CREDITS AND DEBTS FROM RELATED COMPANIES

The related-party transactions are performed under usual market conditions.

As part of the restructuring process of Brasil Ferrovias and Novoeste Brasil, ALL – América Latina Logística S.A. (“ALL”) transferred funds to its indirect subsidiaries Ferronorte, Nova Ferroban and Novoeste, as Advances for Future Capital Increase (AFAC), pursuant to “Private Instrument of Advances for Future Capital Increase” executed on May 29, 2006. Until June 30, 2006 a R$226,690 amount had been transferred to Ferronorte and to Nova Ferroban, and R$18,450 to Novoeste, by ALL.

Also on May 29, 2006, Brasil Ferrovias and Novoeste entered into another “Private Instrument of Advances for Future Capital Increase” with their direct subsidiaries Ferronorte, Nova Ferroban and Novoeste, transferring the responsibility for the advances received from the Company to Brasil Ferrovias and Novoeste Brasil.

On July 3, 2006, an addendum to the “Private Instrument of Advances for Future Capital Increase” was entered into, under the denomination of “Advances for Future Subscription and Payment of Debentures”, with a view to converting the advances recorded in Brasil Ferrovias and Novoeste Brasil, into debt with the parent company ALL. This agreement establishes that the managers of Brasil Ferrovias, Novoeste Brasil and ALL undertake to carry out the issue, subscription and payment of the debentures until December 31, 2006. The interest rate was established at 100% of the Interbank Deposits (DI) daily average rates, plus 4% p.a. as surcharge.

Thus, in the third quarter of 2006, the advances recorded in Brasil Ferrovias and Novoeste Brasil until June 30, 2006, in the amount of R$226,690 and R$18,450 were reclassified to debts with related parties, restated by the aforementioned rates. The balance of the debt on December 31, 2006 represents R$642,690 in Brasil Ferrovias and R$53,121 in Novoeste Brasil, according to note 11.

Regarding other balances with related parties, there is no interest levy in the transactions, which reflect, besides the normal operations, financial coverage transactions.

The parent company’s service rendering revenues against the subsidiary ALL Brasil at the amount of R$960, refers to consulting services rendered.

PROVISION FOR UNREALIZED PROFIT

On September 30, 2001, the parent company sold to the subsidiary ALL Brasil the right to use the lines from Presidente Epitácio to Rubião Junior and from Pinhalzinho/Apiaí to Iperó at the market value of R$22,387, supported by an appraisal report prepared by independent experts as of that date. On December 31, 2001, the parent company established a provision of R$19,312 for unrealized profit from this operation, recorded in long-term liabilities. In the years ended December 31, 2006 and 2005, the amount of R$744 was realized.

DEFERRED INCOME

ALL Brasil: this refers to an assignment agreement of the right of way for optical fibers alongside the track granted in the form of capital contribution to the associated company Geodex Communications do Brasil S.A., at the contractual amount of R$10,000, which is being appropriated to results on a straight-line basis over the remaining term of the assignment of rights.

ALL Intermodal: this refers to the deferred revenue originated in the capital stock payment by means of land granted under loan for use by ALL Intermodal to Rhall Terminais Ltda., appropriated on a straight-line basis over the remaining concession period.

Ferroban: this results from agreements entered into with communication companies, whose purpose is the assignment of the right of way of the track for the passage of optical fiber cables for the effectiveness period of the Concession Agreement of the Public Service of Cargo Rail Transportation (until 2028), linearly appropriated to the result for the remaining term of the assignment of right.

SHAREHOLDERS’ EQUITY

(a) Capital stock
The Company’s subscribed and paid-up capital stock is represented as follows:

The Extraordinary General Meeting as of March 10, 2005, approved the splitting of the total shares issued by the Company, so that each share, regardless of type, was split into 5 shares of the same type, and the Company’s capital stock was divided into 216,090,630 shares, 76,918,990 of which are common shares and 139,171,640 are preferred shares, all non-par registered book-entry shares.

At the Company’s Board of Directors’ meeting as of March 10, 2005 and according to the Notice to Shareholders published on March 11, 2005, the option, during the period between March 16, 2005 and May 12, 2005 (“Conversion Period”), to convert preferred shares issued by the Company into common shares and vice versa and/or to issue Units, was attributed to all the Company’s
shareholders, in compliance with the provision in the Company’s Bylaws and other conditions published.

Units are deposit certificates which represent four preferred shares and one common share issued by the Company.

The Company’s authorized capital is R$3,000,000, and the Board of Directors is the appropriate body to resolve on the Capital increase within the referred limit, and there are not other limitations or conditions to make the capital increase within the authorized capital limit.

All the Company’s shareholders have a preemptive right, in equal conditions, to the subscription of new shares issued by the Company, except for the issuance of shares in paragraph 3 of Article 171 of Law 6,404/76.

The Company’s subscribed capital stock increased from R$688,782 on December 31, 2005 to R$2,136,535 on December 31, 2006, upon the subscription of 643,425,175 new shares, 203,678,155 of which are common shares and 439,747,020 are preferred shares.

On September 5, 2006, the split of the total shares issued by the Company was approved at a General Meeting, so that each share started to be represented by 10 shares of the same type.

(b) Distribution of dividends and interest on own capital
Shareholders are assured a minimum mandatory dividend of 25% on the adjusted net income in accordance with Article 202 of Law 6,404/76. The calculation basis for dividends, according to the present legislation, is as follows:

As a result of commitments undertaken pursuant to financing agreements, the parent company may not distribute dividends in excess of the minimum mandatory ones up to 2011.

(c) Profit reserve
Pursuant to Brazil’s corporate law, the legal reserve is established at 5% of net income for the year, prior to any other appropriations, and shall not exceed 20% of capital stock.

The investment reserve is based on statutory provisions, which are supported with the Company’s investment plan by means of use and sources subject to the Board of Directors, and pursuant to Article 194 of Law 6,404/76, which determines that this reserve shall not exceed subscribed capital stock, at an amount not less than twenty-five percent (25%) and not exceeding seventy-five per cent (75%) of the net income for the year adjusted in accordance with Article 202 of Law 6,404/76, with a view to financing the expansion of the Company’s and its subsidiaries’ activities, also through the subscription of capital increases or the development of new ventures.

(d) Advances for future capital increases
The amounts received as advances for future capital increase, resulting from contributions to the Stock Option Plan, described in Note 24, are presented in a Shareholders’ Equity account.

(e) Managers’ compensation
In the minutes of a General Meeting held on March 27, 2006, the amount of R$192 was determined as annual global compensation for the members of the FiscalCouncil, and as annual global amount for the Managers’ compensation the amount of up to R$15,000, these compensations are valid until the next Annual General Meeting.