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Earnings Release 2Q08

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    Earnings Release 2Q08 Earnings Release 2Q08 Document Transcript

    • Unconsolidated and Consolidated Quarterly Financial Information BR Properties S.A. June 30, 2008 and March 31, 2008 with Special Review Report of Independent Auditors
    • BR PROPERTIES S.A. UNCONSOLIDATED AND CONSOLIDATED QUARTERLY FINANCIAL INFORMATION June 30, 2008 and March 31, 2008 Contents Special Review Report of Independent Auditors ................................................................ 1 Quarterly Financial Information Balance Sheets ..................................................................................................................... 2 Statements of Operations .................................................................................................... 4 Notes to the Quarterly Financial Information...................................................................... 5
    • A free translation from Portuguese into English of Special Review Report of Independent Auditors on quarterly financial information prepared in Brazilian currency in accordance with the accounting practices adopted in Brazil and specific standards established by IBRACON, CFC and CVM SPECIAL REVIEW REPORT OF INDEPENDENT AUDITORS The Board of Directors and Shareholders BR Properties S.A. 1. We have performed a special review of the accompanying unconsolidated and consolidated quarterly financial information (ITR) of BR Properties S.A. (the Company) for the quarter ended June 30, 2008, including the balance sheets, the related statements of operations, cash flows and value added, and accompanying notes, prepared under the responsibility of management. 2. We conducted our review in accordance with specific standards established by the Brazilian Institute of Independent Auditors (IBRACON), together with the Federal Accounting Council (CFC), which consisted principally of: (a) inquiries of and discussions with persons responsible for the accounting, financial and operating areas of the Company and subsidiaries as to the criteria adopted in preparing the quarterly financial information, and (b) review of the information and subsequent events that had or might have had material effects on the financial position and results of operations of the Company and subsidiaries. 3. Based on our special review, we are not aware of any material modification that should be made to the quarterly financial information (ITR) referred to above for it to be in conformity with the standards established by the Brazilian Securities Commission (CVM), applicable to the preparation of quarterly financial information, including CVM Ruling No. 469/08. 4. As mentioned in Note 2.2, Law No. 11638 was approved on December 28, 2007, effective as from January 1, 2008. This law amended, revoked and introduced new provisions to Law No. 6404/76 (Brazilian Corporation Law), resulting in changes in accounting practices adopted in Brazil. Although said Law is already in force, the main changes introduced by it depend on regulation by regulatory agencies to be fully applied by the companies. As such, in this transition phase, CVM, through CVM Ruling No. 469, dated May 2, 2008, allowed non-application of the provisions of Law No. 11638/07 in preparing quarterly financial information (ITR). In view of this, the accounting information contained in the quarterly financial information (ITR) for the quarter ended June 30, 2008 was prepared in accordance with specific CVM rulings and does not consider the changes in accounting practices introduced by Law No. 11638/07. São Paulo, August 1, 2008, except Note 18, dated August 11, 2008 ERNST & YOUNG Auditores Independentes S.S. CRC-2SP015199/O-6 Antonio Humberto Barros dos Santos Accountant CRC-1SP161745/O-3 1
    • A free translation from Portuguese into English of quarterly financial information prepared in Brazilian currency in accordance with the accounting practices adopted in Brazil BR PROPERTIES S.A. BALANCE SHEETS June 30, 2008 and March 31, 2008 (In thousands of reais) Company Consolidated June 30, March 31, June 30, March 31, 2008 2008 2008 2008 Assets Current assets Cash and cash equivalents (Note 4) 480 87 1,304 2,776 Short-term investments (Note 4) 157,495 210,436 167,223 216,576 Trade accounts receivables (Note 5) - - 8,599 8,267 Advances for acquisition of real estate - - 20,485 452 Recoverable taxes (Note 6) 1,977 1,508 2,419 1,774 Deferred income and social contribution taxes Prepaid expenses 87 72 694 508 Other accounts receivable 565 5,589 2,275 5,237 160,604 217,692 235,590 Permanent assets Investments in subsidiaries(Note 7) 520,454 463,883 - - Goodwill on investment acquisition(Note 7) 8,080 8,080 9,847 9,487 Property and equipment (Note 8) 532 517 1,116,098 1,079,811 528,986 472,480 1,125,945 1,089,298 Total assets 689.590 690,172 1,328,584 1,324,888 2
    • Company Consolidated June 30, March 31, June 30, March 31, 2008 2008 2008 2008 Liabilities and shareholders’ equity Current liabilities Loans and financing (Note 9) - - 61,770 58,997 Trade accounts payable 299 349 1,876 938 Salaries and social charges payable 418 863 505 1,077 Taxes payable 88 595 689 1,173 Provision for income and social 206 594 contribution taxes 244 557 Payables for acquisition of real estate 341 7,580 (Note 10) 464 13,832 Advances - - 299 593 Other accounts payable 69 2 1,514 4,282 1.421 2,517 74,827 81,449 Noncurrent liabilities Provision for income and social - 52,554 contribution taxes (Note 11) - 52,771 Loans and financing (Note 9) - - 513,034 503,013 - - 565,588 555,784 Shareholders’ equity Capital: Subscribed capital (Note 13) 597,033 597,033 597,033 597,033 Revaluation reserve – subsidiaries 102,018 102,438 102,018 102,438 Accumulated losses (10,882) (11,816) (10,882) (11,816) 688,169 687,655 688,169 687,655 Total liabilities and shareholders’ equity 689,590 690,172 1,328,584 1,324,888 See accompanying notes. 3
    • BR PROPERTIES S.A. STATEMENTS OF OPERATIONS Three month periods ended June 30, 2008 and March 31, 2008 (In thousands of reais) Company Consolidated Three month Three month Three month Three month period ended period ended period ended period ended June 30, 2008 March 31, 2008 June 30, 2008 March 31, 2008 Gross Revenues from sales: Lease - 43,950 21,777 Services rendered - 313 65 Taxes on revenues - (4,564) (2,657) Net revenue from rental - 39,699 19,185 Cost of leased properties and services rendered - (7,523) (3,011) Gross profit - 32,176 16,174 Operating income (expenses) General and administrative expenses (5,285) (2,644) (8,045) (3,954) Financial income (Note 14) 11,113 5,936 11,486 6,097 Financial expenses (Note 14) (220) (69) (32,950) (16,103) Equity pick-up in subsidiaries (3,319) (1,153) - - Operating and pretax loss 2,289 2,068 2,667 2,214 Non operating income 30 30 199 116 Income and social contribution (1,867) (1,320) taxes (Note 11) (761) (993) Loss for the period 999 1,337 999 1,337 See accompanying notes. 4
    • BR PROPERTIES S.A. NOTES TO THE QUARTERLY FINANCIAL INFORMATION June 30, 2008 and March 31, 2008 (In thousands of reais) 1. Operations The Company was incorporated on May 26, 2004 as a stock corporation named Itarema Participações S.A. On December 22, 2006, its corporate name was changed to BR Properties S.A. (“BR Properties” or the “Company”). On December 22, 2006, the Company received contributions from shareholders, including new shareholders, amounting to R$ 53,000. The major new shareholders were GP Investments Ltd, Private Equity Partners A, LLC, Private Equity Partners B, LLC, Reic Brasil Holding LLC, Castlerigg Latin American Investments LLC, Peter L. Malkin Family 2000 LLC, Talisman Special Purpose Fund Ltd, Tudor Proprietary Trading LLC and Tudor Brazil Investments LLC. The shareholders established the Company’s business plan and resolved that it would operate as a holding engaged in (i) purchase, sale and development of commercial buildings, existing or to be built; (ii) management of own or third party properties; (iii) leasing, commercial exploration, rent or sub-rent of own commercial properties, including those built to suit. The Company started operations in April 2007, by establishing Special Purpose Companies (SPCs) to acquire properties and have them rented under commercial lease agreements, having invested approximatelyR$932 million until June 30, 2008. The Company also invested close to R$42 million in the acquisition of land banks for future commercial property developments. In the second quarter of 2008, the Company invested R$60 million in the acquisition of the following properties: On May 8, 2008, the Company, through its subsidiary BRPR XV Empreendimentos e Participações Ltda., acquired the industrial warehouse Trisoft, located in the city of Itapeví, state of São Paulo, at Avenida Professor Vernon Krieble, 455. On May 8, 2008, the Company, through its subsidiary BRPR X Empreendimentos e Participações Ltda., acquired the commercial building Twin Towers, located in the city of Belo Horizonte, state of Minas Gerais, at Avenida Raja Gabaglia, 1.725. On June 30, the Company had made an advance payment of approximately R$20 million, recorded under current assets. 5
    • BR PROPERTIES S.A. NOTES TO THE QUARTERLY FINANCIAL INFORMATION June 30, 2008 and March 31, 2008 (In thousands of reais) 1. Operations (continued) On June 23, 2008, the Company, through its subsidiary BRPR XIX Empreendimentos e Participações Ltda., acquired the Panamérica II plot of land, located in the city of São Paulo, state of São Paulo, at Avenida Guido Caloi, 1000. These properties are rented for terms varying between 4 and 8 years, with the possibility of being extended for equal periods. 2. Basis of Preparation and Presentation of the Financial Statements 2.1. Quarterly financial information The quarterly financial information was prepared in accordance with accounting practices adopted in Brazil, the accounting guidelines in Brazilian Corporation Law and the accounting rules and procedures established by the Brazilian Securities and Exchange Commission (CVM). The preparation of the quarterly information involves the use of accounting estimates. Such estimates were based on objective and subjective aspects considering management’s judgment to determine the adequate amount to be recorded in the financial statements. Significant items subject to these estimates and assumptions include selection of useful lives and recoverability of property and equipment, credit risk analysis in determining the allowance for doubtful accounts, as well as the analysis of other risks to determine other provisions, including provision for contingencies and measurement of financial instruments and other assets and liabilities at the date of the financial statements. Settlement of transactions involving these estimates may result in amounts significantly different from those recorded in the financial statements due to the uncertainties inherent in the estimate process. Income and social contribution taxes were computed based on applicable legislation at the balance sheet date. Assets and liabilities are classified as current whenever their realization or settlement is likely to occur within the following twelve months. Otherwise, these will be shown as non-current. 6
    • BR PROPERTIES S.A. NOTES TO THE QUARTERLY FINANCIAL INFORMATION June 30, 2008 and March 31, 2008 (In thousands of reais) 2. Basis of Preparation and Presentation of the Financial Statements (Continued) 2.1. Quarterly financial information (continued) The consolidated quarterly financial information includes operations of the Company and the following subsidiaries, in which its ownership interest at June 30, 2008 is summarized as follows: Direct ownership Consolidation interest criterion BRPR I Empreendimentos e Participações Ltda. 99.99% Full BRPR II Empreendimentos e Participações Ltda. 99.99% Full BRPR III Empreendimentos e Participações Ltda. 99.99% Full BRPR IV Empreendimentos e Participações Ltda. 99.99% Full BRPR V Empreendimentos e Participações Ltda. 99.99% Full BRPR VII Empreendimentos e Participações Ltda. 99.99% Full BRPR VIII Empreendimentos e Participações Ltda. 99.99% Full BRPR IX Empreendimentos e Participações Ltda. 99.99% Full BRPR X Empreendimentos e Participações Ltda. 99.99% Full BRPR XI Empreendimentos e Participações Ltda. 99.99% Full BRPR XII Empreendimentos e Participações Ltda. 99.99% Full BRPR XIII Empreendimentos e Participações Ltda. 99.99% Full BRPR XIV Empreendimentos e Participações Ltda. 99.99% Full BRPR XV Empreendimentos e Participações Ltda. 99.99% Full BRPR XVI Empreendimentos e Participações Ltda. 99.90% Full BRPR XVII Empreendimentos e Participações Ltda. 99.90% Full BRPR XVIII Empreendimentos e Participações Ltda. 99.90% Full BRPR XIX Empreendimentos e Participações Ltda. 99.99% Full BRPR XX Empreendimentos e Participações Ltda. 99.90% Full BRPR XXI Empreendimentos e Participações Ltda. 99.90% Full BRPR XXII Empreendimentos e Participações Ltda. 99.90% Full BRPR XXIII Empreendimentos e Participações Ltda. 99.90% Full BRPR XXIV Empreendimentos e Participações Ltda. 99.90% Full BRPR XXV Empreendimentos e Participações Ltda. 99.90% Full BRPR A Administradora de Ativos Imobiliários Ltda. 99.90% Full The fiscal years of subsidiaries included in consolidation are the same as those of the Company, and accounting policies were consistently applied by the consolidated companies. For consolidation purposes, subsidiary BRPR I consolidates the operations of its wholly-owned subsidiary BRPR VI. The main consolidation procedures are: 7
    • BR PROPERTIES S.A. NOTES TO THE QUARTERLY FINANCIAL INFORMATION June 30, 2008 and March 31, 2008 (In thousands of reais) 2. Basis of Preparation and Presentation of the Financial Statements (Continued) 2.1. Quarterly financial information (continued) - Elimination of the balance of intercompany assets and liabilities between consolidated companies; - Elimination of participation in capital, reserves and retained earnings of consolidated companies; - Elimination of the balances of revenues and expenses resulting from intercompany transactions. 2.2. Changes in the Brazilian Corporation Law – Law No. 11638/07 Law No. 11638, approved on December 28, 2007, amends, revokes and introduces new provisions in Law No. 6.404, dated December 15, 1976 and Law No. 6385, dated December 7, 1976. The main objective of these changes is to update Brazilian Corporation Law to allow convergence of accounting practices adopted in Brazil with international accounting standards issued by the International Accounting Standards Board – IASB. The requirements of this new Law apply to financial statements for fiscal years beginning on or after January 1, 2008. The referred to requirements are not regarded as changes in circumstances or estimates and, as such, as a general rule, must be demonstrated retrospectively. In other words, these new accounting practices are applied as if they had been effective in all periods presented, with observance of the standard that addresses “Accounting Practices, Changes in Accounting Estimates and Correction of Errors”, approved by CVM Resolution No. 506. On May 2, 2008, CVM Ruling No. 469 was issued, which regulates Law No. 11638/07, establishing the minimum requirements to be observed in the presentation of the quarterly financial information (ITR) during 2008. Such Ruling, under certain conditions, permitted the option of fully adopting the provisions of the mentioned Law. The Company management opted not to adopt this alternative and, as such, applied Law No. 11638/07 to the minimum extent required by CVM Ruling No. 469 for presentation of its quarterly financial information for 2008. Among the main changes in accounting standards introduced by the new law, we list below only those which, based on a preliminary analysis made by management, may come to impact the financial statements of the Company and its subsidiaries for the year ending December 31, 2008: 8
    • BR PROPERTIES S.A. NOTES TO THE QUARTERLY FINANCIAL INFORMATION June 30, 2008 and March 31, 2008 (In thousands of reais) 2. Basis of Preparation and Presentation of the Financial Statements (Continued) 2.2. Changes in the Brazilian Corporation Law – Law No. 11638/07 (continued) Analysis of the recoverability of the amounts recorded in fixed, intangible and deferred assets, as established in Pronouncement No. 01 issued by the Accounting Pronouncement Board (CPC), approved by CVM Resolution No. 527. Based on analysis of cash flows of assets, the Company management did not identify amounts indicating their impairment. Management and employee share-based compensation – As mentioned in Note 13b, the Company offers a share purchase option plan to management and major executives, based on achievement of certain goals. This issue is still pending regulation by CVM, therefore, had the Company recorded compensation expenses by means of share purchase options, it is estimated that shareholders’ equity and P&L for the six-month period ended June 30, 2008 would have been reduced by approximately R$4 million. In business combinations between independent parties involving effective transfer of controlling interest, assets and liabilities of the company to be merged or resulting from merger or spin-off shall be recorded at market value. As disclosed in Note 7 c, there was no amortization of goodwill balance of R$ 9,487 at June 30, 2008, which will take place as from 2010 based on net income projections prepared by management. In the quarter ended June 30, 2008, the Company did not acquire shareholdings. Eliminated the possibility of voluntary revaluation of assets and, consequently the revaluation reserve, including periodic revaluations provided for by CVM Resolution No. 183, dated June 19, 1995. In view of this, the existing revaluation reserve recorded before effect of Law No. 11638, dated 2007, including of the revaluation reserves of subsidiaries and affiliates, may be maintained until their effective realization or reversed until the end of the year in which Law No. 11638 became effective, i.e. 2008. Company management chose to maintain the existing balances of the revaluation reserves until their effective realization. 9
    • BR PROPERTIES S.A. NOTES TO THE QUARTERLY FINANCIAL INFORMATION June 30, 2008 and March 31, 2008 (In thousands of reais) 2. Basis of Preparation and Presentation of the Financial Statements (Continued) 2.2. Changes in the Brazilian Corporation Law – Law No. 11638/07 (continued) Financial instruments, including derivatives must be stated: (i) at market or equivalent value, when these are for trading or available for sale; and (ii) at cost of acquisition or issue value, restated according to legal or contractual provisions, adjusted to probable realization value, when this is lower. Company management believes that its accounting practices related to financial investments are aligned with CVM requirements, i.e. no significant effect is expected to result from adoption of the referred to rule. In relation to derivatives, management is waiting for regulation of the changes introduced by Law No. 11638 to conduct detailed analyses to allow proper recording and disclosure relating to this matter. Noncurrent assets and liabilities must be adjusted to present value. The remaining balances shall be adjusted to present value only when the effect on the quarterly financial information is significant. The Company records no current or noncurrent assets and liabilities that should be adjusted to present value. Possibility of separately recording transactions to meet tax legislation, and subsequently the necessary adjustments to comply with accounting practices. The Company is evaluating the impacts of this change on its internal control structure in order to better define the practice to be adopted. Rights related to assets intended for maintenance of Company activities, including those resulting from operations that transfer benefits, risks and control over the assets to the Company, such as commercial leasing, must be recorded in permanent assets. The Company believes that the referred to change will not generate any significant impact on its financial statements. Investments in affiliates in whose management significant influence is exerted or ownership interest of 20% or more in voting capital (and no longer in total capital) is held, in subsidiaries and in other companies belonging to the same group or that are under common control must be stated by the equity method. The concept of significance was eliminated. Company management believes that the referred to change will not generate any significant impact on the quarterly financial information. The Company is disclosing the Statements of Cash Flows and of Value Added as supplementary information. 10
    • BR PROPERTIES S.A. NOTES TO THE QUARTERLY FINANCIAL INFORMATION June 30, 2008 and March 31, 2008 (In thousands of reais) 3. Summary of Significant Accounting Practices a) Determination of profit and loss Revenues and expenses are recorded on the accrual basis. Revenue is not recognized if significant uncertainty exists about its collectability. b) Cash and cash equivalents Include bank account balances and short-term investments redeemable within 90 days from the balance sheet date, at acquisition cost plus income earned to the balance sheet date. c) Investments Investments in subsidiaries are stated by the equity method. d) Property and equipment These are recorded at acquisition cost, plus revaluation of buildings and land, recognized in December 2007 by subsidiaries, based on the valuation report prepared by independent appraisers. Depreciation is calculated by the straight-line method at rates mentioned in Note 8. The revaluation was recognized against the corresponding reserve in shareholders’ equity, net of tax effects. The revaluation reserve will be transferred to retained earnings upon depreciation and write-off of such revalued assets. e) Goodwill Goodwill on investment acquisition is based on future economic benefits arising therefrom and will be amortized according to the yield curves of each business venture, based on management projections, over no more than 10 years. The Company periodically reviews its future profitability projections and performs goodwill impairment tests. 11
    • BR PROPERTIES S.A. NOTES TO THE QUARTERLY FINANCIAL INFORMATION June 30, 2008 and March 31, 2008 (In thousands of reais) 3. Summary of Significant Accounting Practices (Continued) f) Liabilities 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 a cash outflow. Due to uncertainty with respect to the timing and amount of the cash outflow required for settlement, certain liabilities are estimated as incurred and recorded as a provision. Provisions are recorded reflecting the best estimates of the risk involved. g) Loans and financing Loans and financing are subject to monetary variations and include respective charges to the balance sheet date. h) Payables for acquisition of real estate These are liabilities contractually established for acquisition of commercial properties and land, plus underlying interest and monetary restatement, when applicable. i) Taxation Revenues from lease of real estate properties are subject to the following taxes and mandatory contributions at the following basic tax rates: Taxes and contributions Abbreviation Rates Social Contribution Tax on Gross Revenue for PIS 1.65% Social Integration Program Social Contribution Tax on Gross Revenue for Social Security Financing COFINS 7.6% These charges are shown as deductions from revenues from lease of real estate in the statement of operations. Credits from non-cumulative PIS/Cofins are presented in the statement of operations net of the cost of leased properties and services rendered. Income and social contribution taxes are levied on income. 12
    • BR PROPERTIES S.A. NOTES TO THE QUARTERLY FINANCIAL INFORMATION June 30, 2008 and March 31, 2008 (In thousands of reais) 3. Summary of Significant Accounting Practices (Continued) i) Taxation (Continued) Income tax is determined on taxable profit at 15%, plus a 10% surtax on profits in excess of R$ 240 in the period of 12 months, while social contribution tax is calculated on taxable profit at 9% and recognized on the accrual basis. As provided for in current tax legislation, certain subsidiaries opted for taxable profit computed as a percentage of gross revenues. 4. Cash and Cash Equivalents Company Consolidated 06/30/2008 03/31/2008 06/30/2008 03/31/2008 Cash and cash equivalents 480 87 1.304 2.776 Short-term investments and CDBs 157.495 210.436 167.223 216.576 157.975 210.523 168.527 219.352 These mainly refer to highly-liquid investments (debentures and bank deposit certificates) with major banks, which are remunerated at rates between 100.7% and 103% of Interbank Deposit Certificate (CDI). 5. Trade Accounts Receivable Consolidated 06/30/2008 03/31/2008 Rents receivable 8.649 8.267 Condominium shares 912 880 Allowance for doubtful accounts (50) - 9.511 9.147 Under the agreements entered into with clients, rents are usually received until the 10th business day of the following month. Company management does not expect significant losses on accounts receivable, reason for which an allowance for doubtful accounts of only R$ 50 thousand was recorded. 13
    • BR PROPERTIES S.A. NOTES TO THE QUARTERLY FINANCIAL INFORMATION June 30, 2008 and March 31, 2008 (In thousands of reais) 6. Recoverable Taxes Company Consolidated 06/30/2008 03/31/2008 06/30/2008 03/31/2008 Prepaid income and social contribution taxes 583 583 689 689 PIS recoverable - 1 4 2 COFINS recoverable 1 1 17 7 Withholding income tax – IRRF 1.393 923 1.709 1.076 1.977 1.508 2.419 1.774 7. Investments Company Consolidated 06/30/2008 03/31/2008 06/30/2008 03/31/2008 Investments in subsidiaries 520.374 463.883 - - Goodwill 8.080 8.080 9.487 9.487 528.454 471.963 9.487 9.487 14
    • BR PROPERTIES S.A. NOTES TO THE QUARTERLY FINANCIAL INFORMATION June 30, 2008 and March 31, 2008 (In thousands of reais) 7. Investments (Continued) a) Information on subsidiaries at June 30, 2008 Investments in subsidiaries stated by the equity method were determined in accordance with the balance sheets at June 30, 2008. Company Shares/ units Revaluation Shareholders' Income (loss) Investment book Subsidiaries of interest Capital reserve equity for the period value Equity pickup BRPR I Empreend. e Part. Ltda. 98.741.500 98.741 36.200 129.326 (995) 129.326 (1.218) BRPR II Empreend.e Part. Ltda. 33.016.000 31.170 27.814 58.694 (543) 58.694 (543) BRPR III Empreend. e Part. Ltda. 23.785.000 23.785 14.319 38.740 484 38.740 484 BRPR IV Empreend. e Part. Ltda. 66.896.620 66.897 4.317 70.798 585 70.798 585 BRPR V Empreend. e Part. Ltda. 56.869.000 56.869 1.119 58.319 427 58.319 427 BRPR VII Empreend. e Part. Ltda. 22.294.400 22.294 5.954 28.041 103 28.041 103 BRPR VIII Empreend. e Part. Ltda. 15.001.000 15.001 - 13.918 (1.080) 13.918 (1.080) BRPR IX Empreend. e Part. Ltda. 14.208.771 14.209 12.295 26.751 126 26.751 126 BRPR X Empreend. e Part. Ltda. 20.001.000 20.001 - 19.999 (2) 19.999 (3) BRPR XI Empreend. e Part. Ltda. 23.451.000 23.451 - 23.423 (26) 23.423 (26) BRPR XII Empreend. e Part. Ltda. 101.000 101 - 97 (4) 97 (4) BRPR XIII Empreend. e Part. Ltda. 5.701.000 5.701 - 5.589 (111) 5.589 (111) BRPR XIV Empreend. e Part. Ltda. 21.851.000 21.851 - 20.032 (1.818) 20.032 (1.818) BRPR XV Empreend. e Part. Ltda. 8.671.000 8.671 - 8.453 (217) 8.453 (217) BRPR XVI Empreend. e Part. Ltda. 1.000 1 - (54) (55) (54) (55) BRPR XVII Empreend e Part. Ltda. 1.000 1 - (1) (2) (1) (2) BRPR XVIII Empreend e Part. Ltda. 1.000 1 - (1) (2) (1) (2) BRPR XIX Empreend e Part. Ltda. 18.221.000 18.221 - 18.219 (2) 18.219 (2) BRPR XX Empreend e Part. Ltda. 1.000 1 - (3) (4) (3) (4) BRPR A Adm. de Ativos Imob. Ltda 1.000 1 - 33 41 33 41 520.374 (3.319) Company’s interest in subsidiaries is described in Note 2. 15
    • BR PROPERTIES S.A. NOTES TO THE QUARTERLY FINANCIAL INFORMATION June 30, 2008 and March 31, 2008 (In thousands of reais) 7. Investments (Continued) b) Information on the main asset, liability and profit & loss items of subsidiaries at June 30, 2008 Curre nt Noncurre nt Pe rmane nt Total Curre nt Noncurre nt Equity Total BRPR I Empreend. e Part. Ltda. 4.596 1.407 316.241 322.244 24.041 168.877 129.326 322.244 BRPR II Empreend.e Part. Ltda. 1.308 - 152.450 153.758 9.042 86.021 58.694 153.757 BRPR III Empreend. e Part. Ltda. 3.375 - 94.356 97.731 7.195 51.796 38.740 97.731 BRPR IV Empreend. e Part. Ltda. 4.343 - 136.316 140.659 8.096 61.768 70.798 140.662 BRPR V Empreend. e Part. Ltda. 3.932 - 157.927 161.859 11.576 91.965 58.319 161.860 BRPR VII Empreend. e Part. Ltda. 889 - 56.921 57.810 3.105 26.663 28.041 57.809 BRPR VIII Empreend. e Part. Ltda. 954 - 40.333 41.286 2.888 24.480 13.918 41.286 BRPR IX Empreend. e Part. Ltda. 1.251 - 33.435 34.686 1.601 6.334 26.751 34.686 BRPR X Empreend. e Part. Ltda. 20.014 - - 20.014 15 - 19.999 20.014 BRPR XI Empreend. e Part. Ltda. 171 - 23.613 23.784 360 - 23.423 23.784 BRPR XII Empreend. e Part. Ltda. 127 - 4 131 34 - 97 131 BRPR XIII Empreend. e Part. Ltda. 403 - 14.317 14.720 747 8.384 5.589 14.719 BRPR XIV Empreend. e Part. Ltda. 800 - 49.966 50.766 3.620 27.113 20.032 50.766 BRPR XV Empreend. e Part. Ltda. 487 - 21.565 22.052 1.411 12.186 8.454 22.051 BRPR XVI Empreend. e Part. Ltda. 15 - - 15 69 - (54) 15 BRPR XVII Empreend e Part. Ltda. 1 - - 1 2 - (1) 1 BRPR XVIII Empreend e Part. Ltda. 2 - - 2 3 - (1) 2 BRPR XIX Empreend e Part. Ltda. 139 - 18.083 18.222 3 - 18.219 18.222 BRPR XX Empreend e Part. Ltda. 1 - - 1 4 - (3) 0 BRPR XXI Empreend e Part. Ltda. - - - - - - - - BRPR XXII Empreend e Part. Ltda. - - - - - - - - BRPR XXIII Empreend e Part. Ltda. - - - - - - - - BRPR XXIV Empreend e Part. Ltda. - - - - - - - - BRPR XXV Empreend e Part. Ltda. - - - - - - - - BRPR A Adm. de Ativos Imob. Ltda 105 - 38 143 110 - 32 142 42.913 1.407 1.115.566 1.159.886 73.923 565.588 520.374 1.159.885 16
    • BR PROPERTIES S.A. NOTES TO THE QUARTERLY FINANCIAL INFORMATION June 30, 2008 and March 31, 2008 (In thousands of reais) 7. Investments (Continued) b) Information on the main asset, liability and profit & loss items of subsidiaries at June 30, 2008 (continued) Statement of Operations Taxes, Gross rebates and Income and revenues costs of social from lease leased Operating contribution Income (loss) and services properties expenses taxes for the period BRPR I Empreend. e Part. Ltda. 12.779 (3.149) (10.372) (476) (1.218) BRPR II Empreend.e Part. Ltda. 5.420 (1.602) (4.361) - (543) BRPR III Empreend. e Part. Ltda. 4.362 (1.215) (2.660) (2) 484 BRPR IV Empreend. e Part. Ltda. 5.795 (1.579) (3.631) - 585 BRPR V Empreend. e Part. Ltda. 7.956 (1.963) (5.566) - 427 BRPR VII Empreend. e Part. Ltda. 2.758 (875) (1.780) - 103 BRPR VIII Empreend. e Part. Ltda. 2.038 (439) (2.679) - (1.080) BRPR IX Empreend. e Part. Ltda. 1.289 (587) (518) (58) 126 BRPR X Empreend. e Part. Ltda. - - (3) - (3) BRPR XI Empreend. e Part. Ltda. - - (26) - (26) BRPR XII Empreend. e Part. Ltda. - - (4) - (4) BRPR XIII Empreend. e Part. Ltda. 600 (127) (584) - (111) BRPR XIV Empreend. e Part. Ltda. 613 (430) (2.001) - (1.818) BRPR XV Empreend. e Part. Ltda. 340 (77) (480) - (217) BRPR XVI Empreend. e Part. Ltda. - - (55) - (55) BRPR XVII Empreend e Part. Ltda. - - (2) - (2) BRPR XVIII Empreend e Part. Ltda. - - (2) - (2) BRPR XIX Empreend e Part. Ltda. - - (2) - (2) BRPR XX Empreend e Part. Ltda. - - (4) - (4) BRPR XXI Empreend e Part. Ltda. - - - - - BRPR XXII Empreend e Part. Ltda. - - - - - BRPR XXIII Empreend e Part. Ltda. - - - - - BRPR XXIV Empreend e Part. Ltda. - - - - - BRPR XXV Empreend e Part. Ltda. - - - - - BRPR A Adm. de Ativos Imob. Ltda 312 (45) (216) (10) 41 44.263 (12.088) (34.947) (547) (3.319) 17
    • BR PROPERTIES S.A. NOTES TO THE QUARTERLY FINANCIAL INFORMATION June 30, 2008 and March 31, 2008 (In thousands of reais) 7. Investments (Continued) c) Goodwill Goodwill on acquisition – Company Goodwill on acquisition of DVR V Empreendimentos Imobiliários Ltda. (i) 1.407 Goodwill on acquisition of Icomap Industria e Comércio Ltda. (ii) 8.080 9.487 (i) This company is the owner of two industrial warehouses located in the city of Jandira, state of São Paulo. After its acquisition by BR Properties, its corporate name was changed to BRPR VI Empreendimentos e Participações Ltda. (ii) This company is the owner of Edifício Icomap located in Rio de Janeiro. After its acquisition by BR Properties, its corporate name was changed to BRPR IX Empreendimentos e Participações Ltda. Goodwill amortization will be recorded according to the net income projections prepared by management, as shown below: Year ICOMAP DVR 2010 4% 1% 2011 4% 3% 2012 6% 4% 2013 8% 7% 2014 to 2018 78% 85% Total 100% 100% Based on the projected discounted cash flows arising from the assets maintained by these subsidiaries, Company management did not identify any indication of impairment of the goodwill recorded at June 30, 2008. 18
    • BR PROPERTIES S.A. NOTES TO THE QUARTERLY FINANCIAL INFORMATION June 30, 2008 and March 31, 2008 (In thousands of reais) 8. Property and Equipment Company 06/30/2008 03/31/2008 Annual Accumulated depreciation rate Cost depreciation Net Net Software 20% 91 (18) 73 15 Facilities 10% 177 (17) 160 85 Furniture and fixtures 10% 142 (16) 126 199 Data processing equipment 20% 220 (49) 173 218 632 (100) 532 517 Consolidated 6/30/2008 3/31/2008 Annual Accumulated depreciation rate Cost depreciation Net Net Land - 273.221 - 273.221 256.956 Land revaluation - 44.680 - 44.680 44.681 Buildings * 691.427 (12.190) 679.237 658.622 Building revaluation * 111.165 (1.274) 109.891 110.529 Certificates of Additional Construction Potential - CEPAC (a) 8.494 - 8.494 8.494 Software 20% 104 (20) 84 15 Facilities 10% 177 (18) 159 87 Furniture and fixtures 10% 149 (16) 132 199 Data processing equipment 20% 230 (46) 184 Telecommunications equipment 20% 22 (6) 16 229 1.129.668 (13.570) 1.116.098 1.079.812 * Depreciation is calculated considering the period in which properties are expected to be used by the Company, for periods ranging from 33 to 50 years, over the remaining useful life of the assets set out in the valuation reports issued by independent appraisers. a) The Company acquired Certificates of Additional Construction Potential – CEPAC in the amount of R$8,494 issued by the São Paulo Municipal Government to be used, as applicable, to pay construction area in excess of the standards established by municipal legislation on land use and occupation. In using the certificates, the corresponding amount is a component of the construction cost of commercial properties for future lease. In the quarter ended June 30, 2008, the Company did not enter into any obligation related to commercial leasing. 19
    • BR PROPERTIES S.A. NOTES TO THE QUARTERLY FINANCIAL INFORMATION June 30, 2008 and March 31, 2008 (In thousands of reais) 8. Property and Equipment (Continued) At December 31, 2007, the Company subsidiaries, based on the valuation report issued by independent appraisers, recorded the revaluation of buildings and land in the amount of R$155,847 against the revaluation reserve in shareholders’ equity. Deferred income tax liabilities, amounting to R$52,988 at December 31, 2007, were recorded in Long- term payables, thereby reducing the balance of that reserve in shareholders’ equity, and their realization is upon disposal, sale and depreciation of the revalued assets. In the quarter ended June 30, 2008, there was realization of R$ 1,274 thousand through depreciation. 9. Loans and Financing Consolidated Financial Final Purpose charges maturity 06/30/2008 03/31/2008 Acquisition of Condomínio Edifício Bonfiglioli IGP M+8.84% 12.410 12.198 p.a. 04/17/2017 Acquisition of Condomínio Panamérica Park and Edifício Plaza Centenário TR+9.90% p.a. 05/25/2017 50.009 50.319 Acquisition of Condomínio Edifício Glória (RJ), a building located at 1280 TR+9.90% p.a. 08/17/2017 143.132 144.298 Avenida Piraporinha, Alphaville Centro Empresarial e Industrial, a building located in Jundiaí, and a set of commercial warehouses in Itapeví Acquisition of 2 properties in Jandira CDI+1.27% 37.400 37.596 p.a. 08/17/2017 Acquisition of Edifício Henrique Schaumann TR+10.15% 10/17/2017 30.484 30.527 p.a. Acquisition of Edifício Generalli (SP) and Edifício Bovespa (RJ) TR+9.90% p.a. 08/17/2017 25.626 25.908 Acquisition of suites of Edifício Paulista Park, Edifício Berrini, Condomínio TR+10.15% 08/17/2017 66.835 66.981 Edifício Isabella Plaza, 3rd floor of Edifício Olympic p.a. Tower, Edifício Joaquim Floriano, Condomínio Edifício Midas, Edifício Number One, suite no. 31 of Edifício Network Empresarial, Celebration and Athenas. Acquisition of buildings MV9, Sylvio Fraga, Raja Hills and Coveright TR+9.90% p.a. 12/20/2017 102.140 102.067 industrial warehouse Acquisition of buildings Avaya and Presidente Vargas TR+10.15% 09/18/2017 26.427 26.727 p.a. Acquisition of buildings Birmann 23 and Santo Antônio IGPM+6% p.a. 01/17/2018 27.332 26.710 Acquisition of building Ericsson São José dos Campos TR+10.15% 01/17/2018 30.336 29.520 p.a. Acquisition of Edifício Hochtief TR+10.15% 01/17/2021 9.109 9.159 p.a. Acquisition of Edifício Trisoft TR+10.15% 04/09/2018 13.566 - p.a. 574.804 562.010 (61.770) (58.997) Portion maturing over the next 12 months 513.034 503.013 Noncurrent liabilities 20
    • BR PROPERTIES S.A. NOTES TO THE QUARTERLY FINANCIAL INFORMATION June 30, 2008 and March 31, 2008 (In thousands of reais) 9. Loans and Financing (Continued) Properties acquired were used as a security (mortgage) for the repayment of the loans. Also, guarantees were offered as chattel mortgage of units of interest in borrowing subsidiaries and assignment in trust of credit rights under lease agreements signed with the lessees. Long-term loans and financing mature as follows: 2009 41.556 2010 42.069 2011 42.582 2012 48.737 2013 to 2017 338.090 513.034 10. Payables for Acquisition of Real Estate These comprise payables for acquisition of commercial properties, as follows: Consolidated 06/30/2008 03/31/2008 Jundiaí industrial building 3.000 3.000 Edifício Glória 1.500 1.500 Jandira warehouse 1.740 1.740 Cidade Jardim land - 6.128 Interbox 1.000 1.000 Edificio Icomap 340 464 7.580 13.832 21
    • BR PROPERTIES S.A. NOTES TO THE QUARTERLY FINANCIAL INFORMATION June 30, 2008 and March 31, 2008 (In thousands of reais) 11. Income and Social Contribution Taxes The Company recorded taxable profit for the quarter ended June 30, 2008 and did not record deferred income tax assets arising from tax losses related to income and social contribution taxes, which will be recognized only when there are consistent prospects of their realization. Company 06/30/2008 Income before income and social contribution taxes 2.319 Statutory rate 34% Income and social contribution tax expense at statutory rate (789) Loss from equity pickup (1.129) Offset of tax losses 598 Income and social contribution tax expense posted to the statement of operations for the quarter (1.320) The expense with income and social contribution taxes of R$1,867 recorded in the statement of operations – consolidated refers to R$1,320 Company and R$ 547, paid by certain subsidiaries computing taxable profit as a percentage of gross revenues. At June 30, 2008, the balance of income and social contribution tax losses was R$ 5,638. Deferred income and social contribution tax liabilities, in the amount of R$ 52,554 thousand at June 30, 2008 were recorded on the revaluation reserve of property and equipment items (land and buildings), recorded by the subsidiaries, and on a portion of the land, and their realization is based on write-offs and depreciation of such revalued assets. 12. Contingencies At June 30, 2008, the Company and its subsidiaries and affiliates were parties to civil proceedings arising from the normal course of business, which, individually, do not involve significant amounts. Based on the opinion of the Company’s legal advisors and management assessment, no provision for contingencies was recorded, since there were no proceedings for which the likelihood of loss was classified as probable. 22
    • BR PROPERTIES S.A. NOTES TO THE QUARTERLY FINANCIAL INFORMATION June 30, 2008 and March 31, 2008 (In thousands of reais) 13. Shareholders’ Equity a) Capital On December 22, 2006, a capital increase was approved in the amount of R$ 53,960, which was paid-up on January 8, 2007. On April 16, 2007, a capital increase was approved and paid-up in the amount of R$ 1,080, with the issue of 500,000 common shares. On May 10, 2007, a capital increase was approved in the amount of R$ 51,566 by means of private subscription of shares. Relevant contribution took place on May 31, 2007. On June 19, 2007, the Board of Directors approved a capital increase in the amount of R$97,140. Relevant contribution took place in July 2007. On July 27, 2007 the Board of Directors approved a capital increase for the Company amounting to R$ 97,175, which was paid up in August 2007. On December 18, 2007, the Board of Directors approved a capital increase in the amount of R$26,079, by means of private subscription of 13,956,935 common shares due to the exercise of the subscription warrants granted to shareholder GP Investments, Ltd. at the Special Shareholders’ Meeting of December 22, 2006. On December 19, 2007, a capital increase was approved in the amount of R$270,033, by means of private subscription, with issue of 87,278,150 common shares, all registered, with no par value, at the price of R$3.09 per share. At June 30, 2008 paid up capital of R$ 597,033 comprises 240,804,449 common shares, all registered, with no par value. Of the total paid up capital, R$ 591,132 is comprised of shares owned by shareholders domiciled abroad. At June 30, 2008, the limit of authorized capital is 300,000,000 common shares. 23
    • BR PROPERTIES S.A. NOTES TO THE QUARTERLY FINANCIAL INFORMATION June 30, 2008 and March 31, 2008 (In thousands of reais) 13. Shareholders’ Equity (Continued) b) Stock option plan The Annual and Special Shareholders’ Meeting held on April 16, 2007 approved the Stock Option Plan, according to which the Board of Directors can grant stock options to Company management and employees. The options shall be no greater than 10% of total capital shares of the Company existing on the date of grant, and the strike price shall be the amount in local currency equivalent to US$ 1.00 (one U.S. dollar). On July 17, 2007 and August 31, 2007, respectively, the first and the second Stock Option Plans were approved for 2007, including the number of options granted (totaling 13,956,935), the price and other conditions to exercise the options, to which the Company management members were entitled. The option granted to management members may be exercised as from July 17, 2008 regarding the First Program, and as from August 31, 2008 regarding the Second Program, in five equal annual lots, each of which equivalent to 20% of the total option granted. At June 30, 2008, none of the management members had exercised options referring to the 2007 programs. The Annual and Special Shareholders’ Meeting held on April 30, 2008 approved the second Stock Option Plan, according to which the Board of Directors may periodically grant stock options to certain Company management and employees. The options shall be no greater than 10% of total capital shares of the Company existing on the date of grant, and the sum of the entire shares issued by the Company will be considered for purposes of such limit, including those shares that may come to be issued by the Company as a result of options granted within the scope of this and the previously approved Plans, as if such options had been exercised. The Board of Directors Meeting held on May 30, 2008 approved the first Stock Option Plan for 2008, granting 3,559,871 stock options. The strike price is set at R$3.09 per share, plus 4% interest and restatement based on the IGPM/FGV index. The 2008 and 2007 stock option plans are represented as follows: 24
    • BR PROPERTIES S.A. NOTES TO THE QUARTERLY FINANCIAL INFORMATION June 30, 2008 and March 31, 2008 (In thousands of reais) 13. Shareholders’ Equity (Continued) b) Stock option plan (continued) Maximum number of shares Stock options to be exercised: 1st Stock Option Program – 2007 (exercised as from July 17, 2008) 9.438.617 2nd Stock Option Program – 2007 (exercised as from August 31, 2008) 4.518.318 12.956.935 1st Stock Option Program – 2008 (exercised as from May 5, 2009) 3.559.871 Stock options to be exercised at June 30, 2008 17.516.806 c) Revaluation reserve At December 31, 2007, a “Reserve revaluation in subsidiaries” was set up on the amounts recorded by subsidiaries, net of tax effects. This reserve will be transferred to retained earnings/ (accumulated losses) upon realization of the assets revalued by the subsidiaries through their depreciation, write-offs or disposals. 14. Financial Income (Expenses), Net 6/30/2008 Company Consolidated Financial income Short-term investments 11.109 11.404 Other 4 83 11.113 11.487 Financial expenses Interest and charges on loans - (31.265) Tax on Financial Transactions - IOF (3) (1.466) Other 223 (119) 220 (32.850) 25
    • BR PROPERTIES S.A. NOTES TO THE QUARTERLY FINANCIAL INFORMATION June 30, 2008 and March 31, 2008 (In thousands of reais) 15. Related Parties Company Assets Jun-08 Mar-08 BRPR I Empreendimentos e Participações Ltda. (ii) 1 23 BRPR V Empreendimentos e Participações Ltda. (ii) 1 910 BRPR IX Empreendimentos e Participações Ltda. (i) 1 4.229 BRPR X Empreendimentos e Participações Ltda. (ii) 15 - BRPR XI Empreendimentos e Participações Ltda. (ii) 360 359 BRPR XII Empreendimentos e Participações Ltda. (ii) 27 1 BRPR XIII Empreendimentos e Participações Ltda. (ii) 4 4 BRPR XIV Empreendimentos e Participações Ltda. (ii) 1 1 BRPR XV Empreendimentos e Participações Ltda. (ii) 4 1 BRPR XVI Empreendimentos e Participações Ltda. (ii) 61 2 BRPR XVII Empreendimentos e Participações Ltda. (ii) 2 1 BRPR XVIII Empreendimentos e Participações Ltda. (ii) 2 - BRPR XX Empreendimentos e Participações Ltda. (ii) 1 - BRPR A Administradora de Ativos Imobiliários Ltda. (ii) 39 49 517 5.580 (i) Represented by advances for future capital increase. (ii) Corresponding to intercompany current accounts, this balance refers substantially to payments of expenses to be reimbursed in the short term. 16. Financial Instruments and Risk Management The Company and its subsidiaries engage in transactions involving financial instruments with a view to financing its own activities or investing available funds. Management of such instruments and related risks is performed through defining conservative strategies aiming at liquidity, profitability and reliance. The Company mitigates its exposure to credit risk by making short-term investments with leading financial institutions. Credit risk is minimized since lease agreements are entered into with major customers. As of June 30, 2008 there was no significant concentration of credit risk with clients. 26
    • BR PROPERTIES S.A. NOTES TO THE QUARTERLY FINANCIAL INFORMATION June 30, 2008 and March 31, 2008 (In thousands of reais) 16. Financial Instruments and Risk Management (Continued) The Company and its subsidiaries have no significant debts, liabilities or costs denominated in foreign currency. The Company operated with derivatives in 2008 in order to obtain hedge against any possible negative mismatching between Referential Rate – TR variation, which indexes most of bank financing agreements, and the General Price Index – Market - IGP-M, which indexes most lease agreements. The hedging swap transaction was contracted in February 2008 with term of 30 months and nominal value of R$ 59,372 thousand, which resulted in temporary loss of R$210 recognized in the statement of operations for the period. The main financial risks are as follows: Interest rate risk The Company’s revenues and expenses are affected by changes in interest rates because of the impact of such changes on interest expenses in connection with instruments of indebtedness with variable rates and interest income on cash and short-term investment balances. Liquidity risk Liquidity risk management is performed based on the Company’s cash flow, by maintaining a robust capital structure. Additionally, any mismatching between assets and liabilities is consistently monitored. 17. Insurance Coverage (Not Reviewed) At June 30, 2008, insurance retained by lessees is considered to be sufficient by Company management to cover any losses. 27
    • BR PROPERTIES S.A. NOTES TO THE QUARTERLY FINANCIAL INFORMATION June 30, 2008 and March 31, 2008 (In thousands of reais) 18. Statements of Cash Flows Company Consolidated Six-month periods ended 6/30/2008 6/30/2007 6/30/2008 6/30/2007 OPERATING ACTIVITIES Income (loss) for the period 999 - (443) 999 - (443) Adjustments to reconcile net income for the six-month period with cash generated from operating activities: Depreciation 143 - 11 7.524 - 554 Equity pickup 3.319 - 520 - - - Changes in assets and liabilities Trade accounts receivable - - - (3.056) - (638) Related Parties 4.009 - (9) 3.917 - (9) Other receivables 62 - (757) (2.072) - (919) Supplies (247) - 11 1.543 - 19 Salaries and social charges (1.720) - 180 (1.653) - 180 Payables for acquisition of properties (600) - - (12.357) - - Accounts payable and others (617) - 174 1.057 - 194 5.349 - (312) (4.097) - (1.061) INVESTMENT ACTIVITIES Advances for future capital increase - - (5.500) (24.434) - (5.500) Other investments, net (119.288) - (21.752) - - - Fixed asset investments (68) - (479) (159.651) - (84.442) Cash originating from (applied in) investment activities (119.356) - (27.731) (184.085) - (89.942) FINANCING ACTIVITIES Loans and financing taken out - - - 102.757 - 63.888 Payment of loans and financing - - (27.015) (830) Capital increase in cash - - 106.543 - - 106.543 Cash originating from (applied in) financing activities - - 106.543 75.742 - 169.601 Changes in cash, net (114.007) - 78.499 (112.440) - 78.598 Cash and cash equivalents at beginning of period 271.981 - - 280.975 - - Cash and cash equivalents at end of period 157.974 - 78.499 168.535 - 78.598 28
    • BR PROPERTIES S.A. NOTES TO THE QUARTERLY FINANCIAL INFORMATION June 30, 2008 and March 31, 2008 (In thousands of reais) 19. Statements of Value Added Company Consolidated Six-month periods ended 06/30/2008 06/30/2007 06/30/2008 06/30/2007 Revenues - - 43.502 1.048 Non-operating revenues 30 199 Cost of services provided - - (7.524) - Materials, electricity, third-party services and other (2.104) (1.284) (4.174) (1.471) Gross value added (2.074) (1.284) 32.003 (424) Retentions (Depreciation, amortization and depletion) (45) (11) (598) (565) Generated value added, net (2.119) (1.295) 31.405 (989) Received value added upon transfer 7.793 2.231 11.487 2.752 Equity pickup (3.320) (520) - - Financial income 11.113 2.751 11.487 2.752 Value added for distribution 5.674 936 42.892 1.763 Distribution of value added: Government (1.362) (140) (5.823) (214) Employees (2.967) (1.163) (3.120) (1.163) Remuneration of third-party capital/financing (interest and rent) (346) (76) (32.950) (829) Interest on shareholders' equity and dividends - - - - Retained earnings (accumulated losses) 999 (443) 999 (443) Total distributed and retained 5.674 936 42.892 1.763 29
    • BR PROPERTIES S.A. NOTES TO THE QUARTERLY FINANCIAL INFORMATION June 30, 2008 and March 31, 2008 (In thousands of reais) 20. Subsequent Events On July 4, 2008, the Company, through its subsidiary BRPR XVII Empreendimentos e Participações Ltda., acquired the property Tecsis, located in the city of Sorocaba, state of São Paulo, at Avenida Hollingsworth, 127-215. On July 11, 2008, the Company, through its subsidiary BRPR XI Empreendimentos e Participações, acquired 50% interest in the capital of the company Edifício Cidade Jardim SPE Empreendimentos Imobiliários Ltda., for R$25,000,000.00, exclusively for execution of the real estate developments located at Avenida Cidade Jardim and Rua Camargo Cabral. On this same date, the subsidiary BRPR XI also signed a Members’ Agreement with the partner MA Empreendimentos Imobiliários Ltda., which will rule the form of execution of the real estate development, rights and obligations of the parties, among other issues. On August 11, 2008, 230,252 options were exercised in the terms of the First Stock Option Purchase Program of 2007, with issuance by the Company of 230,252 common book entry shares, in the total amount of R$389, at the unit price of R$1.69, increasing capital from R$597,033 to R$597,422, represented by 241,034,701 common book entry shares. Such capital increase will be approved by the Board of Directors within 30 days. 30