2011

4Q10

3Q11

4Q11

Depreciation Deprecation came to R$18.0 million in 2011, a 48.1% increase over the R$12.1 million recorded in 2010, mainly due to the Company’s recent acquisitions, particularly the Royal Tulip Rio de Janeiro. In 4Q11, depreciation came to R$4.0 million, up by 17.2% on 4Q10, in line with the increase in the number of assets during the 2011 fiscal year. In comparison with 3Q11, depreciation fell by R$2.1 million, or 34.1%, in 4Q11, as a result of the adjustment to the depreciation rate due to the new useful life of assets.

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4Q11 AND 2011 EARNINGS RELEASE Net Financial Result In 2011, the net financial result was a negative R$11.7 million, down by R$6.6 million, or 328.4%, from the positive result of R$5.1 million in 2010. Recent acquisitions and hotel renovations were the main factors driving down the Company`s net financial result, leading to a decrease in cash available for financial investment, while also increasing loans and financing due to the strategy of leveraging 40% of acquisitions, thereby increasing interest payments and the amortization of loans. In 4Q11, the net financial result was a negative R$6.4 million, down by R$6.8 million from the positive result of R$0.4 million in 4Q10. In comparison with 3Q11, the same figure fell by 67.4%, or R$2.6 million, due to the aforementioned factors.

Net Income/Loss In 2011, the Company posted its first operational net income, totaling R$9.6 million, versus a net loss of R$6.2 million in 2010. This 256.2% increase over 2010 was driven by the growth of the Company`s hotel operations, including the operation of the Royal Tulip Rio de Janeiro and the impact of revenue from non-operated properties thanks to the legal compensation of the Rio Palace Hotel, as well as the dilution of corporate costs and the decrease in landbank expenses, combined with a positive R$7.0 million from the sale of the Av. Brigadeiro Faria Lima property. Even excluding the effect of the property sale, net income would have totaled R$2.6 million in 2011, an R$8.8 million increase over 2010. Net income stood at R$3.7 million in 4Q11, versus net losses of R$0.7 million in 4Q10 and R$1.0 million in 3Q11. The R$4.4 million increase over 4Q10 was driven by the Companyâ&#x20AC;&#x2122;s increased operational scale and control and dilution of costs. In comparison with 3Q11, the R$4.7 million increase in the net result was due to the recognition in the revenue from non-operated properties of the legal compensation related to the Rio Palace Hotel, which had a positive impact of R$4.6 million in the period.

Net Debt Cash and cash equivalents stood at R$44.6 million at the close of 2011, down by R$122.8 million, or 73.3%, on the close of 2010. This drop was mainly the result of the acquisitions of the Royal Tulip Rio

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4Q11 AND 2011 EARNINGS RELEASE de Janeiro and the Rio Palace Hotel during 2011, in addition to expenses with the modernization of a number of hotels acquired in recent years.

BHG’s gross debt reached R$244.2 million at the end of 2011, up by R$116.2 million on 2010, driven up by the aforementioned investments, which were made, in part, using financing, in accordance with the Company's strategy in leveraging all acquisitions in 40%. Therefore, at the end of 2011, the Company’s net debt stood at R$199.6 million. 2011 vs. 2010

Annual Data Net cash reconciliation (In thousands of Reais) (+) Cash and cash equivalents (+) Cash/Banks (+) Financial investments (+) Receivables from the sale of investments (-) Loans and financing (-) Loans (-) Accounts payable from the acquisition of investments¹ Net cash

2011

2010

Δ%

44,628

167,430

-73.3%

6,650

6,423

3.5%

22,335

115,285

-80.6%

15,643

45,722

-65.8%

(244,190)

(127,996)

90.8%

(235,647)

(114,706)

105.4%

(8,543)

(13,290)

-35.7%

39,434

-606.1%

(199,562)

Accounts payable from the acquisition of investments¹ = Loans related to the acquisition of hotels, in which the seller finances part of the sale (seller financing).

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4Q11 AND 2011 EARNINGS RELEASE

Capital Market:

Quarterly Data¹ Capital Market Number of shares (in thousands) Market cap (R$ million)

4Q11

3Q11

4Q10

4Q11 vs. 3Q11

4Q11 vs. 4Q10

Δ%

41,067

36,472

12.6%

636.5

739.2

736.4

-13.9%

-13.6%

15.50

18.00

20.19

-13.9%

-23.2%

Price* BHGR3 (R$) Small Cap Index**

1,200

1,162

1,440

3.3%

-16.6%

Ibovespa

56,754

52,324

69,305

8.5%

-18.1%

Dow Jones

12,218

10,913

11,578

12.0%

5.5%

11,567

19,148

49,056

-39.6%

-76.4%

193,579

382,062

1,017,001

-49.3%

-81.0%

Average daily share volume Average daily financial volume

¹ Amounts updated in accordance with the share split on January 12, 2010 (1:20). * End of the quarter; ** Small Cap Index of the BM&F Bovespa; Source: Bloomberg.

During 2011, the global economy was characterized by fiscal difficulties throughout the majority of the European Union (EU). A prolonged crisis and difficulty in approving a financial aid package were the main drags on capital markets, which posted anemic performance in the period. Despite growth of almost 3% in the Brazilian economy, the risk-adverse scenario thanks to difficulties in the EU cast a shadow over the performance of the Bovespa, which posted its third worst showing since 1994, falling by 18.1% in the year. In the midst of such uncertainty, the Company’s shares suffered in the period, posting a depreciation of 23.2% over 2010. With an improved international scenario influenced by the seemingly impending agreement on the financial aid package to countries facing crisis in the European Union, together with lower pressure for the sale of its stock, the Company’s shares began 2012 in a strong position, rising above the BM&FBovespa. Shares reached R$20.5 on March 14, 2012, up by 32.3% on December 2011, and have already posted a 1 year return of 2.6%.

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4Q11 AND 2011 EARNINGS RELEASE

At the close of December 2011, the Companyâ&#x20AC;&#x2122;s controlling shareholders held an interest of 46.2%. Excluding treasury stock and shares held by executive officers and Board members, the Company's free-float was 50.8%.

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4Q11 AND 2011 EARNINGS RELEASE Exhibits: Consolidated Statement of Income Annual and Quarterly Data - Consolidated Results (In thousands of Reais) Gross operating revenue

4Q11

3Q11

4Q10

2011

2010

4Q11 vs. 3Q11

4Q11 vs. 4Q10

2011 vs. 2010

Δ%

60,231

47,431

40,563

197,078

134,661

27.0%

48.5%

46.4%

Room revenue

43,149

34,584

27,725

143,412

91,848

24.8%

55.6%

56.1%

F&B and other revenue

14,780

10,354

10,213

44,673

32,931

42.7%

44.7%

35.7%

Management fee revenue Taxes and deductions Net revenue Cost of services Room F&B and other

2,302

2,493

2,625

8,993

9,882

-7.7%

-12.3%

-9.0%

(6,471)

(5,162)

(3,887)

(20,500)

(12,861)

25.4%

66.5%

59.4%

53,760

42,269

36,676

176,578

121,800

27.2%

46.6%

45.0%

(16,065)

(12,722)

(11,486)

(53,877)

(38,859)

26.3%

39.9%

38.6%

(7,699)

(6,193)

(5,269)

(26,302)

(17,760)

24.3%

46.1%

48.1%

(8,366)

(6,529)

(6,217)

(27,575)

(21,099)

28.1%

34.6%

30.7%

Result from activities

37,695

29,547

25,190

122,701

82,941

27.6%

49.6%

47.9%

SG&A expenses - Hotel

(18,877)

(15,464)

(14,406)

(64,477)

(49,987)

22.1%

31.0%

29.0%

(13,370)

(10,406)

(9,463)

(43,754)

(33,732)

28.5%

41.3%

29.7%

(1,814)

(1,774)

(1,775)

(7,283)

(6,416)

2.3%

2.2%

13.5%

General and administrative Maintenance Marketing and advertising Hotel EBITDA Revenue from non-operated properties

(3,693)

(3,283)

(3,168)

(13,440)

(9,839)

12.5%

16.6%

36.6%

18,818

14,083

10,784

58,224

32,954

33.6%

74.5%

76.7% 402.9%

5,004

2,518

9,394

1,868

98.7%

811.5%

SG&A expenses - Corporate

(5,516)

(4,879)

(3,554)

(19,874)

(16,320)

13.1%

55.2%

21.8%

Real estate development

(1,570)

(1,170)

(2,127)

(5,856)

(7,848)

34.2%

-26.2%

-25.4%

Revenue - Sites launched Expenses - Sites launched Landbank expenses - Non-launched sites

(354)

549

250

834

1,472

834

n.m.

76.5%

(257)

(524)

(2,093)

(524)

37.7%

-32.4%

299.4%

(1,216)

(1,163)

(2,437)

(5,235)

(8,158)

4.6%

-50.1%

-35.8%

16,736

10,552

5,652

41,888

10,654

58.6%

196.1%

293.2%

(1,937)

(7,748)

n.m.

Depreciation and amortization

(4,039)

(6,128)

(3,446)

EBIT

12,697

4,424

Net financial result

(6,444)

(3,849)

Financial revenue

3,132

4,983

3,854

Financial expenses

(9,576)

(8,832)

(3,503)

Consolidated EBITDA GR Capital

(17,961)

(12,129)

-34.1%

17.2%

48.1%

269

23,927

(9,223)

187.0%

4620.1%

359.4%

351

(11,746)

5,143

67.4%

-1935.9%

-328.4%

19,425

17,654

-37.1%

-18.7%

10.0%

(31,171)

(12,511)

8.4%

173.4%

149.1%

Other

1,180

(312)

(377)

7,995

(275)

n.m.

Income before income tax

7,433

263

243

20,176

(4,355)

2726.2%

2958.8%

563.3%

Minority interest Income tax and social contribution Net income/loss

1,685

1,591

-52.5%

1414.3%

5.9%

(4,085)

318

(1,943)

669

(989)

(12,219)

(3,408)

110.2%

313.0%

258.5%

3,668

(1,011)

(723)

9,644

(6,172)

462.8%

607.3%

256.3%

n.m. not measured

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4Q11 AND 2011 EARNINGS RELEASE Balance Sheet Balance Sheet (in thousands of Reais) Assets Total assets

12/31/2011

12/31/2010

1,016,102

801,340

Current assets

82,176

203,469

Cash and cash equivalents

28,985

121,708

Client receivables

31,150

24,981

Other receivables

20,438

54,907

1,603

1,873

Inventories Other

Non-current assets

933,926

597,871

Long-term assets

206,592

180,874

Client receivables Other receivables Loans with related parties

46,530

460 21,572

1,889

1,163

Properties to be sold

158,173

157,679

Permanent assets

727,334

416,997

Investments Property, plant and equipment Intangible assets Deferred assets Liabilities Total liabilities Current liabilities Suppliers Loans and financing

4,320

677,817

359,553

45,197

53,124

12/31/2011

12/31/2010

1,016,102

801,340

151,147

67,256

19,662

16,534

102,419

19,903

Taxes and contributions

7,400

7,158

Obligations with the acquisition of investments

8,543

13,290

Payroll and related taxes

9,872

5,631

Other payables

3,251

4,740

Noncurrent liabilities

134,076

95,885

Loans and financing

133,228

94,803

Advance for future capital increase

275

896

573.00

186

Shareholders' equity

730,879

638,199

Capital stock

725,775

640,775

Capital reserves

93,717

93,164

Shares held in treasury

(8,225)

(9,756)

(86,322)

(95,966)

5,934

9,982

Other

Accumulated losses Minority interest

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4Q11 AND 2011 EARNINGS RELEASE Statement of Cash Flow Cash flow (in thousands of Reais) Cash flow from operating activities Cash from operating activities Result before income tax and social contribution Depreciation and amortization Write-off of property, plant and equipment Options granted Equity income (loss) Changes in assets and liabilities Clients Restricted deposits Inventories Recoverable taxes Deferred taxes Judicial deposits Other assets Suppliers Taxes and contributions Accounts payable from the acquisition of investments Payroll and related taxes Contingent liabilities Other liabilities Income tax and social contribution paid Cash flow from investment activities Loans Interest received Receivables from the sale of investments Sale of investments Acquisition of fixed assets Acquisition of intangible assets (except goodwill) Acquisition of investments/goodwill Advance for future capital increase Properties to be sold Bonus received from the granting of options Minority interest Cash flow from financing activities Loans with related parties Loans Interest paid Debt with related parties Shares held in treasury Capital increase Increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of the period Cash and cash equivalents at end of the period Variation of cash and cash equivalents

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12/31/2011

12/31/2010

17,888

(10,539)

54,352

9,610

20,176

(4,355)

17,961

12,129

14,955

577

1,260

1,259

24,245

(16,741)

(5,709)

(10,092)

1,892 270 (2,676) (7,645)

(175) (831) (1,965) -

(1,329)

(214)

(10,684)

(4,419)

3,128

6,561

242

2,044

(4,514)

(4,093)

4,241

(3,791)

28 (1,489)

234

(12,219)

(3,408)

(317,359)

(162,346)

30,079 6,874

(7,060) 2,610 (145,916) -

(340,701)

(3,773)

(4,701)

(8,814)

(3,040)

(3,711)

(621) (494) (707) (4,048) 206,748

(586) 1,051 3,853 48,289

(726) 129,753

56 59,570

(8,810)

(8,773)

(2,000)

1,531 85,000

(564) -

(92,723)

(124,596)

121,708

246,304

28,985

121,708

(92,723)

(124,596)

4Q11 AND 2011 EARNINGS RELEASE EBITDA Reconciliation Annual and Quarterly Data - Consolidated Results EBITDA Reconciliation

Δ%

(1,011)

(723)

9,644

(6,172)

462.8%

607.3%

256.3%

(+) Income tax and social contribution

4,085

1,943

989

12,219

3,408

110.2%

313.0%

258.5%

(669)

(21)

(1,685)

(1,591)

-52.5%

1414.3%

5.9%

7,433

263

243

20,176

(4,355)

(1,180)

312

377

(7,995)

(-) Other

(318)

4Q10

2011

2010

2011 vs. 2010

3,668

Income before income tax

3Q11

4Q11 vs. 4Q10

Net income

(-) Minority interest

4Q11

4Q11 vs. 3Q11

2726.2%

2958.8%

563.3%

275

n.m.

8.4%

173.4%

149.1%

(+) Financial expenses

9,576

8,832

3,503

31,171

12,511

(-) Financial revenue

(3,132)

(4,983)

(3,854)

(19,425)

(17,654)

-37.1%

-18.7%

10.0%

4,039

6,128

3,446

17,961

12,129

-34.1%

17.2%

48.1%

1,937

7,748

n.m.

16,736

10,552

5,652

41,888

10,654

58.6%

196.1%

293.2%

(+) Depreciation and amortization (+) GR Capital Consolidated EBITDA n.m. not measured

Disclaimer:

The statements herein related to the business prospects, projections of operating and financial results and the Company’s growth prospects are merely forecasts, and as such are based exclusively on Management's expectations for the future of the businesses. These expectations depend substantially on changes in market conditions, the performance of the Brazilian economy, the sector and international markets and are therefore subject to change without prior notice.

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