Always ahead in its Results - Presentation of the Financial Statements

INVESTMENTS

(a) Investments in subsidiaries and affiliated companies

(b) Chart of interest in subsidiaries and affiliated companies

(a) It comprises the exchange variation on the investee with functional currency in dollars in the amount of (R$278).

(b) Subsidiary purchased by the merger of Logispar on September 29, 2006.

(c) Subsidiaries with Negative Shareholders’ Equity
Related to those subsidiaries that present negative shareholders’ equity, the respective provision was composed, which is being presented in the Long-term Liabilities group in the balance sheet, and it was estimated as it follows:

(d) General information
ALL Overseas: a wholly-owned subsidiary acquired in December 1999, and its corporate purpose is to perform any activities that comply with Bahamian legislation.

Logispar: the main purpose of the acquisition of Logispar was to integrate the operating, accounting and corporate activities performed in Brazil by the Company and its subsidiaries with those performed in Argentina by Logispar and its subsidiaries.

In order to define its acquisition value, considering the investees ALL Central and ALL Mesopotâmica, ALL Argentina had its shareholders’ equity appraised at market value, at the amount of R$355,888, by local independent experts based on the expectation of future profitability. This amount was settled with credits the Company had against Logispar at the amount of R$282,930 recorded under the item “Accounts receivable – sale of subsidiaries” and loan receivable from such related party. Goodwill verified at the amount of R$142,260 has been amortized on a straight-line basis over the remaining concession periods, and R$7,269 of which has been amortized in the years ended on December 31, 2006 and 2005.

On March 29, 2006, Logispar no longer has the right of usufruct over ALL Argentina’s shares, by means of capital reduction and assignment of this right to its parent company ALL. On September 29, 2006, the Board of Directors resolved on the merger of Logispar’s net assets by ALL, being the goodwill reclassified to deferred assets.

Geodex: the Company has a 3.28% interest in the voting capital and a 43.69% interest in the total capital of Geodex Communications S.A. (Geodex), whose main activity is to provide telecommunication services in connection with the network and specialized circuits. On October 06, 2006, the Company adhered to the Memorandum of Understanding with the other shareholders of Geodex, for a future disposal. The investment is evaluated by the equity method until September 30, 2006, adjusted by the estimated recovery value.

Pursuant to the Shareholders Agreement of Geodex, the preemptive right of receipt in the disposal shall be granted to the shareholders who have performed capital contributions in cash, who shall be remunerated by the US dollar variation plus 10% per year. For the reason shown the Company has recorded a provision for investment loss in Geodex in the amount of R$55,112 and reclassified the loss net permanent investment in the amount of R$13,514 under the item other accounts receivable in current assets.

In the consolidated balance sheet, investments are comprised as follows:

ALL Argentina: goodwill in ALL Argentina is based on the future profitability at the time the shares of ALL Central and ALL Mesopotámica were acquired on May 26, 1999, and has been amortized on a straight-line basis over the concession period. On August 11, 2005, the Company and Millinium Investimentos Ltda. (“Millinium”), subsidiary of the Indian Company Besco Engineering and Services Private Limited, entered into agreements aiming at the incorporation of Santa Fé Vagões S.A. Its corporate purpose is manufacture, maintain, commercialize, and trade items and
services related to rolling stocks, rail systems, traction equipment, trails, signaling on rail vehicles, and mechanical equipment related to rail activities, in addition to its parts and components, as well as the import, export, purchase, sale, distribution, lease, rental and loan of railcars, machinery, equipment and inputs related to rail activities.

According to the agreements mentioned above, Millinium has undertaken to provide Santa Fé Vagões with complete technical support and the know-how necessary for railcar manufacturing. The Company, on its turn, granted Santa Fé Vagões a loan for use of an area located in the city of Santa Maria, state of Rio Grande do Sul, including part of the equipment used by Santa Fé Vagões for the fulfillment of its corporate purpose, for the performance of its industrial, commercial and administrative activities.

On November 1, 2004, the Company incorporated, with minority shareholders, the Company ALL - América Latina Logística Centro-Oeste Ltda. The Company’s corporate purpose is the rendering of services related to contracting of freight road transportation under the local, interstate and international scope, combined with rail and water transportation of cargo, in addition to other activities related to freight transportation such as logistics, port operations, handling and storage of commodities and containers, cargo agency, operation and management of
warehouses, purchase, sale and lease of containers, association with other logistic carriers, alternatively being able to become involved in other similar, related or ancillary activities, or activities that use the Company’s structure.

On May 9, 2006, PREVI, FUNCEF, JP Morgan, BRP FERRONORTE, GABORONE and ALL executed two Investment Agreements, besides other ancillary and correlative agreements, which establish the terms and conditions of the merger, by ALL, of all shares issued by Brasil Ferrovias and by Novoeste. On May 10, 2006, BNDESPAR, which originally had the tag-along right in a Shareholders’ Agreement executed with PREVI and FUNCEF, exercised the referred right and adhered to the Investment Agreement and Other Covenants related to the merger of shares from Brasil Ferrovias and Novoeste Brasil.

The conclusion of the operation was conditioned to the compliance with a series of suspensive conditions, which were fully accomplished.

In accordance with Protocols for Merger of Shares and Justifications, entered into on May 31, 2006, the operation was structured based on Article 252 of the Corporation Law, through the merger of all shares issued by Brasil Ferrovias and by Novoeste Brasil, with all rights inherent to them, including those related to dividends, recorded or not, bonuses, and any other forms of profit sharing. With the conclusion of the operation and, therefore, the effective corporate reorganization resulting from the merger of shares, ALL became holder of the totality of Brasil Ferrovias’ and Novoeste do Brasil’s capital stock and, as a result, it also became holder, indirectly, of the share control of rail concessionaries Ferroban, Ferronorte and Ferrovia Novoeste.

The merger of shares of Brasil Ferrovias and of Novoeste do Brasil caused an increase in ALL’s capital stock, through the conference of all shares held by shareholders of those corporations, excepting the ones who have exercised their right to withdrawal, in accordance with the economic values verified in the appraisal reports of Brasil Ferrovias and of Novoeste do Brasil. The increase in ALL’s capital and conference of shares carried out on June 16, 2006 totaled approximately R$1,405,033, plus the costs directly attributable to the acquisition process, generated goodwill of R$2,496,807 on December 31, 2006, based on the expectation of future profitability generation.

On June 16, 2006, the General Shareholders’ Meetings of the Company, of Brasil Ferrovias and of Novoeste do Brasil, approved the merger of shares, as well as further related acts necessary to the implementation of the referred acquisition. As part of the transaction, PREVI, FUNCEF and BNDESPAR adhered to the Issuer’s block of control, becoming a party of the Shareholders’ Agreement.

The term for the exercise of the withdrawal right expired on July 24, 2006 for the dissenting shareholders of the Company and on July 26 for the dissenting shareholders of Brasil Ferrovias and of Novoeste do Brasil. After the term expiration, the former shareholders of Brasil Ferrovias and of Novoeste do Brasil who did not exercise the right to withdraw, became shareholders of the Company, which became holder of all shares issued by Brasil Ferrovias and by Novoeste do Brasil.

The documents related to the merger of shares were presented to the authorities of Competition Defense Brazilian System on May 29, 2006, and are currently under a process of analysis by the proper authorities.

IMOBILIZADO

DEFERRED CHARGES

The subsidiary ALL Brasil adopts as a basic criterion to amortize concession and lease expenses on the straight-line basis over the remaining term of the agreement. However, based on an operational study of installed capacity for transportation in tons per kilometer useful- RTK, concluded in December 1998, management reviewed the estimate of such amortization absorption until the subsidiary reaches its operational break-even. From 1998 through mid December 2001, amortization of concession and lease amounts was calculated considering the proportion between the RTK transported volume and the volume projected to reach operational break-even, estimated at 14 billion RTK. With the attainment of the operational break-even, deferred concession and lease expenses have been amortized on a straight-line basis over the remaining concession and lease term, and the amount of R$983 was recorded for the years ended on December 31, 2006 and 2005.

Pre-operating expenses refer to disbursements in the Argentine rail companies ALL Central and ALL Mesopotâmica in connection with feasibility studies for the concession acquisition, which are amortized over the remaining concession period.

The pre-operating expenses of the indirect subsidiary Ferronorte refer to the implementation expenditures incurred in its pre-operational phase since 1988, net of financial expenses and income. The expenditures come from Phase I, comprising the segment of 403 km between the roadrail bridge on Paraná River and Alto Taquari (MT), ended in March 2001 and expenditures coming from Phase II, which comprised the segment 1, of 96 Km between Alto Taquari (MT) and Alto Araguaia (MT), ended in March 2003. Such expenses have been amortized on the straight-line basis, by the remaining term of the concession.