STOCK OPTION PLAN

At an Extraordinary General Meeting held on April 1, 1999, the shareholders approved the Company’s Stock Option Plan (“Plan”), targeted at board members, executive officers, top managers and outsourced service providers of the Company (“Beneficiaries”). The plan is managed by the Company’s Board of Directors, or at its discretion, by a Committee specially made up for this purpose, which may, periodically, create stock option programs defined by a pre-determined period, as well as to set forth, within the qualified individuals, those to whom options will be granted.

The Plan sets forth the conditions for the grant of the stock option of preferred and common shares, in order to enable the Beneficiary the receipt of a multiple number of shares for the formation of share deposit certificates composed of 1 common share and 4 preferred shares issued by the Company (“UNITS”). The number of stock options is limited, in the grant year of these acquisitions, to 8% of the shares representing the Company’s capital stock.

The Plan, established under an individual agreement between the Company and the Beneficiary, has as applicable conditions, the payment of 10% of the share amount, at the moment of the execution of the agreement and exercise of the option, acquiring, consequently, the right to make every year acquisitions of 18% of the total share number, where the Beneficiary has exercised his/her right, and restated by the IGP-M (General Market Price Index), up to the end of the fifth year. The shares will be delivered to the Beneficiary only after the course of the terms and contributions set forth in the agreement. The following conditions are exceptions for the delivery of the shares: withdrawal of the Beneficiary from the Company “without cause”; retirement, decease or permanent disability, and it is at the Company’s discretion the delivery of the shares or reimbursement of the contributions made.

On March 7, 2005, the Plan’s Committee created by the Board of Directors approved the creation of its fifth program, which is different from the others in two aspects: a) it sets forth the use of the Beneficiaries in each fiscal year of at least 50% of the amounts received by means of the variable compensation program, net of taxes and social charges, for the payment of the contributions for the acquisition of shares, under penalty of reduction proportional to the number of shares, and b) possibility of early issue of shares as from the second reference date of the contributions, in the events where the Beneficiary has already made the payment of 30% of his/her contributions. The Company does not have the obligation to buyback, at any moment, the shares acquired in the referred Plan.

On March 1, 2006, the Plan Management Committee approved the creation of the 2006 Stock Option Program (“2006 Program”) and established that (i) the number of shares integrating the 2006 Program is 4,500,000 shares: 900,000 common shares and 3,600,000 preferred shares, corresponding to 2.0% of the Company’s capital stock, and (ii) the price per share is R$23.00. The 2006 Program comprises two groups of beneficiaries, with different types of agreement, referred herein as “Agreement A” and “Agreement B”. The Agreement A has the same characteristics established for the 2005 Program. The Agreement B is different from the Agreement A in two aspects:

(i) the acquisition of the right to make the contributions for the acquisition of shares changes from 18% per year, as in the Agreement A, to 5% in the first year, 10% in the second, 15% in the third, 25% in the fourth and 35% in the fifth and last year. In case the beneficiary of the Agreement B is fired, the Plan Management Committee may, at its discretion, change the acquisition schedule of the right to make contributions for the acquisition of shares, to 18% per year, such as the schedule of the Agreement A.

(ii) the right to make contributions for the acquisition of shares is subject to the decision of the beneficiary as to the sale of shares resulting from the Stock Option Programs of the previous years. In case on March 1, 2006 the beneficiary has, among merged and non-merged shares referring to the Programs of previous years, a number of shares higher than the one attributed to him/her, the beneficiary may sell a number of shares equivalent to the difference between (a) the balance of the shares related to the previous Programs and (b) the total shares whose acquisition option was granted to the beneficiary within the scope of the 2006 Program, without losing the right to the exercise of making contributions for acquisition of shares of the 2006 Program. For each share sold beyond the limit indicated above, the beneficiary will lose the right to make the contribution for acquisition of 1 (one) share related to the 2006 Program. In case on March 1, 2006 the beneficiary has, among merged and non-merged shares referring to previous Programs, a number of shares lower or equal to the one attributed to him/her in the 2006 Program, for each share sold related to previous Programs, the beneficiary will lose the right to make the contribution for the acquisition of 1 (one) share related to the 2006 Program.

The conditions, nature, amounts and prices shown below are in compliance with CVM Deliberation 371/2000.

The summary of the movement of the stock options for the period ended December 31, 2006 is shown as follows:

The Company accounts for the contributions, based on the individual controls of each beneficiary, as advance for future capital increase, composing the shareholders’ equity and after the dulydeliberation at a General Meeting, the due amount is recorded as capital stock.

For the specific case of contributions of 30% made for the acquisition of options, the Company accounts for the capital increase as from the second reference date, in compliance with Law 6,404/76.

DETERMINATION OF THE INCOME TAX AND SOCIAL CONTRIBUTION - PARENT COMPANY

The reconciliation of the effective income tax and social contribution rate on the income before taxes with the provision for income tax and social contribution has not been shown for purposes of these consolidated financial statements, as the parent Company and its domestic and foreign subsidiaries are subject to different taxes and rates.

NET FINANCIAL INCOME

INSURANCE - CONSOLIDATED (UNAUDITED)

The Companies maintain insurance policies in amounts considered sufficient by management to cover possible losses, as follows:

The total coverage of the policies above, on December 31, 2006, is R$207,500.