Banco Fibra - Annual Report 2006

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ENGLISH

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iI.

Fibra ranks amongst the top 20th largest banks in the country, by total assets.

Its core business is to service middle and upper middle market clients, with tailor-made products and solutions.

The bank's activities comprise among others credit and treasury products, capitalmarkets, trade finance and consumer financing through GVI Promotora de Vendas.

Fibra has a team of highly qualified and experienced professionals, able to meet allthe needs of its clients, and focused in building up long term relationships.

The Bank is faithful to the following principles - professionalism, transparency andethics and applies high levels of corporate governance.

Banco Fibra has successfully sailed through the ever-changing economic andbusiness environments of recent years. The boldness inherited from its industrialorigin combined with the banking proficiency of its managers, made Fibra aprofitable and solid institution, promoting the growth and development of thecompanies in the country.

Established in 1987 as a brokerage firm, to manage the financial assets of its owners,since 1989 Banco Fibra acts as a Multiple Bank. The bank is part of one of the largestindustrial conglomerates in Brazil. The most relevant companies of this conglomerateowned by the Steinbruch Family comprises CSN - Companhia Siderúrgica Nacionaland Vicunha Têxtil.

HISTORY

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iSTEINBRUCH GROUP

The group's history began in 1966, when the Steinbruch and the Rabinovichfamilies joined forces in creating a textile company named Brasibel. In thefollowing year, the purchase of Lanifício Varam, Latin America's biggest wool-producer and owner of the Vicunha brand, has opened the way for a continuousflow of acquisitions and partnerships, that led Vicunha to the prominent positionin textile segment, that they have today.

In 1993, the group has foreseen a possibility of expanding and diversifying itsbusinesses, and has acquired, through the privatization process, a relevantparticipation in the capital of Companhia Siderúrgica Nacional - CSN, (a) leader inthe steel segment in Brazil. In the year 2000, the group became the mainshareholder of CSN.

In March 2005, the Steinbruch family has agreed to acquire the Rabinovich family'sstake in Vicunha Têxtil and in Vicunha Siderurgia, the company that holds the controlof CSN. As a consequence, the Steinbruch family holds today the control of the abovementioned companies.

II.

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iIII.

The Brazilian economy presented a modest GDP growth in 2006, with an annual ratelower than 3% for the second year in a row.The good news came from the inflationaryfront.The consumer price index accumulated 3.14% in 2006, the lowest rate since theadoption of the inflation target system. In this benign inflationary scenario, the CentralBank reduced interest rates in all monetary policy meetings of the year, from 18% bythe end of 2005 to 13.25% by the end of 2006.

Brazilian external accounts showed another year of very positive results, contributingto the fourth consecutive year of BRL appreciation against the US Dollar and reductionof the country's external vulnerability. The trade balance surplus reached US$ 46billion and its international reserves surpassed US$ 85 billion by the end of 2006.

On the fiscal side, the increase of federal government expenses (in part due to severaldecisions taken in the context of presidential elections) reduced the primary surplus,but not in the amount necessary to jeopardize the accomplishment of the target of4.25% of GDP. In this context, the public debt, as a percentage of GDP, fell from 51.7%by the end of 2005 to 50.0% by the end of 2006.

Based on the maintenance of a favorable international environment and a responsibledomestic economic policy, the perspectives for 2007 aim to a more robust growth(around 3.5%), stimulated by the monetary policy easing process, additional fiscalstimuli, income gains and credit incentives.

ECONOMIC OUTLOOK - 2006

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iIV.MAIN DEVELOPMENTS

Established as a wholesale bank since 2000, Fibra has sought to become more agile,dynamic and well-structured, in a powerful effort to achieve excellence in meeting theneeds of its clients. It offers a wide range of products and services to service itsclientele broadly and competitively.

The bank has defined to keep its staff highly qualified in the market segment it haschosen to work in - middle market segment of clients.

In 2006, the bank has consolidated the three pillars of its activities: commercialbanking, consumer financing, and treasury, by expanding its regional presence, itsproduct and client portfolios.

Due to the expansion of the Direct consumer credit market, and to allow a more agiledistribution of Banco Fibra's financial products, the Steinbruch group has acquired inthe beginning of 2006, a company named Portocred. This company was renamed asGVI Promotora de Vendas, late in the same year.

Fibra has strengthened its activities in the International market, through new bondissuances, and the expansion of the base of correspondent banks financing its tradefinance transactions.

While many institutions focus on specific markets,Banco Fibra has chosen to focus onits clients, their needs and expectations.

With headquarters in São Paulo and acting also in Rio de Janeiro, Belo Horizonte,Curitiba, Fortaleza, Guarulhos, São Bernardo, Campinas, Ribeirão Preto and São José doRio Preto, Fibra is prepared add value to the decision making process. Fibra has alsoconsolidated its overseas strategy with the flexibility granted by its Cayman Islands fullbranch.

A flexible structure, offering fast and qualified solutions

Those are the key factors leading Banco Fibra's to obtain improved ratings from themost prestigious rating agencies in the world.The bank is frequently considered as anexample of transparency and determination in carrying out operational strategies.

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iV.

Fibra has consolidated its business strategy in the middle and upper middle marketsegments in 2005 and 2006, and has expanded its regional presence in the country.The access to new markets is one of the bank's main objectives.

In 2007, IT and operational skills of a business unit acquired in the south of Brazil willboost the operations of the consumer finance activity of the bank.

Treasury, always focused and agile, will work with a wider range of products to itsclientele, and will carry on new alternatives of funding and transactions.

PERSPECTIVES

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iVI.CORE BUSINESS AREAS

Treasury

The Treasury area is responsible for the management of the banks' liquidity. Thisarea has is very well recognized in the local market in the trading of governmentsecurities, in both primary and secondary markets, as well as in the foreign exchangemarket. During the last couple of years, Fibra has also being dedicated to thederivatives market (swaps and hedges ). The diversification of the sources of fundinghas played a key role in 2006.Fibra has ended 2006 with USD 245 MM in bonds issuedabroad, with tenors ranging from 18 to 36 months, and a 10 years, USD 30 MMsubordinated debt bond.

Commercial Banking

This area is dedicated to service mostly medium-sized companies, through a widerange of products. Fibra offers to its clientele from trade finance to working capitalloans, including financing through on-lending of resources from the BNDES and long-term investment structures. One of Fibra's main advantages is the competence increating solutions that cater to all the capital needs of its clients, taking intoconsideration its production cycle, growth potential and competitiveness.The bank isalso engaged in financing the industrial supply chain of its clients

Fibra aims to establish long term and long lasting relationships with its clients.

By the end of 2006, the commercial Bank portfolio has reached R$ 2,6 billion,distributed among a client base of 920 active clients.

Financing Company

This activity was started in mid-2005 and further developed in 2006, with threemain business lines:

• Consumer credit loans, personal loans and payroll deduction loansthrough agreements with retail stores and independent distributors,with approximately 620,000 active clients and 3,000 sales points;

• Structured consumer loans;

• Payroll deduction loans for social security beneficiaries, publicservers and autarchies.

The consumer financing portfolio which has began 2006 with R$ 95 MM has endedthe year with R$ 320 MM, more then tripling its market participation.

During the year Banco Fibra has established as one of its top priorities, the revision ofits Human resources policies and the improvement of its team skills. Fibra kept thefocus in the individual development of its employees, and has also reactivated itstraining program for graduated college students, allocating them in different areas ascommercial division, credit and IT.

The employees training programs have been enhanced,and a new evaluation methodwas implemented, generating a new model of bonus distribution, based onmeritocracy.

The human resources division seeks to align the interests of its 315 employees withthe ones of the bank's shareholders,and also to value and keep the best standards andmarket practices.

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iVII. HUMAN RESOURCES

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iSOCIAL RESPONSABIL IT Y

Social responsibility means first of all acting with ethics and transparency in thecommunities where the bank is represented, and more then that, contributing withthe development of the country.

Fibra has chosen to support projects involving children and teenagers of lessprivileged communities. The bank sponsored 4 projects in 2006 and made donationsto institutions as Instituto Brasil Voluntário, linked to the Projeto Faça Parte; ProjetoCisternas do Fome Zero, arranged by FEBRABAN; Projeto Travessia and InstitutoReciclar.

Two other projects should be highlighted:

• Fibra has sponsored the book “Estrada Real - Brasil”, a collection ofmemories of the golden period of the “Gold Cicle” in Brazil, duringthe Brazilian empire, in the form of pictures and drawings of theroute traced by the adventurers through Rio de Janeiro, MinasGerais and São Paulo.

• Donation to “Associação Beneficente Chabad Itaim” , an entitywhose main purpose is to strengthen the jewish culture andvalues, and the assistance to the less privileged, without anydistinction.

Fibra adopted as a criteria to support and sponsor projects taking into considerationthe competence of those institutions, as well as to do a follow up of the use ofproceeds and the social and professional insertion of the projects' participants intothe community and society.

VIII.

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BALANCES

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

Banco Fibra S.A. Fibra ConsolidatedASSETS 2006 2005 2006 2005CURRENT ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.930.443 8.849.101 7.608.772 8.956.746Cash and Cash Equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34.482 19.226 34.690 19.358Interbank investments (Note 5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.204.671 6.924.010 1.207.362 6.924.010Open Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.168.368 6.803.907 1.171.059 6.803.907Interbank Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.914 14.709 14.914 14.709Investments in Foreign Currencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21.389 105.394 21.389 105.394Securities and DerivativeFinancial Instruments (Note 6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.319.341 518.866 3.958.532 575.962Own Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 700.931 294.604 338.893 351.700Subject to Repurchase Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.575.607 175.438 3.575.607 175.438Derivative Financial Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.507 39.053 8.736 39.053Subject to Guarantees Provided . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32.873 9.771 32.873 9.771Securities Subject to Repurchase Commitments and Free Transactions . . . . . . 2.423 - 2.423 -Interbank Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41.223 761 41.223 761Collections in transit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 3 - 3Term deposits - Deposited with the Central Bank of Brazil . . . . . . . . . . . . . . . . . . . 39.827 401 39.827 401Correspondents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.396 357 1.396 357Loans (Note 8 and 9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.917.885 1.124.116 1.917.395 1.124.116Public Sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35.625 2.503 35.625 2.503Private Sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.936.293 1.153.242 1.935.803 1.153.242Provision for Doubtful Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (54.033) (31.629) (54.033) (31.629)Lease Operations (Note 8 and 9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 183 727 183 727Lease Receivable - Private Sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 185 1.159 185 1.159Overdue Lease Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - (176) - (176)Unearned lease income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - (230) - (230)Provision for Doubtful Lease Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2) (26) (2) (26)Other Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 397.724 251.410 433.490 300.593Guarantees Honored . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 15 - 15Foreigh Exchange Portfolio (Note 16) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 351.099 230.536 351.099 230.536Income Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.040 632 2.241 868Securities Clearing Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 612 4.130 5.562 5.613Other (Notes 17.a and 18) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47.759 19.340 78.864 67.775Provision for Doubtful Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3.786) (3.243) (4.276) (4.214)Other Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.934 9.985 15.897 11.219Other Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.066 8.621 3.149 8.621Provision for Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1.540) (4.284) (1.540) (4.284)Prepaid Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.408 5.648 14.288 6.882


Banco Fibra S.A. Fibra Consolidated2006 2005 2006 2005

LONGTERM RECEIVABLES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 646.982 781.820 710.051 430.835SECURITIES ANDDERIVATIVE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .FINANCIAL INSTRUMENTS (NOTE 6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.456 351.105 7.458 120Own Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 351.105 - -Derivative Financial Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.456 - 7.458 120Loans (Note 8 and 9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 478.642 298.545 479.131 298.545

Public Sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.438 13.521 17.438 13.521Private Sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 461.204 285.024 461.693 285.024

Lease Operations (Note 8 and 9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 197 - 197 -Leasing Operation Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 197 437 197 437Unearned Lease Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - (437) - (437)Other Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150.927 131.840 207.505 131.840

Income Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 139 9 139Other (Notes 17.a and 18) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150.918 131.701 207.496 131.701Other Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.760 330 15.760 330Prepaid Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.760 330 15.760 330PERMANENT ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133.953 154.625 20.628 20.719Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125.354 144.992 6.560 5.750

Shareholding Interest in Subsidiaries - In Brazil (Note 10) . . . . . . . . . . . . . . . . . . . . 119.363 126.536 - -Shareholding Interest in Subsidiaries - Abroad (Note 10) . . . . . . . . . . . . . . . . . . . . - 13.272 - -Other Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.991 5.184 6.560 5.750Premises and Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.651 4.805 3.918 4.999

Other fixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.251 12.118 9.582 12.339Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5.600) (7.313) (5.664) (7.340)Deferred Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.948 4.828 10.150 9.970

Deferred charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.307 8.023 13.515 13.165Accumulated Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3.359) (3.195) (3.365) (3.195)TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.711.378 9.785.546 8.339.451 9.408.300

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Banco Fibra S.A. Fibra ConsolidatedLIABILITIES 2006 2005 2006 2005CURRENT LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.433.997 8.827.718 7.059.375 8.463.346Deposits (Note 12) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.943.595 1.477.068 1.671.788 1.170.673Demand deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62.668 65.242 60.868 52.672Interbank Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 431.391 418.650 167.285 134.277Time Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.448.319 992.820 1.442.418 983.368Other Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.217 356 1.217 356Moneymarket repurchase commitment (Note 13) . . . . . . . . . . . . . . . . . . . . . . 4.501.957 6.889.531 4.501.957 6.889.531Own Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.453.389 165.006 3.453.389 165.006Third Party Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 967.561 6.466.522 967.561 6.466.522Free Transaction Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81.007 258.003 81.007 258.003Acceptances and Endorsements (Note 14) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153.239 5.859 153.239 5.859Notes and bonds issued abroad . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153.239 5.859 153.239 5.859Interbank accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148.735 82.300 - -Interbank Repasses (Note 17.b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148.735 82.300 - -Interbranch accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20.126 3.497 20.126 3.497Own funds in transit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20.126 3.497 20.126 3.497Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 396.367 200.862 396.367 200.862Foreign currency trade finance borrowings (Note 15.a) . . . . . . . . . . . . . . . . . . . . . . 396.367 200.862 396.367 200.862Repass borrowings from public sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135.414 56.462 135.414 56.462

BNDES / FINAME (Note 15.b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135.414 56.462 135.414 56.462Derivative Financial Instruments (Note 6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.328 46.313 8.808 38.117Derivative Financial Instruments (Note 6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.328 46.313 8.808 38.117Other Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132.236 65.826 171.676 98.345Collection of Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 540 143 540 143Foreign Exchange Portfolio (Note 16) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35.474 29.831 35.474 29.831Taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60.061 12.807 94.455 16.125Due in connection with securities dealing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.278 3.614 9.678 5.094Subordinate Debts (Note 20) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.577 - 1.577 -Other (Note 17.c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27.306 19.431 29.952 47.152

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LONGTERM LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 833.938 558.187 836.608 545.291Deposits (Note 12) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 177.081 90.502 172.097 82.006Interbank Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 1.201 - 1.201Time Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 177.081 89.301 172.097 80.805MoneyMarket Repurchase Commitment (Note 13) . . . . . . . . . . . . . . . . . . . . . 32.224 1.236 32.224 1.236Own Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32.224 1.236 32.224 1.236Acceptances and Endorsements (Note 14) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 365.963 282.772 365.963 282.772Notes and Bonds Issued Abroad (Note 15.a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 365.963 282.772 365.963 282.772Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54.125 34.319 54.125 34.319Foreign Currency trade finance Borrowings (Note 15.a) . . . . . . . . . . . . . . . . . . . . . . 54.125 34.319 54.125 34.319Repass Borrowings from Public Sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120.426 144.748 120.426 144.748

BNDES / FINAME (Note 15.b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120.426 144.748 120.426 144.748Derivative Financial Instruments (Note 6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.112 4.610 - 210Derivative Financial Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.112 4.610 - 210Other Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74.007 - 91.773 -Subordinate Debts (Note 20) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64.140 - 64.140 -Other (Note 17.c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.867 - 27.633 -DEFERRED INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.794 2.317 2.794 2.317Deferred Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.794 2.317 2.794 2.317MINORITY INTEREST IN SUBSIDIARIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - - 25 22Minority Interest in Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - - 25 22SHAREHOLDERS' EQUITY (Note 21) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 440.649 397.324 440.649 397.324

Share Capital - Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 350.000 236.470 350.000 236.470Capital Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.611 5.804 6.611 5.804Profit Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30.814 27.243 30.814 27.243Adjustment to Market Value - Securities and Derivatives (Note 4.c) . . . . . . . . . . 273 238 273 238Retained Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52.951 127.569 52.951 127.569TOTAL LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.711.378 9.785.546 8.339.451 9.408.300

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STATEMENTS OF INCOME FORTHEYEARS ENDED DECEMBER 31,2006 AND 2005 ANDTHE HALFYEAR ENDEDDECEMBER 31,2006 (In thousands of Reais)


2nd Half Year Year 2nd Half Year YearFINANCIAL OPERATIONS INCOME ......................... 844.966 1.706.567 1.522.492 736.590 1.614.832 1.500.348Loans ........................................................................................... 243.723 398.314 231.259 236.753 403.502 240.212Leases ......................................................................................... 700 1.938 18.915 700 1.938 20.174Securities Income ................................................................... 582.844 1.154.440 1.132.438 433.922 1.078.789 1.202.207Financial Derivative Instruments ..................................... (1.185) 99.867 57.375 38.294 131.318 (35.953)Trade finance and foreign

exchange income (losses) ................................................ 18.885 52.009 82.505 26.921 (715) 73.709FINANCIAL OPERATIONS EXPENSES ..................... (748.188) (1.544.367) (1.475.993) (639.404) (1.446.992) (1.403.377)Deposits, Money Market and Interbank Funds ............ (602.520) (1.331.319) (1.386.641) (579.175) (1.298.357) (1.318.303)Borrowings and Repasses ................................................... (117.404) (167.521) (55.492) (32.045) (103.588) (25.017)Leases ......................................................................................... (163) (692) (50) (163) (692) (27.062)Allowance for Losses on Doubtful Receivable ............. (28.102) (44.836) (33.810) (28.021) (44.355) (32.995)GROSS INCOMEON FINANCIAL OPERATIONS....... 96.778 162.200 46.499 97.186 167.840 96.971OTHER OPERATING INCOME (EXPENSES) .............. (35.125) (61.942) (10.246) (34.675) (64.450) (62.001)Service Fee Income................................................................. 10.221 16.350 10.953 11.774 19.236 13.507Equity in Earnings (Losses) of Subsidiaries ................... 1.517 3.399 45.253 - - -Personnel Expenses ............................................................... (21.409) (40.797) (33.962) (25.033) (45.726) (35.628)Other Administrative Expenses.......................................... (18.314) (28.807) (29.424) (13.815) (25.061) (30.737)Tax Expenses ............................................................................ 122 (3.583) (5.999) (1.062) (5.566) (9.645)Other Operating Income ..................................................... 1.473 2.642 5.514 1.231 2.814 6.557Other Operating Expenses .................................................. (8.735) (11.146) (2.581) (7.770) (10.147) (6.055)OPERATING INCOME................................................ 61.653 100.258 36.253 62.511 103.390 34.970NON-OPERATING INCOME ..................................... 191 (3.680) 401 147 (4.442) 381INCOME BEFORE INCOME ANDSOCIAL CONTRIBUTIONTAXES ........................... 61.844 96.578 36.654 62.658 98.948 35.351

INCOME AND SOCIAL CONTRIBUTIONTAXES ....... (3.007) (7.319) 9.697 (3.854) (9.179) 11.112Provision for Income Tax ..................................................... (7.852) (16.114) (5.658) (9.077) (18.513) (3.372)Provision for Social Contribution Tax ............................. (2.919) (5.821) (1.895) (3.200) (6.910) (2.375)Deferred Tax Assets ................................................................ 7.764 14.616 17.250 8.423 16.244 16.859STATUTORY PROFIT SHARING ............................... (14.845) (17.843) (6.075) (14.812) (18.353) (6.187)NET INCOME ............................................................ 43.992 71.416 40.276 43.992 71.416 40.276NET INCOMEPER LOTOFATHOUSANDSHARES - R$ 42,47 68,94 38,88

See the accompanying notes to the financial statements

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STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY FORTHEYEARS ENDEDDECEMBER 31,2006 AND 2005 ANDTHE HALFYEAR ENDED DECEMBER 31,2006 (In thousands of Reais)

Adjustment toMarket Value

Paid in Capital Capital Profit Securities and RetainedCapital Increase Reserves Reserves Derivatives Earnings Total

BALANCES AT DECEMBER 31,2004 236.470 - 5.190 25.229 (346) 159.144 425.687

Adjustments due to

Circulars 3068/01 and 3082/02 - - - - 584 (137) 447

Subsidies for Investments - - (767) - - - (767)

Price Level Restatement of

Membership Certificates - - 1.381 - - - 1.381

Dividends from Prior Years - - - - - (69.700) (69.700)

Net Income for the Year - - - - - 40.276 40.276

Distribution to Legal Reserve - - - 2.014 - (2.014) -

BALANCES AT DECEMBER 31,2005 236.470 - 5.804 27.243 238 127.569 397.324

Prior Year Adjustments (note 4.k) - - - - - (19.063) (19.063)

Adjustments due to

Circulars 3068/01 and 3082/02 - - - - 35 - 35

Capital Increase from Subscription 21.030 34.900 - - - - 55.930

Capital Increase from Reserves - 57.600 - - - (57.600) -


Membership Certificates - - 807 - - - 807

Interest on Shareholders' Equity - - - - - (65.800) (65.800)

Net Income for the Year - - - - - 71.416 71.416


BALANCES AT DECEMBER 31,2006 257.500 92.500 6.611 30.814 273 52.951 440.649

BALANCES AT JUNE 30,2006 236.470 14.730 6.459 28.614 1.291 136.293 423.857

Prior Year Adjustments (note 4.k) - - - - - (19.063) (19.063)

Adjustments due to

Circulars 3068/01and 3082/02 - - - - (1.018) - (1.018)

Capital Increase from Subscription 21.030 20.170 - - - - 41.200

Capital Increase from Reserves - 57.600 - - - (57.600) -


Membership Certificates - - 152 - - - 152

Interest on Shareholders' Equity - - - - - (48.471) (48.471)

Net Income for the Half Year - - - - - 43.992 43.992


BALANCES AT DECEMBER 31,2006 257.500 92.500 6.611 30.814 273 52.951 440.649

60

STATEMENTS OF CHANGES IN FINANCIAL POSITION FORTHEYEARS ENDEDDECEMBER 31,2006 AND 2005(In thousands of Reais)


2nd Half Year Year 2nd Half Year YearSOURCEOF FUNDS .............................................. 4.323.240 7.127.983 3.752.883 4.321.911 7.102.429 3.707.440Net Income for the Period ......................................... 43.992 71.416 40.276 43.992 71.416 40.276Adjustments to Net Income for the Half Year ...... (298) (1.034) (42.966) 1.234 2.380 2.287

Depreciation and Amortization ........................... 1.219 2.365 2.287 1.234 2.380 2.287Equity in Earnings (Losses) of Subsidiaries ....... (1.517) (3.399) (45.253) - - -

Prior Year Adjustments ................................... (19.063) (19.063) - (19.063) (19.063) -Adjustments due toCirculars 3068/01 and 3082/02 ...................... (1.018) 35 447 (1.018) 35 447Funds from Shareholders - Realizationof Capital ......................................................... 41.200 55.930 - 41.200 55.930 -Variation of Minority Interests ....................... - - - - 3 22Valuation of Membership Certificates ........... 152 807 1.381 152 807 1.381Donations and Subsidies for Investments .... - - (767) - - (767)Variation in Deferred Income for Half Years .. (203) 477 - (203) 477 -Funds fromThird Parties: ............................... 4.258.478 7.019.416 3.754.512 4.255.617 6.990.444 3.663.794- Increase in Liabilities ................................... 776.314 1.277.096 2.942.958 787.224 1.273.449 3.084.905

Deposits ..................................................................... 376.817 553.106 - 368.846 591.206 209.405Money Market Repurchase Commitments .... - - 2.548.223 - - 2.548.223Acceptances and Endorsements ......................... 153.386 230.571 288.631 153.386 230.571 288.631Interbank and Interbranch Accounts ............... 17.840 83.064 60.329 8.300 16.629 1.955Borrowings and Repass Borrowings ................. 196.941 269.941 37.299 196.941 269.941 36.691Derivative Financial Instruments ....................... - - 8.476 - - -Other Liabilities ........................................................ 31.330 140.414 - 59.751 165.102 -

- Decrease in Assets ...................................... 3.471.084 5.719.686 809.031 3.468.393 5.716.995 576.562Short-term Interbank Investments .................... 3.471.084 5.719.339 - 3.468.393 5.716.648 -Securities .................................................................... - - 714.231 - - 485.451Interbank and Interbranch Accounts ............... - - 305 - - 305Lease Operations ..................................................... - 347 - - 347 795Other Receivable ...................................................... - - 94.495 - - 89.962Other Assets .............................................................. - - - - - 49

- Disposal of Assets and Investments: ........... 11.080 22.633 2.523 - - 2.327Investments ................................................................ - - 2.523 - - 2.327Shareholding Interests ............................................ 10.948 21.479 - - - -Premises and Equipment ...................................... 132 1.154 - - - -

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


2nd Half Year Year 2nd Half Year YearAPPLICATIONS OF FUNDS ................................ 4.311.328 7.112.728 3.751.495 4.309.852 7.087.097 3.705.953Variation In Deferred Income .......................... - - 2.552 - - 2.552Interest on Shareholders' Equity ..................... 48.471 65.800 - 48.471 65.800 -Prior Year Adjustments .................................... - - - - - -Dividend Distributions .................................... - - 69.700 - - 69.700Investments in: ................................................ 152 807 31.049 1.247 2.109 3.222

Corporate Interests .................................................. - - 28.020 - - -Investments .................................................................. 152 807 1.381 152 810 1.381Premises and equipment ........................................ - - 1.648 1.095 1.299 1.841

Deferred Charges ............................................. 311 121 2.261 (287) 181 7.404- Increase in Assets ......................................... 1.876.092 4.650.931 3.464.081 1.881.948 4.632.902 3.463.308Short-term Interbank Investments ...................... - - 2.791.191 - - 2.791.195Securities ...................................................................... 1.274.712 3.450.826 - 1.266.171 3.389.908 -Interbank and Interbranch Accounts ................. 36.011 40.462 - 36.011 40.462 -Loans .............................................................................. 474.265 973.865 672.113 474.264 973.865 672.113Lease Operations ....................................................... 380 - 727 380 - -Other Receivable ........................................................ 77.131 165.401 - 91.701 208.562 -Other Assets ................................................................ 13.593 20.377 50 13.421 20.105 -- Decrease in Liabilities ................................. 2.386.302 2.395.069 181.852 2.378.473 2.386.105 159.767Deposits ........................................................................ - - 14.410 - - -Money Market Repurchase Commitments ....... 2.266.760 2.356.586 - 2.266.760 2.356.586 -Borrowings and Repass Borrowings ................... - - - - - 1.944Derivative Financial Instruments ......................... 119.542 38.483 167.442 111.713 29.519 157.823

INCREASE IN CASH AND CASH EQUIVALENTS 11.912 15.256 1.388 12.059 15.332 1.487CHANGES IN FINANCIAL POSITION: .................

Cash and Cash Equivalents ......................................Beginning of the Period ........................................ 22.570 19.226 17.838 22.631 19.358 17.871End of the Period ..................................................... 34.482 34.482 19.226 34.690 34.690 19.358

Increase in Cash and Cash Equivalents ........... 11.912 15.256 1.388 12.059 15.332 1.487

See the accompanying notes to the financial statements

62

NOTES TO THE FINANCIAL STATEMENTS

iX.

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NOTESTOTHE FINANCIAL STATEMENTSASONDECEMBER 31,2006AND2005 (In thousands of Reais)

1.OPERATIONS

Banco Fibra S.A. is a multiple service bank,operating through commercial,exchange, investment,credit and finance portfoliosas well acting as an intermediary for its subsidiaries in securities brokerage activities, securitization of real estate credits as well asportfolio and investment fund management.

2.PRESENTATIONOFTHE FINANCIAL STATEMENTS

The financial statements of Banco Fibra S.A. include operations conducted by its branch located abroad (Note 11) and arepresented together with the consolidated financial statements (Fibra Consolidated) which include the Bank and its subsidiaries.

3.CONSOLIDATEDFINANCIAL STATEMENTS

The consolidated financial statements include Banco Fibra S.A., its branch overseas and interests held in its subsidiaries, FibraAsset Management Distribuidora de Títulos e Valores Mobiliários Ltda. (99.99%), Fibra Companhia Securitizadora de CréditosFinanceiros (99.99%), Fibra Companhia Securitizadora de Créditos Imobiliários (99.94%), Fibra Projetos e Consultoria EconômicaLtda. (99,99%) and RTSPE Empreendimentos e Participações Ltda. (99.99%).

The income and expenses and asset and liability operating balances between the consolidated companies have beeneliminated from the consolidated financial statements. (Note 22).

4.SIGNIFICANTACCOUNTINGPRACTICES

The accounting practices for recording and preparing the financial statements are derived from Brazilian Corporation Law, inconjunction with Central Bank of Brazil (BACEN) regulations and instructions and the most significant accounting practices are listedbelow:a.Statementof Income: Income and expenses arising from asset and liability operations are recognized on a accrual basis andtake into account the effects of operations subject to price level restatement on a daily pro-rata basis.Asset and liability operations thatcarry exchange variation clauses are price level restated according to the buy or sell rate of the foreign currency on the balance sheetdates according to the contractual provisions.b.Short-term Interbank Investments:These are valued at the cost of acquisition plusinterest incurred up to the balance sheet dates and,when applicable,are adjusted to market value.Investments in foreign currency areshown at the cost of acquisition plus accrued income calculated on a daily pro rata basis and the foreign exchange variations arerecorded up to the balance sheet dates.c.Securities:These are classified into three categories:“trading securities ”,“securities availablefor sale” and “securities held to maturity”. Securities classified as “trading securities” are valued at their market value and theiradjustments are offset and recorded in the appropriate income or expense account for the period. Securities classified as “securitiesavailable for sale”are valued at their market value and adjustments to them are recorded in an appropriate account in shareholders'equity, less tax effects and transferred to income for the period in which they were effectively sold. Securities, classified as "held tomaturity" are valued at their cost of acquisition plus interest earned up to the balance sheets dates. Classification in this categorydepends upon the financial capacity of the institution to hold them until redemption and Management's decision to rule out anypossibility of selling these securities.(Note 6a).d.DerivativeFinancial Instruments:According to Central Bank of Brazil Circular Letter3082, derivative financial instruments are valued and recorded at market value and classified as either hedge or non hedge. Hedgeinstruments are classified as: (i)“market risk hedge”or (ii)“cashflow hedge”. The criteria for recording them are as follows: for derivativefinancial instruments which are not intended to be used as a hedge as well as those classified as market risk hedge, adjustments tomarket value are recorded and offset in the appropriate income or expense account under income for the period. For derivativefinancial instruments classified as "cash flow hedge," the effective portion of the hedge must be recorded and offset in a special

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account in Shareholders' Equity and any variation is offset in the appropriate income or expense account under income for the period.In the event of derivative financial instruments which are intended to protect securities classified in the category "securities held tomaturity" both the security and the derivative financial instrument are valued and recorded in compliance with the intrinsiccontracted terms and are not recorded at market value. With the advent of the changes introduced by Central Bank Circular Letter3150,this treatment is also given to derivative instruments traded in association with fund raising operations or fund investments andmarket value may be disregarded under the terms therein specified. (Note 6b).e.Provisions for Doubtful Loans,Doubtful LeaseReceivable andDoubtful Receivable:These provisions are recorded at an amount considered sufficient to cover any losses arisingon their collection .The Central Bank of Brazil established regulations through Resolution 2682/99,which are based on risk analyses ofclients with asset operations and past experience as well as specific sector or portfolio risks. (Note 9) f. Assets not for Use: Goodsreceived in lieu of payment are recorded in the account “Other Assets” and include provisions recorded in an amount consideredsufficient to cover any losses arising on collection. g. Investments - Interests held in subsidiaries are valued according to the equitymethod of accounting.The other investments are valued according to the cost of acquisition,price level restated up to December 31,1995, less provisions for losses when applicable. The book balances of the entities headquartered abroad, which are preparedaccording to international accounting standards (IFRS),were translated into the local currency the real,using the US dollar quotationon the closing date of the period. For the purposes of calculating equity pick up and consolidation, these balances were adjusted tothe accounting practices derived from Brazilian corporation law. h. Property, plant and equipment and Deferred charges -Depreciation of property, plant and equipment and amortization of deferred charges are calculated using the straight linemethod,accordingtothefollowingannual ratesandterms: (i) property,plant and equipment:vehicles and computer system,20%;other assets 10%; (ii) differed charges: expenses for acquisition and development of computer software, 20% and improvementstoleasehold properties - according to the term of the lease. i. Incomeand social contribution taxes: The provision for income tax isrecorded at a rate of 15% plus a 10% surcharge on the portion of annual taxable income that exceeds R$ 240.The provision for socialcontribution taxes is recorded at a rate of 9% in compliance with prevailing legislation. Details of the effects of these taxes are shownin Note 18. j. Other Current Assets and Long Term Receivables: These are shown at their cost values, including, when applicable,accrued income and price level restatement less the corresponding provisions for losses or adjustments to the realization value.k. Contingencies and legal obligations: Recognition, measurement and disclosure of asset and liability contingencies and legalobligations are carried out according to the criteria defined in CVM (Brazilian Securities and Exchange Commission) Determination489/05, which came into effect on January 1,2006: i)Contingent assets: are not recognized in the accounting,except in the event ofa favorable judicial decision, considered practically certain, which does not permit any appeals. Assets with chances of successconsidered as probable are only disclosed only in a note to the financial statements (note 19). ii) Contingent liabilities: They arerecorded when, in the opinion of legal counsel, the chances of loss are probable. The cases where the chances of loss are classified aspossible are only disclosed in a note to the financial statements (note 19). iii) Legal obligations:These are recognized and provisionsare recorded in the balance sheet,regardless of the probabilities of success of the legal suit.During 2006,as a result of full complianceof the financial statements with the new regulations, the legal and administrative processes were reviewed and reclassified and taxand social security legal obligations were recorded in the amount of R$ 25,070 (R$ 19,918, net of tax credits) and the amount of R$19,062 was recognized as a prior period adjustment in retained earnins and the amount of R$ 856 was recorded as operatingexpenses for the period. l.Current Liabilities and LongTerm Liabilities:These are shown at the known values or at values that canbe calculated and include charges and price level restatement or exchange variations incurred up to the balance sheet dates.m. Accounting Estimates: The preparation of the financial statements in accordance with accounting practices adopted in Brazilrequires that the Management uses its judgment when determining and recording accounting estimates. Significant assets and

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liabilities subject to these estimates and assumptions include the residual value of a property, plant and equipment, provision fordoubtful accounts, provision for devaluation of certain assets and deferred income tax, provision for contingencies and valuation ofderivative instruments. The settlement of transactions involving these estimates may result in amounts different to those estimateddue to the lack of precision inherent to the process for determining them.The Bank periodically reviews estimates and assumptions.

5.SHORT-TERMINTERBANK INVESTMENTS:Short-term Interbank investments are represented by the main by investmentsin the open market,guaranteed by i federal public securities in the Banco Fibra and Fibra Consolidated statements.

6.SECURITIESANDDERIVATIVE FINANCIAL INSTRUMENTS

a.Classification of the Securities andDerivative Financial Instruments Portfolio,according on thebusiness strategy:

Banco Fibra S.A. Fibra Consolidated2006 2005 2006 2005Book Book Book

Curve Value/ Book Curve Value/ MarketValue Market Value Value Market Value

(4) (4)Trading Securities (1) .............................................. 4.248.026 4.304.602 470.450 3.925.141 3.942.564 535.308Financial Treasury Bill - LFT .................................................. 24.366 24.368 2.475 24.473 24.475 3.279National Treasury Bill - LTN................................................... 3.615.627 3.616.121 28.362 3.615.627 3.616.121 28.362National Treasury Notes - NTN............................................ 90.692 91.177 153.064 90.692 91.177 154.405Fixed Income Private Securities ........................................ 13.763 14.531 10.674 13.763 14.531 28.847Stocks .......................................................................................... 19.482 34.959 6.429 19.482 34.959 6.429Euronotes and Commercial Papers (3) ............................ 398.951 439.530 53.683 71.161 72.582 53.683Other............................................................................................ - - 6.052 - - 6.052Investment Fund Quotas: .....................................................Repurchase Commitments ................................................. 10.955 10.955 - 10.955 10.955 -National Treasury Bills - LTN................................................. - - 184.962 - - 199.894Central Bank Notes - NBC ..................................................... - - 17.514 - - 17.514National Treasury Notes - NTN............................................ 65.372 65.372 4.093 65.372 65.372 4.093Fixed Income Private Securities ........................................ 3.028 3.028 3.007 3.028 3.028 6.181Stocks........................................................................................... 231 231 13.080 231 231 13.140Swap Differences Payable ................................................... 3.207 3.207 - 4.436 4.436 -Other Investment Fund Securities (2).............................. 2.352 1.123 (12.945) 5.921 4.697 13.429Securities Held to Maturity ................................................ - - 358.868 - - -Euronotes and Commercial Papers (3) ............................ - - 358.868 - - -Securities Available for Sale (1) ............................. 6.819 7.232 1.600 6.819 7.232 1.600National Treasury Notes - NTN............................................ 4.418 4.688 - 4.418 4.688 -Stocks .......................................................................................... 2.401 2.544 1.562 2.401 2.544 1.562Other ........................................................................................... - - 38 - - 38Derivative Financial Instruments .......................... 6.339 8.963 39.053 8.652 16.194 39.173Swap Receivable Differences ............................................. 6.339 8.963 39.053 8.652 16.194 39.173Total Securities Portfolio .............................. 4.261.184 4.320.797 869.971 3.940.612 3.965.990 576.081

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(1) The book value of the securities for the categories "Securities Available for Sale" and "Trading Securities" was calculatedbased on the following criteria: a) government securities and operations conducted on the futures, forward and options marketsbased on the pricing model described in Note 7; b) Publicly traded company stocks and forward operations guaranteed by thesesecurities,according to the average quotation available from the last trading floor session of the month or in the absence thereof,themost recent trading floor sessions published in the Daily Bulletin for each Exchange and; c) Swaps, based on the notional values ofeach one of the parameters of the contracts,considering the cash flow discounted to the present value by the futures market interestrates calculated on the pricing model described in Note 7, in compliance with the terms of each contract; (2)Other Investment Fundsecurities are represented by quotas in Credit Rights funds (FIDC) in the amount of R$ 2,122 and other accounts payable in theamount of R$ 999. In the Fibra Consolidated statements, they are basically represented by quotas in other Financial InvestmentFunds in the amount of R$ 4,798. (3) In the Banco Fibra S.A.statements, in 2005,R$ 358,868, in relation to Euro Medium Term Notes,the liability of Fibra Asset Management Distribuidora de Títulos e Valores Mobiliários Ltda. was eliminated from the consolidatedstatements. In view of the fact that the aforementioned securities were issued by a company that is part of the group and that thereare derivative financial instruments which mitigate market risks, both in relation to the asset operation as well as the liabilityoperation and that these are eliminated in the Fibra Consolidated statements and therefore a position is not recorded in the group'sown portfolio, Management reclassified these securities which totaled R$ 327,791 from the category "Securities Held to Maturity"to the category "Trading Securities". In the Banco Fibra S.A. statements, the isolated effect of this reclassification resulted in marketvaluation income in the amount of R$ 39,157, offset by the expenses involved in the market value adjustments of the underlyingderivative of R$ 32,072 and by the equity adjustment expenses from the compensating adjustments in the related company FibraAsset Management in the amount of R$ 7,085.As aresult of these adjustments,the total effect in the results and shareholders' equityin Banco Fibra S.A., and the Fibra Consolidated statements was null. (4) The book value shown in this column refers to the marketvalue of the securities.

b.Derivative Financial Instruments:Banco Fibra S.A.and its subsidiaries conducted operations with derivatives to attend itsown needs and those of its clients, with respect to reducing exposure to market, currency and interest risks. Management of theserisks is conducted through determining limits and establishing strategies for operations.Derivatives are recorded according to theirnature and specific legislation in equity and/or contra accounts.As of December 31,2006,the market value of the derivative financialinstruments according to the balance sheet can be broken down as shown below:

Derivative Financial Instruments - Swap and Similar ContractsBanco Fibra S.A.

2006 2005ASSETPOSITION Assets Liabilities Receivables Assets LiabilitiesReceivablesPRE vs.DOLLAR ....................................................................... - - - 367.720 354.945 12.775CDI vs.DOLLAR ........................................................................ 65.113 59.782 5.331 18.446 16.705 1.741PRE vs.CDI ................................................................................. 128.952 126.649 2.303 - - -CDI vs.PRE ................................................................................. - - - 3.134 3.132 2DOLLAR vs.PRE ...................................................................... - - - 978.231 957.177 21.054IGPM vs.CDI .............................................................................. 41.500 40.177 1.323 - - -OTHER ...................................................................... 33 27 6 3.481 - 3.481TOTAL -MarketValue 235.598 226.635 8.963 1.371.012 1.331.959 39.053Amounts Receivable calculated accordingto the operation curves 6.339 40.592

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Swap andSimilar Contracts Fibra Consolidated2006 2005

ASSETPOSITION Assets Liabilities Receivables Assets Liabilities ReceivablesPRE vs.DOLLAR - - - 367.720 354.945 12.775CDI vs.DOLLAR 73.094 66.534 6.560 18.446 16.705 1.741PRE vs.CDI 128.952 126.649 2.303 3.134 3.132 2DOLLAR vs.CDI - - - 7.027 6.934 93DOLLAR vs.PRE - - - 978.231 957.177 21.054CDI vs. IGPM - - - 32.133 32.106 27IGPM vs.CDI 84.497 77.173 7.324 - - -OTHER 33 26 7 3.481 - 3.481TOTAL -MarketValue 286.576 270.382 16.194 1.410.172 1.370.999 39.173Amounts receivable calculated accordingto the operation curves 8.652 40.633

Swap andSimilar Contracts Banco Fibra S.A.2006 2005

ASSETPOSITION Assets Liabilities Payables Assets Liabilities PayablesPRE vs.DOLLAR - - - 962.884 984.226 (21.342)CDI vs.DOLLAR 463.806 469.196 (5.390) 363.413 375.887 (12.474)PRE vs.CDI - - - 143.015 143.701 (686)DOLLAR vs.CDI 215.283 219.545 (4.262) 1.179 1.501 (322)DOLLAR vs.PRE - - - 354.945 367.721 (12.776)CDI vs. IGPM 40.207 42.995 (2.788) - - -OTHER - - - - 3.323 (3.323)TOTAL -MarketValue 719.296 731.736 (12.440) 1.825.436 1.876.359 (50.923)Amounts receivable calculated accordingto the operation curves 22.793 (53.209)

Swap andSimilar Contracts Fibra Consolidated2006 2005

LIABILITY POSITION Assets Liabilities Payables Assets Liabilities PayablesPRE vs.DOLLAR - - - 962.884 983.786 (20.902)CDI vs.DOLLAR - - - 25.589 25.880 (291)PRE vs.CDI - - - 143.015 143.701 (686)DOLLAR vs.CDI 7.277 8.767 (1.490) 1.179 1.501 (322)DOLLAR vs.PRE - - - 354.945 367.721 (12.776)CDI vs. IGPM 77.176 84.494 (7.318) - - -IGPM vs.CDI - - - 32.106 32.133 (27)OTHER - - - - 3.323 (3.323)TOTAL -MarketValue 84.453 93.261 (8.808) 1.519.718 1.558.045 (38.327)Amounts receivable calculated accordingto the operation curves (2.742) (41.065)

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c.Securities andDerivative Financial Instruments -maturity terms:up to 31 to 91 to 181 to over Total Total

Banco Fibra S.A. 30 days 90days 180days 360days 360days 2006 2005CategoriesTrading securities ............................................... 4.304.602 - - - - 4.304.602 470.450Securities Held to Maturity ........................... - - - - - - 358.868Securities Available for Sale .......................... 7.232 - - - - 7.232 1.600Derivative Financial

Instruments (ASSETS)..................................... 673 4.367 666 1.801 1.456 8.963 39.053Total ......................................................... 4.312.507 4.367 666 1.801 1.456 4.320.797 869.971Derivative Financial

Instruments (LIABILITIES) ............................ (27) (3.806) 878 627 (10.112) (12.440) (50.923)

up to 31 to 91 to 181 to over Total TotalFibra Consolidated 30days 90days 180days 360days 360days 2006 2005CategoriesTrading Securities............................................... 3.942.564 - - - - 3.942.564 535.308Securities Available for Sale .......................... 7.232 - - - - 7.232 1.600Derivative Financial

Instruments (ASSETS).................................... 1.902 4.367 690 1.777 7.458 16.194 39.173Total ......................................................... 3.951.696 4.367 690 1.777 7.458 3.965.990 576.081Derivative Financial

Instruments (LIABILITIES) ............................ (1.256) (53) (78) (102) (7.319) (8.808) (38.327)

The total nominal values of Swap contracts recorded at CETIP (Clearing House for the Custody and Financial Settlement of Securities)as of December 31, 2006 was R$ 785,755 in Banco Fibra and R$ 863,530 in Fibra Consolidated.The margins deposited in guaranteeof the derivative financial instruments totaled R$ 90,263 for the Banco Fibra S/A and the Consolidated statements,of which R$ 62,838refers to margins deposited by Valência Fundo de Investimento Multimercado.

7. RISK MANAGEMENT: Market Risks: The management of the risk positions assumed by the Financial Group involve aset of controls that include the Value at Risk (VaR) concept, whereby the model used is the parameter and the volatility model isthe EWMA (Exponentially Weighted Moving Average), a generalization of the Moving Average model whereby greater weightsare assigned to the most recent data, thereby enabling quicker reactions to market fluctuations and the Crash Scenario analysiswhich serves to assess the maximum potential loss of each portfolio taking into account extreme scenarios. In conjunction withother risk assessment instruments, they are intended to present the risks assumed by the Bank. The risk exposure policy isregarded as conservative and the VaR limits and stress scenarios are periodically reviewed by the Market Risk Committee,whichincludes members of the Executive Board.The Company has invested in the development of control systems, for the purpose ofregularly monitoring risks. The pricing models used by the Bank were developed internally and the calculation of curves andreference prices are operations under the responsibility of the Risk Management Area,whose methodology has been approvedby senior Bank management and takes into consideration the nature of each financial instrument traded. Liquidity Risks: Forthe purpose of managing liquidity risk exposure, the bank has adopted instruments to control cash flow and forecast needs or

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excess funds in a timely manner to enable it to implement preventive measures beforehand. These instruments includeprojected cashflow, stress scenarios and simulations of payment events or renewal of operations. Credit Risks: Managementadopts as a basic premise for extending credit the capacity of the company to present an adequate cashflow, so as to enablenormal continuity to its operations, complying with its credit line access capacity.Loan decisions are taken at a committee levelon four levels of authority, which include members of the Executive Board and the Board of Directors, according to each level.The Bank has credit risk controls which enable it to monitor the quality of its portfolio and foresee any problems which mightoccur in relation to its clients.

8.LOANPORTFOLIO (CONSOLIDATED)

a.BreakdownofOperations:

2006 2005R$ % R$ %

Loans .................................................................................... 2.450.559 75,5 1.454.290 69,1Working Capital and Secured Account ...................................... 1.234.625 38,1 796.691 37,9Retail portfolio ................................................................................... 313.033 9,7 133.047 6,3Acquired Credit - Other Banks ..................................................... 334.743 10,3 165.698 7,9Resolution 2770 repasses .............................................................. 144.847 4,5 81.524 3,9Foreign Currency Financing (Imports/Exports) ..................... 94.047 2,9 34.725 1,6BNDES (National Bank for Economic andSocial Development) Repasses ................................................... 257.801 7,9 194.068 9,2"Vendor" and "Compror" ................................................................ 68.391 2,1 48.492 2,3Other ...................................................................................................... 3.072 0,1 45 -

Lease Operations ................................................................. 382 - 753 -Advances on Exchange and Export Contracts - ACC/ACE .... 333.072 10,3 201.528 9,6Other receivable ................................................................. 14.500 0,4 3.841 0,2Total Portfolio - Credit Extended ....................................... 2.798.513 86,3 1.660.412 78,9Guarantees provided - BNDES............................................ 115.497 3,5 99.085 4,7Bonds and Guarantees Plrovided ...................................... 329.675 10,2 344.586 16,4Total Portfolio ..................................................................... 3.243.685 100,0 2.104.083 100,0

b.Breakdownper Sector of Activity:2006 2005

R$ % R$ %Loans .................................................................................... 2.450.559 75,5 1.454.290 69,1Industry ...................................................................................................... 1.073.683 33,1 828.539 39,4Commerce................................................................................................. 431.021 13,3 303.640 14,4Services ...................................................................................................... 745.277 23,0 511.462 24,3Rural............................................................................................................. 88.532 2,7 71.550 3,4Housing ...................................................................................................... 34.650 1,1 7.764 0,4Public Sector ........................................................................................... 53.062 1,6 16.024 0,8Financial Intermediaries ...................................................................... 346.398 10,7 191.821 9,1Individuals ................................................................................................ 471.062 14,5 173.283 8,2Total Portfolio ..................................................................... 3.243.685 100,0 2.104.083 100,0

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c.Concentration ofMainDebtors:1) With interbankmarket operations: 2006 2005

% of % ofIn % of shareholders‘ In % of shareholders‘R$ Portfolio equity R$ Portfolio equity

Main Debtors 104.120 3,2% 23,6% 55.202 2,6 13,9%10 Largest Debtors 481.111 14,8% 109,2% 364.147 17,3 91,7%20 Largest Debtors 760.855 23,5% 172,7% 552.251 26,2 139,0%

2) Without interbankmarket operations: 2006 2005% of % of

In % of shareholders‘ In % of shareholders‘R$ Portfolio equity R$ Portfolio equity

Main Debtors 54.071 1,7% 12,3% 50.878 2,4 12,8%10 Largest Debtors 353.401 10,9% 80,2% 321.059 15,3 80,8%20 Largest Debtors 609.995 18,8% 138,4% 494.037 23,5 124,3%

d.BreakdownbyMaturity: 2006 2005R$ % R$ %

Overdue .............................................................................................. 36.498 1,1 23.955 1,1Falling due in 30 days..................................................................... 566.674 17,5 402.782 19,1Falling due fin 31 to 60 days ........................................................ 407.447 12,6 245.567 11,7Falling due in 61 to 90 days .......................................................... 350.495 10,8 197.670 9,4Falling due in 91 to 180 days ....................................................... 680.497 21,0 381.719 18,1Falling due in 181 to 360 days ..................................................... 609.403 18,7 300.928 14,3Falling due in over 360 days ........................................................ 592.671 18,3 551.462 26,2Total Portfolio .................................................................................... 3.243.685 100,0 2.104.083 100,0

9.CLASSIFICATIONOF LOANSPERRISK LEVEL

a. LoanPortfolio according to risk levels - retail operations:

Risk % Performing loans Non-performing loans Total TotalLevels Minimum InR$ Provisions Overdue Falling due Provisions Loans ProvisionsAA . . . . . . . . . . . . . . . . - - - - - - - -A . . . . . . . . . . . . . . . . . . 0,5 233.217 1.166 - - - 233.217 1.166B . . . . . . . . . . . . . . . . . . 1,0 - - 2.424 27.426 298 29.850 298C . . . . . . . . . . . . . . . . . . 3,0 - - 1.990 11.207 396 13.197 396D . . . . . . . . . . . . . . . . . 10,0 - - 1.944 4.783 673 6.727 673E . . . . . . . . . . . . . . . . . . 30,0 - - 2.186 3.300 1.646 5.486 1.646F . . . . . . . . . . . . . . . . . . 50,0 - - 2.158 2.166 2.162 4.324 2.162G . . . . . . . . . . . . . . . . . 70,0 - - 2.086 1.460 2.482 3.546 2.482H . . . . . . . . . . . . . . . . . 100,0 - - 13.495 3.191 16.686 16.686 16.686Total in 2006 . . . . . 233.217 1.166 26.283 53.533 24.343 313.033 25.509% Portfolio . . . . . . . . 7,2% 0,8% 1,7% 9,7%Total in 2005 . . . . . 113.720 569 11.475 7.852 10.731 133.047 11.300% Portfolio . . . . . . . . 5,4% 0,5% 0,4% 6,3%

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b. LoanPortfolio,according to risk levels -wholesale operations:Risk % Performing loans Non-performing loans Total TotalLevels Minimum InR$ Provisions Overdue Falling due Provisions Loans ProvisionsAA ................................. - 149.364 - - - - 149.364 -A .................................... 0,5 1.160.289 5.801 - - - 1.160.289 5.801B .................................... 1,0 809.247 8.092 246 5.158 54 814.651 8.146C .................................... 3,0 338.505 10.155 991 2.844 115 342.340 10.270D .................................... 10,0 1.400 140 4.412 555 497 6.367 637E ..................................... 30,0 3.650 1.095 149 373 156 4.172 1.251F ..................................... 50,0 - - 315 1.429 873 1.744 873G .................................... 70,0 - - 535 1.897 1.702 2.432 1.702H .................................... 100,0 71 71 3.567 483 4.050 4.121 4.121Total Portfolio - LoansExtended ............... 2.462.526 25.354 10.215 12.739 7.447 2.485.480 32.801Bonds and Guarantees Provided 445.172Total in 2006 ......... 2.462.526 25.354 10.215 12.739 7.447 2.930.652 32.801% Portfolio ............... 75,9% 0,3% 0,4% 90,3%Total in 2005 ......... 1.955.546 14.509 12.480 3.010 10.060 1.971.036 24.569% Portfolio ............... 92,9% 0,6% 0,1% 93,7%

c. Total LoanPortfolio according to the risk levels:Risk % Performing loans Non-performing loans Total TotalLevels Minimum InR$ Provisions Overdue Falling due Provisions Loans ProvisionsAA ................................. - 149.364 - - - - 149.364 -A .................................... 0,5 1.393.506 6.967 - - - 1.393.506 6.967B .................................... 1,0 809.247 8.092 2.670 32.584 352 844.501 8.444C .................................... 3,0 338.505 10.155 2.982 14.051 511 355.537 10.666D .................................... 10,0 1.400 140 6.356 5.338 1.170 13.094 1.310E ..................................... 30,0 3.650 1.095 2.336 3.673 1.803 9.659 2.898F ..................................... 50,0 - - 2.472 3.595 3.034 6.067 3.034G .................................... 70,0 - - 2.621 3.357 4.184 5.978 4.184H .................................... 100,0 71 71 17.062 3.674 20.736 20.807 20.807Total Portfolio - LoansExtended ............... 2.695.743 26.520 36.498 66.272 31.790 2.798.513 58.310Bonds and Guarantees Provided 445.172Total in 2006 ......... 2.695.743 26.520 36.498 66.272 31.790 3.243.685 58.310% Portfolio ................ 83,1% 1,1% 2,0% 100,0%Total in 2005 ......... 2.069.266 15.078 23.955 10.862 20.791 2.104.083 35.869% Portfolio ................ 98,3% 1,1% 0,5% 100,0%

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d.Provision forDoubtful Loans - Consolidated2006 2005

Retail Wholesale Total Retail Wholesale TotalOpening Balance........................................................... 11.300 24.569 35.869 3.007 17.577 20.584Write-offs against provision ..................................... (13.203) (8.711) (21.914) (6.812) (10.898) (17.710)Provision recorded for the year................................ 27.413 16.942 44.355 15.105 17.890 32.995Closing Balance ............................................... 25.510 32.800 58.310 11.300 24.569 35.869The total loans renegotiated during the year was R$ 89,245 (in 2005, R$ 676) and the total recovery of loans written offfrom prior years was R$ 728 in the Fibra Consolidated statements (in 2005, R$ 522). e. Loans Extended: consolidatedDuring 2006 loans were extended to financial institutions of the "Payroll guaranteed loan" type and the "Bank CreditNote" type in the amount of R$ 157.584, with co-obligation of Banco Fibra S.A.The positive result of the aforementionedloans was R$ 2.504 net of taxes.

10. SHAREHOLDING INTEREST IN SUBSIDIARIES2006 2005

Net Income Equity in BookValue BookValueInterest held Shareholders' (Loss) for Earningsof of the of the

Companies by theBank Equity for theYear theSubsidiary Investment InvestmentFibra Asset ManagementDistribuidora de Títulos e Valores

Mobiliários Ltda. . . . . . . . . . . . . . . . . . . . 99,9989% 66.044 (3.039) (3.037) 66.044 81.894RTSPE Empreendimentos e

Participações Ltda. (b) . . . . . . . . . . . . . . 99,9990% 211 (1) (1) 211 412Fibra Projetos e Consultoria

Econômica Ltda. (a) . . . . . . . . . . . . . . . . 99,9998% 5.564 164 165 5.564 4.400Fibra Cia. Securitizadora de Créditos

Financeiros . . . . . . . . . . . . . . . . . . . . . . . . 99,9899% 3.908 2.728 2.728 3.907 1.179Fibra Cia. Securitizadora de Créditos

Imobiliários . . . . . . . . . . . . . . . . . . . . . . . . 99,9533% 43.658 4.986 4.987 43.637 38.651Banco Fibra International Ltd. (c) . . . . . 100,0000% – – (1.443) – 13.272Totais . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.399 119.363 139.808

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

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11.AGENCIES ABROAD Intercompanybalances Third party balances

Assets 2006 2005 2006 2005Cash and Cash Equivalents..................................... 175 83.135 4.896 10.348Short-term Interbank Investments ..................... 286.967 128.739 21.389 110.557Securities and Derivative FinancialInvestments ............................................................... 366.948 366.814 92.301 58.771

Loans ............................................................................. 85.669 65.368 83.730 54.698Other Receivable Credits ........................................ - - 4 3.293Other Assets ................................................................ - - 1.007 1.483

LiabilitiesDemand deposits ..................................................... - - 10.664 17.696Time Deposits ............................................................. - - 93.283 173.742Repurchase Agreements......................................... - - 28.813 26.267Acceptances ................................................................ - - 519.202 -Borrowings and Repass Borrowings ................... - 194.107 88.860 148.599Derivative Financial Instruments.......................... - - - 3.936Other Liabilities ......................................................... 9 - 71.567 5.657

On June 29, 2006, Banco Fibra S.A repatriated capital from its branch in Nassau-Bahamas and shut down its operations.

12. INTERBANK DEMANDANDTIME DEPOSITSa.Maturity Terms

Banco Fibra S.A. Fibra ConsolidatedDemand Demand

andOther Time Total andOther Time TotalDeposits deposits Interbank Deposits Deposits deposits Interbank Deposits

up to 30 days . . . . . . . . . . . . . . . . . . . . 63.885 496.727 83.048 643.660 62.085 496.727 83.048 641.86031 to 60 days . . . . . . . . . . . . . . . . . . . . - 351.416 13.830 365.246 - 350.306 10.682 360.98861 to 90 days . . . . . . . . . . . . . . . . . . . . - 386.812 24.938 411.750 - 386.808 24.938 411.74691 to 180 days . . . . . . . . . . . . . . . . . . . - 139.381 42.234 181.615 - 139.381 42.234 181.615181 to 360 days . . . . . . . . . . . . . . . . . . - 73.983 267.341 341.324 - 69.196 6.383 75.579over 360 days . . . . . . . . . . . . . . . . . . - 177.081 - 177.081 - 172.097 - 172.097Total in 2006 . . . . . . . . . . . . . . . . . . . 63.885 1.625.400 431.391 2.120.676 62.085 1.614.515 167.285 1.843.885Total in 2005 . . . . . . . . . . . . . . . . . . . 65.598 1.082.121 419.851 1.567.570 53.028 1.064.173 135.478 1.252.679

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13. MONEY MARKET REPURCHASE COMMITMENTS: This refers to securities put operations on the marketcarrying repurchase commitments, backed by government or third party securities according to the following terms:

Up to in 31 to in 61 to in 91 to in 181 to Over 360 Total in Total in30 days 60 days 90 days 180 days 360 days days 2006 2005

Banco Fibra S.A. andFibra Consolidated....................... 4.222.422 277.836 1.335 302 62 32.224 4.534.181 6.890.767

14. ACCEPTANCES AND ENDORSEMENTS - CONSOLIDATED: This refers to issuances of securities abroad, basedon A program of total issues of up to US$ 500 million.Banco Fibra S.A, through its branch located in Grand Cayman placedthree series in dollars at rates of 6.5% to 8% p.a. and a series in reais at a rate of 17.85% p.a., as shown below:


Series in US$ ...................................... - 3.059 - 2.101 - 365.963 371.123 142.627Series in R$ ........................................ - 148.079 - - - - 148.079 146.004Total .......................................... - 151.138 - 2.101 - 365.963 519.202 288.631

15. FOREIGN LOANS ANDDOMESTIC REPASS BORROWINGS

a. Foreign Loans: These are represented by funds in foreign currency on which financial charges are levied i.e., LIBORplus interest ranging from 0.15% to 0.5% p.a. or pre-fixed interest from 4.05% to 7.82% p.a. in the following terms:


Banco Fibra S.A. and FibraConsolidated Statements ........ 46.259 63.173 37.863 132.410 116.662 54.125 450.492 235.181

b.Domestic Repasses:Domestic repass obligations are the funds repassed by BNDES and FINAME (Government Agencyfor Machinery and Equipment Financing) and price level restated according to the TJLP (Long Term Interest Rate) andinterest that ranges from 5.75% to 11% p.a., according to the following terms:


Banco Fibra S.A. andFibra Consolidated .................... 5.037 12.817 6.168 33.040 78.352 120.426 255.840 201.210

16. EXCHANGE PORTFOLIO Banco Fibra S.A. and Fibra Consolidated2006 2005

Interbank Clients Total Interbank Clients TotalAssets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.870 349.229 351.099 8.632 221.904 230.536Purchased Exchange

Pending Settlement . . . . . . . . . . . . . . . 165 341.315 341.480 3.388 217.742 221.130Rights on Exchange Sale . . . . . . . . . . . 7.209 8.190 15.399 9.778 1.235 11.013(-) Advances in Local Currency . . . . . . (5.504) (8.190) (13.694) (4.534) (1.183) (5.717)Income Receivable . . . . . . . . . . . . . . . . . - 7.914 7.914 - 4.110 4.110Liabilities . . . . . . . . . . . . . . . . . . . . . . . 7.331 28.143 35.474 11.956 17.875 29.831Liabilities for Exchange Purchases . . 167 345.115 345.282 3.402 214.043 217.445Sold Exchange Pending

Sales Settlement . . . . . . . . . . . . . . . . . . 7.164 8.186 15.350 9.730 1.250 10.980(-) Advances on Exchange Contracts - (325.158) (325.158) (1.176) (197.418) (198.594)

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17.BREAKDOWNOF OTHER ACCOUNTSWITH SIGNIFICANT BALANCES

a. Current Assets and Long Term Receivables - Other Receivable - Other: This refers mainly to guarantee deposits inthe amount of R$ 32,702 in the Banco Fibra S.A. statements (in 2005, R$ 23,181) and R$ 55,260 in the Fibra Consolidatedstatements(in 2005, R$ 35,081), recoverable taxes in the amount of R$ 35,288 in the Banco Fibra statements (in 2005,R$ 18,312) and R$ 46,479 in the Fibra Consolidated statements(in 2005, R$ 30,277), advances to suppliers of our accountin the amount of R$ 5,626 (in 2005 R$ 10,092) in Banco Fibra and R$ 13,461 (in 2005 R$ 23,264) in the Fibra Consolidatedstatements, tax credits in the amount of R$ 107,990 (in 2005 R$ 91,864) for Banco Fibra and R$ 113,523 (in 2005,R$ 92,686) in the Fibra Consolidated statements, credits arising from export note contracts in the amount of R$ 12,494 inBanco Fibra and Fibra Consolidated and real estate receivables of R$ 39,801 in the Fibra Consolidated statements.

b.Current Liabilities - Interbank Accounts - Interbank Repasses:This refers to the lines supported by Brazilian CentralBank Resolution 2770 repassed by Fibra Asset Management Distribuidora de Títulos e Valores Mobiliários Ltda. to BancoFibra S.A., at normal market rates and used to peg foreign currency repasses.

c. Current Liabilities and Long Term Liabilities - Other Liabilities - Other: This refers mainly to the provisions forcontingent liabilities, which totaled R$ 9,867 in the Banco Fibra S.A. statements (in 2005, R$ 8,994) and R$ 10,828 in theFibra Consolidated statements (in 2005, R$ 10,053), provision for payments to be made R$ 13,960 - Banco Fibra S.A. (in2005, R$ 5,816) and R$ 14,460 - Fibra Consolidated (in 2005, R$ 6,140), Certificates of Real Estate Receivables - R$ 18,502(in 2005, R$ 25,589) in the Fibra Consolidated statements.

d. Other Operating Income: This refers mainly to the price level restatement of judicial deposits in the amount of R$1,858 (in 2005, R$ 682) - Banco Fibra S.A and Fibra Consolidated.

e.Other Operating Expenses: This refers mainly to expenses incurred in the repossession of assets in the amount of R$335 (in 2005, R$ 548) - Banco Fibra S.A and R$ 354 (in 2005, R$ 573) - Fibra Consolidated, expenses for civil contingenciesin the amount of R$ 1,723 (in 2005, R$ 252) - Banco Fibra S.A. and R$ 1.736 (in 2005, R$252) - Fibra Consolidated, chargeson tax collections in the amount of R$ 5,703 (in 2005, R$ 7,201) - Banco Fibra and R$ 7,123 (in 2005, R$ 7,208) - FibraConsolidated and credit life insurance for loans discounted directly in the payroll and guarantee expenses in the amountof R$ 891 in Banco Fibra and Fibra Consolidated.

f. Non-operating result: This item refers mainly to the gains and losses in the sale of assets not for own use and therecording of provisions for potential losses on assets of this nature.

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18. INCOME AND SOCIAL CONTRIBUTION TAXES: As of December 31, 2006, the Bank had income and socialcontribution tax credits, calculated according to the prevailing rates as shown below. These credits are recorded underassets as "Other Receivable - Other" considering the estimates for realization in light of forecasts for taxable incomebased on a technical study.

Banco Fibra S.A. Fibra ConsolidatedBalance at Formation/ Balance at Balance at Formation/ Balance at

TAXCREDITS 12/31/2005 (Realization) 12/31/2006 12/31/2005 (Realization) 12/31/2006

Total Tax Credits from

Temporary Differences . . . . . . . . . . 22.528 26.997 49.525 23.003 23.954 46.957

Provision for Doubtful Loans . . . . . . . 18.598 15.245 33.843 18.928 15.081 34.009

Provision for Profit Sharing . . . . . . . . . - 3.347 3.347 - 3.347 3.347

Labor Provision . . . . . . . . . . . . . . . . . . . . . 1.911 (46) 1.865 1.911 (46) 1.865

Provision for Contingencies . . . . . . . . . - 3.626 3.626 - 7.089 7.089

Provision for Valuation of

Securitiesand Investments . . . . . . . . . 562 5.758 6.320 707 (584) 123

Provision for Valuation of

Goods Not of Own Use . . . . . . . . . . . . 1.457 (933) 524 1.457 (933) 524

Tax Losses and Negative Base of

Social Contribution Tax . . . . . . . . . 53.832 (10.871) 42.961 54.179 (3.117) 51.062

Social Contribution Tax

- MP2158-35 issued08/24/2001 . . 15.504 - 15.504 15.504 - 15.504

Total Tax Credits . . . . . . . . . . . . . . . . . 91.864 16.126 107.990 92.686 20.837 113.523

Deferred Tax Liabilities . . . . . . . . . . (7.725) 3.283 (4.442) (7.725) 3.283 (4.442)

Net Tax Credits . . . . . . . . . . . . . . . . . . 84.139 19.409 103.548 84.961 24.120 109.081

Net Tax Credits on

Shareholders' Equity . . . . . . . . . . . . 21,2% 23,5% 21,4% 24,8%

Net Tax Credits onTotal Assets . . . 0,9% 1,2% 0,9% 1,3%

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During 2006, provisions for contingencies were reviewed and reclassified as a result of fully adapting the financialstatements to the regulations in force and as a result tax credits were generated in the amount of R$1,510 - Banco FibraS.A and R$ 4,593 - Fibra Consolidated, which were offset and recognized as prior year adjustments to retained earnings.Based on a technical study prepared on December 31, 2006, which took past realization and a future profitability forecastinto consideration, the annual expectation for realization of the tax credits on temporary differences, tax losses and thenegative base of social contribution and the respective present value, calculated according to the average rate offunding, is shown below:Year to be Realized Banco Fibra S.A. Fibra Consolidated

FaceValue Present Value FaceValue Present Value2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23.130 20.745 25.201 22.6272008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21.232 17.332 21.232 17.3322009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21.774 16.372 21.774 16.3722010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22.647 15.837 22.647 15.8372011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.759 8.993 13.759 8.9932012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.448 3.342 8.910 5.467Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107.990 82.621 113.523 86.628

Statement of the calculation of income and social contribution tax charges of Banco Fibra S.A.:2006 2005

IRPJ CSLL IRPJ CSLLIncome before IncomeTaxes andProfit Sharing . . . . . . . . . . . . . . . . . . . . . . . 96.578 96.578 36.654 36.654

Payment of Interest on Shareholders' Equity (65.800) (65.800) - -Profit sharing . . . . . . . . . . . . . . . . . . . . . . . . . . . . (17.843) (17.843) (6.075) (6.075)Income before Income and SocialContribution Taxes . . . . . . . . . . . . . . . . . . 12.935 12.935 30.579 30.579IncomeTax (25%) and Social ContributionTax (9%) Charges . . . . . . . . . . . . . . . . . . . . (3.234) (1.164) (7.621) (2.752)Effect of Additions and Exclusions onTax Calculations: . . . . . . . . . . . . . . . . . . . . .

Exclusion of Excess Depreciation . . . . . . . . . 116 - 4.417 -Nondeductible expenses net ofnontaxable income . . . . . . . . . . . . . . . . . . . . . (3.083) (1.110) 197 71

Shareholding interest in subsidiaries . . . . . 850 306 11.313 4.072Income and Social ContributionTaxes for theYear . . . . . . . . . . . . . . . . . . . (5.351) (1.968) 8.306 1.391

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19.CONTINGENTASSETSANDLIABILITIESANDLEGAL LIABILITIES -TAXANDSOCIAL SECURITY:Banco Fibra andits subsidiaries are involved in legal suits and administrative processes arising during the normal course of operationsconcerning issues of a civil, labor, tax and social security nature.a) Contingent Assets: There are no contingent assets recorded in the books. There are legal processes, however that havegood chances of success, the most significant are: COFINS (Tax for Social Security Financing ) - R$ 17,369 and PIS - R$ 3,350:petition for restitution of values paid from July 2001 to June 2006, which exceed the calculation effected on the basis ofComplementary Law 7/70 and in view of the unconstitutionality of the expansion of the calculation base provided in Law9.718/98; CSLL Isonomy: lodged to suspend the CSLL requirement applicable to financial institutions at rates higher thanthose applicable to other legal entities, in view of the noncompliance with the principle under which no new tax may becollected during the year in which it is created during the 90 days after issue of the law instituting the tax.b) Liabilities of a labor and civil nature: The Company, based on the information provided by their legal counsel and on areview of the pending legal matters, which involve suits calling for indemnity of material losses and damages, pain andsuffering especially arising from the collection of debts, has established provisions based on the history of losses verified insimilar cases. In relation to labor suits, based on prior experience related to amounts demanded and in accordance with thestatus of each one of the processes, the Company has established a provision in an amount deemed sufficient to cover anyestimated losses involved in the pending suits.c)Legal liabilitiesandcontingent liabilities:Legal liabilities and contingent liabilities classified as probable losses have beenfully provisioned. the most relevant issues are:CSLL Isonomy:lodged to suspend the CSLL requirement applicable to financialinstitutions at rates higher than those applicable to other legal entities in view of the disregard to the constitutional principleof isonomy. COFINS and PIS: petitions payment of the contributions beginning June 2006 on the basis of the calculationstipulated by Complementary Law 7/70, in and in view of the unconstitutionality of the expansion of the calculation baseprovided in Law 9.718/98.d) Contingent liabilities andpossible loss risks:The contingent liabilities classified as possible losses are monitored by theinstitution and are based on reports issued by its legal counsel in relation to each one of the legal measures and administrativeprocesses. Therefore, according to prevailing regulations, the contingencies classified as possible losses have not beenrecognized in the accounting; these contingencies mainly comprise the following issues: a) R$ 11,708 for ISS (Services tax)collection in several periods and by several municipalities in Brazil on leasing operations, since the same tax had beencollected in the city in which the now defunct company was located, and b) R$ 12,666 in Corporate Income Tax - IRPJ on thenon deductibility of losses incurred in variable income in 1995.e) Contingent liability provision transactions Fibra Consolidated

2005 2006Civil and Labor Initial balance Transactions Final BalanceCivil Suits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.433 909 5.342Labor Suits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.621 (135) 5.486Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.054 774 10.828

Tax - Legal Liabilities- CSLL Isonomy 1996 to 1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . - 25.070 25.070- CSLL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86 - 86- INSS Educational Salary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 701 15 716- Finsocial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.161 - 1.161- ISS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 172 172- PIS Law 9.718 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 796 796- Cofins Law 9.718 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 4.899 4.899Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.948 30.952 32.900

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20. SUBORDINATE DEBTS ELIGIBLE FOR CAPITALOn October 14, 2005, o Banco Fibra S/A, through its branch in Grand Cayman and in compliance with Central Bank of BrazilResolution 2837 dated May 30, 2001, initiated a subordinate securities program and the first funds were raised on March 2,2006 in the amount of US$ 30,000,000 with maturity on March 2,2016 and interest of 7.5% p.a.paid every six months for thefirst five years and amortization of the principle only on maturity. According to the terms of the issue of this instrument, forthis debt to be eligible as Level II regulatory capital, the payment of the principal and interest is contingent on compliancewith the operational limits established by the Brazilian Central Bank, or, in the event that this redemption would result innoncompliance these limits, the payment may be postponed until it duly complies with these limits. On June 30, 2006, theCentral Bank of Brazil ratified the terms of the first issue of subordinate debt securities. For the purpose of calculating theminimum capital and shareholders' equity established by the Central Bank these debt securities were regarded as Level IIregulatory capital. At December 31, 2006, the subordinate debt balance eligible as capital totaled R$ 65,717.

21.CAPITALShare capital is divided into 1,035,887,231 shares, of which 517,943,617 are common nominative shares and 517,943,614 arepreferred shares,with no par value and yield based on the distribution of the minimum obligatory dividend provided for in thebylaws of 25% of net profits for the year, adjusted according to prevailing legislation.The distribution of the dividends by theExecutive Board is subject to the Shareholders Annual General Meeting, which can decide whether to fully or partially retainprofits for the period.On June 29,September 27 and December 28,2006, it was decided to pay interest on shareholders' equityin accordance with article 9 of Law 9249/95, in the amounts of R$ 17,329,R$ 7,412 and R$ 41,059,respectively,reducing incomeand social contribution taxes for the period by R$ 22.372. For the purpose of the presentation of these financial statements,these interest payments were reclassified from "Other Operating Expenses" to "Retained Earnings." At the ExtraordinaryGeneral meetings held on June 29, September 27 and December 28, 2006, it was decided to increase paid in capital in theamounts of R$ 14,730, R$ 6,300 and R$ 34,900, without issuing new shares. On December, 28, the Meeting also decided toincrease capital by using retained earnings from prior years in the amount of R$ 57,600,without issuing new shares.

22.RELATED PARTYTRANSACTIONS: Transactions with related were conducted under normal market terms andconditions, taking into account the absence of risks and are shown below:

Assets (liabilities) Income (expenses)2006 2005 2006 2005

Securities and Derivative Financial Instruments 376.339 358.868 66.042 92.076Other Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . 178 - - 2.636Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (264.106) (314.676) (36.433) (45.178)Interbank Accounts . . . . . . . . . . . . . . . . . . . . . . . (148.735) - (5.826) -Loans and Repass Borrowings . . . . . . . . . . . . . . - (82.300) - (1.850)Derivative Financial Instruments . . . . . . . . . . . - (12.723) (56.126) (18.266)Other Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . (1.622) (633) - -

23.FUNDMANAGEMENT:Fibra Consolidated is responsible for the management of a number of investment fundsand portfolios, the assets of which as of December 31, 2006 totaled R$ 937,423 (in 2005, R$ 2,623,004).

24. OPERATING LIMITS: a. Basel Agreement: Financial institutions must maintain shareholders' equity that iscompatible with the degree of risk of the structure of its assets weighted by factors ranging from 0 to 300%, in accordancewith BACEN Resolution 2099/94 and subsequent amendments. The Shareholders' Equity as of December 31, 2006, incompliance with prevailing regulations corresponds to 13.7% (14.7% in December 2005) of the total weighted assets,when currently 11.0% is the minimum limit required.

ADMINISTRATIVE BOARD BOARD OF DIRECTORS CONTROLLER - SÉRGIO FERRAZ DOS SANTOS - Accountant - CRC SP179881/O-5

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iXI. COMMIT TEE'S REPORT

INDEPENDENT AUDITORS’ REPORT

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AUDIT COMMITTEEREPORT SUMMARY

INDEPENDENT AUDITORS’ REPORT

In the course of its duties, the Banco Fibra S.A. Audit Committee established on the basis of statutory provisions in the appropriate segment of

Resolution 3.198 issued by the National Monetary Counsel on May 27, 2004, has performed its assignments and conducted its business in compliance

with the Audit Committee Internal Regulations, approved by the Board of Directors.

The Fibra Conglomerate has opted to use the sole Audit Committee created by Banco Fibra S.A., the lead institution of the financial conglomerate and

which is made up of three directors appointed by the Board of Directors to hold office for three years.

It is the responsibility of the Committee to assess the reliability of existing controls procedures and verify compliance of the operations and business of

the Fibra Conglomerate with the regulatory provisions and it is also its duty to make the results of this work available to the members of the Board of

Directors, which must also include information regarding the results arising from the Internal and External, Operations and Compliance Audits and the

their conclusions and recommendations regarding the status of the implementation and improvement of them.

In the course of 2006, in line with the expansion of the institution, the Committee undertook a number of activities which detected opportunities for

improvement and which are currently in an advanced stage of implementation; however, no significant events occurred which could jeopardize the

control environment.

Based on the foregoing statements and on the results of the external audit work and the efficiency of the operations processes of the Fibra

Conglomerate, we believe that the quality and integrity of the financial statements presented for the half-year and year ended on December 31, 2006

are satisfactory and recommend that the Board of Directors approve them.

São Paulo, February 9, 2007

To

The Managers and Shareholders

Banco Fibra S.A.

São Paulo - SP

We have examined the balance sheets of Banco Fibra S.A. and the consolidated balance sheets of Banco Fibra S.A.and its subsidiaries as of December

31, 2006 and 2005 and the related statements of income, changes in shareholders’ equity, and changes in financial position for the years then ended,

which are the responsibility of its management. Our responsibility is to express an opinion on these financial statements.

Our examinations were conducted in accordance with auditing standards applied in Brazil and included: (a) planning of the audit work, considering the

materiality of the balances, the volume of transactions and the accounting systems and internal accounting controls of the Bank and its subsidiaries;

(b) verification, on a test basis, of the evidence and records which support the amounts and accounting information disclosed; and (c) evaluation of the

most significant accounting policies and estimates adopted by management of the Bank and its subsidiaries, as well as the presentation of the financial

statements taken as a whole.

In our opinion, the aforementioned financial statements present fairly, in all material respects, the financial position of Banco Fibra S.A. and the

consolidated financial position of Banco Fibra S.A. and its subsidiaries as of December 31, 2006 and 2005, the results of its operations, changes in its

shareholders’ equity and changes in its financial position for the years then ended, in conformity with accounting practices adopted in Brazil.

February 9, 2007

Auditores Independentes Zenko NakassatoCRC 2SP014428/O-6 Accountant CRC 1SP160769/O-0

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Banco Fibra - Annual Report 2006

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