UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549
FORM 20-F
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: December 31, 2007
Commission file number: 1-14626

COMPANHIA BRASILEIRA DE DISTRIBUIO

(Exact name of Registrant as specified in its charter)
Brazilian Distribution Company
(Translation of Registrants Name into English)

Federative Republic of Brazil

(Jurisdiction of Incorporation)

Avenida Brigadeiro Luiz Antonio, no. 3,142

01402-901 So Paulo, SP, Brazil
(Address of Principal Executive Offices)
__________________________

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Title of Each Class Name of Each Exchange on Which Registered:
Preferred Shares, without par value* New York Stock Exchange**
American Depositary Shares (as evidenced by New York Stock Exchange
American Depositary Receipts), each
Representing two Preferred Shares
___________
*The Preferred Shares are non-voting, except under limited circumstances.
**Not for trading purposes, but only in connection with the listing on the New York Stock Exchange of American Depositary Shares
representing those Preferred Shares.
___________________________

Securities registered or to be registered pursuant to Section 12(g) of the Act:

None.
_____________________________

Securities for which there is a reporting obligation

pursuant to Section 15(d) of the Act:
None.
_____________________________

The number of issued shares of each class of stock of COMPANHIA BRASILEIRA DE DISTRIBUIO as of December 31, 2007
was:
99,679,851 Common Shares, no par value per share
128,239,535 Preferred Shares, no par value per share

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes No
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934.
Yes No
NoteChecking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 from their obligations under those Sections.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of
accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check one):
Large Accelerated Filer Accelerated Filer Non-accelerated Filer

Indicate by check mark which financial statement item the registrant has elected to follow.
Item 17 Item 18

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes No

Erro! Nome de propriedade do documento desconhecido.

 TABLE OF CONTENTS

Page

PART I
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS .....................................4
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE........................................................................4
ITEM 3. KEY INFORMATION ............................................................................................................................4
3A. Selected Financial Data .......................................................................................................................4
3B. Capitalization and Indebtedness.........................................................................................................9
3C. Reasons for the Offer and Use of Proceeds........................................................................................9
3D. Risk Factors..........................................................................................................................................9
ITEM 4. INFORMATION ON THE COMPANY ...............................................................................................12
4A. History and Development of the Company.....................................................................................12
4B. Business Overview.............................................................................................................................15
4C. Organizational Structure .................................................................................................................29
4D. Property, Plants and Equipment .....................................................................................................29
ITEM 4A. UNRESOLVED STAFF COMMENTS.............29
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS .......................................................29
5A. Operating Results .............................................................................................................................29
5B. Liquidity and Capital Resources .....................................................................................................40
5C. Research and Development, Patents and Licenses, Etc. ................................................................43
5D. Trend Information.............................................................................................................................43
5E. Off-balance sheet arrangements ......................................................................................................43
5F. Tabular disclosure of contractual obligations.................................................................................44
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES ..........................................................45
ITEM 7 MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS.........................................54
7A Major Shareholders...........................................................................................................................54
7B Related Party Transactions...............................................................................................................59
7C. Interests of Experts and Counsel......................................................................................................61
ITEM 8. FINANCIAL INFORMATION ..............................................................................................................61
8A. Consolidated Statements and Other Financial Information ..........................................................61
8B. Significant Changes.............................................................................................................................64
ITEM 9. THE OFFER AND LISTING .............................................................................................................65
9A. Offer and Listing Details ...................................................................................................................65
9B. Plan of Distribution.................................................................................................................................67
9C. Markets....................................................................................................................................................67
ITEM 10. ADDITIONAL INFORMATION...68
10A. Share Capital....68
10B. Memorandum and Articles of Association.....68
10C. Material Contracts........................................................................................................................82
10D. Exchange Controls.................................................................................................................................85
10E. Taxation ....................................................................................................................................................86
10F. Dividends and Paying Agents.................................................................................................................93
10G. Statement by Experts .............................................................................................................................93
10H. Documents on Display ............................................................................................................................93
10I. Subsidiary Information.........................................................................................................................93
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK................93
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES.......................................99
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES ................................................99
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF
PROCEEDS ....................................................................................................................................99
ITEM 15. CONTROLS AND PROCEDURES ......................................................................................................99
ITEM 16. [Reserved] 99
16A. Audit Committee Financial Expert ........................................................................................................99
16B. Code of Ethics.........................................................................................................................................100

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 16C. Principal Accountant Fees and Services ..............................................................................................100
16D. Exemptions from the Listing Standards for Audit Committees ........................................................100
16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers...........................................101
ITEM 17. FINANCIAL STATEMENTS ..............................................................................................................101
ITEM 18. FINANCIAL STATEMENTS ..............................................................................................................101
ITEM 19. EXHIBITS 101

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 INTRODUCTION

All references in this annual report to (i) CBD, we, us, our or Company are references to
Companhia Brasileira de Distribuio and its consolidated subsidiaries, (ii) the Brazilian government are
references to the federal government of the Federative Republic of Brazil, or Brazil, and (iii) preferred shares and
common shares are references to our authorized and outstanding shares of non-voting preferred stock, designated
as aes preferenciais, and common stock, designated as aes ordinrias, respectively, in each case without par
value. All references to ADSs are to American depositary shares, each representing two preferred shares. All
references herein to the real, reais or R$ are to Brazilian reais, the official currency of Brazil. All references
to U.S.$, dollars or U.S. dollars are to United States dollars.

At May 12, 2008, the commercial selling rate for purchasing U.S. dollars was R$1.6743 to U.S.$ 1.00.

We have prepared our consolidated financial statements included in this annual report in conformity with
accounting practices adopted in Brazil, or Brazilian GAAP, which are based on:

Brazilian Law No. 6,404/76, as amended by Brazilian Law No. 9,457/97 and Brazilian Law No.
10,303/01, which we refer to collectively as the Brazilian Corporation Law;

the rules and regulations of the Brazilian Securities Commission, or Comisso de Valores Mobilirios,
or CVM; and

the accounting standards issued by the Brazilian Institute of Independent Accountants (Instituto dos
Auditores Independentes do Brasil or IBRACON).

For the years ended December 31, 2003 and 2002, we had prepared consolidated financial statements for
Companhia Brasileira de Distribuio using the U.S. dollar as the reporting currency and in accordance with U.S.
GAAP, under Statement of Financial Accounting Standards (SFAS) No. 52, Foreign Currency Translation, which
we filed with the United States Securities and Exchange Commission (SEC) on June 21, 2004. However, since that
time we have changed the format of our primary financial statements, which are now being presented and prepared
in Brazilian reais and in accordance with Brazilian GAAP. This change was made to better facilitate the
understanding of our financial information and to provide uniform information to our foreign and local investors.
These financial statements prepared in accordance with Brazilian GAAP include a reconciliation to U.S. GAAP.

Brazilian GAAP differs in significant respects from accounting principles generally accepted in the United
States, or U.S. GAAP. For more information about the differences between Brazilian GAAP and U.S. GAAP and a
reconciliation of our net income and shareholders equity from Brazilian GAAP to U.S. GAAP, see note 26 to our
consolidated financial statements. The financial information contained in this annual report is in accordance with
Brazilian GAAP, except as otherwise noted.

FORWARD-LOOKING STATEMENTS

This annual report includes forward-looking statements, principally in Item 3D Key Information
Risk Factors, Item 4B Information on the Company Business Overview and Item 5 Operating and
Financial Review and Prospects We have based these forward-looking statements largely on our current
expectations and projections about future events and financial trends affecting our business. These forward-looking
statements are subject to risks, uncertainties and assumptions including, among other things:

our ability to sustain or improve our performance,

competition in the Brazilian retail food industry,

government regulation and tax matters,

adverse legal or regulatory disputes or proceedings,

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 credit and other risks of lending and investment activities,

changes in regional, national and international business and economic conditions and inflation, and
other risk factors as set forth under Item 3D. Key Information Risk Factors.

The words believe, may, will, estimate, continue, anticipate, intend, expect and similar
words are intended to identify forward-looking statements. We undertake no obligation to update publicly or revise
any forward-looking statements because of new information, future events or otherwise. In light of these risks and
uncertainties, the forward-looking information, events and circumstances discussed in this annual report might not
occur. Our actual results and performance could differ substantially from those anticipated in our forward-looking
statements.

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS

Not applicable.

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

ITEM 3. KEY INFORMATION

3A. Selected Financial Data

The following table presents our selected financial data as of the dates and for each of the periods indicated.
The selected financial data at December 31, 2007 and 2006 and for each of the three years ended December 31,
2007, 2006 and 2005 have been derived from our consolidated financial statements prepared under Brazilian GAAP
and included in this annual report. The selected financial information at December 31, 2005, 2004 and 2003 and for
each of the two years ended December 31, 2004 and 2003 have been derived from our consolidated financial
statements prepared under Brazilian GAAP that are not included in this annual report.

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 At and for the Year Ended December 31,

2007(1) 2006(1) 2005(1) 2004(1) 2003(1)

(millions of R$, except as indicated)
Statement of operations data
Brazilian GAAP:
Net sales revenue ...................................................................... 14,902.9 13,880.4 13,413.4 12,565.0 10,806.4
Cost of sales ............................................................................. (10,724.5) (9,963.0) (9,438.1) (8,891.5) (7,764.3)
Gross profit ............................................................................... 4,178.4 3,917.4 3,975.3 3,673.5 3,042.1
Selling, general and administrative expenses .......................... (3,152.4) (3,031.0) (2,868.8) (2,690.1) (2,183.6)
Depreciation and amortization ................................................. (550.7) (547.9) (625.3) (489.6) (454.3)
Financial income ...................................................................... 344.4 382.8 446.7 330.3 575.3
Financial expenses .................................................................... (555.6) (603.4) (683.5) (618.3) (760.1)
Equity results ............................................................................ (28.9) (53.2) (16.2) 5.3 (8.8)
Operating income ..................................................................... 235.2 64.7 228.2 211.1 210.6
Non-operating income (expense), net ...................................... (9.1) (323.2) 32.1 80.3 5.2
Income (loss) before income taxes .......................................... 226.1 (258.5) 260.3 291.4 215.8
Income tax (expense) benefit:
Current .............................................................................. (49.7) (92.2) (133.9) (39.0) (31.4)
Deferred ............................................................................ 38.4 90.7 80.9 88.5 41.1
Employee profit sharing ........................................................... (13.4) (13.4) (14.5) (14.3) 0.0
Minority interest ....................................................................... 9.5 359.0 64.2 43.2 0.0
Net income ................................................................................ 210.9 85.6 257.0 369.8 225.5

Number of shares outstanding at year end(1):

Preferred shares ................................................................ 128,240 127,863 127,656 100,103 99,943
Common shares ................................................................ 99,680 99,680 99,680 126,942 126,942

Net income per share at year end (2) ......................................... 0.93 0.38 1.13 1.63 0.99
Net income per ADS at year end (2) ......................................... 0.93 0.38 1.13 1.63 0.99

U.S. GAAP:
Net income (3) ............................................................................ 273.4 14.5 270.6 488.9 293.2

Basic earnings per share (2)(3)(4)

Preferred ............................................................................ 1.25 0.07 1.25 2.27 1.36
Common ............................................................................ 1.14 0.06 1.13 2.06 1.24
Diluted earnings per share (2)(3)(4)
Preferred ............................................................................ 1.25 0.07 1.24 2.27 1.36
Common ............................................................................ 1.14 0.06 1.13 2.06 1.24

Basic earnings (loss) per ADS (2)(3) ........................................... 1.25 0.07 1.25 2.27 1.36
Diluted earnings (loss) per ADS (2)(3) ........................................ 1.25 0.07 1.24 2.27 1.36

Weighted average number of shares outstanding (1)

Preferred ............................................................................ 128,010 127,807 118,117 100,065 99,450
Common ............................................................................ 99,680 99,680 108,941 126,942 126,942
Total........................................................................................... 227,690 227,487 227,058 227,007 226,392

Dividends declared and interest on shareholders equity

per share(1)(4)(5)
Preferred ............................................................................ 0.23 0.09 0.29 0.41 0.28
Common ............................................................................ 0.21 0.08 0.26 0.38 0.25
Dividends declared and interest on shareholders' equity per
ADS(1)(4)(5) .................................................................................. 0.23 0.09 0.29 0.41 0.28

Balance sheet data

Brazilian GAAP:
Cash and cash equivalents ........................................................ 1,064.1 1,281.5 1,710.8 1,179.5 981.9
Property and equipment, net .................................................... 4,820.2 4,241.0 3,861.7 4,425.4 3,986.0
Total assets ............................................................................... 12,746.1 11,672.3 10,923.2 11,040.2 8,939.9
Short-term debt (including current portion of long-term debt) 1,466.9 1,286.1 440.6 1,304.3 1,387.7
Long-term debt ......................................................................... 1,698.9 1,382.2 2,353.9 1,400.5 1,081.1
Shareholders' equity .................................................................. 5,012.0 4,842.1 4,252.4 4,051.0 3,768.4
Capital stock .............................................................................. 4,149.9 3,954.6 3,680.2 3,509.4 3,157.2

5
 At and for the Year Ended December 31,

2007(1) 2006(1) 2005(1) 2004(1) 2003(1)

(millions of R$, except as indicated)

U.S. GAAP:
Total assets ................................................................................ 12,536.0 11,225.0 10,513.7 9,396.4 9,159.3
Shareholders' equity .................................................................. 4,770.5 4,658.0 4,148.0 3,922.5 3,573.6

Other financial information

Brazilian GAAP:
Net cash provided by (used in):
Operating activities............................................................... 562.4 937.6 1,063.5 406.5 1,103.1
Investing activities ................................................................ (1,319.0) (918.4) 62.2 (133.2) (627.1)
Financing activities............................................................... 539.2 (448.5) (594.3) (148.7) (629.3)
Capital expenditures ............................................................. (1,293.9) (902.2) (899.6) (559.4) (541.7)

(1) Taking into account the 500:1 reverse stock split that became effective on September 1, 2007. In order to facilitate the comparison of
the per share information in all periods presented, we restated our financial statements for the years ended December 31, 2003 to 2006
to take into account the 500:1 stock split as if it had already occurred on January 1, 2003.
(2) Net income per share or ADS under Brazilian GAAP is based on shares outstanding at the end of each year. Earnings per share or
ADS under U.S. GAAP are based on the weighted average number of shares outstanding during each period. Per share or ADS data
takes into account the 500:1 reverse stock split that became effective on September 1, 2007.. In order to facilitate the comparison of
the per share information in all periods presented, we restated our financial statements for the years ended December 31, 2003 to 2006
to take into account the 500:1 stock split as if it had already occurred on January 1, 2003.
(3) The U.S. GAAP financial information was restated to correct the accounting treatment for cash considerations received from vendors
in 2003 and amortization of leasehold improvements in 2003 and 2002.
(4) In accordance with Law No. 6,404 of December 15, 1976, as amended or Brazilian corporate law, we can distribute a notional, tax-
deductible interest charge attributable to shareholders equity as an alternative form of payment to shareholders. A dividend of R$0.23
per preferred share and R$0.21 per common share was approved and declared at our general shareholders meeting held on April 30,
2008 and will be paid in June, 2008. Dividends declared and interest on shareholders equity per preferred share, per common share
and per ADS, were U.S.$0.13, U.S.$0.12 and U.S.$0.13, respectively, translated using the exchange rate at December 31, 2007 of
R$1,7713 per U.S.$1.00, taking into account the 500:1 reverse stock split that became effective on September 1, 2007.
(5) Since 2003, each preferred share receives a dividend 10% higher than the dividend paid to each common share. See Item 8A
Financial Information Consolidated Statements and Other Financial Information Dividend Policy and Dividends.

6
 At and for the Year Ended December 31,
2007 2006 2005 2004 2003

(millions of reais, except as indicated)

Operating Data
Employees at end of period 66,165 63,607 62,803 63,484 55,557
Total square meters of selling area at end of period 1,338,329 1,217,984 1,206,254 1,144,749 982,701
Number of stores at end of period:
Po de Acar 153 164 185 196 208
CompreBem 178 186 176 165 172
Extra (1) 125 87 79 72 62
Extra Eletro 42 50 50 55 55
Assai (2) 15 - - - -
Sendas (3) 62 62 66 63 -
Total number of stores at end of period 575 549 556 551 497

Net sales revenues per employee (4):

Po de Acar R$ 220,827 R$ 220,246 R$ 222,565 R$ 214,883 R$ 198,342
CompreBem 299,372 270,280 255.681 224,435 206,737
Extra (1) 311,826 273,978 280.753 273,659 264,315
Extra Eletro 399,083 446,178 408,056 380,098 371,991
Assai (2) 423,158 - - - -
Sendas (3) 235,897 252,224 195,347 150,098 -
Total net sales revenues per employee R$ 286,662 R$ 259,467 R$ 252,186 R$ 234,423 R$ 230,156

Net sales revenues by store format:

Po de Acar R$ 3,149 R$ 3,092 R$ 3,245 R$ 3,315 R$ 3,435
CompreBem 2,477 2,278 2,194 2,016 1,921
Extra (1) 7,665 7,050 6,532 5,996 5,195
Extra Eletro 261 286 233 240 255
Assai (2) 201 - - - -
Sendas (3) 1,150 1,174 1,209 998 -
Total net sales R$ 14,903 R$ 13,880 R$ 13,413 R$ 12,565 R$ 10,806

Average monthly net sales revenue per square meter (5):

Po de Acar R$ 1,296.2 R$ 1,163.7 R$ 1,094.1 R$ 1,033.8 R$ 1,075.1
CompreBem 912.2 841.0 852.4 834.3 846.1
Extra (1) 868.7 933.0 921.2 951.9 946.4
Extra Eletro 787.7 706.9 575.9 559.2 621.5
Assai (2) 2,461.2 - - - -
Sendas (3) 905.8 911.0 839.7 745.3 -
CBD average monthly net sales revenue per square meter R$ 990.5 R$ 949.7 R$ 856.7 R$ 917.8 R$ 950.8

Average ticket amount:

Po de Acar R$ 23.2 R$ 21.5 R$ 20.5 R$ 19.2 R$ 19.2
CompreBem 18.0 16.7 16.0 14.9 15.0
Extra (1) 41.5 41.6 40.2 39.1 39.6
Extra Eletro 303.2 310.5 283.5 261.9 279.4
Sendas (3) 19.9 19.0 18.8 18.0 -
CBD average ticket amount R$ 28.8 R$ 27.1 R$ 25.7 R$ 24.3 R$ 24.6

Average number of tickets per month:

Po de Acar 11,324,400 11,978,947 13,189,705 14,356,288 14,882,404
CompreBem 11,464,794 11,344,846 11,415,478 11,284,705 10,694,314
Extra (1) 15,373,736 14,123,289 13,538,497 12,779,828 10,939,529
Extra Eletro 71,729 76,762 68,497 76,366 76,068
Sendas (3) 4,827,581 5,138,482 5,348,968 4,619,534 -

CBD average number of tickets per month 43,062,240 42,662,326 43,561,146 43,116,721 36,592,315

(1) Includes 19 Extra Fcil convenience stores and 15 Extra Perto supermarket stores.
(2) Assai, a cash and carry format, was acquired in November, 2007. For further information on our cash and carry format, see
Information on the Company Business Overview.
(3) Includes Sendas supermarkets but excludes Extra hypermarkets and Po de Acar and CompreBem supermarkets in the State
of Rio de Janeiro.
(4) Based on the average of the full-time equivalent number of employees calculated by dividing the total number of hours
worked by all employees at the end of each month in the period presented by 220 hours.
(5) Calculated using the average of square meters of selling area on the last day of each of the months in the period.

7
Exchange Rates

Before March 14, 2005, there were two principal legal foreign exchange markets in Brazil, the
commercial rate exchange market and the floating rate exchange market. On March 4, 2005, the National
Monetary Council (Conselho Monetrio Nacional), or CMN, enacted Resolution No. 3,265, pursuant to
which the floating rate market and the commercial market were unified under the denomination exchange
market, effective as of March 14, 2005. The new regulation allows the purchase and sale of foreign currency
and the international transfer of reais by any person or legal entity, regardless of the amount, provided,
however, the transaction is legal and subject to certain regulatory procedures.

Since 1999, the Central Bank has allowed the real/U.S. dollar exchange rate to float freely, and,
since then, the real/U.S. dollar exchange rate has fluctuated considerably. Since the beginning of 2001, the
Brazilian exchange market has been increasingly volatile, and, until early 2003, the value of the real declined
relative to the U.S. dollar. The real appreciated against the U.S. dollar in 2004, 2005, 2006 and 2007. At
December 31, 2007, the exchange rate for U.S. dollars was R$1.7713 per U.S.$1.00. In the past, the Central
Bank has intervened occasionally to control unstable movements in foreign exchange rates. We cannot predict
whether the Central Bank or the Brazilian government will continue to let the real float freely or will
intervene in the exchange rate market through the return of a currency band system or otherwise. The real
may depreciate or appreciate against the U.S. dollar substantially in the future. For more information on these
risks, see 3D. Risk FactorsRisks Relating to Brazil.

The following tables set forth the commercial selling rate, expressed in reais per U.S. dollar
(R$/U.S.$), for the periods indicated.

Exchange Rate of Brazilian Currency per U.S.$1.00

Year Low High Average(1) Year-End
2003 2.8219 3.6623 3.0600 2.8892
2004 2.6544 3.2051 2.9171 2.6544
2005 2.1633 2.7621 2.4125 2.3407
2006 2.0586 2.3711 2.1770 2.1380
2007 1.7325 2.1556 1.9483 1.7713

Exchange Rate of Brazilian Currency per U.S.$1.00

Month Low High Average(1) Year-End
November 2007 1.7325 1.8501 1.7699 1.7837
December 2007 1.7616 1.8233 1.7860 1.7713
January 2008 1.7414 1.8301 1.7743 1.7603
February 2008 1.6715 1.7681 1.7277 1.6833
March 2008 1.6700 1.7491 1.7076 1.7491
April 2008 1.6575 1.7534 1.6889 1.6872
May 2008 (through May 12) 1.6949 1.6506 1.6724 1.6743

__________
Source: Central Bank
(1) Represents the average of the exchange rates of each trading date.

8
 Exchange rate fluctuations will affect the U.S. dollar equivalent of the real price of the common
shares on the BOVESPA as well as the U.S. dollar equivalent of any distributions we make in reais with
respect to our shares.

3B. Capitalization and Indebtedness

Not applicable.

3C. Reasons for the Offer and Use of Proceeds

Not applicable.

3D. Risk Factors

This section is intended to be a summary of more detailed discussions contained elsewhere in this
document. The risks described below are not the only ones we face. Additional risks may impair our business
operations. Our business, results of operations or financial condition could be harmed if any of these risks
materializes and, as a result, the trading price of the ADSs could decline.

Risks Relating to Brazil

The Brazilian government has exercised, and continues to exercise, significant influence over the
Brazilian economy. This influence, as well as Brazilian political and economic conditions, may adversely
affect us and the trading price of the preferred shares and the ADSs.

The Brazilian government frequently intervenes in the Brazilian economy and occasionally makes
significant changes in policy and regulations. The Brazilian governments actions to control inflation and
other policies and regulations have often involved, among other measures, increases in interest rates, changes
in tax policies, price controls, currency devaluations, capital controls and limits on imports. We may be
adversely affected by changes in policy or regulations involving or affecting factors, such as:

interest rates;

monetary policy;

exchange controls and restrictions on remittances outside Brazil, such as those which were
briefly imposed in 1989 and early 1990;

currency fluctuations;

inflation;

liquidity of domestic capital and lending markets;

tax policies; and

other political, social and economic developments in or affecting Brazil.

Uncertainty over whether the Brazilian government will implement changes in policies or
regulations affecting these or other factors in the future may contribute to economic uncertainty in Brazil and
to heightened volatility in the Brazilian securities markets and securities issued abroad that are supported by
Brazilian issuers.

9
 Inflation and efforts by the Brazilian government to combat inflation may contribute significantly
to economic uncertainty in Brazil and could harm us and the market value of our preferred shares.

Brazil has in the past experienced extremely high rates of inflation. Inflation, along with the
Brazilian governments measures to combat inflation, has had significant negative effects on the Brazilian
economy, contributing to economic uncertainty in Brazil and heightened volatility in the Brazilian securities
markets. The annual rate of inflation, as measured by the IGP-M, has decreased from 20.1% in 1999 to 7.8%
in 2007. The Brazilian governments measures to control inflation have often included maintaining a tight
monetary policy with high interest rates, thereby restricting the availability of credit and reducing economic
growth. As a result, interest rates have fluctuated significantly. For example, the official interest rates in
Brazil at the end of 2004, 2005, 2006 and 2007 were 17.75%, 18.00%, 13.25% and 11.25%, respectively, as
set by the Brazilian Committee on Monetary Policy (Comit de Poltica Monetria), or COPOM.

Measures taken by the Brazilian government, including interest rate adjustments, intervention in the
foreign exchange market and actions to adjust or fix the value of the real, may trigger increases in inflation. If
Brazil experiences high inflation in the future, we may not be able to adjust the rates we charge our customers
to offset the effects of inflation on our cost structure. Inflationary pressures may also hinder our ability to
access foreign financial markets or lead to government policies to combat inflation that could harm our
business or adversely affect the market value of our preferred shares and, as a result, the ADSs.

Exchange rate instability may adversely affect the Brazilian economy and the market price of our
preferred shares and the ADSs.

As a result of inflationary pressures, the Brazilian currency has been devalued periodically in relation
to the U.S. dollar and other foreign currencies during the last four decades. Throughout this period, the
Brazilian government has implemented various economic plans and utilized a number of exchange rate
policies, including sudden devaluations, periodic mini-devaluations during which the frequency of
adjustments has ranged from daily to monthly, floating exchange rate systems, exchange controls and dual
exchange rate markets. From time to time, there have been significant fluctuations in the exchange rate
between the Brazilian currency and the U.S. dollar and other currencies. For example, the real depreciated
against the U.S. dollar 15.7% in 2001 and 34.3% in 2002. Although the real appreciated 22.3%, 8.8%, 13.4%,
9.5% and 20.7% against the U.S. dollar in 2003, 2004, 2005, 2006 and 2007, respectively, there can be no
assurance that the real will not depreciate against the U.S. dollar again. See Item 3A Key Information
Selected Financial Data Exchange Rates for more information on exchange rates.

Depreciation of the real relative to the U.S. dollar could create additional inflationary pressures in
Brazil and lead to increases in interest rates, which could negatively affect the Brazilian economy as a whole
and result in a material adverse effect on us. Depreciation would also reduce the U.S. dollar value of
distributions and dividends and the U.S. dollar equivalent of the market price of our preferred shares and the
ADSs.

Developments and the perception of risk in other countries, especially emerging market countries,
may adversely affect the market price of Brazilian securities, including our preferred shares and the ADSs.

The market price of securities of Brazilian companies is affected to varying degrees by economic and
market conditions in other countries, particularly other Latin American and emerging market countries.

Although economic conditions in these countries may differ significantly from economic conditions
in Brazil, investors reactions to developments in these other countries may have an adverse effect on the
market price of securities of Brazilian issuers. Crises in other emerging market countries may diminish
investors interest in securities of Brazilian issuers, including our preferred shares. This could adversely affect
the market price of our preferred shares, and the ADSs, and could also make it more difficult for us to gain
access to the capital markets and finance our operations on acceptable terms, or at all.

10
Risks Relating to the Food Retail Industry and Us

We face significant competition, which may adversely affect our market share and net income.

The food retail industry in Brazil, including the new cash and carry segment (atacarejo), a wholesale
format in the retail food sector, is highly competitive. We face intense competition from small food retailers
that often benefit from inefficiencies in the Brazilian tax collection system. These small food retailers also
frequently have access to merchandise from irregular and informal distribution channels at lower prices than
those charged by manufacturers and stores in the conventional supply chain of the organized retail food
sector. In addition, in our markets, and particularly in the So Paulo City area, we compete with a number of
large multinational retail food and general merchandise and cash and carry chains, as well as local
supermarkets and independent grocery stores. Some of these international competitors have greater financial
resources than we have. Acquisitions or consolidations within the industry may also increase competition and
adversely affect our market share and net income.

Our company is co-controlled by two groups of shareholders.

The Diniz group and the Casino group share our control through a holding company that owns
65.6% of our voting shares. This holding company is also referred to herein as the Holding Company. See
Item 7A. Major Shareholders and Related Party Transactions Major Shareholders. Consequently, our two
indirect co-controlling shareholders have the power to control our company, including the power to:

appoint the members to our board of directors, who, in turn, name our
executive officers,

determine the outcome of any action requiring shareholder approval, including

the timing and payment of any future dividends, and

transfer our control.

Although Mr. Abilio Diniz will remain Chairman of both the Holding Company and us for several
years, and will retain decision-making powers in the ordinary course of business, the co-control of our
company could result in deadlocks with respect to certain important issues. For other information on shared
decision-making, see Item 7A. Major Shareholders and Related Party TransactionsMajor Shareholders
Shareholders Transactions.

We engage in, and expect from time to time in the future to engage in, commercial and financial
transactions with our controlling shareholders or their affiliates. Neither the Casino group nor the Diniz group
can enter into transactions with us without the approval of the other.

Our operations are subject to environmental risks.

We are subject to a number of different environmental laws, regulations and reporting requirements,
specially related to our gas stations. Costs are incurred for prevention, control, reduction or elimination of
releases into the air, ground and water at our gas stations, as well as in the disposal and handling of wastes at
our stores and distribution centers. The increase in environmental protection and control costs related to our
gas station operation could adversely affect us and the market value of our preferred shares and the ADSs.

Risks Relating to the Preferred Shares and ADSs

If you exchange the ADSs for preferred shares, as a result of Brazilian regulations you may risk
losing the ability to remit foreign currency abroad.

The Brazilian custodian for the preferred shares must register with the Central Bank of Brazil to
remit U.S. dollars abroad. If you decide to exchange your ADSs for the underlying preferred shares, you will

11
be entitled to continue to rely, for five business days from the date of the exchange, on the custodians
registration. Thereafter, you may not be able to obtain and remit U.S. dollars abroad unless you obtain your
own registration. Obtaining your own registration will result in expenses and may cause you to suffer delays
in receiving distributions. See Item 10D. Additional Information Exchange Controls.

You might be unable to exercise preemptive rights with respect to the preferred shares.

You will not be able to exercise the preemptive rights relating to the preferred shares underlying
your ADSs unless a registration statement under the Securities Act of 1933 is effective with respect to those
rights, or an exemption from the registration requirements of the Securities Act is available. We are not
obligated to file a registration statement. Unless we file a registration statement or an exemption from
registration applies, you may receive only the net proceeds from the sale of your preemptive rights by the
depositary or, if the preemptive rights cannot be sold, they will lapse and you will not receive any value for
them.

The relative volatility and illiquidity of the Brazilian securities markets may substantially limit
your ability to sell the preferred shares underlying the ADSs at the price and time you desire.

Investing in securities that trade in emerging markets, such as Brazil, often involves greater risk than
investing in securities of issuers in the United States, and such investments are generally considered to be
more speculative in nature. The Brazilian securities market is substantially smaller, less liquid, more
concentrated and can be more volatile than major securities markets in the United States. Accordingly,
although you are entitled to withdraw the preferred shares underlying the ADSs from the depositary at any
time, your ability to sell the preferred shares underlying the ADSs at a price and time at which you wish to do
so may be substantially limited. There is also significantly greater concentration in the Brazilian securities
market than in major securities markets in the United States. The ten largest companies in terms of market
capitalization represented approximately 54.2% of the aggregate market capitalization of the BOVESPA as of
December 31, 2007. The top ten stocks in terms of trading volume accounted for approximately, 51%, 70%
and 50% of all shares traded on the BOVESPA in 2005, 2006 and 2007, respectively.

ITEM 4. INFORMATION ON THE COMPANY

4A. History and Development of the Company

We were incorporated in Brazil under Brazilian law on November 10, 1981 as Companhia Brasileira
de Distribuio for an indefinite period of time. Our principal executive offices are located at Avenida
Brigadeiro Luis Antonio, 3,142, CEP 01402-901 So Paulo, SP, Brazil (telephone: 55-11-3886-0421). Our
agent for service of process in the United States is CT Corporation, 1633 Broadway, New York, New York,
10019.

We have been a pioneer in the Brazilian retail food industry, opening our first store, a pastry shop, in
1948 in So Paulo City under the name Po de Acar. We established one of the first supermarket chains in
Brazil, opening our first supermarket in 1959, and opened the first hypermarket in Brazil in 1971.

Brazilian economic reforms implemented in 1994, including the introduction of the real as the
Brazilian currency and the drastic reduction of inflation rates, resulted in an unprecedented growth in local
consumer markets. It has been estimated that more than 19 million people gained access to consumer goods
markets for the first time after 1994, as Brazilians, predominantly in lower and middle-income households,
generally experienced real income gains. This increase in available income and the resulting increase in
consumer confidence broadened our potential customer base and provided us with growth opportunities.

We responded to these changes by strengthening our capital structure, increasing our logistics and
technology investments and implementing an expansion strategy focused on the different consumer
preferences of the Brazilian population. To support our expansion strategy, consisting of acquisitions and
organic growth, we defined the format of our stores in terms of the expectations, consumption patterns and
purchasing power of the different income levels in Brazil. In order to implement such strategy and to increase

12
our market share, over the last few years we acquired important chains such as Coopercitrus, Loureno,
Barateiro (we operate these stores under the CompreBem banner), Peralta, Paes Mendona, ABC
Supermercados, S Supermercados and other small chains, such as So Luiz, Nagumo and Rosado. We
furthermore started to lease from the Rossi Monza chain, for a period of five years, five stores (four located in
So Paulo and one in Guarulhos) representing 15,000 m sales area. We subsequently converted four of these
stores into the Extra Perto format and one into the CompreBem format. In the context of these leases, we
made a prepayment of R$ 45.5 million and agreed to make monthly payments of R$0.1 million. Pursuant to
the leasing agreement, we acquired accounts receivable representing R$4.7 million and inventories
representing R$16.7 million. At the end of the leases, we may purchase the fixed assets at the residual book
value.

In addition, we acquired a 60% ownership interest in the Assai chain and entered into an association
called Sendas Distribuidora S.A., with Sendas S.A. (of which we currently hold 42.57%) and investment funds
of the AIG Group. We also established a financial partnership called Financeira Ita CBD S.A. Crdito,
Financiamento e Investimento, or FIC, which exclusively offers private label and co-branded credit cards,
personal and consumer credit, extended warranties and insurance at our stores. Parties have granted mutual
Put/Call options in the Sendas and Assai Associations, which are further described on section 10c Material
Contracts.

From 2005 through 2007, we invested approximately R$375.0 million in technology, or about 12.1%
of our total investments in the last three years. We also implemented projects designed to improve operational
logistics and margins. We operate under centralized commercial and distribution systems, to obtain
economies of scale. This has strengthened our negotiating position with suppliers with respect to prices and
payment terms. We have also sought to gain efficiencies through improvements in our supply chain, in an
effort to decrease stock-outs, breakage and shrinkage, increase productivity in our stores, as well as to
increase inventory turnover.

Since 2005, we acquired a total of 27 stores and opened 69 stores. When entering new markets, we
have generally sought to acquire local supermarket chains to benefit from existing know-how of the
geographic region. For expansion within urban areas where we already have a presence, we have historically
opened new stores. Currently, our main focus is to expand organically, but we may continue carrying out
strategic acquisitions, to the extent that they bring synergies and add value to us. Historically, our organic
growth and smaller acquisitions have generally been funded from our cash flow from operations, and larger
acquisition opportunities have required external funding or capital increases. We expect to fund future organic
growth from our cash flow from operations. Our aggregate sales area has increased by 10.9% since 2005, as a
result of our acquisitions and our opening of new stores.

In line with our expansion strategy, we continue implementing innovative formats in order to enter
new market segments. Accordingly, (i) in November 2006, we entered the convenience market segment with
our newly established Extra Fcil stores; (ii) in July 2007, we launched Extra Perto, a compact hypermarket
model; (iii) in September 2007, we formed a Purchasing Group partnership with Unio Brasil and; (iv) in
November 2007, we acquired a 60% ownership interest in the Assai chain, which enabled us to enter the cash
and carry segment, a wholesale format in the retail food sector, which is one of the fastest-growing market
segments in Brazil. These strategic undertakings complement our existing formats, to attract different
customer groups and to develop a better understanding of our customers needs and demands. For further
information on the Purchasing Group, see Item 4B Business Overview Purchasing Group.

Capital Expansion and Investment Plan

As part of our capital expansion and investment plan, we have invested approximately R$3,095.7
million in our operations since 2005. Our investments have included:

Acquisitions of supermarket and hypermarket chains Since 2005, we have acquired 27 stores. In
addition, when entering new markets, we have generally sought to acquire local supermarket chains to benefit

13
from their existing know-how of the geographic region. We have spent an aggregate of R$380.9 million on
acquisitions since 2005.

The following table presents information regarding these acquisitions and the regional distribution of
the stores we acquired over the past three years:

Number of

Year Chains Acquired Stores Geographic Distribution

2005 Coopercitrus 6 So Paulo

2006 Loureno 2 So Paulo

2007 Rossi 5 So Paulo

2007 Assai * 14 So Paulo

Total 27

* acquisition of a 60% ownership interest through an association

Opening of new stores As part of our expansion strategy, we have opened 69 new stores from 2005
through 2007, including 11 Po de Acar stores, 15 CompreBem stores, 19 Extra stores, 10 Extra Perto
stores, 13 Extra Fcil convenience stores and one Assai store. The total cost of opening these new stores was
R$878.3 million. We seek real estate properties to construct new stores under one of our banners in regions
where there are no local supermarket chain acquisition opportunities that suits one of our formats.

Renovation of existing stores We usually remodel some of our Po de Acar, CompreBem, Extra
stores, Sendas and Extra Eletro stores every year. Through our renovation program we add refrigeration
equipment to our stores, create a more modern, customer-friendly and efficient environment, and outfit our
stores with advanced information technology systems. The total cost of renovating stores between 2005 and
2007 was R$1,002.4 million.

Improvements to information technology We are committed to technology as an important

component in our pursuit of greater efficiency and security in the flow of information among stores,
distribution centers, suppliers and corporate headquarters. We implemented a computerized ordering system,
which automatically replenishes our inventory based on consumers shopping habits. We have a proprietary
technology system, the pd@net, a B2B, or business to business, platform for the on-line integration of
approximately 7,000 suppliers. This Internet process enables information to be exchanged rapidly, precisely
and transparently among all participants in the supply chain. For more information, see Technology. We
have spent an aggregate of R$375.0 million on information technology from 2005 through 2007.

Expansion of distribution facilities Since 2005, we have opened distribution centers in the cities of
So Paulo, Braslia, Fortaleza, Rio de Janeiro, Recife, Salvador and Curitiba. The increase and improvement
in storage space enables us to further centralize purchasing for our stores and, together with improvements to

14
our information technology, improve the overall efficiency of our inventory flow. We have spent an aggregate
of R$83.5 million on our distribution facilities from 2005 through 2007.

The following table provides a summary description of our principal capital expenditures disbursed
for the three years ended December 31, 2007:

Year Ended December 31,

2007 2006 2005
(millions of reais)

Opening of new stores ................................................................................................... R$ 350.2 R$ 210.8 R$ 317.3

Acquisition of retail chains............................................................................................ 284.8 74.6 21.5
Purchases of real estate.................................................................................................. 121.0 182.6 72.0
Renovations ................................................................................................................... 380.3 262.8 359.3
Information technology ................................................................................................. 141.7 123.8 109.5
Distribution centers........................................................................................................ 15.9 47.6 20.0
Total ...................................................................................................................... R$ 1,293.9 R$ 902.2 R$ 899.6

We invested R$1,293.9 million in 2007, mostly in opening new stores and remodeling stores. Annual
organic growth in 2007 was strong, with the opening of seven Extra hypermarkets, one Po de Acar store,
five CompreBem stores, 10 Extra Perto stores, 13 Extra Fcil convenience stores, one Assai store, as well as
12 gas stations and 24 drugstores.

4B. Business Overview

The Brazilian Retail Food Sector

The Brazilian retail food sector represented approximately 5.2% of Brazils GDP (gross domestic
product) in 2007. According to ABRAS (Brazils supermarket association), the food retail sector in Brazil had
gross revenues of R$136.3 billion in 2007, representing a 9.8% increase over 2006. The Brazilian retail food
sector is highly fragmented. Despite consolidation within the Brazilian retail food industry, in 2007, the three
largest supermarket chains represented only approximately 38.9% of the retail food sector, as compared to
36.1% in 2003. We believe the acquisitions trend will slowdown, because the principal chains have already
been acquired by the main competitors on the market. We believe that future acquisitions will mainly involve
smaller sized-stores. Another recent trend in the retail food sector is large chains migrating to smaller formats
such as neighborhood banners. According to ABRAS, our gross sales represented 13.8% of the gross sales of
the entire retail food sector in 2007.

Foreign ownership in the Brazilian food retail sector began with Carrefour, a leading French retail
chain, which opened its first hypermarket in Brazil 33 years ago. In the last decade, the international chain
Wal-Mart has also entered the Brazilian market, mostly through acquisitions of domestic retail food chains,
and competition in the industry has intensified. In addition to the organized retail food sector, the industry in
Brazil also consists of small food retailers which frequently avail themselves of access to merchandise from
irregular and informal distribution channels. This merchandise usually has lower prices than those charged by
manufacturers and stores in the conventional supply chain of the organized retail food sector.

The cash and carry segment (atacarejo segment), a wholesale segment in the retail food sector is one
of the fastest growing market segments in Brazil in terms of new store openings. This segment was created in
order to serve customers within a market niche that was neither reached by self-service retail nor by
wholesale.

In order to enter this segment, we made an association with one of the major players in the cash and
carry segment, the Assai chain. We control the association with a 60% ownership interest. Assais
management includes executives with extensive experience in the cash and carry segment that were managing
the Assai chain already prior to its acquisition by us. The cash and carry stores continue operating under the

15
Assai banner and maintain their main competitive advantages such as low operational cost, competitive prices
and the offer of a selective mix of consumer goods in each store.

Overall supermarket penetration in Brazil today, in terms of the number of supermarkets relative to
overall population and area, is estimated to be below the levels in the United States, many western European
countries such as France, and some South American countries such as Chile. Management believes that the
population of Brazil is an important factor affecting the potential growth in supermarket activity. According
to the Brazilian Institute of Geography and Statistics, or IBGE, the total population of Brazil was
approximately 186.7 million in 2007, making Brazil the fifth most populous country in the world, with a
population currently growing at a rate of 1% per year. More than 80% of the population lives in urban areas
(where most of our operations are located) and the urban population has been increasing at a greater rate than
the population as a whole, our business is particularly well positioned to benefit from Brazils urban growth
and economies of scale related to urban growth. So Paulo, with a current population of approximately 11.0
million, and Rio de Janeiro, with a population of approximately 6.1 million, are the two largest cities in
Brazil. So Paulo State has a total population in excess of 39.9 million, representing approximately 22,0% of
the Brazilian population and is our largest consumer market. Rio de Janeiro State is our second largest
consumer market.

The Brazilian retail sector is perceived as essentially growth-oriented, since retail margins are
substantially more constrained compared to other business sectors. We are therefore intrinsically dependent
on the growth rate of Brazils urban population and its different income levels. While living expenses in
Brazil are lower than those in North America, Western Europe and Japan, Brazilian household income levels
are also substantially lower.

The following table sets forth the different income class levels of Brazilian households, according to
Ibope (Brazilian Institute of Public Opinion and Statistics).

Annual Income (average)

Class Level (in reais)

A1 Above R$116,796
A2 Between R$116,795 and R$78,756
B1 Between R$78,755 and R$41,748
B2 Between R$41,747 and R$24,144
C1 Between R$24,143 and R$14,328
C2 Between R$14,327 and R$8,712
D Between R$8,711 and R$5,820
E Under R$3,312

Classes A1 and A2 households account for only 5% of the urban population and classes B1 and B2
households account for 24% of the urban population. Classes C1 and C2, D and E collectively represent 71%
of all urban households. In recent years, the number of class C, D and E households has increased in terms of
total urban households and their average purchasing power has become greater.

Current salary levels in Brazil have generally lagged compared to increases in interest and exchange
rates and price levels. We expect that increased consumption by the lower income class levels will take place
over time as a result of gradual salary increases and a steadily growing population. As seen in the years
immediately following the introduction of the real, even small increments in purchasing power generally
result in significant increases in consumption in absolute terms, as well as increased expenditures in premium
priced food products and other non-food items, including home appliances and consumer electronics.

16
Our Company

We are one of the largest food retailers in Brazil based on both gross revenues and number of stores.
In 2007, we had a market share of approximately 13.8% in the Brazilian food retailing business, according to
ABRAS, with annualized gross sales of R$18.8 billion. As of December 31, 2007, we operated 575 stores
throughout Brazil, of which 533 were retail food stores. Of our retail food stores, 353 are located in So Paulo
State, representing 61.5% of our net sales revenue from our retail food stores in 2007. So Paulo State is the
Brazils largest consumer market. We are among the market leaders in the retail food stores in the cities of
So Paulo, Rio de Janeiro, Braslia, Curitiba, Belo Horizonte, Salvador and Fortaleza. The Companys sales
are effected through different sales formats under eight banners: Po de Acar (153 supermarkets),
CompreBem (178 supermarkets), Sendas (62 supermarkets), Extra (91 hypermarkets), Extra Eletro (42 home
appliance stores), Extra Fcil (19 convenience stores), Extra Perto (15 supermarkets) and Assai (15 cash and
carry stores).

The following table sets forth the number of our stores by region, as of December 31, 2007:

South and Southeast

Rest of the
City of So State of Rio (excluding States of Center-
State of So Northeast
Paulo de Janeiro So Paulo and Rio de West
Paulo(1)
Janeiro)(2)
Po de Acar.............................. 58 37 9 4 32 13
Extra............................................. 21 25 17 7 13 8
CompreBem ................................. 73 91 14 - - -
Sendas .......................................... - - 62 - - -
Extra Eletro ................................. 20 22 - - - -
Extra Fcil 19 - - - - -
Extra Perto................................... 14 - - - 1 -
Assai 7 8 - - - -
Total ........................................ 212 183 102 11 46 21
__________

(1) The rest of the state of So Paulo consists of 39 cities, including Campinas, Ribeiro Preto and Santos.
(2) This area comprises the states of Minas Gerais and Paran.

The following table sets forth the activity in our stores during the periods presented:

Po de CompreBem Extra Extra Sendas Extra Extra Assai(3) Total

Acar Eletro Fcil(1) Perto(2)

At December 31, 2004 196 165 72 55 63 551

Opened 7 9 7 23
Closed (6) (7) (5) (18)
Transferred (from)/to (12) 9 3
At December 31, 2005 185 176 79 50 66 556
Opened 3 9 5 4 21
Closed (21) (3) (1) (3) (28)
Transferred (from)/to (3) 4 (1)
At December 31, 2006 164 186 83 50 62 4 549
Opened 1 5 7 - - 13 10 15 51
Closed (5) (11) - (8) - (1) - - (25)
Transferred (from)/to (7) (2) 1 - - 3 5 - -
At December 31, 2007 153 178 91 42 62 19 15 15 575

_______________________

(1) Extra Fcil is a convenience store.

17
(2) Extra Perto is a new supermarket model, known as a compact hypermarket.
(3) Assai is a cash and carry store, which was acquired in November 2007.

Our Competitive Strengths

Our main competitive strengths are our different retail food store formats, our extensive network of
distribution centers, our economies of scale, our prime locations in densely populated urban areas and
growing provincial urban areas, and our high level of customer service.

Different retail food store formats

We conduct our retail food operations under different store formats, namely Po de Acar,
CompreBem/Sendas, Extra, Extra Fcil, Extra Perto and Assai. Each of these store formats has a distinct
merchandising strategy and a strong brand name. We offer a variety of formats, which enables us to
effectively target different consumer preferences and thus earn their loyalty. This approach, coupled with our
intimate understanding of the Brazilian consumer permits us to meet diverse customer needs without
confusing consumers as to the marketing or price focus of each format. Each of our brand concepts is clearly
identified in the marketplace for a combination of goods and services offered and relative consumer wealth.
For example, Po de Acar format is positioned to serve the higher income consumers through a
combination of store location, store design and product and service offerings. The CompreBem and Sendas
banners target the middle and lower income consumer brackets. Extra is our hypermarket format which offers
the widest assortment of any of our store formats and allows us to target potential customers along the entire
income spectrum. Our hypermarket stores have the additional advantage of benefiting from the general lack
of department stores and specialized stores in Brazil. As a result, a retailer such as an Extra store that also
sells non-food products such as household appliances, consumer electronic products, general merchandise,
clothing and textiles is particularly convenient to a Brazilian consumer.

The Extra Perto banner was launched in November 2006 within the convenience store model. In
July 2007, it started to operate a new supermarket format, known as compact hypermarket, which is
characterized by neighborhood stores with a complete selection of food products and a selected assortment of
non-food products. The stores are relatively small ranging from 2,000 to 4,000 square meters with 1/3 of the
sales area dedicated to food products and two thirds to non-food products.

With the establishment of the Extra Fcil banner in July 2007, the Group significantly increased its
presence in the convenience stores segment, where we had already been operating through our Extra Perto
stores. Under the Extra Fcil banner, we operate neighborhood stores, with a size of approximately 200 to
250 square meters, mainly offering food products and basic services such as recharge for mobile phones and
payment for utilities bills.
In order to enter the cash and carry segment, one of the fastest growing segments in Brazil, we
acquired a 60% ownership interest in one of the major players in this market, namely the Assai chain. Assai
operates food product stores targeting producers and retailers, offering highly competitive prices and quality
products.

Extensive network of distribution centers

We operate distribution centers strategically located in the cities of So Paulo, Braslia, Fortaleza,
Rio de Janeiro, Recife, Salvador and Curitiba. Our distribution centers have a total storage capacity of
401,208 square meters. Our management believes that our network of distribution centers is the most
extensive one in the Brazilian retail food industry. We believe that our facilities are capable of servicing
substantially all of our distribution requirements, both for our existing stores and for the stores that we plan to
open in the near future. Approximately 85% of our inventory in 2007 came directly from one of our
distribution centers, instead of from our suppliers, resulting in higher bargaining power with suppliers, fewer
inventory shortages, lower shrinkage and improved working capital management. Many of the functions of
our distribution centers are automated, allowing for quicker and more efficient handling of products. Our

18
distribution centers are supported by important systems, including pd@net, a business-to-business technology
platform which links our computer automated ordering system, our suppliers and our distribution centers to
automatically replenish our inventory.

Economies of scale

We enjoy significant economies of scale resulting from our position as one of the largest food
retailers in Brazil. Our large scale gives us increased bargaining power with suppliers, resulting in lower
prices for consumers, higher operating margins and more favorable payment terms. Our size permits us to
benefit from important marketing channels including prime time television advertising, one of the most
effective means to promote sales, which is prohibitively expensive for smaller retail chains. Our scale also
enables us to make major operational investments, such as in technology, which generates attractive returns.
Our size and financial strength, compared to most other supermarket chains in Brazil, has put us at the
forefront of the Brazilian retail industry in using information technology and in continually improving our
sophisticated management information systems.

Our Strategy

In 2007, we continued to implement innovative formats, some of them marking our entry into
market models where we did not yet operate. In this sense, we continued developing our Extra Fcil banner in
the convenience store format, launched Extra Perto as a compact hypermarket format, made an association
with Assai as well as a Purchasing Group partnership with Unio Brasil. We also implemented initiatives
designed to improve our competitiveness and profitability. In this context, we point out: (i) our store
productivity programs, which helped to cut our expenses; (ii) our Shrinkage Reduction Program, designed to
reduce in-store losses; (iii) the assortment review process, which improved our negotiation results with
suppliers; and (iv) more efficient stock out management.

For 2008, we plan to focus on the following initiatives: the consolidation and expansion of the Extra
Perto and Extra Fcil formats; the expansion of Assai, particularly through the conversion of existing Group
stores; the generation of efficiency gains through simplified procedures and structures and the streamlining of
the management model; the acceleration of new partnerships to expand the Purchasing Group; and expanding
and increasing the profitability of the non-food category, with investments in various areas: Extra.com, Extra
Eletro, global sourcing, consolidation of the subcategories (Mundo Casa General Merchandise,; Mundo
Entretenimento - Entertainment; Mundo TEC- Textiles, Sports and Children, among others).

In order to improve our profitability and shareholder value, we focus on two main fronts:

Sales growth

To achieve a higher sales turnover, we aim to develop initiatives that will enhance our
competitiveness, including the adoption of pricing policies increasing our consumer flow and consumer
fidelity. In addition, we aim to increase the participation of noon-food revenues as well as the expansion of
our FIC financial services and private label products. We also intend to achieve higher sales levels through
the expansion of our sales area as a result of new store openings in our different formats.

Sustained profitability growth

We intend to increase our profitability through: (1) the rationalization and decrease of corporate
expenses; (2) the improvement of our logistic structure; (3) the achievement of better price conditions with
our suppliers; and (4) the consolidation of our multi-format structure by expanding e-commerce, convenience
stores, cash and carry stores and compact hypermarkets.
In order to increase profitability, we also strive for greater efficiency in all of our processes.
Accordingly, we plan to invest in reducing breakage and shrinkage, improving the purchase process,
increasing the store productivity index and strengthen our management model.

19
 Operations

The following table sets forth the number of stores, the total selling area, the average selling area per
store, total number of employees and the net sales revenue as a percentage of our total net sales revenue for
each of our store formats at December 31, 2007:

Average
Total Selling Area Percentage
Selling Area Per Store Total Number of Our Net
(in square (in square of Sales
Store Format Number of Stores meters) meters) Employees(1) Revenues

Po de Acar.............................. Supermarket 153 202,458 1,323 14,260 21.1

CompreBem ................................. Supermarket 178 226,289 1,271 8,274 16.6
Extra............................................. Hypermarket 91 689,887 7,581 23,170 51.4(2)
Home appliance
Extra Eletro (2).............................. store 42 27,611 657 654 1.8
Convenience
Extra Fcil(2) store 19 4,783 252 150 _
Compact
Extra Perto................................... hypermarket 15 40,663 2,711 1,261 _
Assai Cash and carry 15 40,833 2,722 2,850 1.4
Sendas .......................................... Supermarket 62 105,805 1,706 4,875 7.7
Head office &
distribution center ........................ 10,671

Total .................................... 575 1,338,329 2,328 66,165 100.0%

_______________

(1) Based on the full-time equivalent number of employees calculated by dividing the total number of hours worked by all
employees in December 2007 by 220 hours.
(2) Extra Perto and Extra Fcil sales included in Extra hypermarkets.

For a detailed description of net sales revenue for each of our store formats, see Item 5A. Operating
and Financial Review and ProspectsOperating ResultsCertain Operating Data.

Po de Acar Stores

Po de Acar operates convenient neighborhood stores, which are predominantly located in large
urban areas (with over one-third located in the greater So Paulo City area). We believe this is a significant
competitive advantage since available sites in those urban areas are scarce. The Po de Acar stores target
the Brazilian class A and class B household consumers. The stores are characterized by a pleasant shopping
environment, a broad mix of quality products, innovative service offerings and high level of customer service,
with an average of 70 employees per 1,000 square meters of store space. Many of these stores feature
specialty areas such as perishables, baked goods, wine, ready-to-eat dishes, meat, cheese and seafood
departments. Many stores offer shopping advisors to assist customers with inquiries about particular food
needs, prices, special discounts and brand information.

As of December 31, 2007, we had 153 Po de Acar stores. The Po de Acar stores range in size
from 331 to 4,819 square meters and as of December 31, 2007, averaged 1,323 square meters of selling space.
The sale of food products represented 94.2% and non-food products represented 5.8% of Po de Acar gross
sales in 2007.

20
 The Po de Acar banner recorded the best performance for 2007 in same stores sales indicator.
Total gross sales were R$3,743.6 million, representing an increase of 2.7% relative to 2006. This performance
was a result of various factors, including: (i) the consolidation of the brand positioning; (ii) the improved
adaptation of stores to their respective micro-markets; (iii) the continuous price adaptation work; and (iv) the
optimization of the product mix.

In 2007, the Po de Acar banner also improved its performance in the perishable products
category (mainly bakery, fish and seafood products). Besides improving the bakery production areas of
approximately 20 stores, we provided specific training to employees of the banner working in the perishable
goods areas.
In 2007, we registered strong results for our Plus Program (Programa Mais), a program involving
a self-sustained, preferred shopper/fidelity card. Through a pilot project in several of our stores, we increased
the amount of customers, using the Plus Program as well as the average ticket. In view of these results, we
plan to expand the Plus Program to all stores by the end of 2008.
Po de Acar customers can also make purchases on-line through paodeacucar.com.br, the Po de
Acar website. This service is available to customers in the cities of So Paulo, Rio de Janeiro, Braslia,
Curitiba and Fortaleza.

CompreBem Stores

CompreBem supermarkets offer competitive prices and essential services. CompreBem stores target
the Brazilian classes C, D and E household consumers, which collectively make up approximately 71% of all
urban households. Generally, CompreBem stores offer more competitively priced products than Po de
Acar stores. In addition, these stores are characterized by a lower level of personal service than Po de
Acar stores, with an average of 37 employees per 1,000 square meters of store space.
We had 178 stores under the CompreBem banner at December 31, 2007. CompreBems stores range
in size from 301 to 3,953 square meters and averaged 1,271 square meters of selling space at December 31,
2007. Non-food items accounted for approximately 9.6% and food items accounted for approximately 90.4%
of CompreBem gross sales in 2007.

Total gross sales of the CompreBem banner in 2007 reached R$2,910.3 million, representing an
increase of 8.1% compared to 2006. In 2007, we opened five additional CompreBem stores and renovated 20
other stores in order to enhance the CompreBem brand exposure and increase its market penetration, mainly in
the more popular regions of So Paulo.

Over the last four years, we have been adjusting this banners pricing model and controlling its
expenses in order to maintain its competitiveness and lower prices.

Sendas Stores
We acquired the Sendas stores through our association called Sendas Distribuidora. Similarly to our
CompreBem banner, the Sendas banner targets middle and lower income consumers, (the Brazilian Classes C,
D and E household consumers). Sendas stores are all located in Rio de Janeiro, in lower-income
neighborhoods. Sendas stores offer competitively priced products, as done in CompreBem stores.

In July 2007, we hired the consultancy firm Galeazzi & Associados to implement a restructuring plan
to enhance Sendas Distribuidoras operational performance in the state of Rio de Janeiro. As per the
restructuring plan, Sendas Distribuidora became an independent business unit and adopted a result-oriented
management model that aims at increasing competitiveness, reducing costs and expenses and establishing a
balance between margins and sales. As a result of the new management model, in 2007, the Sendas chains
EBITDA margin increased by 3.4%. In December 2007, we elected Cludio Galeazzi as our CEO. Cludio
Galeazzis consultancy firm continues to render services to Sendas Distribuidora under the same conditions

21
as agreed prior to Cludio Galeazzi becoming our CEO. For further information on Cludio Galeazzi, see
Directors, Senior Management and Employees Directors and Senior Management Executive Officers.

Extra Hypermarkets

Extra hypermarkets are our largest stores. We introduced the hypermarket format in Brazil with the
opening of our first 7,000 square meter store in 1971. The Extra hypermarkets offer the widest assortment of
products of any of our store formats, with approximately 70,000 items and an average selling area of 7,581
square meters at December 31, 2007. The Extra stores target the Brazilian class B, C, D and E household
consumers. As of December 31, 2007, we owned 91 Extra stores, including seven stores opened in 2007 (four
in the Northeastern region of Brazil, two in Minas Gerais state and two in So Paulo state) and one store that
was converted from a Po de Acar store to an Extra store. The sale of food products and non-food products
represented 62.2% and 37.8% of Extras gross sales in 2007, respectively. Gross sales of the Extra banner in
2007 reached R$9,114.8 million, a 8.3% increase compared to 2006.

Extra-Eletro Stores

Extra-Eletro stores are generally small showrooms that sell a broad range of home appliances and
consumer electronic products. These stores had an average selling area of 657 square meters at December 31,
2007. Customers place orders in the stores, and products are shipped from a central warehouse. At December
31, 2007, we had 42 stores and gross sales of R$330.1 million.

Extra Perto

The Extra Perto banner was launched in November 2006 within the convenience store segment. In
July 2007, it started to operate a new supermarket format known as compact hypermarket, which is
characterized by neighborhood stores with a complete offering of food products and a selected assortment of
non-food products. The stores are relatively small ranging from 2,000 to 4,000 square meters with 1/3 of the
sales area dedicated to food products and 2/3 to non-food products. This new format is a result of a series of
research studies that revealed a new market niche resulting from a change in the shopping behavior of the
consumer.

Extra Fcil

With the establishment of the Extra Fcil banner in July, 2007, we significantly increased our
presence in the convenience store segment, where we had already been operating through our Extra Perto
stores. Through Extra Fcil, we aim to satisfy the consumers demand for stores that combine convenience
with proximity. In July 2007, the stores started to effectively operate under the Extra Fcil brand. In 2007, we
opened 15 new Extra Fcil stores, resulting in a total of 19 Extra Fcil stores as of December 31, 2007.

Extra.com.br

In line with our strategy to restructure our e-commerce operations initiated in 2006, we consolidated
our e-commerce performance through Extra.com.br, which focuses on the sale of non-food products. With a
90% increase in sales from 2006 and 2007, sales carried out via Extra.com.br represented 1.2% of total sales
of the Group in 2007.

Several strategic initiatives were put in place with a view to establishing the banner as an important
player in the on-line market such as: (1) the implementation of a new back-end and front-end system, which is
designed to support growth for several years; (2) a fully remodeled layout of the Extra.com.br website with
improved browsing capability; (3) increase of the offered sales items from 5,000 to 16,000 products,
implemented by an experienced commercial team; (4) the reinforcement of our media plan, thereby promoting
our banner in the Brazilian key web portals; (5) the launch of the first printed descriptive list of products sold

22
under Extra.com.br; (6) the adoption of new payment methods (bank slip and debit against checking account);
and (7) the implementation of 24-hour delivery to the metropolitan area of So Paulo, ensuring competitive
advantage in relation to competitors.
We seek to continue the banners significant sales growth by intensifying specific marketing
initiatives targeting e-commerce, in particular with regard to technology products. In addition, we will
continue investing in seeking a greater synergy with physical stores.

Assai

The cash and carry segment (atacarejo segment), a wholesale segment in the retail food sector, is
one of the fastest growing market segments in Brazil in terms of new store openings. This segment was
created in order to serve customers within a market niche that was neither reached by self-service retail nor by
wholesale. In order to enter this segment, on November 1, 2007, we acquired a 60% ownership interest in one
of the major players in the cash and carry segment, the Assai chain. Assai has been operating in the cash and
carry segment for 33 years and as of December 31, 2007, Assai had 2,700 employees and 15 stores, all of
them located in the state of So Paulo (out of which seven stores located in the city of So Paulo).
The acquisition of Assai was carried out through our subsidiary Sevilha Empreendimentos e
Participaes Ltda., or Sevilha, which we used as a vehicle to acquire shares representing 60% of the total
and voting capital of Barcelona Comrcio Varejista e Atacadista S.A., or Barcelona Comrcio, a newly
formed company to which all of Assais assets related to its operations were transferred. The remaining 40%
of ownership interest in Barcelona Comrcio remained with the former controlling shareholders of Assai. The
acquisition generated a goodwill of R$206.1 million and our acquisition costs amounted to R$ 208.5 million.
Assais performance since its implementation in November has been strong, with gross sales of
R$234.2 million recorded in November and December 2007. In December 2007, a new Assai store was
opened and for 2008.

Gas Stations and Drugstores

Over the past several years, we have begun to expand our range of complementary products and
services in order to enhance our customers satisfaction, providing them with additional services tailored to
their specific needs, such as gas stations (located within the parking area of some of our stores) and drugstores
(located inside some of our stores).

Purchasing Group

Another strategic initiative to reinforce our multi-format positioning was the partnership entered into
with Unio Brasil, in order to launch operations (initially through a pilot project conducted in Esprito Santo)
in the Purchasing Group segment formed by smaller stores with up to ten check-outs which currently
experiences strong growth in Brazil. Through our Purchasing Group, we provide business and logistics
expertise to retail store chains in order to increase our bargain power in this retail segment and also with an
objective to reach new markets in regions where we are not present.
Our partnership with Unio Brasil will allow us to tap a new business segment and new markets
where we have not yet been operating. Initially, the partnership will exclusively serve Multishow, a purchase
center affiliated with Unio Brasil which has 52 associated stores and annual sales of R$200 million.

Seasonality

We have historically experienced seasonality in our results of operations, principally due to

traditionally stronger sales in the fourth quarter holiday season. Sales revenues in December are typically 45%
above the average sales revenues in the other months.

23
 Supply and Distribution

Supply. We have centralized purchasing for our Po de Acar, CompreBem, Sendas, Extra, Extra
Eletro, Extra Perto and Extra Fcil stores. We purchase substantially all of our food products on a spot or
short-term basis from unaffiliated suppliers. In the aggregate, we purchase approximately 170,000 products
from approximately 10,000 suppliers.

Distribution. In order to distribute perishable food products, grocery items and general merchandise
efficiently, we operate 22 distribution centers strategically located within the cities of So Paulo, Braslia,
Fortaleza, Curitiba, Rio de Janeiro, Salvador and Recife with a total storage capacity of 401,208 square
meters. We were the first retailer in Brazil to have a centralized distribution center. The locations of our
distribution centers enable us to make frequent shipments to stores, which reduce the need of in-store
inventory space, and limits non-productive store inventories.
In 2007, we focused on four main issues: (1) ensuring the full availability of products and services,
and thus indirectly contribute to the Companys expansion; (2) improving the level of service to stores; (3)
enhancing the inventory management; and (4) reducing costs in our supply chain. Major initiatives developed
according to these goals included:
opening of a new non-food distribution center in the city of Recife;
adjustments in distribution centers in So Paulo in order to support the growth of our Extra Fcil
banner;
improvements in the breakage management;
improvements in the stores supply management;
capture synergies in our freight operations with suppliers and the automation in the loading structure
by reducing freight costs;
introduction of inventory management at stores (Gesto de Estoque em Loja), the purpose of which
is to establish parameters and ensure a high level of automation of the supply system; and
consolidation of the certification, which as of December 31, 2007 also covered 23 certified suppliers.
Top Log aims to strengthen relationship and mutual understanding between retail store chains and
suppliers of their respective logistics and distribution systems. The Top Log certification resulted in
the development of several joint process-improvement initiatives between us and our suppliers.

Marketing

Our marketing strategy is to further enhance the quality image of our stores and to emphasize our
selection and service and our competitive and fair prices. Each store banner executes its own marketing
strategy designed to promote its particular strengths and to appeal to its customer base. In 2007 and 2006, we
spent approximately R$199.1 million and R$230.2 million, respectively, on advertising (approximately 1.3%
and 1.7% of total net sales revenues in each year, respectively).

We spent 30.2% in 2007 and 31.4% in 2006 of our total marketing expenditures on radio, newspaper
and magazine advertising. In addition, television accounted for 39.1% of advertising expenses in 2007 and
32.5% in 2006. We spent 30.7% in 2007 and 36.1% in 2006 on other promotional activities.

In 2007, we significantly restructured our Companys brands, including the Po de Acar Group
corporate brand, which now is the official signature in all levels of communication with employees. The
restructuring of our brands, which focuses on Po de Acar, Extra and CompreBem went along with a
strategic review, aims at streamlining the brands composing our portfolio.
We also intend to reduce the amount of brands of our private label by the end of 2008. We also plan
to operate through a Transversal Exclusive Brands, concept present in all banners, aiming at increasing our

24
competitiveness, our profitability and our bargaining power.
Financeira Ita CBD

Financeira Ita CBD, or FIC, service kiosks in our stores have exclusive rights to offer private label
and co-branded credit cards, personal and consumer credit, extended warranties and insurance. Currently, FIC
is present in 545 stores with kiosks and assistance or electronic kiosks. We and Ita Holding each indirectly
hold 50% of FICs capital stock. Ita Holding is responsible for the management of FIC, being entitled to
appoint most of its officers.

FIC, which intermediated approximately 12.5% of the Groups total sales in 2007, reached the break-
even point in December 2007.
On December 31, 2007, our FIC client portfolio included 5.7 million customers, which represented a
11.7% increase from December 31, 2006. During the same period, the receivables portfolio increased by
50.5% to R$1,344.9 million.
The principal initiatives that contributed to the strong FIC performance were:
purchase of the portfolio of co-branded cards previously owned by Credicard;
continuing growth in card activation levels;
expansion of the private label card portfolio through increased use, new clients and the migration
from private label cards to Mastercard co-branded cards;
reinitiation of co-branded card sales;
new client-registering and credit-granting initiatives, with higher limits and more extended payment
terms than the ones offered by competitors;
creation of the CDC (direct consumer credit) for private label cards, with a substantial expansion of
clients installment payment capacity and a pre-approved credit portfolio of more than R$5.0 billion;
and
participation in the Retail in the Soul (Varejo na Alma) campaign, whereby store employees
encourage card use by customers.
The table below sets forth the breakdown of FICs clients in 2007 and 2006.

Total of clients (in thousands) 2007 2006

Private label cards ............................................................ 3,997 3,493
Co-branded cards ............................................................. 595 91
CDC agreements .............................................................. 247 519
Extended Guarantee ......................................................... 640 863
Personal Loan................................................................... 216 127
Total................................................................................. 5,695 5,093

Credit Sales

In 2007, 49.9% of our net sales revenue was represented by credit sales in the form of credit card
sales, installment sales, post-dated checks and purchase vouchers. In 2006, 50.5% of our net sales revenue
was represented by credit sales.

25
 Credit card sales. All our store formats accept payment for purchases with MasterCard, Visa, Diners
Club, American Express and our co-branded credit cards. Sales to customers using credit cards accounted for
39.8%, 38.6%, 37.1% of our net sales revenue in 2007, 2006 and 2005, respectively. From this total, sales
through private label and co-branded credit cards accounted for 10.3% of our net sales revenue in 2007. An
allowance for doubtful accounts is not required as credit risks are substantially assumed by credit card
companies. Our Ita CBD partnership provides credit products and services at our stores, which involves
private label and co-branded credit cards.

Installment sales. Our Extra Eletro stores and Extra hypermarkets offer attractive consumer
financing conditions to our customers who frequently purchase electronic goods or home appliances,
respectively, on an installment basis. The installment sales accounted for 0.8%, 1.9%, 2.0% of our total net
sales revenue in 2007, 2006 and 2005, respectively.

Post-dated checks. Post-dated checks are used as financial instruments in Brazil to make purchases.
Post-dated checks are executed by a consumer with a future date (up to 60 days) instead of the date of the
purchase. The retailer typically deposits the check only as of this future date, and interest for the time elapsed
is included in the amount of the check. We currently have post-dated check programs in which interest is
computed on the settlement amount based upon a fixed monthly rate of interest (to a lesser extent, for certain
promotional programs no interest is charged). We limit the availability of post-dated checks to customers who
meet our credit criteria and who hold our identification card. Sales to customers using post-dated checks
accounted for 1.5%, 2.0% and 3.0% of our net sales revenue in 2007, 2006 and 2005, respectively.

As part of the credit approval process, we require each customer to complete a credit application.
The applicant must also provide a taxpayers identification number, identification card, proof of residential
address and current pay stub or other evidence of income as part of the application process. We then run a
credit check with local credit reporting services and with SPC (Credit Protection Service) and SERASA, both
of which are large databases on individuals, firms and corporate concerns, to determine a credit limit. We also
input the data regarding the client and any purchases into our database.

Purchase vouchers. We accept as payment in our stores vouchers issued by third party agents to
participating companies who provide them to their employees as a fringe benefit. Purchase vouchers
accounted for 7.8%, 8.0% and 7.5% of our net sales revenue in 2007, 2006 and 2005, respectively. An
allowance for doubtful accounts is not required as credit risks are substantially assumed by third parties.

Technology

We invested R$141.7 million in information technology in 2007 and R$123.8 million in 2006. We
consider information technology one of the pillars of our company. Our information technology department
interacts with our other departments, thereby streamlining our several strategic initiatives. In 2007, strategic
initiatives included:
During 2007, we launched several initiatives with a view to consolidate our strategy in the
information technology area. These initiatives included the following ones:
technological innovations reopening of a Po de Acar store in the Iguatemi shopping mall in
So Paulo which is operated on the basis of innovative technologies: including digital media,
intelligent cart, interactive kiosks, identification of type of wine by radio-frequency in the wine
department, electronic labels on all products, etc;
e-commerce implementation of new technologies and systems that will improve our ability to
monitor and manage the development of our Extra.com.br banner (both with respect to the website
itself and back-end systems such as distribution center, telesales and payment modules);
pricing adoption of a new pricing system (DemandTec), which will facilitate the pricing process of
products;
technological upgrade replacement of equipment at stores (totaling 2,238 computers, 297 scales,
1,095 scanners, 1,521 invoice printers and 377 store servers); and

26
 CSC (Shared Services Center) review and automation of existing administrative processes at
stores, which led to a reduction in expenses by R$25 million in 2007.
In 2007, we also started the implementation of the ERP SAP R/3 process which we expect will
start operating during 2008, with the implementation of several modules.

Intellectual Property

We consider our trademarks one of our most valuable assets. In order to reach one of our main goals,
which is to be the most well-known and admired trademark by consumers, we have worked extensively to
define the characteristics of each of our banners: Extra, Extra Perto, Extra Fcil, Extra-Eletro, Po de
Acar, CompreBem, Sendas and Assai. We are pioneers in the food retail industry to determine a clear
position and define the format for each banner, so that each banner complements the others, and believe this is
a strong competitive advantage.

This strategy also allowed us to better understand the market, consumption patterns and behavior of
our clients.

Pursuant to our policy to register all our trademarks, as of December 31, 2007 our most important
trademarks (Po de Acar, Companhia Brasileira de Distribuio, Barateiro, Extra, Qualit, CompreBem,
Sendas, Taeq and Assai) were duly registered and we had approximately 1,601 trademarks registered or being
registered in Brazil. We did not have any patents as of December 31, 2007.

Competition

The Brazilian food retailing business is highly competitive and has experienced consolidation in
recent years. In 2007, the five largest food retailers in Brazil accounted for 41.5% of the organized sector
sales, which consist of sales by companies enrolled in ABRAS, Brazils supermarket association. In 2007, we
accounted for 13.8% of the organized sector sales according to ABRAS. We believe the acquisitions trend
will slowdown, because the principal chains have already been acquired by the main competitors on the
market. We believe that future acquisitions will mainly involve smaller sized-stores. Another recent trend in
the retail food sector is large chains migrating to smaller formats such as neighborhood banners.
Hypermarkets are expected to gain market share in apparel, general merchandise, consumer electronics,
furniture, home development and other non-food categories because of a general lack of department stores
and specialized stores in Brazil. We have continued our growth strategy by focusing on regions where we can
reinforce our presence. As part of our expansion strategy, we have also focused on the needs and expectations
of different consumers by developing store formats that respond to different household income levels.
Although we operate stores in many regions throughout Brazil, the size, wealth and importance of the So
Paulo State have led us to concentrate our stores in this particular market. In 2007, sales in So Paulo State
accounted for 61.5% of our total sales. In So Paulo State and throughout Brazil, we compete principally on
the basis of location, price, image, quality and service. In the food retail market, our competition includes
hypermarkets, supermarkets and traditional wholesalers. Our principal competitors are multinational retail
food chains, local supermarkets and grocery stores.

The main competitor of our Extra hypermarket is Carrefour, a leading French retail food chain,
which at December 31, 2007 operated retail stores principally in the southeast and south of Brazil. At
December 31, 2007, Carrefour accounted for 14.1% of the organized sectors sales according to data from
ABRAS. Wal-Mart is also a competitor in the hypermarket and supermarket format with a 11.0% market
share in Brazil.

In 2007, we acquired the Assai chain with 14 stores in the state of So Paulo, which operates in the
cash and carry segment. Assais main competitors are Atacado (a wholesale chain with 34 stores acquired by
Carrefour in 2007), Roldo, Tenda and Makro.

27
 Po de Acar has different competitors in each of the markets where we operate. In So Paulo
State, we compete principally with a number of local supermarkets and grocery stores such as Sonda,
Pastorinho, Carrefour, Mambo, Futurama and Wal-Mart. The main competitor of Po de Acar in Braslia is
Carrefour Bairro, the supermarket division of Carrefour, Super Maia, Super Cei and Big Box. In the state of
Rio de Janeiro, our Po de Acar format competes with Supermercados Mundial and Zona Sul. In Paraba,
Pernambuco, Cear and Piau, our main competitors are local supermarkets and Bompreo (Wal-Mart).

CompreBem/Sendas also faces different competitors depending on the particular regional market. In
the state of So Paulo, CompreBem faces strong competition from a number of smaller regional chains. The
main competitors of CompreBem/Sendas in the state of Rio de Janeiro are Guanabara, Prezunic, Zona Sul,
Carrefour Bairro and Mundial.

In other regional markets, we compete within the organized food retail sector as well as against
several medium and small chains and family-owned and operated food retail businesses, which are estimated
to represent approximately 50% of overall food sales in Brazil. Other organized food retail chains among our
competitors include Sonae and Bompreo, owned by Wal-Mart in Brazil.

The principal competitors of our Extra Eletro stores are Casas Bahia and Ponto Frio (Globex), each
of which operates in So Paulo State.

Other U.S. and international retailers may enter into the Brazilian retail market, either directly, by
forming joint ventures or by acquiring existing chains. Some of these potential competitors may have greater
financial resources than us. Moreover, to the extent that other large international food retailers enter the
Brazilian market or the retail sector continues to consolidate through the acquisition of local supermarket
chains, our market share may be adversely affected.

Regulatory Matters

We are subject to a wide range of governmental regulation and supervision generally applicable to
companies engaged in business in Brazil, including federal, state and municipal regulation, such as labor laws,
public health and environmental laws. In order to open and operate our stores, we need a business permit and
site approval, an inspection certificate from the local fire department as well as health and safety permits. Our
stores are subject to inspection by city authorities. We believe that we are in compliance in all material
respects with all applicable statutory and administrative regulations with respect to our business.

Our business is primarily affected by a set of consumer protection rules regulating matters such as
advertising, labeling and consumer credit. We believe we are in compliance in all material respects with these
consumer protection regulations.

As a result of significant inflation during long periods in the past, it was commonly the practice in
Brazil not to label individual items. However, a recently enacted federal regulation concerning this issue
established that products exposed to consumers must contain information about prices (for instance price tags,
signs or bar codes which can be read with scanners) in order to facilitate the identification of prices of each
product by the consumer. Pursuant to these new rules, the pricing information must be physically attached or
adjacent to the product. When bar codes are used, the commercial establishment is required to provide easily
accessible scanners. We believe that we are in compliance with these new provisions in all material aspects.

The Brazilian Congress is considering a bill requiring a prior assessment of the impact of the
construction of a hypermarket in excess of 1,000 square meters on the relevant neighborhood. The proposed
regulation is intended to protect traditional family-owned retailers that have increasingly lost market share in
Brazil to the larger chains and hypermarkets. Regulations of this type already exist at the municipal level. For
example, governmental authorities in the city of Porto Alegre in the state of Rio Grande do Sul issued a city
ordinance in January 2001 prohibiting construction of food retail stores with a selling area greater than 1,500
square meters, which in May 2005, was amended as to increase from 1,500 to 2,500 squares meters the selling
area of food retail stores. Other jurisdictions may adopt similar laws, and, if the bill pending before the
Brazilian Congress becomes law, our future expansion and growth may be subject to significant constraints.

28
 4C. Organizational Structure

Companhia Brasileira de Distribuio conducts our operations. Our investments in subsidiaries are
effected primarily to acquire the share capital of other retail chains from third parties. In most cases, the retail
operations are transferred to retail stores under existing banners or the stores acquired begin operating under
our banners. All our operations are conducted under the Po de Acar, CompreBem, Sendas, Extra, Extra
Eletro, Extra Fcil, Extra Perto and Assai banners. For further information on our subsidiaries see Note 2(q)
to our financial statements included under Item 18, Financial Statements.

4D. Property, Plants and Equipment

We own 79 stores, seven warehouses and a part of our headquarters. The remaining 481 stores and
15 warehouses we operate and the remainders of our headquarters are leased. Leases are usually for a term of
five to 25 years, and provide for monthly rent payments based on a percentage of sales above an agreed
minimum value. We have nine leases expiring in 2008. Based on our prior experience and Brazilian law and
leasing practices, we do not anticipate any material change in the general terms of our leases or any material
difficulty in renewing them. As of December 31, 2007, we leased 16 properties from members of the Diniz
family and 61 stores from Fundo de Investimento Imobilirio Pennsula. Our management believes that these
leases are based on normal market conditions. See Item 7B Major Shareholders and Related Party
Transactions Related Party Transactions Leases.

The following table sets forth the number and total selling area of our owned and leased retail stores
by store format, the number and total storage area of our owned and leased warehouses and the total office
area of our headquarters that is owned and leased as of December 31, 2007:

Owned Leased Total

Area (in Area (in Area (in

square square square
Number meters) Number meters) Number (*) meters)

Po de Acar........................................................................ 29 39,116 124 163,342 153 202,458

Extra....................................................................................... 20 152,815 71 537,072 91 689,887
Extra Eletro............................................................................ 2 2,498 40 25,113 42 27,611
Extra Perto............................................................................. 6 16,232 9 24,431 15 40,663
Extra Fcil 2 395 17 4,388 19 4,783
CompreBem............................................................................ 18 26,642 160 199,647 178 226,289
Sendas .................................................................................... 2 2,153 60 103,652 62 105,805
Assai - - 15 40,833 15 40,833
Warehouses ............................................................................ 7 286,559 15 98,441 22 401,208
Headquarters ......................................................................... 28,591 13,043 41,634
(*) 69 of our stores have been subject to liens as a result of judicial proceedings.

ITEM 4A. UNRESOLVED STAFF COMMENTS

None.

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

5A. Operating Results

The following discussion should be read in conjunction with our audited consolidated financial
statements as of December 31, 2007 and 2006 and for the three years ended December 31, 2007, 2006 and

29
2005 appearing elsewhere in this annual report, and in conjunction with the financial information statements
included under Item 3A. Key Information Selected Financial Data.

Financial Presentation and Accounting Policies

Presentation of Financial Statements

We have prepared our consolidated financial statements as of December 31, 2007 and 2006 and for
the three years ended December 31, 2007, 2006 and 2005 in accordance with Brazilian GAAP, which differs
in significant respects from U.S. GAAP. Except as otherwise indicated, all financial information in this annual
report has been presented in reais and prepared in accordance with Brazilian GAAP, which differs in
significant respects from U.S. GAAP. See note 26 to our audited consolidated financial statements included in
this annual report for an explanation of these differences.

Discussion of Critical Accounting Policies

Management strives to report the financial results of the company in a clear and understandable
manner, even though in some cases accounting and disclosure rules are complex and require us to use
technical terminology.

In connection with the preparation of the financial statements included in this annual report, we have
relied on variables and assumptions derived from historical experience and various other factors that we deem
reasonable and relevant. Although we review these estimates and assumptions in the ordinary course of
business, the portrayal of our financial condition and results of operation often requires our management to
make judgments regarding the effects of inherently uncertain matters on the carrying value of our assets and
liabilities. Actual results may differ from those estimated under different variables, assumptions or conditions.
We provide below a summarized discussion of the significant accounting policies involving these
management judgments, including the variables and assumptions underlying the policies:

Inventories and payments from suppliers

Inventories are accounted for at the lower of cost or market. We record the inventory losses
(shrinkage) throughout the year.

We receive cash consideration from suppliers for various programs, primarily volume incentives,
warehouse allowances and reimbursements for specific programs such as markdowns, margin protection and
cooperative advertising. Volume bonuses and discounts are received from suppliers in the form of product as
zero-cost additions to inventories and the benefit is recognized as the product is sold. Discounts and bonuses
in cash are recorded as decreases in cost of sales when certain conditions are fulfilled. Substantially all cash
consideration from suppliers are accounted for as a reduction of item cost and recognized as income when
certain conditions are fulfilled and the related inventory is sold.

Leases

Under Brazilian GAAP, leases are treated as operating leases and the expense is recognized at the
time each lease installment becomes due. Under U.S. GAAP, we estimate the expected term of leases of our
stores by assuming the exercise of renewal options, which are at the sole discretion of the Company. This
expected term is used in the determination of whether a store lease is capital or operating and in the
calculation of straight-line rent expense. Additionally, the useful life of leasehold improvements is limited by
the lease term.

Valuation of long-lived assets

Under Brazilian GAAP, companies are required to determine if operating income is sufficient to
absorb the depreciation or amortization of long-lived assets in order to assess potential asset impairment. In

30
the event such operating income is insufficient to recover the depreciation, the assets, or groups of assets, are
written down to recoverable values, preferably based on the projected discounted cash flows of future
operations. Under U.S. GAAP, in accordance with SFAS No. 144, long-lived assets are reviewed for
impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may
not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying
amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If
the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized in
the amount by which the carrying amount of the asset exceeds the fair value of the asset.

A determination of the fair value of an asset and estimating recoverability require management to
make certain assumptions and estimates with respect to projected cash inflows and outflows related to future
revenues and expenditures and expenses. These assumptions and estimates can be influenced by different
external and internal factors, such as economic and industry trends, interest rates and changes in the
marketplace. A change in the assumptions and estimates that we use could change its estimate of the expected
future net cash flows and lead to the recognition of an impairment charge in results of operations relating to
our property and equipment.

FIN 48

The Company adopted the provisions of FASB Interpretation No. 48 (FIN 48), Accounting for
Uncertainty in Income Taxes, on January 1, 2007. Since January 1, 2007, the Company records the financial
statement effects of an income tax position when it is more likely than not, based on the technical merits, that
it will be sustained upon examination. A tax position that meets the more-likely-than-not recognition
threshold is measured and recorded as the largest amount of tax benefit that is greater than 50 percent likely of
being realized upon ultimate settlement with a taxing authority. Previously recognized tax positions are
derecognized in the first period in which it is no longer more likely than not that the tax position will be
sustained. The benefit associated with previously unrecognized tax positions are generally recognized in the
first period in which the more-likely-than-not threshold is met at the reporting date, the tax matter is
ultimately settled through negotiation or litigation or when the related statute of limitations for the relevant
taxing authority to examine and challenge the tax position has expired. The recognition, derecognition and
measurement of tax positions are based on our managements best judgment given the facts, circumstance and
information available at the reporting date.

Differences between a tax position taken or expected to be taken in the Companys tax returns and
the amount of benefit recognized and measured in the financial statements result in unrecognized tax benefits,
which are recorded in the balance sheet as either a liability for unrecognized tax benefits or reductions to
recorded tax assets, as applicable. The liability for unrecognized tax benefits expected to be realized within
one year is classified as current in the balance sheet.

The Company will recognize penalties and interest accrued on any unrecognized tax benefits as a
component of income tax expenses.

The adoption of FIN 48 did not have a material impact on the Companys statements of operations
and financial position and did not result in a cumulative adjustment to retained earnings at adoption. As a
consequence of adopting FIN 48, the Company did not identify, as of December 31, 2007 and 2006, any
recorded liabilities related to unrecognized tax benefits.

The Company or its subsidiaries file income tax returns in Brazil and other foreign federal and state
jurisdictions. The tax years 2002 through 2006 remain open and subject to examination by the relevant tax
authorities.

Goodwill

Under Brazilian GAAP, goodwill arises from the difference between the amount paid and the
Brazilian GAAP book value (normally also the tax basis) of the net assets acquired. This goodwill is normally
attributed to the difference between the book value and the market value of assets acquired or justified based

31
on expectation of future profitability and is amortized on a straight line basis over the remaining useful lives
of the assets or up to ten years. Goodwill in a subsidiary subsequently merged into its parent is reclassified to
intangible assets.

Under U.S. GAAP, fair values are assigned to assets acquired and liabilities assumed in business
combinations, including intangible assets. The difference between consideration paid over the fair value of
assets acquired and liabilities assumed is recorded as goodwill. Statement of Financial Accounting Standards
No. 142 Goodwill and Other Intangible Assets (FAS 142) requires that, effective January 1, 2002, goodwill,
including those in the carrying value of investments accounted for under the equity method and certain other
intangible assets deemed to have an indefinite useful life, cease to be amortized. FAS 142 also requires that
goodwill and certain intangible assets be assessed for impairment using fair value measurement techniques.
Goodwill is evaluated for impairment annually or whenever events or changes in circumstances indicate that
the value of certain goodwill may be impaired. This evaluation requires management to make judgments
relating to future cash flows, growth rates, economic and market conditions. These evaluations are based on
discounted cash flows that incorporate the impact of existing company businesses. Historically, the company
has generated sufficient returns to recover the cost of goodwill and other intangible assets. Because of the
nature of the factors used in these tests, if different conditions occur in future periods, future operating results
could be materially impacted.

Intangible Assets and Business Combinations

The Company has entered into two business combination transactions in 2007. Under Brazilian
GAAP, the transactions were accounted at historical values. Under U.S. GAAP, the Company applied FAS
141 and the purchase method of accounting. The Company has concluded the identification and valuation at
fair value of tangible assets for the acquisitions occurred in 2006. Additionally, management has already
concluded its evaluation regarding identification of additional liabilities, concluding that no additional accrual
should be recorded in the beginning balance of acquired shares representing 60% of the total and voting
capital of Barcelona Comrcio, a newly formed company that received the assets of Assai. Using the work of
specialists, management has initially identified intangible assets, as shown above. However, the Company is
still working in the identification and valuation of additional intangible assets and, at the date of the issuance
of the financial statements, has not gathered enough historical data from Assai to conclude such analysis.
Considering that under FAS 141, there is an allocation period of 12 months to complete the purchase price
allocation, the Company will conclude the collection of data and conclude the valuation of the intangibles
during 2008.

Deferred Taxes

We compute and pay income taxes based on results of operations determined under Brazilian GAAP.
Under Brazilian GAAP and U.S. GAAP, we recognize deferred tax assets and liabilities based on the
differences between the financial statement carrying amounts and the tax bases of assets and liabilities. We
regularly review the deferred tax assets for recoverability and establish a valuation allowance if, under U.S.
GAAP, it is more likely than not that the deferred tax assets will not be realized, based on historical taxable
income, projected future taxable income, and the expected timing of the reversals of existing temporary
differences. Under Brazilian GAAP, deferred tax assets are recorded when recoverability is considered
probable, limited to the assets which will be recovered over the following 10 years against estimated taxable
income at present values. When performing such reviews, we are required to make significant estimates and
assumptions about future taxable income. In order to determine future taxable income, we need to estimate
future taxable revenues and deductible expenses, which are subject to different external and internal factors,
such as economic and industry trends, interest rates, changes in our business strategies and changes in the type
of services it offers to the market. The use of different assumptions and estimates could significantly change
our financial statements. A change in the assumptions and estimates with respect to our expected future
taxable income could result in a reduction in deferred tax assets being charged to income. If we operate at a
loss or are unable to generate sufficient future taxable income, or if there is a material change in the actual
effective tax rates or discount rates, the time period over which the underlying temporary differences become
taxable or deductible, or any change in its future projections, we could be required to establish a valuation
allowance against or write off all or a significant portion of our deferred tax assets resulting in a substantial

32
increase of our effective tax rate and a material adverse impact on operating results. Under U.S. GAAP, a
valuation allowance is recognized if, based on the weight of available evidence, it is more-likely-than-not that
some portion, or all, of the deferred tax asset will not be realized and the projection if estimated future taxable
income is considered only for a short period of time.

U.S. GAAP Reconciliation

Our net income in accordance with Brazilian GAAP was R$210.9 million in 2007, R$85.5 million in
2006 and R$257.0 million in 2005. Under U.S. GAAP, we would have reported net income of R$273.4
million in 2007, R$14.5 million in 2006 and R$270.6 million in 2005.

Our shareholders' equity in accordance with Brazilian GAAP was R$5,012.0 million at December
31, 2007 and R$4,842.1 million at December 31, 2006. Under U.S. GAAP, we would have reported
shareholders' equity of R$4,770.5 million at December 31, 2007, R$4,658.0 million at December 31, 2006
and R$4,148.0 million at December 31, 2005.

The principal differences between Brazilian GAAP and U.S. GAAP that affected our net income in
2007, 2006 and 2005, as well as shareholders equity at December 31, 2007 and 2006, are described in note
26 to our audited consolidated financial statements, included in this annual report. The major differences
relate to the accounting treatment of the following items:

supplementary inflation restatement of permanent assets and shareholders equity in 1996 and 1997;

capitalized interest;

leasehold improvements;

deferred gain on FIC transactions;

deferred charges and other intangible assets;

business combinations;

accounting for put options;

sale leaseback transactions;

deferred income taxes;

consolidation of Sendas Distribuidora;

stock options under SFAS 123R, and

puttable minority interest.

Brazilian Economic Environment

As a Brazilian company with all of our operations in Brazil, we are significantly affected by
economic and social conditions in the country. In particular, our results of operations and financial condition,
as reported in the financial statements included in Item 18 of this annual report, have been affected by the
growth rate of the Brazilian gross domestic product and the rate of Brazilian inflation. Our results of
operations and financial condition have also been affected by the rate of depreciation of the Brazilian
currency against the U.S. dollar. See Effects of Fluctuations in Exchange Rates between Real and U.S.
Dollar Effects of Exchange Rate Variation and Inflation on Our Financial Condition and Results of
Operations.

33
 Our business is directly affected by the macroeconomic trend of the global economy in general and
the Brazilian economy in particular. If interest rates rise and the Brazilian economy enters a period of
continued recession, demand for our products and services is likely to be negatively affected. Further,
continuing depreciation of the Brazilian real against the U.S. dollar and the consequent inflation would reduce
the purchasing power of Brazilian consumers, negatively affecting the ability of our customers to pay for our
products and services. Future real devaluations would also affect our profit margins by increasing the
carrying costs of our U.S. dollar and other foreign currency denominated debt and our other costs and
expenses based on the U.S. dollar and other foreign currencies. If Brazil experiences significant inflation
rates, we may be unable to increase prices charged to our customers in amounts that are sufficient to cover our
increasing operating costs, and our business may be adversely affected as a consequence.

Driven by exports, Brazils economic growth began to accelerate in 2004, especially in the sectors
that are seen as more sensitive to the availability of credit. Signals of recovery in the domestic market were
reflected positively in the labor market, as unemployment fell, in an increase in the income of Brazils
populace and in the strengthening of the Brazilian economy. Brazils gross domestic products, or GDP, grew
by 4.9% and the real appreciated by 8.8% against the U.S. dollar between December 31, 2003 and December
31, 2004.

In the same period, the labor market grew with the creation of approximately 1.9 million new jobs,
which led to an increase in the demand for goods and services in the economy. Inflation, as measured by the
Broad Consumer Price Index (ndice Nacional de Preos ao Consumidor Amplo), or the IPCA, was 7.6%.
Exports and foreign investment led to a significant current account surplus of more than U.S.$10.0 billion
(equivalent to 2.0% of Brazils GDP).

In September 2004, the Central Bank began to implement a policy of increasing Brazils base interest
rate, known as the reference rate to the Special System for Settlement and Custody (Sistema Especial de
Liquidao e Custdia), or SELIC, because the inflationary indicators exceeded the target established by the
Treasury Ministry for 2005. The effects of the increase of the SELIC rate were reflected in Brazils economic
growth, as GDP grew by only 2.3% in 2005, as compared with 4.9% in 2004.

Commencing in September 2005, the SELIC rate began to be gradually reduced as the inflation
estimates for 2005 and the next 12 months began to converge with the target. The SELIC rate was 18.0% at
the end of 2005. The inflation rate, according to the IPCA index, was 4.5%, below the target of 5.1% set by
the Central Bank on December 31, 2007. The real appreciated by 13.4% against the U.S. dollar, reaching
R$2.34 to U.S.$1.00 on December 31, 2005.

In 2006 and 2007, the Central Bank continued the process of reducing the SELIC interest rate, which
reached 13.25% and 11.25% on December 31, 2006 and 2007, respectively. In 2006 and 2007, inflation was
3.1% and 4.5%, respectively according to the IPCA and the real appreciated by 9.5% and 20.7%, respectively
against the U.S. dollar, reaching R$1.7713 to U.S.$1.00 on December 31, 2007.

34
 The table below shows real GDP growth, inflation, interest rates and the real/U.S. dollar exchange
rate for the years indicated:

For the year ended December 31,

2007 2006 2005 2004 2003

Real GDP growth ......................................................................... 5.4% 2.9% 2.3% 4.9% 0.5%

(1)
Inflation (General Market Price Index, or IGP-M) ................... 7.8% 3.8% 1.2% 12.4% 8.7%
(2)
Inflation (IPCA) ........................................................................ 4.5% 3.1% 5.7% 7.6% 8.7%
SELIC rate at the end of the period.............................................. 11.3% 13.3% 18.0% 17.8% 16.5%
Exchange rate at end of period (U.S.$1.00)................................. R$1.771 R$2.138 R$2.341 R$2.654 R$2.889
Average exchange rate (U.S.$1.00) ............................................. R$1.948 R$2.177 R$2.413 R$2.917 R$3.078
Appreciation (devaluation) of the real against the U.S. dollar.... 20.7% 9.5% (13.4%) (8.8%) (22.3%)

(1) ndice Geral de Preos Mercado (general price index) compiled by the Fundao Getlio Vargas.
(2) ndice de Preos ao Consumidor Amplo (consumer price index) compiled by IBGE, the Brazilian Institute of Geography and
Statistics.

Effects of Exchange Rate Variation and Inflation on Our Financial Condition and Results of
Operations

The depreciation or appreciation of the real against the U.S. dollar has had and may continue to have
multiple effects on our results of operations. Exchange gains and losses arising from our transactions in U.S.
dollars (excluding transactions which are covered by cross-currency interest rate swaps) are recorded directly
in our statement of operations. As shown in the above table, the appreciation of the real was 20.7% in 2007,
9.5% in 2006 and 13.4% in 2005.

Inflation and exchange rate variations have had, and may continue to have, effects on our financial
condition and results of operations. One significant effect of inflation and exchange rate variations relates to
our costs and operating expenses. Substantially all our cash costs (i.e., other than depreciation and
amortization) and operating expenses are in reais and tend to increase with Brazilian inflation because our
suppliers and service providers generally increase prices to reflect Brazilian inflation.

The devaluation of the real affects the amount available for distribution when measured in U.S.
dollars. Amounts reported as available for distribution in our statutory accounting records prepared under
Brazilian GAAP will decrease or increase when measured in U.S. dollars as the real depreciates or
appreciates, respectively, against the U.S. dollar. In addition, the devaluation of the real creates foreign
exchange losses which are included in the results of operations determined under Brazilian GAAP which
affect the amount of inappropriate earnings available for distribution.

We generally manage financial market risk, principally by swapping a substantial portion of our
U.S. dollar-denominated liabilities for obligations denominated in reais. Our policy has been to swap all
foreign currency debt at fixed rates for reais debt using a fixed percentage of a floating rate, except for import
financing and a portion of our capital lease agreements.

We engage in cross-currency interest rate swaps under which we enter into an agreement typically
with the same counter-party which provides the original U.S. dollar-denominated financing. A separate
financial instrument is signed at the time the loan agreement is consummated, under which we are then
effectively liable for amounts in reais and interest at a percentage of an interbank (Certificado de Depsito
Interbancrio CDI) variable interest rate. The term of the swap contract matches the term of the underlying
obligation; we have not terminated any of our contracts prior to maturity. The counter-parties to these

35
contracts are major financial institutions that have acceptable credit ratings. We do not have significant
exposure to any single counter-party.

We use these derivative financial instruments for purposes other than trading and do so only to
manage and reduce our exposure to market risk resulting from fluctuations in interest rates and foreign
currency exchange rates.

Under Brazilian GAAP, we account for these instruments under the accrual method. We record both
the interest expense from the original loan and the net realized and unrealized effect of the results of the cross-
currency interest rate swaps under Financial expense interest expense. If the results of applying the
variation of the U.S. dollar plus the original fixed coupon, that is, the original characteristics of the financial
instrument, exceed the product of applying the CDI rate, we record this benefit reducing our Financial
expense interest expense to reflect the gain accruing as a result of our having opted to swap the currency
and interest rate components. If the inverse were to occur, an additional charge is recorded under Financial
expense interest expense to reflect the loss accruing as a result of our having opted to swap the currency
and interest rate components. Accordingly, if the real devalues against the U.S. dollar, the cross-currency
interest rate swaps assure that we mitigate the effects of the loss from the devaluation. Under U.S. GAAP, we
account for these financial instruments at fair value with resulting effect in the income statement.

Tax Environment

We are currently involved in tax proceedings as discussed in note 16 to our audited consolidated
financial statements included in this annual report and Item 8A Financial Information Consolidated
Statements and Other Financial Information Legal Proceedings. We record provisions for our estimated
costs for the resolution of these claims when we consider the loss of our claim to be probable and for existing
tax obligations under dispute. The tax contingencies relate primarily to taxes on revenue, social security
contributions and income tax. We have identified probable losses and existing tax obligations under dispute in
the amount of R$1,309.8 million at December 31, 2007 (R$1,209.4 million in 2006) that have been recorded
as liabilities on our consolidated financial statements. This estimate has been developed based on consultation
with outside legal counsel handling our defense in these matters and is based upon an analysis of potential
results, assuming a combination of litigation and settlement strategies. We do not believe these tax
proceedings will have a material adverse effect on our financial position. It is possible, however, that future
results of operations could be materially affected by changes in our assumptions and the effectiveness of our
strategies with respect to these proceedings.

Income taxes in Brazil generally include federal income tax and social contribution on net profits.
The overall tax rate is currently 34%, which includes income tax (15% plus a surtax of 10% on taxable
income exceeding R$20,000 per month, or R$60,000 per quarter, or R$240,000 per year) and social
contribution on net profits (9%).

2007 Business and Economic Environment

During 2007, we observed an increase of purchasing power in all income segments in Brazil, mainly
the low-income segments, which accounts for 71% of the population. This increase resulted from the actual
growth of the minimum wage and lower interest rates, resulting in a better consumption level.

Certain Operating Data

The following table presents the net sales revenue in reais for each of our store formats for the years
ended December 31, 2007, 2006 and 2005.

36
 Year Ended December 31,

2007 2006 2005

(millions of reais, except percentage amounts)

Net sales revenue by store format:
Po de Acar................................................ R$3,149.1 21.1% R$3,091.7 22.3% R$3,244.9 24.2%
Extra(*).......................................................... 7,664.8 51.4 7,050.1 50.8 6,532.3 48.7
Extra Eletro ................................................... 260.8 1.8 285.6 2.1 232.8 1.7
CompreBem ................................................... 2,477.1 16.6 2,279.4 16.4 2,194.3 16.4
Sendas ............................................................ 1,150.5 7.7 1,173.6 8.4 1,209.1 9.0
Assai 200.6 1.4 - - - -

Total net sales revenue.............................. R$14,902.9 100.0% R$13,880.4 100.0% R$13,413.4 100.0%

(*) Extra Perto and Extra Fcil sales included.

Results of Operations for 2007, 2006 and 2005

The following table summarizes our historical results of operations for the years ended December 31,
2007, 2006 and 2005.

Year Ended December 31,

2007 2006 2005
(millions of reais, except percentages)
Statement of operations data

Brazilian GAAP:
Net sales revenue 14,902.9 100.0 13,880.4 100.0 13,413.4 100.0
Cost of sales (10,724.5) (72.0) (9,963.0) (71.8) (9,438.1) (70.4)

Gross profit 4,178.4 28.0 3,917.4 28.2 3,975.3 29.6

Selling, general and administrative expenses (3,152.4) (21.2) (3,031.1) (21.8) (2,868.8) (21.4)
Depreciation and Amortization (550.7) (3.7) (547.9) (4.0) (625.3) (4.7)
Financial income 344.4 2.3 382.8 2.8 446.7 3.3
Financial expense (555.6) (3.7) (603.4) (4.3) (683.5) (5.1)
Equity (28.9) (0.2) (53.2) (0.4) (16.2) (0.1)

Operating income 235.2 1.6 64.6 0.5 228.2 1.7

Non-operating income (expense), net (9.1) (0.1) (323.2) (2.3) 32.1 0.2

Income / (loss) before income taxes 226.1 1.5 (258.6) (1.8) 260.3 1.9
Income tax (expense) benefit:
Current (49.7) (0.3) (92.2) (0.7) (133.9) (1.0)
Deferred 38.4 0.3 90.7 0.7 80.9 0.6
Employee profit sharing (13.4) (0.1) (13.4) (0.1) (14.5) (0.1)
Minority interest 9.5 0.1 359.0 2.5 64.2 0.5
Net income 210.9 1.4 85.5 0.6 257.0 1.9

37
Year Ended December 31, 2007 Compared to Year Ended December 31, 2006

Net sales revenue. Net sales revenue increased by 7.4% to R$14,902.9 million in the year ended
December 31, 2007 from R$13,880.4 million in the year ended December 31, 2006 mainly due to the
following factors in each of our banners:

Po de Acar banner net sales revenue increased by 1.9% to R$3,149.1 million in 2007 from
R$3,091.7 million in 2006. This increase was the result of the opening of three stores on the second half of
2006 and one store in 2007. Po de Acar banner recorded the best performance in terms of store sales
among our banners for 2007 with gross sales of R$3,743.6 million, representing an increase of 2.7% relative
to 2006.

CompreBem net sales revenue increased by 8.7% to R$2,477.1 million in 2007 from R$2,279.5
million in 2006. This increase was due to the opening of nine stores in late 2006 and five new stores in 2007
as well as the renovation of 20 stores in 2007.

Sendas net sales revenue decreased by 2.0% to R$1,150.5 million in 2007 from R$1,173.6 million in
2006. This decrease was due to the closing of three stores and the conversion of one store to the CompreBem
banner in late 2006.

Extra net sales revenue increased by 8.7% to R$7,664.8 million in 2007 from R$7,050.1 million in
2006, mainly as a result of the opening of five new stores in late 2006 and seven new stores in 2007 as well as
the conversion of one store from the Po de Acar format to the hypermarket format (fully rebuilt) in 2007.

Extra Eletro net sales revenue decreased by 8.7% to R$260.8 million in 2007 from R$285.6 million
in 2006. This decrease was mainly due to the closing of eight stores in 2007.

We acquired the Assai stores in November 2007 and cannot therefore provide a year-to-year
comparison of this banners net sales revenue.

Gross Profit. Our total gross profit increased by 6.7% to R$4,178.4 million in 2007 from R$3,917.4
million in 2006, mainly as a result of a review of our pricing policy which enhanced our competitiveness and
overall profitability beginning in the second half of 2006. In 2007, our new pricing policy was already fully
reflected in our results. Our gross margin decreased to 28.0% in 2007 from 28.2% in 2006.

Selling, General and Administrative Expenses. Selling, general and administrative expenses
increased by 4.0% to R$3,152.4 million in 2007 from R$3,031.1 million in 2006. Selling, general and
administrative expenses as a percentage of net sales decreased by 0.6% to 21.2% in 2007 from 21.8% in 2006.
This decrease resulted from the expense reduction programs that were implemented in 2006 and consolidated
in 2007. These programs modified our administrative structure and generated economies of scale and
productivity gains in various managerial processes.

Depreciation and Amortization. Depreciation and amortization increased by 0.5% to R$550.7 million
in 2007 from R$547.9 million in 2006. This increase resulted from capital expenditures in 2007.

Financial Income. Financial income decreased by 20.5% to R$344.4 million in 2007 from R$433.4
million in 2006, mainly due to a 32.3% reduction in our average cash position in 2007 and lower interest rates
in 2007 as compared to 2006.

Financial Expenses. Financial expenses decreased by 15.1% to R$555.6 million in 2007 from
R$654.0 million in 2006. This reduction resulted from lower interest rates (Selic of 11.3% per year in 2007 as
compared to 13.3% per year in 2006).

38
 Operating Income. Operating income increased by 263.5% to R$235.2 million in 2007 from R$64.6
million in 2006 as a result of the foregoing.

Non-operating Income (Expense). Non-operating expenses decreased by 97.2% to R$9.1 million in

2007 from R$323.2 million in 2006. This decrease was due to the constitution of a provision for the partial
reduction of goodwill of Sendas Distribuidora in 2006. Net non-operating income in 2007 also includes asset
write-offs related to the closing of stores.

Income (Expense) Before Income Taxes, Employee Profit Sharing and Minority Interest. Income
taxes, employee profit sharing and minority interest represented a positive result of R$226.1 million in 2007
as compared to a negative result of R$258.6 million in 2006 due to the factors described above.

Income Tax Benefits (Expense). Income tax expenses increased by 653%, to R$11.3 million in 2007
from R$1.5 million in 2006. The effective tax rate increased from a negative basis of 0.6% to a positive basis
of 5%. The main reason for such fluctuation is related to the recognition of deferred income tax assets for
Sendas Distribuidora (which is consolidated under BRGAAP).

Employee Profit Sharing. The profit sharing paid to employees in 2007 represented R$13.4 million,
compared to R$13.4 million in 2006, taking into account the headcount and years of service at the Company.

Net Income. Net income increased by 146.4% to R$210.9 million in 2007 from R$85.5 million in
2006 due to reasons mentioned above.

Year Ended December 31, 2006 Compared to Year Ended December 31, 2005

Net sales revenue. Net sales revenue increased by 3.5% to R$13,880.4 million in the year ended
December 31, 2006 from R$13,413.4 million in the year ended December 31, 2005 mainly due to the
following factors in each of our banners:

Po de Acar net sales revenue decreased by 4.7% to R$3,091.7 million in 2006 from R$3,244.9
million in 2005. This decrease was mainly due to the conversion of three stores to the CompreBem banner and
to the closing of 21 stores during 2006.

CompreBem net sales revenue increased by 3.9% to R$2,279.5 million from R$2,194.3 million in
2005, mainly due to the conversion of four stores from other banners to the CompreBem format and to the
opening of nine new stores.

Sendas stores net sales revenue decreased by 2.9% to R$1,173.6 million in 2006 from R$1,209.1
million in 2005. One of the main factors behind these results was the closing of three Sendas stores during
2006.

Extra stores net sales revenue increased by 7.9% to R$7,050.1 million in 2006 from R$6,532.3
million in 2005, due to the opening of five new stores, as well as an increase in non-food products sales,
mainly due to the growth in computer products sales.

Extra Eletro stores net sales revenue increased by 22.7% to R$285.6 million in 2006 from R$232.8
million in 2005. This performance was impacted mainly by lower interest taxes and a favorable environment
for credit sales.

Gross profit. Gross profit remained stable in 2006, totaling R$3,917.4 million compared to
R$3,975.3 million in 2005. The gross margin decreased from 29.6% in 2005 to 28.2% in 2006, due to our

39
strategic decision during the year to focus on reducing prices and adopting more aggressive prices for traffic-
generating products.

Selling, General and Administrative Expenses. In 2006, selling, general and administrative expenses
reached R$3,031.1 million, a 5% increase over 2005. Total expenses in 2006 were equivalent to 21.8% of net
sales, mainly because expense dilution was negatively affected by the sales scenario throughout most of the
year.

Depreciation and Amortization. Depreciation and amortization decreased by 12.4% to R$547.9

million in 2006 from R$625.3 million in 2005, due to the sale of 60 real estate properties to Fundo Pennsula
and the recalculation of the terms of the leases of previous years that affected the last quarter of 2005 in the
amount of R$86.5 million, to comply with the Brazilian Accounting Rules.

Financial Income. Financial income decreased by 14.3% to R$382.8 million in 2006 from R$446.7
million in 2005, due to lower income in financial investments, mainly resulting from lower interest rates in
times of specific festivities and holidays during which we expect sales of products in installments to increase.

Financial Expenses. Financial expenses decreased by 11.7% to R$603.4 million in 2006 from
R$683.6 million in 2005, due to lower interest taxes compared to 2005.

Operating Income. Operating income decreased by 71.7% to R$64.6 million in 2006 from R$228.2
million in 2005, as a result of the foregoing.

Non-operating Income (Expense). We recorded non-operating income (expense) of R$(323.2)

million in 2006 and non-operating income of R$32.1 million in 2005, due to the accrual of a provision for
partial reduction of goodwill of Sendas Distribuidora, with a net effect on our consolidated non-operating
income of R$268.9 million in the fourth quarter of 2006. Net non-operating income in 2006 also includes
asset write-offs related to the closing of stores.

Income (Expense) Before Income Taxes, Employee Profit Sharing and Minority Interest. Due to the
effects described above, we recorded expenses before income taxes, employee profit sharing and minority
interest in the amount of R$258.6 million in 2006 and income before income taxes, employee profit sharing
and minority interest in the amount of R$260.3 million in 2005.

Income Tax Benefits (Expense). In 2006, we had an income tax expense of R$1.5 million as
compared to an income tax expense of R$53 million in 2005. This decrease is primarily a result of two
factors: (i) the provision and payment of administrative contingencies related to the soy exports, and (ii) to the
non-recurrent operating expenses related to our corporate restructuring.

Employee Profit Sharing. The profit sharing paid in 2006 to employees was R$13.4 million
compared to R$14.5 million in 2005.

Net Income. Net income decreased by 66.7% to R$85.5 million in 2006 from R$257 million in 2005
due to the foregoing factors.

5B. Liquidity and Capital Resources

We have funded our operations and capital expenditures mainly from operating cash flows, loans
obtained from the Brazilian National Bank for Economic and Social Development, or BNDES, issuances of
debentures and loans from banks. In addition, we fund our working capital needs through a receivables
securitization investment fund (PAFIDC).

40
 At December 31, 2007, we had R$1,064.1 million in cash and cash equivalents. We have a policy of
maintaining substantial cash and cash equivalents in order to be in a position to respond immediately to
liquidity requirements.

Our main cash requirements include:

the servicing of our indebtedness;

capital expenditures, including the construction and remodeling of new stores

and investments in our infra-structure;

consumer credit;

acquisitions of other supermarket chains; and

distribution of dividends and interest on shareholders equity.

Our primary sources of liquidity have historically been cash flows from our operating activities and
borrowings. Net cash from operating activities was R$562.4 million in 2007, R$937.6 million in 2006 and
R$1,063.5 million in 2005. Net cash provided by (used in) financing activities was R$539.2 million in 2007
(after payment of R$20.3 million in dividends), R$(448.5) million in 2006 (after payment of R$62.1 million
of dividends) and R$(594.3) million in 2005 (after payment of R$89.1 million in dividends). In 2007, these
cash flows were primarily used for investments in the capital expenditures program, totaling R$1,293.9
million.

At December 31, 2007, our total outstanding debt was R$3,165.8 million, consisting of:

R$1,987.3 million in real-denominated loans,

R$1,162.1 million in U.S. dollar-denominated debt, and

R$16.4 million in debt linked to a basket of foreign currencies to reflect

BNDES funding portfolio, plus an annual spread.

At December 31, 2007, R$1,162.1 million of our debt was U.S. dollar denominated. In addition, we
have R$16.4 million of debt in favor of BNDES that is linked to a basket of foreign currencies, for which we
have swap agreements to mitigate foreign currency risk. During the last years we have adopted a treasury
policy to manage financial market risk, principally by entering into swaps into reais for more than 95% of our
U.S. dollar-denominated liabilities. We engage in cross-currency interest rate swaps under which we enter
into an agreement typically with the same counter-party that provides the original U.S. dollar-denominated
financing. A separate financial instrument is signed at the time the loan agreement is consummated, under
which we are then effectively liable for amounts in reais and interest at a percentage of an interbank variable
interest rate (CDI). The reference amounts and maturity periods of these swaps normally correspond to the
original U.S. dollar-denominated loan. This policy protects us against losses resulting from currency
devaluations. (Under U.S. GAAP we account for these financial instruments at fair value with resulting effect
in the income statement).

We may in the future enter into cross-currency swap agreements and other swap transactions
designed to manage our remaining exposure to foreign currency liabilities, namely our import-finance credit
lines.

Total debt at December 31, 2007 increased by R$497.6 million from R$2,668.2 million in 2006 to
R$3,165.8 million in 2007. Our most significant debt was incurred in connection with the acquisition and
construction of new stores, and with the remodeling of the existing stores. Our cash interest expense was
R$490.4 million in 2007, R$113.6 million in 2006 and R$547.3 million in 2005.

41
 Several banks provide us with short-term financing. Two of these banks, ABN-Amro and Santander,
individually represent more than 10.2% of the total amount of short-term debt outstanding as of December 31,
2007. Although we have no committed lines of credit with these banks, our management believes we are in
good standing with our lenders and have sufficient available credit for our needs. These short-term U.S.
dollar-denominated financings are guaranteed by a promissory note.

Our long-term debt net of current portion totaled R$919.3 million, R$1,382.2 million and R$1,615.4
at December 31, 2007, 2006 and 2005 respectively. The balance consists primarily of long-term expansion
program loans from BNDES, working capital loans from Brazilian banks and debentures we issued.

We have entered into five lines of credit agreements with BNDES, which are either denominated in
reais and subject to indexation, based on the TJLP plus an annual spread, or are denominated based on a
basket of foreign currencies to reflect BNDES funding portfolio, plus an annual spread. Amortizations will
be in monthly installments after a grace period. BNDES has been historically an important source of financing
for new stores and the acquisition of supermarket chains. For more information regarding our lines of credit
with BNDES, see note 13(ii) to our audited consolidated financial statements included in this annual report.

We cannot offer any assets as collateral for loans to other parties without the prior authorization of
BNDES and must comply with the following negative covenants measured in accordance with Brazilian
GAAP: (i) maintain a capitalization ratio (shareholders equity/total assets) equal to or in excess of 0.40 and
(ii) maintain a current ratio (current assets/current liabilities) equal to or in excess of 1.05. The Diniz group
provided sureties with respect to the amount drawn down.

We issued a number of convertible and non-convertible debentures between 1997 and 2007, some of
which have since been converted into our non-voting preferred shares.

On October 4, 2002, the shareholders approved the fifth issuance and public placement of
debentures. We received proceeds equivalent to R$411.9 million, for 40,149 non-convertible debentures
issued as the first series of this fifth issuance. The debentures are indexed to the average rate of CDI and
accrue an annual spread of 1.45%, which is payable semi-annually. The remuneration of the first series was
subject to renegotiation or a put exercised in October 2004. The first series was renegotiated to accrue the
CDI plus an annual spread of 0.95% as from October 1, 2004, which was payable semi-annually, beginning
on April 1, 2005 and ending on October 1, 2007. The fifth issuance of debentures was totally paid on
September 28, 2007.

On March 1, 2007, the shareholders approved the sixth issuance and public placement of debentures.
We received proceeds equivalent to R$779.6 million, for 77,965 non-convertible debentures issued as the first
(54,000) and second (23,965) series of this sixth issuance. The debentures are indexed to the average rate of
CDI and accrue an annual spread of 0.5%, which is payable semi-annually. The principal amount will be
repaid in three equal installments on March 1, 2010, 2011 and 2012. At December 31, 2007, we had 77,965
non-convertible debentures outstanding from the first and second series of our sixth issuance, totaling
R$807.5 million. We are required to comply with the following negative covenants measured in accordance
with Brazilian GAAP: (i) net debt (debt less cash and cash equivalents and accounts receivable) no higher
than the balance of shareholders equity; and (ii) maintenance of a ratio between net debt and EBITDA less
than or equal to 3.25.

For more information on our convertible and non-convertible debentures, see note 14 to our audited
consolidated financial statements included in this annual report.

On September 19, 2003, we concluded the structure of Po de Acar Fundo de Investimento em

Direitos Creditrios (or PAFIDC), a receivables securitization fund. The PAFIDC has duration of five
years, renewable for one additional five-year period, beginning from the date of the first subscription of
quotas. The capital structure of PAFIDC is composed of 80.6% senior quotas held by third parties and 19.4%
subordinated quotas held by us. Senior quotas will be divided in two series: Series A for which the benchmark
remuneration (i) was 103% of CDI (Certificado de Depsito Interbancrio), an interbank variable interest
rate, during the period beginning on the date of the first subscription of quotas and ending on February 20,

42
2004 and (ii) is 105% of CDI as from February 21, 2004; and Series B for which the benchmark remuneration
is 101% of CDI. The holders of senior quotas series B redeemed on June 23, 2007 the principal amount of
R$133.7 million. The series A quota holders of R$556.8 million will redeem their quotas at the end of the
funds duration. The senior C quota holders of R$133.3 million will redeem their quotas at the end of the
funds duration. Upon consolidation of PAFIDC, senior quotas are recorded as current and non-current loans
and financing. Subordinated quotas have a single series. Beginning in February 2004, the quotas are
nominative and could be listed for negotiation the over-the-counter market. We hold a retained interest of
19.2% (subordinated quotas) and will redeem the subordinated quotas only after the redemption of senior
quotas (or at the end of the PAFIDCs duration). Subordinated quotas are non-transferable and nominative.
Once the senior quotas have been remunerated, the subordinated quotas receive the balance of the PAFIDCs
net assets after absorbing any default on the credit rights transferred to PAFIDC and any losses attributed to
the PAFIDC.

We invested R$100.0 million in October 2003, R$29.9 million in July 2004 and R$7.7 million in
September 2007, in subordinated quotas of PAFIDC and transferred credit rights to the securitization fund. In
2007, we transferred to PAFIDC customer credit financing and accounts receivable from credit card
companies, in securitization transactions totaling R$7,381.4 million in 2007, R$7,299.7 million in 2006 and
R$6,750.1 million in 2005. The outstanding balance of these receivables at December 31, 2007 was R$825.6
million and R$845.7 million in 2006. For all securitizations, we retained servicing responsibilities and
subordinated interests. The default credits will be collected by PAFIDCs administrator, which will be
assisted by our collection department, for which we do not receive fees for such service. The quota holders of
senior quotas have no recourse to our other assets for failure of debtors to pay when due. As defined in the
agreement between us and PAFIDC, the transfer of credit rights is irrevocable, non-retroactive and the
transfer is definitive and not enforceable against us. PAFIDC is consolidated into our financial statements.

In 2007, our capital expenditures totaled R$1,293.9 million. These investment projects were financed
primarily from our operating cash flow and, to a lesser extent, by third parties. Our capital expenditures were
R$902.2 million in 2006 and R$899.6 million in 2005. For specific use of our capital expenditures in 2007,
see Item 4A Information on the Company History and Development of the Company Capital
Expansion and Investment Plan.

We believe that existing resources and operating income will be sufficient to complete the capital
expansion and investment program described above and meet our liquidity requirements. However, our
capital expansion and investment plan is subject to a number of contingencies, many of which are beyond our
control, including the continued growth and stability of the Brazilian economy. We cannot assure you that we
will successfully complete all of or any portion of our capital expansion and investment plan. In addition, we
may participate in acquisitions not budgeted in the capital expansion and investment plan, and we may modify
these plans.

5C. Research and Development, Patents and Licenses, Etc.

We do not have any significant research and development policies.

5D. Trend Information

The trends, which influence our sales, are primarily the patterns of consumer purchases through the
year and the effects on consumer disposable incomes of such factors as economic conditions, consumer
confidence, level of employment and credit conditions.

5E. Off-balance sheet arrangements

We do not maintain any off-balance sheet transactions, arrangements, obligations or other

relationships with unconsolidated entities or others that are reasonably likely to have a material current or
future effect on our financial condition, changes in financial condition, revenues or expenses, results of
operations, liquidity, capital expenditures or capital resources.

43
 5F. Tabular disclosure of contractual obligations

The following table summarizes significant contractual obligations and commitments at December
31, 2007 that have an impact on our liquidity:

Payment Due by Period

Less than One to three Three to five After five
Contractual Obligations Total one year years years years
(in millions of reais)

Longterm debt................................................................ 1,642.2 988.2 266.4 387.6 -

Debentures ....................................................................... 805.3 25.7 - 519.7 259.9
Estimated interest payments(1) ......................................... 312.2 225.3 84.2 2.7 -
Taxes, other than on income............................................ 311.3 60.5 105.5 105.4 39.9
Sales lease back 1,040.5 11.5 26.0 30.6 972.4
Financial Leasing 92.9 23.8 33.3 3.5 32.3
Operating lease(2).............................................................. 750.1 170.1 262.9 184.0 133.1
Puttable Minority Interest 125.3 - - 125.3 -
Other................................................................................. 16.0 16.0 - - -
Total contractual obligations ........................................ 5,095.8 1,521.1 778.3 1,358.8 1,437.6

(1) Estimated interest payments include unrealized losses on cross-currency and interest rate swap contracts. Estimated interest
payments and foreign currency losses were determined considering the interest rate and exchange rate at December 31, 2007. However,
our long- term debt is subject to variable interest rates and inflation indices, and these estimated payments may differ significantly from
the payments actually made.
(2) Operating leases include minimum rental obligations which are not distinguished in the Brazilian GAAP.

44
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

6A. Directors and Senior Management

Board of Directors

Our board of directors is currently composed of the following members:

Name Position Since

Abilio dos Santos Diniz Chairman 1995

Ana Maria Falleiros dos Santos Diniz DAvila Director 2003

Joo Paulo Falleiros dos Santos Diniz Director 1999

Pedro Paulo Falleiros dos Santos Diniz Director 2003

Geyze Marchesi Diniz Director 2005

Jean-Charles Henri Naouri Director 2005

Hakim Laurent Aouani Director 2005

Francis Andr Mauger Director 2005

Michel Alain Maurice Favre Director 2006

Jacques-Edouard Marie Charret Director 2008

Candido Botelho Bracher Director 2005

Fbio Schvartsman Director 2007

Maria Silvia Bastos Marques Director 2003

Guilherme Affonso Ferreira Director 2008

Mr. Abilio dos Santos Diniz is the chairman of our board of directors since 2003. He had been a
director of our board of directors from 1995 to 1999, when he became its vice-chairman. Mr. Abilio Diniz
was one of the founders of So Paulo's supermarket association, and was also a founder of ABRAS. He is a
former member of the Brazilian National Monetary Council. Mr. Abilio Diniz holds a bachelor's degree in
Business Administration from Fundao Getlio Vargas and has attended Columbia University in New York
and the University of Ohio at Dayton.

Mrs. Ana Maria Falleiros dos Santos Diniz D'Avila is a member of our board of directors since
2003. She has a bachelor's degree in Business Administration from Fundao Armando lvares Penteado
(FAAP) and postgraduate degree in Marketing from Fundao Getlio Vargas and from FAAP. Mrs. Diniz
D'Avila is the daughter of Mr. Abilio Diniz.

Mr. Joo Paulo Falleiros dos Santos Diniz is a member of our board of directors since 1999. He was
an executive officer in charge of our associated companies and our International Division. Mr. Joo Paulo
Diniz has a bachelor's degree in Business Administration from Fundao Getlio Vargas and has attended the
London Business School. Mr. Joo Paulo Diniz is the son of Mr. Abilio Diniz.

45
 Mr. Pedro Paulo Falleiros dos Santos Diniz is a member of our board of directors since 2003. Mr.
Pedro Paulo Diniz is a businessman and the president of PPD Sports. Mr. Pedro Paulo Diniz is the son of Mr.
Abilio Diniz.

Mrs. Geyze Marchesi Diniz is a member of our board of directors since 2005. She has a bachelor's
degree in Economics and earned an MBA from Fundao Getlio Vargas. Mrs. Marchesi Diniz is Mr. Abilio
Dinizs wife.

Mr. Jean-Charles Henri Naouri is a member of our board of directors since 2005. Mr. Naouri is
Chairman and Chief Executive Officer of Casino group. Mr. Naouri has a degree in sciences from Ecole
Normale Suprieure, has studied at Harvard University and at Ecole Nationale d'Administration.

Mr. Hakim Laurent Aouani is a member of our board of directors since 2005. Mr. Aouani is Director
of Corporate Finance at Casino group. Mr. Aouani received a degree from SUPELEC Engineering School
with a major in telecommunication and also holds a degree in business administration from HEC Business
School.

Mr. Francis Andr Mauger is a member of our board of directors since 2005. Mr. Mauger is Director
of Latin America Operation of Casino group. Mr. Mauger has attended The Ecole Hteliere de Lausanne
Swiss.

Mr. Michel Alain Maurice Favre is a member of our board of directors since 2006. Mr. Favre is
Administrative Financial Officer of Casino group. He previously served as Administrative Financial Officer
of Grupo Altadis and was member of board of directors and responsible for several divisions of Grupo Valeo.
Mr. Favre has a degree in Business Administration from HEC Business School.

Mr. Jacques-Edouard Marie Charret is a member of our board of directors since 2008. Mr. Charret
is Marketing and Commercial Food Products of Casino group. Mr. Charret has a degree in Economy and
earned a MBA in marketing.

Mr. Candido Botelho Bracher is a member of our board of directors since 2005. Mr. Bracher was a
director of Banco Itamarati S.A. and Vice President of BADESP Banco de Desenvolvimento do Estado de
So Paulo S.A. Mr. Bracher is President of Banco Ita BBA S.A. Mr. Bracher has a degree in Business
Administration from Fundao Getlio Vargas.

Mr. Fbio Schvartsman is a member of our board of directors since 2007. Mr. Schvartsman is the
chief executive officer of Telemar Participaes and member of the board of directors of the companies
Telemar Norte Leste, Contax and Gafisa. Mr. Schvartsman has a degree in Engineering and has post-
graduation degrees in Production Engineering from Escola Politcnica da Universidade de So Paulo USP
and in Business Administration from Fundao Getlio Vargas.

Mrs. Maria Silvia Bastos Marques is a member of our board of directors since 2003. Mrs. Marques
is the CEO of Icatu Hartford. She was the former President of the Instituto Brasileiro de Siderurgia, Officer-
Director of Companhia Siderrgica Nacional, Municipal Secretary of Finance of the City of Rio de Janeiro
and Director of Banco Nacional de Desenvolvimento Econmico e Social BNDES. Mrs. Marques has a
degree in Public Administration from Fundao Getlio Vargas, where she earned a master's degree and a
doctoral degree.

Mr. Guilherme Affonso Ferreira is a member of our board of directors since 2008. Mr. Ferreira is the
CEO of Bahema Participaes S/A. He was the former President of Bahema Agropecuria S/A and Bahema
S/A and has been a member of the board of directors of Unibanco Holdings since 1998. Mr. Ferreira has a
degree in Production Engineering from Escola Politcnica da Universidade de So Paulo USP and in
Economics and Politics from Macalester College.

46
Executive Officers

The following table sets forth the name, position and the year of election of each of our executive
officers. A brief biographical description of each of our executive officers follows the table:

Name Position First Year Elected

Cludio Eugnio Stiller Chief Executive Officer 2007

Galeazzi

Enas Csar Pestana Neto Chief Financial Officer 2003

Jos Roberto Coimbra Chief Operational Officer 2003

Tambasco

Hugo Antonio Jordo Bethlem Chief Supply Chain Officer 2003

Caio Racy Mattar Investment and Construction 1995

Officer

Sylvia de Souza Leo Hypermarkets Officer 2008

Wanderley

Jorge Fernando Herzog Regional Operations Officer 2008

Antonio Ramatis Fernandes Commercial Officer 2007

Rodrigues

Daniela Sabbag Investor Relations Officer 2006

Mr. Cludio Galeazzi holds a degree in accounting and is partner and founder of Galeazzi &
Associados. Due to the positive results of the work performed by Galeazzi & Associados in Sendas
Distribuidora, he was hired as our CEO in 2007. He focused his professional activities in business
management, participation in boards of directors and companies restructuring. At the age of 26, he served as
Managing Director of the Argentinean and Brazilian subsidiaries of Dow Chemical Corp. Before the
foundation of Galeazzi & Associados, he served as chairman of Cesbra, John Sommers (a joint venture
between British Petroleum and Brascan) and as vice-chairman of British Petroleum Minerao do Brasil. He
also served as Chairman of the Conselho Nacional do SESI (as appointed by the President of the Republic of
Brazil), Executive Officer of Fiesp and IEL, and Vice-Chairman of ANFAC. During restructuring processes,
he served as CEO of Artex, Mococa, Vila Romana, Cecrisa and Lojas Americanas, among others. Cludio
Galeazzis consultancy firm will continue to render services to Sendas Distribuidora in the same conditions
agreed before Cludio hiring process.

Mr. Enas Csar Pestana Neto has been our Chief Financial Officer since 2006 and began his career
with us in 2003, as an Administrative Officer. He was the Vice-President of Laboratrio Delboni Auriemo
and has worked for GP Investimentos and Carrefour. Mr. Pestana holds a degree in Accounting from
Pontifcia Universidade Catlica de So Paulo PUC.

Mr. Jos Roberto Coimbra Tambasco is our Chief Operating Officer. Mr. Tambasco has a degree in
Business Administration from Fundao Getlio Vargas. Mr. Tambasco began his career with us in 1979 and
has been our executive officer since 2003.

Mr. Hugo A. Jordo Bethlem is our Chief Supply Chain Officer. Mr. Bethlem was the Commercial
Officer of DiCicco, Jernimo Martins, Parque Temtico Play Center and Carrefour. Mr. Bethlem has a degree

47
in Business Administration from Faculdades Metropolitanas Unidas FMU and has a post-graduate degree in
Administration from Cornell University. Mr. Bethlem began his career with us in 2001 and has been our
executive officer since 2003.

Mr. Caio Racy Mattar is our Investment and Construction Officer. He previously served as a
member of the executive office of Rene Engenharia e Construes Ltda. He is also a member of the board of
directors of Paramount Lansul S.A., Sendas Distribuidora S.A. and Gafisa S.A. Mr. Mattar has an engineering
degree from Instituto de Engenharia Paulista and has attended the London Business School. Mr. Mattar began
his career with us in 1993 and has been our executive officer since 1995.

Mrs. Sylvia de Souza Leo Wanderley is our Hypermarkets Officer. In 2000, Mrs. Leo began
working at our company as a commercial director. She has been an executive officer at our company since
April 2008. Prior to joining our Company, she worked as a Commercial and Marketing Director for Wal Mart
and has also worked for Mesbla. Mrs. Leo has a degree in Social Communications from FACHA and an
Executive MBA from UFRJ.

Mr. Jorge Fernando Herzog has been our Regional Operations Officer since April 2008. He
previously served as Sendas Distribuidoras Operating Officer for two years. Prior to joining our Company,
Mr. Herzog worked for Carrefour for 15 years in several areas such as Operating, Human Resources and
Accounting. Mr. Herzog has a degree in Economy from Faculdade Dom Bosco.

Mr. Antonio Ramatis Fernandes Rodrigues has been our Commercial Food Executive Officer since
2007. Mr. Rodrigues was the Commercial and Marketing vice-chairman of Grupo Bom Preo, the
Commercial and Logistics vice-chairman of Grupo Sonae and the Commercial vice-chairman of C&A. Mr.
Rodrigues has a degree in engineering from Fundao Armando lvares Penteado FAAP and holds a
master degree in business administration from Universidade de So Paulo.

Mrs. Daniela Sabbag is our Investor Relations Officer. Mrs. Sabbag has worked in our Investor
Relations area since 2000, and in recent years was the Investor Relations Manager. Mrs. Sabbag has a degree
in business administration and holds an MBA from Fundao Getlio Vargas, with supplementary courses
and post-graduate studies in business administration from Fipecafi at the Universidade de So Paulo.
Previously, Mrs. Sabbag worked as an investment analyst (equity research) at Deutsche Bank, and with S
Supermercados in Jernimo Martins. Mrs. Sabbag began her career with us in 2000 and has been our
executive officer since 2006.

6.B. Compensation

For the year ended December 31, 2007, the aggregate compensation paid in cash to all of our
directors and executive officers and members of our committees as a group was approximately R$19 million.
Other non-cash benefits in 2007 included reimbursements of medical expenses to our executive officers and
the use of our cars during working hours. There are no outstanding loans granted by us to our executive
officers or members of our board of directors. We are not required under Brazilian law to disclose on an
individual basis the compensation of our directors and executive officers, and we do not otherwise publicly
disclose this information.

In July 2007, the Company established a supplementary private pension plan of defined contribution
to its employees by retaining the financial institution Brasilprev Seguros e Previdncia S.A. as administrator.
Within the scope of the private pension plan, the Company provides monthly contributions on behalf of its
employees on account of services rendered to the Company. Contributions made by the Company in the year
ended December 31, 2007, amounted to R$0.9 millions and employees contributions amounted to R$2.1
millions with 895 participants.

48
First Stock Option Plan

In 1997, our shareholders approved a compensatory stock option plan for our management and
certain employees. Our stock option plan is designed to obtain and retain the services of executives and
certain employees. Only options covering preferred shares are granted.

Our stock option plan is managed by a committee elected by our board of directors, the plan
management committee. This committee periodically grants share options setting the terms thereof and
determining the employees to be included. In addition to managing our stock option plan, the committee is
responsible for selecting the manager and employee beneficiaries who are entitled to benefit from the option
plan as well as establishing the specific terms and conditions of each option agreement (including the quantity
of shares to be acquired) applicable to each of the beneficiaries. The exercise price will not be lower than 60%
of the weighted average market price of our shares on the So Paulo Stock Exchange (BOVESPA) during the
four business days preceding the date of the option agreement.

When share options are exercised, we can grant new shares to the new shareholders. Under U.S.
GAAP, our stock option plans are accounted for as variable plans as the indexed exercise price of the options
is adjusted by dividends declared from the grant date through the exercise date. Under Brazilian GAAP, the
issuance of stock options does not result in any accounting effect. Our stock option plan stipulates that 50% of
the options granted vest and can be exercised at the end of three years and the remaining 50% vest and can be
exercised at the end of five years. The exercise term expires after a period of three months after the vesting
dates. In 1999, our board of directors approved a new grant of options convertible into an additional 3.4
billion preferred shares to be granted under our stock option plan.

Share options (thousands)

Restatement (*)

Capital
increase 2007 2006 2005

Options outstanding at beginning of year 2.941 3.243 3.414

Options granted
Series 9 (granted on April 15, 2005) - - 989
Series 10 (granted on July 7, 2006) - 901 -
Series A1 Gold (granted on April 13, 2007 324 - -
Series A1 Silver (granted on April 13, 2007 1.122 - -
Options exercised
Series 7 December 13, 2005 R$ 6.445 - - (291)
Series 6 April 7, 2006 R$ 7.120 - (203) -
Series 7 May 9, 2006 R$ 92 - (4) -
Series 8 May 15, 2007 R$ 5.631 (195) - -
Series 7 July 10, 2007 R$ 13 (1) - -
Series 8 July 10, 2007 R$ 542 (19) - -
Series A1 Gold - July 10, 2007 R$ 0 (3) - -
Series A1 Silver - July 10, 2007 R$ 260 (11) - -
Series 7 November 28, 2007 R$ 13 (1) - -
Series A1 Gold - November 28, 2007 R$ 0 (11) - -
Series A1 Silver - November 28, 2007 R$ 878 (36) - -
Series A1 Gold - December 17, 2007 R$ 0 (31) - -
Series A1 Silver - December 17, 2007 R$ 1.734 (70) - -
Options forfeited (605) (517) (395)
Options expired (242) (479) (474)
Outstanding options granted at end of year 3.162 2.941 3.243
(*) Restated, according to the reserve split occurred in September 2007.

Second stock option plan

At the extraordinary general meeting held on December 20, 2006, our shareholders approved an
amendment to our stock option plan.

49
 Beginning in 2007, stocks option may be granted to our management and employees as follows:

shares will be classified into two types: Silver and Gold;

the quantity of Gold-type shares may be decreased and/or increased (reducer or accelerator),
at the discretion of the plan management committee, over 35 months following the granting
date granted. The price per each thousand Gold-type shares will correspond to R$0.01;

the price for each thousand Silver-type shares will correspond to the average closing price
of our preferred shares over the last 20 trading sessions of BOVESPA, prior to the date on
which the committee grants the option, with negative goodwill of 20%;

in both cases, the prices will not be restated, and

the options granted vest as follows: from the 36th month to the 48th month from the grant
date or a date to be defined by the committee, the beneficiary will acquire the right to
exercise: 1) 100% of the Silver-type options granted; 2) the amount of Gold-type shares to
be determined by the committee, after compliance with the granting conditions.

As of April 13, 2007, the series A1 was issued.

The Meeting of the Stock Option Plan Management Committee held on March 3, 2008, approved the
issue of one million, seven hundred, ninety-eight thousand, one hundred and eighty-six (1,798,186)
Series A2 preferred shares related to call options for preferred shares, as follows:

a) The options will be divided into 2 types: Silver and Gold, distributed as follows:

Type Silver Gold Total

Amount Strike price Amount Strike price Amount
Starting 483,893 R$ 26.93 456,208 R$0.01 940,101
Tranche
Closing 466,429 R$ 26.93 391,656 R$0.01 858,085
Tranche
Total 950,322 847,864 1,798,186

b) the starting tranche may be exercised at any moment as of the granting date, in whole or partially,
up to the last business day of the 48th granting month.
c) the closing tranche may be exercised as of the 36th month of granting date, in whole or partially,
up to the last business day of the 48th of the granting month.
d) The amount of Gold-type shares may be decreased and/or increased (reducer or accelerator), at the
discretion of the Plan Management Committee, pursuant to Item 3.2 of the plan.
e) the strike prices of both types will not be restated.

6C. Board Practices

According to our by-laws, our board of directors consists of at least 3 (three) and up to 18 (eighteen)
members. The directors meet ordinarily, at least once a month, and extraordinarily whenever required. The
members of our board of directors are appointed at general shareholders meetings for a term of office of
three-year terms and are required to be our shareholders. The boards responsibilities include leading the
corporate governance process, electing our executive officers and supervising our management. Currently our
board of directors consists of fourteen members elected by our shareholders, consisting of five representatives
of the Diniz group, four external directors and five representatives of the Casino group, whose term of office
expires in 2011. We are managed by our Conselho de Administrao, or board of directors and by our
Executive Officers Committee (Diretoria). None of our directors is party to an employment agreement
providing for benefits upon termination of employment.

50
 Following the implementation of the transactions contemplated by the Joint Venture Agreement
celebrated on May 3, 2005 as described in "Item 7A - Major Shareholders and Related Party Transactions -
Major Shareholders - Shareholders' Transactions - Holding Company Shareholders' Agreement", our
shareholders' meetings held on June 22, 2005 and August 16, 2005 approved our corporate management
structure reorganization. As a result of the reorganization, four special committees were created to support the
structure of our Board of Directors, which will set forth the committees' attributions, as well as the regulation
of our executive officers' duties and titles. For specific information regarding the new corporate structure and
competences of our committees, see "- Committees".

At our general shareholders meeting held on June 22, 2005 and at our extraordinary shareholders
meeting held on August 16, 2005, our shareholders also appointed new members to our board of directors and
renewed the mandate of existing board members. Mr. Abilio Diniz has been re-confirmed as the Chairman of
our board of directors and appointed as the Chairman of the board of directors of the Holding Company. As
part of his duties as Chairman of our board of directors, Mr. Abilio Diniz is responsible for the general
supervision of our strategy and activities and will serve as liaison between our board of directors and our
executive officers committee. As Chairman of our board of directors, Mr. Abilio Diniz has a casting vote for
matters in the regular course of our business. See Item 7A Major Shareholders and Related Party
Transactions Major Shareholders - Shareholders Transactions Holding Company Shareholders
Agreement. Also on June 22, 2005, our directors renewed the mandate of existing officers.

Our executive officers committee is composed of at least 2 (two) and up to 14 (fourteen) members,
being one the Chief Executive Officer and the other executive officers, elected by our board of directors. The
general responsibilities of our executive officers are determined pursuant to our bylaws, and their duties and
titles will be established by our board of directors.

The responsibilities of our executive officers include adopting plans and rules related to our
management and operations, reporting to stockholders each fiscal year on the status of our business activities
and presenting the year-end balance sheets and other legally required financial statements, submitting
investment programs and budgets to our board of directors.

Our executive officers are elected by our board of directors for three-year terms, although any
executive officer may be removed by our board of directors before the expiration of his or her term.
Currently, the term of all executive officers expires in April, 2008.

Fiscal Council

Under the Brazilian corporate law and our by-laws, we are not required to, and currently do not,
maintain a permanent fiscal council (conselho fiscal). However, we are required to establish a fiscal council
upon the request of shareholders who hold at least 2% of the common shares or 1% of the preferred shares,
pursuant to CVM Instruction 324, dated as of January 19, 2000. Any fiscal council would consist of three and
up to five members and an equal number of alternates. The members of the fiscal council would be elected, at
the maximum, for one-year terms, but can be reelected for additional one-year terms. Holders of preferred
shares, voting as a class, would be entitled to elect one member (and his or her alternate) by majority vote of
the shareholders present at the meeting at which members of the fiscal council are elected, and holders of
common shares would be entitled to elect the other members (and their respective alternates), provided that
such holders represent at least 10% of the common shares. The primary responsibility of the fiscal council,
which, if established, would act independently from our management and external auditors, would be to
review our consolidated financial statements and report on them to our shareholders.

Committees

Pursuant to our by-laws, we currently have the following four special committees: (i) Audit
Committee; (ii) Human Resources and Compensation Committee; (iii) Financial Committee; and (iv)
Innovation and Development Committee. The attributions of each committee will be set forth by our board of
directors, as well as the members of each committee will be appointed by our board of directors, solely among
its members, and will also designate the President of each special committee. Each special committee will be

51
composed of 3 (three) and up to 5 (five) members for a term of office of 3 (three) years, reelection being
permitted. In addition to these committees, the board of directors may create other committees with special
roles.

Audit Committee

The audit committee holds meetings monthly and has the following assignments: (i) to review the
appointment by our board of directors of the independent public accountants who will audit our financial
statements; (ii) to review the financial statements and the annual and quarterly financial statements together
with the accompanying reports, through discussions with our Chief Executive Officer, Chief Financial Officer
and/or with the Administrative Financial Officer; (iii) to review the internal control systems, and in a more
generic way to examine our audit, accounting and management procedures, through discussions with our
Chief Executive Officer and the Administrative Financial Officer; and (iv) to review and discuss any fact or
event likely to have a material impact on our financial situation and/or any of our controlled companies in
relation to the obligations and/or risks, compliance with laws and regulations and any material pending
litigation, and more particularly those matters concerning risk management and identification and prevention
of management errors.

The responsibilities of the audit committee are consistent with the U.S. Blue Ribbon Committee and
the rules and regulations of the New York Stock Exchange. At our general shareholders' meeting held on
April 30, 2008, Gerald Dinu Reiss, at that time member of our board of directors, was not reelected to the
board. Accordingly, his position as president and member of our audit committee also terminated. As a
consequence, we currently have only two members, namely Maria Silvia Bastos Marques and Fbio
Schvartsman.

Human Resources and Compensation Committee

The human resources and compensation committee holds meetings at least once every two months
and will have the following assignments: (i) to provide guidelines to the profile of the officer that will become
our Chief Executive Officer; (ii) to examine candidates for election to our board of directors, in light of their
commercial experience, expertise and economic, social and cultural activity; (iii) to examine candidates for
appointment to our executive officers committee; (iv) to review and discuss management compensation and
stock option plan for our officers; (v) to propose criteria for the assessment of the performance of our
managers, using similar Brazilian corporations as benchmark; (vi) to review the recruitment and hiring
methods adopted by us and our controlled companies, using similar Brazilian corporations as benchmark; (vii)
to define the compensation and incentive policies for our managers; and (viii) to identify individuals within
our company and our controlled companies who could be our future leaders and follow up the development of
their career. Our Human Resources and Compensation Committee is composed of Ana Maria Falleiros dos
Santos Diniz D'Avila, Geyze Marchesi Diniz and Francis Andr Mauger.

Financial Committee

The financial committee holds meetings at least once every two months and will have the following
assignments: (i) to review the financial/economic viability of our investment plans and programs; (ii) to
review and recommend actions for the negotiation of any merger and acquisition or of any similar transaction
involving us and any of our controlled companies; (iii) to follow up any such transaction and negotiation
referred to in item (ii); (iv) to review our cash flow, indebtedness policy and capital structure; (v) to
accompany and supervise the implementation and accomplishment of our annual investment plan; (vi) to
accompany the average cost of our capital structure and to make suggestions for modifications whenever
deemed necessary; and (vii) to review and recommend opportunities related to financing transactions that may
improve our capital structure. Our financial committee is currently composed of Ana Maria Falleiros dos
Santos Diniz DAvila, Joo Paulo Falleiros dos Santos Diniz, Hakim Laurent Aouani and Michael Alain
Maurice Favre.

52
 Innovation and Development Committee

The innovation and development committee will hold meetings at least once every three months and
will have the following assignments: (i) to review the projects related to business and technology innovations
as well as to recommend to our company the introduction of such innovations; (ii) to review and propose
market opportunities or new business formats to strengthen our growth strategy; and (iii) to review the real
estate expansion plans. Our innovation and development committee is composed of Pedro Paulo Falleiros dos
Santos Diniz, Geyze Marchesi Diniz and Francis Andr Mauger .

Advisory Board

In addition to the committees described above, our by-laws provide for an ad hoc advisory board of
up to 13 (thirteen) members, whose purpose is to make recommendations to our board of directors on
measures to be taken in order to ensure the development of our businesses and activities, as well as render
opinion on any matters submitted by our board of directors. Our advisory board meets semi-annually and, in
extraordinary circumstances, whenever called by the president of our board of directors. The current term of
all members of our advisory board is 3 (three) years, reelection being permitted, and such members may
receive a compensation set forth by our general shareholders meeting. Our advisory board was elected by our
shareholders in the shareholders meeting held on June 22, 2005 and is comprised of the following members,
most of them economists or former ministers of economy of Brazil: Luiz Carlos Bresser Gonalves Pereira,
Mailson Ferreira da Nbrega, Roberto Teixeira da Costa, Jos Roberto Mendona de Barros, Manuel Carlos
Teixeira de Abreu, Luiz Felipe Chaves Dvila, Luiz Marcelo Dias Sales, Arthur Antonio Sendas and
Fernando Maida Dall Acqua and Yoshiaki Nakano.

For the year ended December 31, 2007, the aggregate compensation paid in cash to all of our
directors and executive officers and members of our committees as a group was approximately R$19 million.
Other non-cash benefits in 2007 included reimbursements of medical expenses to our executive officers and
the use of our cars during working hours. There are no outstanding loans granted by us to our executive
officers or members of our board of directors. We are not required under Brazilian law to disclose on an
individual basis the compensation of our directors and executive officers, and we do not otherwise publicly
disclose this information.

6D. Employees

Our workforce at December 31, 2007 consisted of 66,165 employees (calculated on a full-time
employee equivalent basis). Virtually all of our employees are covered by union agreements. The agreements
are renegotiated annually as part of industry-wide negotiations between a management group representing the
major participants in the retail food industry, including our management, and unions representing employees
in the retail food industry. We believe we compensate our hourly employees on a competitive basis, and we
have developed incentive programs to motivate our employees and reduce employee turnover. Our
management considers our relations with our employees and their unions to be good. We have not had a strike
in our history.

The following table sets forth the number of our employees at December 31, for each of the five
years ended December 31, 2007, 2006, 2005, 2004 and 2003:

At December 31(1)

2007 2006 2005 2004 2003

Operational ............................................................................ 55,494 53,495 53,187 53,177 46,094

Administrative ....................................................................... 10,671 10,112 9,616 10,307 9,463
Total .................................................................................. 66,165 63,607 62,803 63,484 55,557

53
(1) Based on the full-time equivalent number of employees calculated by dividing the total number of hours worked by
all employees in the final month of each period presented by 220 hours.

6E. Share Ownership

At May 25, 2007, the board members owned an aggregate amount of 85 common shares. The
members of our board of directors and our executive officers, on an individual basis and as a group, own less
than 1% of our common stock. See Item 7A.Major Shareholders and Related Party TransactionsMajor
Shareholders. As of May 15, 2007, our management and some of our employees also owned options to
purchase an aggregate amount of 97,470,000 preferred shares at per-share purchase price of R$57.77. None of
the members of our management and our employees holds any options to purchase our common shares. See
Item 6B. Directors, Senior management and Employees Compensation for a description of our stock
option plan applicable to our management and employees, including those of our subsidiaries.

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

7A. Major Shareholders

The following table sets forth information as of April 30, 2008, with respect to holdings of our capital
stock:

Shareholder Common Shares Preferred Shares Total Shares

Number Percentage Number Percentage Number Percentage

Wilkes Participaes S.A 65,400,000 65.61% - - 65,400,000 28.63%

Peninsula Particpaes Ltda 2,784,175 2.79% 2,608,467 2.03% 5,392,642 2.36%
Sudaco Participaes Ltda 28,619,173 28.71% - - 28,619,173 12.53%
Segisor S.A. - - 3,785,893 2.94% 3,785,893 1.66%
Casino Guichard Perrachon S.A 52 - - - 52 -
Abilio dos Santos Diniz 100 - - - 100 -
Joo Paulo F. dos Santos Diniz - - 17,800 0.01% 17,800 -
Ana Maria F. dos Santos Diniz D'Avila 1 - - - 1 -
Pedro Paulo F. dos Santos Diniz - - 721 - 721 -
Jean-Charles Naouri 2 - - - 2 -
Rio So Empreendimentos e Participaes Ltda 2,815,825 2.82% - - 2,815,825 1.23%
Flylight Comercial Ltda - - 320,629 0.25% 320,629 0.14%
Onyx 2006 Participaes Ltda - - 20,527,380 16.00% 20,527,380 9.00%
Rio Plate Empreendimentos e Participaes Ltda - - 4,055,172 3.15% 4,055,172 1.77%
Swordfish Investments Limited - - 4,472,620 3.47% 4,472,620 1.96%
Directors and officers 3 - 108,522 0.08% 108,525 0.05%
Others 60,520 0.06% 92,852,299 72.12% 92,912,819 40.67%
TOTAL 99,679,851 100.0% 128,749,503 100.00% 228,429,354 100.00%

At April 30, 2008, there were 92,852,299 preferred shares held by holders of record in Brazil,
representing 72.12% of the total of preferred shares outstanding, and 60,520 common shares held by holders
of record in Brazil, representing 0.06%% of the total of common shares outstanding.

Holding Company Goodwill Amortization

On May 3, 2005, the Diniz Group (group of shareholders composed by the members of the Diniz
family) and the Casino Group (a retail company headquartered in France) formed Vieri Empreendimentos e
Participaes S.A. (Vieri or parent company), which became the parent company of CBD, whose control
is shared by both groups of shareholders.

When Vieri acquired the common shares of the Company, a higher price was paid in relation to the

54
book value of the Company, thus generating goodwill. In 2006, Companhia Brasileira de Distribuio and the
parent company began a restructuring process in order to transfer the goodwill to the Company to obtain the
tax deductibility of the goodwill amortization. On December 31, 2007, the estimated tax benefit was
approximately R$517.3 million.

As a first step of the restructuring process, the goodwill was transferred from the parent company to
Companhia Brasileira de Distribuio in two phases, including the creation of a new subsidiary by the parent
company to where the goodwill was transferred, and subsequently the merger of this new subsidiary into
Companhia Brasileira de Distribuio. This first step was concluded on December 20, 2006, with the approval
by the shareholders at an Extraordinary General Meeting.

A valuation allowance, denominated in the books as Provision for maintenance of shareholders

equity, was recorded by the subsidiaries in relation to the goodwill. Accordingly, the remaining net balances
correspond to the tax benefit resulting from the future amortization of goodwill.

On December 31, 2007 the value of the resulting tax benefit related to both income taxes and social
contribution tax on profits of the Companhia Brasileira de Distribuio was R$517.3 million. This is shown in
the balance sheet as part of deferred taxes which is R$48.7 million as current and R$468.6 million as non-
current assets on December 31, 2007, respectively.

Under the terms of the reorganization, the resulting tax benefit reverts to the benefit of the
controlling shareholder that originated the goodwill without, however, causing any negative effects to the
Companys profitability or the flow of dividends to its minority shareholders. The effect of the reorganization
on the balance sheet and income statement accounts as at December 31, 2007 is shown below:

Balance sheet effects: In thousands of reais

Cash 37
Unamortized balance of goodwill 2,061,951
Provision for maintenance of shareholders equity (1,546,463)
Deferred income tax 1,806

Tax benefit balance presented under Deferred income taxes 517,331

In addition to the R$517.3 million tax benefits balance presented as deferred income taxes, this
transaction also brought to Companhia Brasileira de Distribuio the amount of R$1.8 million regarding
deferred income tax which existed at Vieri.

The goodwill will be amortized straight line over 5 years, starting in 2008. The provision for
maintenance of shareholders` equity was established at an amount sufficient to reduce the unamortized
balance of the goodwill to the estimated value of the future tax benefits that will be generated by its
amortization by the Company. This is also the amount necessary to ensure that there will be no reduction in
the amount of retained earnings available for the distribution of dividends on account of the future
amortization of the goodwill in excess of the related tax benefit. The offsetting entry to the initial recognition
of the tax benefit balance is recognized directly in shareholders` equity as a capital reserve (Goodwill special
reserve). Also under the terms of the restructuring, the effective tax benefit realized in each fiscal year will
subsequently be capitalized in the name of the controlling shareholder, and minority shareholders are ensured
the right to preference in the acquisition of a proportional amount of new capital from the controlling
shareholder.

Shareholders Transactions

As a result of a joint venture entered into in 2005, the Diniz group (consisting of our shareholders
Mr. Abilio Diniz, Pennsula Participaes Ltda., or Pennsula, and the other members of the Diniz family that

55
control Pennsula) and the Casino group share our control, through a Holding Company. The Diniz group and
the Casino group entered into a Holding Company Shareholders Agreement that outlines the rules for the
exercise of our co-control, corporate governance and restrictions on transfer of the Holding Companys
shares. In addition, the Diniz group, the Casino group and the Holding Company entered into a new CBD
Shareholders Agreement that governs their relationship in light of the Holding Company Shareholders
Agreement, and establishes that the Diniz group and the Casino group will vote our shares in accordance with
instructions given by the Holding Company.

56
 Holding Company Shareholders Agreement

Pursuant to the Holding Company Shareholders Agreement, the Diniz group, at the Holding Company
level:

may appoint (i) two directors and respective alternates (out of four members)
of the board of directors of the Holding Company, and (ii) two executive
officers of the Holding Company;

may appoint the Chairman of the board of directors of the Holding Company
up to the 7th year after the date of implementation of the joint venture.

The Diniz group, at our companys level:

may appoint five directors to our board of directors;

may appoint the Chairman of our board of directors up to the 7th year after the
date of implementation of the joint venture; from the beginning of the 8th year
after the date of implementation of the joint venture and every three years
thereafter, there will be an alternating appointment of the Chairman of our
board of directors between the two groups, and the Casino group will have the
right to the first alternate appointment, for a term-in-office comprising June
22, 2012 to June 21, 2015; however, the Casino group has agreed, for this first
alternate appointment, that Mr. Abilio Diniz will continue as Chairman of our
board of directors, provided that we maintain a good performance track
record. Moreover, for any subsequent terms as to which the Casino group is
entitled to name the Chairman, Casino has agreed that Mr. Abilio Diniz will
remain Chairman as long as he is mentally and physically fit for the functions
and as long as we maintain a good performance track record;

may cast a casting vote if the Casino group requests a lower distribution of
dividends by us than the Diniz group prefers, in which case the Diniz group
may affect dividends of up to 40% of our annual profits.

The Casino group, at the Holding Company level:

may appoint (i) two directors and respective alternates (out of four members)
of the board of directors of the Holding Company, and (ii) two executive
officers of the Holding Company;

may appoint the Chairman of the board of directors of the Holding Company
(i) from the beginning of the 8th year until the end of the 9th year after the date
of implementation of the joint venture, which if exercised, would trigger a
share put and call option in respect of the Diniz groups shares of the Holding
Company, and (ii) from the beginning of the 10th year after the date of
implementation of the joint venture, if the Diniz group transfers any common
shares of the Holding Company to a third party.

The Casino group, at our companys level:

may appoint five directors to our board of directors;

may cast a casting vote if the Diniz group requests a lower distribution of
dividends by us than the Casino group prefers, in which case the Casino group
may effect dividends of up to 32.5% of our annual profits;

57
 may determine the kind or classes of new shares or convertible securities
issued by us, if any, and only the Casino group will subscribe new common
shares or securities convertible into common shares issued by us (although the
Diniz group may veto these rights, as described below).

Both the Casino group and the Diniz group are subject to limitations on the purchase of our preferred
shares on the open market, which limitations vary according to the percentage of shares freely available to the
investing public. However, the Casino group is free to acquire any of our common or preferred shares held by
the Diniz group.

In addition, both the Casino group and the Diniz group have, except in certain circumstances, the
right of first refusal with respect to shares or convertible securities of the Holding Company to be disposed of
by any of them. The Casino group may not sell its shares in the Holding Company for 18 months from the
date of execution of the Holding Company Shareholders Agreement, and the Diniz group may not sell its
shares in the Holding Company for nine years from such date (or, if the Casino group appoints the Chairman
of the board of directors of the Holding Company, on the date of such appointment).

If the Casino group appoints the Chairman of the board of directors of the Holding Company or
acquires shares of the Holding Company from the Diniz group under certain circumstances, the Diniz group,
as long as it holds specified share amounts in the Holding Company or us, will only have, except under
certain circumstances, the following Diniz Group Rights: (A) veto rights regarding, among other matters: (i)
any corporate restructuring of our company or of the Holding Company; (ii) certain contracts or agreements
entered into by and between us and the Holding Company; (iii) any change in our dividend policy or that of
the Holding Company; (iv) the delisting, or any change in the rights and characteristics, of our shares; and (B)
certain other rights regarding the election and composition of our board of directors, including Mr. Abilio
Dinizs right to remain as the Chairman of our board of directors as long as he is mentally and physically fit
for the function of Chairman and as long as we maintain a good performance track record.

The Holding Company Shareholders Agreement provides that the Diniz group and the Casino group
will not compete with each other in the food retailing business in Argentina, Uruguay, Paraguay, and
Colombia, and they may not engage in the food retailing business in Brazil through any entity other than us.
The non-compete provision will continue for three years counted from the date either party ceases to be the
owner of at least 10% of the voting capital stock of the Holding Company, except that Diniz group may not
compete with the Casino group as long as any of its members (i) remains a direct or indirect shareholder of
the Brazilian corporation that received real estate properties from us and rents them to us or (ii) keeps, in
whole or in part, the Diniz Group Rights described above.

Our company also has a preemptive right to take advantage of business opportunities identified by
either (i) certain members of the Diniz group or the Casino group in a new business other than the food retail
business in Brazil or (ii) the Diniz group or the Casino group in a food retail business in Portugal on a 50%-
50% basis with whichever shareholder identified the opportunity.

The Holding Company Shareholders Agreement has a term of forty years and terminates
automatically (except with respect to the three-year non-compete provision and in certain circumstances the
Diniz Group Rights described above) when either of the Casino group or the Diniz group ceases to hold 10%
of the Holding Companys shares or convertible securities.

CBD Shareholders Agreement

According to the CBD Shareholders Agreement, the Diniz group and the Casino group are obligated
to vote together and in the same way that the Holding Company votes at any of our general shareholders
meetings. In the event that the Holding Company refrains to vote in any matter in our general shareholders
meetings, Casino group and Diniz group agreed to equally refrain upon such matter. In order to guarantee
compliance with the Shareholders Agreement by the Holding Company and us, the voting rights of our
shares owned directly by Casino group or Diniz group have been pledged to the Holding Company.

58
 The Holding Company has, except in certain circumstances, the right of first refusal with respect to
our shares or convertible securities to be disposed of by any of the Casino group and/or the Diniz group.

If our preferred shares come to have any voting rights by operation of law, the Casino group and/or
the Diniz group will automatically cede such voting right to the Holding Company. For the period the
preferred shares have any voting rights, the Casino group will be free to acquire our preferred shares from any
third party, provided that any voting rights are ceded to the Holding Company.

The Casino group will not convert, during the term of the CBD Shareholders Agreement, any of our
common shares held by it into preferred shares, unless authorized by the Holding Company.

The CBD Shareholders Agreement will remain valid as long as the Holding Company is our
controlling shareholder.

7B. Related Party Transactions

From time to time we have entered into transactions with the Diniz group and other related parties
for the provision of certain services. In the past, we and our shareholders have advanced funds to each other
and may do so in the future. If our shareholders advance funds to us, or if we advance funds to our
shareholders, the transaction will be conducted on the same terms applied to third parties. The following
discussion summarizes certain of the significant agreements and arrangements among us and certain of our
affiliates.

Leases

We currently lease properties from some members of the Diniz family, some of whom are our
shareholders, and also lease properties from Fundo de Investimento Imobilirio Pennsula, which belongs to
the Diniz group. These properties include one store from Mrs. Floripes Pires Diniz, four stores from Mr.
Arnaldo dos Santos Diniz, four stores from Mrs. Vera Lcia dos Santos Diniz and seven stores from Mrs.
Sonia Maria dos Santos Diniz Bernandini, 65 stores from the Sendas family, four stores from Barcelona
Comrcio and 60 stores from the Fundo de Investimento Imobilirio Pennsula. Aggregate payments in 2007
under those leases equaled approximately R$12.5 million to the Diniz family, R$33.2 million to the Sendas
family, R$0.4 million to the Barcelona Comrcio and R$117.1 million to the Fundo de Investimento
Imobilirio Pennsula. We believe that all such leases are on terms at least as favorable to us as those which
could be obtained from unrelated parties on an arms-length basis. For further information on these leases, see
note 26 (v) (i) to our audited consolidated financial statements included in this annual report.

Technical Assistance Agreement with Casino

In July 2005, we entered into a Technical Assistance Service Agreement with our shareholder
Casino, in the total annual amount in Brazilian reais corresponding to U.S.$2.7 million, of which the subject
matter is the rendering of services by Casino to us, involving technical assistance in the areas of human
resources, trademarks, marketing and communication, global campaigns and administrative assistance, among
others. This agreement is effective for seven years, after which term it will be automatically renewed for an
undetermined period. This agreement was approved by a board of directors meeting and an Extraordinary
General Meeting held on August 16, 2005. In 2007, we registered the amount of R$6.3 million (tax included)
related to this technical assistance agreement.

Consultancy Agreement with Galeazzi & Associados

In July 2007, we hired the consultancy firm Galeazzi & Associados to implement a restructuring plan
to enhance Sendas Distribuidoras operational performance in the state of Rio de Janeiro. One of the partners
of Galeazzi & Associados, namely Claudio Galeazzi, is currently our CEO.

The scope of the Consultancy Agreement involves: 1) the development of a Strategic and
Operational Diagnosis Program, with a view to assessing all the business profitability opportunities, 2) Action

59
Plan in order to take advantage of opportunities identified and 3) business management derived from the
development of the Action Plan, aiming at making our operations more competitive, efficient and profitable.

The timeframe to carry out the project was estimated at 14.5 months, and conclusion foreseen for the
third quarter of 2008. The fees are divided into a monthly fixed amount of R$350,000 and a variable amount
subject to the fulfillment of goals previously established to improve the companys profitability.

60
 7C. Interests of Experts and Counsel

Not applicable.

ITEM 8. FINANCIAL INFORMATION

8A. Consolidated Statements and Other Financial Information

The information included in Item 18 of this annual report is referred to and incorporated by reference
into this Item 8A.

Legal Proceedings

We are party to administrative proceedings and lawsuits that are incidental to the normal course of
our business, some of which are described below. These include general civil, tax and labor litigation and
administrative proceedings. We believe that our provisions for legal proceedings are sufficient to meet
probable and reasonably estimable losses in the event of unfavorable court decisions and that the ultimate
outcome of these matters will not have a material effect on our financial condition or results of operations.
We cannot estimate the amount of all potential costs that we may incur or penalties that may be imposed on
us other than those amounts for which we have provisions. For further information on our legal proceedings,
see note 16 to our audited consolidated financial statements included in this annual report.

The following probable losses from existing tax obligations under dispute have been identified based
on the advice of outside legal counsel and have been provided as liabilities in our financial statements:

2007 2006
(millions of reais)

Taxes:
COFINS and PIS............................................................. 1,086.2 1,011.3
Labor claims ........................................................................ 50.2 42.7
Civil and other ..................................................................... 173.4 155.4
1,309.8 1,209.4

Judicial deposits (93.6) (71.8)

Total accrued liabilities for legal proceedings.................... 1,216.2 1,137.6

Taxes on Revenues

We are questioning the constitutionality of the increase of the tax rate of the PIS and the COFINS
taxes, which accrue on revenues, as well as the expansion of their tax basis as of February 1, 1999 because we
believe these changes could only be introduced by a law complementary to the Federal Constitution. On
September 1999, the lower court issued a ruling in our favor. The federal government appealed the decision
and is awaiting a final judgment. At December 31, 2007, we had a provision of R$1,086.2 million that we
believe corresponds to the amount of PIS and COFINS we did not collect, based on the lower court decision,
and this provision is monetarily updated. Since these contributions are not being collected, the federal
government has issued tax assessment notices to charge the corresponding values not collected.

In March 2004, we filed an injunction seeking a judicial authorization so as to ensure the right to
enlist the credit resulting from the COFINS levied on the inventory at the rate of 7.6% in a single installment.

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The preliminary order was granted. According to this decision, we did not collect the amount of R$32.9
million. The chances of success for this lawsuit are deemed possible. As of December 31, 2007, the amount
recorded was R$22.4 million.

Social Security Contributions

We are challenging the constitutionality of some social security contributions, such as the
contributions for education allowance (salrio educao) and for workers compensation insurance (SAT), as
well as our right to offset the amount we believe was overpaid with other social security contributions. Based
on preliminary orders issued in our favor by the lower courts, we have not been collecting some of these
contributions and/or we have been offsetting overpaid contributions with other social security contributions.
The lower courts provided a favorable decision in both lawsuits. The federal government appealed these
decisions and, with regard to workers compensation insurance (SAT) the court ruled against us, prompting us
to join the Special Installments Program (Parcelamento Especial - PAES) pursuant to Law 10,684/2003 and
pay the amount of R$256.6 million of social security contributions in installments. As of December 31, 2007,
the amount of R$206.7 million was recorded in our current liabilities and non-current liabilities as Taxes
payable in installments.

Furthermore, the Social Security Institute INSS filed several assessment tax notices, to charge the
social security contribution levied on payments that we do not believe should be included in the calculation of
this contribution, since they do not reflect a consideration for the work accomplished and are not paid
habitually, in the approximate amount of R$116.5 million. We presented administrative defenses, and are
awaiting a decision. We believe our chances of success are possible, and there is no provision accrued for this
contingency.

Income Tax

In January 1995, we filed an injunction to obtain a judicial authorization to adjust our 1989 balance
sheet using a rate relating to the inflationary index for January and February 1989 (70.3%), which generated
an additional tax-deductible depreciation charge. In July 2000, a lower court issued a ruling, which was
partially favorable to us, acknowledging our right to use a tax inflation index for the month of January 1989
of 42.7% for purposes of determining the depreciation charge. We appealed the decision and asserted the right
to adjust our 1989 balance sheet according to the inflationary index of 6.3% for February 1989. The federal
government also appealed the decision and is awaiting a final judgment. The federal government is charging
the values not collected since there is a lawsuit in the amount of R$54.1 million. Since it is probable that we
will not prevail in this lawsuit, as of December 31, 2004, we had a provision of R$10.6 million that we
believe corresponds to the difference between the 42.7% inflationary index for January 1989 and the 6.3%
inflationary index for February 1989 and the 70.3% rate, which was fully settled in June 2005. As of
December 31, 2007, the amount recorded was R$6.2 million.

The federal government is charging the values resulting from additional amounts that have not been
included in the calculation of the Corporate Income Tax in the amount of R$69.3 million; we believe our
chances of success in this suit are possible.

ICMS - State Value-Added Tax on Sales and Services

We were served notice by the state tax authorities regarding the appropriation of electricity credits,
acquisitions from suppliers considered to be disreputable, refund of tax replacement without due compliance
of ancillary obligations brought by CAT Ordinance 17 of the State of So Paulo, among others, not relevant.
At the end of 2007, we were again served notice by the State of So Paulo, amounting to nearly R$557.8
million, of which approximately R$425.0 million were classified by the management and legal counsels, as
possible losses. The total amount of these assessments amounts to R$878.1 million (R$330.9 million in
2006), which await a final decision in the administrative and court levels.

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 Other Tax-Related Matters

In June 1990, we filed an injunction seeking protection for non-payment of the Brazilian social
contribution on profits, which we claimed to be unconstitutional based on the fact that this tax should have
been enacted by a complementary law to the Brazilian Constitution. We obtained a favorable decision from
the lower court in March 1991. Although no appeal was presented by the Federal government, pursuant to
Brazilian law, this lawsuit was submitted to mandatory review of the Regional Federal Court, which in
February 1992, confirmed the lower courts decision. Based on the opinion of our legal counsel, we believe
that the federal tax authorities have no further legal appeal available to collect this contribution on a
retroactive basis. To sum up, according to our lawyers, the chances of the Federal Tax Authorities succeed in
any claim related to this subject are unlikely.

The Internal Revenue Service issued tax assessment notice charging the IRRF, PIS, COFINS and
CPMF. According to our lawyers, our chances of loss in these administrative defenses are deemed possible to
R$243.6 million (R$212.9 million in 2006).

Taxes related to assessments on third parties retention, tax payment discrepancies, fines due to non-
compliance of ancillary obligations and sundry taxes ISS, Municipal Real Estate Tax (IPTU), Property
Transfer Tax (ITBI) and others amount to R$17.9 million, which is classified as possible loss by our legal
counsels and is pending administrative and court decisions. In 2006, the likelihood of loss was classified as
remote by our legal counsels.

Labor Claims

We are party to numerous lawsuits involving disputes with our employees, primarily arising from
layoffs in the ordinary course of our business. At December 31, 2007, we had a provision of R$50.2 million
(in addition to judicial deposits in the amount of R$47.8 million) for labor related loss contingencies, since it
is probable that we will not prevail in these lawsuits and the damages are reasonably estimable.

Other

The Company is defendant, at several judicial levels, in lawsuits of civil nature and others. The
Company sets up provisions for losses in amounts considered to be sufficient to cover unfavorable court
decisions when its internal and external legal advisors consider losses to be probable. For further information
on these lawsuits, see note 16 to our audited consolidated financial statements included in this annual report.
At December 31, 2007, we had a provision of R$108.8 million (in addition to judicial deposits in the amount
of R$45.9 million) for liabilities in connection with civil and other lawsuits.

Subsequent changes in the expectation of risk of the referred lawsuits may require the recording of
additional provisions for contingencies.

Dividend Policy and Dividends

General

Pursuant to the Brazilian corporate law, Brazilian corporations are required to hold an annual
shareholders meeting in the first four months of each year at which an annual dividend may be declared.
Under the Brazilian corporate law, shareholders of a Brazilian corporation have the right to receive, as a
mandatory dividend for each fiscal year, a part of the corporations net profits as established under its by-laws
or, if not provided under such by-laws, an amount equal to that established 50% of the net profits adjusted
pursuant to the Brazilian corporate law. Currently, the Brazilian corporate law generally requires that each

63
Brazilian corporation distribute as a mandatory dividend an aggregate amount equal to at least 25% of the net
profits adjusted according to Brazilian corporate law. Pursuant to the Brazilian corporate law, in addition to
the mandatory dividend, the board of directors may recommend to the shareholders payment of interim
dividends and payment of dividends from other legally available funds. For further information see item 10B
Additional Information Memorandum and Articles of Association Allocation of Net Profits and
Distribution of Dividends Distribution of Dividends.

Dividend Policy and History of Dividend Payments

The following table sets forth the distributions paid to holders of our common shares and preferred
shares since 2003:

Total amount
in dividends and
R$ per R$ per interest on
First payment preferred common shareholders' equity
Period Description date share (1) share (1) (in R$ millions)

2003 Dividends June 2004 0.2544 0.2313 54.8

2004 Dividends June 2005 0.4133 0.3757 89.1
2005 Dividends June 2006 0.3101 0.2819 62.0
2006 Dividends June 2007 0.0930 0.0845 20.3
2007 Dividends June 2008 0.2288 0.2080 50.1

(1) The dividend accrued in December 31, 2007 was approved at the annual shareholders meeting held on April 30, 2008 and will be
paid in June 2008. Taking into account the (ratio) reverse stock split that became effective on September 1, 2007. In order to facilitate the
comparison of the per share information in all periods presented, we restated our financial statements for the years ended December 31,
2003 to 2006 to take into account the 500:1 stock split as if it had already occurred on January 1, 2003. According to Brazilian corporate
law and our by-laws, we must pay declared dividends within 60 days after the approval.

Shareholders who are not residents of Brazil must generally register with the Central Bank to have
dividends and/or interest on shareholders equity, sales proceeds or other amounts with respect to their shares
eligible to be remitted in foreign currency outside of Brazil. See Item 10D Additional Information
Exchange Controls. The preferred shares underlying the ADSs are held in Brazil by the custodian, as agent
for the depositary, the registered owner on the records of the registrar for the preferred shares underlying the
ADSs. The current registrar is Banco Ita S.A.

Payments of cash dividends and distributions, if any, will be made in Brazilian currency to the
custodian on behalf of the depositary, which will then convert the payments in Brazilian currency into U.S.
dollars and thereafter will cause the U.S. dollars to be delivered to the depositary for distribution to holders of
ADSs as described above. In the event that the custodian is unable to convert immediately the Brazilian
currency received as dividends and/or interest on shareholders equity into U.S. dollars, the amount of U.S.
dollars payable to holders of ADSs may be adversely affected by devaluations of the Brazilian currency that
occur before the distributions are converted and remitted. See Item 3A Key Information Selected
Financial Data Exchange Rates. Dividends and interest on shareholders equity in respect of the preferred
shares paid to shareholders, including holders of ADSs, are subject to the tax treatment outlined in Item 10E
Additional Information Taxation Brazilian Tax Considerations.

8B. Significant Changes

We are not aware of any significant changes bearing upon our financial condition since the date of
the consolidated financial statements included in this annual report.

64
ITEM 9. THE OFFER AND LISTING

9A. Offer and Listing Details

Our preferred shares are traded on the So Paulo Stock Exchange BOVESPA under the trading
symbol PCAR4. Our preferred shares in the form of American Depositary Shares, or ADSs, also trade on the
New York Stock Exchange under the trading symbol CBD and on the Luxembourg Stock Exchange. We
became a U.S. registered company listed on the New York Stock Exchange in May 1997.

The Extraordinary General Meeting held on July 30, 2007 approved the conversion of
113,885,493,433 non-par shares, of which 49,839,925,688 are common shares and 64,045,567,745 are
preferred shares, representing the Companys capital stock, at the ratio of five hundred (500) existing shares
for one (1) share of same type, and the Companys capital stock now is represented by 227,770,986 non-par
shares, of which 99,679,851 are common shares and 128,091,135 are preferred shares. The number of shares
and paid-in capital are already present in this note considering such conversion.

Each ADS represents 1:2 preferred shares, without par value. The ADSs are evidenced by American
Depositary Receipts, or ADRs, issued by The Bank of New York, as depositary.

The following table sets forth, for the period indicated, the reported high and low sales prices for the
preferred shares on the So Paulo Stock Exchange, in reais and U.S. dollars:

R$ Average
Daily Trading
High Low High Low Volume
Calendar Period R$ U.S.$(1)
2003(2) 35.50 20.00 12.29 5.97 2,562,900
2004(2) 38.74 21.47 13.46 6.91 3,349,238
2005(2) 38.50 28.40 16.45 12.13 5,841,394
2006(2):
1st quarter 49.43 38.53 22.75 17.73 10,006,019
2nd quarter 44.85 30.75 20.72 14.21 11,858,911
3rd quarter 34.35 28.00 15.81 13.89 9,979,949
4th quarter 37.85 28.15 17.70 13.17 13,079,044
2007:
1st quarter 38.08 29.53 18.57 14.40 11,951,805
2nd quarter 38.25 29.50 19.86 15.32 19,037,432
3rd quarter 40.75 27.44 22.16 14.92 19,455,678
4th quarter 35.20 27.05 19.87 15.27 27,085,753

Share prices for the most recent six months are as follows:

November 2007 30.10 27.49 16.88 15.41 25,821,992

December 2007 35.20 29.70 19.87 16.77 29,443,884
January 2008 33.00 27.81 18.75 15.80 20,764,553
February 2008 36.90 31.10 21.92 18.48 26,420,489
March 2008 37.15 34.15 21.24 19.52 30,052,779
April 2008 38.00 35.25 22.52 20.89 21,884,088
May 2008 (through May 12) 40.70 39.00 24.31 23.29 18,142,421
______________

(1) Converted into U.S. dollars at the U.S. dollar-Brazilian real exchange rate in effect at the end of each period presented. There
was a significant devaluation of the Brazilian real in early 2002 and 2003. See Item 3A Key Information Selected
Financial Data Exchange Rates.

(2) As restated due to the reverse stock split of the shares.

On May 12, 2008, the closing sale price for the preferred shares on the So Paulo Stock Exchange
was R$39.50 per preferred share, equivalent to U.S.$66.13 per ADS translated at the exchange rate of
R$1.6743 per U.S.$1.00, the commercial market rate on such date. On the same date, the closing sale price for

65
our ADSs on the NYSE was US$47.40. The ADSs are issued under a deposit agreement and The Bank of
New York serves as depositary under that agreement.

66
 The following table sets forth, for the periods indicated, the reported high and low sales prices for
our ADSs listed on the New York Stock Exchange, in U.S. dollars and reais:

U.S.$ Average
Daily Trading
High Low High Low Volume
Calendar Period U.S.$ ADSs R$ ADSs
2003 25.15 11.44 72.66 33.05 2,374,799
2004 27.74 13.37 80.68 41.55 3,287,320
2005 34.61 25.53 81.01 59.76 6,392,071
2006:
1st quarter 46.13 34.37 100.21 74.67 10,012,190
2nd quarter 42.15 27.14 91.23 58.74 12,000,366
3rd quarter 31.39 25.61 68.19 55.64 7,943,120
4th quarter 35.02 26.15 74.87 55.91 8,135,213
2007:
1st quarter 34.33 27.83 70.39 57.06 6,133,913
2nd quarter 40.17 28.87 77.38 55.61 12,257,827
3rd quarter 43.77 27.50 80.49 50.57 15,403,909
4th quarter 39.68 29.73 70.29 52.66 14,960,591

Share prices for the most recent six months are as follows:

November 2007 34.89 29.83 62.23 53.21 12,587,895

December 2007 39.68 33.10 70.29 58.63 17,492,765
January 2008 36.83 31.65 64.83 55.71 14,808,760
February 2008 43.94 35.49 73.96 59.74 18,556,575
March 2008 44.55 39.28 77.92 68.70 17,845,819
April 2008 45.89 41.55 77.43 70.10 15,196,790
May 2008 (through May 12) 48.70 46.10 81.54 77.19 21,270,222

9B. Plan of Distribution

Not applicable.

9C. Markets

Trading on the Brazilian Stock Exchanges

The principal trading market for our preferred shares and common shares is the So Paulo Stock
Exchange (BOVESPA). Settlement of transactions on BOVESPA occurs three business days after the trade
date. Delivery of and payment for shares is made through the facilities of an independent clearinghouse. The
clearinghouse for BOVESPA is Companhia Brasileira de Liquidao e Custdia, or CBLC. The CBLC is
the central counterparty for transactions effected on BOVESPA, carrying out multi-party settlement for
financial obligations and transfers of securities. Under the regulations of the CBLC, financial settlement is
carried out through the Sistema de Transferncia de Reservas (Reserve Transfer System) of the Central Bank.
The settlement of trades of shares is carried out in the custodial system of CBLC. All deliveries against final
payment are irrevocable.

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 At December 31, 2007, there were 644 companies listed on the BOVESPA.

Trading on Brazilian stock exchanges by non-residents of Brazil is subject to certain limitations

under Brazilian foreign investment and tax legislation.

As the result of a corporate restructuring on August 28, 2007, BOVESPA, which previously was a
not-for-profit institution, started to operate as a joint stock corporation. At the same date, BOVESPA Holding
was created. BOVESPA Holding operates the stock exchange and the organized over-the-counter markets,
through its fully owned subsidiary BVSP. The provision of settlement, clearing and depository services are
carried out by BOVESPA Holdings fully owned subsidiary CBLC.

Regulation of the Brazilian Securities Markets

The Brazilian securities markets are regulated by the CVM, the Brazilian securities commission,
which has authority over stock exchanges and the securities markets generally, the Conselho Monetrio
NacionalCMN, the national monetary council, and the Central Bank, which has, among other powers,
licensing authority over brokerage firms and regulates foreign investment and foreign exchange transactions.

Under the Brazilian corporate law, a company is either public, a companhia aberta, such as we are,
or private, a companhia fechada. All public companies are registered with the CVM, and are subject to
reporting requirements. A company registered with the CVM may have its securities traded either on the
Brazilian stock exchanges or in the Brazilian over-the-counter market. The shares of a public company may
also be traded privately, subject to certain limitations. To be listed on a Brazilian stock exchange, a company
must apply for registration with the CVM and with a stock exchange. Once this stock exchange has admitted a
company to listing and the CVM has accepted its registration as a public company, its securities may, under
certain circumstances, be traded on all other Brazilian stock exchanges.

Trading in securities on the Brazilian stock exchanges may be suspended at the request of a company
in anticipation of a material announcement. Trading may also be suspended on the initiative of a Brazilian
stock exchange or the CVM, based on or due to, among other reasons, a belief that a company has provided
inadequate information regarding a material event or has provided inadequate responses to inquiries by the
CVM or the relevant stock exchange.

The Brazilian securities law, the Brazilian corporate law and the laws and regulations issued by the
CVM, the CMN, and the Central Bank provide for, among other things, disclosure requirements applicable to
issuers of traded securities, restrictions on insider trading and price manipulation, and protection of minority
shareholders. However, the Brazilian securities markets are not as highly regulated and supervised as the U.S.
securities markets or markets in certain other jurisdictions.

Corporate Governance Practices

As a Brazilian company listed on the Nvel 1 das Prticas Diferenciadas de Governana

Corporativa da Bolsa de Valores de So Paulo (Level 1 of the Differentiated Practices of Corporate
Governance of the So Paulo Stock Exchange or Level 1) we must comply with the corporate governance
standards set forth in the Brazilian corporate law, the rules of the CVM and the Regulamento de Prticas
Diferenciadas de Governana Corporativa da Bolsa de Valores de So Paulo (the Differentiated Practices of
Corporate Governance of the So Paulo Stock Exchange or the Level One Regulation), as well as our own
by-laws.

On November 4, 2003, the SEC approved the new corporate governance rules established by the
NYSE. Pursuant to these rules, foreign private issuers that are listed on the NYSE, such us, must disclose any
significant differences in corporate governance practices compared to U.S. domestic companies under the
listing rules of the NYSE.

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 9D. Selling Shareholders

Not applicable.

9E. Dilution

Not applicable.

9F. Expenses of the Issue

Not applicable.

ITEM 10. ADDITIONAL INFORMATION

10A. Share Capital

The Extraordinary General Meeting held on July 30, 2007 approved the conversion of
113,885,493,433 non-par shares, of which 49,839,925,688 are common shares and 64,045,567,745 are
preferred shares, representing the Companys capital stock, at the ratio of five hundred (500) existing shares
for one (1) share of same type. The Companys capital stock is currently represented by 228,429,354 non-par
shares, of which 99,679,851 are common shares and 128,749,503 are preferred shares.

10B. Memorandum and Articles of Association

Set forth below is a brief summary of certain significant provisions of our by-laws and Brazilian
corporate law. This description does not purport to be complete and is qualified by reference to our by-laws
(an English translation of which has been filed with the Commission) and to the Brazilian corporate law.

Objects and Purposes

We are a publicly held corporation with principal place of business and jurisdiction in the City of
So Paulo, Brazil, governed mainly by Brazilian laws (including the Brazilian corporate law), CVM
regulations and our by-laws.

Our main business purpose is to sell manufactured, semi-manufactured and natural products of both
national and foreign origin, of any and all kind and description, nature or quality, provided that they are not
forbidden by law. Furthermore, we may also engage in a wide range of activities set forth in article 2 of our
by-laws.

Preferred Shares and Common Shares

General

Pursuant to the Brazilian corporate law and our by-laws, each common share entitles the holder
thereof to one vote at meetings of our shareholders. Holders of common shares are not entitled to any
preference relating to our dividends or other distributions or any preference upon our liquidation, provided
that they may convert at any time their common shares into preferred shares. See - Conversion of Common
Shares into Preferred Shares below.

Pursuant to the Brazilian corporate law, each preferred share is non-voting, except under limited
circumstances, and is entitled to:

(i) priority in the receipt of fixed or minimum dividend;

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 (ii) priority in the reimbursement of capital, with or without premium; or

(iii) cumulative preferences and advantages established in items (i) and (ii) above.

Furthermore, the preferred shares will only be admitted for trading on the Brazilian stock exchanges
if they are entitled to at least one of the following preferences:

right to participate in the distribution of the mandatory dividend of 25% of our adjusted net
profits, pursuant to the following criteria (See - Allocation of Net Profits and Distribution of
Dividends Mandatory Dividends for a description of calculation of our adjusted net profits):

(i) priority in the receipt of dividends corresponding to at least 3% of the shares book value;
and

(ii) right to participate in the profit distribution together with the common shares under equal
conditions, after the common shares have received dividends as set forth in item (i) above.

right to receive dividends in an amount per share at least 10% higher than the amount per share
paid to holders of common shares; or

tag-along right of at least 80% of the price paid to the controlling shareholder in case of transfer
of control.

In this sense, our by-laws sets forth that the preferred shares are entitled to the following advantages
and preferences:

(i) priority in receiving a minimum non-cumulative annual preferred dividend equal to R$0.08
per preferred share that is accounted for as a portion of the mandatory dividends (as mentioned
below);

(ii) priority in the reimbursement of capital, which value will be calculated by the division of
the corporate capital for the number of trading shares, without premium, in the event of our
liquidation;

(iii) participation under equal conditions with common shares, in the distribution of bonus shares
resulting from capitalization of reserves or retained earnings; and

(iv) each preferred share will be entitled to a mandatory dividend 10% (ten per cent) higher than
the dividend amount attributed to each common share (including, for purposes of such calculation, in
the sum of the total amount of dividends paid to the preferred shares, the amount paid pursuant to
item (i) above).

In addition, pursuant to the Brazilian corporate law and our by-laws, the preferred shares will acquire
the right to vote in the event that the minimum non-cumulative annual preferred dividend is not paid for a
period of three consecutive years and such voting right will cease upon the payment of such minimum non-
cumulative annual preferred dividend.

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 Under the Brazilian corporate law, amendments reducing the rights of preferred shares entitle the
holders of those shares to withdrawal rights. See Withdrawal Rights for a description of withdrawal rights.

Allocation of Net Profits and Distribution of Dividends

Allocation of Net Profits

Brazilian corporate law defines the net profit as the results of the relevant fiscal year, reduced by
accumulated losses of prior fiscal years, provisions for income tax and social contribution for such fiscal year,
and amounts allocated to employees and managements participation in the results in such fiscal year. The
allocation of our net profits is proposed by our management and is subject to approval by our shareholders at
a general shareholders meeting. The discretion of our management and our shareholders to determine the
allocation of our net profits, however, is limited by certain rules that determine whether such net profits
should be distributed as dividends or allocated to certain profit reserves or carried forward to future fiscal
years, as follows:

Mandatory dividends. Our shareholders are generally entitled to receive mandatory dividends each
year, in an amount equivalent to 25% of our adjusted net profits. Adjusted net profits are net profits following
the addition or subtraction of:

amounts allocated to the formation of a legal reserve account;

amounts allocated to the formation of a contingency reserve account and the return of any
amounts in any contingency reserve accounts deposited in previous years;

amounts allocated to the formation of a tax incentives reserve account;

amounts allocated to the statutory reserve, if any;

amounts allocated to the unrealized profit reserve;

amounts allocated to the retained profit reserve; and

reversions of the amounts allocated to the unrealized profit reserve, when realized and not
absorbed by losses.

The payment of our mandatory dividends may be limited to the profits actually realized in the fiscal
year, if the portion of the profits not realized is allocated to the unrealized income reserve account (as
described below).

Legal reserve account. We are required to maintain a legal reserve to which we must allocate 5% of
our net profits for each fiscal year until the amount of the reserve equals 20% of our paid-in capital. The
allocation of a portion of the net profits to the legal reserve account is mandatory and it must be submitted to
the approval by the shareholders voting at the general shareholders meeting and may only be transferred to
our capital account or used to offset accumulated losses, if any. We are not required to make any allocations
to our legal reserve for any fiscal year in which such reserve, when added to our capital reserves, exceeds
30% of our capital stock. The legal reserve account is not available for the payment of dividends.

Expansion Reserve. Currently, our by-laws provide for an expansion reserve (Reserva de Expanso)
which will be made of up to 100% of the remainder net profits adjusted after the establishment of the legal,
contingency and unrealized income reserves. The total amount of this reserve may not exceed the amount
corresponding to our share capital. Our shareholders may amend our by-laws in order to establish one or more
other discretionary reserves. The allocation of our net profits to discretionary reserve accounts may not be
made if it prevents the distribution of our mandatory dividends.

71
 Contingency reserve account. A portion of our net profits may also be allocated to a contingency
reserve for an anticipated loss that is deemed probable in future years. Any amount so allocated in a prior year
must either be reversed in the fiscal year for which the loss was anticipated if the loss does not occur or be
charged off if the anticipated loss occurs.

Tax incentives reserve account. According to the Brazilian Corporation Law, our shareholders
meeting, upon a justified proposal of our Board of Directors or Board of Executive Officers, may decide to
allocate a percentage of our net profits resulting from government donations or subventions for investment
purposes.

Retention of our net profits. According to the Brazilian corporate law, the shareholders can decide to
retain a portion of the net profit provided that such portion has been contemplated in the capital budget
previously approved by the shareholders.

Unrealized income reserve account. The portion of the mandatory dividends that exceeds the net
profits actually realized in that year may be allocated to the unrealized income reserve account. Unrealized
income is that resulting from the equity pick up result and/or the profits of earnings of any transaction, the
financial satisfaction of which takes place in the subsequent fiscal year.

The unrealized income reserve account, when realized, must be used first to offset accumulated
losses, if any, and the remaining portion must be used for the payment of mandatory dividends.

The balance of the profits reserve accounts, except for the contingency reserve account and
unrealized income reserve account, may not exceed the share capital. If this happens, a shareholders meeting
must resolve if the excess will be applied to pay in the subscribed and unpaid capital, to increase and pay in
the subscribed share capital or to distribute dividends.

If our board of directors determines prior to a general shareholders meeting that payment of
mandatory dividends with respect to the prior fiscal year would be incompatible in view of our financial
condition, we would not be required to pay the mandatory dividend. This determination must be reviewed by
the fiscal council, if it is convened, and our management must report to the CVM within five days of the
relevant general shareholders meeting. The amount of mandatory dividends not distributed as a consequence
of the Brazilian corporations financial condition will be registered on a special account and, if not offset
against losses in future years, will be distributed as mandatory dividends as soon as the corporations financial
condition permits.

Distribution of Dividends

Under the Brazilian corporate law and our by-laws, we may pay dividends only from:

our net profits earned in a given fiscal year, which is our result of the relevant fiscal year,
reduced by: accumulated losses from prior fiscal years; provisions for income tax and social
contribution for such fiscal year; and amounts allocated to employees and managers
participation in the results in such fiscal year pursuant to our Profit Sharing Program
(participaes estatutrias). Furthermore, our by-laws authorize not only a profit sharing
plan for employees and managers, but also a stock option plan. The amount to be paid in
connection with both plans is set forth by our board of directors and must not exceed an
amount equal to 15% of our net profits. Under Brazilian corporate law, this profit sharing
may only be paid to managers with respect to a fiscal year in which the mandatory dividend
has been declared to the shareholders.

our net profits accrued in previous fiscal years or in any six-month and/or
quarterly interim periods of a fiscal year; or

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 our profit reserves set aside in previous fiscal years or in the first six months
of a fiscal year. In this case, profit reserves means any discretionary reserve
account, contingency reserve account, amounts allocated to our capital
expenditure budget approved by our shareholders resolution or unrealized
income reserve account, not including the legal reserve account.

Under our by-laws, the preferred shares are entitled to: (i) priority in receiving a minimum non-
cumulative annual preferred dividend equal to R$0.08 per preferred share, (ii) priority in reimbursement of
capital, without premium, in case of liquidation, (iii) participation on equal terms with common shares in the
distribution of bonus shares resulting from capitalization of reserves of retained earnings and (iv) receipt of
the mandatory dividend that is 10% higher than the dividend of each common share, including, for purposes
of this calculation, in the sum of the total dividend amount paid to the preferred shares, the amount paid as a
minimum non-cumulative annual preferred dividend equal to R$0.08 per share.

Consequently, under our by-laws, to the extent funds are available, dividends and/or interest on
shareholders equity are paid in the following order: (i) a minimum non-cumulative annual preferred dividend
in respect of the preferred shares in the amount of R$0.08 per preferred share; and (ii) after common shares
are assured a dividend equal to the minimum non-cumulative annual preferred dividend equal to R$0.08 per
share, each preferred share receives a dividend that is 10% higher than the dividend of each common share,
including, for purposes of this calculation, the amount paid as a minimum non-cumulative annual preferred
dividend equal to R$0.08 per preferred share, subject to any determination by our board of directors that such
distribution would be incompatible in view of our financial condition. We are authorized, but not required, to
distribute a greater amount of dividends.

Dividends are generally to be declared at general shareholders meetings in accordance with the
recommendation of the board of directors. Our board of directors may declare interim dividends to be
deducted from the accrued profits recorded in our annual or semiannual financial statements. In addition, our
board of directors may pay dividends from the net income based on our unaudited quarterly financial
statements. The interim dividends may be declared and debited to the profit reserve amount registered at the
most recent annual or semiannual statement. These semiannual or quarterly interim dividends may not exceed
the amounts accounted for in our capital reserve accounts. Any payment of interim dividends may be set off
against the amount of mandatory dividends relating to the net profits earned in the year the interim dividends
were paid.

Distributions of interest on our shareholders equity may constitute an alternative form of payment to
shareholders. These payments may qualify as part of the mandatory dividend at their net value. Please see
Item 10E Additional information Taxation Brazilian Tax Considerations.

Dividends are generally available to the shareholders within 60 days after the date the dividends
were declared to the holder of record on the declaration date. The amount is subject to monetary restatement,
in accordance with recommendation of our board of directors and the current corporate law.

A shareholder has a three-year period following the dividend payment date to claim a dividend in
respect of its shares, after which we have no liability for such payment.

Our calculation of net profits and allocations to reserves for any fiscal year are determined on the
basis of financial statements prepared in accordance with Brazilian GAAP. Although our allocations to
reserves and dividends will be reflected in those financial statements, investors will not be able to calculate
these allocations or required dividend amounts from the financial information in U.S. GAAP.

Conversion of Common Shares into Preferred Shares

Our by-laws do not provide for the conversion of preferred shares into common shares. In
accordance with our by-laws, our shareholders may at any time convert our common shares into preferred
shares, provided that such common shares are fully paid and that the total of preferred shares issued do not

73
exceed the limit of two-thirds of all outstanding shares. The requests for conversion must be submitted in
writing to our executive officers committee and subsequently ratified at the next board of directors meeting.

Interest on Shareholders Equity

We are allowed to pay interest on shareholders equity as an alternative form of payment to

shareholders, which payment may be treated as a deductible expense for income tax and social contribution
purposes. Payments of interest on shareholders equity may be made at the discretion of our board of
directors, subject to the approval of our shareholders in the shareholders meeting. The amount paid to
shareholders as interest on shareholders equity, net of any withholding tax, may be included as part of the
mandatory distribution. This interest is limited to the daily pro rata variation of the TJLP, the Brazilian
governments long-term interest rate, as determined by the Brazilian Central Bank from time to time, and
cannot exceed, for tax purposes, the greater of (i) 50% of net income (after deduction of social contribution on
profits and before taking such distribution and any deduction for corporate income tax) for the year in respect
of which the payment is made; or (ii) 50% of the sum of retained profits and profit reserves in the beginning
of the period with respect to which the payment is made.

Distribution of interest on shareholders equity may also be accounted for as our tax deductible
expense, and any payment of interest on preferred shares to shareholders, whether Brazilian residents or not,
including holders of ADSs, is subject to Brazilian withholding tax at the rate of 15% or at the rate of 25% in
case the beneficiary is resident and domiciled in the so-called tax haventhat is, a country or location that
does not impose income tax or where the maximum income tax rate is lower than 20% or where the local
legislation imposes restrictions on disclosing the shareholding composition or the ownership of the
investment. See Item 10E Additional information Taxation Brazilian Tax Considerations Interest on
Shareholders Equity. To the extent we distribute interest on shareholders equity in any year, which
distribution is not accounted for as part of the mandatory distribution, a Brazilian withholding tax would
apply and we would not be required to make a gross-up.

Board of Directors

Under the Brazilian Corporate Law, the members of a companys Board of Directors must be
shareholders of the company. There is no requirement as to the number of shares an individual must own in
order to act as a member of the Board of Directors.

According to the Brazilian Corporate Law, our officers and directors are prohibited from voting on,
or acting in, matters in which their interests conflict with ours.

Our bylaws provide that the shareholders are responsible for determining the global remuneration of
the members of our management bodies. There are no specific provisions regarding the directors power to
vote on their compensation in the absence of an independent quorum.

With respect to the borrowing powers of the Board of Directors, the Board of Directors has the
power to authorize the borrowing of funds. Other financing arrangements, including bank loans, may be
entered into by us upon the joint signatures of (i) two executive officers, (ii) one officer and one
attorney-in-fact, or (iii) two attorneys-in-fact.

There is no requirement under the Brazilian Corporate Law or our bylaws that directors retire upon
reaching a certain age. In addition, our bylaws do not provide for the re-election of directors at staggered
intervals.

For a discussion of our Board of Directors, see Item 6A. Directors and Senior ManagementBoard
of Directors and Item 6C. Board Practices.

74
Voting Rights

Each common share entitles the holder thereof to one vote at meetings of our shareholders. Preferred
shares do not entitle the holder to vote.

The Brazilian corporate law provides that non-voting or restricted voting shares (such as the
preferred shares) entitled to fixed or minimum dividends acquire unrestricted voting rights if the company has
failed for three consecutive fiscal years (or for any shorter period set forth in a companys by-laws) to pay any
fixed or minimum dividend to which such shares are entitled, and such voting rights exist until the payment
thereof is made. Our by-laws do not set forth any shorter period.

In any circumstance in which holders of preferred shares are entitled to vote, each preferred share
will entitle the holder thereof to one vote.

Any change in the preferences or advantages of the preferred shares, or the creation of a class of
shares having priority or preference over the existing preferred shares, would require, in addition to the
affirmative vote of shareholders holding at least one-half of our common shares in a shareholders meeting,
the prior approval or the ratification by holders of a majority of the concerned outstanding preferred shares,
voting as a class at a special meeting of holders of preferred shares.

This meeting would be called by notice published at least three times in the Dirio Oficial do Estado
de So Paulo, as well as in a newspaper of wide circulation in So Paulo, our principal place of business, at
least 15 days prior to the meeting, but would not generally require any other form of notice. We have
designated Folha de So Paulo, Gazeta Mercantil, Valor Econmico or Estado de S. Paulo for this purpose.

According to the Brazilian corporate law, (i) shareholders that jointly hold preferred shares that
represent, at least, 10% of the total capital stock, and (ii) holders of common shares that are not controlling
shareholders and represent, at least, 15% of the total voting stock, will have the right to elect one member of
the board of directors and an alternate. In case non-controlling shareholders do not achieve the
aforementioned percentage, they may combine their participation and, if they jointly hold at least 10% of the
total capital, they may elect a member of the board of directors and an alternate director. Only shareholders
that prove they have been holding the shares for at least 3 continuous months may exercise such rights.

Shareholders Meetings

Under the Brazilian corporate law, at an annual general meeting of shareholders, or an extraordinary
general meeting, convened and held in accordance with such law and our by-laws, the shareholders are
empowered to decide all matters relating to our business purposes.

Pursuant to the Brazilian corporate law, shareholders voting at a general meeting have the power,
among others, to:

amend our by-laws;

delisting of the company from CVM (to become a privately held company);

approval of the issuance of convertible debentures and secured debentures;

election or dismissal of members of our board of directors and of our fiscal council, at any
time;

receipt of the managements accounts and approval of the financial statements, including the
allocation of net profits;

75
 suspension of the rights of a shareholder who has violated Brazilian corporate law or our by-
laws;

approval of the valuation of assets to be paid in our capital stock;

approval of the transformation of our corporate form or of our merger with or into another
company (incorporao or fuso), spin-off (ciso), consolidation or split; and

authorization of management to petition for our bankruptcy, to declare our company

insolvent and to request a recuperao judicial or recuperao extrajudicial (a procedure
involving protection from creditors similar in nature to reorganization under the U.S.
Bankruptcy Code).

In addition, our by-laws also establish that a general meeting of our shareholders will have the
following duties:

approval of our dissolution or liquidation and the appointment and dismissal of the
respective liquidator and review the reports;

appointment and removal of the Chairman of our board of directors;

approval of the annual global compensation of the members of our management, including
benefits;

approval of or amendment to our annual investment program;

approval of any issuance of common or preferred shares up to the limit of the authorized
capital (400,000,000 shares), and/or any bonuses, debentures convertible into our shares or
with secured guarantee or securities or other rights or interests which are convertible or
exchangeable into or exercisable for our shares, or any other options, warrants, rights,
contracts or commitments of any character pursuant to which we are or may be bound to
issue, transfer, sell, repurchase or otherwise acquire any shares and the terms and conditions
of subscription and payment;

approval of any agreement or amendment to any agreement, directly or indirectly, between

us and/or our affiliates and any of our controlling shareholders or their relatives, members
of our management or any of our controlled companies and affiliates, except those
agreements executed in ordinary course of business, which should be contracted on an
arms-length basis (market conditions);

approval of any delisting from trading on any stock exchange or filings for new listings;

approval of any change in our dividend policy;

approval of any joint venture between us and third parties involving an individual
investment or investments aggregated over a fiscal year in excess of the amount equivalent
in reais to U.S.$100,000,000 or in excess of an amount equal to 6% of our shareholders
equity (patrimnio lquido) as determined in its latest annual balance sheet, whichever is the
higher, provided that the Joint Venture was previously approved by our board of directors;

approval of any purchase, sale, disposal of or creation of any lien on any asset of ours or any
other investment made by us (Investment) in an individual amount or amounts aggregated
over a fiscal year in excess of the amount in reais equivalent to U.S.$100,000,000, or in
excess of an amount equal to 6% of our shareholders equity as determined in our latest
annual balance sheet, whichever is higher; and

76
 approval of any financial arrangement, including the lending or borrowing by us of funds
and the issuance of non-convertible debentures in excess of an individual amount equal to
two times EBITDA of the preceding 12 months.

In relation to the matters described in the last two bullet points above, according to our by-laws, our
board of directors will have the following duties:

approval of any Investment in an individual amount or cumulated over a fiscal year in

excess of the amount in reais equivalent to U.S.$20,000,000 or in excess of an amount
equal to 1% and up to 6% of our shareholders equity as determined in its latest annual
balance sheet, whichever is the higher; and

approval of any Financial Arrangement in excess of an individual amount equivalent to one

half and up to two times EBITDA of the preceding 12 months.

According to Brazilian corporate law, neither a companys by-laws nor actions taken at a
shareholders meeting may deprive a shareholder of some specific rights, such as:

the right to participate in the distribution of profits;

the right to participate equally and ratably in any remaining residual assets in the event of
liquidation of the company;

the right to preemptive rights in the event of subscription of shares, convertible debentures
or subscription warrants, except in some specific circumstances under the Brazilian law
described in Preemptive rights;

the right to withdraw from the company in the cases specified in Brazilian corporate law,
described in Withdrawal rights; and

the right to supervise, pursuant to Brazilian corporate law, the management of the Company.

Quorum. Generally, Brazilian corporate law provides that a quorum at a shareholders meeting consists
of shareholders representing at least 25% of a companys issued and outstanding voting capital on the first
call and, if that quorum is not reached, any percentage on the second call. If the shareholders are called to
amend our by-laws, a quorum at a shareholders meeting consists of shareholders representing at least two-
thirds of our issued and outstanding voting capital on the first call and any percentage on the second call.

As a general rule, the affirmative vote of shareholders representing at least the majority of our issued and
outstanding common shares present in person or represented by proxy at a shareholders meeting is required
to ratify any proposed action, and abstentions are not taken into account. However, the affirmative vote of
shareholders representing one-half of our issued and outstanding voting capital is required to:

modify a preference, privilege or condition of redemption or amortization conferred on one

or more classes of preferred shares, or create a new class with greater privileges than the
existing classes of preferred shares;

reduce the percentage of mandatory dividends;

change our corporate purpose;

merge us into or with (fuso or incorporao) another company;

spin off a portion of our assets or liabilities;

77
 approve our participation in a group of companies (as defined in the Brazilian corporate
law);

apply for cancellation of any voluntary liquidation;

merge all our shares into another Brazilian company, so that we become a wholly-owned
subsidiary of such company; and

approve our dissolution.

Notice of our shareholders meetings. Notice of our shareholders meetings must be published at least
three times in the Dirio Oficial do Estado, the official newspaper of the state where our headquarters are
located and another newspaper widely published, currently Folha de So Paulo, Gazeta Mercantil, Valor
Econmico or Estado de S. Paulo. The first notice must be published no later than 15 days before the date of
the meeting on the first call, and no later than eight days before the date of the meeting on the second call.
However, in certain circumstances, the CVM may require that the first notice be published 30 days in advance
of the meeting.

Conditions of admission. Shareholders attending a shareholders meeting must produce proof of their
status as shareholders and proof that they hold the shares they intend to vote. A shareholder may be
represented at a shareholders meeting by a proxy appointed less than a year before, which must be a
shareholder, a corporation officer, a lawyer or a financial institution. Investment funds must be represented by
their manager.

Preemptive Rights on Increase in Preferred Share Capital

Under the Brazilian corporate law, each shareholder has a general preemptive right to subscribe for
shares in any capital increase, in proportion to its shareholding, except in the event of the grant and exercise
of any option to acquire shares of our capital stock under our stock option program. A shareholder has a
general preemptive right to subscribe for debentures convertible into shares of our company, rights to acquire
our shares and subscription warrants that we may issue. A minimum period of 30 days following the
publication of notice of the capital increase is allowed for the exercise of the right, except if otherwise
determined by the by-laws or the shareholder meeting, and the right is negotiable.

However, our board of directors is authorized to eliminate preemptive rights with respect to the
issuance of shares, debentures convertible into shares and subscription warrants, provided that the distribution
of such shares is effected (i) through a stock exchange or in a public offering or (ii) through an exchange of
shares in a public offering, the purpose of which is to acquire control of another company.

According to Brazilian corporate law, capital increases that do not change the proportion between the
existing classes and types of shares entitle the shareholders to exercise their preemptive rights solely with
respect to shares of equal class and type as the shares each of them already holds. Notwithstanding that, if the
company issues shares that cause changes to the existing proportion of classes and types of shares, then the
shareholders may exercise their preemptive rights with respect to shares of equal class and type as the shares
they already hold and, only if necessary to maintain its participation in the total capital stock, may subscribe
for other classes or types of shares.

Therefore, in the event of a capital increase, which would maintain or increase the proportion of
capital represented by preferred shares, holders of ADSs, except as described above, would have preemptive
rights to subscribe only newly issued preferred shares. In the event of a capital increase which would reduce
the proportion of capital represented by preferred shares, holders of ADSs, except as described above, would
have preemptive rights to subscribe for preferred shares, in proportion to their shareholdings and for common
shares only to the extent necessary to prevent dilution of their interest in us. For risks associated with
preemptive rights, see Item 3D Key Information Risk Factors.

78
Withdrawal Rights

Neither the common shares nor the preferred shares are redeemable. Any of our shareholders who dissent
from certain actions taken by our shareholders in a shareholders meeting have the right to withdraw from our
company and to receive the value of their shares. According to the Brazilian corporate law, the withdrawal
rights of a dissenting shareholder may be exercised in the event that our shareholders representing at least
one-half of our issued and outstanding voting capital authorizes:

(i) the creation of preferred shares or the disproportional increase of an existing class of preferred
shares relative to the other classes of shares, unless such action is provided for or authorized by our
by-laws;

(ii) the modification of a preference, privilege or condition of redemption or amortization conferred on

one or more classes of preferred shares, or the creation of a new class with greater privileges than
the existing classes of preferred shares;

(iii) a reduction in the mandatory distribution of dividends;

(iv) a change in our corporate purposes;

(v) the transfer of all of our shares to another company in order to make us a wholly owned subsidiary
of such company or vice versa (incorporao de aes);

(vi) our merger into or with another company, including if we are merged into one of our controlling
companies, or are consolidated with another company;

(vii) our participation in a group of companies as defined under the Brazilian corporate law and subject
to the conditions set forth therein;

(viii) a spin-off of our company if it entails a change in the corporate purpose, a reduction in mandatory
dividends or the participation in a centralized group of companies; or

(ix) the transformation of our company into another type of company.

Dissenting shareholders also have a right of withdrawal in the event that the entity resulting from (a)
an incorporao de aes as described above, (b) a spin-off and, (c) a merger or a consolidation of a
Brazilian publicly listed company, fails to become a Brazilian publicly listed company within 120 days of the
general shareholders meeting in which such decision was taken.

The right to withdraw lapses 30 days after publication of the minutes of the relevant shareholders
meeting. In items (i) and (ii) above, the resolution will be effective only upon the prior approval or
confirmation within one year by the preferred shareholders, which must be made at a special meeting, in
which case the 30-day term is counted from the date the minutes of the special meeting are published. In any
event, we are entitled to reconsider any action giving rise to withdrawal rights within ten days following the
expiration of the 30-day term mentioned above, if the withdrawal of shares of dissenting shareholders would
jeopardize our financial stability.

In addition, the rights of withdrawal in items (iv), (v), (vii) and (viii), above, may not be exercised by
holders of shares if such shares have (a) liquidity, when such shares are part of the BOVESPA Index, or part
of any other stock exchange index in Brazil or in the world, as defined by the CVM, and (b) dispersion, when
the controlling shareholder or other companies under the same control has less than 50% of the shares or class
of shares.

Our preferred shares may be withdrawn at their book value, determined on the basis of the last balance
sheet approved by the shareholders. If the shareholders meeting giving rise to withdrawal rights occurs more

79
than sixty days after the date of the last approved balance sheet, a shareholder may demand that its shares be
valued on the basis of a special balance sheet that is of a date within sixty days of such shareholders meeting.
In this case, we must immediately pay 80% of the book value of the shares according to the most recent
balance sheet approved by our shareholders, and the balance must be paid within 120 days after the date of
the resolution of the relevant shareholders meeting.

Form and Transfer of Shares

Our shares are in book-entry form, and the transfer of such shares is made by the registrar in our
books, by debiting the share account of the transferor and crediting the share account of the transferee. We
maintain book-entry form services with Banco Ita S.A., or the registrar, which performs all the services of
safekeeping and transfer of our shares and related services.

Transfer of shares by a foreign investor is made in the same way and is requested by the investors
local agent on the investors behalf. If the original investment is registered with the Central Bank pursuant to
Resolution 2,689, of CMN (National Monetary Council) the foreign investor should also seek the amendment
of this Resolution.

CBLC is the exclusive clearing house that operates in So Paulo Stock Exchange. CBLC is also
responsible for settlement and custody of the shares.

Other Dispositions

In addition to the provisions already described in this annual report, the Brazilian corporate law and
current regulations set forth:

upon a sale of control, the acquirer is required to launch a tender offer to

purchase all minority voting shares at a price equal to at least 80% of the
control price;

if provided for in the by-laws, disputes among our shareholders will be subject
to arbitration. Our by-laws currently do not provide for arbitration;

upon the occurrence of a tender offer aiming at delisting our company or

through which our controlling shareholders acquire more than one-third of the
float shares, the purchase price will be equal to the fair value of the shares
considering the total number of outstanding shares;

members of our board of directors elected by the non-controlling shareholders

will have the right to veto the choice of the independent accountant of the
controlling shareholders;

our controlling shareholders, the shareholders that elect members to our board
of directors and to the fiscal council, our directors, members of fiscal council
and our executive officers will be required to disclose any purchase or sale of
our shares to the CVM and to the So Paulo Stock Exchange; and

the chairman of any shareholders or board of directors meeting will

disregard any vote that is rendered against provisions of any shareholders
agreement if that shareholders agreement has been duly filed with us.

We have amended our by-laws to meet certain mandatory provisions of the Brazilian corporate law.

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Significant Differences between our Corporate Governance Practices and NYSE Corporate
Governance Standards

We are subject to the NYSE corporate governance listing standards. As a foreign private issuer, the
standards applicable to us are considerably different than the standards applied to U.S. listed companies.
Under the NYSE rules, we must disclose any significant differences between our corporate governance
practices and those followed by U.S. companies under NYSE listing standards. As a Brazilian company listed
on the So Paulo Stock Exchange, we are required to comply with the corporate governance standards set
forth in Corporate Law No. 6,404 of December 15, 1976, as amended, or the Brazilian Corporate Law, and
the rules of CVM. The following is a summary of those differences.

Independence of Directors and Independence Tests

The Brazilian corporate law and our by-laws require that our directors be elected by our shareholders
at a general shareholders meeting. Currently our board of directors consists of fourteen members elected by
our shareholders, consisting of five representatives of the Diniz group, five representatives of the Casino
group, and four external directors.

Neither our board of directors nor our management tests the independence of the directors before
such elections are made. However, both the Brazilian corporate law and CVM establish rules in relation to
certain qualification requirements and restrictions, investiture, compensation, duties and responsibilities of the
companies executives and directors. Because we believe these rules provide adequate assurances that our
directors are independent, we have not otherwise attempted to impose the independence tests established by
the NYSE.

Executive Sessions

According to the Brazilian corporate law, up to 1/3 of the members of the board of directors can be
elected into executive positions.

The remaining non-management directors are not expressly empowered to serve as a check on
management and there is no requirement that those directors meet regularly without management.
Notwithstanding, our board of directors consists of one honorable member and fourteen members elected by
our shareholders, all of whom are non-management directors. Therefore we are in compliance with this
standard.

Committees

We are not required under applicable Brazilian corporate law to have, and accordingly we do not
have, a Nominating Committee and a Corporate Governance Committee. Although we are not required to
have a Compensation Committee, we currently have a Human Resources and Compensation Committee,
which, among other assignments, will review and discuss management compensation. See Item 6C
Directors, Senior Management and Employees Board Practices Committees. Pursuant to our by-laws our
directors are elected by our shareholders at a general shareholders meeting. Compensation for our directors
and executive officers is established by our shareholders.

Audit Committee and Audit Committee Additional Requirements

Under the Brazilian corporate law and our by-laws, we are not required to, and currently do not,
maintain a permanent fiscal council (Conselho Fiscal). The fiscal council operates independently from our
management and from our external auditors. Its main function is to examine the financial statements of each
fiscal year and provide a formal report to our shareholders. We do not maintain a permanent fiscal council,
however if necessary we should install one upon the vote of 2% of our common shares shareholders or 1% of
the holders of our preferred shares, pursuant to CVM Instruction 324, dated as of January 14, 2000. In order
to comply with the requirements of the Sarbanes-Oxley Act and the rules and regulations of the NYSE, we
finished the implementation of an independent audit committee. For further information on our audit

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committee, see Directors, Senior Management and Employees Board Practices Committees Audit
Committee.

Shareholder Approval of Equity Compensation Plans

Our board of directors is responsible for voting on the issuance of new equity in connection with our
existing stock option plans, provided that the limit of our authorized capital is respected. However, any
issuance of new shares that exceeds such authorized capital is subject to shareholder approval.

Corporate Governance Guidelines

Under NYSE listing standards, a listed U.S. company must adopt and disclose corporate governance
guidelines that cover certain minimum specified subjects. We have adopted and observe corporate
governance guidelines in accordance with Brazilian legislation, including a disclosure policy which requires,
among other things, the disclosure of our corporate governance guidelines, material facts and annual Financial
Reports. In addition, we have adopted and observe a policy on business conduct and ethics and we have
implemented a Sarbanes-Oxley Disclosure Committee.

Code of Business Conduct and Ethics

Although the adoption of a code of ethics is not required by Brazilian corporate law, we
implemented our Code of Ethics in 2000, further amended in 2005, to regulate our employees conduct with
us and our customers, suppliers, competitors and the public at large. In order to comply with the requirements
of the Sarbanes-Oxley Act and New York Stock Exchange rules, we later implemented rules applicable to our
managers conduct in connection with the registration and control of financial and accounting information and
their access to privileged and non-public information and data. For more information about our Code of
Ethics, see Item 16B Code of Ethics.

In July 2007, we hired the consultancy firm Galeazzi & Associados to implement a restructuring
plan to enhance Sendas Distribuidoras operational performance in the state of Rio de Janeiro. In December
2007, we elected Cludio Galeazzi as our CEO. Cludio Galeazzis consultancy firm continues to render
services to Sendas Distribuidora under the same conditions as agreed prior to Cludio Galeazzi becoming our
CEO. Our Board of Directors concluded that there is not any conflict of interest in the relationship between
Mr. Galleazzi and CBD.

In addition to complying with the rules of corporate governance applicable to us under Brazilian law,
we intend to gradually comply with substantially all of the new rules established by the NYSE and the SEC
applicable to domestic U.S. companies.

10C. Material Contracts

The Sendas Association

We and Mr. Abilio dos Santos Diniz, Pennsula and Po de Acar S.A. Indstria e Comrcio, or
PAIC, are parties to a shareholders agreement dated September 16, 2005 with Sendas S.A., or Sendas, and its
direct and indirect controlling shareholders Sendas Empreendimentos e Participaes Ltda. and Mr. Arthur
Antonio Sendas. The main purpose of the Sendas shareholders agreement is to regulate our relationship with
Sendas as shareholders of Sendas Distribuidora, a joint participation on a shared basis and in a 50%
proportion of the voting stock.

Pursuant to the Sendas and the AIG Group shareholders agreement:

Sendas is entitled to appoint five members and two alternates of the board of
directors of Sendas Distribuidora, while we are entitled to appoint the
remaining seven members and two alternates, as long as we and Sendas

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 continue to own shares representing 50% of the joint participation (defined
under the shareholders agreement as the sum of our and Sendas equity
interests in the voting capital of Sendas Distribuidora);

the investor is entitled to appoint one member and the respective alternate;

any two directors appointed by Sendas can veto specific business decisions
outside the business purpose of Sendas Distribuidora;

we have the right to appoint all executive officers of Sendas Distribuidora,

who must be professionals with flawless reputations and renowned
competence, which enables us to be fully responsible for the operating and
administrative management of Sendas Distribuidora and to have complete
freedom in connection with the day-to-day operational decisions;

as long as we and Sendas continue to own fifty percent of the joint

participation, the shareholders resolutions of Sendas Distribuidora must be
taken by consensus between us and Sendas. However, if the equity
participation of any of us or Sendas falls below fifty percent of the joint
participation, the shareholders resolutions will have to be decided by a simple
majority vote, giving the minority shareholder in this case the right to veto
certain major corporate decisions, such as changes to provisions in the by-laws
of Sendas Distribuidora regarding its capital stock, issuance of securities and
dividends policies, as well as the mergers, spin-offs and other corporate
reorganizations, among others. This veto right will be valid provided that the
minority shareholder continues to own more than twenty-five percent of the
joint participation; and

as long as AIG Group is a shareholder of Sendas Distribuidora it will have the

right to veto certain major corporate decisions, such as issuance of new class
B preferred shares, changes to provisions in the by-laws regarding the rights
granted to the holders of the class B preferred shares, redemption of shares,
merger, spin-off and other corporate reorganizations.

The shareholders agreement also establishes certain rights as described below:

in the event PAIC, Pennsula and Mr. Abilio Diniz decide to transfer, either
direct or indirectly, our own equity control, Sendas will be entitled, pursuant
to the Sendas shareholders agreement, to exercise a put option right against us
and therefore to sell the totality of its Sendas Distribuidoras shares at the
price fixed by the shareholders agreement. On the other hand, if Sendas
controlling shareholder receives from a third party an offer for Sendas
control, we are entitled to either exercise a right of first refusal and acquire the
shares at the terms and conditions offered by such third party or to acquire, at
the price fixed under the shareholders agreement, the totality of shares in the
capital stock of Sendas Distribuidora owned by Sendas. On October 19,
2006, Sendas notified its put option exercise to us based on a transaction with
the Casino Group in 2005, which would have constituted a change of control
of CBD. We responded to the notification informing that the option is not
exercisable on grounds that the transaction between Diniz group and Casino
group did not constitute a transfer of our control and therefore it should not
constitute a trigger to the put option right. On October 31, 2006, we were
notified by the Fundao Getlio Vargas Arbitration Chamber (Cmara de
Conciliao e Arbitragem da Fundao Getlio Vargas FGV) of the
arbitration proceeding initiated by Sendas. On March 13, 2007, we and Sendas

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 executed the arbitration submission agreement, which marked the initiation of
the arbitration proceeding. During the proceeding, we and Sendas submitted
petitions and documents to the arbitral tribunal and a preliminary hearing was
held on October 4, 2007. On April 29, 2008, the Fundao Getlio Vargas
Arbitration Chamber, ultimately expressed an opinion, which is favorable to
CBD, that the transaction with the Casino Group in 2005 did not constitute a
change of control of CBD as claimed by Sendas. Accordingly, the claims
formalized by Sendas in the arbitration proceeding were denied, specifically
the request for the recognition of its alleged right to exercise the put of its
shares in Sendas Distribuidora and promptly receive the total amount in cash.
Consequently, Sendas, after the transfer value is defined and agreed upon by
the parties, has to exchange all of its shares in Sendas Distribuidora with
preferred shares of CBDs capital stock following the terms established in the
shareholders agreement.

the shareholders agreement also provides that Sendas may at any time as of
February 1, 2007 exercise the right to exchange the totality or a portion of its
paid-in shares in Sendas Distribuidora for preferred shares representing our
capital stock. In such case, we can alternatively (i) carry out the share
exchange; or (ii) purchase in cash, at a certain transfer price determined by the
Sendas shareholders agreement, the shares upon which the right of share
exchange has been exercised; or (iii) accomplish the exchange transaction
through several corporate procedures such as capital increases, mergers of
shares and others. In addition to the cash or shares received, as the case may
be, Sendas would also have the right, in case all its shares in Sendas
Distribuidora were exchanged for our preferred shares, to subscribe one class
A common share that would be issued by Sendas Distribuidora. This special
share would allow it to appoint, in a separate voting procedure, one member of
the Sendas Distribuidoras board of directors.

However, if Sendas transferred more than 75% of our preferred shares

following the exchange, it would be required to sell back such class A
common shares to us at a fixed price of R$1.00 and therefore it would cease to
have the special rights provided therein. In addition, Sendas would also be
subject to limitations in the amount of our preferred shares, which it could sell
in the open market.

We and Sendas have also agreed pursuant to the Sendas shareholders agreement not to compete,
either independently or jointly with third parties, with Sendas Distribuidora in the food retailing business in
the state of Rio de Janeiro and, in the future, in the state of Esprito Santo, for so long as the shareholders
agreement is in effect.

Other than the Sendas association and the Joint Venture Agreement and related agreements between
the Diniz group and the Casino group, described under Item 7A Major Shareholders and Related Party
Transactions Major Shareholders Shareholders Transactions, we have not entered into any material
contracts outside the normal course of our business.

Barcelona Comrcio Shareholders Agreement

Within the scope of the Barcelona Comrcio association, we entered into a shareholders agreement
with Assais former controlling shareholders that established a put and call option related to the 40%
ownership interest in Barcelona Comrcio owned by these former controlling shareholders.

According to the shareholders agreement, in case the call or put options are exercised, the purchase
or sales price shall be calculated as follows:

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 1) The higher amount of seven times our EBITDA and 35.16% of net sales over the last 12
months prior to the option exercise date after deducting net indebtedness and contingencies
with probable unfavorable outcome. In case the EBITDA margin is lower than 4.625%, the
EBITDA - related criterion will be automatically taken into account; or

2) The initial purchase price net of distributed dividend, restated by IPCA plus 6.5% p.a.

The exercise of the put and call options is subject to the following conditions:

if the chairman of Barcelona Comrcio does not meet certain parameters set forth in the
shareholders agreement, the put and call options may be exercised by calculating the sales
price pursuant to criterion 1 mentioned above;

if the chairman of Barcelona Comrcio resigns or if the chairman fails to attend more than
1/3 of the Board meetings held during a given fiscal year, the put and call options may be
exercised by calculating the sales price pursuant to the lower value of criterion 1 or 125% of
the sales price resulting pursuant to criterion 2 mentioned above;

at any moment, until December 31, 2011, the put and call options may be exercised by
calculating the sales price pursuant to the higher value of criterion 1 or 125% of the sales
price calculated pursuant to criterion 2 mentioned above;

from January 1 to January 15 of each calendar year between 2012 and 2014, the put and call
options may be exercised by calculating the sales price pursuant to the higher value of
criterion 1 or criterion 2 mentioned above; or

if the chairman of Barcelona deceases or becomes disabled, the put and call options may be
exercised by calculating the sales price pursuant to criterion 1 mentioned above.

In addition, the former controlling shareholders of Assai may exercise the put option as of January 1,
2012 pursuant to the conditions set forth in criterion 1 mentioned above.

10D. Exchange Controls

The ownership of preferred or common shares by individuals or legal entities domiciled outside
Brazil is subject to certain conditions established under Brazilian Law.

The right to convert dividend payments and proceeds from the sale of common shares or preferred
shares into foreign currency and to remit those amounts outside Brazil is subject to exchange control
restrictions and foreign investment legislation which generally requires, among other things, obtaining an
electronic registration with the Central Bank.

Resolution No. 1,927 of the CMN, which is the restated and amended Annex V to Resolution No.
1,289 of the CMN, or the Annex V Regulations, provides for the issuance of depositary receipts in foreign
markets in respect of shares of Brazilian issuers. We filed an application to have the ADSs approved under the
Annex V Regulations by the Central Bank and the CVM, and we received final approval before the offering
of the preferred shares underlying the ADSs in May 1997.

An electronic registration, which replaced the amended certificate of registration, was issued in the
name of the depositary with respect to the ADSs and is maintained by the custodian on behalf of the
depositary.

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 This electronic registration was carried on through the Sistema do Banco CentralSISBACEN, a
database of information provided by financial institutions to the Central Bank. Pursuant to the electronic
registration, the custodian is able to convert dividends and other distributions with respect to the preferred
shares represented by the ADSs into foreign currency and remit the proceeds outside Brazil. In the event that
a holder of ADSs exchanges those ADSs for preferred shares, that holder will be entitled to continue to rely
on the depositarys electronic registration for only five business days after that exchange, following which
that holder must seek to obtain its own electronic registration. Thereafter, unless the preferred shares are held
pursuant to Resolution No. 2,689 of November 25, 2004, as amended, or Resolution 2,689, of CMN, the
National Monetary Council, by a duly registered investor or, if not a registered investor under Resolution
2,689, a holder of preferred shares who applies for and obtains a new electronic registration, that holder may
not be able to obtain and remit abroad U.S. dollars or other foreign currencies upon the disposition of the
preferred shares, or distributions with respect thereto, and generally will be subject to less favorable tax
treatment when it obtains its own electronic registration. In addition, if the foreign investor resides in a tax
haven jurisdiction, the investor will be also subject to less favorable tax treatment. See Item 10E
Additional Information Taxation Brazilian Tax Considerations.

Under Resolution 2,689, foreign investors may invest in almost all financial assets and engage in
almost all transactions available in the Brazilian financial and capital markets, provided that the requirements
described below are fulfilled. In accordance with Resolution 2,689, the definition of foreign investor includes
individuals, legal entities, mutual funds and other collective investment entities domiciled or headquartered
abroad.

Pursuant to Resolution 2,689, foreign investors must fulfill the following requirements before
engaging in financial transactions:

appoint at least one representative in Brazil with powers to perform actions

relating to the foreign investment;

appoint an authorized custodian in Brazil for the investments, which must be a

financial institution duly authorized by the Central Bank and CVM;

register as a foreign investor with the CVM, the Brazilian securities

commission; and

register the foreign investment with the Central Bank.

Securities and other financial assets held by foreign investors pursuant to Resolution 2,689 must be
registered or maintained in deposit accounts or under the custody of an entity duly licensed by the Central
Bank or the CVM. In addition, securities trading by foreign investors are generally restricted to transactions
involving securities listed on the Brazilian stock exchanges or traded in organized over-the-counter markets
licensed by the CVM.

Investors under Resolution 2,689 who are not resident in a tax haven jurisdiction (i.e., a country that
does not impose income tax or where the maximum income tax rate is lower than 20%) are entitled to
favorable tax treatment. See Item 10E Additional Information Taxation Brazilian Tax Considerations.

10E. Taxation

This summary contains a description of the principal Brazilian and U.S. federal income tax
consequences of the purchase, ownership and disposition of preferred shares or ADSs, but it does not purport
to be a comprehensive description of all the tax considerations that may be relevant to these matters based
upon the particular circumstances of a holder.

This summary is based upon tax laws of Brazil and the federal income tax laws of the United States
in effect as of the date hereof, which laws are subject to change (possibly with retroactive effect) and differing

86
interpretations. This summary is also based upon the representations of the depositary and on the assumption
that each obligation in the Amended and Restated Deposit Agreement, dated as of May 28, 1997, among us,
the depositary and the Owners from time to time of American Depositary Receipts, and any related
documents, will be performed in accordance with its terms.

Although there is presently no income tax treaty between Brazil and the United States, the tax
authorities of the two countries have had discussions that may culminate in such a treaty. No assurance can be
given, however, as to whether or when a treaty will enter into force or how such a treaty would affect a U.S.
holder of preferred shares or ADSs.

Brazilian Tax Considerations

The following discussion summarizes the principal Brazilian tax consequences of the acquisition,
ownership and disposition of preferred shares or ADSs by a holder that is not domiciled in Brazil for purposes
of Brazilian taxation (a Non-Brazilian Holder). It is based on Brazilian law as currently in effect, which is
subject to change, possibly with retroactive effect, and to differing interpretations. Any change in such law
may change the consequences described below. Each Non-Brazilian Holder should consult his or her own tax
adviser concerning the Brazilian tax consequences of an investment in preferred shares or ADSs.

Taxation of Dividends

Dividends based on profits generated after January 1, 1996, including dividends paid in kind,
payable by us to the depositary in respect of preferred shares underlying ADS or to a Non-Brazilian Holder in
respect of preferred shares, are exempt from withholding income tax. Dividends and stock dividends relating
to profits generated prior to January 1, 1996 may be subject to Brazilian withholding income tax at varying
rates, depending on the year the profits were generated.

Distribution of Interest on Shareholders Equity

In accordance with the Law No. 9,249, dated December 26, 1995, as amended, Brazilian
corporations may make payments to shareholders characterized as distributions of interest on shareholders
equity. Such interest is calculated by reference to the TJLP as determined by the Brazilian Central Bank from
time to time and cannot exceed the greater of:

50% of the net income (after the deduction of social contribution on net profits and before
taking such distribution and the provision for corporate income tax into account) for the
period in respect of which the payment is made; or

50% of the sum of retained profits and profits reserves, as of the date of the beginning of the
period in respect of which the payment is made.

Payments of interest on shareholders equity to a Non-Brazilian Holder may be deducted for

purposes of calculating Brazilian corporate income tax and social contribution on net profits as far as the
limits described above are observed. Such payments are subject to withholding income tax at the rate of 15%,
or 25% if the Non-Brazilian Holder is domiciled in a tax haven that is, a country or location that does not
impose income tax or where the maximum income tax rate is lower than 20% or where the local legislation
imposes restrictions on disclosing the shareholding composition or the ownership of the investment (Tax
Haven Resident). To the extent that such payment is accounted for as part of the mandatory dividend, under
current Brazilian law, we are obliged to distribute to shareholders an additional amount sufficient to ensure
that the net amount received by the shareholders, after payment by us of applicable Brazilian withholding
taxes in respect of the distribution of interest on net worth, plus the amount of declared dividends, is at least
equal to the mandatory dividend. To the extent we distribute interest on shareholders equity, which
distribution is not accounted for as part of the mandatory dividend, we are not obliged to pay such an
additional amount on behalf of the shareholders. The distribution of interest on shareholders equity is

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proposed by our board of directors and subject to subsequent declaration by the shareholders at the general
meeting.

Taxation of Gains

According to Law No. 10,833 of December 29, 2003, capital gains realized on the disposition of
assets located in Brazil by a Non-Brazilian Holder, whether to other non-Brazilian resident or to a Brazilian
resident are subject to taxation in Brazil. In this sense, on the disposition of the preferred shares, as they are
assets located in Brazil, the Non-Brazilian Holder will be subject to income tax on the gains assessed,
following the rules described below, regardless of whether the disposition is conducted in Brazil or abroad
and with a Brazilian resident or not.

Regarding the ADSs, although the matter is not free from doubt, arguably the gains realized by a
Non-Brazilian Holder on the disposition of ADSs to another non-Brazilian resident are not taxed in Brazil,
based on the argument that ADSs would not constitute assets located in Brazil for purposes of Law No.
10,833/03. However, we cannot assure you of how Brazilian courts would interpret the definition of assets
located in Brazil in connection with the taxation of gains realized by a Non-Brazilian Holder on the
disposition of ADSs to another non-Brazilian resident. As a result, gains on a disposition of ADSs by a Non-
Brazilian Holder to Brazilian resident, or even to Non-Brazilian Holder in the event that courts determine that
ADSs would constitute assets located in Brazil, may be subject to income tax in Brazil according to the rules
described below.

The withdrawal of ADSs in exchange for preferred shares is not subject to Brazilian income tax as
long as registration rules for the preferred shares are appropriately observed with the Brazilian Central Bank.
The deposit of preferred shares in exchange for ADSs may be subject to Brazilian income tax on capital gains
at the rate of 15% or 25%, in case of a Tax Haven Resident, if the acquisition cost of the preferred shares is
lower than (1) the average price per preferred share on a Brazilian stock exchange on which the greatest
number of such shares were sold on the day of deposit, or (2) if no preferred shares were sold on that day, the
average price on the Brazilian stock exchange on which the greatest number of preferred shares were sold in
the fifteen trading sessions immediately preceding such deposit. In this case, the difference between the
acquisition cost and the average price of the preferred shares, calculated as above, will be considered a capital
gain subject to taxation. In some circumstances, there may be arguments to claim that this taxation is not
applicable in the case of a Non-Brazilian Holder that is a 2,689 Holder (as defined below) and is not a Tax
Haven Resident.

Under Brazilian law, income tax rules on such gains can vary, depending on the domicile of the Non-
Brazilian Holder, the type of registration of the investment by the Non-Brazilian Holder with the Central
Bank and how the disposition is carried out, as described below.

Capital gains assessed by a Non-Brazilian Holder on a disposition of preferred shares carried out on
the Brazilian stock exchange (which includes the transactions carried out on the organized over-the-counter
market) are:

exempt from income tax when assessed by a Non-Brazilian Holder that (1) has registered its
investment in Brazil with the Central Bank under the rules of Resolution No. 2,689/00 (2,689
Holder) and (2) is not a Tax Haven Resident; or

subject to income tax at a rate of 15% in any other case, including a case of gains assessed by a
Non-Brazilian Holder that is not a 2,689 Holder, or is a Tax Haven Resident. In these cases, a
withholding income tax of 0.005% of the sale value will be applicable and can be later offset
with the eventual income tax due on the capital gain.

Any other gains assessed on a disposition of the preferred shares that is not carried out on a Brazilian
stock exchange are subject to income tax at the rate of 15%, except for Tax Haven Resident which, in this
case, is subject to income tax at the rate of 25%. If these gains are related to transactions conducted on the

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Brazilian non-organized over-the-counter market with intermediation, the withholding income tax of 0.005%
shall also be applicable and can be offset against the eventual income tax due on the capital gain.

In the case of a redemption of preferred shares or ADSs or a capital reduction by a Brazilian

corporation, such as our company, the positive difference between the amount received by the Non-Brazilian
Holder and the acquisition cost of the preferred shares or ADSs redeemed is treated as capital gain derived
from the sale or exchange of shares not carried out on a Brazilian stock exchange market and is therefore
subject to income tax at the rate of 15%, or 25%, as the case may be.

As a general rule, the gains realized as a result of a disposition of preferred shares or ADSs is the
positive difference between the amount realized on the sale or exchange of the shares and their acquisition
cost.

There is no assurance that the current preferential treatment for Non-Brazilian Holder of ADSs and
2,689 Holder of preferred shares will continue or that it will not be changed in the future.

Any exercise of preemptive rights relating to the preferred shares or ADSs will not be subject to
Brazilian income tax. Any gain on the sale or assignment of preemptive rights relating to the preferred shares
or ADSs by a Non-Brazilian Holder will be subject to Brazilian taxation at the same rate applicable to the sale
or disposition of preferred shares.

Other Brazilian Taxes

There are no Brazilian inheritance, gift or succession taxes applicable to the ownership, transfer or
disposition of preferred shares or ADSs by a Non-Brazilian Holder, except for gift and inheritance taxes,
which are levied by some states of Brazil on gifts made or inheritances bestowed by the Non-Brazilian Holder
within such states to individuals or entities resident or domiciled within such states in Brazil. There are no
Brazilian stamp, issue, registration or similar taxes or duties payable by a Non-Brazilian Holder of preferred
shares or ADSs.

Tax on Bank Account Transactions (CPMF)

Until December 31, 2007, as a general rule, transactions carried out in Brazil that resulted in the
transfer of funds from an account maintained with a Brazilian financial institution were subject to the
Temporary Contribution on Financial Transactions ("CPMF Tax"), at the rate of 0.38%.

However, as of January 2008, the CPMF Tax is no longer in force. The Brazilian government could
attempt to reestablish the CPMF Tax after February 2008, by submitting a new proposal to the Brazilian
Congress, which did not occur as of the date of this Form 20-F. In the event CPMF is reestablished, it will
apply only after a period of 90 (ninety) days have elapsed after enactment of the respective introductory
legislation ("vacatio legis") and only in regard with respect to future triggering events.

Taxation of Foreign Exchange Transactions (IOF/Cmbio)

Pursuant to Decree No. 6,306, dated December 14, 2007, the conversion of Brazilian currency into
foreign currency (e.g., for purposes of paying dividends and interest) and on the conversion of foreign
currency into Brazilian currency may be subject to the Tax on Foreign Exchange Transactions
(IOF/Exchange). Currently, for most exchange transactions, the rate of IOF/Exchange is 0,38%. However,
exchange transactions carried out by 2,689 Holders are subject to IOF/Exchange at a zero percent rate. In any
case, the Brazilian government may increase at any time the rate to a maximum of 25%, but only in relation to
future transactions.

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 Tax on Bonds and Securities Transactions (IOF/Ttulos)

Pursuant to Decree No. 6,306/07, the Tax on Bonds and Securities Transactions (IOF/Bonds) may
be imposed on any transactions involving bonds and securities, including those carried out on Brazilian stock,
futures and commodities stock exchanges. As a general rule, the rate of this tax is currently zero, although the
executive branch may increase such rate up to 1.5% per day, but only with respect to future transactions.

U.S. Federal Income Tax Considerations

The following discussion summarizes the principal U.S. federal income tax considerations relating to
the purchase, ownership and disposition of preferred shares or ADSs by a U.S. holder (as defined below)
holding such preferred shares or ADSs as capital assets (generally, property held for investment). This
summary is based upon the Internal Revenue Code of 1986, as amended (the Code), Treasury regulations,
administrative pronouncements of the U.S. Internal Revenue Service (the IRS) and judicial decisions, all as
in effect on the date hereof, and all of which are subject to change (possibly with retroactive effect) and to
differing interpretations. This summary does not describe any implications under state, local or non-U.S. tax
law, or any aspect of U.S. federal tax law other than income taxation.

This summary does not purport to address all the material U.S. federal income tax consequences that
may be relevant to the holders of the preferred shares or ADSs, and does not take into account the specific
circumstances of any particular investors, some of which (such as tax-exempt entities, banks or other financial
institutions, insurance companies, broker-dealers, traders in securities that elect to use a mark-to-market
method of accounting for their securities holdings, regulated investment companies, real estate investment
trusts, investors liable for the alternative minimum tax, partnerships and other pass-through entities, U.S.
expatriates, investors that own or are treated as owning 10% or more of our voting stock, investors that hold
the preferred shares or ADSs as part of a straddle, hedge, conversion or constructive sale transaction or other
integrated transaction and U.S. holders (as defined below) whose functional currency is not the U.S. dollar
may be subject to special tax rules.

As used below, a U.S. holder is a beneficial owner of preferred shares or ADSs that is, for U.S.
federal income tax purposes:

(i) an individual citizen or resident of the United States;

(ii) a corporation (or an entity taxable as a corporation) created or organized in or under the laws of
the United States, any state, or the District of Columbia;

(iii) an estate the income of which is subject to U.S. federal income tax regardless of its source; or

(iv) a trust if (A) a court within the United States is able to exercise primary supervision over the
administration of the trust and one or more United States persons have the authority to control
all substantial decisions of the trust or (B) the trust has a valid election in effect under applicable
U.S. Treasury regulations to be treated as a United States person.

If a partnership or other entity taxable as a partnership holds preferred shares or ADSs, the tax
treatment of a partner will generally depend on the status of the partner and the activities of the partnership.
Partners of partnerships holding preferred shares or ADSs should consult their tax advisors.

In general, for U.S. federal income tax purposes, holders of American Depositary Receipts
evidencing ADSs will be treated as the beneficial owners of the preferred shares represented by those ADSs.

Taxation of Distributions

In general, distributions with respect to the preferred shares or ADSs (which likely include
distributions of interest on shareholders equity, as described above under Brazilian Tax Considerations

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Interest on Shareholders Equity) will, to the extent made from our current or accumulated earnings and
profits, as determined under U.S. federal income tax principles, constitute dividends for U.S. federal income
tax purposes. If a distribution exceeds the amount of our current and accumulated earnings and profits, as so
determined under U.S. federal income tax principles, it will be treated as a non-taxable return of capital to the
extent of the U.S. holders tax basis in the preferred shares or ADSs, and thereafter as capital gain. As used
below, the term dividend means a distribution that constitutes a dividend for U.S. federal income tax
purposes.

The gross amount of any dividends (including amounts withheld in respect of Brazilian taxes) paid
with respect to the preferred shares or ADSs generally will be subject to U.S. federal income taxation as
ordinary income and will not be eligible for the dividends received deduction allowed to corporations.
Dividends paid in Brazilian currency will be included in the gross income of a U.S. holder in a U.S. dollar
amount calculated by reference to the exchange rate in effect on the date the dividends are received by the
U.S. holder, or in the case of dividends received in respect of ADSs, on the date the dividends are received by
the depositary, whether or not converted into U.S. dollars. A U.S. holder will have a tax basis in any
distributed Brazilian currency equal to its U.S. dollar amount on the date of receipt by the U.S. holder or
disposition, as the case may be, and any gain or loss recognized upon a subsequent disposition of such
Brazilian currency generally will be foreign currency gain or loss that is treated as U.S. source ordinary
income or loss. If dividends paid in Brazilian currency are converted into U.S. dollars on the day they are
received by the U.S. holder or the depositary, as the case may be, U.S. holders generally should not be
required to recognize foreign currency gain or loss in respect of the dividend income. U.S. holders should
consult their own tax advisors regarding the treatment of any foreign currency gain or loss if any Brazilian
currency received by the U.S. holder or the depositary or its agent is not converted into U.S. dollars on the
date of receipt.

Subject to certain exceptions for short-term and hedged positions, under current law, the U.S. dollar
amount of dividends received in taxable years beginning on or before December 31, 2010 by an individual
with respect to the ADSs will be subject to taxation at a maximum rate of 15% if the dividends represent
qualified dividend income. Dividends paid on the ADSs will be treated as qualified dividend income if
(i) the ADSs are readily tradable on an established securities market in the United States and (ii) we were not
in the year prior to the year in which the dividend was paid, and are not in the year in which the dividend is
paid, a passive foreign investment company (PFIC). The ADSs are listed on the New York Stock
Exchange, and should qualify as readily tradable on an established securities market in the United States so
long as they are so listed. However, no assurances can be given that the ADSs will be or remain readily
tradable. Based on our audited financial statements as well as relevant market and shareholder data, we
believe that we were not treated as a PFIC for U.S. federal income tax purposes with respect to our 2007
taxable year. In addition, based on the our audited financial statements and current expectations regarding the
value and nature of its assets, the sources and nature of its income, and relevant market and shareholder data,
we do not anticipate becoming a PFIC for our 2008 taxable year. Because these determinations are based on
the nature of our income and assets from time to time, and involve the application of complex tax rules, no
assurances can be provided that we will not be considered a PFIC for the current (or any past or future tax
year).

Based on existing guidance, it is not entirely clear whether dividends received with respect to the
preferred shares (to the extent not represented by ADSs) will be treated as qualified dividend income, because
the preferred shares are not themselves listed on a U.S. exchange. In addition, the U.S. Treasury Department
has announced its intention to promulgate rules pursuant to which holders of ADSs or preferred stock and
intermediaries though whom such securities are held will be permitted to rely on certifications from issuers to
establish that dividends are treated as qualified dividends. Because such procedures have not yet been issued,
we are not certain that we will be able to comply with them. U.S. Holders of ADSs and preferred shares
should consult their own tax advisors regarding the availability of the reduced dividend tax rate in the light of
their own particular circumstances.

Dividends paid by us generally will constitute income from non-U.S. sources and will be subject to
various classification and other limitations for U.S. foreign tax credit purposes. Subject to generally
applicable limitations under U.S. federal income tax law, Brazilian tax imposed on such dividends, if any, will

91
be treated as a foreign income tax eligible for credit against a U.S. holders U.S. federal income tax liability
(or at a U.S. holders election if it does not elect to claim a foreign tax credit for any foreign taxes paid during
the taxable year, all foreign income taxes paid may instead be deducted in computing such U.S. holders
taxable income). In general, special rules will apply to the calculation of foreign tax credits in respect of
dividend income that is subject to preferential rates of U.S. federal income tax. U.S. holders should be aware
that the IRS has expressed concern that parties to whom ADSs are released may be taking actions that are
inconsistent with the claiming of foreign tax credits by U.S. holders of ADSs. Accordingly, the discussion
above regarding the creditability of Brazilian withholding tax on dividends could be affected by future actions
that may be taken by the IRS.

Taxation of Capital Gains

Deposits and withdrawals of preferred shares by U.S. holders in exchange for ADSs will not result in
the realization of gain or loss for U.S. federal income tax purposes.

In general, gain or loss, if any, realized by a U.S. holder upon a sale or other taxable disposition of
preferred shares or ADSs will be subject to U.S. federal income taxation as capital gain or loss in an amount
equal to the difference between the amount realized on the sale or other taxable disposition and such U.S.
holders adjusted tax basis in the preferred shares or ADSs. Such capital gain or loss will be long-term capital
gain or loss if at the time of sale or other taxable disposition the preferred shares or ADSs have been held for
more than one year. Under current U.S. federal income tax law, net long-term capital gain of certain U.S.
holders (including individuals) is eligible for taxation at preferential rates. The deductibility of capital losses
is subject to certain limitations under the Code. Gain, if any, realized by a U.S. holder on the sale or other
disposition of preferred shares or ADSs generally will be treated as U.S. source gain for U.S. foreign tax
credit purposes. Consequently, if a Brazilian withholding tax is imposed on the sale or disposition of preferred
shares, a U.S. holder that does not receive sufficient foreign source income from other sources may not be
able to derive effective U.S. foreign tax credit benefits in respect of such Brazilian withholding tax.
Alternatively, a U.S. holder may take a deduction for all foreign income taxes paid during the taxable year if
it does not elect to claim a foreign tax credit for any foreign taxes paid or accrued during the taxable year.
U.S. holders should consult their own tax advisors regarding the application of the foreign tax credit rules to
their investment in, and disposition of, preferred shares or ADSs.

Passive Foreign Investment Company Rules

Based upon our current and projected income, assets and activities, we do not expect the preferred
shares or ADSs to be considered shares of a PFIC for our current fiscal year or for future fiscal years.
However, because the determination of whether the preferred shares or ADSs constitute shares of a PFIC will
be based upon the composition of our income, assets and the nature of our business, as well as the income,
assets and business of entities in which we hold at least a 25% interest, from time to time, and because there
are uncertainties in the application of the relevant rules, there can be no assurance that the preferred shares or
ADSs will not be considered shares of a PFIC for any fiscal year. If the preferred shares or ADSs were shares
of a PFIC for any fiscal year, U.S. holders (including certain indirect U.S. holders) may be subject to adverse
tax consequences, including the possible imposition of an interest charge on gains or excess distributions
allocable to prior years in the U.S. holders holding period during which we were determined to be a PFIC. If
we are deemed to be a PFIC for a taxable year, dividends on our preferred shares or ADSs would not be
qualified dividend income subject to preferential rates of U.S. federal income taxation. U.S. holders should
consult their own tax advisors regarding the application of the PFIC rules to the preferred shares or ADSs.

U.S. Backup Withholding and Information Reporting

A U.S. holder of preferred shares or ADSs may, under certain circumstances, be subject to
information reporting and backup withholding with respect to certain payments to such U.S. holder, such as
dividends paid by our company or the proceeds of a sale of preferred shares or ADSs, unless such U.S. holder
(i) is a corporation or comes within certain other exempt categories, and demonstrates this fact when so
required, or (ii) in the case of backup withholding, provides a correct taxpayer identification number, certifies
that it is a U.S. person and that it is not subject to backup withholding, and otherwise complies with

92
applicable requirements of the backup withholding rules. Backup withholding is not an additional tax. Any
amount withheld under these rules will be creditable against a U.S. holders U.S. federal income tax liability,
provided the requisite information is timely furnished to the IRS

10F. Dividends and Paying Agents

Not applicable.

10G. Statement by Experts

Not applicable.

10H. Documents on Display

We are subject to the information requirements of the Securities Exchange Act of 1934, as amended,
pursuant to which we file reports and other information with the SEC. Reports and other information filed by
us with the SEC may be inspected and copied at the public reference facilities maintained by the SEC at
Room 1580, 100 F Street N.E., Washington, D.C. 20549, and at the Commissions Regional Offices at 233
Broadway, New York, New York 10279 and Northwestern Atrium Center, 500 West Madison Street, Suite
1400, Chicago, IL 60661-2511. Copies of such material can also be obtained at prescribed rates by writing to
the Public Reference Section of the SEC at 100 F Street N.E., Washington, D.C. 20549. You may also inspect
these reports and other information at the offices of the New York Stock Exchange Inc., 120 Broad Street,
New York, New York 10005, on which our ADSs are listed.

We also file financial statements and other periodic reports with the CVM.

Copies of our annual reports on Form 20-F and documents referred to in this annual report and our
bylaws will be available for inspection upon request at our headquarters at: Avenida Brigadeiro Luiz Antnio,
no. 3,172, CEP 01402-901, So Paulo, SP, Brazil.

10I. Subsidiary Information

Not required.

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risk

We are exposed to market risks from changes in foreign currency and interest rates. Market risk is
the potential loss arising from adverse changes in market rates, such as foreign currency exchange rates and
interest rates. See notes 20(c) and 26(i) to our financial statements for additional information regarding
derivative financial instruments and our foreign exchange and interest rate risk management.

We use derivative financial instruments for purposes other than trading and do so to manage and
reduce our exposures to market risk resulting from fluctuations in interest rates and foreign currency exchange
rates. These instruments do not qualify for deferral, hedge, accrual or settlement accounting, with the resulting
gains and losses reflected in the statement of operations within financial income and financial expense,
respectively.

Since late 1999, we have adopted a treasury policy designed to manage financial market risk,
principally by swapping a substantial part of our U.S. dollar-denominated liabilities to obligations
denominated in reais. We engage in cross-currency interest rate swaps under which we enter into an
agreement typically with the same counter-party which provides the original U.S. dollar-denominated
financing. A separate financial instrument is signed at the time the loan agreement is consummated, under
which we effectively are then liable for amounts in reais and interest at a percentage of an interbank

93
(Certificado de Depsito Interbancrio - CDI) variable interest rate. Amounts are normally consummated with
the same financial institutions and for the same maturity periods. See Item 5B Operating and Financial
Review and Prospects Liquidity and Capital Resources.

We use derivative financial instruments, usually cross-currency interest rate swaps, to mitigate risk
caused by fluctuating currency and interest rates. We enter into cross-currency interest rate swaps to protect
foreign currency exposure. Decisions regarding swap contracts are made on a case-by-case basis, taking into
consideration the amount and duration of the exposure, market volatility, and economic trends. We realized
and unrealized gains and losses on these contracts which are included within financial income and
financial expense, respectively.

We do not hold or issue financial instruments for trading purposes.

We use interest rate swap agreements to manage interest costs and risks associated with changing
rates. The differential to be paid or received is accrued as interest rates change and is recognized in interest
expense over the life of the agreements.

We have a policy of entering into contracts only with parties that have high credit ratings. The
counter-parties to these contracts are major financial institutions, and we do not have significant exposure to
any single counter-party. We do not anticipate a credit loss from counter-party non-performance.

In order to minimize credit risk from our investments, we have adopted policies restricting cash
and/or investments that may be allocated among financial institutions, which take into consideration monetary
limits and financial institution credit ratings.

Interest Rate Risk

We are exposed to interest rate volatility with regard to our cash and cash equivalents, fixed and
floating rate debt. For cash and cash equivalents, we generally will swap the fixed interest rate for a floating
rate, the CDI rate. The interest rate in our cash and cash equivalents denominated in reais is based on the CDI
rate, the benchmark interest rate set by the interbank market on a daily basis.

We are exposed to interest rate volatility with regard to future issuances of fixed rate debt, foreign
currency fluctuations and existing issuances of fixed rate debt, foreign currency fluctuations and existing
issuances of variable rate debt. We manage our debt portfolio in response to changes in interest rates and
foreign currency rates by periodically retiring, redeeming and repurchasing debt, and using derivative
financial instruments. Among other facilities, we also use bank loans to meet our financing requirements,
originally denominated in U.S. dollars and swapped to obligations in reais accruing interest based on the CDI.

The table below provides information about our significant interest rate-sensitive instruments. For
variable interest rate debt, the rate presented is the weighted average rate calculated as of December 31, 2007.
See notes 13 and 14 to our financial statements.

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 As of December 31, 2007
Expected Maturity Date
Annual
There- Fair Average
2008 2009 2010 2011 2012 after Total Value Interest Rate
(millions of reais)
Assets:
Cash and banks in reais 414.0 - - - - - 414.0 414.0
Cash equivalents denominated in reais 650.1 - - - - - 650.1 650.1 100.6% of CDI
Total cash and cash equivalents 1,064.1 - - - - - 1,064.1 1,064.1

Liabilities:
Loans and financing
Floating rate, denominated in US 14.3 - - - - 14.3 14.3 Foreign
dollars - exchange
7.9 7.9 0.7 - - - 16.5 16.6 4,1% over basket
Floating rate, denominated in US of foreign
dollars currencies (**)
Floating rate, denominated in US 430.8 1.1 368.2 326.9 - - 1,127.0 1,103.0 104.7% of CDI
dollars (*)
Floating rate, denominated in US 20.8 - - - - 20.8 20.6 100% of CDI
dollars (*) -
Floating rate, denominated in reais 823.8 - - - - 823.8 823.8 103.6% of CDI
Floating rate, denominated in reais 141.4 100.1 42.4 37.5 34.4 - 355.8 336.6 3.4% over TJLP
Total loans and financing 1,439.0 109.1 411.3 364.4 34.4 - 2,358.2 2,314.9

Debentures
Floating rate, denominated in reais 27.9 - - 259.8 259.9 259.9 807.5 805.4 0.5% over CDI
Total Debentures 27.9 - - 259.8 259.9 259.9 807.5 805.4

(*) We entered into cross-currency interest rate swaps in the same amount to exchange the U.S. dollars exposure for R$ indexed
by CDI.

(**) Based on a basket of foreign currencies to reflect BNDESs funding portfolio

95
 The annual TJLP, which is modified quarterly, was as follows:

2007 2006 2005

First quarter ................................................................ 6.50% 9.00% 9.75%

Second quarter............................................................ 6.50 8.15 9.75

Third quarter............................................................... 6.25 7.50 9.75

Fourth quarter............................................................. 6.25 6.85 9.75

Annualized Rate

As of December 31

Three months
ended March 31,
2008 2007 2006 2005

IGP-M(1) ........................................................................... 2.6% 7.8% 3.8% 1.2%

(2)
CDI .............................................................................. 2.5% 11.8% 15.0% 18.0%

TR .................................................................................... 0.2% 1.5% 2.0% 2.8%

(1)
ndice Geral de Preos Mercado (general price index) compiled by the Fundao Getlio Vargas.

(2)
Certificado de Depsito Interbancrio (interbank variable interest rate), annualized rate at the end of each period.

We have not experienced, and we do not expect to experience, difficulty obtaining financing or refinancing
existing debt. As of December 31, 2007, we had no committed line of credit agreements, other than the BNDES
contracts. See Item 5B Operating and Financial Review and Prospects Liquidity and Capital Resources for a
discussion of these agreements.

Foreign Currency Exchange Rate Risk

We are exposed to fluctuations in foreign currency cash flows related to certain short-term and long-term
debt payments. Primary exposure is to the U.S. dollar. Additionally, certain lines of credit agreements entered into
with BNDES are subject to indexation based on a basket of foreign currencies to reflect BNDESs funding portfolio.

Since January 1, 2003 and through December 31, 2007, the U.S. dollar depreciated by 49.9% against the
real, and as of December 31, 2007, the commercial market rate for purchasing U.S. dollars was R$1.7713 to U.S.$
1.00. In the first three months of 2008, the real appreciated by 1.3% against the U.S. dollar, and as of March 31,
2008, the commercial market rate for purchasing U.S. dollars was R$1.7491 to U.S.$1.00.

Our foreign currency exposure gives rise to market risks associated with exchange rate movements against
the U.S. dollar. Foreign currency-denominated liabilities at December 31, 2007 included debt denominated mainly
in U.S. dollars. Our net foreign currency exposure (U.S. dollar-denominated debt less our cross-currency interest
rate swaps in our U.S. dollar-denominated debt) was R$14.3 million at December 31, 2007 compared to R$14.1
million at December 31, 2006. Our net foreign currency exposure is represented by the debt due to import financing.
Our cross-currency interest rate swaps partially protect our exposure arising from our U.S. dollar-denominated debt.

96
 The table below provides information on our debt outstanding as of December 31, 2007.

Expected Maturity Date

2008 2009 2010 2011 2012 Thereafter Total Fair Value
(millions of reais)
Loans and financing
Foreign currencies (**) 7.9 7.9 0.7 - - - 16.5 16.6
US dollars 14.3 - - - - - 14.3 14.3
US dollars (*) 451.6 1.1 368.2 326.9 - - 1,147.8 1,123.6
reais 965.2 100.1 42.4 37.5 34.4 - 1,179.6 1,160.4
Total loans and financing 1,439.0 109.1 411.3 364.4 34.4 - 2,358.2 2,314.9

Debentures
reais 27.9 - - 259.8 259.9 259.9 807.5 805.4
Total Debentures 27.9 - - 259.8 259.9 259.9 807.5 805.4

(*) Originally US dollar-denominated and swapped to CDI.

(**) Based on a basket of foreign currencies to reflect BNDESs funding portfolio.

Our utilization of derivative financial instruments is substantially limited to the use of cross-currency
interest rate swap contracts to mitigate foreign currency risks. Foreign currency swap contracts allow us to swap
fixed rate U.S. dollar-denominated short-term and long-term debt for Brazilian real-denominated floating rate debt,
based on the CDI rate variation. See notes 13 and 14 to the financial statements. As of December 31, 2007, the
originally U.S. dollar-denominated debt of R$1,147.8 million (2006 R$1,230.7 million) which were covered by
floating rate swaps in Brazilian reais, based on the CDI rate, has been treated on a combined basis as if these loans
had been originally denominated in reais and accrued CDI. In addition, the swap agreements do not provide for
collateral.

97
 The table below provides information about our cross-currency interest rate swaps:

As of December 31, 2007

Expected Maturity Date
Average
Fair Value Paying Average
There of (Assets) Rate in Receiving
2008 2009 2010 2011 after Total Liabilities reais Rate
(millions of reais)
Cross currency and interest rate swap
contracts notional amount 102.3% 5.4% over

US dollars to reais 230.7 142.0 142.2 312.9 - 827.8 312.2 over CDI U.S.dollar

98
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

Not applicable.

PART II

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

No matters to report.

ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE
OF PROCEEDS

None.

ITEM 15. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures. Management, with the participation of our chief
executive officer and our chief financial officer, after evaluating the effectiveness of our disclosure controls and
procedures (as defined in the U.S. Securities Exchange Act of 1934 under Rules 13a-15(e)) as of the end of the
period covered by this annual report, has concluded that, as of that date, our disclosure controls and procedures were
effective to provide reasonable assurance that information required to be disclosed by us in the reports we file or
submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified
in the Commissions rules and forms, and is accumulated and communicated to management, including our chief
executive officer and chief financial officer, to allow timely decisions regarding required disclosure.

Managements Report on Internal Control over Financial Reporting. Management of the Registrant is
responsible for establishing and maintaining effective internal control over financial reporting as defined in Rules
13a-15(f) under the Securities Exchange Act of 1934. Our internal control over financial reporting is designed to
provide reasonable assurance to our management and board of directors regarding the preparation and fair
presentation of published financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with
respect to financial statement preparation and presentation.

Our management assessed the effectiveness of our internal control over financial reporting as of December
31, 2007. In making this assessment, management used the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO) in Internal ControlIntegrated Framework. Based on this
assessment, management believes that, as of December 31, 2007, the Companys internal control over financial
reporting is effective based on those criteria.

The effectiveness of internal controls over financial reporting as of December 31, 2007 has been audited by
Ernst & Young Auditores Independentes S.S., the independent registered public accounting firm who also audited
our consolidated financial statements. Ernst & Youngs attestation report on Companys internal controls over
financial reporting is included herein as Exhibit 15.1. .

ITEM 16. [Reserved]

16A. Audit Committee Financial Expert

As disclosed in item 16D below, our audit committee follows the independence requirements of the SEC
and the NYSE. Our board of directors determined that at least one of the members of the audit committee must be
an audit committee financial expert.

99
 16B. Code of Ethics

Our board of directors has adopted a Code of Ethics applicable to our directors, officers and employees,
including our principal executive officer and principal financial officer and controller. The Code of Ethics can be
found at www.gpa-ri.com.br. Information found at this website is not incorporated by reference into this document.

16C. Principal Accountant Fees and Services

Ernst & Young Auditores Independentes acted as our independent registered public accounting firm for the
fiscal year ended December 31, 2007 and 2006. The chart below sets forth the total amount billed to us by Ernst &
Young Auditores Independentes for services performed in 2007 and 2006, and breakdown of these amounts by
category of service:

2007 2006
(millions of reais)(1)

Audit Fees ...................................................... 6.1 8.6

AuditRelated Fees........................................ 1.3 1.4

Total............................................................... 7.4 10.0

____________________

(1) Fees including out-of-pocket expenses.

Audit Fees

Audit fees are fees billed for the audit of our annual financial statements and for the reviews of our
quarterly financial statements in connection with statutory and regulatory filings or engagements.

Audit-Related Fees

Audit-related fees were comprised of assurance and related services that are related to the performance of
the audit or review of the financial statements, including due diligence related to mergers and acquisitions, audit in
connection with acquisitions, internal control reviews, attest services that are not required by statute or regulation,
consultations concerning financial accounting and reporting standards and tax compliance review.

Pre-Approval Policies and Procedures

The audit committee approves all audit, audit-related, tax and other services provided by Ernst & Young
Auditores Independentes. Any services provided by Ernst & Young Auditores Independentes that are not
specifically included within the scope of the audit must be pre-approved by the audit committee prior to any
engagement. The audit committee is permitted to approve certain fees for audit-related services, tax services and
other services pursuant to a de minimis exception before the completion of the engagement. In 2006, none of the
fees paid to Ernst & Young Auditores Independentes were approved pursuant to the de minimis exception.

16D. Exemptions from the Listing Standards for Audit Committees

On June 13, 2000, our board of directors approved the creation of an audit committee, whose
responsibilities are consistent with the U.S. Blue Ribbon Committee and the rules and regulations of the New York
Stock Exchange. The primary responsibility of the audit committee, which members have to be independent from
our executive officers committee, from representatives of our controlling shareholders on our board of directors and
from our independent auditors, is to review our financial statements and report on them to our shareholders. We duly
implemented an independent audit committee and we comply with Exchange Act Rule 10A-3. For further

100
information on our audit committee, see Directors, Senior Management and Employees Board Practices
Committees Audit Committee.

16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers

None.

PART III

ITEM 17. FINANCIAL STATEMENTS

We have responded to Item 18 in lieu of responding to this item.

ITEM 18. FINANCIAL STATEMENTS

The consolidated financial statements, together with the Reports of Independent Registered Public
Accounting Firms, are filed as part of this annual report.

ITEM 19. EXHIBITS

Exhibit Number Description

1.1 English translation of our Estatuto Social (by-laws), as amended*

2.(a) Form of Amended Deposit Agreement, among us, The Bank of New York, as depositary,
and each Owner and Beneficial Owner from time to time of ADRs issued thereunder,
including the form of American Depositary Receipt.(1)

4.(b)(1) Partnership Agreement dated February 5, 2004, among us, Sendas S.A., S
Supermercados Ltda., Novasoc Comercial Ltda., Arthur Antonio Sendas, Sendas
Empreendimentos e Participaes Ltda., Po de Acar S.A. Indstria e Comrcio,
Pennsula Participaes Ltda., Nova Pennsula Participaes S.A. and Abilio dos Santos
Diniz.(2)

4.(b)(2) 2nd Addendum to and Restatement of the Shareholders Agreement of Sendas

Distribuidora S.A. dated September 16, 2005, among us, Sendas S.A., S Supermercados
Ltda., Novasoc Comercial Ltda., Arthur Antonio Sendas, Sendas Empreendimentos e
Participaes Ltda., Po de Acar S.A. Indstria e Comrcio, Pennsula Participaes
Ltda., Nova Pennsula Participaes S.A. and Abilio dos Santos Diniz.(4)

4.(b)(3) Joint Venture Agreement dated as of May 3, 2005 among Abilio dos Santos Diniz, Ana
Maria Falleiros dos Santos Diniz DAvila, Adriana Falleiros dos Santos Diniz, Joo
Paulo Falleiros dos Santos Diniz, Pedro Paulo Falleiros dos Santos Diniz, Pennsula
Participaes Ltda., Casino Guichard Perrachon S.A., and Companhia Brasileira de
Distribuio.(2)

101
4.(b)(4) Conditional Put Option Agreement dated as of June 22, 2005 by and between Abilio dos
Santos Diniz, Ana Maria Falleiros dos Santos Diniz DAvila, Adriana Falleiros dos
Santos Diniz, Joo Paulo Falleiros dos Santos Diniz, Pedro Paulo Falleiros dos Santos
Diniz, Pennsula Participaes Ltda., AD Pennsula Empreendimentos e Participaes
Ltda. and Casino Guichard Perrachon S.A. and Segisor.(2)

4.(b)(5) Family Share Call Option Agreement, dated as of June 22, 2005 by and between
Pennsula Participaes Ltda., Rio Soe Empreendimentos e Participaes Ltda. and
Casino Guichard Perrachon S.A.(2)

4.(b)(6) Holding Company (Vieri Participaes S.A.) Shareholders Agreement dated as of

June 22, 2005 among Segisor, Abilio dos Santos Diniz, Ana Maria Falleiros dos Santos
Diniz DAvila, Adriana Falleiros dos Santos Diniz, Joo Paulo Falleiros dos Santos
Diniz, Pedro Paulo Falleiros dos Santos Diniz, and Pennsula Participaes Ltda.(2)

4.(b)(7) CBD Shareholders Agreement dated as of June 22, 2005 among Vieri Participaes
S.A., Segisor, Abilio dos Santos Diniz, Ana Maria Falleiros dos Santos Diniz DAvila,
Adriana Falleiros dos Santos Diniz, Joo Paulo Falleiros dos Santos Diniz, Pedro Paulo
Falleiros dos Santos Diniz, and Pennsula Participaes Ltda.(2)

4.(b)(8) Private Instrument of Institution of Usufruct dated as of July 8, 2005 among Vieri
Participaes S.A., Casino Guichard Perrachon, Segisor, Abilio dos Santos Diniz, Ana
Maria Falleiros dos Santos Diniz DAvila, Adriana Falleiros dos Santos Diniz, Joo
Paulo Falleiros dos Santos Diniz, Pedro Paulo Falleiros dos Santos Diniz, Pennsula
Participaes Ltda. and Companhia Brasileira de Distribuio.(2)

4.(b)(9) Technical Assistance Agreement dated as of July 8, 2005 by and between us and Casino
Guichard Perrachon.(3)

4.(b)(10) Real Estate Structure Agreement dated as of October 3, 2005 by and between us,
Zabaleta Participaes, and Rio Plate Empreendimentos e Participaes Ltda. (4)

4.(b)(11) First Amendment to the Real Estate Structure Agreement dated as of December 30, 2005
by and between us, Zabaleta Participaes, and Rio Plate Empreendimentos e
Participaes Ltda. (4)

4.(b) (12) CBD Shareholders Agreement dated as of November 27, 2006 among Sudaco
Participaes S.A., Segisor, Abilio dos Santos Diniz, Ana Maria Falleiros dos Santos
Diniz DAvila, Adriana Falleiros dos Santos Diniz, Joo Paulo Falleiros dos Santos
Diniz, Pedro Paulo Falleiros dos Santos Diniz, and Pennsula Participaes Ltda.* (5)

4.(b) (13) CBD Shareholders Agreement dated as of December 20, 2006 among Wilkes
Participaes S.A., Segisor, Abilio dos Santos Diniz, Ana Maria Falleiros dos Santos
Diniz DAvila, Adriana Falleiros dos Santos Diniz, Joo Paulo Falleiros dos Santos
Diniz, Pedro Paulo Falleiros dos Santos Diniz, and Pennsula Participaes Ltda.* (5)

4.(b) (14) English translation of Acordo de Acionistas (Stockholders Agreement) of Barcelona

Comrcio Varejista e Atacadista S.A., as amended.*

6.1 See notes 2(o) to our financial statements for information explaining how earnings per
share information was calculated.*

8.1 List of Subsidiaries. See note 2(q) to our financial statements for information regarding
our subsidiaries.*

102
11.1 Code of Ethics and Conduct. (6)

12.1 Section 302 Certification of the Chief Executive Officer.*

12.2 Section 302 Certification of the Administrative Financial Officer.*

13.1 Section 906 Certification of the Chief Executive Officer.*

13.2 Section 906 Certification of the Administrative Financial Officer.*

15.1 Report of Independent Registered Public Accounting Firm.*

(1) Incorporated herein by reference to our registration statement on Form F-6 (No. 333-145679).

(2) Incorporated herein by reference to our annual report on Form 20-F filed on September 15, 2005.

(3) Incorporated herein by reference to our 6-K filed on August 1, 2005.

(4) Incorporated herein by reference to our annual report on Form 20-F filed on June 27, 2006.

(5) Incorporated herein by reference to our annual report on Form 20-F filed on June 28, 2007.

(6) Incorporated herein by reference to our annual report on Form 20-F filed on June 21, 2004.

* Filed herewith

103
 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders of

Companhia Brasileira de Distribuio

We have audited Companhia Brasileira de Distribuio and subsidiaries internal control over financial
reporting as of December 31, 2007, based on criteria established in Internal ControlIntegrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
Companhia Brasileira de Distribuios management is responsible for maintaining effective internal
control over financial reporting, and for its assessment of the effectiveness of internal control over
financial reporting, included in the accompanying Managements report on internal control over financial
reporting. Our responsibility is to express an opinion on the companys internal control over financial
reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether effective internal control over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of internal control over financial reporting,
assessing the risk that a material weakness exists, testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk and performing such other procedures as we
considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our
opinion.

A companys internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles. A companys internal
control over financial reporting includes those policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the
assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted accounting principles,
and that receipts and expenditures of the company are being made only in accordance with authorizations
of management and directors of the company; and (3) provide reasonable assurance regarding prevention
or timely detection of unauthorized acquisition, use, or disposition of the companys assets that could
have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk
that controls may become inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.

In our opinion, Companhia Brasileira de Distribuio and its subsidiaries maintained, in all material
respects, effective internal control over financial reporting as of December 31, 2007, based on the COSO
criteria.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), the consolidated balance sheets of Companhia Brasileira de Distribuio and
subsidiaries as of December 31, 2007 and 2006, and related consolidated statements of income,
shareholders equity, and changes in financial position for each of the three years in the period ended
December 31, 2007 and our report dated April 10, 2008 expressed an unqualified opinion thereon.

ERNST & YOUNG

Auditores Independentes S.S.
CRC-2-SP-015199/O-6

Sergio Citeroni
Partner

So Paulo, Brazil
April 10, 2008

F3
 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders of

Companhia Brasileira de Distribuio

We have audited the accompanying consolidated balance sheets of Companhia Brasileira de Distribuio
and subsidiaries as of December 31, 2007 and 2006, and the related consolidated statements of income,
shareholders' equity, changes in financial position and cash flows for each of the three years in the period
ended December 31, 2007. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial statements based on our
audits. We did not audit the financial statements of Miravalles Empreendimentos e Participaes Ltda., an
equity investment stated at R$ 110,681 thousand as of December 31, 2007, (R$ 79,256 thousands as of
December 31, 2006) and equity loss of R$ 28,909 thousand for the year then ended (R$ 53,191 thousand
of equity loss for December 31, 2006). We also did not audited the financial statements of Po de Acar
Fundo de Investimentos em Direitos Creditrios PAFIDC, a consolidated entity, which statements
reflect total assets of R$ 890,072 thousand as of December 31, 2007 (R$ 921,357 thousand as of
December 31, 2006) and total of revenues of R$ 131,499 thousands for the year then ended (R$ 166,981
thousand for December 31, 2006). Those statements were audited by other auditors whose reports have
been furnished to us, and our opinion, insofar as it relates to the amounts included for those Companies, is
based solely on the reports of the other auditors.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audits to obtain reasonable
assurance about whether the financial statements are free of material misstatement. Our audits of the
financial statements included examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements, assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We believe that our audits and
the reports of other auditors provide a reasonable basis for our opinion.

In our opinion, based on our audits and the reports of other auditors, the consolidated financial statements
referred to above present fairly, in all material respects, the consolidated financial position of Companhia
Brasileira de Distribuio and subsidiaries as of December 31, 2007 and 2006, and the consolidated
results of its operations, shareholders' equity, changes in financial position and cash flows for each of the
three years in the period ended December 31, 2007, in conformity with accounting practices generally
accepted in Brazil, which differ in certain respects from accounting principles generally accepted in the
United States of America (see Note 26 to the consolidated financial statements).

We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), Companhia Brasileira de Distribuio and subsidiaries internal control over
financial reporting as of December 31, 2007, based on criteria established in Internal Control-Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO)
and our report dated April 10, 2008 expressed an unqualified opinion thereon.

ERNST & YOUNG

Auditores Independentes S.S.
CRC-2-SP-015199/O-6

Sergio Citeroni
Partner

So Paulo, Brazil
April 10, 2008 (except Note 27, which date is April 30, 2008)

F4
 COMPANHIA BRASILEIRA DE DISTRIBUIO

CONSOLIDATED BALANCE SHEETS

December 31, 2007 and 2006
(In thousands of reais)

2007 2006
Assets
Current assets
Cash and cash equivalents 414,013 247,677
Marketable securities 650,119 1,033,834
Accounts receivable, net 1,362,474 1,224,494
Inventories 1,534,242 1,231,963
Recoverable taxes 379,980 378,849
Deferred income taxes 88,128 238,676
Accounts receivable from vendors 453,888 397,098
Other 126,288 125,825
Total current assets 5,009,132 4,878,416

Non-current assets
Long-term assets
Accounts receivable 371,221 334,247
Recoverable taxes 142,159 95,970
Deferred income taxes 1,026,540 837,676
Related parties 252,890 245,606
Restricted deposits for legal proceedings 205,000 163,065
Other 55,969 17,634
Total long-term assets 2,053,779 1,694,198

Permanent assets
Investments 110,987 79,557
Property and equipment, net 4,820,179 4,241,040
Intangible assets 674,852 630,945
Deferred charges 77,177 76,281
Total permanent assets 5,683,195 5,027,823
Total non-current assets 7,736,974 6,722,021
Total Assets 12,746,106 11,600,437

F5
 2007 2006

Liabilities and shareholders' equity

Current liabilities
Accounts payable to suppliers 2,324,975 2,027,268
Loans and financing 1,439,029 871,321
Debentures 27,881 414,761
Payroll and related charges 173,053 173,010
Taxes and social contributions payable 102,418 68,675
Dividends payable 50,084 20,312
Financing for purchase of real estate 15,978 44,366
Rent payable 44,159 40,924
Other 175,137 163,272
Total current liabilities 4,352,714 3,823,909

Non-current liabilities
Loans and financing 919,294 1,382,152
Debentures 779,650 -
Taxes payable in installments 250,837 261,101
Provision for contingencies 1,216,189 1,137,627
Other 77,612 25,105
Total non-current liabilities 3,243,582 2,805,985

Minority interest 137,818 128,416

Shareholders equity
Capital 4,149,858 3,954,629
Capital Reserves 517,331 517,331
Revenue reserves 344,803 370,167
5,011,992 4,842,127

Total liabilities and shareholders equity 12,746,106 11,600,437

See accompanying notes.

F6
 COMPANHIA BRASILEIRA DE DISTRIBUIO

CONSOLIDATED STATEMENTS OF INCOME

Years ended December 31, 2007, 2006 and 2005
(In thousands of reais, except earnings per thousand shares)

2007 2006 2005

Gross sales 17,642,563 16,460,296 16,120,963

Taxes on sales (2,739,676) (2,579,893) (2,707,567)

Net sales 14,902,887 13,880,403 13,413,396

Cost of sales (10,724,499) (9,962,965) (9,438,126)

Gross profit 4,178,388 3,917,438 3,975,270

Operating (expenses) income

Selling (2,552,453) (2,418,929) (2,300,026)
General and administrative (500,347) (527,145) (505,652)
Depreciation and amortization (550,696) (547,943) (625,281)
Taxes and charges (99,575) (84,923) (63,150)
Financial expenses (555,578) (603,388) (683,571)
Financial income 344,413 382,761 446,722
Equity pickup results (28,923) (53,197) (16,190)

(3,943,159) (3,852,764) (3,747,148)

Operating income 235,229 64,674 228,122

Non-operating (expense) income, net (9,084) (323,229) 32,131

Income (loss) before income and social contribution taxes

and employees' profit sharing and minority interest 226,145 (258,555) 260,253
Income and social contribution taxes (11,404) (1,472) (52,994)

Income (loss) before employees' profit sharing

and minority interest 214,741 (260,027) 207,259
Employees' profit sharing (13,399) (13,421) (14,453)
Minority interest 9,536 358,972 64,184

Net income 210,878 85,524 256,990

Outstanding shares (in thousand shares) at the year end 227,920 227,543 227,336

Net income for the year per thousand shares 0.93 0.38 1.13

See accompanying notes.

F7
 COMPANHIA BRASILEIRA DE DISTRIBUIO

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY PARENT COMPANY

Years ended December 31, 2007, 2006 and 2005
(In thousands of reais)

Capital Reserve Revenue reserves

Goodwill Unrealized Retention of

Share capital special reserve Legal Expansion earning earnings Retained earnings Total

Balances at December 31, 2004 3,509,421 - 105,948 147,937 4,069 283,615 - 4,050,990

Capitalization of reserves 164,374 - - (147,937) - (16,437) - -

Stock options exercised 6,445 - - - - - - 6,445
Appropriation of reserve - - - 240,460 - (240,460) - -
Realization of reserve - - - - (4,069) - 4,069 -
Net income for the year - - - - - - 256,990 256,990
Appropriation of net income to legal reserve - - 12,849 - - - (12,849) -
Dividends proposed - - - - - - (62,053) (62,053)
Transfer to retention of earnings reserve - - - - - 186,157 (186,157) -

Balances at December 31, 2005 3,680,240 - 118,797 240,460 - 212,875 - 4,252,372

Capitalization of reserves 267,177 - - (240,460) - (26,717) - -

Stock options exercised 7,212 - - - - - - 7,212
Appropriation of reserve - - - 167,542 - (167,542) - -
Merger of parent company - 517,331 - - - - - 517,331
Net income for the year - - - - - - 85,524 85,524
Appropriation of net income to legal reserve - - 4,276 - - - (4,276) -
Dividends proposed - - - - - - (20,312) (20,312)
Transfer to retention of earnings reserve - - - - - 60,936 (60,936) -

Balances at December 31, 2006 3,954,629 517,331 123,073 167,542 - 79,552 - 4,842,127

F8
 COMPANHIA BRASILEIRA DE DISTRIBUIO

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY PARENT COMPANY

Years ended December 31, 2007, 2006 and 2005
(In thousands of reais)

Capital Reserve Revenue reserves

Goodwill Unrealized Retention of

Share capital special reserve Legal Expansion earning earnings Retained earnings Total

Balances at December 31, 2006 3,954,629 517,331 123,073 167,542 - 79,552 - 4,842,127

Capitalization of reserves 186,158 - - (167,542) - (18,616) - -

Stock options exercised 9,071 - - - - - - 9,071
Appropriation of reserve - - - 54,842 - (54,842) - -
Net income for the year - - - - - - 210,878 210,878
Appropriation of net income to legal reserve - - 10,544 - - - (10,544) -
Dividends proposed - - - - - - (50,084) (50,084)
Transfer to retention of earnings reserve - - - - - 150,250 (150,250) -

Balances at December 31, 2007 4,149,858 517,331 133,617 54,842 - 156,344 - 5,011,992

See accompanying notes.

F9
 COMPANHIA BRASILEIRA DE DISTRIBUIO

CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION

Years ended December 31, 2007, 2006 and 2005
(In thousands of reais)

2007 2006 2005

Financial resources were provided by:

Operations
Net income for the year 210,878 85,524 256,990
Expenses (income) not affecting working capital
Depreciation and amortization 550,696 547,943 625,281
Residual value of permanent asset disposals 11,062 84,014 1,022,612
Interest and indexation charges on long-term items 82,747 184,093 417,519
Provision for contingencies 71,103 94,010 51,855
Deferred income and social contribution taxes (188,864) 63,202 (19,660)
Net gain from shareholding dilution - (58,151) (49,447)
Equity pickup results 28,923 53,197 16,190
Provision for property and equipment write-offs and losses 2,205 12,685 -
Provision for goodwill amortization - 268,886 -
Minority interest (9,536) (358,972) (64,184)

759,214 976,431 2,257,156

Shareholders
Capital increase 9,071 7,212 6,445
Increase in special goodwill reserve (Note 18) - 37 -

Third parties
Loans, financings and other liabilities 1,323,208 6,400 642,389
Effect on net current assets due to minority shareholders contribution 12,000 - -
Transfer from non-current to current assets - 57,758 113,104

Total funds provided 2,103,493 1,047,838 3,019,094

Financial resources were used for:

Additions to investments 285,329 70,444 -
Additions to property and equipment 980,626 854,295 888,518
Additions to intangible assets 8,266 3,687 31,798
Additions to deferred charges 16,503 28,640 64,295
Additions to other non-current assets 127,077 - 235,775
Dividends proposed 50,084 20,312 62,053
Transfer from non-current to current liabilities 1,033,697 1,151,050 643,137

Total funds used 2,501,582 2,128,428 1,925,576

(Decrease) Increase in net working capital (398,089) (1,080,590) 1,093,518

Increase (decrease) in net working capital

Current assets
In the end of the year 5,009,132 4,878,416 4,704,528
In the beginning of the year 4,878,416 4,704,528 4,290,000
130,716 173,888 414,528
Current liabilities
In the end of the year 4,352,714 3,823,909 2,569,431
In the beginning of the year 3,823,909 2,569,431 3,248,421
528,805 1,254,478 (678,990)
(Decrease) Increase in net working capital (398,089) (1,080,590) 1,093,518

See accompanying notes.

F 10
 COMPANHIA BRASILEIRA DE DISTRIBUIO

CONSOLIDATED STATEMENTS OF CASH FLOW

Years ended December 31, 2007, 2006 and 2005
(In thousands of reais)

Year ended December 31

2007 2006 2005

Cash flow from operating activities

Net income 210,878 85,524 256,990
Adjustment to reconcile net income to
cash from operating activities
Deferred income tax benefit (38,316) (90,729) (80,867)
Loss (gain) on sale of permanent assets 10,978 70,223 (13,689)
Net gains from shareholding dilution - (58,151) (56,780)
Depreciation and amortization 550,696 547,943 625,281
Unrealized financial expenses and monetary
and foreign exchange variations 9,518 375,519 153,071
Equity pickup results 28,923 53,197 16,190
Provision for contingencies 71,103 94,010 51,855
Provision for property and equipment write-offs and losses 2,205 12,685 -
Provision for goodwill amortization - 268,886 -
Minority interest (9,536) (358,972) (64,184)
Decrease (increase) in assets
Account receivable (211,916) (226,079) 19,971
Advances to suppliers and employees - 3,755 (3,767)
Inventories (215,623) (116,677) (25,638)
Recoverable taxes (19,291) 13,065 49,844
Related parties (2,510) (39,079) (3,627)
Judicial deposits (24,844) 5,159 (30,919)
Other (35,030) (14,794) 55,503
Increase (decrease) in liabilities
Accounts payables to suppliers 236,672 373,034 108,785
Payroll and related charges (6,910) 15,371 7,382
Taxes payable 5,853 (165,468) (30,163)
Other (417) 89,133 28,242

Net cash provided by operating activities 562,433 937,555 1,063,480

F 11
 COMPANHIA BRASILEIRA DE DISTRIBUIO

CONSOLIDATED STATEMENTS OF CASH FLOW

Years ended December 31, 2007, 2006 and 2005
(In thousands of reais)

Year ended December 31

2007 2006 2005

Cash flow from investing activities

Net cash in subsidiaries merger 20 - -
Increase in investments (224,777) (4,107) -
Property and equipment (1,009,017) (827,665) (878,047)
Increase in deferred assets (16,503) (28,640) (64,295)
Increase in intangible assets (8,266) (1,322) (31,798)
Capital increase in subsidiaries (60,553) (70,444) -
Proceeds from sale of property, plant and equipment 85 13,790 1,036,301

Net cash flow (used) provided by investing activities (1,319,011) (918,388) 62,161

Cash flow from financing activities

Proceeds from stock options exercised 9,071 7,212 6,445

Effect on cash and cash equivalents due to minority shareholders contribution 12,000 - -
Capital reserve increase - 37 -
Financings capital increase from minority interest
Issuances 2,455,859 199,549 899,814
Repayments (1,917,419) (593,238) (1,411,474)
Dividends paid (20,312) (62,053) (89,059)

Net cash (used in) provided by financing activities 539,199 (448,493) (594,274)

Net (decrease) increase in cash and cash equivalents (217,379) (429,326) 531,367

Cash and cash equivalents, beginning of year 1,281,511 1,710,837 1,179,470

Cash and cash equivalents, end of year 1,064,132 1,281,511 1,710,837

Cash paid during the year for

Interest (net of amount capitalized) 490,383 113,568 547,343
Income taxes 20,600 74,552 48,659

F 12
 COMPANHIA BRASILEIRA DE DISTRIBUIO

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007, 2006 and 2005
(expressed in thousands of reais, unless otherwise indicated)

1. The Company

Companhia Brasileira de Distribuio ("Company" or CBD) operates primarily as a retailer of food,

clothing, home appliances and other products through its chain of hypermarkets, supermarkets,
specialized and department stores principally under the trade names "Po de Acar", "Comprebem",
"Extra", "Extra Eletro", Extra Perto, Extra Fcil, Sendas and Assai. At December 31, 2007, the
Company had 575 stores (549 stores in 2006), of which 400 are operated by the Parent Company (CBD),
and the remaining by its subsidiaries, 6 of them operated by the subsidiary Novasoc Comercial Ltda.,
("Novasoc"), 52 by S Supermercados Ltda. ("S"), 102 stores by Sendas Distribuidora S.A. ("Sendas
Distribuidora") and 15 stores operated by Barcelona Comrcio Varejista e Atacadista S.A. (Barcelona).

Following are the most recent important changes in operations:

a) Sendas Distribuidora

Sendas Distribuidora operations began at February 1, 2004 through the Investment and Partnership
Agreement, entered into in December 2003 with Sendas S.A. ("Sendas"). This subsidiary concentrates
retailing activities of the Company and Sendas in the state of Rio de Janeiro.

b) Partnership with Ita

At July 27, 2004, a Memorandum of Understanding was executed by Banco Ita Holding Financeira S.A.
("Ita") and the Company with the objective of setting up Financeira Ita CBD S.A. ("FIC"). FIC
structures and trades financial products, services and related items to CBD customers on an exclusive
basis (see Note 9 (e)). The Company has 50% shareholding of FICs capital through its subsidiary
Miravalles Empreendimentos e Participaes S.A. (Miravalles).

c) Casino joint venture agreement

On May 3, 2005, the Diniz Group (group of shareholders composed by the members of the Diniz family)
and the Casino Group (a retail company headquartered in France) formed Vieri Empreendiments and
Participaes S.A. (Vieri), which became the parent company of CBD, whose control is shared by both
group of shareholders. When Vieri acquired the common shares of the Company, a higher price was paid
in relation to the book value of the Company, thus generating goodwill. In 2006, Companhia Brasileira de
Distribuio and Vieri began a restructuring process in order to transfer the goodwill to the Company to
obtain the tax deductibility of the goodwill amortization. The estimated tax benefit is approximately R$
517,331.

As a first step of the restructuring process, the goodwill was transferred from the parent company to
Companhia Brasileira de Distribuio in two phases, including the creation of a new subsidiary by the
parent company to where the goodwill was transferred, and subsequently the merger of this new
subsidiary into Companhia Brasileira de Distribuio. This first step was concluded on December 20,
2006, with the approval by the shareholders through an Extraordinary General Meeting.

A valuation allowance, denominated in the books as Provision for maintenance of shareholders equity,
was recorded by the subsidiaries in relation to the goodwill. Accordingly, the remaining net balances
correspond to the tax benefit resulting from the future amortization of goodwill.

On December 31, 2007 and 2006 the value of the resulting tax benefit related to both income taxes and
social contribution tax on profits of the Companhia Brasileira de Distribuio was R$ 517,331.

F 13
 COMPANHIA BRASILEIRA DE DISTRIBUIO

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007, 2006 and 2005
(expressed in thousands of reais, unless otherwise indicated)

1. The Company (Continued)

d) Acquisition of Rossi Chain

On August 3, 2007, CBD structured a transaction through which it leased five stores from Rossi Monza
chain. Four of them are located in the eastward zone of the city of So Paulo and one in the city of
Guarulhos. Leased stores amount to 15.5 thousand m sales area. Four of these stores were converted into
the brand Extra Perto and one into the Comprebem brand. This transaction is treated as an operational
lease with a 5-year term. CBD made a prepayment of R$ 45,500, and agreed to make monthly
payments of R$117.

e) Acquisition of Barcelona - (ASSAI)

On November 1, 2007, CBD, through a company owned by S (Sevilha Empreendimentos e

Participaes Ltda. Sevilha), the Company acquired shares representing 60% of the total and voting
capital of Barcelona, a new company that received the assets of Assai Comercial e Importadora Ltda.
(Assai) related to activities previsouly carried out by Assai in the wholesale market. With this
acquisition, CBD, that already operates with different types of stores, now operates in the cash & carry
segment (atacarejo), thus, reinforcing its multiformat positioning.

2. Summary of Significant Accounting Policies

a) Basis of preparation

The consolidated financial statements were prepared in accordance with the accounting practices adopted
in Brazil and with the rules issued by the Brazilian Securities Commission (Comisso de Valores
Mobilirios or CVM) and certain accounting standards issued by the Brazilian Institute of Accountants
(Instituto dos Auditores Independentes do Brasil or IBRACON), herein referred to as Brazilian GAAP.

In view of the implementation of guidelines established by IBRACON for presentation and disclosure of
financial statements defined in Accounting Standards and Procedures (NPC) 27 issued on October 3,
2005, some items of the balance sheet for the year ended December 31, 2006 were reclassified in order to
comply with these guidelines and allow for comparison. See below a table with these reclassifications:

Financial
Financial Statements Statements
Accounts disclosed in 2006 Reclassifications disclosed in 2007

Restricted deposits for legal proceedings 234,901 (71,836) 163,065

Provision for contingencies (1,209,463) 71,836 (1,137,627)

In order to facilitate the understanding of its financial information, and to provide more uniform
information to its foreign and local shareholders, the Company has elected to prepare and present its
primary financial statements in accordance with Brazilian GAAP, expressed in reais. Because Brazilian
GAAP differs in significant respects from U.S. GAAP, a reconciliation of the net income for the year and
shareholders equity from Brazilian GAAP to equivalent amounts prepared under U.S. GAAP is provided
herein (Note 26).

F 14
 COMPANHIA BRASILEIRA DE DISTRIBUIO

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007, 2006 and 2005
(expressed in thousands of reais, unless otherwise indicated)

2. Summary of Significant Accounting Policies (Continued)

a) Basis of preparation (Continued)

Certain assets, liabilities, revenues and expenses are determined on the basis of estimates when preparing
the financial statements. Accordingly, the consolidated financial statements include various
estimates,such as those relating to calculation of allowance for doubtful accounts, depreciation and
amortization, asset valuation allowance, realization of deferred taxes, contingencies and other estimates.
Actual results may differ from those estimated.

The accompanying financial statements are a translation and adaptation of those originally issued in
Brazil, based on Brazilian GAAP. Certain reclassifications and changes in terminology have been made
and the notes have been expanded, in order to conform more closely to prevailing reporting practices
pursuant to U.S. GAAP.

Significant accounting practices and consolidation criteria adopted by the Company are shown below:

b) Cash and banks

(i) Cash and banks

Cash and cash equivalents include the cash and account balances.

(ii) Marketable Securities

Marketable securities are considered cash equivalents and consist principally of time deposits and
certificates of deposit in Brazilian currency having a ready market and an original maturity of 90 days or
less and earn interest mainly at the Interbank Deposit Certificate (CDI) rate.

c) Accounts receivable

Accounts receivable are stated at estimated realizable values. An allowance for doubtful accounts is
provided in an amount considered by management to be sufficient to meet probable losses related to
uncollectible accounts. The allowance is primarily based on the historical average losses and on specific
accounts deemed to be uncollectible.

The Company carries out securitization operations of its accounts receivable with a special purpose entity,
the PAFIDC (Po de Acar Fundo de Investimento em Direitos Creditrios). (See also note 4 b and note
7).

d) Inventories

Inventories are carried at the lower of cost or market value. The valuation of cost of inventories purchased
directly by the stores is based on the last purchase price, which approximates the First In, First Out
(FIFO) method. The cost of inventories purchased through the warehouse is recorded at average cost,
including warehousing and handling costs.

Inventories are also reduced by the allowance for losses and breakage, which is periodically reviewed and
evaluated as to their adequacy.

F 15
 COMPANHIA BRASILEIRA DE DISTRIBUIO

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007, 2006 and 2005
(expressed in thousands of reais, unless otherwise indicated)

2. Summary of Significant Accounting Policies (Continued)

e) Other current and non-current assets

Other assets and receivables are stated at cost, including, when applicable, contractual indexation
accruals, net of allowances to reflect realizable amounts, if necessary.

f) Investments

Investments in subsidiaries where CBD exercises significant control are accounted for by the equity
method, and provision for capital deficiency is recorded, when applicable. Other investments are recorded
at acquisition cost.

g) Property and equipment

These assets are shown at acquisition or construction cost, monetarily restated until December 31, 1995,
net of the related accumulated depreciation which calculated on a straight-line basis at the rates
mentioned in Note 10, which take into account the economic useful lives of the assets or the leasing term,
in case of leasehold improvements, whichever is shorter.

Interest and financial charges on loans and financing obtained from third parties directly or indirectly
attributable to the process of purchase, construction and operating expansion, are capitalized during the
construction and refurbishment of the Companys and its subsidiaries stores in conformity with CVM
Deliberation 193. The capitalized interest and financial charges are reflected in results of operations over
the depreciation periods of the corresponding assets.

Expenditures for repairs and maintenance that do not significantly extend the useful lives of related asset
are charged to expense as incurred. Expenditures that significantly extend the useful lives of existing
facilities and equipment are capitalized.

h) Intangible assets

Intangible assets include goodwill derived from the acquisition of companies and amounts related to
acquisition of commercial rights and outlets. These amounts are supported by appraisal reports issued by
independent experts, based on the expectation of future profitability, and are amortized in accordance
with projected profitability over a maximum period of ten years.

i) Deferred charges

The expenditures related to the implementation of projects and development of new products and
business models have been recorded based on feasibility studies and are amortized over a maximum
period of five years.

j) Other current and non-current liabilities

These liabilities are stated at known or estimated amounts including, when applicable, accrued charges
and interest or foreign exchange variations.

F 16
 COMPANHIA BRASILEIRA DE DISTRIBUIO

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007, 2006 and 2005
(expressed in thousands of reais, unless otherwise indicated)

2. Summary of Significant Accounting Policies (Continued)

k) Derivative financial instruments

The Company uses derivative financial instruments to reduce its exposure to market risk resulting from
fluctuations in interest and foreign currency exchange rates. Derivative financial instruments are
accounted for under the accrual method, based on spot rates as of the balance sheet date.

l) Taxation

Sales and services revenue are subject to taxation by State Value-Added Tax - ICMS, Services Tax - ISS,
computed by state or municipality Social Integration Program - PIS and Social Contribution Tax
COFINS. Those are presented as sales deductions in the statement of income.

The credits from PIS and COFINS are deducted from cost of goods sold. The debits related to financial
income and credits derived from financial expenses are also deducted in these line items of the statement
of income.

The advances or amounts subject to recoverability are shown in the current and non-current assets, in
accordance with the estimate for their realization.

The taxation on income comprises the income and social contribution taxes, which are calculated based
on taxable income (adjusted income), at rates applicable according to the prevailing laws 15%, and 10%
over the amount exceeding R$ 240 yearly for income tax and 9% for social contribution tax.

Deferred income and social contribution tax assets were related to tax losses, negative basis of social
contribution and temporary differences, taking into account the prevailing rates of said taxes, pursuant to
the provisions of CVM Deliberation 273 of August 20, 1998 CVM Ruling 371 of June 27, 2002, and
taking into account the history of profitability and the expectation of generating future taxable income
based on a technical feasibility study which is approved by the Board of Directors.

m) Provision for contingencies

Provision for contingencies is set up based on legal counsel opinions, in amounts considered sufficient to
cover probable losses.

In accordance with the CVM Deliberation 489/05, the Company adopted the concepts established in NPC
22 on provisions, liabilities, gains and losses on contingencies and related disclosures on matters
regarding litigation and contingencies (Note 16). Losses are recorded when probable and contingent
gains are not recorded until realized.

n) Revenues and expenses

Sales revenue is recognized when customer receives the goods. Financial income arising from credit sales
is accrued over the credit term. Expenses and costs are recognized on the accruals basis. Volume bonuses
and discounts received from suppliers in the form of product are recorded as zero-cost additions to
inventories and the benefit recognized as the product is sold. Costs of goods include stocking and
handling costs in the warehouses.

F 17
 COMPANHIA BRASILEIRA DE DISTRIBUIO

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007, 2006 and 2005
(expressed in thousands of reais, unless otherwise indicated)

2. Summary of Significant Accounting Policies (Continued)

o) Earnings per share

The calculation was made based on the number of outstanding shares at the balance sheet dates as if net
income of the year was fully distributed. Earnings may be distributed, used for capital increase purposes,
or for the profit reserve for expansion, based on capital budget. Due to the reverse split in 2007 (Note 18
a), the disclosures related to prior years were restated to allow comparability with the current year.

p) Allocation of net income

The financial statements reflect the Board of Directors proposal to allocate the net income for the year
under the assumption that it will be approved at the Annual General Shareholders Meeting.

q) Consolidated Financial Statements

The consolidated financial statements was prepared in conformity with the consolidation principles
prescribed by the Brazilian Corporate Law and CVM Ruling 247, and include the financial statements of
the Company and its direct or indirect subsidiaries, based on its percentage ownership, as follows:

Direct Interest Interest % in

2007 2006
Novasoc Comercial Ltda. 10.00 10.00
S Supermercados Ltda. 93.05 91.92
Po de Acar Fundo de Investimentos Creditrios - PAFIDC 6.90 19.40
PA Publicidade Ltda. 99.99 99.99
CBD Holland 100.00 -
Versalhes Comrcio de Produtos Eletroeletrnicos Ltda. - 90.00
Auto Posto MFP Ltda. - 99.99
Auto Posto Sigua Ltda. - 99.99
Loureno & Cia. Ltda. - 99.99
Nova Saper - 99.97
Obla Participaes - 99.99

Indirect Interest (through subsidiaries) Interest % in

2007 2006
S Supermercados Ltda. 6.95 8.08
Versalhes Comrcio de Produtos Eletroeletrnicos Ltda. - 10.00
Sendas Distribuidora S.A. 42.57 42.57
Sevilha Empreendimentos e Participaes S.A. 99.99 -
Barcelona Comrcio Varejista e Atacadista S.A. 60.00 -
CBD Panam 100.00 -

Although the Companys interest in Novasoc is represented by 10% of Novasocs quotas of interest,
Novasoc is included in the consolidated financial statements as the Company effectively has control over
a 99.98% beneficial interest in Novasoc. The other members have no effective veto or other participating
or protective rights. Under the bylaws of Novasoc, the appropriation of its net income does not need to be
proportional to the quotas of interest held in the subsidiary.

F 18
 COMPANHIA BRASILEIRA DE DISTRIBUIO

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007, 2006 and 2005
(expressed in thousands of reais, unless otherwise indicated)

2. Summary of Significant Accounting Policies (Continued)

q) Consolidated Financial Statements (Continued)

Since July 1, 2007, the companies Versalhes Comrcio de Produtos Eletrnicos Ltda, Auto Posto MFP
Ltda, Auto Posto Sigua Ltda, Loureno Supermercados Ltda, Nova Saper Participaes Ltda and Obla
Participaes are presented in the financial statements of CBD, as a result of their merger into the
Company at carryover historical values.

The subsidiary Sendas Distribuidora was fully consolidated, in accordance with the shareholders
agreement, which establishes the operating and administrative management by CBD.

The proportional investment of the Parent Company in the income of the investee, the balances payable
and receivable, revenues and expenses and the unrealized profit originated in transactions between the
consolidated companies were eliminated in the consolidated financial statements.

Pursuant to CVM Ruling 408, of August 18, 2004, since the first quarter of 2005 the Company is
consolidating PAFIDCs financial statements, a special purpose entity, organized with exclusive purpose
of conducting the securitization of receivables of the Company and its subsidiaries. The consolidation is
justified by the fact that most of risks and benefits related to the fund profitability are linked to
subordinated quotas, maintained by the Company.

Since prevailing decisions related to the operational management of Miravalles (note 1 b) lies on another
partner quotaholder, Miravalles is not consolidated in the Companys financial statements.

3. Marketable Securities

Marketable securities are considered cash equivalents and consist principally of time deposits and
certificates of deposit in Brazilian currency having a ready market and an original maturity of 90 days or
less and earn interest mainly at the Interbank Deposit Certificate (CDI) rate.

F 19
 COMPANHIA BRASILEIRA DE DISTRIBUIO

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007, 2006 and 2005
(expressed in thousands of reais, unless otherwise indicated)

4. Trade Accounts Receivable

a) Breakdown

2007 2006
Current
Resulting from sales from
Credit card 409,731 299,272
Customer credit financings - 30
Sales vouchers and others 88,107 63,422
Credit sales with post-dated checks 45,451 28,699
Allowance for doubtful accounts (6,421) (12,597)
Resulting from commercial agreements with suppliers 453,888 397,098
990,756 775,924
Accounts receivable - Securitization Fund -
PAFIDC 825,606 845,668
1,816,362 1,621,592
Non-current
Trade accounts receivable Paes Mendona 371,221 334,247
371,221 334,247

Credit card sales are receivable from the credit card companies in installments not exceeding 12 months.
Credits sales settled with post-dated checks bear interest of up to 6.50% per month (same for 2006) for
settlement in up to 60 days.

The Company carries out securitization operations of its credit rights, represented by customer credit
financing, credit sales with post-dated checks and credit card company receivables, to PAFIDC.

The volume of operations was R$ 7,381,416 in 2007 (R$ 7,299,680 in 2006), in which the responsibility
for services rendered and subordinated interests was retained by the Company. The securitization costs of
such receivables amounted to R$ 125,487 in 2007 (R$ 139,485 in 2006), recognized as financial expenses
in income for 2007 and 2006, respectively. Services rendered, which are not remunerated, include credit
analysis and the assistance by the collection department to the funds manager.

The outstanding balance of these receivables at December 31, 2007 and 2006 was R$ 825,606 and
R$ 845,668, respectively, net of allowance.

c) Accounts receivable Paes Mendona

Accounts receivable - Paes Mendona - relate to amounts deriving from the payment of liabilities on
behalf of Paes Mendona. Pursuant to contractual provisions, these accounts receivable are collaterized
by Commercial Rights (Fundo de Comrcio) of certain stores currently operated by CBD and its
subsidiaries. Maturity of accounts receivable is linked to lease agreements, mentioned in Note 9 (b) (i).

d) Accounts receivable from commercial agreements with suppliers

Accounts receivable under commercial agreements result from current transactions carried out between
the Company and its suppliers, primarily based on the volume of purchases.

F 20
 COMPANHIA BRASILEIRA DE DISTRIBUIO

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007, 2006 and 2005
(expressed in thousands of reais, unless otherwise indicated)

4. Trade Accounts Receivable (Continued)

e) Allowance for doubtful accounts

2007 2006 2005

At beginning of year (12,597) (6,028) (23,709)

Provision for doubtful accounts (19,053) (16,635) (44,194)
Recoveries and provision written off 25,229 10,066 61,875
At end of year (6,421) (12,597) (6,028)

Customer credit financing (5,031) (12,491) (4,255)

Credit sales with post-dated checks (1,390) (106) (481)
Accounts receivable - PAFIDC - - (1,292)
(6,421) (12,597) (6,028)

5. Inventories

2007 2006

Stores 995,332 817,501

Warehouses 538,910 414,462

1,534,242 1,231,963

Inventories are stated, net of provisions for shrinkage of inventories and obsolescence.

6. Recoverable Taxes

Recoverable taxes at December 31, 2007 and 2006 refer basically to credits from IRRF (Withholding
Income Tax), PIS (Social Contribution Tax on Gross Revenue for Social Integration Program), COFINS
(Social Contribution Tax on Gross Revenue for Social Security Financing) and ICMS (State Value-Added
Tax):

2007 2006
Current
Tax on sales 299,399 278,927
Income tax and others 80,581 99,922
379,980 378,849
Non-current
Taxes on sales 61,589 87,340
VAT and others 80,570 8,630
142,159 95,970

Total of recoverable taxes 522,139 474,819

F 21
 COMPANHIA BRASILEIRA DE DISTRIBUIO

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007, 2006 and 2005
(expressed in thousands of reais, unless otherwise indicated)

7. Po de Acar Receivables Securitization Fund - PAFIDC

PAFIDC is a receivables securitization fund formed in compliance with CVM Rulings 356 and 393 for
the purpose of acquiring the Companys and its subsidiaries trade receivables, arising from sales of
products and services to their customers. Initially, the fund would acquire credit rights derived from credit
cards sales, meal tickets, installment system or post-dated checks. In the fourth quarter of 2005, the fund
no longer acquired receivables from installment system and in July 2007, receivables from post-dated
checks.

PAFIDC has a predetermined duration of five years, renewable for an additional five-year period,
maturing on May 26, 2008. The capital structure of the fund, at December 31, 2007, is composed of
10,256 senior quotas (10,126 in 2006), held by third parties in the amount of R$ 823,802, which represent
93.1% of the funds equity (79.7% in 2006) and 2,864 subordinated quotas (2,439 in 2006) held by the
Company and subsidiaries in the amount of R$ 61,012, which represent 6.9% of the funds equity (20.3%
in 2006).

The balance of PAFIDC as of December 31, 2007 and 2006 are as follows:

2007 2006
Assets
Cash and cash equivalents 64,466 75,689
Accounts receivable 825,606 845,668
Total assets 890,072 921,357

Liabilities and quotaholders equity

Accounts payable 5,258 193
Quotaholders equity (*) 884,814 921,164
Total liabilities and quotaholders equity 890,072 921,357

(*) includes (mandatorily) redeemable quotas of interest in the amount of R$ 823,802 on December 31,
2007 (R$ 734,124 in 2006).

The subordinated quotas were attributed to the Company and are recorded in the noncurrent assets as
participation in the securitization fund, the balance of which at December 31, 2007 was R$ 61,012
(R$ 187,040 December 31, 2006). The retained interest in subordinated quotas represents the
Companys maximum exposure to loss under the securitization transactions.

Pursuant to the Quotaholders General Meeting held at
quotas was authorized. The issuance was concluded at
thirty (130) senior quotas, in a single serie (the series
hundred twenty-five (425) subordinated quotas, in
R$ 137,669.
September 18, 2007, the 3rd Issue of the Funds
October 5, 2007, composed of one hundred and
C) in the total amount of R$ 130,000, and four
the total amount of R$ 7,669, amounting to

The purpose of this issuance was to repay the funds equity in view of the extraordinary amortization of
subordinated quotas occurred in July 2007, when the Quotaholders General Meeting of the fund
approved reduction on Companys interest in subordinated quotas from 20% to 5%. Thus, the fund
returned to the previous capacity of purchasing receivables before the amortization.

F 22
 COMPANHIA BRASILEIRA DE DISTRIBUIO

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007, 2006 and 2005
(expressed in thousands of reais, unless otherwise indicated)

7. Po de Acar Receivables Securitization fund PAFIDC (Continued)

The series A senior quotas reached benchmark profitability of 103.0% of CDI, variable interest interbank
fee, from first subscription of quotas to February 20, 2004, and 105.0% of CDI after such date; the series
B senior quotas were remunerated at 101.0% of CDI; the series C senior quotas were remunerated at
100.0% of CDI + 0.5% p.a.. The remaining balance of results will be attributed to the subordinated
quotas. The series B quotaholders will redeem the remaining balance of R$ 133,682 (R$ 238,993 in 2006)
at the end of the funds term at May 26, 2008. The series A quotaholders will redeem their quotas only at
the end of the funds term, the amount of which at December 31, 2007 corresponds to R$ 556,776
(R$ 495,131 in 2006). The series C quotaholders will redeem the balance of R$ 133,344 at the end of the
funds term Note 13 (iii).

Subordinated quotas are non-transferable and registered, and were issued in a single series. The Company
will redeem the subordinated quotas only after the redemption of senior quotas or at the end of the funds
term. Once the senior quotas have been remunerated, the subordinated quotas will receive the balance of
the funds net assets after absorbing any default on the credit rights transferred to the fund and any losses
attributed to the fund. Their redemption value is subject to credit, prepayment, and interest rate risks on
the transferred financial assets.

At September 15, 2007, the quotahoders general meeting of the Fund authorized the 3rd issuance of
quotas.

The holders of senior quotas have no recourse against the other assets of the Company in the event
customers default on the amounts due. As defined in the agreement between the Company and PAFIDC,
the transfer of credit rights is irrevocable, non-retroactive and the transfer is definitive and not
enforceable against the Company.

The PAFIDC financial statements for the years ended at December 31, 2007 and 2006 were audited by
other independent auditors and are consolidated into the Companys financial statements. In the year
ended December 31, 2007, total assets and net income of this investee represent 6.9% and 11.7%,
respectively, in relation to the Companys consolidated financial statements (7.9% and 39.2% of total
assets and net income, respectively, compared to the Companys consolidated financial statements in the
year ended December 31, 2006).

8. Balances and Transactions with Related Parties

The summary below includes exclusively non consolidated companies plus Sendas Distribuidora, which
is consolidated for Brazilian GAAP purposes.

F 23
 COMPANHIA BRASILEIRA DE DISTRIBUIO

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007, 2006 and 2005
(expressed in thousands of reais, unless otherwise indicated)

8. Balances and Transactions with Related Parties (Continued)

Balances

Accounts Fees and services Intercompany

receivable receivable receivable Proposed
Company (payable) (payable) (payable) dividends
Sendas S.A. - - 217.825 -
FIC 14.376 - - -
Others - 13.927 - (22.861)
Sub-total 14.376 13.927 217.825 (22.861)

Po de Acar Industria e Comrcio S.A. ("PAIC") 1.171 - - -

Wilkes Participaes S.A.(Wilkes) - - - (13.606)
Casino Guichard Perrachon ("Casino") 4.171 - - (6.820)
Pennsula Participaes Ltda. ("Pennsula") (12.522) - - (1.176)
Onyx 2006 Participaes - - - (4.693)
Rio Plate Empreendimentos e Participaes - - - (928)
Sendas Distribuidora 46.871 (151.474) 105.026 -
Sub-total 39.691 (151.474) 105.026 (27.223)
Balance at 12.31.2007 54.067 (137.547) 322.851 (50.084)
Balance at 12.31.2006 85.166 (9.163) 326.440 (11.777)

Transactions held during the year ended at December 31, 2007

Services Net financial

rendered income Dividends
Company and rents Net sales (expenses) paid
PAIC (6,280) - - -
Casino (6,255) - - 384
Wilkes - - - 7,946
Onix - - - 1,906
Rio Plate - - - 377
Fundo de Invest.Imob.Pennsula (117,072) - - 478
Sendas Distribuidora 126,852 220,001 (2,805) -
Others (11,830) - (908) 9,221
Balance at 12.31.2007 (14,585) 220,001 (3,713) 20,312
Balance at 12.31.2006 15,327 248,525 32,237 32,615
Balance at 12.31.2005 59,630 44,872 41,727 65,305

Accounts receivable and sale of goods relate to the supply of stores, mainly of Sendas Distribuidora, by
the Company's warehouse and were made at cost; the remaining transactions, described below, are carried
out at usual market prices and conditions. Certains service contracts are subject to an administration fee.

(i) Leases

CBD leases 20 properties from the Diniz Group (21 in 2006). Payments under such leases in the year
ended December 31, 2007 totaled R$ 11,649 (R$ 15,180 in 2006), including an additional contingent
lease based on 0.5% to 2.5% of revenues from stores.

F 24
 COMPANHIA BRASILEIRA DE DISTRIBUIO

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007, 2006 and 2005
(expressed in thousands of reais, unless otherwise indicated)

8. Balances and Transactions with Related Parties (Continued)

Sendas Distribuidora leases 57 properties from the Sendas Group and 8 properties from the Company (57
and 7 in 2006, respectively). In the year ended at December 31, 2007, the total lease payments amounted
to R$ 33,244 and R$ 5,832, respectively (R$ 29,466 and R$ 4,989 in 2006 and R$ 34,678 and R$ 4,871 in
2005, respectively), including an additional contingent lease based on 0.5% to 2.5% of revenues from
stores. In September 2005, the amount of R$ 10,529 was advanced to Sendas S.A. regarding the lease of 7
stores, which are being amortized in 37 installments.

The leases have terms similar to those that would have been established if they had been taken out with
non-related parties.

(ii) Fundo de Investimento Imobilirio Pennsula leases - Leaseback

On October 3, 2005, the final agreements related to the sale of 60 Company and subsidiary properties to a
real estate fund named Fundo de Investimento Imobilirio Pennsula (Note 10) were executed. The
properties sold were leased back to the Company for a twenty-year term, renewable for two further
consecutive periods of ten years each. CBD was granted a long-term lease agreement for all properties
that were part of this transaction, in addition to periodic reviews of the minimum rent amounts. In
addition, CBD has the right to exit individual stores before termination of the lease term, in case the
Company is no longer interested in maintaining such leases.

The total amount paid under these leases in 2007 was R$ 117,072 (R$ 114,943 in 2006 and R$ 29,006 in
2005). These amounts include an additional contingent lease based on 2.0% of revenues from stores.

(iii) Allocation of corporate expenses

The corporate services, such as purchases, treasury, accounting, human resources and Shared Services
Center (CSC) rendered to subsidiaries and affiliated companies are allocated and charged on to them
based on costs incurred to provide such services.

(iv) Technical Assistance Agreement with Casino

In the Companys Board of Directors meeting held on July 21, 2005, a Technical Assistance Agreement
was signed with Casino, whereby, through the annual payment of US$ 2,727 thousand, Casino shall
provide services to the Company related to technical assistance in the human resources, own brands,
marketing and communications, marketing campaigns and administrative assistance areas. This
agreement is effective for 7 years, with automatic renewal for an indeterminate term. This agreement was
approved in the Extraordinary General Meeting held at August 16, 2005. In the year ended December 31,
2007, the Company paid R$ 6,255 (R$ 6,271 in 2006 and R$ 2,003 in 2005), in connection with the
services provided for in such agreement.

(vi) Receivables from Sendas S.A.

There is an account receivable from Sendas S.A. of R$ 200,000 as of December 31, 2007 and 2006,
regarding the unpaid capital in accordance with the shareholders agreement as further described in note 9
(c).

F 25
 COMPANHIA BRASILEIRA DE DISTRIBUIO

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007, 2006 and 2005
(expressed in thousands of reais, unless otherwise indicated)

9. Investments

a) Information on consolidated investments at December 31, 2007 and 2006

Total shares/quotas held %

2007 2006
Miravalles 50.00 50.00

b) Change in consolidated investments

Nova Saper Miravalles Others Total

Balances at December 31, 2004 101 78,239 205 78,545

Additions - - - -
Write-offs - - - -
Equity pickup - (16,236) 46 (16,190)
Balances at December 31, 2005 101 62,003 251 62,355

Additions - 70,444 - 70,444

Write-offs - - (45) (45)
Equity pickup - (53,192) (5) (53,197)
Balances at December 31, 2006 101 79,255 201 79,557

Additions - 60,335 13,576 73,911

Write-offs - - (100) (100)
Merger (101) - (13,357) (13,458)
Equity pickup - (28,909) (14) (28,923)
Balances at December 31, 2007 - 110,681 306 110,987

(i) Novasoc: Novasoc has, currently, 16 lease agreements with Paes Mendona with a five-year
term, which may be extended twice for similar periods through notification to the leaseholder, with
final maturity in 2014. During the term of the contract, the shareholders of Paes Mendona cannot
sell their shares without prior and express consent of Novasoc. Paes Mendona is by contract fully
and solely responsible for all and any tax, labor, social security, commercial and other liabilities. The
amounts of annual operating lease payments by Novasoc to Paes Mendona amounted to R$ 9,101 in
2007 (R$ 8,919 in 2006 and R$ 8,707 in 2005), including an additional contingent lease based on
0.5% to 2.5% of revenues from stores.

Under Novasoc bylaws, the distribution of its net income need not be proportional to the holding of
each shareholder in the capital of the investee. As per members decision, the Company holds
99.98% of Novasocs results as from 2000.

(ii) S S holds a direct interest in Miravalles, corresponding to 50% of its total capital. Investment
at Miravalles indirectly represents investment at FIC.

(iii) At November 1, 2007, CBD, by means of subsidiary company owned by S (Sevilha

Empreendimentos e Participaes Ltda. Sevilha), acquired shares representing 60% of the total
and voting capital of Barcelona Comrcio Varejista e Atacadista S.A. (Barcelona), a newly formed
company that received the assets of Assai Comercial e Importadora Ltda. (Assai) related to the
activities previously carried out by Assai in the wholesale market. The acquisition amounted
R$ 208,504, generating a goodwill amounted to R$ 206,068.

F 26
 COMPANHIA BRASILEIRA DE DISTRIBUIO

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007, 2006 and 2005
(expressed in thousands of reais, unless otherwise indicated)

9. Investments (Continued)

b) Change in investments (Continued)

ASSAI is a chain of stores in the cash & carry segment known as atacarejo (wholesale+retail)
with 33 years of activities in this business. ASSAI currently has 2,700 employees and 15 stores
located in the state of So Paulo (seven in the city of So Paulo and other stores in the cities of
Santos, Sorocaba, Jundia, Osasco, So Bernardo, Guarulhos (2) and Ribeiro Preto). The stores will
continue operating with the Assai banner and will maintain their main distinguished features: low
operating cost, competitive prices, mix of goods and communication.

The non-controlling shareholders hold 40% interest in Barcelona. A shareholders agreement was
signed and established a put and call option of such interest, under the following conditions:

Criteria for calculation of purchase or sale price for remaining interest of 40% (basis for the call and
put options):

1) The highest amount between 7 times EBITDA and 35.16% of net sales over the past 12 months
immediately prior to the option exercise date, after deducting net indebtedness and contingencies
with probable unfavorable outcome, as defined in the agreement. Should EBITDA margin be
lower than 4.625%, only the 7 times EBITDA criterion will be taken into account; or

2) Initial purchase price net of distributed dividend, restated by IPCA + 6.5% p.a.

(iv) Call option conditions (to be exercised by CBD):

Performance of the chairman of Barcelona lower than specific levels set forth in the shareholders
agreement exercise by criterion 1 of sales price;

Resignation of chairman of Barcelona or absence for more than 1/3 of Board meetings held during a
determined fiscal year - exercise by the lowest value between criterion 1 or 125% of criterion 2 of the
sales price;

At any moment, up to December 31, 2011 exercise by the highest value between criterion 1 or
125% of criterion 2 of the sales price;

From January 1 to 15 of each calendar year between 2012 and 2014 exercise by the highest value
between criterion 1 and criterion 2 of the sales price;

At any time in the event of disability or decease of the chairman of Barcelona, by criterion 1 of the
sales price.

The Board of Directors of Assai will be composed of 7 members, with a 3-year term of office. CBD shall
be in charge for the appointment of 4 members and former controlling shareholders of Assai shall be in
charge for the appointment of 3 members, including the Chairman of the Board of Directors. The former
controlling shareholders of Assai may also exercise the put option as of January 1, 2012 as per conditions
set forth in criterion 1 abovementioned.

F 27
 COMPANHIA BRASILEIRA DE DISTRIBUIO

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007, 2006 and 2005
(expressed in thousands of reais, unless otherwise indicated)

9. Investments (Continued)

c) Investment agreement CBD and Sendas

In February 2004, based on the Investment and Association Agreement, the Company and Sendas S.A.
constituted, by means of transfer of assets, rights and obligations, a new company known as Sendas
Distribuidora S.A., with the objective of operating in the retailing market in general, by means of the
merging of operating activities of both networks in the State of Rio de Janeiro. The Companys indirect
interest in Sendas Distribuidora at December 31, 2007 corresponded to 42.57% of total capital. Pursuant
to the shareholders agreement, it is incumbent upon CBDs Board of Executive Officers to conduct the
operating and administrative management of Sendas Distribuidora.

The shareholders agreement also provides that Sendas could at any time from February 1, 2007 exercise
the right to exchange the totality or a portion of its interest in Sendas Distribuidora for preferred shares of
the Company. At December 31, 2007, Sendas S.A. held 42.57% interest in Sendas Distribuidora, being
23.65% paid and 18,92% unpaid. According to the 2nd amendment to the shareholdersagreement, the
unpaid capital of R$ 200,000 should be paid by 2014.

The value of the shares in Sendas Distribuidora will be based on the Transfer Value, as defined in the
agreement. The Transfer Value will be the value of the paid-in shares (23.65% at December 31, 2007 and
2006), which must the higher between the two points below, limited to CBDs market value:

Price of shares calculated based on the Sendas Distribuidoras market value (valuation) to be
calculated by a first-rate investment bank;
Price of shares calculated based on the Sendas Distribuidoras value (valuation), equivalent to
40% (forty percent) on gross sales of Sendas Distribuidora in the 12 (twelve) months preceding
the acquisition date.

CBD Preferred shares owned by Sendas S.A., after this exchange, may only be sold according to the
following restrictions:

Between February 1, 2007 and January 31, 2010: 1/3 (one third) of CDB Preferred shares;
Between February 1, 2010 and January 31, 2013: 1/3 (one third) of CDB Preferred shares;
As from February 1, 2013: the remaining CDB Preferred shares still held by Sendas S.A.

On September 16, 2005 the 2nd Amendment and Consolidation to the Sendas Distribuidora Shareholders
Agreement was executed by Sendas S.A. and CBD and subsidiaries, establishing the following:

Adoption of proportionality when indicating the Board of Director members, and of the 13 to be
elected, CBD now has the right to elect 7 members;
Restriction of the right to veto of Sendas S.A. to any amendment to the Company business
purpose;
Postponement of the Additional Term ("Second Term") of Payment of Class A Preferred Shares
not paid in by Sendas S.A., until February 28, 2014. During the Second Term, the payment may
only be made in cash, by using the dividends paid by the Company to Sendas S.A.; should the
payment not take place during the period, the shares will be cancelled.

F 28
 COMPANHIA BRASILEIRA DE DISTRIBUIO

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007, 2006 and 2005
(expressed in thousands of reais, unless otherwise indicated)

9. Investments (Continued)

c) Investment agreement CBD and Sendas (Continued)

On October 19, 2006, Sendas notified the Company of its intention to exercise its put option according
to the stated in paragraph 6.7 of Shareholders agreement of Sendas Distribuidora, which addresses the
issue related to transfer of control. The Company responded to the notification informing that the option
is not exercisable since the transaction between Diniz group and Casino group did not constitute a transfer
of control and therefore it should not constitute a trigger to the put option right. On October 31, 2006, the
Company was notified by the Fundao Getlio Vargas Arbitration Chamber (Cmara de Conciliao e
Arbitragem da Fundao Getlio Vargas FGV) of the arbitration procedure initiated by Sendas.

On January 5, 2007, Sendas S.A. notified CBD, expressing the exercise of its right to exchange all of its
interest in Sendas Distribuidora by preferred shares of CBDs capital stock, provided for in Clause 6.9.1
of Shareholders Agreement of Sendas Distribuidora. The right to exchange the shares will be exercised if
the final outcome decision from the arbitration process is favorable to Sendas S.A.

On March 13, 2007, CBD and Sendas started the arbitration proceeding. Since the parties are still
presenting allegations and documents to the arbitrors, the external counsel can not predict the outcome of
the arbitration.

In view of the current status, management of CBD did not change the interest percentage currently used
for the purposes of equity accounting calculation and consolidation of Sendas Distribuidoras financial
statements.

d) Capital subscription by the AIG Group in Sendas Distribuidora

On November 30, 2004, shareholders of Sendas Distribuidora and investment funds of the AIG Group
("AIG") entered into an agreement through which AIG invested the amount of R$ 135,675 in Sendas
Distribuidora, by means of subscription and payment of 157,082,802 class B preferred shares, issued by
Sendas Distribuidora, representing 14.86% of its capital. AIG has waived its rights to receive dividends
until November 30, 2008.

According to the above mentioned agreement, CBD and AIG mutually granted reciprocal call and put
options of the shares of Sendas Distribuidora acquired by AIG, which may be exercised until July 25,
2008.

Upon exercising the options, the shares issued by Sendas Distribuidora to AIG will represent a put against
CBD which may be used to subscribe up to three billion preferred shares to be issued by CBD in a future
capital increase.

The issuance of preferred shares by CBD to AIG will be made at market value at the time of the issuance,
allowing AIG to the subscription up to the maximum number of shares described above. At the time of
the issuance, if the value of AIGs interest in Sendas Distribuidora is more than the market value of the
three billion shares of CBD, the Company will pay the difference in cash.

The exit of AIG from Sendas Distribuidora is defined based on the Exit Price, as defined in the
agreement, the calculation of which is based on the Earnings Before Interest, Tax, Depreciation and
Amortization - EBITDA, EBITDA multiple and the net financial indebtedness of Sendas Distribuidora.
This exit price will give AIG the right to purchase CBD preferred shares according the criteria below:

F 29
 COMPANHIA BRASILEIRA DE DISTRIBUIO

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007, 2006 and 2005
(expressed in thousands of reais, unless otherwise indicated)

9. Investments (Continued)

d) Capital subscription by the AIG Group in Sendas Distribuidora (Continued)

Should the exit price be lower than the equivalent to two billion CBD preferred shares (at
market value at the time of issuance), the number of shares to be issued will be defined by the
exit price divided by the CBD preferred share market value;
Should the exit price exceed the equivalent to two billion CBD preferred shares (at market
value at the time of issuance), the number of shares to be issued will be, at CBD discretion, a
minimum of two billion shares and a maximum of three billion shares, and the difference
between the exit price and the amount equivalent to the number of CBD preferred shares
issued (defined by CBD) will be paid in cash.

At December 31, 2007, total AIG interest represented an amount of R$ 165,440 (R$ 151,157 December
31, 2006), which, converted to the average quotation of the last week of December 2007 of CBD shares in
the So Paulo Stock Exchange (BOVESPA), would be equivalent to a total of 5,294 shares (4,363 shares
- December 31, 2006) of the Company (2.32% of its capital).

e) Investment agreement CBD and Ita

Miravalles Empreendimentos e Participaes S.A. ("Miravalles"), a company constituted in July 2004 and
owner of exploitation rights of the Companys financial activities, received capital subscription from Ita,
which now holds 50% equity interest of such company. Subsequently, with capital of R$ 150,000,
Miravalles constituted Financeira Ita CBD S.A. FIC, a company which structures and trades financial
products, services and related items exclusively to CBD customers.

At December 22, 2005, an amendment to the partnership agreement between the Company, Ita and FIC
was signed, and the clauses referring to meeting of performance goals, initially established, were
changed. By such amendment, the meeting of goals and the escrow account are not longer tied, and fines
for noncompliance of the referred performance goals were established.

This partnership is effective for 20 years and may be extended. The operating activities of FIC will be
handled by Ita management.

In the Extraordinary General Meetings held on June 28, September 27 and December 27, 2007, the
shareholders approved the increase of Miravalles capital in the amounts of R$ 86.400, R$ 12.300 and
R$ 21.970, respectively. CBD contributed to the proportion of its interest of 50%. The remaining 50%
were paid by the other shareholder in the same dates.

The financial statements of Miravalles for the years ended December 31, 2007 and 2006, were audited by
other independent auditors. In the year ended at December 31, 2007, total investments and negative
equity pickup of operations of said investee represented 0.9% and (13.7)%, respectively, when compared
to Companys consolidated financial statements (0.7% and (61.9)% of total assets and net income in the
year ended at December 31, 2006, respectively).

The summarized financial information of Miravalles at December 31, 2007, 2006 and 2005, and for the
three years then ended are as follows:

F 30
 COMPANHIA BRASILEIRA DE DISTRIBUIO

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007, 2006 and 2005
(expressed in thousands of reais, unless otherwise indicated)

9. Investments (Continued)

e) Investment agreement CBD and Ita (Continued)

2007 2006 2005

Operating results:
Revenues 145,061 88,716 55,797
Operating losses (84,975) (158,732) (46,795)
Non-operating losses (316) (87) (15)
Net losses (57,817) (105,902) (32,473)

Current assets 1,340,027 803,526 648,681

Non-current assets 127,436 183,903 59,557
Total assets 1,467,463 987,429 708,238

Current liabilities 1,197,165 785,459 574,094

Non-current liabilities 48,936 43,468 10,139
Shareholders' equity 221,362 158,502 124,005
Total liabilities and shareholders' equity 1,467,463 987,429 708,238

f) Merger of Investments

The Extraordinary General Meeting held on July 5, 2007 approved the merger of the companies Auto
Posto Sigua Ltda., Auto Posto MFP Ltda., Loureno Supermercados Ltda., Obla Participaes Ltda.,
Nova Saper Participaes Ltda., and Versalhes Comrcio de Produtos Eletrnicos Ltda. The net assets of
those companies on the date of merger are listed below:

Sigua MFP Loureno Obla Nova Saper Versalhes

Assets
Current assets 346 586 1,137 18 - 52,270
Noncurrent assets - - - - - -
Property and equipment 89 630 450 153 101 -
Investments - - - - - -
Total assets 435 1,216 1,587 171 101 52,270

Liabilities
Current liabilities 469 629 272 - - 52,652
Noncurrent liabilities - - - - - -
Total liabilities 469 629 272 - - 52,652

Net assets (liabilities) 34 (587) (1,315) (171) (101) 382

At October 10, 2007, pursuant to the protocol of justification and merger, the Messina Empreendimentos
e Participaes Ltda. was merged into S Supermercados Ltda. by its book value. According to the
appraisal report, the merged net assets book value is R$ 13,357. All these mergers were recorded at
historical cost.

F 31
 COMPANHIA BRASILEIRA DE DISTRIBUIO

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007, 2006 and 2005
(expressed in thousands of reais, unless otherwise indicated)

10. Property and Equipment

Annual depreciation rates 2007 2006

Weighted Acumulated
Nominal average Cost depreciation Net Net

Land 706,916 - 706,916 594,585

Buildings 3.33 3.33 2,270,996 (454,178) 1,816,818 1,728,252
Leasehold improvements * 6.70 2,008,241 (781,179) 1,227,062 1,114,130
Equipment 10 to 33 13.10 1,172,235 (677,224) 495,011 442,879
Installations 20 to 25 20.00 569,713 (430,659) 139,054 137,394
Furniture and fixtures 10.00 10.00 312,399 (130,198) 182,201 163,101
Vehicles 20.00 20.00 25,815 (15,008) 10,807 7,957
Construction in progress - - 163,040 - 163,040 37,115
Other 10.00 10.00 100,001 (20,731) 79,270 15,627

7,329,356 (2,509,177) 4,820,179 4,241,040

Annual average depreciation rate % 5.64 5.92

* Leasehold improvements are depreciated based on the lower of the estimated useful life of the asset or the lease
term of agreements, whichever is shorter.

On October 3, 2005, the Company sold 60 properties (28 Extra hypermarkets and 32 Po de Acar
supermarkets), to the Pennsula Fund by the net book value of R$ 1,017,575. The Company received
R$ 1,029,000 and recognized a gain of R$ 11,425 as non-operating income. The sold properties were
leased back to the Company for a twenty-year period, and may be renewed for two further consecutive
periods of 10 years each. As a result of this sale, the Company paid R$ 25,517, on the inception date of
the store lease agreement, as an initial fee for entering into a long term contract. The initial fee was
recorded in deferred charges and is being amortized through the lease agreement of the related stores.

a) Additions to property and equipment

2007 2006

Additions 935,960 806,564

Capitalized interest 44,666 50,632

980,626 857,196

Additions made by the Company relate to purchases of operating assets, acquisition of land and buildings
to expand activities, construction of new stores, modernization of existing warehouses, improvements of
various stores and investment in equipment and information technology.

F 32
 COMPANHIA BRASILEIRA DE DISTRIBUIO

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007, 2006 and 2005
(expressed in thousands of reais, unless otherwise indicated)

11. Intangible Assets

Balance at December 31, 2005 1,083,501

Additions 3,687
Amortization (172,308)
Provision for goodwill reduction (i) (268,886)
Write-off (15,049)
Balance at December 31, 2006 630,945

Additions 198,598
Transfer from property and equipment 7,765
Transfer to investments (9,551)
Amortization (152,905)
Balance at December 31, 2007 674,852

For merged subsidiaries and for consolidation purposes, the goodwill arising from acquisitions are
reclassified from investments to intangible assets. The amortization is recorded based on expected future
earnings limited to 10 years.

(i) Provision for goodwill reduction Sendas Distribuidora S.A.

The Company reviewed the economic and financial assumptions sustaining the future realization of
goodwill of its subsidiary Sendas Distribuidora. Based on this review, the Company determined the need
for a provision for partial reduction of goodwill, the net effect of which was R$ 268,886, recorded as
non-operating expenses at December 31, 2006.

12. Deferred Charges

At January 1, 2006 61,691

Additions 28,640
Transfer to property and equipment (2,902)
Amortization (11,148)
At December 31, 2006 76,281

Additions 16,503
Transfer to property and equipment (2,843)
Amortization (12,764)
At December 31, 2007 77,177

Capitalized expenses related to consulting fees incurred during the development and implementation of
strategic projects, such as:

Categories management;
Maximum efficiency in supermarket stores;
Implementation of CSC Shared Service Center;
Implementation of procurement center of materials and indirect services.

F 33
 COMPANHIA BRASILEIRA DE DISTRIBUIO

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007, 2006 and 2005
(expressed in thousands of reais, unless otherwise indicated)

12. Deferred Charges (Continued)

The pre-operational expenditures are also represented by costs incurred in the development of new
products by means of creation of Brand TAEQ, which aims at serving the well-being segment and a
new business model convenience retail or neighborhood supermarket Extra Fcil. The projects already
concluded are being amortized for a minimum term of 5 years.

13. Loans and Financing

Annual financial charges 2007 2006

Current
In local currency
BNDES (ii) TJLP + 1 to 4.1% 98,032 89,571

Working capital (i) TJLP + 1.7% 6,443 7,542

Working capital (i) Weighted average rate of 103.9% of CDI

(104% in 2006) 30,388 22,752

PAFIDC Quotas (iii) Senior A - 105% of CDI 556,776

Senior B - 101% of CDI 133,682 71,100
Senior C - 100% of CDI + 0.5% pa. 133,344

Leasing CDI rate + 0.14% pa. 6,553 -

In foreign currency - with swap for Brazilian reais

BNDES (ii) exchange variation + 4.1% pa. 7,926 15,069

Working capital (i) Weighted average rate 103.5%

of CDI (103.4% in 2006) 451,598 651,231

Imports US dollar exchange variation 14,287 14,056

1,439,029 871,321
Non-current
In local currency
BNDES (ii) TJLP + 1 to 4.1% 201,514 113,524

Working capital (i) TJLP + 1.7% - 6,401

PAFIDC Quotas (iii) Senior A - 105.0% of CDI - 495,131

Senior B - 101.0% of CDI - 167,893

Leasing CDI rate + 0.14% pa. 13,020 -

In foreign currency - with swap for Brazilian reais

BNDES (ii) exchange variation + 4.1% 8,513 19,672

Working capital (i) Weighted average rate 102.2%

of CDI (103.9% in 2006) 696,247 579,531
919,294 1,382,152

F 34
 COMPANHIA BRASILEIRA DE DISTRIBUIO

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007, 2006 and 2005
(expressed in thousands of reais, unless otherwise indicated)

13. Loans and Financing (Continued)

The Company uses swaps to switch obligations from fixed interest rate in U.S. dollar to Brazilian real
related to CDI (floating) interest rate. The Company entered, contemporaneously with the same
counterparty, into cross-currency interest rate swaps and has treated the instruments on a combined basis
as though the loans were originally denominated in reais and accrued interest at floating rates.

The annualized CDI benchmark rate at December 31, 2007 was 11.8% (15.0% at December 31, 2006).

(i) Working capital financing

This financing is obtained from local banks and partly used to fund customer receivables (the amounts
not securitized with PAFIDC), and to finance CBDs growth. These arrangements do not have collateral,
but are guaranteed by CBD in case of Sendas Distribuidora.

(ii) BNDES credit line

The line of credit agreements, denominated in reais, obtained from the Brazilian National Bank for
Economic and Social Development (BNDES), are either subject to the indexation based on TJLP rate
(long-term rate), plus annual interest rates, or are based on various foreign currencies to reflect the
BNDES funding portfolio, plus annual interest rates. Amounts are due in monthly installments after a
grace period, as mentioned below.

The Company cannot offer any assets as collateral for loans to other parties without the prior
authorization of BNDES and is required to comply with certain debt covenants, calculated on the
consolidated balance sheet, in accordance with Brazilian GAAP, including: (i) maintenance of a
capitalization ratio (shareholders' equity/total assets) equal to or in excess of 0.40 and (ii) maintenance of
a current ratio (current assets/current liabilities) equal to or in excess of 1.05. Management effectively
controls and monitors the covenants. The Company was in compliance with such covenants as of
December 31, 2007. CBD guarantees the debts of all subsidiaries.

At December 31
Grace in Number of
period in monthly
Contract date Annual financial charges months installments Maturity 2007 2006

January 13, 2000 TJLP + 3.5% 12 72 January 2007 - 885

November 10, 2000 TJLP + 1 to 3.5% 20 60 May 2007 - 18,849
November 10, 2000 Basket of currencies + 3.5% 20 60 July 2007 - 4,154
November 14, 2000 TJLP + 2.0% 20 60 June 2007 - 1,358
March 12, 2002 Basket of currencies + 3.5% 12 48 March 2007 - 161
April 25, 2002 TJLP + 3.5% 6 60 October 2007 - 8,521
April 25, 2002 Basket of currencies + 3.5% 6 60 October 2007 - 1,179
November 11, 2003 Basket of currencies + 4.125% 14 60 January 2010 16,438 29,246
November 11, 2003 TJLP + 4.125% 12 60 November 2009 107,845 163,604
November 11, 2003 TJLP + 1.0% 12 60 November 2009 6,513 9,879
May 05, 2007 TJLP + 3.2% 6 60 November 2012 161,813 -
May 05, 2007 TJLP + 2.7% 6 60 November 2012 23,376 -
315,985 237,836

F 35
 COMPANHIA BRASILEIRA DE DISTRIBUIO

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007, 2006 and 2005
(expressed in thousands of reais, unless otherwise indicated)

13. Loans and Financing (Continued)

(ii) BNDES credit line (Continued)

In the event the TJLP exceeds 6% per annum, the excess is added to the principal. In 2007 and 2006,
R$ 636 and R$ 4,732, respectively, were added to the principal.

(iii) Redeemable PAFIDC quotas of interest

As per Official Memorandum CVM/SNC/SEP 01/2006, the Company reclassified the amounts under the
caption Redeemable PAFIDC quotas of interest, due to their characteristics, to the Loans and
financing group of accounts (Note 7).

Characteristics of the PAFIDC quotas of interest:

Types of quotas Number Yield Redemption date

Senior A 5,826 105% of CDI 05/26/2008
Senior B 4,300 101% of CDI 05/26/2008
Senior C 130 101% of CDI + 0.5% p.a. 05/26/2008

(iv) Maturities long-term

2009 109,106
2010 411,298
2011 364,480
2012 34,410
919,294

14. Debentures

a) Breakdown of outstanding debentures:

Anual financial
Type Outstanding Securities charges 2007 2006

5th issue - 1st series Floating - CDI + 0.95% - 414,761

6th issue - 1st series No preference 54,000 CDI + 0.5% 559,268 -
6th issue - 2nd series No preference 23,965 CDI + 0.5% 248,201 -
6th issue - 1st ans 2nd series Interest swap - 104.96% of CDI 62 -
Total 807,531 414,761

Noncurrent liabilities (779,650) -

Current liabilities 27,881 414,761

F 36
 COMPANHIA BRASILEIRA DE DISTRIBUIO

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007, 2006 and 2005
(expressed in thousands of reais, unless otherwise indicated)

14. Debentures (Continued)

b) Debenture transactions:

Number of
debentures Value

At December 31, 2005 40.149 419.469

Interest paid - (67.219)

Interest accrued - 62.511

At December 31, 2006 40.149 414.761

Amortization of principal - 5th issue (40.149) (401.490)

6th issuance 77.965 779.650
Interest paid - (89.313)
Interest accrued - 103.923

At December 31, 2007 77.965 807.531

c) Additional information

Sixth issue on March 1st, 2007, the shareholders approved the issuance and public placement of
R$ 779,650 of 77,965 non-convertible debentures. The Company received proceeds of R$ 551,518, for
54,000 debentures issued from the first series, and R$ 245,263 of 23,965 debentures (with discount of
0.24032%), issued from the second series. From the total proceeds obtained from second series,
R$ 242,721 were used to amortize 23,965 debentures of the fifth issuance and part of the interest. The
debentures are indexed to the average rate of CDI and bear annual spread of 0.5%, payable every six
months, starting on September 1st, 2007 and finishing on March 1st, 2013. The debentures principal
amortization will take place on March 1, 2011, March 1, 2012 and March 1, 2013, amounting to 25,988
debentures for each year. The debentures will not be subject to renegotiation until maturity at March 1,
2013. The Company is in compliance with debt covenants provided for in the 6th issuance, calculated
based on the consolidated balance sheet, in accordance with the accounting practices adopted in Brazil: (i)
net debt (debt less cash and cash equivalents and accounts receivable) not higher than the balance of
shareholders equity; (ii) maintenance of a ratio between net debt and EBITDA, lower or equal to 3.25.

F 37
 COMPANHIA BRASILEIRA DE DISTRIBUIO

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007, 2006 and 2005
(expressed in thousands of reais, unless otherwise indicated)

15. Taxes and Social Contribution Payable

These are composed of the following:

2007 2006
Current
Taxes paid in installments 60,443 52,553
Pis and Cofins payable 25,031 6,583
Provision for income tax and social contribution 16,944 9,539
102,418 68,675
Non-current
Taxes paid in installments 250,837 261,101

353,255 329,776

The Company filed application for the Special Tax Payment Installments Program (PAES), pursuant to
Law 10,680/2003. These installment payments are subject to the Long-Term Interest Rate TJLP and
may be payable in up to 120 months. From the total amount of R$ 311,280, R$ 33,258 are under review
by tax authorities.

The amounts payable in installments were as follows:

2007 2006
Current
I.N.S.S. (Social security tax) 37,561 35,799
CPMF 12,035 16,225
VAT and others 10,847 529
60,443 52,553
Noncurrent
I.N.S.S. (Social security tax) 169,115 196,895
CPMF 54,159 59,575
VAT and others 27,563 4,631
250,837 261,101

16. Provision for Contingencies

Provision for contingencies is estimated by management, supported by its legal counsel. Such provision
was accrued in an amount considered sufficient to cover losses considered probable and is disclosed
below net of judicial deposits:

F 38
 COMPANHIA BRASILEIRA DE DISTRIBUIO

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007, 2006 and 2005
(expressed in thousands of reais, unless otherwise indicated)

16. Provision for Contingencies (Continued)

COFINS e
PIS Others Labor Civel and Other Total

Balances as of December 31, 2005 921,963 9,013 44,567 101,368 1,076,911

Additions 19,577 34,850 15,766 23,818 94,011
Reversal/Payments (9,862) (23,765) (26,367) (6,373) (66,367)
Monetary restatement 79,642 4,482 8,742 12,042 104,908
Judicial deposits - - (36,715) (35,121) (71,836)
Balances as of December 31, 2006 1,011,320 24,580 5,993 95,734 1,137,627

Additions 26,250 2,570 19,462 22,821 71,103

Reversal/Payments (6,886) - (18,087) (21,264) (46,237)
Monetary restatement 55,497 2,389 6,083 11,517 75,486
Judicial deposits - - (11,050) (10,740) (21,790)
Balances as of December 31, 2007 1,086,181 29,539 2,401 98,068 1,216,189

a) Taxes

Tax-related contingencies are indexed to the SELIC Central Bank Overnight Rate, which presented a
cumulative rate of 11.25% for the year ended December 31, 2007 (14.13% in 2006), and are subject,
when applicable, to fines. In all cases, both interest charges and fines, when applicable, have been
computed with respect to unpaid amounts and are fully accrued.

COFINS and PIS

In 1999, the rate for COFINS increased from 2% to 3%, and the tax base of both COFINS and PIS was
extended to encompass other types of income, including financial income. The Company is challenging
the increase in contributions of COFINS and the expansion of the base of such contributions. Provision
for COFINS and PIS includes unpaid amounts, monetarily restated, amounting to R$ 971,004
(R$ 915,313 in 2006) resulting from the lawsuit filed by the Company and its subsidiaries, claiming the
right to not apply Law 9718/98, allowing the Company to pay COFINS under the terms of
Complementary Law 70/91 (2% of revenue) and of PIS under Law 9715/98 (0.65% of revenue) as from
February 1, 1999. The lawsuits are in progress at the Regional Federal Court, and up to this moment, the
Company has not been required to make judicial deposits.

As the calculation system of such contributions started to use the non-cumulative tax principle, starting by
PIS as from December 1, 2002, with the Law 10637/02, and COFINS, as from February 2004 by means
of Law 10833/03, the Company and its subsidiaries then started to apply said rules, as well as to discuss
at court the expansion of the tax base of such contributions, aiming at continuing its application by the
concept of sales revenues, and taking credits not accepted by laws, such as financial expenses and third
parties expenses. The provision recorded in the balance sheet in the amount of R$ 115,177 (R$ 96,007 in
2006), includes the unpaid installment, monetarily restated. In addition, the Company challenges the limit
of percentage for credit of COFINS credit over the opening inventory derived from Law 10833/03. Due to
a judicial authorization, the Company is using such contingent credits and is accruing a provision for
contingencies related to such amounts.

F 39
 COMPANHIA BRASILEIRA DE DISTRIBUIO

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007, 2006 and 2005
(expressed in thousands of reais, unless otherwise indicated)

16. Provision for Contingencies (Continued)

a) Taxes (Continued)

Others

The Company and its subsidiaries have other tax contingencies, which after analysis of its legal counsels,
were deemed as probable losses: a) lawsuit questioning the non-levy of IPI over codfish imports, which
awaits decision by appellate court judge; b) federal administrative assessment about the restatement of
equity accounts by an index higher than that accepted by tax authorities, which awaits decision by
administrative appellate court judge (Summer Plan); c) administrative assessment referring to the
collection of debts of withholding tax (IRRF), social contribution on income (CSLL), which also awaits
decision by administrative appellate court judge; and not clearly d) administrative assessment due to
contingent offsetting of INSS credit made by the Company provided for by law, awaiting for court
verdict; e) tax assessment related to purchase, manufacturing and sale transactions for export purposes of
soybean and its byproducts, in which, in the tax authorities understanding, the circulation of products did
not take place. For these issues, the Company was assessed by federal tax authorities for PIS, COFINS
and income tax. The amount accrued in the financial statements for such issues is R$ 29,539 (R$ 24,580
in 2006). The Company has no judicial deposits related to such issues.

b) Labor claims

The Company is part of numerous lawsuits involving disputes with its former employees, primarily
arising from dismissals in the ordinary course of business. As of December 31, 2007, the Company
recorded a provision of R$ 50,166 (R$ 42,708 in 2006) assessed as probable risk. Lawsuits with possible
unfavorable outcome assessed by our legal counsel are amounted to R$ 7,151 (R$ 9,734 in 2006).
Management, assisted by its legal counsels, evaluates these contingencies and provides for losses where
reasonably estimable, considering historical data regarding the amounts paid. Labor claims are indexed to
the Referential Interest Rate (TR) (2.0% accumulated in the year ended December 31, 2007) plus 1%
monthly interest. The corresponding judicial deposits amounts to R$ 2,401 (R$ 5,993 in 2006).

c) Civil and other

The Company is a defendant, at several judicial levels, in lawsuits of civil natures, among others. The
Companys Management accrues provisions in amounts considered sufficient to cover unfavorable court
decisions when its internal and external legal counsels consider losses to be probable.

Among these lawsuits, we emphasize the following:

The Company is claiming to not pay the contributions provided for by Complementary Law 110/2001
related to the FGTS (Government Severance Indemnity Fund for Employees) financing. The Company
obtained a preliminary injunction recognizing the right to not pay such contributions. Subsequently, this
preliminary injunction was reversed, determining the judicial deposit of unpaid amounts during the
effectiveness period of the preliminary injunction. The enforceability of tax credit is suspended in view of
appeal filed, which awaits decision by the Regional Federal Court. The amount accrued is R$ 46,896
(R$ 43,156 in 2006) and the Company made a judicial deposit in the amount of R$ 8,036 judicial
deposit, protecting the period in which it was not covered by the preliminary injunction.

F 40
 COMPANHIA BRASILEIRA DE DISTRIBUIO

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007, 2006 and 2005
(expressed in thousands of reais, unless otherwise indicated)

16. Provision for Contingencies (Continued)

c) Civil and other (Continued)

The Company is claming to not pay the contribution to SEBRAE, as enacted by Law 8,029/90, and is
asking to offset the amounts paid with balances payable to SESC (Social Service for Trade) and SENAC
(National Service for Commercial Training), excluding the 30% limit. The Company was granted the
right to not pay the SEBRAE contributions, provided that judicial deposits are made, as usual. The
proceeding awaits a decision of the extraordinary appeal. The accrued amount is R$ 37,511 (R$ 31,122 in
2006), and the Company has judicial deposit in the amount of R$ 37,328 (R$ 30,825 in 2006).

The Company is challenging the constitutionality of the FUNRURAL (Rural Workers Assistance Fund)
for companies located in urban areas. The lawsuit is in progress at the Regional Federal Court and the
amount of the provision is R$ 33,141 (R$ 30,516 in 2006). There is no judicial deposit for such
proceeding.

The Company files and answers various lawsuits in which it requests the review of lease amounts paid by
the stores. In these lawsuits, the judge determines a provisional lease amount, which then is paid by the
stores, until a report and a decision define the final lease amount. The accrued provision is the difference
between the amount originally paid by the stores and that defined provisionally in these lawsuits. At
December 31, 2007 the accrual amount for these lawsuits is R$ 11,955 (R$ 11,507 in 2006), for which
there are no judicial deposits.

d) Possible losses

The Company has other contingencies which have been analyzed by the legal counsel and deemed as
possible but not probable; therefore, have not been accrued, at December 31, 2007, as follows:

INSS (Social Security Tax) The Company was assessed regarding the non-levy of payroll
charges on benefits granted to its employees, and the loss, considered possible, amounts to
R$ 116,462 (R$ 106,117 in 2006). These proceedings are under administrative discussion.
Income tax, withholding tax and CSL The Company was assessed regarding the taxes
mentioned, with varied subject-matters, such as offsetting proceedings, undeductible provisions,
all of them awaiting decision in the administrative level the amount of which corresponds to
R$ 69,309 (R$ 49,695 in 2006).
COFINS, PIS and CPMF The Company was assessed with respect to the taxes mentioned with
varied subject-matters, such as offsetting Finsocial, tax payment discrepancies, in addition to PIS
and COFINS assessment of soybean operations, previously mentioned. The amount involved in
these assessments is R$ 243,637 (R$ 212,996 in 2006) and await administrative decision.
ICMS The Company was assessed by state tax authorities regarding the appropriation of
energy credits, acquisitions from suppliers considered to be disreputable, refund of tax
replacement without due compliance of ancillary obligations brought by CAT Ordinance 17 of
the State of So Paulo, among others. At the end of 2007, the Company was assessed by the
State of So Paulo, amounting to nearly R$ 557,764, of which approximately R$ 425,000 were
evaluated by the management and legal counsels as possible losses. The total amount of these
assessments amounts to R$ 878,062 (R$ 330,894 in 2006), which await a final decision in the
administrative and court levels

F 41
 COMPANHIA BRASILEIRA DE DISTRIBUIO

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007, 2006 and 2005
(expressed in thousands of reais, unless otherwise indicated)

16. Provision for Contingencies (Continued)

d) Possible losses (Continued)

Service Tax (ISS), Municipal Real Estate Tax (IPTU), Property Transfer Tax (ITBI) and
other these are related to assessments on third parties retention, tax payment discrepancies,
fines due to non-compliance of ancillary obligations and sundry taxes, the amount of which is
R$ 17,891 and await administrative and court decisions. In 2006, these amounts were classified
as remote losses by the legal counsels.
Other contingencies They are related to administrative lawsuits and lawsuits under the civil
court scope, special civil court, Consumer Protection Agency PROCON (in many states),
Weight and Measure Institute IPEM, National Institute of Metrology, Standardization and
Industrial Quality INMETRO and National Health Surveillance Agency ANVISA, in great
majority related to suits for damages, amounting to R$ 45,139 (R$ 52,404 in 2006).

The outcome in the lawsuits above may change the likelihood of loss and may require additional
provisions for contingencies to be recorded.

e) Appeal and judicial deposits (Restricted deposits escrow)

The Company is challenging the payment of certain taxes, contributions and labor-related obligations and
has made court escrow deposits (restricted deposits) of equivalent amounts pending final legal decisions,
in addition to collateral deposits related to provisions for judicial suits.

f) Guarantees

The Company has granted collaterals to some lawsuits of civil, labor and tax nature, as shown below:

Lawsuits Real Estate Equipment Guarantee Total

Tax 511,920 2,198 206,202 720,320

Labor 5,846 3,631 53,589 63,066
Civil and other 11,003 796 17,070 28,869

Total 528,769 6,625 276,861 812,255

g) Tax audits

In accordance with current legislation in Brazil, federal, state and municipal taxes and payroll charges are
subject to audit by the related authorities, for periods that vary between 5 and 30 years.

F 42
 COMPANHIA BRASILEIRA DE DISTRIBUIO

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007, 2006 and 2005
(expressed in thousands of reais, unless otherwise indicated)

17. Income and Social Contribution Taxes

a) Income and social contribution tax reconciliation

2007 2006 2005

Income (loss) before income taxes 226,145 (258,555) 260,253

Employee's profit sharing (13,399) (13,421) (14,453)
Income (loss) before adjusted income and social
contribution taxes 212,746 (271,976) 245,800

Income and social contribution taxes at nominal rate (64,917) 89,752 (71,282)

Income tax incentive 1,081 3,562 3,076

Partial reversal of provision for
realization of deferred income tax, net 55,000 - -
Equity pickup and provision for capital
deficiency of subsidiary (9,834) (18,085) (5,269)
Unrealized capital gains - 78,961 -
Valuation allowance of deferred income tax assets - (161,196) -
Other permanent adjustments and social
contribution rates, net 7,266 5,534 20,481
Effective income tax (11,404) (1,472) (52,994)

Income tax for the year

Current (49,720) (92,200) (133,861)
Deferred 38,316 90,728 80,867

Income tax and social contribution expenses (11,404) (1,472) (52,994)

Effective rate 5.0 0.6 (21.6)

F 43
 COMPANHIA BRASILEIRA DE DISTRIBUIO

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007, 2006 and 2005
(expressed in thousands of reais, unless otherwise indicated)

17. Income and Social Contribution Taxes (Continued)

b) Breakdown of deferred income and social contribution taxes

2007 2006 2005

Deferred income and social contribution tax assets

Tax loss carryforwards (i) 314,878 298,332 251,307
Provision for contingencies 66,673 65,294 50,131
Provision for interest rate swaps (calculated by cash
basis under Tax Law). 59,975 80,188 42,329
Allowance for doubtful accounts 3,088 13,490 5,944
Goodwill in non-merged companies 74,762 79,433 84,360
Goodwill in merged company (iii) 517,294 517,294 -
Provision for goodwill reduction (Note 11)(i) 139,522 161,196 -
Deferred gain on dilution of investment - 1,518 17,425
Others 22,998 20,803 16,833

1,199,190 1,237,548 468,329

Valuation allowance (i) (84,522) (161,196) -

Total deferred income and social contribution assets taxes, net 1,114,668 1,076,352 468,329

Current assets 88,128 238,676 84,745

Non-current assets 1,026,540 837,676 383,584

Total deferred income and social contribution assets taxes 1,114,668 1,076,352 468,329

(i) At December 31, 2007, in compliance with CVM Ruling 371, the Company and its
subsidiaries recorded deferred income and social contribution taxes arising from tax loss
carryforwards and temporary differences in the amount of R$ 1,114,668 (R$ 1,076,352 in
2006).

Deferred tax assets and liabilities are classified as current or non-current based on the classification
of the asset or liability underlying the temporary difference.

Recognition of deferred income and social contribution tax assets refer to tax loss carryforwards,
acquired from S, and those generated by the subsidiary Sendas Distribuidora, realization of which,
following restructuring measures and after deducting the valuation allowance was considered
probable.

(ii) In 2007, Sendas Distribuidora recorded deferred income and social contribution taxes benefit in the
amount of R$ 91,469, originated from tax loss carryforward and decrease of the provision for
goodwill reduction in 2007, for which management prepared projections and believes that such assets
are realizable.

(iii) On December 20, 2006, the Extraordinary General Meeting of Shareholders of CBD approved the
merger of Vieri into the Company.

F 44
 COMPANHIA BRASILEIRA DE DISTRIBUIO

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007, 2006 and 2005
(expressed in thousands of reais, unless otherwise indicated)

17. Income and Social Contribution Taxes (Continued)

b) Breakdown of deferred income and social contribution taxes (Continued)

The goodwill special reserve accrued by the Company, as a result of such merger, as provided for by
provision in paragraph 1 of article 6 of the CVM Ruling 319/99, will be written-off against retained
earnings at the end of each fiscal year to the extent in which the tax benefit is related to the deductibility
of goodwill amortization, and it represents an effective decrease of taxes payable by the Company.

In order to provide a better presentation of the financial statements, the goodwill merged, net of the
provision, in the amount of R$ 515,488 representing the tax benefit, plus the amount of R$ 1,806, were
reclassified in 2006 to deferred income tax line as of December 31, 2007 and 2006. (See more details on
note 1 c).

The Company prepares annual studies of scenarios and generation of future taxable income, which are
approved by management and by the Board of Directors, which supports the realization of this tax asset.

Based on such studies, the Company estimates that the recovery of tax credits will occur until ten years,
as follows:

2008 88,128
2009 130,217
2010 190,754
2011 194,744
2012 to 2017 510,825
1,114,668

18. Shareholders Equity

a) Share capital

(i) Authorized capital comprises 400,000 (in thousand of shares) approved at the Extraordinary General
Meeting held on November 26, 2007. Fully subscribed and paid-up capital is comprised at December
31, 2007 of 227,920 thousand (113,771,378 in 2006) registered shares with no par value, of which
99,680 shares are common (49,839,926 in 2006) and 128,240 preferred shares (63,931,453 in
thousands in 2006).

(ii) The Extraordinary General Meeting held on July 30, 2007 approved the conversion of
113,885,493,433 non-par shares, of which 49,839,925,688 are common shares and 64,045,567,745
are preferred shares, representing the Companys capital stock, at the ratio of five hundred (500)
existing shares for one (1) share of same type, and the Companys capital stock now is represented by
227,770,986 non-par shares, of which 99,679,851 are common shares and 128,091,135 are preferred
shares. The number of shares and paid-in capital are already present in this note considering such
conversion.

F 45
 COMPANHIA BRASILEIRA DE DISTRIBUIO

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007, 2006 and 2005
(expressed in thousands of reais, unless otherwise indicated)

18. Shareholders Equity (Continued)

a) Share capital (Continued)

Breakdown of paid-in capital and share volume:

Number of shares - in thousands

Share capital Preferred shares Common shares

At December 31, 2005 3,680,240 127,656 99,680

Capitalization of profit reserves 267,177 - -

Stock option exercise
Series VII 7,120 203 -
Series IX 92 4 -
At December 31, 2006 3,954,629 127,863 99,680

Capitalization of profit reserves 167,542 - -

Capitalization of profit reserves 18,616 - -
Stock option exercise
Series VII 26 1 -
Series VIII 6,173 214 -
Series A1 Silver 2,872 117 -
Series A1 Gold - 45 -
At December 31, 2007 4,149,858 128,240 99,680

At the Board of Directors Meetings held at May 15, July 10, November 28 and December 17, 2007, the
pai-in capital increase with the exercise and payment of shares in the Stock Option Plan were approved as
follows:

F 46
 COMPANHIA BRASILEIRA DE DISTRIBUIO

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007, 2006 and 2005
(expressed in thousands of reais, unless otherwise indicated)

18. Shareholders Equity (Continued)

a) Share capital (Continued)

Number
Meeting Series Unit values Total
(thousand)

April 7, 2006 Serie VI 203 35.07 7,120

May 9, 2006 Serie VII 4 23.00 92
Total 2006 207 7,212

July 10, 2007 Serie VII 0.55 22.95 13

November 28,2007 Serie VII 0.55 23.76 13
May 15, 2007 Serie VIII 194.94 28.89 5,631
July 10, 2007 Serie VIII 18.75 28.90 542
July 10, 2007 Serie A1 Silver 10.56 24.63 260
November 28,2007 Serie A1 Silver 35.67 24.63 879
December 17, 2007 Serie A1 Silver 70.41 24.63 1,733
July 10, 2007 Serie A1 Gold 3.43 0.01 0
November 28,2007 Serie A1 Gold 11.05 0.01 0
December 17, 2007 Serie A1 Gold 30.72 0.01 0
Total 2007 376.63 9,071

b) Share rights

The preferred shares are non-voting and have preference with respect to the distribution of capital in the
event of liquidation. Each shareholder has the right pursuant to the Company's bylaws to receive a
proportional amount, based on their respective holdings to total common and preferred shares
outstanding, of a total dividend of at least 25% of annual net income determined on the basis of financial
statements prepared in accordance with Brazilian GAAP, to the extent profits are distributable, and after
transfers to reserves as required by Brazilian Corporation Law, and a proportional amount of any
additional dividends declared. Since 2003, the preferred shares are entitled to receive a dividend 10%
greater than that paid to common shares.

The Companys Bylaws provide that, to the extent funds are available, minimum non-cumulative
preferred dividend to the preferred shares should be paid in the amount of R$ 0.08 per thousand preferred
shares and dividends to the preferred shares shall be 10% higher than the dividends to common shares up
to or, if determined by the shareholders, in excess of the mandatory distribution.

Management is required by the Brazilian Corporation Law to propose the distribution of dividends at
year-end, at least, up to the amount of mandatory dividend, which can include the interest on
shareholders equity, calculated according to Brazilian tax law, net of tax effects.

F 47
 COMPANHIA BRASILEIRA DE DISTRIBUIO

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007, 2006 and 2005
(expressed in thousands of reais, unless otherwise indicated)

18. Shareholders Equity (Continued)

c) Capital reserve Goodwill special reserve

This reserve was generated by the corporate restructuring process outlined in Note 1 (c), and represents
the amount of future tax benefit to be earned through the amortization of goodwill merged. The special
reserve portion corresponding to the benefit earned may be capitalized at the end of each fiscal year to the
benefit of the controlling shareholders, with the issuance of new shares. The capital increase will be
subject to the preemptive right of non-controlling shareholders, in the proportion of their respective
interest, by type and class, at the time of the issuance, and the amounts paid in the year related to such
right will be directly delivered to the controlling shareholder, pursuant to provision in CVM Ruling
319/99 and CVM 349/01.

At December 31, 2006, the tax benefit recorded derived from the goodwill merged amounted to
R$ 517,294, which will be used in the capital increase, upon the realization of reserve.

d) Revenue reserve

(i) Legal reserve the legal reserve is formed based on appropriations from retained earnings of 5% of
annual net income, before any appropriations, and limited to 20% of the capital.

(ii) Expansion reserve was approved by the shareholders to reserve funds to finance additional capital
investments and working and current capital through the appropriation of up to 100% of the net
income remaining after the legal appropriations and supported by capital budget, approved at
shareholders meeting.

(iii) Retention of earnings the balance at December 31, 2007 is available to the Shareholders General
Meeting for allocation.

e) Dividends proposed

At February 26, 2008, management proposed for resolution of the Annual General Meeting - AGO,
dividends to be distributed, calculated as follows:

Year ended December 31

2007 2006 2005

Net income for the year 210,878 85,524 256,990

Realization of unrealized earning reserve - 4,069
Legal reserve (10,544) (4,276) (12,849)

Dividend calculation basis 200,334 81,248 248,210

Minimum mandatory dividend - 25% 50,084 20,312 62,053

Dividends of R$ 0.20804 per thousand common

shares (2006 R$ 0.16903; 2005 R$ 0.51689) 20,737 8,425 25,762
Dividends of R$ 0.22884 per thousand preferred
shares (2006 R$ 0.18594; 2005 R$ 0.56857) 29,347 11,887 36,291

F 48
 COMPANHIA BRASILEIRA DE DISTRIBUIO

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007, 2006 and 2005
(expressed in thousands of reais, unless otherwise indicated)

18. Shareholders Equity (Continued)

f) Employees profit sharing plan

As provided for by the Companys bylaws, the Companys Board of Directors approved in a meeting held
on December 6, 2007, the distribution of the amount of R$ 13,399 (R$ 13,421, R$ 14,453 at December
31, 2006 and 2005).

g) Preferred stock option plan

(i) 1st Stock Option Plan

The Company offers a stock option plan for the purchase of preferred shares to management and
employees. The shares issued under the Plan afford the beneficiaries the same rights granted to the
Company other shareholders. The management of this plan was attributed to a committee designated by
the Board of Directors.

The strike price for each lot of options is at least 60% of the weighted average price of the preferred
shares traded in the week the option is granted.

The options vest in the following manner and terms: (i) 50% in the last month of the third year following
the grant date (1st tranche) and (ii) up to 50% in the last month of the fifth year following the grant date
(2nd tranche). The remaining portion of this second tranche is subject to restriction on sale until the
beneficiarys retirement, as per formula defined in the plan which calculates the amount that will remain
restricted.

The option strike price from the grant date to the exercise date is updated by the General Market Price
Index - IGP-M variation, less dividends attributed for the period.

Pursuant to Clause 14.5 of the Plan, the application of the formula above shall be adjusted considering the
reverse split of shares representing CBD paid-in capital, approved at the Extraordinary General Meeting
held on July 30, 2007.

(ii) 2nd Stock Option Plan

The Extraordinary General Meeting held on December 20, 2006 approved the amendment to the
Companys Stock Option Plan, approved by the Extraordinary General Meeting held at April 28, 1997.

As from 2007, option issued to management and employees under the preferred stock option plan will
have the following conditions:

Shares will be classified into two groups: Silver and Gold, and the quantity of Gold-type shares may be
decreased and/or increased, at discretion of the Plan Management Committee based on Company
performance, during the 36 months following the granting date.

The exercise price for each Silver-type thousand shares will correspond to the average of closing price of
negotiations of the Companys preferred shares occurred over the last 20 trading sessions of BOVESPA,
prior to the date on which the Committee approves the grant of option, with discount of 20%. The price
per each Gold-type thousand shares will correspond to R$ 0.01.

F 49
 COMPANHIA BRASILEIRA DE DISTRIBUIO

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007, 2006 and 2005
(expressed in thousands of reais, unless otherwise indicated)

18. Shareholders Equity (Continued)

g) Preferred stock option plan (Continued)

(ii) 2nd Stock Option Plan (Continued)

The option will vest at the end of the 36th month from the grant date, and expire after the 48th month. The
grant date is defined as the date of the adhesion agreement of respective series. For the gold series, the
Committee is allowed to anticipate the exercise and modify the number of shares granted at its discretion.

The option issued under the previous plan, remain outstanding until the respective maturity dates.

(i) Information on the stock option plans is summarized below:

Breackdown of Series Granted

Price Number of shares (per thousand)

2nd date of Balance of

1st date of exercise and On the End of Amount of Non-exercised options in
Series granted Grant date exercise expiration granting date period shares granted Exercised by dismissal Expired force

Balance at December 31, 2006

Serie VI 03/15/2002 03/15/2005 03/15/2007 23.50 35.92 825 (203) (367) - 255
Serie VII 03/16/2003 03/16/2006 03/16/2008 20.00 22.68 1,000 (295) (246) - 459
Serie VIII 04/30/2004 04/30/2007 04/30/2009 26.00 28.55 862 - (260) - 602
Serie IX 05/15/2005 05/15/2008 05/15/2010 26.00 26.08 989 - (231) - 758
Serie X 06/07/2006 06/07/2009 06/07/2011 33.00 33.78 901 - (34) - 867
4,577 (498) (1,138) - 2,941

Balance at December 31, 2007

Srie VI 03/15/2002 03/15/2005 03/15/2007 23.50 35.92 825 (203) (367) (255) -
Srie VII 03/16/2006 03/16/2006 03/16/2008 20.00 24.34 1,000 (297) (318) - 385
Srie VIII 04/30/2004 04/30/2007 04/30/2009 13.00 30.67 862 (214) (373) - 275
Srie IX 05/15/2005 05/15/2008 05/15/2010 13.00 27.99 989 - (407) - 582
Srie X 06/07/2006 06/07/2009 06/07/2011 16.50 36.30 901 - (210) - 691
Srie A1 - Gold 04/13/2007 04/30/2010 04/29/2011 0.01 0.01 324 (45) (5) - 274
Srie A1 - Silver 04/13/2007 04/30/2010 04/29/2011 24.63 24.63 1,122 (117) (49) - 956
6,023 (876) (1,729) (255) 3,163

The amount of shares at December 31, 2007 and 2006 is already presented considering the reverse split.
In the table above, the end of period strike price includes the effect of inflation for all series except the
Gold and Silver which are not subject to inflation adjustment.

F 50
 COMPANHIA BRASILEIRA DE DISTRIBUIO

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007, 2006 and 2005
(expressed in thousands of reais, unless otherwise indicated)

18. Shareholders Equity (Continued)

g) Preferred stock option plan (Continued)

(ii) 2nd Stock Option Plan (Continued)

Series Exercised
Market price
Total per
Granting Date of Amount Exercise price of the shares
Series granted thousand
date exercise exercised (R$) on the exercise
(R$)
date(R$)

At December 31, 2006

Serie VII 03/16/2003 12/13/2005 291 22.12 6,445 37.43
Serie VI 03/15/2002 04/07/2006 203 35.11 7,120 44.54
Serie VII 03/16/2003 06/09/2006 4 22.12 92 33.33
498 13,657

At December 31, 2007

Srie VI 03/15/2002 04/07/2006 203 35.11 7,120 44.54
Srie VII 03/16/2003 12/13/2005 291 22.12 6,445 37.43
Srie VII 03/16/2003 06/09/2006 4 22.12 91 33.33
Srie VII 03/16/2003 07/10/2007 1 22.95 13 37.15
Srie VII 03/16/2003 11/28/2007 1 23.76 13 28.56
Srie VIII 04/30/2004 05/15/2007 195 28.89 5,631 31.60
Srie VIII 04/30/2004 07/10/2007 19 28.90 542 37.15
Srie A1 Silver 04/13/2007 07/10/2007 11 24.63 260 37.15
Srie A1 Silver 04/13/2007 11/28/2007 36 24.63 878 28.56
Srie A1 Silver 04/13/2007 12/17/2007 70 24.63 1,734 33.26
Srie A1 Gold 04/13/2007 07/10/2007 3 0.01 0 37.15
Srie A1 Gold 04/13/2007 11/28/2007 11 0.01 0 28.56
Srie A1 Gold 04/13/2007 12/17/2007 31 0.01 0 33.26
876 22,727

The amount of shares at December 31,2006 is already presented considering the reverse split.

Gold series may be exercised before they are vested in case of approval by the Plans Management
Committee. In case of dismissal the vest will be immediate for both series gold and silver series.

(iii) Other information related to the stock option plans

At March 15, 2007, series VI was expired.

At February 23, 2006, series V was expired, without any exercise.

At March 31, 2005 series IV was expired, without any exercise.

At March 31, 2004 series III was exercised, shares were issued and the series were expired.

Series I and II were expired in 2001 and 2002, respectively.

At December 31, 2007, the Companys preferred share price on BOVESPA was R$ 34.11 per share.

F 51
 COMPANHIA BRASILEIRA DE DISTRIBUIO

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007, 2006 and 2005
(expressed in thousands of reais, unless otherwise indicated)

18. Shareholders Equity (Continued)

g) Preferred stock option plan (Continued)

(iii) Other information related to the stock option plans (Continued)

The table below shows the maximum percentage of interest dilution to which current shareholders
eventually will be subject to in the event of exercise up to 2011 of all options granted:

2007 2006
Number of shares 227,920 227,543
Balance of series granted outstanding 3,163 2,941
Maximum dilution percentage 1.39% 1.29%

The table below shows the effects on net income if the Company had recognized the expense related to
the granting of stock option, applying the market value method, as required by Official Memorandum
CVM/SNC/SEP N 01/2006 paragraph 25.9:

2007 2006
Shareholders' Net Shareholders'
Net income
equity income equity
At December 31 210,878 5,011,992 85,524 4,842,127
Expenses related to share-based
compensation to employees
determined according to
market value method (3,492) (1,936) (9,744) (5,238)
At December 31 (pro-forma) 207,386 5,010,056 75,780 4,836,889

The market value of each option granted is estimated on the granting date, by using the options pricing
model Black-Scholes considering: expectation of dividends in the average of 0.52% at December 31,
2007 (1.42% in 2006), expectation of volatility of nearly 35.25% at December 31, 2007 (37.2% in 2006),
risk free weighted average interest rate of 11.95% at December 31, 2007 (6.62% in 2006) and expectation
of average life of series VII and VIII is four years, whereas for series A1, the expectation is 3.5 years.

F 52
 COMPANHIA BRASILEIRA DE DISTRIBUIO

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007, 2006 and 2005
(expressed in thousands of reais, unless otherwise indicated)

19. Net Financial Income

2007 2006 2005

Financial expenses
Financial charges - BNDES (25,343) (41,935) (39,879)
Financial charges - Debentures (86,658) (62,527) (87,499)
Financial charges on
contingencies and taxes (93,140) (112,937) (140,876)
Swap operations (85,645) (138,547) (240,939)
Receivables securitization (125,487) (139,485) (99,364)
CPMF (*) and other bank services (67,959) (80,903) (43,708)
Other financial expenses (71,346) (27,054) (31,306)

Total financial expenses (555,578) (603,388) (683,571)

Financial revenues
Interest on cash and cash
equivalents 155,014 231,647 232,825
Financial discounts obtained 40,953 58,092 81,422
Financial charges on taxes
and judicial deposits 64,760 51,095 73,082
Interest on installment sales 38,054 39,669 50,593
Interest on loans 908 2,198 24
Other financial revenues 44,724 60 8,776

Total financial revenues 344,413 382,761 446,722

Net financial result (211,165) (220,627) (236,849)

(*) Provisional tax on financial transactions.

20. Financial Instruments

a) General considerations

Management considers that risk of concentration in financial institutions is low, as transactions are
limited to traditional, highly-rated banks and within limits approved by Management.

b) Concentration of credit risk

The Companys sales are direct to individual customers through post-dated checks, in a small portion of
sales (nearly 1.39% of yearly sales). In such portion, the risk is minimized by the large customer
portfolio.

The advances to suppliers are made only to selected suppliers. We do not have credit risk with suppliers,
since we pay in advance suppliers that have already delivered the goods in order to obtain a discount.

In order to minimize credit risk from investments, the Company adopts policies restricting the marketable
securities that may be allocated to a single financial institution and which also include monetary limits
and financial institution credit ratings.

F 53
 COMPANHIA BRASILEIRA DE DISTRIBUIO

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007, 2006 and 2005
(expressed in thousands of reais, unless otherwise indicated)

20. Financial Instruments (Continued)

c) Market value of financial instruments

Estimated market value of financial instruments at December 31, 2007 considering maturities or frequent
price adjustments approximates the book value of these instruments recorded in the financial statements,
as shown below:

Book Market
Assets
Cash and cash equivalents 414,013 414,013
Marketable securities 650,119 650,119
1,064,132 1,064,132

Liabilities
Loans and financings 2,358,323 2,335,805
Debentures 807,531 805,399
3,165,854 3,141,204

Market value of financial assets and current and noncurrent financing, when applicable, was determined
using current interest rates available for operations carried out under similar conditions and remaining
maturities.

In order to swap the financial charges and exchange variation of loans denominated in foreign currency
into local currency, the Company contracted swaps which change the charges to CDI variation. These
instruments are reflected in the table above at market value.

d) Foreign exchange and interest rate risk management

The use of derivative instruments involving interest rates, intend to protect the Company from the effect
of significant related market variations. This process is conducted by the finance operations area, in
accordance with the strategy previously approved by management.

The cross-currency interest rate swaps permit the Company to exchange fixed rate interest in U.S. dollars
on current and non-current debt Note 13 for floating rate interest in Brazilian reais. As of December 31,
2007, the U.S. dollar-denominated short-term and long-term debt balances of R$ 1,164,284 (US$ 657,305
thousand) (R$ 1,279,559 US$ 598,483 thousand in 2006), at the weighted average interest rates of 5.6%
per annum (5.1% in 2006), are covered by floating rate swaps, linked to a percentage of the CDI in
Brazilian reais, calculated at weighted average rate of 102.7% of CDI (103.6% of CDI in 2006).

F 54
 COMPANHIA BRASILEIRA DE DISTRIBUIO

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007, 2006 and 2005
(expressed in thousands of reais, unless otherwise indicated)

21. Insurance Coverage (unaudited)

Coverage at December 31, 2007 is considered sufficient by management to meet possible estimated losses
and is summarized as follows:

2007 2006
Insured assets Risks covered Amount insured

Property, equipment and inventories Named risks 5,801,656 5,577,635

Profit Loss of profit 1,335,000 1,335,000
Cash Theft 47,194 43,460

The Company also holds specific policies covering civil and management liability risks in the amount of
R$ 142,400 (R$ 160,410 at December 31, 2006).

22. Non-Operating Results

2007 2006 2005

Expenses
Goodwill impairment - (268,886) -
Results in the property and equipment write-off (10,854) (68,585) (17,803)
Judicial deposits write-off (384) (25,844) -
Allowance for losses - other receivable - (22,570) (28,086)
Provision for recovery of assets and others (100) (4,289) (7,271)

Total non-operating expenses (11,338) (390,174) (53,160)

Revenues
Achievement of performance goal - 58,151 38,140
Gains from shareholding dilution - - 18,640
Performance goal on Ita transaction - 7,260 27,172
Provision write-off 2,215 - -
Other 39 1,534 1,339

Total non-operating revenues 2,254 66,945 85,291

Non operating (expenses) revenues, net (9,084) (323,229) 32,131

F 55
 COMPANHIA BRASILEIRA DE DISTRIBUIO

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007, 2006 and 2005
(expressed in thousands of reais, unless otherwise indicated)

23. Commitments

The Company has lease commitments for various stores at December 31, 2007, in the amount of
R$ 1,981,448 as follows:

2008 285,158
2009 240,944
2010 199,116
2011 166,054
2012 142,626
Thereafter 947,550
1,981,448

24. Defined Contribution Pension Plan

In July 2007, the Company established a supplementary defined contribution private pension plan on
behalf of its employees to be managed by the financial institution Brasilprev Seguros e Previdncia S.A.
When setting up the Plan, the Company will provide monthly contributions on behalf of its employees.
Contributions made by the Company in the year ended at December 31, 2007, amounted to R$ 863, and
employees contributions amounted to R$ 2,054, plan has 895 participants as of December 31, 2007.

25. Changes to the Preparation and Disclosure of Financial Statements

On December 28, 2007, Law No. 11,638 was approved, which amends and revokes certain provisions of
Law No. 6,404, dated December 15, 1976, and of Law No. 6,385 dated December 7, 1976. The main
changes brought about by the new law, are:

Net assets, businesses or companies acquired from third parties shall be initially measured at
market value.
Financial assets held for trading or sale, including derivatives, shall be measured at market value.
Other financial assets shall be measured at initial cost, restated under applicable legal or
contractual provisions, and adjusted to their probable realizable value, whenever this is lower.
Long-term assets and liabilities are to be discounted to present value to exclude implicit interest.
Short term assets and liabilities shall be discounted to present value whenever such discount has
any significant effect on financial reporting.
The company shall, on a periodic basis, perform an analysis of the recoverability of the amounts
recorded in fixed, intangible and deferred assets to determine that an impairment loss is recorded
when there is evidence that the capital invested will not produce sufficient cash flows for
recovery of the recorded amount. Further the assets economic useful lives are to be reviewed on
a periodic basis to determine they are appropriate and the calculations of depreciation, depletion
and amortization are to be reviewed and adjusted as necessary. Capital leases shall be recorded
as fixed assets.
Investments in affiliates in whose management the company has significant influence or in
which they hold 20% or more of the voting capital (not of the total capital as before), in
subsidiaries, and in other companies that are in the same group, or that are under common
control, shall be measured by the equity method.
In shareholders equity, the revaluation reserve is eliminated and a newaccount, adjustments to
asset valuation, is introduced. Offsetting entries to increases and decreases in assets and
liabilities measured at market value shall be classified as adjustments to the new equity account
as long as they were not included in net income for the year on an accrual basis.
The statement of changes in financial position has been replaced with statements of value added
(for all publicly-held companies) and cash flows (for all companies). In 2008 (year of transition),
these statements may be presented without prior year comparative amounts.

F 56
 COMPANHIA BRASILEIRA DE DISTRIBUIO

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007, 2006 and 2005
(expressed in thousands of reais, unless otherwise indicated)

25. Changes to the Preparation and Disclosure of Financial Statements (Continued)

Privately-held companies may opt to follow the same financial reporting rules issued by the
Brazilian Securities Commission (CVM) for publicly-held companies.

The requirements of this new Law are applicable to the financial statements for fiscal years starting as
from January 1st, 2008, and the changes thereto for the year ending December 31, 2008 shall also be
applied retroactively to December 31, 2007 for presentation and comparison purposes of the financial
statements to be disclosed.

Upon the preparation of the current financial statements, it is not possible to anticipate the impacts of this
new law on the Companys operation results and and financial position, to be reflected on the individual
and consolidated financial statements for the fiscal year started in January 1,2008 and retrospectively, on
the financial statements for the year ended at December 31, 2007, upon its preparation for comparison
purposes to be disclosed on the financial statements for the year ending December 31,2008.

26. Summary of Differences between Brazilian GAAP and U.S. GAAP applicable to the Company

The accounting practices of the Company are in accordance with the accounting practices adopted in
Brazil (Brazilian GAAP), which comply with those prescribed by Brazilian Corporate Law and specific
standards established by the CVM Comisso de Valores Mobilirios (Securities and Exchange
Comission of Brazil) and IBRACON - Institudo dos Auditores Independentes do Brasil (Brazilian
Institute of Independent Accountants). Accounting practices applicable to the Company, which differ
significantly from Accounting Principles Generally Accepted in the United States (U.S. GAAP), are
summarized below:

F 57
 COMPANHIA BRASILEIRA DE DISTRIBUIO

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007, 2006 and 2005
(expressed in thousands of reais)

26. Summary of Differences between Brazilian GAAP and U.S. GAAP applicable to the Company
(Continued)

a) Supplementary inflation restatement in 1996 and 1997

Under Brazilian GAAP, inflation accounting was discontinued effective January 1, 1996. Prior to that
date, Brazilian GAAP financial statements included indexation adjustments which reflected the effect of
inflation on property and equipment, investments, deferred charges (together known as permanent assets)
and shareholders' equity, and included a net charge or credit in the statement of operations.

However, under U.S. GAAP, Brazil ceased to be treated as a high inflationary economy only as from
January 1, 1998. Accordingly the financial information for purposes of U.S. GAAP includes additional
inflation restatement adjustments made by applying the General Price Index Internal Availability (IGP-
DI) for the two-year period ended December 31, 1997 to permanent assets and shareholders equity. The
IGP-DI index increased by 9.3% in 1996 and 7.5% in 1997.

For U.S. GAAP reconciliation, shareholders' equity under U.S. GAAP was increased by R$ 13,520 and
R$ 15,126, at December 31, 2007 and 2006, respectively, due to the additional inflation restatement
adjustments, net of accumulated depreciation.

These amounts generated increases in depreciation charges in R$ (1,606), R$ (626) and R$ (37,392) in
2007, 2006 and 2005 respectively.

b) Business combinations

For Brazilian GAAP purposes, the net balance of goodwill at December 31, 2007 and 2006 totaled
R$ 674,852 and R$ 630,945 (Consolidated amounts including the goodwill in Sendas Distribuidora),
respectively, classified as intangible assets and amortized over a period of 10 years.

Under Brazilian GAAP, goodwill arises from the difference between the amounts paid and the book value
(usually also tax) of the net assets acquired. This goodwill is normally attributed to the difference between
the book value and the market value of assets acquired, or justified based on expectation of future
profitability and is amortized on a straight line basis over the remaining useful lives of the assets or up to
ten years. Goodwill recorded in a subsidiary books subsequently merged into its parent is reclassified to
deferred charges or property and equipment.

Under U.S. GAAP, fair values are assigned to assets acquired and liabilities assumed in business
combinations, including intangible assets. The difference between the consideration and the fair value of
assets acquired less liabilities assumed is recorded as goodwill. Statement of Financial Accounting
Standards No. 142 "Goodwill and Other Intangible Assets" (SFAS 142) requires that, effective January 1,
2002, goodwill, including those in the carrying value of investments accounted for under the equity
method and certain other intangible assets deemed to have an indefinite useful life, cease to be amortized.
SFAS 142 also requires that goodwill and certain intangible assets be assessed for impairment using fair
value measurement techniques. Goodwill is evaluated for impairment annually or whenever events or
changes in circumstances indicate that the value of certain goodwill may be impaired. This evaluation
requires management to make judgments relating to future cash flows, growth rates, economic and market
conditions.

The Company performs an annual evaluation of impairment comparing the fair value of the Companys
reporting unit, to its carrying value, including goodwill. If the Companys reporting unit fair value
exceeds its carrying value, no further work is required and no impairment loss is recognized. In case the
Companys carrying value of the reporting unit exceeds its fair value, its goodwill is potentially impaired
and then management completes Step 2 in order to measure the impairment loss. In step 2, the Company
compares the implied fair value of goodwill to the carrying value of goodwill.

F 58
 COMPANHIA BRASILEIRA DE DISTRIBUIO

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007, 2006 and 2005
(expressed in thousands of reais)

26. Summary of Differences between Brazilian GAAP and U.S. GAAP applicable to the Company
(Continued)

b) Business combinations (Continued)

If the implied fair value of goodwill is less than the carrying amount of goodwill, the Company
recognizes an impairment loss equal to the difference (i.e., write goodwill down to the implied fair value
of goodwill amount). This becomes the new carrying value of goodwill that will be used in future
impairment tests. The loss cannot exceed the carrying value of goodwill.

Differences in relation to Brazilian GAAP arise principally from the measurement of the fair values
assigned to the assets acquired and liabilities assumed and resulting goodwill amounts, if any.

The roll forward of balances is as follows:

Intangible
Goodwill Total
Assets

Balance as of December 31, 2004 - U.S. GAAP 593,283 52,932 646,215

Impairment (disposals)/ (amortization) (16,015) (10,586) (26,601)

Acquisition 30,257 30,257
Balance as of December 31, 2005 - U.S. GAAP 607,525 42,346 649,871

Impairment (disposals)/ (amortization) (4,885) (10,586) (15,471)

Acquisition 2,485 - 2,485
Balance as of December 31, 2006 - U.S. GAAP 605,125 31,760 636,885

Impairment (disposals)/ (amortization) (i) - (32,449) (32,449)

Acquisition of Rossi (ii) 43,758 43,758
Acquisition of ASSAI 164,293 34,530 198,823
Balance as of December 31, 2007 - U.S. GAAP 813,176 33,841 847,017

Balance as of December 31, 2007 BR GAAP 493,182 - 493,182

Prepaid payment to Rossi, classified in prepaid assets for

BRGAAP purposes, as disclosed below in (iii)
43,758
Others 4,444

GAAP difference (319,994) (33,841) (305,633)

(i) During 2007, management decided to discontinue the BARATEIRO trade-name, resulting in a write-
off of R$ 31,760. The remaining amounts are related to amortization of other intangibles.

For purposes of the U.S. GAAP reconciliation, the effects of these differences in the income statements
were R$ 93,520, R$ 115,141 and R$ 109,338 in 2007, 2006 and 2005, respectively. These amounts are
comprised of the following:

F 59
 COMPANHIA BRASILEIRA DE DISTRIBUIO

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007, 2006 and 2005
(expressed in thousands of reais)

26. Summary of Differences between Brazilian GAAP and U.S. GAAP applicable to the Company
(Continued)

b) Business combinations (Continued)

2007 2006 2005

Amortization and write-off of trade name (32,449) (10,586) (10,586)

Reversal of amortization of goodwill under Brazilian GAAP 125,969 125,727 119,924

93,520 115,141 109,338

The net effect in shareholders equity of these differences related to business combinations, was an
increase of R$ 305,633, and R$ 212,113 in 2006.

Estimated amortization expense for the next 5 years is as follows:

2008 (4,136)
2009 (4,136)
2010 (4,136)
2011 (4,136)
2012 (4,136)
2013 (4,136)
2014 (4,136)
2015 (4,136)
2016 (753)

Total (33,841)

(ii) Acquisition of Rossi

As mentioned in note 1 d), in August 3, 2007, CBD structured a transaction which is accounted for as an
operational leasing of assets of 5 stores from Rossi Supermercados (ROSSI).Under Brazilian GAAP the
transaction is accounted for as an operating lease. The amount of R$ 45,500 was paid in advance and
classified as a prepaid assets. CBD also acquired accounts receivable of R$ 4,681 and inventories by
R$ 16,273. Fixed assets are part of the assets leased and can be purchased in the end of the 5 years leasing
agreement by its residual book value.

Under U.S. GAAP the transaction was accounted for under SFAS 141, as an acquisition of a business.
The conditions established in the agreement meet the definition of a business mentioned in EITF 98-3.
Therefore, for USGAAP purposes, the amount of R$71,764, was considered the acquisition price.

The fair value of intangible and tangible assets were determined based in appraisal reports prepared by
specialists. The goodwill generated in USGAAP is as follows:

F 60
 COMPANHIA BRASILEIRA DE DISTRIBUIO

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007, 2006 and 2005
(expressed in thousands of reais)

26. Summary of Differences between Brazilian GAAP and U.S. GAAP applicable to the Company
(Continued)

b) Business combinations (Continued)

(ii) Acquisition of Rossi (Continued)

August 3rd, 2007

Accounts Receivable 4,681

Inventory 16,273
Property and equipment, net 7,052
Total assets acquired 28,006

Net Assets 28,006

Amount paid in the acquisition 71,764

Goodwill in the acquisition 43,758

(iii) Acquisition of Barcelona - ASSAI

The acquisition was accounted for by the purchase method and accordingly, the purchase price has been
allocated according to the estimated fair value of the assets acquired and liabilities assumed. The results
of the Assais operations have been included in the consolidated financial statements since the acquisition
date which was November 1, 2007.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed:

Nov 1st, 2007

Current assets 70,403

Property and equipment, net 31,321
Intangible assets provisionary identified 34,530
Total assets acquired 136,254

Current liabilities 68,641

Non-current liabilities 16,959
Minority interest 6,443
Total liabilities assumed 92,043

Net Assets 44,211

Amount paid in the acquisition 208,504

Goodwill in the acquisition 164,293

F 61
 COMPANHIA BRASILEIRA DE DISTRIBUIO

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007, 2006 and 2005
(expressed in thousands of reais)

26. Summary of Differences between Brazilian GAAP and U.S. GAAP applicable to the Company
(Continued)

b) Business combinations (Continued)

(iii) Acquisition of Barcelona - ASSAI (Continued)

As described in Note 9 b (iii) CBD paid R$ 208,504 for 60% interest in Barcelona Comercio Varejista e
Atacadista S.A. (Barcelona), which received the operational assets of Assai Comercial e Importadora
Ltda. (Assai), a chain of stores operating in the cash & carry business.

Under Brazilian GAAP, the Company recognized a goodwill of R$206,068 which represents the
difference between the amount paid and the book value of the net assets of Barcelona.

Under US GAAP, this was accounted under the purchase method consistent with FAS 141.

Although the Company has obtained a final valuation of net tangible assets related to the 2007
acquisitions, it has not obtained enough historical data to conclude the valuation of the identified
intangible assets related to the Assai purchase. Consistent with FAS 141 allocation period of 12 months to
complete the purchase price allocation, the Company will conclude the collection of data and conclude
the valuation of the intangibles during 2008.

As mentioned in note 9 b (iii), the 40% minority interest in Barcelona remained with the former
shareholders of ASSAI and is subject to put and call options, pursuant to the shareholders agreement.
For Brazilian GAAP, the put and call option did not generate any accounting entry. For U.S. GAAP, the
put option is considered a puttable minority interest and it is accounted for according to the provisions of
SEC Accounting Series Release No. 268, Presentation in Financial Statements of Redeemable Preferred
Stocks and Topic No. D-98 Classification and Measurement of Redeemable Securities, which require
the Company to record as a liability the higher of the most probable amount of which the option can be
exercised at each reporting date or the minority interest and an offsetting charge against retained earnings
(equity). On December 31, 2007, the liability recorded against equity amounted R$ 125,321.
Additionally, under D 98, this amount is deemed to be a deemed dividend and increases or decreases in
the carrying amount and shall reduce or increase income applicable to common stockholders in the
calculation of earnings per share and preferred stock dividends. If charges or credits are material to
income, separate disclosure of income applicable to common stockholders on the face of the income
statement should be provided.

c) Sendas Distribuidora

Under Brazilian GAAP, following the CVM Instruction No. 247 and in conformity with the shareholders
agreement Sendas Distribuidora was fully consolidated. The shareholders agreement establishes that the
Company has the operating and administrative management in addition to its prevailing decision to elect
or remove directors.

For purposes of U.S. GAAP, the investment in Sendas Distribuidora did not meet the criteria for
consolidation as defined by SFAS No. 94 ("Consolidation of All Majority-Owned Subsidiaries") nor did
it meet the pre-requisites of a qualifying variable interest entity ("VIE"), under FASB Interpretation No.
("FIN") 46R "Consolidation of Variable Interest Entities, (revised December 2003)"; therefore this
investment is accounted for under the equity method.

Additionally, there are several differences related to Sendas financial statements which affect the equity
pick up recorded by the Company. The key differences are as follows:

F 62
 COMPANHIA BRASILEIRA DE DISTRIBUIO

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007, 2006 and 2005
(expressed in thousands of reais)

26. Summary of Differences between Brazilian GAAP and U.S. GAAP applicable to the Company
(Continued)

c) Sendas Distribuidora (Continued)

i. Under U.S. GAAP, the interest in Sendas Distribuidora has been recorded under the equity
method. The related equity pick up was computed based on 50% ownership of common shares,
in conformity with the shareholders agreement. Under Brazilian GAAP, equity pickup is
calculated at 42.57% based on total capital.
ii. Reversal of amortization of Brazilian GAAP goodwill Under Brazilian GAAP, the assets
contributed to the joint venture were recorded at carrying value value and goodwill was
created. Under U.S. GAAP, the assets contributed to the joint venture were recorded at historical
carryover value and no goodwill is recognized. Therefore, the Company reversed the
amortization of goodwill recorded for Brazilian GAAP purposes of R$ 701,773 for 2007 and
R$ 673,551 for 2006. Also, the balances of reversed goodwill amounted to R$ 883,442 for 2007
and 2006. The Companys carrying amount of its investment in Sendas Distribuidora at the date
(February 1, 2004) of the joint venture formation was R$ 141,732, while its 50% interest in the
net assets of the joint venture was a negative amount of R$ 91,738. This difference is accounted
for as embedded goodwill in accordance with APB 18 and will not be amortized, in accordance
with FAS 142, but will be assessed for impairment on an annual basis. The Company determined
that there was no impairment for 2007.

iii. Goodwill impairment As described in Note 17, the Company determined that the Brazilian
GAAP goodwill was impaired and recorded an impairment expense. For US GAAP, this
goodwill does not exist and therefore, such impairment needs to be reversed.
iv. Derivatives See note 26 (i)
v. Income taxes The Company determined that certain deferred income tax assets were not more
likely than to be realized and therefore the Company recorded a valuation allowance.
vi. Capital leases see note 26 (v).

Below is a summary of the mainly effect of these adjustments in Sendas net income and Shareholders
equity:

(i) Shareholders' Deficit

December 31
2007 2006

Shareholders' equity under Brazilian GAAP 4,410 23,603

Reversal of goodwill amortization 701,773 673,551
Reversal of goodwill (883,442) (883,443)
Deferred income taxes, net (264,070) (172,601)
Others 1,439 (17,228)

Shareholders' deficit under U.S. GAAP (439,890) (376,118)

F 63
 COMPANHIA BRASILEIRA DE DISTRIBUIO

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007, 2006 and 2005
(expressed in thousands of reais)

26. Summary of Differences between Brazilian GAAP and U.S. GAAP applicable to the Company
(Continued)

c) Sendas Distribuidora (Continued)

(ii) Net Loss

Year ended December 31

2007 2006 2005

Net income (loss) under Brazilian GAAP (19,193) (625,060) (111,759)

Reversal of goodwill amortization 28,222 556,812 66,057
Deferred income taxes, net (91,469) (43,231) (121,313)
Others 18,667 (13,182) 22,938

Net loss under U.S. GAAP (63,773) (124,661) (144,077)

The effect of these differences between Brazilian GAAP and U.S.GAAP on the financial statements of
Sendas Distribuidora result in the following effect on the equity pick up:

2007 2006 2005

BR GAAP and US GAAP difference on equity pickup - Income statement (23,629) (85,852) (43,103)
Equity pickup Sendas Distribuidora US GAAP - Accumulated equity effect (150,442) (126,726) (40,874)

The Company performs an analysis to determine whether the investment is impaired, in accordance with
APB 18. The Company has performed such tests, and there was no evidence of impairment related to the
investment and related goodwill.

Sendas Distribuidora condensed balance sheets and condensed statements of income in accordance with
U.S. GAAP are as follows:

2007 2006 2005

Net sales revenue 2,783,368 2,776,736 2,866,597

Operating income 33,869 3,333 70,167
Non-operating expenses (97,642) (161,660) (150,008)
Net loss (63,773) (124,661) (144,077)

Current assets 469,544 451,109 495,611

Property and equipment, net 411,164 432,204 460,702
Non-current assets 250,431 174,122 164,736
Total assets 1,131,139 1,057,435 1,121,049

Current liabilities 1,265,530 824,045 697,323

Non-current liabilities 305,500 609,508 675,183
Shareholders' deficit (439,891) (376,118) (251,457)
Total liabilities and shareholders' deficit 1,131,139 1,057,435 1,121,049

Sendas Distribuidora has total loans payable of R$ 1,028,283 and R$ 880,561 at December 31, 2007 and
2006, respectively, which are guaranteed by CBD.

F 64
 COMPANHIA BRASILEIRA DE DISTRIBUIO

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007, 2006 and 2005
(expressed in thousands of reais)

26. Summary of Differences between Brazilian GAAP and U.S. GAAP applicable to the Company
(Continued)

d) Cash consideration received from vendors

Under Brazilian GAAP, the Company receives cash consideration from vendors, primarily volume
incentives, warehouse allowances and reimbursements for specific programs such as markdowns, margin
protection and cooperative advertising. Volume bonuses and discounts received from suppliers in the
form of products are recorded as zero-cost additions to inventories and the benefits are recognized as the
product is sold. Discounts and bonuses in cash are recorded as decreases to cost of sales.

Under U.S. GAAP, substantially all cash considerations from vendors are accounted for as a reduction of
items cost and recognized in income when certain conditions are fulfilled and the related inventory is
sold. EITF 02-16, "Accounting by a Customer (Including a Reseller) for Certain Consideration Received
from a Vendor" was issued in December 2002 and was to be applied by the Company to new
arrangements, including modifications of existing arrangements, entered into after December 31, 2002.

For purposes of the U.S. GAAP reconciliation, income in 2005 was increased by R$ 25,190. In addition,
the Company decided, beginning at January 1, 2005, to change the accounting treatment used for cash
consideration received from vendors in Brazilian GAAP to the same required under US GAAP.

e) Property and equipment

(i) Capitalized interest on construction in progress

As from January 1, 1997, Brazilian GAAP permits interest on loans identified to be used to finance assets
under construction to be capitalized.

Under U.S. GAAP, capitalization of the financial costs of borrowed funds, excluding foreign exchange
losses, during construction of stores is recognized as part of the cost of the related assets. Capitalized
interest should be depreciated over the useful life of the assets.

For purposes of the reconciliation, shareholders equity was reduced by R$ 8,452 in 2007 and R$ 9,293 in
2006 to reflect such adjustments, net of amortization, to comply with U.S. GAAP. These adjustments
reduced depreciation charges by R$ 841, R$ 969 and R$ 1,032 in 2007, 2006 and 2005, respectively.

Additionally, in accounting for long-lived assets, the Company makes assumptions about the expected
useful lives of its assets and the potential for impairment. Long-lived assets are evaluated for impairment
when events and circumstances indicate that the assets may be impaired and the undiscounted cash flows
estimated to be generated by those assets are less than the carrying amount of those assets. Indicators
include operating or cash flow losses, significant decreases in market value. If impairment occurs, any
loss is measured by comparing the fair value of the asset to its net book value. The Company has not
identified any impairment to long-lived assets.

(ii) Leasehold Improvements

Leasehold improvements were amortized over the shorter of the estimated useful lives of the assets or the
lease terms. Until 2004, under Brazilian GAAP, the lease term takes into consideration the lease renewal
periods and the Companys expectation that renewals will occur.

In 2005, Brazilian Accounting Standard NBC T 19.5 Depreciation, Amortization and Depletion was
issued and approved by Resolution No. 1027/05 by the Federal Accounting Council, which changed,
among other things, the leasehold improvement amortization criteria. This rule is effective as from 2006;
however, the Company early-adopted it in 2005.

F 65
 COMPANHIA BRASILEIRA DE DISTRIBUIO

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007, 2006 and 2005
(expressed in thousands of reais)

26. Summary of Differences between Brazilian GAAP and U.S. GAAP applicable to the Company
(Continued)

e) Property and equipment (Continued)

(i) Capitalized interest on construction in progress (Continued)

Under U.S. GAAP, when the renewals have been determined at the inception of the lease to be reasonably
assured, amortization of leasehold improvements is extended over a term that includes assumption of
lease renewals. The lease renewal term may only be included as part of the lease term for purposes of
amortization, if the renewal is available at the inception of the lease and its exercise is at the sole
discretion of the Company.

For U.S. GAAP purposes, the amortization of leasehold improvements increased income for the year
ended December 31, 2005 by R$ 51,677.

f) Deferred charges

Brazilian GAAP permits deferral of certain pre-operating expenses incurred in the construction or
expansion of a store before it begins operations, research and other items which are recorded at cost and
amortized over a period of five years.

For U.S. GAAP purposes, the deferred charges which do not meet the conditions established for deferral
have been charged to the income statement.

For the purposes of the U.S. GAAP reconciliation, shareholders' equity was decreased by R$ 77,177 and
R$ 76,180, at December 31, 2007 and 2006, respectively, due to deferred charges adjustments, net. These
amounts generated decreases in net income of R$ (997), R$ (14,489) and R$ (35,519) in 2007, 2006 and
2005, respectively.

A breakdown of the adjustments into net income for the years presented is set forth in the following table:

Reversal of amortization of deferred charges under Brazilian

GAAP 2007 2006 2005

Pre-operating expenses and other (997) (14,489) (10,002)

Initial fee of sale lease back transaction (note 26(h)) - - (25,517)

(997) (14,489) (35,519)

g) Leases

Under Brazilian GAAP, leases normally are treated for accounting purposes as operating leases and the
expense is recognized when each lease installment is incurred.

Disclosure regarding leases is more limited than under U.S. GAAP. Under U.S. GAAP, leases which
transfer substantially all the benefits and risks of ownership related to the leased property from lessor to
the lessee are treated as capital leases and the corresponding assets or liabilities are recognized, as
appropriate, and the effects of depreciation and interest expense are recognized in the income statement.

F 66
 COMPANHIA BRASILEIRA DE DISTRIBUIO

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007, 2006 and 2005
(expressed in thousands of reais)

26. Summary of Differences between Brazilian GAAP and U.S. GAAP applicable to the Company
(Continued)

g) Leases (Continued)

All other leases are classified as operating leases and the lease expenses are recorded on a straight-line
basis.

For the purposes of the U.S.GAAP reconciliation, shareholders equity was reduced by a net amount of
R$ 9,770 and R$ 7,452, at December 31, 2007 and 2006, comprising adjustments from properties and
equipments under capital lease (R$ 58,432 and R$ 31,322 at December 31, 2007 and 2006, respectively)
and the related capital lease obligations (R$ 68,202 and R$ 38,774 at December 31, 2007 and 2006,
respectively). These amounts increased income in 2007, 2006 and 2005 respectively by R$ 2,318,
R$ 2,121 and R$ 1,334.

The accumulated depreciation regarding these leases are R$ 36,405 and R$ 27,726 at December 31, 2007
and 2006.

h) Sale lease back

Under Brazilian GAAP, as further described in Note 10, the Company concluded on October 3, 2005 the
sale of 60 properties to the Pennsula Fund for R$ 1,029,000. The net book value of the properties was
R$ 1,017,575, consequently the transaction resulted in a gain of R$ 11,425 recognized as non-operating
income at December 31, 2005. The properties were leased back to the Company for a twenty-year period,
and may be renewed for two additional consecutive periods of 10 years each. The Company paid
R$ 25,517, on the inception date of the store lease agreement, as an initial fee for entering into a long
term contract, which was recorded as deferred charges and is being amortized through the lease
agreement of the related stores.

Under US GAAP, in accordance with SFAS 98 Accounting for Leases requires that in order to qualify
for sale lease back accounting, the contracts terms and provisions must transfer all of the other risks and
rewards of ownership, as demonstrated by the absence of any other continuing involvement by the seller-
lessee, among other factors. Pursuant to the agreement of this transaction, CBD and Casino Group
received a golden share, which provided to both veto rights that ensure the properties will be used in the
manner the parties intend. Therefore, this transaction does not classify for sale lease back accounting and
it was accounted as a financing arrangement as described in SFAS 98, paragraph 34.

Consequently, under US GAAP, the Company adjusted the properties sold to fair value of R$ 1,023,927,
which was the same amount of the liability assumed by the Company at present value and resulted in a
deferred gain of R$ 4,780, outcome from disposal of some stores, which is being recognized in twenty
years. The initial fee of R$ 25,517 was considered as part of the initial minimum lease payments. The
annual interest rate used in the calculation was 21.8% at the inception date.

Under U.S. GAAP, the net amount of assets depreciation and liabilities amortization in 2007 result in a
decrease of net income of R$ 35,850 (R$ 30,669 in 2006 and R$ 9,154 in 2005) and shareholders equity
of R$ 75,673 (R$ 39,823 in 2006), which can be summarized as described below:

F 67
 COMPANHIA BRASILEIRA DE DISTRIBUIO

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007, 2006 and 2005
(expressed in thousands of reais)

26. Summary of Differences between Brazilian GAAP and U.S. GAAP applicable to the Company
(Continued)

h) Sale lease back (Continued)

Asset Liability Deferred Gains

2007 2006 2007 2006 2007 2006

Inception 1,023,927 1,023,927 (1,023,927) (1,023,927) -

Deferred gains - - (4,780) (4,780)
Depreciation (54,984) (32,488) - -
Interest accrued - (203,546) (97,730) -
Amortization - - 538 299
Payment - 187,099 94,876 -

Closing balance 968,943 991,439 (1,040,374) (1,026,781) (4,242) (4,481)

2007 2006 2005

Depreciation (22,496) (22,496) (9,992)

Non operating income 239 239 (4,720)
Interest accrued (105,816) (97,730) -
Financial expenses 92,223 89,318 5,558

(35,850) (30,669) (9,154)

i) Derivative and other financial instruments

Under Brazilian GAAP, financial instruments and derivatives are accounted for at cost or contract value
with footnote disclosure of the type and amounts of financial instruments and derivatives. The Company
recorded its derivative activities by the net assets or liabilities amounts measured at the spot rates at the
balance sheet date.

Under U.S. GAAP, SFAS No. 133 "Accounting for Derivative Instruments and Hedging Activities"
establishes accounting and reporting standards for derivative instruments and for hedging activities and
requires an entity to recognize all derivatives as either assets or liabilities and measure those instruments
at fair value.

The Company enters into cross-currency and interest rate swaps to mitigate foreign exchange risk on U.S.
dollar denominated fixed interest debt. The Company does not apply hedge accounting.

At December 31, 2007, the Company has cross-currency and interest rate swaps outstanding of which the
fair value liability amount was R$ (17,453) (2006 R$ (195,529)). They mature in various dates through
June, 2010.

The cross-currency interest rate swaps also permit the Company to exchange fixed rate interest in U.S.
dollars on short-term debt and long-term debt (Note 13) for floating rate interest in Brazilian reais.

At December 31, 2007 the notional amounts of the cross-currency and interest rate swaps and the fair
market value amounts were as follows:

F 68
 COMPANHIA BRASILEIRA DE DISTRIBUIO

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007, 2006 and 2005
(expressed in thousands of reais)

26. Summary of Differences between Brazilian GAAP and U.S. GAAP applicable to the Company
(Continued)

i) Derivative and other financial instruments (Continued)

2007 2006
Notional Fair market value Notional
outstanding (*) outstanding Fair market value (*)
amount Asset Liability amount Asset Liability

Cross-currency interest rate swaps 478,406 - (17,453) 283,025 - (195,529)

Current liabilities - (20,649) - (195,529)

Long-term liabilities - 3,106 - -

(*) Fair market value loss under outstanding cross-currency and interest rate swaps.

The notional amounts of derivatives do not represent amounts exchanged by the parties and, thus, are not
a measure of the Company's exposure through its use of derivatives.

For U.S.GAAP, gains (losses) from derivative activities totaled R$ (19,435), R$ (1,656) and R$ 9 in the
years ended December 31, 2007, 2006 and 2005, respectively, and are included in "Financial expense -
interest expense" and the amounts of R$ (18,423) and R$ (1,012) in the shareholders equity in 2007 and
2006, respectively.

j) Put options - AIG

On November 30, 2004, the shareholders of Sendas Distribuidora and the AIG Group ("AIG") entered
into an agreement through which AIG invested the amount of R$ 135,675 (equivalent to US$ 50 million
at that time) in Sendas Distribuidora (see note 9(c)). According to the agreement, CBD and AIG mutually
granted reciprocal call and put options of the shares purchased by AIG in Sendas Distribuidora, which
may be exercised as from October 25, 2007.

Upon exercising the referred options, the shares issued by Sendas Distribuidora to AIG will represent a
put against CBD, which may be used to subscribe up to three billion preferred shares to be issued by CBD
in a future capital increase. The price of the future issuance of CBD preferred shares will be set based on
market value at the time of issuance. If the value of AIGs shares in Sendas Distribuidora shares results in
more than the value of three billion shares of CBD, the Company will pay the difference in cash.
Additionally, in case of a gridlock, as defined in the agreement, or AIG fails to exercise his Put Option by
July 25th, 2008, at its sole discretion CBD shall have the right to demand from the AIG the sale, transfer
and alienation, to CBD, by the exit price (Note 9 d) of all of AIGs shares of Sendas Distribuidora.

The Company determined that such written put option should be accounted for at fair value as a liability
under US GAAP. The Company calculated the fair value of the put option and recognized R$ 17,929 as a
liability in 2007, (R$ 16,659 in 2006), and expenses amounted to R$ 1,270, R$ 11,455 and R$ 5,204 in
2007, 2006 and 2005, respectively.

Under Brazilian GAAP, there is no specific statement regarding such financial instruments and this
liability is not recorded.

F 69
 COMPANHIA BRASILEIRA DE DISTRIBUIO

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007, 2006 and 2005
(expressed in thousands of reais)

26. Summary of Differences between Brazilian GAAP and U.S. GAAP applicable to the Company
(Continued)

k) Put options Sendas S.A.

As described in note 9(c), at October 19, 2006, Sendas S.A. manifested in writing to CBD the wish to
exercise the put option, pursuant to Clause 6.7 of Sendas Distribuidora Shareholders Agreement,
related to the transfer of equity control. Similarly to the AIG options described above, this instrument
should be recorded at fair value for US GAAP. The Company determined that the fair value was
insignificant at December 31, 2007 and 2006.

l) Deferred gain on FIC Transaction

As described in Note 9(e), the Company formed a strategic alliance with Ita. The deal was effected
through a series of transactions whereby the Company received R$ 380,444 in cash and the Company
then made a cash capital contribution of R$ 75,000 to Miravalles. Pursuant to the joint venture agreement,
R$ 152,500 was placed into a restricted account controlled by Ita and the funds were to be released as
certain performance milestones were achieved.

Under Brazilian GAAP, at December 22, 2005, an amendment to the partnership agreement between
CBD, Ita and FIC was signed, and the clauses referring to meeting of performance goals, initially
established, were changed. By such amendment, the meeting of goals and the escrow account are no
longer tied, and fines for noncompliance of said goals were set out. In 2006, the Company recognized the
remaining amount of R$ 58,151(R$ 38,140 in 2005) under non-operating results, due to the fulfillment of
certain performance goals during the year.

Under U.S. GAAP, this transaction resulted in gain recognition of R$ 152,944 in 2004, and a deferred
gain of R$ 41,755 at December 31, 2007 and R$ 68,425 at December 31, 2006, related to the funds held
in escrow (as of December 31, 2004). The funds were released from escrow in 2005 but remain subject to
the performance of certain milestones, and therefore, under US GAAP, it will continue to defer the gains
until the performance obligations are totally met.

Under U.S. GAAP, the interest in Miravalles Empreendimentos e Participaes S.A. has been recorded
under the equity method considering the 50% ownership. The differences between Brazilian GAAP and
U.S. GAAP on the investment on Miravalles resulted in a total net decrease of R$ 2,419 at December 31,
2007 and R$ 3,916 in 2006, generated a loss on equity pick-up of R$ 17,198 at December 31, 2007 and
R$ 14,779 in 2006.

The differences in the equity pickup related to Miravalles are originated by the difference between U.S.
GAAP and BR GAAP, of this investee. The main differences are related to allowance for loan losses
which are higher under US GAAP and capitalized telemarketing and advertising expenses which are
expensed under US GAAP.

F 70
 COMPANHIA BRASILEIRA DE DISTRIBUIO

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007, 2006 and 2005
(expressed in thousands of reais)

26. Summary of Differences between Brazilian GAAP and U.S. GAAP applicable to the Company
(Continued)

l) Deferred gain on FIC Transaction (Continued)

Therefore, this transaction resulted in a total net increase of gain of R$ 41,670 at December 31, 2007 and
decrease of R$ 39,676 in 2006 and R$ 21,665 in 2005; shareholders equity was decreased by R$ 69,255
and R$ 110,925 in 2007 and 2006, respectively.

Additionally, under U.S. GAAP, the basis of the investment in the joint venture is deemed to be zero.
Under APB 18, this difference of R$ 75,000 from the underlying equity in the net assets of the investee is
recognized as a deferred credit and will be amortized into income using the straight line method over 5
years. The Company recognized amortization of R$ 15,000 in 2007 and 2006, respectively.

The Company analyzed this investment for impairment in accordance with APB 18 and concluded there
was no impairment at December 31, 2007 and 2006.

m) Earnings per share

Under Brazilian GAAP, disclosure of net income per share is computed based on the number of shares
outstanding at the balance sheet dates and does not distinguish between common and preferred shares.
Information is disclosed per lot of one thousand shares, because generally this is the minimum number of
shares that can be traded on the Brazilian stock exchanges. The 10% premium to which preferred
shareholders are entitled on distributed earnings is not allocated on calculating EPS under Brazilian
GAAP.

Under U.S. GAAP, because the preferred and common shareholders have different voting and liquidation
rights, basic and diluted earnings per share have been calculated using the "two-class" method, pursuant
to SFAS No. 128, "Earnings per Share", which provides computation, presentation and disclosure
requirements for earnings per share.

Beginning in 2003, preferred shares are entitled to a dividend 10% greater than that distributed to the
common shares. As such earnings may be capitalized or otherwise appropriated, there can be no
assurance that preferred shareholders will receive the 10% premium referred to above, unless earnings are
fully distributed, and, accordingly, earnings per share have been calculated using the "two class" method.
The "two class" method is an earnings allocation formula that determines earnings per share for preferred
and common shares according to the dividends declared and participation rights in undistributed earnings.

The Company computes earnings per share by dividing the net income pertaining to each class of share
by the weighted-average number of the respective class of shares outstanding during the period.

The Company has issued employee stock options (Note 18(g)), the dilutive effects of which are reflected
in diluted earnings per share by application of the "treasury stock" method. Under the treasury stock
method, earnings per share are calculated as if options were exercised at the beginning of the period, or at
time of issuance, if later, and as if the funds received were used to purchase the Company's own stock.
When the stock option exercise price is greater than the average market price of the preferred shares,
diluted earnings per share are not affected by the stock options.

Due to the reverse split (note 18 a), the Company restated the earning per share presented in 2006 and
2005, in order to maintain the comparability of the earnings per share calculation with the current year.

The table below presents the determination of net income available to common and preferred
shareholders and weighted average common and preferred shares outstanding used to calculate basic and
diluted earnings per share for each of the years presented:

F 71
 COMPANHIA BRASILEIRA DE DISTRIBUIO

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007, 2006 and 2005
(expressed in thousands of reais)

26. Summary of Differences between Brazilian GAAP and U.S. GAAP applicable to the Company
(Continued)

m) Earnings per share (Continued)

Year ended December 31, 2007 Year ended December 31, 2006 (Restated)

Preferred Common Total Preferred Common Total

Basic numerator
Actual dividends proposed 29.327 20.757 50.084 11.887 8.425 20.312
Puttable minority interest per Topic D-98
"ASSAI" 73.377 51.944 125.321 - - -
Basic allocated undistributed earnings 57.385 40.623 98.008 (3.403) (2.412) (5.815)

Allocated net income available for

common and preferred shareholders 160.089 113.324 273.413 8.484 6.013 14.497

Basic denominator (in thousands of

shares)
Weighted-average number of shares 128.010 99.680 227.690 127.807 99.680 227.487

Basic earnings per thousand

shares U.S. GAAP (R$) 1,25 1,14 - 0,07 0,06 -

Diluted numerator
Actual dividends proposed 29.356 20.728 50.084 11.911 8.401 20.312
Puttable minority interest per Topic D-98
"ASSAI" 73.456 51.865 125.321 - - -
Diluted allocated undistributed earnings 57.447 40.561 98.008 (3.410) (2.405) (5.815)

Allocated net income available for

common and preferred shareholders 160.259 113.154 273.413 8.501 5.996 14.497

Diluted denominator (in thousands of

shares)
Weighted-average number of shares 128.010 99.680 227.690 127.807 99.680 227.487
Put options 113 - 113 12 - 12
Stock options 199 - 199 659 - 659

Diluted weighted-average number of

shares 128.322 99.680 228.002 128.478 99.680 228.158

Diluted earnings per thousand

shares U.S. GAAP (R$) 1,25 1,14 - 0,07 0,06 -

F 72
 COMPANHIA BRASILEIRA DE DISTRIBUIO

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007, 2006 and 2005
(expressed in thousands of reais)

26. Summary of Differences between Brazilian GAAP and U.S. GAAP applicable to the Company
(Continued)

m) Earnings per share (Continued)

Year ended December 31, 2005 (Restated)

Preferred Common Total

Basic numerator
Actual dividends proposed 33,753 28,300 62,053
Basic allocated undistributed earnings 113,436 95,113 208,549

Allocated net income available for

common and preferred shareholders 147,189 123,413 270,602

Basic denominator (in thousands of

shares)
Weighted-average number of shares 118,117 108,941 227,058

Basic earnings per thousand

shares U.S. GAAP (R$) 1.25 1.13

Diluted numerator
Actual dividends proposed 33,797 28,256 62,053
Diluted allocated undistributed earnings 113,586 94,963 208,549

Allocated net income available for

common and preferred shareholders 147,383 123,219 270,602

Diluted denominator (in thousands of

shares)
Weighted-average number of shares 118,117 108,941 227,058
Put options 14 - 14
Stock options 328 - 328

Diluted weighted-average number of

shares 118,459 108,941 227,400

Diluted earnings per thousand

shares U.S. GAAP (R$) 1.24 1.13

n) Income taxes

Under Brazilian GAAP, the deferred income tax asset represents the probable estimated amount to be
recovered over a period of up to ten years.

Under U.S. GAAP, deferred taxes are accrued on all temporary tax differences. Valuation allowances are
established when it is not more likely than not that tax losses will be recovered. Deferred tax assets and
liabilities are classified as current or long-term based on the classification of the asset or liability
underlying the temporary difference. Deferred income tax assets and liabilities in the same tax jurisdiction
are netted rather than presented gross.

F 73
 COMPANHIA BRASILEIRA DE DISTRIBUIO

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007, 2006 and 2005
(expressed in thousands of reais)

26. Summary of Differences between Brazilian GAAP and U.S. GAAP applicable to the Company
(Continued)

n) Income taxes (Continued)

For the purposes of these financial statements, the Company has applied SFAS No. 109, "Accounting for
Income Taxes", for all periods presented. The effect of adjustments made to reflect the requirements of
accounting principles generally accepted in the United States of America, as well as, differences between
the tax basis of non-monetary assets as stated in the statutory accounting records, prepared in accordance
with the Brazilian tax law, and the amounts included in these financial statements, have been recognized
as temporary differences for the purpose of recording deferred income taxes.

Additionally, the Company recognized the deferred tax effects related to the temporary differences
generated by U.S.GAAP adjustments. This resulted in a deferred income tax benefit (expenses) of
R$ (25,605), R$ 1,488 and R$ (32,505) in 2007, 2006 and 2005, respectively, and the effect in
shareholders equity is R$ (30,312) and R$ (4,707) in 2007 and 2006, respectively.

o) Pushdown of goodwill

See note 18 (c) for description of the transaction under BRGAAP.

Under US GAAP, goodwill generated internally is not recognized; however, the future tax benefit
generated by the amortization of goodwill is recognized as a contribution from the controlling shareholder
within additional paid-in capital, similarly to the accounting principles under the Brazilian Corporate
Law. The realization of the tax benefit by the amortization of the goodwill will be recognized as a
decrease in the value of the deferred tax with a related decrease in the tax payable, and does not affect the
determination of income for the period, similar to the accounting principles under the Brazilian Corporate
Law. The additional capital paid will be transferred to capital upon the issuance of the shares.

p) Comprehensive income

Under Brazilian GAAP, the concept of comprehensive income is not recognized.

Under U.S. GAAP, SFAS 130, "Reporting Comprehensive Income", requires the disclosure of
comprehensive income. Comprehensive income is comprised of net income and other comprehensive
income that include charges or credits directly to equity which are not the result of transactions with
owners. For the Company, comprehensive income is the same as its net income.

q) Stock-based compensation

Under Brazilian GAAP, the rights to acquire the Companys shares granted to employees, officers and
directors under the stock ownership plan do not result in any expense. The purchase of the stock by the
employees is recorded as an increase in capital stock for the amount of the purchase price.

Under U.S. GAAP, effective January 1, 2006, the Company adopted the provisions of Statement of
Financial Accounting Standards (SFAS) No. 123 (Revised 2004), Stock-Based Payment, (SFAS No.
123(R)) using the modified prospective method SFAS no. 123(R) requires measurement of
compensation cost for all stock-based awards at fair value on the grant date and recognition of
compensation over the service periods for awards expected to vest. The fair value of stock options is
determined using a Black-Scholes-Merton methodology.

F 74
 COMPANHIA BRASILEIRA DE DISTRIBUIO

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007, 2006 and 2005
(expressed in thousands of reais)

26. Summary of Differences between Brazilian GAAP and U.S. GAAP applicable to the Company
(Continued)

q) Stock-based compensation (Continued)

The Company previously applied the recognition and measurement principles of Accounting Principles
Board Opinion No. 25, Accounting for Stock Issued to Employees, (APB 25) for variable plans and
provided the pro forma disclosures required by SFAS No. 123, Accounting for Stock-Based
Compensation (SFAS No. 123).

Effective January 1, 2006, the Company adopted the provision of SFAS No. 123(R) which resulted in a
cumulative effect of change in accounting principle of R$ 8,737 end compensation expense of R$ 5,541
for 2006.

In accordance with the provisions of the modified prospective transition method, results for prior years
have not been restated.

For purposes of the U.S. GAAP reconciliation, additional charges for compensation revenues (expenses)
were recognized under U.S. GAAP in the amounts of R$ (3,141), R$ 5,541 and R$ 10,490 in 2007, 2006
and 2005, respectively.

A summary of options activity under the Plan as of December 31, 2005, 2006 and 2007, and
changes during the years then ended are presented below:

2005 (as restated)

Weighted
average Weighted average Agregate
exercise remaining intrinsic
Shares Price contractual term value
Outstanding at the beginning of the year 3.414 35,00 2,60 -
Granted during the year 989 25,70 - -
Exercised during the year (291) 22,12 - -
Forteited during the year (427) 33,37 - -
Expired during the year (442) 53,06 - -
Outstanding at the end of the year 3.243 30,96 2,61 30.906

Vested or expected to vest at December 31, 2005 2.172 32,62 2,03 19.448
Exercisable at December 31, 2005 883 42,48 0,80 3.077

F 75
 COMPANHIA BRASILEIRA DE DISTRIBUIO

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007, 2006 and 2005
(expressed in thousands of reais)

26. Summary of Differences between Brazilian GAAP and U.S. GAAP applicable to the Company
(Continued)

q) Stock-based compensation (Continued)

2006 (as restated)

Weighted
average Weighted average Agregate
exercise remaining intrinsic
Shares Price contractual term value
Outstanding at the beginning of the year 3,243 30.96 2.61
Granted during the year 901 33.39
Exercised during the year (207) 34.85
Forteited during the year (517) 28.43
Expired during the year (479) 52.29
Outstanding at the end of the year 2,941 29.18 2.89 24,421

Vested or expected to vest at December 31, 2006 1,342 30.07 1.51 9,951
Exercisable at December 31, 2006 109 25.93 1.09 1,244

2007

Weighted
average Weighted average Agregate
exercise remaining intrinsic
Shares Price contractual term value
Outstanding at the beginning of the year 2,941 29.18 2.89
Granted during the year 1,173 24.64
Exercised during the year (377) 24.09
Forteited during the year (605) 30.14
Expired during the year (242) 36.20
Outstanding at the end of the year 2,890 28.64 2.57 17,335

Vested or expected to vest at December 31, 2007 2,137 28.85 1.11 12,389
Exercisable at December 31, 2007 76 26.97 0.77 536

A summary of the status of the nonvested shares as of December 31, 2007 and changes during the year
ended December 31, 2007 is presented below:

2007

Weighted
average Weighted average Agregate
exercise remaining intrinsic
Shares Price contractual term value

Nonvested at the beginning of the year 2,832 12.10 2.96

Granted during the year 1,122 15.25
Vested during the year (647) 12.75 -
Forfeited during the year (493) 12.35
Nonvested at the end of the year 2,814 13.16 2.96

F 76
 COMPANHIA BRASILEIRA DE DISTRIBUIO

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007, 2006 and 2005
(expressed in thousands of reais)

26. Summary of Differences between Brazilian GAAP and U.S. GAAP applicable to the Company
(Continued)

q) Stock-based compensation (Continued)

The remaining compensation expenses to be recognized related to nonvested awards may be summarized
as follows:

Year Total
2008 6,449
2009 5,567
2010 4,776
2011 1,553
18,346

The recently created Gold Series has a performance condition, but the performance condition is unstated
and subject to subjective change based on the discretion of the Stock Option Plan Management
Committee. The Committee has the ability during the three years vesting period to change the number of
shares to be issued based on a performance condition that is unspecified at the option issuance date. The
intent of this term is to give the Committee the ability to impact the number of shares to be issued based
on performance of the Company principally unfavorable performance. Only upon vesting at the end of
the 36th month are all of the terms fixed.

FAS 123(R) defines the grant date as The date at which an employer and an employee reach a mutual
understanding of the key terms and conditions of a share-based payment award. Given this term in the
Gold Series options, a grant date has not occurred until the vesting date, (or other date when the
Committee establishes all the key terms of the option grant) , because the number of shares to be issued is
not known until that time. As a result, the value of the options is not measured until the vesting date, and
the full fair value of the options will be recorded at that time.

Then, based on the previously discussed liability accounting, the options will be revalued at current fair
value at each subsequent reporting date until such time as the options are exercised. Liability accounting
is applicable to series until XI.

Gold and Silver series are classified as equity and fair value is avaluated at grant date.

The following table illustrates the effect on the net income and earnings per share if the Company had
applied the fair value recognition provisions of statement 123 to options in 2005. For purposes of this pro-
forma disclosure, the value of the options is estimated using the Black-Scholes-Merton option-pricing
formula and amortized to expense over the options vesting periods.

F 77
 COMPANHIA BRASILEIRA DE DISTRIBUIO

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007, 2006 and 2005
(expressed in thousands of reais)

26. Summary of Differences between Brazilian GAAP and U.S. GAAP applicable to the Company
(Continued)

q) Stock-based compensation (Continued)

Year ended December 31 , 2005

Net income U.S. GAAP 270,602

Add: stock-based employee compensation
included in reported net income 10,490
Deduct: total stock-based employee
compensation expense determined under fair
value based method for all awards (2,319)

Net income pro forma 278,773

Earnings per thousand shares:

Basic U.S. GAAP
Preferred 1.25
Common 1.14
Basic - pro forma
Preferred 1.29
Common 1.17

Diluted U.S. GAAP

Preferred 1.25
Common 1.14
Diluted - pro forma
Preferred 1.29
Common 1.17

The fair value of each stock option award is estimated as of year end using the Black-Scholes-Merton
option valuation model that uses various assumptions for inputs: expected dividend yield of 0.52%,
expected volatility of approximately 35.25%, weighted average risk-free interest rate of 11.95% and an
expected average life of four years and three and a half years for the New Plan related to grants after
2007. Forfeitures are estimated using historical cancellation data by each series.

Company calculates the expected volatility for the series according to the expected to complete vesting
period of the option. The risk-free interest rate based on the remuneration of the bonds issued by Brazilian
government, which is the best basis of comparison of risk-free in the Brazilian market. The rate used for
each series change in accordance to the period they are outstanding. The dividend yield is based on the
historical earning per share included in the audited financial statements, which is base for the dividends
paid. The forfeitures are estimated based on: the historical cancellation of each series, the probability that
they will be in the money or out the money in the date of exercise and the percentage of cancellation in
the past years. There is no a fixed percentage for forfeiture, it is re-estimated every year for every series.

The weighted-average grant-date fair value of options granted during the years 2007, 2006, and 2005 was
R$17.48, R$17.19, and R$17.64, respectively. The total intrinsic value of options exercised during the
years ended December 31, 2007, 2006, and 2005, was R$ 3,040, R$ 2,022, and R$ 4,459. The fair value
of nonvested shares is determined based on the opening trading price of the company's shares on the grant
date. The weighted-average grant-date fair value of shares granted during the years 2007, 2006, and 2005
was R$26.32, R$29.12, and R$31.66, respectively.

F 78
 COMPANHIA BRASILEIRA DE DISTRIBUIO

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007, 2006 and 2005
(expressed in thousands of reais)

26. Summary of Differences between Brazilian GAAP and U.S. GAAP applicable to the Company
(Continued)

r) Business segments disclosure

Under Brazilian GAAP, there is no requirement to present disaggregated information with respect to
business segments of an enterprise.

Under U.S. GAAP, SFAS 131, "Disclosures about Segments of an Enterprise and Related Information",
requires that public enterprises disclose certain information about segments on the basis that senior
management uses the information to allocate resources among segments and evaluate their performance.
The Company operates principally in the retail trade; the Company's other activities are not significant.

s) Classification of statement of income line items and other

Under Brazilian GAAP, in addition to the issues noted above, the classification of certain income and
expense items is presented differently from U.S. GAAP.

The reclassifications are summarized as follows:

(i) Interest income and interest expense, together with other financial charges, are displayed within
operating income in the statement of income presented in accordance with Brazilian GAAP.
Such amounts are reclassified to non-operating income and expenses in accordance with U.S.
GAAP;

(ii) Under Brazilian GAAP, gains and losses on the disposal or impairment of permanent assets are
classified as a non-operating income (expense). Under U.S. GAAP, gains and losses on the
disposal or impairment of permanent assets or goodwill are classified as an adjustment to
operating income (expense);

(iii) Employee profit sharing expenses have been classified after non-operating expenses in the
consolidated statement of income in accordance with Brazilian GAAP. Such amounts are
classified as operating expenses in accordance with U.S. GAAP. Employee profit sharing
expenses recorded in 2007, 2006 and 2005 totaled R$ 10,354, R$ 10,583 and R$ 14,453,
respectively.

(iv) Under Brazilian GAAP, equity in results of investees is recognized as operating income in the
statement of income. Under U.S. GAAP equity in results of investees is classified in the
statement of income as non-operating item.

(v) Under Brazilian GAAP, cash consideration received from vendors is recorded as a reduction of
cost of sales on operating expenses. Under U.S. GAAP, cash consideration received from
vendors related to payment for services delivered to a vendor would be recorded as other
income, which totaled R$ 194,676, R$ 177,288 and R$ 147,248 in the years ended December 31,
2007, 2006 and 2005, respectively. Under U.S. GAAP, reimbursements of advertising expense
incurred by the Company to sell the vendors products should be characterized as a reduction of
that expense. The amount of R$ 124,855, R$ 126,644 and R$ 123,720 for the years ended
December 31, 2007, 2006 and 2005, respectively, would be classified as a reduction of selling,
general and administrative expenses.

(vi) Under U.S. GAAP, deferred tax assets and liabilities would be netted and classified as current or
non-current based on the classification of the underlying temporary difference.

F 79
 COMPANHIA BRASILEIRA DE DISTRIBUIO

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007, 2006 and 2005
(expressed in thousands of reais)

26. Summary of Differences between Brazilian GAAP and U.S. GAAP applicable to the Company
(Continued)

s) Classification of statement of income line items and other (Continued)

(vii) Under U.S. GAAP, the cash and cash equivalent presented in the cash flow would be less in
R$ 59,388 for the year ended December 31, 2007, R$ 72,288 for the year ended December 31,
2006 and R$ 161,836 for the year ended December 31, 2005.

t) Reconciliation of differences between Brazilian GAAP and U.S. GAAP

Shareholders equity and net income, adjusted to take into account the significant differences between
Brazilian GAAP and U.S. GAAP, are as follows:

(i) Shareholders equity

2007 2006

As reported in the accompanying financial statements under Brazilian

GAAP 5,011,992 4,842,127

Additional indexation of permanent assets for 1996 and 1997 69,248 71,899
Depreciation and disposal of additional indexation of permanent assets
for 1996 and 1997 (55,728) (56,773)
Business combinations adjustments 305,633 212,113
Equity results
Sendas Distribuidora + stock options (150,443) (126,726)
Miravalles Empreendimentos (17,198) (14,779)
Capitalized interest (8,452) (9,293)
Deferred charges, net (77,177) (76,180)
Capital leases
Property and equipment under capital lease 58,432 31,322
Capital lease obligations (68,202) (38,774)
Sale lease back (75,673) (39,823)
Derivative instruments 18,423 (1,012)
Put options
AIG (17,929) (16,659)
ASSAI (125,321) -
Deferred gain on FIC transaction (69,255) (110,925)
Prepaid expenses and other 14,417 10,425
Share-based compensation liability (11,990) (14,278)
Deferred income taxes on adjustments above (30,312) (4,707)
Shareholders' equity under U.S. GAAP 4,770,465 4,657,957

F 80
 COMPANHIA BRASILEIRA DE DISTRIBUIO

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007, 2006 and 2005
(expressed in thousands of reais)

26. Summary of Differences between Brazilian GAAP and U.S. GAAP applicable to the Company
(Continued)

t) Reconciliation of differences between Brazilian GAAP and U.S. GAAP (Continued)

(ii) Net income

2007 2006 2005

As reported in the accompanying financial statements under Brazilian GAAP 210.878 85.524 256.990
Depreciation and disposal of additional indexation of permanent assets for 1996
and 1997 (1.606) (626) (37.392)
Business combinations adjustments 93.520 115.141 109.338
Equity results
Sendas Distribuidora (23.717) (85.852) (43.103)
Miravalles Empreendimentos (2.419) (3.916) (10.863)
Cash consideration received from vendors - - 25.190
Capitalized interest 841 969 1.032
Leasehold improvements - - 51.677
Deferred charges, net (997) (14.489) (35.519)
Capital leases (2.318) 2.121 1.334
Sale lease back (35.850) (30.669) (9.154)
Derivative instruments 19.435 (1.656) 9
Put options (1.270) (11.455) (5.204)
Deferred gain on FIC transaction 41.670 (39.676) (21.665)
Prepaid expenses and other 3.992 3.134 30.927
Compensation expense from stock ownership plan (3.141) (5.541) (10.490)
Deferred income taxes on adjustments above (25.605) 1.488 (32.505)

Net income under U.S. GAAP 273.413 14.497 270.602

(iii) Condensed changes in shareholders equity under U.S. GAAP

Year ended December 31

2007 2006 2005

Shareholders' equity under U.S. GAAP at beginning of the year 4,657,957 4,147,966 3,922,482
Capital increase 9,071 7,212 6,445
Capital reserve - 517,331 -
Net income for the year 273,413 14,497 270,602
Others 5,429 (8,737) 10,490
Deemed dividends puttable minority interests under D-98 (125,321)
Dividends (50,084) (20,312) (62,053)

Shareholders' equity under U.S. GAAP at end of the year 4,770,465 4,657,957 4,147,966

Net income for the year 273,413 14,497 270,602

Comprehensive Income 273,413 14,497 270,602

F 81
 COMPANHIA BRASILEIRA DE DISTRIBUIO

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007, 2006 and 2005
(expressed in thousands of reais)

26. Summary of Differences between Brazilian GAAP and U.S. GAAP applicable to the Company
(Continued)

u) Liabilites associated with unrecognized tax benefits

The Company adopted the provisions of FASB Interpretation No. 48 (FIN 48), Accounting for
Uncertainty in Income Taxes, on January 1, 2007. Beginning January 1, 2007, the Company records the
financial statement effects of an income tax position when it is more likely than not, based on the
technical merits, that it will be sustained upon examination. A tax position that meets the more-likely-
than-not recognition threshold is measured and recorded as the largest amount of tax benefit that is
greater than 50 percent likely of being realized upon ultimate settlement with a taxing authority.
Previously recognized tax positions are derecognized in the first period in which it is no longer more
likely than not that the tax position will be sustained. The benefit associated with previously unrecognized
tax positions are generally recognized in the first period in which the more-likely-than-not threshold is
met at the reporting date, the tax matter is ultimately settled through negotiation or litigation or when the
related statute of limitations for the relevant taxing authority to examine and challenge the tax position
has expired. The recognition, derecognition and measurement of tax positions are based on managements
best judgment given the facts, circumstance and information available at the reporting date.

Differences between a tax position taken or expected to be taken in the Companys tax returns and the
amount of benefit recognized and measured in the financial statements result in unrecognized tax benefits,
which are recorded in the balance sheet as a either a liability for unrecognized tax benefits or reductions
to recorded tax assets, as applicable. The liability for unrecognized tax benefits expected to be realized
within one year are classified as current in the balance sheet.

The Company will recognize penalties and interest accrued on any unrecognized tax benefits as a
component of income tax expenses.

The adoption of FIN 48 did not have a material impact in the Companys statements of operations and
financial position and did not result in a cumulative adjustment to retained earnings at adoption.

As a consequence of adoption, the Company did not identify, as of December 31, 2007 and 2006, any
recorded liabilities related to unrecognized tax benefits. .

The Company or its subsidiaries file income tax returns in Brazil and other foreign federal and state
jurisdictions. Generally, the tax years 2002 through 2006 remain open and subject to examination by the
relevant tax authorities.

v) U.S.GAAP Supplementary information

(i) Leases

A significant portion of retail units are leased under operating lease agreements, and a few portion under
capital lease generally for terms from five to 25 years with varying renewal options to extend the terms of
the leases for up to 10 years beyond the initial non-cancelable term. Most of the leases include contingent
rentals based on a percentage of sales. For the year ended December 31, 2007, the effective rate of rentals
was 1.79% (2006 2.05%, 2005 1.69%) of sales. Also, certain leases provide for the payment by the
lessee of certain costs (taxes, maintenance and insurance). Some selling space has been sublet to other
retailers in certain of the Company's leased facilities. Penalties are incurred on lease cancellations.

F 82
 COMPANHIA BRASILEIRA DE DISTRIBUIO

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007, 2006 and 2005
(expressed in thousands of reais)

26. Summary of Differences between Brazilian GAAP and U.S. GAAP applicable to the Company
(Continued)

v) U.S.GAAP Supplementary information (Continued)

(i) Leases (continued)

Certain computer equipment leases are accounted for as capital leases, which are generally for terms of
three years and allow the Company the option to purchase such equipment at the termination of the
leases. Future minimum annual lease payments with respect to non-cancelable capital and operating
leases and imputed interest on capital leases as of December 31, 2007 are summarized below:

Sale Lease- Operating

Capital Lease back Lease

2008 33,688 95,977 170,067

2009 29,647 95,977 147,905
2010 18,197 95,977 114,981
2011 8,412 95,977 99,809
2012 6,782 95,977 84,147
Thereafter 133,914 1,825,476 133,122

Total minimum lease payments 230,640 2,305,361 750,031

Imputed interest (137,695) (1,264,988)

Present value of capitalized lease payments 92,945 1,040,373

Current portion 23,826 11,482

Long-term capitalized lease obligations 69,119 1,028,891

Net rental expense, included in selling, general and administrative expenses, consists of the following:

2007 2006 2005

Minimum rentals 209,590 191,971 194,269

Contingent rentals 95,093 120,633 35,428
Sublease rentals (46,913) (41,264) (37,355)
257,770 271,340 192,342

For purposes of the U.S. GAAP reconciliation, additional charges for the capital lease obligations
(expenses) were recognized in the amounts of R$ (2,318), R$ 2,121 and R$ 1,334 in 2007, 2006 and
2005, respectively. The effect in shareholders equity, net of the effects in Property and equipments and
capital lease obligation, is R$ (9,770) and R$ (7,452) in 2007 and 2006, respectively.

F 83
 COMPANHIA BRASILEIRA DE DISTRIBUIO

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007, 2006 and 2005
(expressed in thousands of reais)

26. Summary of Differences between Brazilian GAAP and U.S. GAAP applicable to the Company
(Continued)

v) U.S.GAAP Supplementary information (Continued)

(ii) Major Non-cash Transactions

In 2007, the Company acquired equipment under capital lease agreements in the amount of R$ 5,017
(2006 R$ 13,592 and 2005 R$ 2,793).

v) Recently issued accounting pronouncements under U.S. GAAP

In September 2006, the FASB issued SFAS 157 - "Fair value measurements", which defines fair value,
establishes a framework for measuring fair value, and expands disclosures about fair value measurements.
This Statement applies under other accounting pronouncements that require or permit fair value
measurements. The FASB having previously concluded in those accounting pronouncements that fair
value is the relevant measurement attribute. Accordingly, this Statement does not require any new fair
value measurements. This Statement is effective for financial statements issued for fiscal years beginning
after November 15, 2007 and interim periods within those fiscal years (that is, in the case of CBD,
January 1, 2008). The Company continues to evaluate the impact of this statement on its consolidated
financial statements but believes that such pronouncement will not generate a material impact on the
Company's consolidated results of operations or financial position.

In February 2007, the FASB issued SFAS 159, "The Fair Value Option for Financial Assets and Financial
Liabilities". SFAS 159, includes an amendment of SFAS 115, "Accounting for Certain Investments in
Debt and Equity Securities". SFAS 159 permits companies to choose to measure many financial
instruments and certain other items at fair value in order to mitigate volatility in reported earnings caused
by measuring related assets and liabilities differently without having to apply complex hedge accounting
provisions. SFAS 159 is effective for the Company's fiscal year that begins after November 15, 2007 (that
is, in the case of CBD, January 1, 2008). The Company is currently assessing the impact of this statement
on its consolidated financial statements but believes that such pronouncement will not generate a material
impact on the Company's consolidated results of operations or financial position.

In December 2007, the FASB issued SFAS 141 (revised 2007), "Business Combination", which replaces
SFAS 141, Business Combinations. SFAS 141(R) retains the fundamental requirements in SFAS 141 the
acquisition method of accounting (which SFAS 141 called the purchase method) be used for all business
combinations and for an acquirer to be identified for each business combination. SFAS 141(R) defines the
acquirer as the entity that obtains control of one or more businesses in the business combination and
establishes the acquisition date as the date that the acquirer achieves control. SFAS 141(R) did not define
the acquirer, although it included guidance on identifying the acquirer. SFAS 141(R) scope is broader
than that of SFAS 141, which applied only to business combinations in which control was obtained by
transferring consideration. The result of applying SFAS 141 guidance on recognizing and measuring
assets and liabilities in a step acquisition was to measure them at a blend of historical costs and fair
values. In addition, SFAS 141(R) requires a company to measure the noncontrolling interest in the
acquiree at fair value which results in recognizing the goodwill attributable to the noncontrolling interest
in addition to that attributable to the acquirer. SFAS 141(R) applies prospectively to business
combinations for which the acquisition date is on or after the beginning of the first annual reporting
period beginning on or after December 15, 2008 (that is, in the case of CBD, January 1, 2009). An entity
may not apply it before that date. The effective date of this Statement is the same as that of the related
SFAS 160, Noncontrolling Interests in Consolidated Financial Statements - an amendment of ARB No.
51" (described below). The Company will apply such pronouncement on a prospective basis for each new
business combination.

F 84
 COMPANHIA BRASILEIRA DE DISTRIBUIO

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007, 2006 and 2005
(expressed in thousands of reais)

26. Summary of Differences between Brazilian GAAP and U.S. GAAP applicable to the Company
(Continued)

v) Recently issued accounting pronouncements under U.S. GAAP (Continued)

In December 2007, the FASB issued SFAS 160 noncontrolling interests in consolidated financial
statements, which clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the
consolidated entity that should be reported as equity in the consolidated financial statements. SFAS 160 is
effective for fiscal years and interim periods within those fiscal years, beginning on or after December 15,
2008 (that is, in the case of CBD, January 1, 2009). Earlier adoption is prohibited. SFAS 160 shall be
applied prospectively as of the beginning of the fiscal year in which this Statement is initially applied,
except for the presentation and disclosure requirements. The presentation and disclosure requirements
shall be applied retrospectively for all periods presented. The Company is currently evaluating the impact
of such new pronouncement in its consolidated financial statements.

In December 2007, the SEC staff issued Staff Accounting Bulletin No. 110 (SAB 110), which, effective
January 1, 2008, amends and replaces Question 6 of Section D.2 of SAB Topic 14, Share- Based
Payment. SAB 110 expresses the views of the SEC staff regarding the use of a simplified method in
developing an estimate of expected term of plain vanilla share options in accordance with FASB
Statement No. 123(R), Share-Based Payment. Under the simplified method, the expected term is
calculated as the midpoint between the vesting date and the end of the contractual term of the option. The
use of the simplified method, which was first described in Staff Accounting Bulletin No. 107, was
scheduled to expire on December 31, 2007. The SEC staff does not expect the simplified method to be
used when sufficient information regarding exercise behavior, such as historical exercise data or exercise
information from external sources, becomes available. Management is currently evaluating the effect, if
any, of the adoption of SAB 110 on its consolidated financial statements.

27. Subsequent events

a) AIG exercise of the Put Option

In March 17, 2008, AIG exercised the put option for its 157,082,802 preferred shares of Sendas
Distribuidora, as described in note 9d, by the amount of R$165,440; such put will be settled in the amount
of R$ 165,440, comprised of cash of R$12,066 and RS153, 374 comprised of 4,325 preferred shares of
CBD (2.05% of its capital) based on the average quotation of the 30 days before the exercise date.

After the settlement, CBD will hold 57.43% of Sendas Distribuidora against 42.57% of Sendas S.A.,
nevertheless, Sendas Distribuidora is still under joint control, since the voting and protective rights
remain unchanged for Sendas S.A. The control of Sendas Distribuidora by CBD is subject to and will be
effective only after the results of the arbitration process described in note 9c.

b) Increase of Capital

In the Extraordinary Meetings of April 8, 2008, the shareholders of CBD approved the increase of the
capital in cash in the amount of R$ 273,540 through the subscription of 7,714,055 preferred shares.

c) Approval of dividends

At the Annual and Extraordinary Meetings of April 30, 2008, the shareholders approved (i) the
distribution of proposed dividends in the amount of R$ 50,084 (being R$0.2084 per 1 (one) common
share and R$0.22884 per 1 (one) preferred share) and (ii) the increase of capital in the amount of R$
60,936 using expansion reserve in the amount of R$ 54,842 and earnings retention reserve based on
capital budget of R$ 6,094.

F 85
 COMPANHIA BRASILEIRA DE DISTRIBUIO

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007, 2006 and 2005
(expressed in thousands of reais)

27. Subsequent events (Continued)

d) Extension of PAFIDC term

As described in note 7, the PAFIDC term ends on May 26, 2008. The quotaholders have signed a
memorandum of understanding on February 22, 2008, in order to extend the duration of the fund for more
two years. The new quotas will have benchmark profitability of 105.0% of CDI. The other operational
conditions remain the same.

e) Arbitration decision

In addition to Note 9c, on April 29, 2008, the Fundao Getlio Vargas Arbitration Chamber , ultimately
expressed an opinion, which is favorable to CBD, that the transaction with the Casino Group in 2005 did
not constitute a change of control of CBD as claimed by Sendas S.A. Accordingly, the claims formalized
by Sendas in the arbitration proceeding were denied, specifically the request for the recognition of its
alleged right to exercise the put of its shares in Sendas Distribuidora S.A. and promptly receive the total
amount in cash. Consequently, Sendas S.A. , after the transfer value is defined and agreed upon by the
parties, has to exchange all of its shares in Sendas Distribuidora S.A. with preferred shares of CBDs
capital stock following the terms established in the shareholders agreement.

F 86
 Report of Independent Registered
Public Accounting Firm

To the Board of Directors and Shareholders

Miravalles Empreendimentos e Participaes S.A.

1 We have audited the accompanying consolidated balance sheets of Miravalles Empreendimentos e

Participaes S.A. and subsidiaries ("the Company") as of December 31, 2007 and 2006 and the
related consolidated statements of operations and of changes in financial position and of changes
in shareholders' equity of Miravalles Empreendimentos e Participaes S.A. (the Parent
Company) for each of the years then ended. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these financial
statements based on our audits.

2 We conducted our audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis for our opinion.

3 In our opinion, the consolidated financial statements referred to above present fairly, in all material
respects, the consolidated financial position of Miravalles Empreendimentos e Participaes S.A.
and subsidiaries at December 31, 2007 and 2006, the consolidated results of their operations, the
consolidated changes in their financial position and the changes in shareholders' equity of the
Parent Company for each of the years then ended, in conformity with accounting practices adopted
in Brazil.

4 Accounting practices adopted in Brazil vary in certain significant respects from accounting
principles generally accepted in the United States of America. Information relating to the nature and
effect of such differences is presented in Note 15 to the consolidated financial statements.

So Paulo, Brazil
March 11, 2008

PricewaterhouseCoopers
Auditores Independentes

A-1
MIRAVALLES EMPREENDIMENTOS E PARTICIPAES S.A.
CONSOLIDATED BALANCE SHEET
(In thousands of reais)

ASSETS 12/31/2007 12/31/2006

CURRENT ASSETS 1,340,027 803,526

CASH AND CASH EQUIVALENTS 5,375 4,609
INTERBANK INVESTMENTS - Money market (Notes 4a and 5) 126,167 6,403
SECURITIES AND DERIVATIVE FINANCIAL INSTRUMENTS (Notes 4b and 6) 16,238 13,681
LOAN OPERATIONS (Note 7) 439,168 385,100
Private sector (Note 4c) 660,880 548,888
(-) Allowance for loan losses (Note 4d) (221,712) (163,788)
OTHER RECEIVABLES 746,775 388,115
Accrued receivables (Note 4e) 8,337 6,305
Operations with credit granting characteristics (Note 2) 667,223 304,572
Sundry (Note 8a) 79,893 80,836
(-) Allowance for loan losses (Notes 4d and 7b) (8,678) (3,598)
OTHER ASSETS Prepaid expenses (Note 8b) 6,304 5,618

LONG-TERM RECEIVABLES 109,052 162,444

INTERBANK INVESTMENTS - Money market (Notes 4a and 5) 5,217 6,552
SECURITIES AND DERIVATIVE FINANCIAL INSTRUMENTS (Notes 4b and 6) - 45,774
LOAN OPERATIONS (Note 7) 13,659 37,382
Private sector (Note 4c) 16,693 39,638
(-) Allowance for loan losses (Note 4d) (3,034) (2,256)
OTHER RECEIVABLES 71,553 47,809
Operations with credit granting characteristics (Note 2) 106 346
Sundry (Note 8a) 71,449 47,467
(-) Allowance for loan losses (Notes 4d and 7b) (2) (4)
OTHER ASSETS Prepaid expenses (Note 8b) 18,623 24,927

PERMANENT ASSETS 18,384 21,459

FIXED ASSETS (Notes 4f and 10) 7,357 8,065
Other fixed assets 11,865 11,058
(-) Accumulated depreciation (4,508) (2,993)
DEFERRED CHARGES (Note 4g and 10) 11,027 13,394
Organization and expansion expenditures 17,232 16,481
(-) Accumulated amortization (6,205) (3,087)

TOTAL ASSETS 1,467,463 987,429

A-2
MIRAVALLES EMPREENDIMENTOS E PARTICIPAES S.A.
CONSOLIDATED BALANCE SHEET
(In thousands of reais)

LIABILITIES 12/31/2007 12/31/2006

CURRENT LIABILITIES 1,197,165 785,459

DEPOSITS Interbank deposits (Notes 4a and 11) 437,752 412,048
OTHER LIABILITIES 759,413 373,411
Collection and payment of taxes and contributions 3,518 1,882
Social and statutory 527 289
Tax and social security contributions (Note 9c) 2,871 3,992
Credit card operations 726,129 325,105
Sundry (Note 8c) 26,368 42,143

LONG-TERM LIABILITIES 48,108 40,978

DEPOSITS Interbank deposits (Notes 4a and 11) 8,659 27,146
OTHER LIABILITIES 39,449 13,832
Tax and social security contributions (Note 9c) 35,517 9,575
Sundry (Note 8c) 3,932 4,257

DEFERRED INCOME (Note 4j) 828 2,490

STOCKHOLDERS EQUITY (Note 12) 221,362 158,502

Capital - Domestic 279,179 260,888
Capital reserves - 3,523
Adjustment to market value securities - (7)
Retained earnings (Accumulated deficit) (57,817) (105,902)

TOTAL LIABILITIES AND STOCKHOLDERS EQUITY 1,467,463 987,429

(The accompanying notes are an integral part of these financial statements)

A-3
MIRAVALLES EMPREENDIMENTOS E PARTICIPAES S.A.
CONSOLIDATED STATEMENT OF INCOME
(In thousands of reais)

01/01 to 01/01 to
12/31/2007 12/31/2006

INCOME FROM FINANCIAL OPERATIONS 471,200 349,909

Loan operations 465,148 343,252
Securities 6,052 6,657

EXPENSES ON FINANCIAL OPERATIONS (326,139) (261,193)

Money market (54,873) (59,146)
Borronwings and onlendings (294) -
Allowance for loan losses (270,972) (202,047)

GROSS INCOME FROM FINANCIAL OPERATIONS 145,061 88,716

OTHER OPERATING INCOME (EXPENSES) (230,036) (247,448)

Service fees (Note 8d) 122,484 88,557
Personnel expenses (51,634) (46,720)
Other administrative expenses (Note 8e) (227,927) (243,774)
Tax expenses (Note 9a) (44,654) (35,984)
Other operating income (Note 8f) 13,109 14,890
Other operating expenses (Note 8g) (41,414) (24,417)

NONOPERATING INCOME (316) (87)

INCOME BEFORE TAX ON INCOME (85,291) (158,819)

INCOME TAX AND SOCIAL CONTRIBUTION (Notes 4i and 9a I) 27,925 53,654

Due on operations for the period (5,010) (10,447)
Related to temporary differences 32,935 64,101

PROFIT SHARING (451) (737)

NET LOSS (57,817) (105,902)

NUMBER OF SHARES (Note 12a) 255,038 130,444

NET INCOME (LOSS) PER THOUSAND SHARES R$ (226.70) (811.86)

(The accompanying notes are an integral part of these financial statements)

A-4
MIRAVALLES EMPREENDIMENTOS E PARTICIPAES S.A.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (NOTE 12)
(In thousands of reais)

Adjustment Retained
Capital to market earnings
Capital Total
reserves value - (Accumulated
securities deficit)

BALANCES AT JANUARY 1, 2006 120,000 4,005 - - 124,005

Reserves from tax incentives - (482) - - (482)
Capital increase E/ASM 03/28/2006, 07/25/2006, 10/30/2006, 12/21/2006 140,888 - - - 140,888
Adjustment to market value Securities - Subsidiaries and affiliates - - (7) - (7)
Loss for the year - - - (105,902) (105,902)
BALANCES AT DECEMBER 31, 2006 260,888 3,523 (7) (105,902) 158,502
CHANGES IN THE PERIOD 140,888 (482) (7) (105,902) 34,497
BALANCES AT JANUARY 1, 2007 260,888 3,523 (7) (105,902) 158,502
Capital reduction E/ASM 04/30/2007 (Note 12a) (102,379) (3,523) - 105,902 -
Capital increase E/ASM 06/28/2007, 09/27/2007, 12/27/2007 (Note 12a) 120,670 - - - 120,670
Adjustment to market value Securities - Subsidiaries and affiliates - - 7 - 7
Loss for the year - - - (57,817) (57,817)
BALANCES AT DECEMBER 31, 2007 279,179 - - (57,817) 221,362
CHANGES IN THE PERIOD 18,291 (3,523) 7 48,085 62,860
The accompanying notes are an integral part of these financial statements

A-5
 MIRAVALLES EMPREENDIMENTOS E PARTICIPAES S.A.
Consolidated Statement of Changes in Financial Position
(In thousands of reais)

01/01 to 01/01 to
12/31/2007 12/31/2006
A - FINANCIAL RESOURCES WERE PROVIDED BY 586,726 434,105

STOCKHOLDERS' RESOURCES - Capital increase 120,670 140,888

THIRD PARTIES' RESOURCES ARISING FROM: 466,056 293,217

- Increase in liabilities: 418,835 252,240
Deposits 7,217 187,353
Other liabilities 411,618 64,887
- Decrease in assets: 48,847 48,523
Financial investments - 48,523
Securities and derivative financial instruments 43,229 -
Other assets 5,618 -
- Changes in deferred income (1,662) (7,546)
- Disposal of fixed assets 36 -

B - FINANCIAL RESOURCES WERE USED FOR 585,960 435,031

ADJUSTED LOSS 52,647 100,638

Loss 57,817 105,902
Adjustments to loss Depreciation and amortization (5,170) (5,264)

INVESTMENTS IN FIXED ASSETS 1,656 1,714

DEFERRED CHARGES 475 558

INCREASE IN ASSETS: 531,182 332,121

- Financial investments 118,428 -
- Securities and derivative financial instruments - 59,466
- Loans 30,345 128,887
- Other receivables 382,409 113,821
- Other assets - 29,947

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (A - B) 766 (926)

CHANGES IN FINANCIAL POSITION:

Cash and cash equivalents:

- At the beginning of the period 4,609 5,535
- At the end of the period 5,375 4,609
- Increase (decrease) 766 (926)
The accompanying notes are an integral part of these financial statements

A-6
 MIRAVALLES EMPREENDIMENTOS E PARTICIPAES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006
(In thousands of reais)

NOTE 1 - OPERATIONS

Miravalles Empreendimentos e Participaes S.A. (MIRAVALLES) is a closely-held corporation whose shares

are 50% held by subsidiaries of Companhia Brasileira de Distribuio (CBD) and the remaining 50% are held by
subsidiaries of Banco Ita Holding Financeira (ITA HOLDING). CBD is one of the major retail chains in Brazil
and ITA HOLDING is one of the largest banking groups in Brazil.

Miravalles, through its subsidiaries Financeira Ita CBD S.A. Crdito, Financiamento e Investimento (FIC) and
FIC Promotora de Vendas Ltda. (FIC PROMOTORA), operates in the development and sale of financial
products and services and related products and services exclusively to CDB clients as established in a
partnership agreement signed by CDB and ITA HOLDING in July 2004. FIC is a financial institution subject to
the regulation of the Central Bank of Brazil (BACEN).

Among the financial products and services that are provided by MIRAVALLES are private label credit cards
(own cards with its use restricted to CBD stores), co-branded cards that are widely accepted, direct consumer
credit and personal loans.

NOTE 2 - PRESENTATION OF THE FINANCIAL STATEMENTS

The financial statements of MIRAVALLES and of its subsidiaries (MIRAVALLES CONSOLIDATED) have been
prepared in accordance with Brazilian Corporate Law and instructions issued by the Central Bank of Brazil
(BACEN), which include the use of estimates necessary mainly to calculate accounting provisions, particularly
regarding the allowance for loan losses and the recognition of deferred tax assets.

Loan Operations and Other Receivables - Sundry, includes receivables arising from purchases made by credit
cardholders and direct consumer loans. Loan Operations comprises operations made to clients through the
revolving credit line whereas Other Receivables Sundry comprises purchases made by credit cardholders to
be billed and maturing bills. Funding for such loans is recorded under Other Liabilities Sundry.

NOTE 3 - CONSOLIDATION

Intercompany transactions and balances and results have been eliminated on consolidation.

The consolidated financial statements include the following direct and indirect subsidiaries:

Financeira Ita CBD S.A. Crdito, Financiamento e Investimento 99.99%

FIC Promotora de Vendas Ltda 99.99%

A-7
NOTE 4 - SUMMARY OF THE MAIN ACCOUNTING PRACTICES

a) Interbank investments and Interbank Deposits Corresponds to operations with fixed charges recorded
at present value, calculated "pro rata die" based on the variation of the contracted index and interest rate.

b) Securities - Recorded at cost of acquisition restated by the index and/or effective interest rate and
presented in the Balance Sheet, according to BACEN Circular Letter 3,068, of November 8, 2001.
Securities are classified into the following categories:

- Trading securities acquired to be actively and frequently traded, and adjusted to market value, with a
contra-entry to the results for the period;

- Available-for-sale securities securities that can be negotiated but are not acquired to be actively and
frequently traded. They are adjusted to their market value with a contra-entry to an account disclosed in
stockholders equity;

Gains and losses on available-for-sale securities, when realized, are recognized at the trading date in the
statement of income, with a contra-entry to a specific stockholders' equity account.

Decreases in the market value of available-for-sale securities below their related costs, resulting from other
than temporary reasons, are recorded in income as realized losses.

The effects of the application of the procedures described above by the subsidiary FIC, reflected by FIC in
its stockholders' equity or income, were also recorded in the stockholders' equity or in the consolidated
income proportionally to the ownership percentage.

c) Loan and Other Credit Operations (Operations with Credit Granting Characteristics) These
transactions are recorded at present value and calculated pro rata die based on the variation of the
contracted index and interest rate, and are recorded on the accrual basis until the 60th day overdue. After
the 60th day, income is recognized upon the effective collection of installments.

d) Allowance for Loan Losses - The balance of the allowance for loan losses was recorded according to the
rules determined by CMN Resolutions 2,682 of December 21, 1999 and 2,697 of February 24, 2000, among
which are:

Allowances are calculated based on the percentages set forth by CMN for each rating category, that vary
from AA to H. Loans are classified in each category only considering whether the payment of principal
and/or interest is overdue, provided that the rating corresponds to not more than A. The percentages of
allowance established by CMN for loans classified in each category are as follows:

Category % of allowance
A 0.50
B 1.00
C 3.00
D 10.00
E 30.00
F 50.00
G 70.00
H 100.00

Write-offs are recorded 360 days after the due date of the credit or after 540 days for operations with
more than 36 months until their final maturity.

e) Accrued receivables Corresponds to other receivables related to credit card transactions.

f) Fixed assets These assets are stated at cost of acquisition, less accumulated depreciation.
Depreciation is calculated using the straight-line method at the following annual rates:

Furniture and equipment in use 10%

Installations 10% and 20%
EDP systems 20%

A-8
g) Deferred charges Correspond mainly to pre-operating expenses incurred with telemarketing and
advertising as well as software development costs. They are amortized based on the straight-line method
over five years.

h) Contingent Assets and Liabilities and Legal Liabilities Tax and Social Security: assessed,
recognized and disclosed according to the provisions set forth in CVM Resolution 489 of October 3, 2005.

I - Contingent Assets and Liabilities

Refer to potential rights and obligations arising from past events, the occurrence of which is dependent
upon future events.

Contingent Assets: not recognized, except upon evidence indicates a high probability level of
realization, usually represented by claims awarded a final and unappealable judgment and
confirmation of the recoverability of the claim through collection of amounts or its offset against
another liability.

Contingent Liabilities: basically arise from administrative proceedings and lawsuits, inherent in the
normal course of business, filed by third parties, former employees and governmental bodies, in
connection with civil, labor, tax and social security lawsuits and other risks. These contingencies
are recorded based on the opinion of legal advisors and consider the probability that financial
resources shall be required for settling the obligation, the amount of which may be estimated with
reasonable certainty. Contingencies are classified either as probable, for which provisions are
recognized; possible, which are disclosed but not recognized; or remote, for which recognition or
disclosure is not required. Any contingent amounts are measured through the use of models and
criteria which allow their adequate measurement, in spite of the uncertainty of their term and
amounts.

Escrow deposits are restated in accordance with the current legislation.

II - Legal Liabilities Tax and Social Security

Represented by amounts payable related to tax liabilities, the legality or constitutionality of which are
subject to administrative or judicial defense, recognized at the full amount under discussion.

Liabilities and related escrow deposits are adjusted in accordance with the current legislation.

According to the opinion of the legal advisors, MIRAVALLES is not involved in any other administrative
proceedings or lawsuits that may significantly affect the results of its operations.

i) Taxes - These provisions are calculated according to current legislation at the rates shown below.

Income tax 15.00%

Additional income tax 10.00%
Social contribution 9.00%
PIS (1) 1.65%
COFINS (1) 7.60%
ISS up to 5,00%
CPMF (2) 0.38%
(1) For non-financial subsidiaries that do not fall into the non-cumulative calculation system, the PIS rate is 0.65%, and COFINS rate is 4%.
(2) As from January 1, 2008, the withholding and payment of this contribution were ended, pursuant to Regulatory Instruction 450 of September 21,
2004, of the Federal Revenue Service.

j) Deferred income Correspond mainly to interest received in advance with respect to consumer credit
transactions that will be accrued in future periods over the loan term.

A-9
NOTE 5 - INTERBANK INVESTMENTS

12/31/2007 12/31/2006
0 - 30 181 - 365 After 365 Total Total

Money market
Securities purchased under resale agreements 21,970 104,197 5,217 131,384 12,955

NOTE 6 - SECURITIES AND DERIVATIVE FINANCIAL INSTRUMENTS

a) The portfolio is composed of shares of Fixed-income Funds (Nonexclusive) that total R$ 16,238 and are
classified as Trading Securities. On December 31, 2006, the portfolio was composed of Financial Treasury Bills
amounting to R$ 45,774, Bank Deposit Certificate amounting to R$ 4,065 and Quotas of Fixed-income Funds
amounting to R$ 9,616.

b) At December 31, 2007 and 2006 there were no open positions on the derivatives market.

A - 10
NOTE 7 LOAN AND OTHER CREDIT OPERATIONS

a) Per maturity and risk level

At December 31, 2007, includes Loan Operations RR$ 677,573 (R$ 588,526 at December 31, 2006) and Other Credits Operations with Credit Granting Characteristics R$ 667,329 (R$ 304,918 at
December 31, 2006).

OVERDUE OPERATIONS (1)

A B C D E F G H Total
Falling due installments - 9,496 7,420 5,214 12,463 7,480 5,004 25,858 72,935
01 to 60 - 2,776 2,117 1,415 8,146 2,604 1,481 12,027 30,566
61 to 90 - 1,138 893 660 733 757 590 2,847 7,618
91 to 180 - 2,817 2,138 1,558 1,819 1,898 1,446 6,146 17,822
181 to 365 - 2,320 1,880 1,303 1,385 1,541 1,039 3,800 13,268
Over 365 - 445 392 278 380 680 448 1,038 3,661

Overdue installments - 15,203 16,181 17,008 20,048 19,440 17,872 141,493 247,245
01 to 60 - 15,203 16,181 2,967 2,879 2,189 1,557 8,862 49,838
61 to 90 - - - 14,041 2,144 1,624 894 4,980 23,683
91 to 180 - - - - 15,025 15,627 15,421 18,558 64,631
181 to 365 - - - - - - - 108,881 108,881
Over 365 - - - - - - - 212 212

SUBTOTAL - 24,699 23,601 22,222 32,511 26,920 22,876 167,351 320,180

NONOVERDUE OPERATIONS
Falling due installments 944,705 17,851 7,797 2,502 11,049 4,750 1,468 10,884 1,001,006
01 to 60 585,665 10,309 4,094 1,234 8,389 1,436 660 6,228 618,015
61 to 90 93,427 1,916 915 261 536 391 130 959 98,535
91 to 180 154,245 3,217 1,611 504 1,059 943 278 1,744 163,601
181 to 365 100,499 2,117 1,019 395 828 1,190 275 1,392 107,715
Over 365 10,869 292 158 108 237 790 125 561 13,140

Overdue up to 14 days 21,967 473 304 145 283 130 59 355 23,716

SUBTOTAL 966,672 18,324 8,101 2,647 11,332 4,880 1,527 11,239 1,024,722
- - - - - - - - 1
GRAND TOTAL (a) 966,672 43,023 31,702 24,869 43,843 31,800 24,403 178,590 1,344,902
TOTAL ALLOWANCE (4,833) (430) (951) (2,487) (13,153) (15,900) (17,082) (178,590) (233,426)
GRAND TOTAL AT 12/31/2006 (b) 601,882 40,646 30,394 23,040 24,519 23,335 18,791 130,837 893,444
TOTAL ALLOWANCE (3,009) (406) (912) (2,304) (7,356) (11,668) (13,154) (130,837) (169,646)
(a) Operations with overdue installments for more than 14 days or with companies in bankruptcy or in process of bankruptcy companies.
(b) The composition of the portfolio by sector of activity corresponds exclusively to operations with individuals.

A - 11
b) Allowance for loan losses

01/01 to 01/01 to
12/31/2007 12/31/2006
Opening balance (169,646) (39,860)
Portfolio acquisition (Nota 7d) (49,106) -
Net increase for the period (270,972) (202,047)
Write-Offs 256,298 72,261
Closing balance (233,426) (169,646)

c) Recovery and renegotiation of credits

I - In the period, loans amounting to R$ 22,843 (R$ 1,821 from 01/01 to 12/31/2006) and that had been
written off were recovered.

II - At 12/31/2007, renegotiated credits totaled R$ 47,439 (R$ 5,152 at 12/31/2006), and the related
Allowance for Loan Losses totaled R$ 30,709 (R$ 3,190 at 12/31/2006)

d) In May 2007, the portfolio of Banco Ita Cartes S.A.s (consisting exclusively of credits cards balances
for customers with an active credit line as of the date of acquisition) amounting to R$ 366,533 was
acquired. The portfolios carrying amount was R$ 415,639 and the corresponding allowance for loan
losses was R$ (49,106). The amount paid of R$ 366,533 represents the estimated fair value of the
acquired portfolio.

A - 12
NOTE 8 BREAKDOWN OF ACCOUNTS

a) Other Sundry Receivables

12/31/2007 12/31/2006
Deferred tax assets (Note 9b) 117,063 84,129
Taxes and contributions for offset 1,383 818
Sundry debtors 30,673 41,787
Amounts receivable from related companies (Note 13) 518 866
Sundry 1,705 703
Total 151,342 128,303

b) Prepaid expenses

12/31/2007 12/31/2006
Customer rights (*) 24,210 29,797
Sundry 717 748
Total 24,927 30,545
(*) Refers to the agreement over CDB cards that used to be in the portfolio of Banco Ita Cartes S.A. (BIC) (former Credicard Banco
S.A.). For the rights, the subsidiary FIC paid R$ 33,522. This agreement is valid for six years, as from May 2, 2006.

c) Other Sundry Liabilities

12/31/2007 12/31/2006
Provision for payments 6,757 21,727
Provision for contingent liabilities 6,948 5,505
Civil 6,082 5,112
Labor 866 393
Amounts payable to related companies (Note 13) 1,544 1,826
Sundry creditors 15,051 17,342
Total 30,300 46,400

d) Service fees

01/01 to 01/01 to
12/31/2007 12/31/2006
Credit cards 109,252 61,039
Statement issue fee 36,909 30,905
Commissions paid - Stores 34,108 17,274
Loan operations 16,941 7,660
Insurance/Assistance 5,767 3,049
Annual fees 14,335 1,806
Sundry 1,192 345
Other 13,232 27,518
Commissions 12,564 27,239
Collection income 668 279
Total 122,484 88,557

A - 13
e) Other administrative expenses

01/01 to 01/01 to
12/31/2007 12/31/2006
Cost sharing (100,215) (111,595)
Data processing and telecommunications (47,749) (54,862)
Third-party services (44,165) (37,703)
Advertising, promotions and publications (6,970) (12,114)
Financial system services (11,541) (8,750)
Sundry (17,287) (18,750)
Total (227,927) (243,774)

f) Other operating revenues

01/01 to 01/01 to
12/31/2007 12/31/2006
Other revenues Credit Card 1,656 7,071
Recovery of charges and expenses 10,714 5,080
Reversal of operating provisions 515 2,390
Sundry 224 349
Total 13,109 14,890

g) Other operating expenses

01/01 to 01/01 to
12/31/2007 12/31/2006
Provision for civil contingencies (15,845) (10,071)
Other expenses Credit Card (13,996) (6,012)
Claims (8,031) (3,421)
Charges on cost sharing - (3,178)
Sundry (3,542) (1,735)
Total (41,414) (24,417)

A - 14
NOTE 9 - TAXES

a) Composition of expenses for taxes and contributions

I) We present below the Income tax and Social Contribution due on operations for the period and on temporary
differences:

01/01 to 01/01 to
12/31/2007 12/31/2006

Due on operations for the period

Income before income tax and social contribution (85,291) (158,819)
Charges (Income Tax and Social Contribution) at the rates of 25% and 9% (Note 4i),
respectively 28,999 53,998

Increase/decrease to Income Tax and Social Contribution charges arising from:

Permanent (additions) exclusions (1,007) (832)
Temporary (additions) exclusions (17,263) (20,419)
Allowance for loan losses (13,928) (10,696)
Legal liabilities - tax and social security and contingent liabilities (6,426) (4,142)
Other non-deductible provisions 3,091 (5,581)
(Increase) Reduction of tax losses/Negative social contribution basis (15,739) (43,194)
Expenses for income tax and social contribution (5,010) (10,447)
Related to temporary differences
Increase (reversal) for the period 32,987 63,648
Prior periods increase (reversal) (52) 453
Income (expenses) from deferred taxes 32,935 64,101
Total income tax and social contribution 27,925 53,654

II) Tax expenses

01/01 to 01/01 to
12/31/2007 12/31/2006
PIS AND COFINS (33,443) (25,648)
ISS (8,419) (7,717)
CPMF (2,559) (2,399)
Other (233) (220)
Total (Note 4i) (44,654) (35,984)

A - 15
b) Deferred taxes

I) The deferred tax balance, segregated based on its origin and disbursements incurred, is represented as
follows:

Realization /
12/31/2006 Increase 12/31/2007
Reversal

Related to income tax and social contribution loss carryforwards 54,562 - 15,671 70,233

Temporary differences 29,567 (27,060) 44,323 46,830

Allowance for loan losses 18,334 (18,334) 32,262 32,262

Legal liabilities - tax and social security 2,322 - 5,957 8,279

Provision for contingent liabilities 1,871 (1,738) 2,207 2,340

Other non-deductible provisions 7,040 (6,988) 3,897 3,949

Total deferred taxes 84,129 (27,060) 59,994 117,063

II - The estimate of realization and present value of Deferred Tax Assets existing at December 31, 2007,
in accordance with the expected generation of future taxable income, based on technical feasibility
studies, are:

Deferred tax assets

Realization year
Temporary differences Tax loss and negative basis TOTAL

2008 30,170 6,993 37,163

2009 4,723 13,819 18,542
2010 1,098 11,146 12,244
2011 1,264 13,568 14,832
2012 1,296 16,484 17,780
Over 2012 8,279 8,223 16,502
Total 46,830 70,233 117,063
Present value (*) 40,948 57,556 98,504
(*) The average funding rate was used to determine the present value.

The projections of future taxable income include estimates related to macroeconomic variables,
exchange rates, interest rates, volume of financial operations and services fees and others, which
can vary in relation to actual data and amounts.

Net income in the financial statements is not directly related to taxable income for income tax and
social contribution, due to differences existing between accounting criteria and tax legislation,
besides corporate aspects. Accordingly, we recommend that the trend of the realization of deferred
tax assets arising from temporary differences, income tax and social contribution loss carryforwards
not be used as an indication of future net income.

III- Unrecorded deferred tax assets amount to R$ 807 (R$ 792 at 12/31/2006).

A - 16
c) Tax and Social Security Contributions

The balance of tax and social security contributions is represented by:

12/31/2007 12/31/2006

Taxes and contributions on income payable 30 167

Taxes and contributions payable 2,842 3,826
Provision for deferred income tax and social contribution 9 8
Legal liabilities - Tax and Social Security (*) 35,507 9,566
Total 38,388 13,567
(*) Refers to the discussion over PIS and COFINS that aims to suspend the computation of these contributions according to
paragraph 1 of Article 3 of Law 9,718/98.

NOTE 10 FIXED ASSETS AND DEFERRED CHARGES

12/31/2007 12/31/2006

Depreciation /
Cost Net Net
amortization

Fixed assets In use Other fixed assets 11,865 (4,508) 7,357 8,065
Installations 80 (18) 62 85
Furniture and equipment 4,809 (299) 4,510 3,492
EDP systems 6,972 (4,190) 2,782 4,484
Other (Communication, security and transportation) 4 (1) 3 4

Deferred charges 17,232 (6,205) 11,027 13,394

Data processing 6,052 (2,420) 3,632 4,832
Telemarketing 9,098 (3,639) 5,459 7,279
Leasehold improvements 2,072 (144) 1,928 1,273
Other 10 (2) 8 10

Total 29,097 (10,713) 18,384 21,459

NOTE 11 INTERBANK DEPOSITS

This operation was carried out with Banco Ita as follows:

12/31/2007 12/31/2006
0 - 30 31 - 180 181 - 365 Over 365 Total Total

Prefixed CDI 274,244 110,702 52,806 8,659 446,411 439,194

A - 17
NOTE 12 - STOCKHOLDERS' EQUITY

a) Capital

In the year, stockholders resolved to change capital as follows:

- E/ASM of April 20, 2007 Reduction in the amount of R$102,379 through absorbtion of the loss for
2006.

- EGM of June 28, 2007 Increase in the amount of R$ 86,400 in cash by issuing 85,342 nominative
common shares with no par value.

- EGM of September 27, 2007 Increase in the amount of R$ 12,300 in cash by issuing 13,478
nominative common shares with no par value.

- EGM of December 27, 2007 Increase in the amount of R$ 21,970 in cash by issuing 25,774
nominative common shares with no par value.

Capital is represented by 255,038 nominative common shares with no par value.

b) Dividends

Stockholders are entitled to a mandatory minimum dividend of 25% of net income, which is adjusted
according to the rules set forth in Brazilian Corporate Law.

NOTE 13 - RELATED PARTIES

The transactions involving MIRAVALLES and its subsidiaries were eliminated.

Transactions between related parties, which are basically Banco Ita S.A. and CDB, are carried out at amounts, terms and rates in accordance
with normal market practices in force in the period and are as follows:

Assets (Liabilities) Revenues (Expenses)

01/01 to 01/01 to
12/31/2007 12/31/2006
12/31/2007 12/31/2006
Interbank investments 131,384 12,955 5,685 4,930
Securities and derivative financial instruments - 4,065 232 265
Other receivables Income receivable Credit card operations 4,383 5,379 - 32,425
Other receivables Sundry Amounts receivable from related companies (Note 8a) 518 866 - -
Interbank deposits (446,411) (439,194) (54,868) (59,139)
Other liabilities - Provision for payments (*) - (2,790) - -
Other liabilities - Amounts payable to related companies (Note 8c) (1,544) (1,826) - -
Service fees - - 2,293 6,702
Cost sharing - - (88,814) (94,974)
Administrative expenses Financial system services - - (11,010) (8,610)
Administrative expenses Third-party services - - (8,074) (32,280)
Administrative expenses Data processing - - (20,567) (3,178)
(*) Refers to the cost sharing agreement entered into CBD.

A - 18
14 - STATEMENT OF CASH FLOWS

01/01 to 01/01 to
12/31/2007 12/31/2006
Operating Activities
Net loss (57,817) (105,902)
Adjustment for reconciling net income with net cash used in Operating Activities
Allowance for loan losses 270,972 202,047
Increase (Decrease) in interest and financial charges (35,120) 20,108
Depreciation and amortization 5,170 5,264
Deferred taxes (32,935) (64,101)
Changes in assets and liabilities
(Increase) Decrease in interbank investments (118,428) 48,523
(Increase) Decrease in loan, lease and other credit operations (279,395) (341,919)
(Increase) Decrease in other receivables and assets (343,803) (79,667)
(Decrease) Increase in other liabilities 411,618 64,887
(Decrease) Increase in deferred income (1,662) (7,546)

OPERATING ACTIVITIES Net cash (used in) (181,400) (258,306)

Investment Activities
Purchase of available-for-sale securities (104,444) (159,694)
Sale and redemption of available-for-sale securities 150,108 102,087
Disposal of fixed assets 36 -
Purchase of fixed assets (2,131) (2,272)
INVESTMENT ACTIVITIES Net cash provided by (used in) 43,569 (59,879)
Financing Activities

Increase (Decrease) in deposits 17,927 176,371

Capital increase 120,670 140,888
FINANCING ACTIVITIES Net cash provided by 138,597 317,259
Increase (Decrease) in cash and cash equivalents, net 766 (926)
Cash and cash equivalents
At the beginning of the period 4,609 5,535
At the end of the period 5,375 4,609
Additional information on cash flows
Cash used for payment of interest 44,163 70,128
Cash used for payment of income tax and social contribution 4,553 17,806

A - 19
NOTE 15 SUMMARY OF DIFFERENCES BETWEEN THE ACCOUNTING PRACTICES ADOPTED IN
BRAZIL (BRGAAP) AND ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES
OF AMERICA (USGAAP) APPLICABLE TO MIRAVALLES

The accounting principles adopted by MIRAVALLES in its consolidated financial statements (Note 4) are in
accordance with accounting practices adopted in Brazil, which are in compliance with the Brazilian Corporate
Law and the rules set forth by the Central Bank of Brazil (BACEN). The accounting principles applicable to
MIRAVALLES, that differ significantly from USGAAP are summarized below:

a) Allowance for loan losses

As described in Note 4d, the allowance for loan losses is computed by applying percentages to the loans
rated in categories. The classification of loans into categories between A and H is made by
MIRAVALLES, considering whether the payment of principal and/or interest is overdue, provided that the
rating corresponds to at least A.

According to US GAAP, MIRAVALLES considers that its loan portfolio consists only of homogenous small
balance loans and are evaluated on a portfolio basis determine probable losses in compliance with
Statement of Financial Accounting Standards SFAS 5 Accounting for Contingencies. The allowance for
loan losses is recorded to cover probable losses arising from the current portfolio existing as of the balance
sheet date. In order to estimate the probable losses arising from the current portfolio at the end of each
period, MIRAVALLES management adopts methodologies that were internally developed that considers the
history of losses for the credit products offered by MIRAVALLES.

b) Telemarketing and Advertising expenses

According to BRGAAP, telemarketing and advertising pre-operating expenses may be deferred over the
period in which the company expects to obtain benefits arising from them. Such expenses have been
recorded under Deferred Charges and are amortized over five years.

Under USGAAP, telemarketing and advertising expenses shall be expensed when incurred.

c) Earnings per share

According to BRGAAP, earnings per share are calculated based on the number of outstanding shares on the
balance sheet date.

According to USGAAP, earnings per share are calculated in compliance with SFAS No. 128 Earnings per
Share, based on the average number of shares outstanding during the period. During the periods presented
there are no dilutive instruments.

A - 20
d) Reconciliation of the differences between BRGAAP and USGAAP

I) Stockholders equity

12/31/2007 12/31/2006
Stockholders equity as reported in the consolidated financial statements prepared
according to BRGAAP 221,362 158,502
(a) Additional allowance for loan losses (46,657) (37,506)
(b) Recognition of telemarketing and advertising expenses (5,459) (7,279)
Deferred tax effect on the adjustments above 17,721 15,227
Consolidated stockholders equity according to USGAAP 186,967 128,944

II) Net loss

01/01 to 01/01 to
12/31/2007 12/31/2006
Net loss as reported in the consolidated financial statements prepared according to
BRGAAP (57,817) (105,902)
(a) Additional allowance for loan losses (9,151) (13,686)
(b) Recognition of telemarketing and advertising expenses 1,820 1,820
(c) Other - (482)
Deferred tax effect on the adjustments above except for (c) 2,494 4,035

Consolidated loss and comprehensive income according to USGAAP (62,654) (114,215)

Average number of shares outstanding in the year 186,867 82,819
Loss per share (in R$) (335.29) (1,379.09)

III) Changes in stockholders equity

12/31/2007 12/31/2006
Consolidated stockholders equity according to USGAAP Balance at the beginning
of the year 128,944 102,278
- Capital increase 120,670 140,888
- Loss in the period (62,654) (114,215)
- Adjustment to market value securities 7 (7)
Consolidated stockholders equity according to USGAAP Balance at the end of the
year 186,967 128,944

A - 21
 Report of Independent Registered
Public Accounting Firm

To the Quotaholders and the Manager

Po de Acar Fundo de Investimento
em Direitos Creditrios
(Managed by Concrdia S.A. Corretora de
Valores Mobilirios, Cmbio e Commodities)

1 We have audited the accompanying statement of composition and diversification of portfolio

investments of Po de Acar Fundo de Investimento em Direitos Creditrios (the "Fund") as
of December 31, 2007 and the statement of changes in net assets for the years ended
December 31, 2007 and 2006. These financial statements are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial statements based
on our audits.

2 We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.

3 In our opinion, the financial statements referred to above present fairly, in all material
respects, the financial position of Po de Acar Fundo de Investimento em Direitos
Creditrios as of December 31, 2007, and the results of its operations and the statement of
changes in net assets for the years ended December 31, 2007 and 2006 in conformity with
accounting practices adopted in Brazil.

4 Our audits were performed for the purpose of issuing an opinion on the financial statements
referred to in the first paragraph, prepared in conformity with accounting practices adopted in
Brazil. The statements of cash flows (Note 16) which provide supplemental information about

B-1
 Po de Acar Fundo de Investimento
em Direitos Creditrios
(Managed by Concrdia S.A. Corretora de
Valores Mobilirios, Cmbio e Commodities)

the Fund are not a required component of the financial statements. We applied the same
audit procedures described in the second paragraph to the statements of cash flows for the
years ended December 31, 2007 and 2006 and, in our opinion; they are fairly stated in all
material respects in relation to the financial statements taken as a whole.

5 Accounting practices adopted in Brazil vary in certain significant respects from accounting
principles generally accepted in the United States of America. Information relating to the
nature and effect of such differences is presented in the "Summary of Principal Differences
between Brazilian GAAP and US GAAP" Note 17 to the financial statements.

So Paulo, March 14, 2008

PricewaterhouseCoopers
Auditores Independentes
CRC 2SP000160/O-5

Ricardo Baldin
Contador CRC 1SP110374/O-0

B-2
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of

Sendas Distribuidora S.A.

We have audited the accompanying balance sheet of Sendas Distribuidora S.A. as of December 31, 2006 and
the related statement of income, shareholders' equity, and changes in financial position for the year ended then
ended. These financial statements are the responsibility of the Company's management. Our responsibility is
to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. We were not engaged to perform an
audit of the Company's internal control over financial reporting. Our audit of the financial statements included
consideration of internal control over financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our audit provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial
position of Sendas Distribuidora S.A. at December 31, 2006 and the results of its operations and changes in
financial position for the year then ended in conformity with accounting practices generally accepted in
Brazil, which differ in certain respects from accounting principles generally accepted in the United States of
America (see Note 20 to the financial statements).

So Paulo, June 8, 2007

ERNST & YOUNG

Auditores Independentes S.S.

Sergio Citeroni

Partner

C1
 2007 2006
Unaudited
Assets
Current assets
Cash 76,603 71,361
Accounts receivable, net 88,987 73,220
Inventories 233,675 225,369
Recoverable taxes 6,554 5,155
Deferred income and social contribution taxes 6,435 59,235
Accounts receivable from vendors 43,470 54,099
Others 20,255 21,905
Total current assets 475,979 510,344

Non-current assets
Long-term assets
Accounts receivable 142,457 131,908
Recoverable taxes 1,919 1,518
Deferred income and social contribution taxes 257,635 113,366
Related parties 52,096 2,571
Restricted deposits for legal proceedings 53,069 33,583
Others 172 3,542
Total long-term assets 507,348 286,488

Permanent assets
Property and equipment, net 407,039 427,690
Intangible assets 181,670 209,892
Deferred charges - 101
Total permanent assets 588,709 637,683

Total non-current assets 1,096,057 924,171

Total Assets 1,572,036 1,434,515

C2
 2007 2006
Unaudited
Liabilities and shareholders' equity
Current liabilities
Accounts payable to suppliers 387,677 369,820
Loans and financing 799,174 288,350
Payroll and related charges 19,349 18,514
Taxes and social contributions payable 22,798 1,335
Related parties - 73,049
Rental payable 11,640 10,155
Others 21,942 17,493
Total current liabilities 1,262,580 778,716

Non-current liabilities
Loans and financing 236,168 579,532
Provision for contingencies 3,309 2,153
Real estate tax payable 59,184 42,256
Others 6,385 8,255
Total non-current liabilities 305,046 632,196

Shareholders equity
Capital 1,035,677 1,035,677
Unpaid capital (200,000) (200,000)
Accumulated losses (831,267) (812,074)
4,410 23,603

Total liabilities and shareholders equity 1,572,036 1,434,515

See accompanying notes.

C3
 SENDAS DISTRIBUIDORA S.A.

STATEMENTS OF OPERATIONS
Years ended December 31, 2007, 2006 and 2005
(expressed in thousands of reais, except losses per thousand shares)

2007 2006 2005

Unaudited

Gross sales 3,209,614 3,203,739 3,329,065

Taxes on sales (426,246) (427,003) (462,468)
Net sales 2,783,368 2,776,736 2,866,597
Cost of sales (2,048,605) (2,036,431) (2,035,748)
Gross profit 734,763 740,305 830,849

Operating (expenses) income

Selling (489,815) (493,273) (539,517)
General and administrative (123,275) (137,886) (137,470)
Depreciation and amortization (85,787) (136,698) (144,413)
Taxes and charges (26,659) (24,111) (22,066)
Financial expenses (149,272) (189,806) (206,358)
Financial income 32,871 38,163 58,264
(841,937) (943,611) (991,560)
Operating loss (107,174) (203,306) (160,711)

Non-operating loss, net (443) (498,651) (4,975)

Loss before income and social contribution taxes

and employees' profit sharing and minority interest (107,617) (701,957) (165,686)
Income and social contribution taxes 91,469 76,897 57,077

Loss before employees profit sharing (16,148) (625,060) (108,609)

Employees' profit sharing (3,045) - (3,150)
Net loss (19,193) (625,060) (111,759)

Outstanding shares (in thousand shares)

at the year end 1,057,085 1,057,085 1,057,085

Loss for the year per thousand shares (18.16) (591.31) (105.72)

See accompanying notes.

C4
 SENDAS DISTRIBUIDORA S.A.

STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY

Years ended December 31, 2007, 2006 and 2005
(expressed in thousands of reais)

Capital Accumulated
Share Unpaid Total losses Total

Balances at December 31, 2004 1,035,677 (200,000) 835,677 (75,255) 760,422

Loss for the year (111,759) (111,759)

Balances at December 31, 2005 1,035,677 (200,000) 835,677 (187,014) 648,663

Loss for the year (625,060) (625,060)

Balances at December 31, 2006 1,035,677 (200,000) 835,677 (812,074) 23,603

Loss for the year (19,193) (19,193)

Balances at December 31, 2007 1,035,677 (200,000) 835,677 (831,267) 4,410

See accompanying notes.

C5
 SENDAS DISTRIBUIDORA S.A.

STATEMENTS OF CHANGES IN FINANCIAL POSITION

Years ended December 31, 2007, 2006 and 2005
(expressed in thousands of reais)

2007 2006 2005

Unaudited
Financial resources were provided by:
Operations - 6,440 67,279
Third parties
Loans, financings and other liabilities - - 577,482
Increase in long-term liabilities - 51,311 122
Transfer to current assets 3,470 64,807 (348)
Total funds provided 3,470 122,558 644,535

Financial resources were used for:

Operations 54,007 - -
Additions to property and equipment 39,788 56,791 137,235
Additions to deferred charges - 101 1,550
Transfer to current liabilities 284,855 165,253 163,348
Additions to non-current assets 143,049 7,246 24,503
Total funds used 521,699 229,391 326,636
Increase (Decrease) in net working capital (518,229) (106,833) 317,899

Statements of increase (decrease) in net working capital

Current assets
At end of year 475,979 510,344 495,733
At beginning of year 510,344 495,733 493,499
(34,365) 14,611 2,234
Current liabilities
At end of year 1,262,580 778,716 657,272
At beginning of year 778,716 657,272 972,937
483,864 121,444 (315,665)
Increase (decrease) in working capital (518,229) (106,833) 317,899

Statements of resources generated from (used in) operations:

Net loss for the year (19,193) (625,060) (111,759)
Expenses (income) not affecting working capital:
Depreciation and amortization 85,787 136,698 144,413
Residual value of permanent asset disposals 348 25,442 -
Deferred income and social contribution taxes (91,469) (76,897) (57,077)
Provision for contingencies 4,991 3,890 3,117
Provision for goodwill amortization - 474,107 -
Interest and indexation charges on long-term items (34,471) 68,260 88,585
Resources generated from (used in) operations (54,007) 6,440 67,279

See accompanying notes.

C6
 SENDAS DISTRIBUIDORA S/A

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Year ended December 31, 2007, 2006 and 2005
(expressed in thousands of reais)

1. Operations

Sendas Distribuidora S.A. ("Company" or Sendas Distribuidora) operates primarily as a retailer of food,
clothing, home appliances and other products through its chain of hypermarkets, supermarkets, specialized
and department stores, principally under the trade names "Po de Acar", "Extra", and Sendas. At
December 31, 2007, the Company had 102 stores in operation, all of them located in the state of Rio de
Janeiro.

Sendas Distribuidora operations began at February 1, 2004 through the Investment and Partnership
Agreement, entered into by Companhia Brasileira de Distribuio (CBD) and Sendas S.A. (Sendas) in
December 2003. The Company concentrates CBD and Sendas retailing activities in the state of Rio de
Janeiro.

The Shareholders Agreement executed between CBD and Sendas S.A establishes that the operating and
administrative management of the Company is entirely under the responsibility of CBD, which can freely take
decisions concerning daily operations of the Companys stores as well as to appoint its board of executive
officers.

CBDs indirect equity interest in Sendas Distribuidora at December 31, 2007 corresponds to 42.57% of the
total capital. According to the shareholders agreement, the executive officers of CBD shall be responsible for
the operational and administrative management of Sendas Distribuidora.

Pursuant to its Shareholders Agreement, as of February 1, 2007, Sendas S.A. had the right to exchange its
paid-up shares or a portion thereof, for preferred shares of CBD. At December 31, 2007, Sendas S.A. held
42.57% shareholding in the total capital of Sendas Distribuidora, 23.65% of which already paid-up and
18.92% to be paid-up. Pursuant to the 2nd amendment to the Shareholders Agreement, Sendas S.A. shall pay
the remaining installment of R$200,000 up to 2014.

At October 19, 2006, Sendas S.A. manifested in writing to CBD the wish to exercise the put option,
pursuant to Clause 6.7 of Sendas Distribuidora Shareholders Agreement, related to the transfer of equity
control. CBD, understanding that a sale of control was not held, sent a counter-notice to Sendas S.A.

At October 31, 2006, CBD was notified by the Cmara de Conciliao e Arbitragem da Fundao Getulio
Vargas FGV (Chamber of Conciliation and Arbitration of the Getulio Vargas Foundation) that Sendas S.A.
had filed an appeal and brought the matter to arbitration, authority expected to discuss such matter.

At January 5, 2007, Sendas S.A. notified CBD, claiming for the exercise of right to swap the totality of paid-
in shares owned thereby with preferred shares of CBDs capital stock, provided for in Clause 6.9.1 of
Shareholders Agreement of Sendas Distribuidora, subjecting the effectiveness of swap to the award of
arbitration mentioned above not to acknowledge the put exercise right for Sendas S.A.

At March 13, 2007, CBD and Sendas S.A. entered into a arbitration proceeding. The arbitration is still under
preliminary allegations, and therefore the legal counsel representing CBD is not able predict the outcome and
eventual settlement amount for the proceeding.

C7
 SENDAS DISTRIBUIDORA S/A

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Year ended December 31, 2007, 2006 and 2005
(expressed in thousands of reais)

1. Operations (Continued)

At December 31, 2007, the Company presented deficient working capital amounting to R$786,601, and
incurred net losses in the past years. The management has plans to recover the profitability and continue
operations, mainly based on reduction of financial and operating expenses.

The Companys financial statements for the years ended at December 31, 2007 and 2006 were prepared based
on the assumption of going concern, which includes the realization of assets and the payment of obligations
and commitments during the regular course of business. The assumption is that the parent company (CBD)
will continue providing the Company with all the financial support necessary.

a) Investment Agreement between CBD and Banco Ita

At July 27, 2004, a Memorandum of Understanding was signed between CBD and Banco Ita Holding
Financeira S.A. ("Ita") with the objective of establishing a partnership to create a new company called
Financeira Ita CBD S.A. ("FIC"). FIC structures and trades financial products, services and related
items on an exclusive basis to CBD customers and its subsidiaries, including Sendas Distribuidora.

b) Anti-trust approval

At March 5, 2004, Sendas Distribuidora shareholders entered into an Operation Reversibility Agreement
related to the association between CBD and Sendas S.A. in the state of Rio de Janeiro. This agreement
established conditions to be observed until the final decision on the association process, such as: a) the
continuance, totally or partially, of the stores under Sendas Distribuidora responsibility; b) maintenance
of the work posts in accordance with the average gross revenue by employee of the five largest
supermarket chains; c) non-reduction of the term of current lease agreements.

At October 24, 2007, CADE (Anti-trust Committee) approved the association between CBD and Sendas
S.A to constitute Sendas Distribuidora. CADE stated that the Company may operate in the State of Rio
de Janeiro with limited expansion to the State of Esprito Santo, requiring the applicant to sell, within 60
days, one of its stores located in the city of de Cabo Frio, state of Rio de Janeiro.

c) Investment agreement CBD and AIG

On November 30, 2004, shareholders of Sendas Distribuidora and investment funds of the AIG Group
("AIG") entered into an agreement through which AIG invested R$ 135,675 in Sendas Distribuidora, by
means of subscription and payment of 157,082,802 class B preferred shares, issued by Sendas
Distribuidora, representing 14.86% of its capital. AIG has waived its rights to receive dividends, until
November 30, 2008.

After this transaction, CBD (through its subsidiary S) and Sendas S.A., hold 42.57% each of the Sendas
Distribuidora total capital and 50% of the voting capital.

According to the above mentioned agreement, CBD and AIG mutually granted reciprocal call and put
options of the shares purchased by AIG in Sendas Distribuidora, which may be exercised until July 25,
2008.

C8
 SENDAS DISTRIBUIDORA S/A

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Year ended December 31, 2007, 2006 and 2005
(expressed in thousands of reais)

1. Operations (Continued)

c) Investment agreement CBD and AIG (Continued)

Upon exercising the options, the shares issued by Sendas Distribuidora to AIG will represent a put
against CBD which may be used to subscribe up to three billion preferred shares to be issued by CBD in
a future capital increase (Capital increase is already authorized by Board of Directors) .

The issuance of preferred shares by CBD to AIG, will be made at market value at the time of the
issuance, allowing AIG to the subscription up to the maximum number of shares described above. The
price of the CBD preferred shares will be set based on market value at the time of issuance. If the value
of AIGs shares in Sendas Distribuidora is more than the value of three billion shares of CBD, CBD will
pay the difference in cash.

2. Basis of Preparation and Presentation of the Financial Statements

The financial statements were prepared in accordance with the accounting practices adopted in Brazil and
with the rules issued by the Brazilian Securities Commission (Comisso de Valores Mobilirios - CVM) and
by the Brazilian Institute of Accountants (IBRACON), herein referred to as Brazilian GAAP.

The authorization to issue these financial statements occurred at the board of executive officers meeting held
on February 26, 2008.

In order to facilitate the understanding of its financial information, and to provide more uniform information
to its foreign and local shareholders, the Company has elected to prepare and present its primary financial
statements in accordance with Brazilian GAAP, expressed in reais. Because Brazilian GAAP differs in
significant respects for U.S. GAAP, the significant differences form Brazilian GAAP to U.S. GAAP are
explained herein (Note 20).

In view of the implementation of the guidelines set forth by IBRACON concerning the presentation and
disclosure of the financial statements provided for in the Accounting Rules and Procedures (NPC) 27,
issued on October 3, 2005, few items of the balance sheet for the year ended at December 31, 2006 were
reclassified in order to meet those guidelines and to enable the comparison.

Financial Statements Financial Statements

disclosed in 2006 disclosed in 2006
Accounts before NPC 27 Reclassification after NPC 27

Restricted deposits for legal proceeding 33,865 (282) 33,583

Provision for contingencies (2,435) 282 (2,153)
Real estate tax payable - short term (42,256) 42,256 -
Real estate tax payable - long term - (42,256) (42,256)

Certain assets, liabilities, revenues and expenses are determined on the basis of estimates when preparing the
financial statements. Accordingly, the financial statements of the Company include various estimates, among
which are those relating to calculation of allowance for doubtful accounts, depreciation and amortization,
asset valuation allowance, realization of deferred income and social contribution taxes, contingencies and
other estimates. Actual results may differ from those estimated.

C9
 SENDAS DISTRIBUIDORA S/A

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Year ended December 31, 2007, 2006 and 2005
(expressed in thousands of reais)

2. Basis of Preparation and Presentation of the Financial Statements (Continued)

The accompanying financial statements are a translation and adaptation of those originally issued in Brazil,
based on Brazilian GAAP. Certain reclassifications and changes in terminology have been made and the notes
have been expanded, in order to conform more closely to prevailing reporting practices pursuant to U.S.
GAAP.

Significant financial practices adopted by the Company are shown below:

a) Cash and cash equivalents

Cash and cash equivalents include the cash and checking account balances.

b) Accounts receivable

Accounts receivable are stated at estimated realizable values. An allowance for doubtful accounts is provided
in an amount considered by Management to be sufficient to meet probable losses related to uncollectible
accounts. The provision is mainly based on the historic average of losses, in addition to specific accounts
receivable deemed as uncollectible.

Financed sales made by the Company are intermediated by FIC, and those receivables do not remain on the
Companys balance sheet.

The Company carries out securitization operations of its accounts receivable with a special purpose entity,
which is sponsored by CBD , the PAFIDC (Po de Acar Fundo de Investimento em Direitos Creditrios).

c) Inventories

Inventories are carried at the lower of cost or market value. The cost of inventories purchased directly by the
stores is based on the last purchase price, which approximates the First In, First Out (FIFO) method. The
cost of inventories purchased through the warehouse is recorded at average cost, including warehousing and
handling costs.

The inventories are also stated net of the provision for losses and shrinkage, which are periodically reviewed
and assessed as to their sufficiency.

d) Other current and noncurrent assets

Other assets and receivables are stated at cost, including, when applicable, contractual indexation accruals,
and net of allowances to reflect realizable amounts, if necessary.

e) Property and equipment

These assets are shown at acquisition or construction cost, less the related accumulated depreciation,
calculated on a straight-line basis at the rates mentioned in Note 7, which take into account the estimated
useful lives of the assets and , in case of leasehold improvements, the shorter of useful life or leasing term.

C 10
 SENDAS DISTRIBUIDORA S/A

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Year ended December 31, 2007, 2006 and 2005
(expressed in thousands of reais)

2. Basis of Preparation and Presentation of the Financial Statements (Continued)

e) Property and equipment (Continued)

Interest and financial charges on loans and financing obtained from third parties directly or indirectly
attributable to the process of purchase, construction and stores expansion and remodeling are capitalized
during the construction and refurbishment of the Companys stores in conformity with CVM Deliberation
193. The capitalized interest and financial charges are recognized in results of operations over the
depreciation periods of the corresponding assets.

Expenditures for repairs and maintenance that do not significantly extend the useful lives of related asset are
charged to expense as incurred. Expenditures that significantly extend the useful lives of existing facilities
and equipment are added to the property and equipment value.

f) Intangible assets

Intangible assets refer to the goodwill at the time the Company was created. These amounts are supported by
appraisal reports issued by independent experts, based on the expectation of future profitability, and are
amortized in accordance with projected profitability over a maximum period of ten years.

g) Other current and noncurrent liabilities

These liabilities are stated at known or estimated amounts including, when applicable, accrued charges and
interest or foreign exchange variations.

h) Derivative financial instruments

The Company uses derivative financial instruments to reduce its exposure to market risk resulting from
fluctuations in interest and foreign currency exchange rates. Derivative financial instruments are accounted
for under the accrual method.

i) Taxation

Revenues from sales and services are subject to taxation by State Value-Added Tax (ICMS), Services Tax
(ISS), Social Contribution Tax on Gross Revenue for Social Integration Program (PIS) and Social
Contribution Tax on Gross Revenue for Social Security Financing (COFINS) at rates prevailing in each
region and are presented as sales deductions in the statement of income.

The credits derived from PIS and COFINS are recorded as deductions from cost of goods sold. The debits
related to financial income and credits derived from financial expenses are shown in these line items.

The advances or amounts subject to offsetting are shown in the current and noncurrent assets, in accordance
with the estimate for their realization.

The taxation on income comprises income and social contribution taxes, which are calculated based on
taxable income (adjusted income), at rates applicable according to the prevailing laws 15%, (10% over the
amount exceeding R$240 yearly for income tax) and 9% for social contribution tax.

C 11
 SENDAS DISTRIBUIDORA S/A

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Year ended December 31, 2007, 2006 and 2005
(expressed in thousands of reais)

2. Basis of Preparation and Presentation of the Financial Statements (Continued)

i) Taxation (Continued)

Deferred income and social contribution tax assets were related to tax losses, negative basis of social
contribution and temporary differences, taking into account the prevailing rates of said taxes, pursuant to the
provisions of CVM Deliberation 273 of August 20, 1998 CVM Ruling 371 of June 27, 2002, and taking into
account the history of profitability and the expectation of generating future taxable income based on a
technical feasibility study which is approved by the Board of Directors.

j) Provision for contingencies

Provision for contingencies is based on legal counsel opinions, in amounts considered sufficient to cover
losses and risks considered probable.

As per CVM Deliberation 489/05, the Company adopted the concepts established in NPC 22 on provisions,
liabilities, gains and losses on contingencies when recording provisions and disclosures on matters regarding
litigation and contingencies (Note 11). Losses are recorded when probable and contingent gains are not
recorded until realized.

k) Revenues and expenses

Sales revenue is recognized when customer receives the goods. Financial income arising from credit sales is
accrued over the credit term. Expenses and costs are recognized on the accruals basis. Volume bonuses and
discounts received from suppliers in the form of product are recorded as zero-cost additions to inventories and
the benefit recognized as the product is sold. Costs of goods include stock and handling costs in the
warehouses.

C 12
 SENDAS DISTRIBUIDORA S/A

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Year ended December 31, 2007, 2006 and 2005
(expressed in thousands of reais)

3. Trade Accounts Receivable

a) Breakdown

2007 2006
Unaudited
Current
Resulting from sales through:
Credit card companies 70,788 56,410
Sales vouchers and others 9,364 10,279
Credit sales with post-dated checks 7,759 5,177
Accounts receivable from parent company 1,984 1,504
Allowance for doubtful accounts (908) (150)
Resulting from commercial agreements 43,470 54,099
132,457 127,319

Noncurrent
Trade accounts receivable - Paes Mendona 142,457 131,908
142,457 131,908

Credit card sales are receivable from the credit card companies in installments not exceeding 12 months.
Credits sales settled with post-dated checks bear interest of up to 6.5% per month (the same percentage in
2006) for settlement within up to 60 days. Credit sales are recorded net of unearned interest income.

Accounts receivable from the Parent Company relate to sales of merchandise by the Company, to supply the
Parent Companys stores. Sales of merchandise by the Companys warehouses to the Parent Company were
substantially carried out at cost.

b) Accounts receivable Paes Mendona

Accounts receivable Paes Mendona relate to amounts deriving from the payment of liabilities on behalf of
Paes Mendona. Pursuant to contractual provisions, these accounts receivable are collaterized by Commercial
Rights (Fundo de Comrcio) of certain stores currently operated by the Company or by the Parent Company,
(CBD). Maturity of accounts receivable is linked to lease agreements, effective for 5 years and may be
extended for equal period, for two consecutive times through notification to the leaseholder, with final
maturity in 2014.

c) Accounts receivable under commercial agreements

Accounts receivable under commercial agreements result from current transactions carried out between the
Company and its suppliers, related to the volume of purchases.

C 13
 SENDAS DISTRIBUIDORA S/A

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Year ended December 31, 2007, 2006 and 2005
(expressed in thousands of reais)

3. Trade Accounts Receivable (Continued)

d) Allowance for doubtful accounts

The allowance for doubtful accounts is based on average actual losses in previous periods complemented by
Management's estimates of probable future losses on outstanding receivables.

2007 2006
Unaudited

At beginning of year (150) (609)

Provision for doubtful accounts (3,374) (674)
Recoveries and provision written off 2,616 1,133

At end of year (908) (150)

e) Accounts Receivable PAFIDC

The Company carries out securitization operations of its credit rights, represented by customer credit
financing, credit sales with post-dated checks and accounts receivable from credit card companies with
PAFIDC. The volume of operations was R$1,289,917 at December 31, 2007 (R$1,336,795 in 2006). The
securitization costs of such receivables amounted to R$17,109 at December 31, 2007 (R$21,645 in 2006),
recognized as financial expenses in the income for 2007 and 2006, respectively. Services rendered, which are
not remunerated, include credit analysis and the assistance by the collection department to the funds
manager.

4. Inventories

2007 2006
Unaudited

Stores 163,163 160,462

Warehouses 70,512 64,907

233,675 225,369

C 14
 SENDAS DISTRIBUIDORA S/A

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Year ended December 31, 2007, 2006 and 2005
(expressed in thousands of reais)

5. Recoverable Taxes

Recoverable taxes at December 31, 2007 and 2006 refer primarily to credits from IRRF (Withholding Income
Tax), PIS (Social Contribution Tax on Gross Revenue for Social Integration Program), COFINS (Social
Contribution Tax on Gross Revenue for Social Security Financing) and ICMS (State Value-Added Tax):

2007 2006
Unaudited
Current
Tax on sales 6,554 5,155
6,554 5,155
Non-current
Tax on sales 1,919 1,518
1,919 1,518
Total 8,473 6,673

6. Balances and Transactions with Related Parties

Balances and transactions with related parties are as follows:

Transactions held in the period ended at

Balances December 31, 2007
Net
Accounts Fees and Service Intercompany Accounts Services financial
receivable receivable receivable payable rendered Net sales income /
Company (payable) (payable) (payable) (Supplier) and rents (purchases) (expenses)
Unaudited

CBD - 151,474 (105,026) (46,871) (3,428) 220,001 -

Sendas S.A. 11,341 - - - (126,852) - 2,805
Sendas Esporte Clue - 4,100 - - - -
FIC 1,548 - - - (1,548) - -
Balance at 12.31.2007 12,889 155,574 (105,026) (46,871) (131,828) 220,001 2,805

Balance at 12.31.2006 9,011 17,743 (90,792) (52,543) 45,240 (248,525) (32,237)

Balance at 12.31.2005 14,822 253,063 (428,229) (52,701) (39,549) (262,343) 60,435

Accounts receivable and sale of goods relate to the supply of stores, mainly of Sendas Distribuidora, by the
Company's warehouse and were made at cost; the remaining transactions, described below, are carried out at
usual market prices and conditions. Certain service contracts are subject to an administration fee.

C 15
 SENDAS DISTRIBUIDORA S/A

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Year ended December 31, 2007, 2006 and 2005
(expressed in thousands of reais)

6. Balances and Transactions with Related Parties (Continued)

At December 31, 2007, the balance of R$11,341 (R$11,363 in 2006) receivable from Sendas S.A. is
composed of R$3,428 referring to the rental advanced to Sendas S.A regarding the lease of 7 stores which
will be amortized in 10 installments and R$ 7,913 related to other accounts receivable from Sendas S.A

Loan is subject to charges corresponding to the 106% of average rate of CDI (same for 2006).

(i) Leases

Sendas Distribuidora leases 57 properties from the Sendas Group and 8 properties from CBD (57 and 7 in
2006, respectively). For the year ended at December 31, 2007, the total lease payments amounted to R$33,244
and R$5,832, respectively (R$29,466 and R$4,989 in 2006, respectively), including an additional contingent
lease based on 0.5% to 2.5% of revenues from stores. In September 2005, the amount of R$10,509 was
advanced to Sendas S.A. regarding the lease of 7 stores, with 37-installment amortization term. The balance at
December 31, 2007, net of payment and monetary restatement amounted to R$3,428 (R$6,953 in 2006).

The leases have terms similar to those that would have been established if they had been taken out with non-
related parties.

(ii) Allocation of corporate expenses

The corporate services, such as purchases, treasury, accounting, human resources and Shared Services Center
(CSC) are provided by CBD to its subsidiaries and affiliated companies and passed on by the cost amount
effectively incurred with such services.

7. Property and equipment

Annual depreciation
2007 2006 rates
Accumulated Weighted
Cost Depreciation Net Net Nominal average
Unaudited

Land 3,118 - 3,118 3,118 - -

Buildings 17,534 (1,490) 16,044 16,943 3.33 3.3
Leasehold improvements 352,668 (109,513) 243,155 253,813 * 6.8
Equipment 155,019 (77,709) 77,310 78,030 10 to 33 16.8
Installations 60,570 (40,531) 20,039 23,295 20 to 25 20
Furniture and fixtures 73,643 (27,004) 46,639 50,879 10 10
Vehicles 679 (89) 590 248 20 20
Construction in progress 11 - 11 1,358 - -
Other 148 (15) 133 6 10 9.1
663,390 (256,351) 407,039 427,690

Annual average depreciation rate - % 9.16 9.06

(*) Leasehold improvements are depreciated based on the shorter of the estimated useful life of the asset or
the lease term of agreements.

C 16
 SENDAS DISTRIBUIDORA S/A

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Year ended December 31, 2007, 2006 and 2005
(expressed in thousands of reais)

7. Property and equipment (Continued)

a) Additions to property and equipment

2007 2006
Unaudited

Additions 37,547 56,791

Capitalized interest 2,241 2,523
39,788 59,314

Additions made by the Company relate to purchases of operating assets, modernization of warehouses,
improvements of various stores and investment in equipment and information technology.

8. Intangible Assets

2007 2006 2005

Unaudited

Balance at the beginning of the period 209,892 766,704 834,061

Additions - (82,705) 1,550
Amortization (91,969) - (68,907)
Provision for goodwill amortization (i) 63,747 (474,107)
Balance at the end of the period 181,670 209,892 766,704

Upon the acquisition of subsidiaries, the amounts originally recorded under investments as goodwill based
mainly on expected future profitability , were transferred to intangible assets, and will be amortized over
periods consistent with the earnings projections on which they were originally based, limited to not later than
10 years.

(i) Provision for goodwill amortization

The Company reviewed the economic and financial assumptions sustaining the future realization of goodwill.
Based on this review, the Company determined the need of provision for partial reduction of goodwill of
R$474,107, recorded under the non-operating result item at December 31, 2006. The partial reversal of the
provision for goodwill reduction is included in amortization expense.

C 17
 SENDAS DISTRIBUIDORA S/A

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Year ended December 31, 2007, 2006 and 2005
(expressed in thousands of reais)

9. Loans and Financing

Annual financial charges 2007 2006

Unaudited
Current

In local currency with swap in reais

Working capital (i) Weighted average rate 103.8% of
CDI (103.4% in 2006) 430,484 260,310

In foreign currency
Imports Exchange rate variation 2,370 5,336

In local currency
Working capital (i) Weighted average rate of 104% of
CDI (104% in 2006) 366,320 22,704
799,174 288,350

Non-current

In foreign currency with swap to Reais

Working capital (i) Weighted average rate of 104.2% of
CDI (103.88% in 2006) 236,168 579,532

The Company uses swaps to switch obligations from fixed interest rate in U.S. dollar to Brazilian real related
to CDI (Interbank Report Certificate) variable interest rate. The Company entered, contemporaneously with
the same counterparty, into cross-currency interest rate swaps and has treated the instruments on a combined
basis as though the loans were originally denominated in reais and accrued interest at floating rates.

The annualized CDI benchmark rate at December 31, 2007 was 11.82% (15.0% in 2006).

(i) Working capital financing

The financing is obtained from local banks and used to finance Companys investments. Promissory notes
have been offered as guarantee.

C 18
 SENDAS DISTRIBUIDORA S/A

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Year ended December 31, 2007, 2006 and 2005
(expressed in thousands of reais)

9. Loans and Financing (Continued)

Non-current financing by year for maturity:

2007
Unaudited
2009 1,148
2010 235,020
Total 236,168

10. Real Estate Tax Payable

The Executive Branch of the city of Rio de Janeiro enacted the Decree No. 26,101 at December 13, 2005,
which reduced the Municipal Real Estate Tax (IPTU) levied on properties occupied by supermarkets from
1% to 0.6%. The Company is challenging the amount charged by the local authorities that did not take into
account said decree when levying the tax. The Company has been accruing the total amount of tax recorded
and the outstanding balance at December 31, 2007 is R$59,184 (R$42,256 in 2006), indexed to a monthly
1.5% interest rate.

11. Provision for Contingencies

Provision for contingencies is estimated by management, supported by its legal counsel. Such provision was
set up in an amount considered sufficient to cover losses considered probable by the Companys legal
counsel, and is stated net of judicial deposits, as shown below:

Balance at Balance at
December 31, Payments/Re MonetaryRestat Judicial December 31,
2005 Additions versals ement Deposits 2006

Labor 300 1,094 (950) 82 (282) 244

Civil and other 2,379 2,796 (3,468) 202 - 1,909
Total 2,679 3,890 (4,418) 284 (282) 2,153

Balance at Balance at
December 31, Payments/Re MonetaryRestat Judicial December 31,
2006 Additions versals ement Deposits 2007
Unaudited
Labor 244 3,780 (2,197) 151 (1,442) 536
Civil and other 1,909 1,211 (593) 246 - 2,773
Total 2,153 4,991 (2,790) 397 (1,442) 3,309

C 19
 SENDAS DISTRIBUIDORA S/A

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Year ended December 31, 2007, 2006 and 2005
(expressed in thousands of reais)

11. Provision for Contingencies (Continued)

a) Labor

The Company is party to numerous lawsuits involving disputes with its employees, primarily arising from
dismissals in the ordinary course of business. At December 31, 2007, the Company recorded a provision of
R$2,260 (R$526 in 2006) assessed as a probable risk. Lawsuits with possible unfavorable outcome assessed
by our legal counsels amount R$1,127 (R$1,455 in 2006).

Management, assisted by its legal counsels, evaluates these contingencies, recording provisions for losses
when reasonably estimated, considering historical data regarding the amount paid.

Labor claims are indexed to the Referential Interest Rate (TR) (2.0% accumulated in the year ended at
December 31, 2007) plus 1% monthly interest. The balance of net provision for restricted court deposits is
R$536 (R$244 in 2006).

b) Civil and other

The Company is a defendant at several judicial levels, in lawsuits of civil natures, among others. The
Companys management accrues provision in amounts considered sufficient to cover unfavorable court
decisions when its internal and external legal counsels consider the losses to be probable.

c) Possible losses

The Company has other contingencies which have been analyzed by the legal counsel and deemed as possible
but not probable; therefore, they have not been accrued at December 31, 2007, as follows:

Other contingencies they are related to lawsuits under the civil court scope, special civil court, Consumer
Protection Agency (PROCON), Weight and Measure Institute (IPEM), National Institute of Metrology,
Standardization and Industrial Quality (INMETRO) and National Health Surveillance Agency
(ANVISA), the great majority of lawsuits is related to suits for damages derived from consumers
relationship amounting to R$4,930 in 2007 (R$4,853 in 2006). There are also lawsuits related to tax
assessments notices in the state level, as to the utilization of ICMS credits related to electricity amounted to
R$54,043 (R$46,229 in 2006) as well as Service Tax (ISS) challenges amounting to R$834.

Occasional adverse changes in the expectation of risk of the referred lawsuits may require additional
provision for contingencies.

d) Appeal and judicial deposits (Restricted deposits escrow)

The Company is challenging the payment of certain taxes, contributions and labor-related obligations and has
made court escrow deposits (restricted deposits) of equivalent amounts pending final legal decisions, in
addition to collateral deposits related to provisions for lawsuits.

C 20
 SENDAS DISTRIBUIDORA S/A

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Year ended December 31, 2007, 2006 and 2005
(expressed in thousands of reais)

11. Provision for Contingencies (Continued)

e) Guarantees

The Company has granted collaterals to some lawsuits of civil, labor and tax nature, as shown below:

Guarantee
letter from
Lawsuits Real Estate Equipment banks Total
Unaudited
Tax 67 921 44,875 45,863
Labor - 155 4,623 4,778
Civil and other 84 256 2,278 2,618
Total 151 1,332 51,776 53,259

f) Tax audits

In accordance with current legislation in Brazil, federal, state and municipal taxes and payroll charges are
subject to audit by the related authorities, for periods that vary between 5 and 30 years.

12. Income and Social Contribution Taxes

a) Income and social contribution tax reconciliation

2007 2006 2005

Unaudited
Loss before income and social contribution taxes (107,617) (701,957) (165,686)
Employees' profit sharing (3,045) - (3,150)
(110,662) (701,957) (168,836)

Income and social contribution tax at nominal rate 37,625 238,665 57,404
Deferred income and social contribution taxes 55,000 - -
Income tax over goodwill amortization - (161,196) -
Other (1,156) (572) (327)

Effective income tax 91,469 76,897 57,077

Effective rate -82.7% -11.0% -33.8%

b) Breakdown of deferred income and social contribution taxes

The main components of deferred income tax in the balance sheet are the following:

C 21
 SENDAS DISTRIBUIDORA S/A

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Year ended December 31, 2007, 2006 and 2005
(expressed in thousands of reais)

12. Income and Social Contribution Taxes (Continued)

2007 2006
Unaudited
Deferred income and social contribution tax assets
Tax losses carryforward (i) 150,869 113,229
Provision for contingencies 1,049 178
Provision for hedge and levied on a cash basis 52,259 54,273
Allowance for doubtful accounts 309 51
Provision of inventory adjustment 4,491 4,579
Provision for goodwill impairment - Note 8 (i) 139,522 161,196
Other 93 291
348,592 333,797
Provision for realization of deferred income tax (84,522) (161,196)
Total deferred income tax assets 264,070 172,601

Current assets 6,435 59,235

Long-term assets 257,635 113,366
Total deferred income tax assets 264,070 172,601

At December 31, 2007, in compliance with CVM Ruling 371, the Company had deferred income and social
contribution taxes arising from tax loss and temporary differences in the amount of R$264,070 (R$172,601 at
December 31, 2006).

The Company prepares annual studies of scenarios and generation of future taxable income, which are
approved by Management and by the Board of Directors, which supports the realization of this tax assets.

Based on the studies approved, management approved the partial reversal of the provision of R$55,000 for
realization of the deferred income and social contribution taxes, due to the recoverability estimated in the
projections. Management estimates that will recover such credits in 10 years:

Unaudited
2008 6,435
2009 34,252
2010 53,612
2011 24,748
2012 to 2017 145,023
264,070

C 22
 SENDAS DISTRIBUIDORA S/A

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Year ended December 31, 2007, 2006 and 2005
(expressed in thousands of reais)

13. Shareholders Equity

a) Share Capital

The Companys capital stock comprises 1,057,085 shares (same as 2006), of which 500,002 (same as 2006)
are class A common shares, 58,229 are class B common shares, 341,771 are class A preferred shares and
157,083 (same as 2006) are class B preferred shares; all of them are registered shares with no par value.

Each class A or class B common share entitles its holder to one vote at the General Meetings.

Class A preferred shares do not grant the right to vote at the General Meeting. Their exclusive rights are
capital refund priority may also be converted into common shares issued by the Company, according to the
bylaws, subject to approval by the Board of Directors and the agreement between the shareholders.

Class B preferred shares do not grant the right to vote at the General Meeting. Their exclusive rights are
capital refund priority and they may neither be converted into common shares nor into class A preferred
shares issued by the Company.

The shareholders are entitled to receive a mandatory minimum annual dividend equivalent to one per cent
(1%) of net income for each fiscal year, adjusted according to the provision of law. Interest on own capital
and dividends distributed during the period are off-set in the payment of annual dividends. All Companys
shares, whether common or preferred are equally treated in the distributions of dividends or payments of
interest on own capital.

b) Breakdown of capital stock and share volume:

Number of shares - in thousands

Share Capital Preferred shares Common shares Total
Unaudited

Class A 341,770,950 500,002,000 841,772,950

Class B - 58,229,050 58,229,050

Total 900,002 341,770,950 558,231,050 900,002,000

Payment Class B 135,675 157,082,802 - 157,082,802

Balance at December 31, 2007 1,035,677 498,853,752 558,231,050 1,057,084,802

c) Capital subscription by AIG Group

The description of this transaction is detailed at note 1(c).

C 23
 SENDAS DISTRIBUIDORA S/A

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Year ended December 31, 2007, 2006 and 2005
(expressed in thousands of reais)

13. Shareholders Equity (Continued)

d) Unpaid Capital

As determined in the Minutes of the Extraordinary General Meeting held at February 29, 2004, the capital
stock to be paid, represented by 200,000,000 preferred shares, amounting to R$200,000 shall be paid-in by
Sendas S.A. until February 29, 2008. Nevertheless, at September 16, 2005, Sendas S.A. and CBD and its
subsidiaries entered into the 2nd Addendum and Ratification of Shareholders Agreement of Sendas
Distribuidora which, among other resolutions, decided to postpone the Additional Term ("Second Term) of
Payment of Class A preferred shares not paid-in by Sendas S.A., for a period to end at February 28, 2014.
During this second term, the payment only may be made in cash, especially by means of utilization of
dividends paid by the Company to Sendas S.A.; after such term, should payment do not occur during this
period, the shares will be cancelled.

14. Net Financial Income

2007 2006 2005

Unaudited
Financial expenses
Financial charges - Debentures - - 6,568
Swap operations 65,621 118,731 149,449
Financial charges on contingencies and taxes 5,419 7,380 25
Interest on installment sales 4,105 30,034 41,702
Receivables securitization 17,109 20,291 425
CPMF(*) and other bank services 9,845 13,370 8,189
Other financial expenses 47,173 - -
Total financial expenses 149,272 189,806 206,358

Financial income
Interest on cash and cash equivalents 29 5,305 12,289
Financial discounts obtained 4,869 5,103 7,607
Financial charges on taxes and judicial deposits 15,635 9,504 3,999
Interest on loans related parties 1,299 - -
Interest on installment sales 8,799 6,746 2,572
Other financial income 2,240 11,505 31,797
Total financial revenues 32,871 38,163 58,264

Net financial income (116,401) (151,643) (148,094)

(*) Provision tax on financial transactions

C 24
 SENDAS DISTRIBUIDORA S/A

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Year ended December 31, 2007, 2006 and 2005
(expressed in thousands of reais)

15. Financial Instruments

a) General considerations

Management considers the risks of concentration in financial institutions are low as operations are limited to
traditional, highly-rated banks and within limits approved by the Management.

b) Concentration of credit risk

The Companys sales are direct to individual customers through post-dated checks, in a small portion of sales
(nearly 1.66% of sales). In such portion, the risk is minimized by the large customer portfolio. These
receivables are also mainly sold to PAFIDC without any recourse condition.

In order to minimize credit risk from investments, the Company adopts policies restricting the marketable
securities that may be allocated to a single financial institution, and which also include monetary limits and
financial institution credit ratings.

c) Market value of financial instruments

Estimated market values of financial instruments at December 31, 2007 considering maturities as frequent
price adjustments approximates the book value of these instruments recorded in the financial statements:

Unaudited
Book value Market value
Assets
Cash and banks 76,603 76,603
76,603 76,603

Liabilities
Short and long-term loans and financing
1,035,342 1,028,283
1,035,342 1,028,283

Market value of financial assets and current and non-current financing, where applicable, was determined
using current interest rates available for operations carried out under similar conditions and remaining
maturities.

In order to swap the financial charges and exchange variation of loans denominated in foreign currency into
local currency, the Company contracted swap which charges to CDI variation. These instruments are reflected
in the table above at market value.

d) Foreign exchange rate and interest rate risk management

The use of derivative instruments and operations involving interest rates, intend to protect the Company, from
significant variations. This process is conducted by the finance operations area, in accordance with the
strategy previously approved by Management.

C 25
 SENDAS DISTRIBUIDORA S/A

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Year ended December 31, 2007, 2006 and 2005
(expressed in thousands of reais)

15. Financial Instruments (Continued)

d) Foreign exchange rate and interest rate risk management (Continued)

The cross-currency interest rate swaps permit the Company to exchange fixed interest rate in U.S. dollars on
short-term and long-term debt (Note 9) for floating rate interest in Brazilian reais. As of December 31, 2007,
the U.S. dollar-denominated short-term and long-term debt balances of R$669,022 (US$376,363) (R$845,178
- US$392,815 in 2006), the weighted average interest rates of 5.6% per annum (5.1% in 2006) which are
covered by floating rate swaps, linked to a percentage of the CDI in Brazilian reais, calculated at weighted
average rate of 103.8% of CDI (103.4% of CDI in 2006).

16. Insurance Coverage (unaudited)

Coverage at December 31, 2007 is considered sufficient by management to meet possible losses and is
summarized as follows:

Amount insured
Insured assets Risks covered 2007 2006

Property, equipment and inventories Named risks 5,801,656 5,577,635

Profit Loss of profit 1,335,000 1,335,000
Cash Theft 47,194 43,600

The Parent Company also holds a specific policy covering civil liability risks in the amount of R$ 142,400
(R$ 160,410 at December 31, 2006).

17. Non-Operating Results

2007 2006 2005

Expenses Unaudited

Net effect of allowance for goodwill reduction - Note 8 i - 474,107 -

Income on permanent assets disposal 348 25,442 263
Judicial deposits write-off 95 - -
Provision for recovery of assets and other - (898) 4,712

Non-operating result 443 498,651 4,975

C 26
 SENDAS DISTRIBUIDORA S/A

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Year ended December 31, 2007, 2006 and 2005
(expressed in thousands of reais)

18. Commitments

The Company has commitments assumed with lessees of several stores already contracted at December 31,
2007, as follows:

2007
Unaudited
2008 50,692
2009 48,661
2010 43,873
2011 41,942
2012 41,498
Thereafter 381,108
607,774

19. Changes to the Preparation and Disclosure of Financial Statements

On December 28, 2007, Law No. 11,638 was approved, which amends and revokes certain provisions of Law
No. 6,404, dated December 15, 1976, and of Law No. 6,385 dated December 7, 1976. The main changes
brought by the new law, are:

Net assets, businesses or companies acquired from third parties shall be initially measured at market
value.
Financial assets held for trading or sale, including derivatives, shall be measured at market value.
Other financial assets shall be measured at initial cost, restated under applicable legal or contractual
provisions, and adjusted to their probable realizable value, whenever this is lower.
Long-term assets and liabilities are to be discounted to present value to exclude implicit interest.
Short term assets and liabilities shall be discounted to present value whenever such discount has any
significant effect on financial reporting.
The company shall, on a periodic basis, perform an analysis of the recoverability of the amounts
recorded in fixed, intangible and deferred assets to determine that an impairment loss is recorded
when there is evidence that the capital invested will not produce sufficient cash flows for recovery of
the recorded amount. Further the assets economic useful lives are to be reviewed on a periodic basis
to determine they are appropriate and the calculations of depreciation, depletion and amortization are
to be reviewed and adjusted as necessary. Capital leases shall be recorded as fixed assets.
Investments in affiliates in whose management the company has significant influence or in which
they hold 20% or more of the voting capital (not of the total capital as before), in subsidiaries, and in
other companies that are in the same group, or that are under common control, shall be measured by
the equity method.
In shareholders equity, the revaluation reserve is eliminated and a new account, adjustments to
asset valuation, is introduced. Offsetting entries to increases and decreases in assets and liabilities
measured at market value shall be classified as adjustments to the new equity account as long as they
were not included in net income for the year on an accrual basis.
The statement of changes in financial position has been replaced with statements of value added (for
all publicly-held companies) and cash flows (for all companies). In the 2008 year of transition, these
statements may be presented without prior year comparative amounts.

C 27
 SENDAS DISTRIBUIDORA S/A

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Year ended December 31, 2007, 2006 and 2005
(expressed in thousands of reais)

19. Changes to the Preparation and Disclosure of Financial Statements (Continued)

Privately-held companies may opt to follow the same financial reporting rules issued by the
Brazilian Securities Commission (CVM) for publicly-held companies.

The requirements of this new Law are applicable to the financial statements for fiscal years starting as from
January 1st, 2008, and the changes thereto for the year ending December 31, 2008 shall also be applied
retroactively to December 31, 2007 for presentation and comparison purposes of the financial statements to be
disclosed.

Upon the preparation of the current financial statements, it is not possible to anticipate the impacts of this new
law on the Companys results of operations and financial position, to be reflected on the individual and
consolidated financial statements for the fiscal year started on January 1, 2008 and retrospectively, on the
financial statements for the year ended at December 31, 2007, upon its preparation for comparison purposes
to be disclosed on the financial statements for the year ending December 31,2008.

20. Summary of Differences between Brazilian GAAP and U.S. GAAP applicable to the Company

a) Significant differences between Brazilian GAAP and U.S. GAAP

The accounting practices of the Company (Note 2) are in accordance with the accounting practices adopted in
(Brazilian GAAP), which comply with those prescribed by Brazilian Corporate Law and specific standards
established by the CVM (Comisso de Valores Mobilirios) and IBRACON (Brazilian Institute of
Independent Accountants). Accounting practices applicable to the Company, which differ may significantly
from Accounting Principles Generally Accepted in the United States (U.S. GAAP), are summarized below:

i. Reversal of amortization of BR GAAP goodwill Under Brazilian GAAP the assets contributed, by the
parent company, to the joint venture -Sendas Distribuidora - were recorded at fair value and goodwill was
created. Under U.S. GAAP, the assets contributed to the joint venture were recorded at historical
carryover value and no goodwill is recognized. Therefore, the Company reversed the goodwill and its
corresponding amortization for US GAAP purposes.

ii. Goodwill impairment The Company determined that the BR GAAP goodwill was impaired and
recorded an impairment expense. For US GAAP, this goodwill does not exist and therefore, such
impairment needs to be reversed.

iii. Derivatives - Under Brazilian GAAP, Derivative financial instruments are accounted for under the
accrual method. Under U.S. GAAP, the Company followed the provision from SFAS No. 133
"Accounting for Derivative Instruments and Hedging Activities", as amended by SFAS No. 137 and
SFAS No. 138, and, consequently measures those instruments at fair value. The Company does not apply
hedge accounting.

iv. Leases - Under Brazilian GAAP, leases normally are treated for accounting purposes as operating leases
and the expense is recognized when each lease installment is incurred. For the purposes of the U.S.GAAP
the Company followed the provision of FAS 13- Accounting for Lease.

C 28
 SENDAS DISTRIBUIDORA S/A

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Year ended December 31, 2007, 2006 and 2005
(expressed in thousands of reais)

20. Summary of Differences between Brazilian GAAP and U.S. GAAP applicable to the Company
(Continued)

v. Income taxes Under BR GAAP, deferred income taxes are accounted for as described in Note 2. Under
U.S. GAAP the Company determined that certain deferred income tax assets were not more likely than
not to be realized and therefore the Company recorded a valuation allowance.

vi. Securitization of receivables - As described in Note 2 (b) the Company carries out securitization
operations of its credit rights to PAFIDC. US GAAP has very specific requirements to determine whether
the transfer of financial assets qualifies for a sale, pursuant to the provisions of FAS 140 Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities.

vii. Brazilian GAAP does not require the presentation of a statement of cash flows. US GAAP requires a
presentation of a statement of cash flows, pursuant to FAS 95 (Statement of Cash Flows), showing cash
flows from operations, investing and financing activities.

viii. Brazilian GAAP allows for certain items to be presented in the income statement as non-operating items.
US GAAP has stricter rules about classification of items as non-operating.

ix. Under BR GAAP, uncertain tax positions are accounted for similar to SFAS 5 when probable and
estimable. Liabilities associated with unrecognized tax benefits The Company adopted the provisions of
FASB Interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income Taxes, on January 1,
2007. Beginning January 1, 2007, the Company records the financial statement effects of an income tax
position when it is more likely than not, based on the technical merits, that it will be sustained upon
examination. A tax position that meets the more-likely-than-not recognition threshold is measured and
recorded as the largest amount of tax benefit that is greater than 50 percent likely of being realized upon
ultimate settlement with a taxing authority. Previously recognized tax positions are derecognized in the
first period in which it is no longer more likely than not that the tax position will be sustained. The
benefit associated with previously unrecognized tax positions are generally recognized in the first period
in which the more-likely-than-not threshold is met at the reporting date, the tax matter is ultimately
settled through negotiation or litigation or when the related statute of limitations for the relevant taxing
authority to examine and challenge the tax position has expired. The recognition, derecognition and
measurement of tax positions are based on managements best judgment given the facts, circumstances
and information available at the reporting date.

b) Recently issued accounting pronouncements under U.S. GAAP

In September 2006, the FASB issued SFAS 157 - "Fair value measurements", which defines fair value,
establishes a framework for measuring fair value, and expands disclosures about fair value measurements.
This Statement applies under other accounting pronouncements that require or permit fair value
measurements. The FASB having previously concluded in those accounting pronouncements that fair value is
the relevant measurement attribute. Accordingly, this Statement does not require any new fair value
measurements. This Statement is effective for financial statements issued for fiscal years beginning after
November 15, 2007 and interim periods within those fiscal years (that is, in the case of Sendas Distribuidora,
January 1, 2008). The Company continues to evaluate the impact of this statement on its consolidated
financial statements but believes that such pronouncement will not generate a material impact on the
Company's consolidated results of operations or financial position.

C 29
 SENDAS DISTRIBUIDORA S/A

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Year ended December 31, 2007, 2006 and 2005
(expressed in thousands of reais)

20. Summary of Differences between Brazilian GAAP and U.S. GAAP applicable to the Company
(Continued)

b) Recently issued accounting pronouncements under U.S. GAAP (Continued)

In February 2007, the FASB issued SFAS 159, "The Fair Value Option for Financial Assets and Financial
Liabilities". SFAS 159, includes an amendment of SFAS 115,"Accounting for Certain Investments in Debt
and Equity Securities". SFAS 159 permits companies to choose to measure many financial instruments and
certain other items at fair value in order to mitigate volatility in reported earnings caused by measuring related
assets and liabilities differently without having to apply complex hedge accounting provisions. SFAS 159 is
effective for the Company's fiscal year that begins after November 15, 2007 (that is, in the case of Sendas
Distribuidora, January 1, 2008). The Company is currently assessing the impact of this statement on its
consolidated financial statements but believes that such pronouncement will not generate a material impact on
the Company's consolidated results of operations or financial position.

In December 2007, the FASB issued SFAS 141 (revised 2007), "Business Combination", which replaces
SFAS 141, Business Combinations. SFAS 141(R) retains the fundamental requirements in SFAS 141 the
acquisition method of accounting (which SFAS 141 called the purchase method) be used for all business
combinations and for an acquirer to be identified for each business combination. SFAS 141(R) defines the
acquirer as the entity that obtains control of one or more businesses in the business combination and
establishes the acquisition date as the date that the acquirer achieves control. SFAS 141(R) did not define the
acquirer, although it included guidance on identifying the acquirer. SFAS 141(R) scope is broader than that of
SFAS 141, which applied only to business combinations in which control was obtained by transferring
consideration. The result of applying SFAS 141 guidance on recognizing and measuring assets and liabilities
in a step acquisition was to measure them at a blend of historical costs and fair values. In addition, SFAS
141(R) requires a company to measure the noncontrolling interest in the acquiree at fair value which results in
recognizing the goodwill attributable to the noncontrolling interest in addition to that attributable to the
acquirer. SFAS 141(R) applies prospectively to business combinations for which the acquisition date is on or
after the beginning of the first annual reporting period beginning on or after December 15, 2008 (that is, in the
case of Sendas Distribuidora, January 1, 2009). An entity may not apply it before that date. The effective date
of this Statement is the same as that of the related SFAS 160, Noncontrolling Interests in Consolidated
Financial Statements - an amendment of ARB No. 51" (described below). The Company will apply such
pronouncement on a prospective basis for each new business combination.

In December 2007, the FASB issued SFAS 160 noncontrolling interests in consolidated financial
statements, which clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the
consolidated entity that should be reported as equity in the consolidated financial statements. SFAS 160 is
effective for fiscal years and interim periods within those fiscal years, beginning on or after December 15,
2008 (that is, in the case of Sendas Distribuidora, January 1, 2009). Earlier adoption is prohibited. SFAS 160
shall be applied prospectively as of the beginning of the fiscal year in which this Statement is initially applied,
except for the presentation and disclosure requirements. The presentation and disclosure requirements shall be
applied retrospectively for all periods presented. The Company is currently evaluating the impact of such new
pronouncement in its consolidated financial statements

C 30
 SENDAS DISTRIBUIDORA S/A

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Year ended December 31, 2007, 2006 and 2005
(expressed in thousands of reais)

20. Summary of Differences between Brazilian GAAP and U.S. GAAP applicable to the Company
(Continued)

b) Recently issued accounting pronouncements under U.S. GAAP (Continued)

In December 2007, the SEC staff issued Staff Accounting Bulletin No. 110 (SAB 110), which, effective
January 1, 2008, amends and replaces Question 6 of Section D.2 of SAB Topic 14, Share- Based Payment.
SAB 110 expresses the views of the SEC staff regarding the use of a simplified method in developing an
estimate of expected term of plain vanilla share options in accordance with FASB Statement No. 123(R),
Share-Based Payment. Under the simplified method, the expected term is calculated as the midpoint
between the vesting date and the end of the contractual term of the option. The use of the simplified
method, which was first described in Staff Accounting Bulletin No. 107, was scheduled to expire on
December 31, 2007. The SEC staff does not expect the simplified method to be used when sufficient
information regarding exercise behavior, such as historical exercise data or exercise information from external
sources, becomes available. Management is currently evaluating the effect, if any, of the adoption of SAB
110 on its consolidated financial statements.

21. Subsequent events

a) AIG exercise of the Put Option

In March 17, 2008, AIG exercised the put option for its 157,082,802 preferred shares of Sendas Distribuidora
(14.86% of its capital), as described in note 1c, by the amount of R$165,440; such put will be settled in the
amount of R$ 165,440, comprised of cash of R$12,066 and R$153,374 comprised of 4,325 preferred shares of
CBD (2.05% of its capital) based on the average quotation of the 30 days before the exercise date.

After the settlement, CBD will hold 57.43% of Sendas Distribuidora against 42.57% of Sendas S.A.,
nevertheless, Sendas Distribuidora is still under joint control, since the voting and protective rights remain
unchanged for Sendas S.A. The control of Sendas Distribuidora by CBD is subject to and will be effective
only after the results of the arbitration process described in note 1.

b) Arbitration decision

In addition to Note 1, on April 29, 2008, the Fundao Getlio Vargas Arbitration Chamber , ultimately
expressed an opinion, which is favorable to CBD, that the transaction with the Casino Group in 2005 did not
constitute a change of control of CBD as claimed by Sendas S.A. Accordingly, the claims formalized by
Sendas in the arbitration proceeding were denied, specifically the request for the recognition of its alleged
right to exercise the put of its shares in Sendas Distribuidora S.A. and promptly receive the total amount in
cash. Consequently, Sendas S.A. , after the transfer value is defined and agreed upon by the parties, has to
exchange all of its shares in Sendas Distribuidora S.A. with preferred shares of CBDs capital stock
following the terms established in the shareholders agreement.

C 31
 SIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and has
duly caused and authorized the undersigned to sign this Annual Report on its behalf.

COMPANHIA BRASILEIRA DE DISTRIBUIO

By: /s/ Claudio Eugenio Stiller Galeazzi

Name: Claudio Eugenio Stiller Galeazzi
Title: Chief Executive Officer

By: /s/ Enas Csar Pestana Neto

Name: Enas Csar Pestana Neto
Title: Chief Financial Officer

Dated: May 16, 2008

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm ............................. F-3

Consolidated Balance Sheets at December 31, 2007 and 2006 ........................ F-5

Consolidated Statements of Income for the years ended December 31, 2007,
F-7
2006 and 2005...................................................................................................

Consolidated Statements of Changes in Shareholders Equity for the years

F-8
ended December 31, 2007, 2006 and 2005 .......................................................

Consolidated Statements of Changes in Financial Position for the years

F-9
ended December 31, 2007, 2006 and 2005 .......................................................

Notes to Consolidated Financial Statements..................................................... F-12

Miravalles - Report of Independent Registered Public Accounting Firm......... A-1

Balance Sheets at December 31, 2007 and 2006 .............................................. A-2

Statements of Income for the years ended December 31, 2007, 2006 and
A-4
2005

Statements of Changes in Shareholders Equity for the years ended A-5

December 31, 2007, 2006 and 2005 .................................................................

Statements of Changes in Financial Position for the years ended A-6

December 31, 2007, 2006 and 2005 .................................................................

Notes to Consolidated Financial Statements..................................................... A-7

PAFIDC - Report of Independent Registered Public Accounting Firm............ B-1

Sendas - Report of Independent Registered Public Accounting Firm .............. C-1

Statements of Income for the years ended December 31, 2007, 2006 and 2005 C-3
..........................................................................................................................

Statements of Changes in Shareholders Equity for the years ended C-6

December 31, 2007, 2006 and 2005 .................................................................

Statements of Changes in Financial Position for the years ended C-7

December 31, 2007, 2006 and 2005 .................................................................

Notes to Consolidated Financial Statements..................................................... C-8

[REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM]
[F-PAGES TO BE INCLUDED]
Exhibit Index

Exhibit Number Description

1.1 English translation of our Estatuto Social (by-laws), as amended.

5.1 English translation of Acordo de Acionistas (Stockholders Agreement) of Barcelona

Comrcio Varejista e Atacadista S.A., as amended.

12.1 Section 302 Certification of the Chief Executive Officer.

12.2 Section 302 Certification of the Chief Financial Officer.

13.1 Section 906 Certification of the Chief Executive Officer.

13.2 Section 906 Certification of the Chief Financial Officer.

15.1 Report of Independent Registered Public Accounting Firm.

Exhibit Index

Exhibit Number Description

1.1 English translation of our Estatuto Social (by-laws), as amended.

5.1 English translation of Acordo de Acionistas (Stockholders Agreement) of Barcelona

Comrcio Varejista e Atacadista S.A., as amended.

12.1 Section 302 Certification of the Chief Executive Officer.

12.2 Section 302 Certification of the Chief Financial Officer.

13.1 Section 906 Certification of the Chief Executive Officer.

13.2 Section 906 Certification of the Chief Financial Officer.

15.1 Report of Independent Registered Public Accounting Firm.

 EXHIBIT 1.1

COMPANHIA BRASILEIRA DE DISTRIBUIO

BY-LAWS OF THE

CHAPTER I

NAME, HEAD OFFICE, PURPOSE AND DURATION

ARTICLE 1 - COMPANHIA BRASILEIRA DE DISTRIBUIO is a stock corporation with head

offices and jurisdiction at Av. Brigadeiro Luiz Antonio, No. 3142, in the City of So Paulo,
Federative Republic of Brazil, hereinafter governed by these By-laws, by Law 6,404 dated
December 15, 1976, as amended, and other applicable legal provisions.

ARTICLE 2 - The corporate purpose of the Company is the sale of manufactured, semi-
manufactured or raw products, both Brazilian and foreign, of any type or species, nature or quality,
provided that the sale of such products is not prohibited by law.

First Paragraph - The Company may also engage in the following activities:

a) manufacture, processing, exportation, importation and representation of products either on its

own or through third parties;

b) international trade, including that involving coffee;

c) importation, distribution and sale of cosmetic products for hygienic or make-up purposes,
toiletries, sanitary and related products and food supplements;

d) sale of drugs and medicines, pharmaceutical and homeopathic specialties, chemical products,
accessories, dental care equipment, tools and equipment for surgery, production of chemical
products and pharmaceutical specialties, with the possibility that such activities of the Company are
specialized as Drugstore, Allopathic Drugstore, Homeopathic Drugstore or Manipulation Drugstore
of each specialty;

e) sale of oil products, filling up of fuels of any kind, rendering of technical assistance services,
garage, repair, washing, lubrication, sale of accessories and other similar services, of any vehicles;

1
f) sale of products, drugs and general veterinary medicines; veterinary office, clinic and hospital and
pet shop with bath and shearing service;

g) rental of VCR tapes;

h) performance of photo, film and similar studio services;

i) execution and administration of real estate transactions, purchasing, promoting subdivisions and
incorporations, leasing and selling real estate properties on the Companys own behalf as well as
for third parties;

j) acting as distributor, agent and representative of merchants and industrial concerns established in
Brazil or abroad and, in such capacity, for consignors or on its own behalf acquiring, retaining,
possessing and carrying out any operations and transactions in its own interests or on behalf of
such consignors;

k) data processing services;

l) building and construction services of all kinds, either on its own behalf or for third parties,
purchase and sale of construction materials and installation and maintenance of air conditioning
systems, cargo loaders and freight elevators;

m) utilization of sanitary products and related products;

n) highway transportation of general freight for its own products, including warehousing and storage
services;

o) general advertising, including for other connected fields, being duly observed any legal
restrictions;

p) purchase, sale and distribution of books, magazines, newspapers, periodicals and similar
products;
q) performance of studies, analysis, planning and markets research;

r) performance of market test for the launching of new products, packing and labels;

2
s) creation of strategies and analysis of "comportamento setorial de vendas", of special promotions
and advertising;

t) representation of other companies, both Brazilian and foreign, and participation in other
companies irrespective of the form or object of same.

Second Paragraph- The Company may provide guarantees or collateral for business transactions of
its interest, although it must not do so merely as a favor.

ARTICLE 3 - The Companys term of duration shall be indefinite.

CHAPTER II

CAPITAL STOCK AND SHARES

ARTICLE 4 - The Capital Stock of the Company is R$ 4.218.356.697,71 (four billion, two hundred
and eighteen million, three hundred and fifty six thousand, six hundred and ninety seven reais and
seventy one cents of real), fully paid in and divided into 228,429,354 (two hundred and twenty eight
million, four hundred and twenty nine thousand, three hundred and fifty four) shares without par
value, being 99,679,851 (ninety nine million, six hundred and seventy nine thousand, eight hundred
and fifty one) common shares and 128,749,503 (one hundred twenty eight million, seven hundred
fourty nine thousand and five hundred and three) preferred shares.

First Paragraph - The shares of capital stock are indivisible in relation to the Company and each
common entitles its owner to one vote at the General Shareholders' Meetings.

Second Paragraph - The shares shall be recorded in book-entry systems and be kept in deposit
accounts on behalf of their holders with the authorized financial institution designated by the
Company, without issuance of share certificates.

Third Paragraph - The shareholders may convert their common shares into preferred shares at
any time, provided that such shares are fully paid in and considering the limit provided by Article 5
below. The request for conversion shall be addressed in writing to the Executive Officers
Committee. The conversion requests received by the Executive Officers Committee shall be

3
subsequently ratified at the next meeting of the Board of Directors to be held, if the conditions
herein above are met.

Fourth Paragraph - The cost of the service of transferring the ownership of the book-entry shares
charged by the depositary financial institution may be passed on to the shareholder, pursuant to the
third paragraph of Article 35 of Law No. 6,404 dated 12/15/76, subject to the maximum limits
established by the Brazilian Securities Exchange Commission ("Comisso de Valores Mobilirios").

ARTICLE 5 - The Company is entitled to issue new shares without maintaining proportion between
types and/or classes of the existing shares, provided that the number of preferred shares shall not
exceed the limit of 2/3 (two thirds) of the total issued shares.

First Paragraph - The preferred shares shall be entitled to the following privileges and preferences:

a) priority in the reimbursement of capital, in an amount calculated by dividing the Capital Stock by
the number of outstanding shares, without premium, in the event of liquidation of the Company;

b) priority in the receipt of a minimum annual dividend in the amount of R$ 0,08 (eight cents of Real)
per 1 (one ) preferred share, on a non-cumulative basis;

c) participation under equal conditions as the common shares in the distribution of bonus shares
resulting from capitalization of reserves or retained earnings;

d) participation in the receipt of dividend as set forth in Article 35, IV, item "c" of these By-Laws,
which shall be distributed for the common and preferred shares so as to for each preferred share
shall be ascribed a dividend ten percent (10%) higher than the dividend assigned to each common
share, pursuant to the provisions of Article 17, first paragraph, of Law No. 6,404/76, as amended by
Law No. 10,303/01, including, for purposes of such calculation, in the sum of the total amount of
dividends paid to the preferred shares, the amount paid as minimum dividend set forth in item "b" of
this First Paragraph.

Second Paragraph - The preferred shares shall have no voting rights.

Third Paragraph - The preferred shares shall acquire voting rights in the event that the Company
fails to pay the minimum dividends to which they are entitled according to these By-laws for a period

4
of 3 (three) consecutive fiscal years, according to the provisions of first paragraph of Article 111 of
Law No. 6,404/76. These voting rights will cease upon the payment of such minimum dividends.

ARTICLE 6 - The Company is authorized to increase its Capital Stock by resolution of the Board of
Directors without the need to amendment the Company by-laws, up to the limit of 400,000,000 (four
hundred million) shares, through issuance of new common or preferred shares, with due regard to
the limit established in article 5 above.

First Paragraph - The limit of the Companys authorized capital shall only be modified by decision
of a General Shareholders Meeting.

Second Paragraph - Within the limit of the authorized capital and in accordance with the plan
approved by the General Shareholders Meeting, the Company may grant stock options to the
members of its management bodies or employees, or to individuals providing services to the
Company.

ARTICLE 7 - The issuance of shares, subscription bonuses or debentures convertible into shares,
may be approved by the Board of Directors, with the exclusion or reduction of the term for the
exercise of preemptive rights, as provided in Article 172 of Law No. 6,404/76.

Sole Paragraph - Except for the provision set out in the heading of this article, the shareholders
shall be entitled to preemptive rights, in proportion to their respective equity interests, in the
subscription of any Companys capital increases, with the exercise of such right being governed by
the legislation applicable thereto.

CHAPTER III

GENERAL SHAREHOLDERS MEETING

ARTICLE 8 - The General Shareholders' Meeting is the meeting of the shareholders. The
shareholders may participate at the General Shareholders' Meetings either in person or through
attorneys-in-fact appointed as provided by law, in order to resolve upon the matters of interest of
the Company.

5
ARTICLE 9 The General Meeting shall be instated and chaired by the Board of Directors
Chairman, in his absence, by the Chief Executive Officer and, in his absence, by an Officer
appointed by the Board of Directors Chairman. The General Meeting shall be called by the Board of
Directors Chairman and shall have the following attributions:

I the amendment to the Company's By-laws;

II the appointment and removal of members of the Company's Board of Directors at any time;

III the appointment and removal of the Chairman of the Company's Board of Directors;

IV the approval, annually, of the accounts and financial statements of the Companys
management, prepared by them;

V the approval of any issuance of common or preferred shares up to the limit of the authorized
capital, as provided in Article 6 above and/or any bonuses, debentures convertible into its shares or
with secured guarantee or securities or other rights or interests which are convertible or
exchangeable into or exercisable for its shares, or any other options, warrants, rights, contracts or
commitments of any character pursuant to which the Company is or may be bound to issue,
transfer, sell, repurchase or otherwise acquire any shares and the terms and conditions of
subscription and payment;

VI the approval of any appraisals of assets, which the shareholders may contribute for the
formation of the Company's capital;

VII the approval of any proposal for change the corporate form, amalgamation, merger (including
merger of shares - incorporao de aes), spin-off or split of the Company, or any other form of
restructuring of the Company;

VIII the approval of any proposal for dissolution or liquidation of the Company, appointing or
replacement of its liquidator(s);

IX the approval of the accounts of the liquidator(s);

6
X the establishment of the global annual compensation of the members of any management body
of the Company, including fringe benefits;

XI the approval or the amendment of the annual operating plan;

XII the approval of any agreement or the amendment in any agreement, directly or indirectly,
between the Company and/or its affiliates and any of its controlling shareholders or their relatives,
members of its management bodies or any of its controlled companys and affiliates thereto,
exception made to those executed in the ordinary course of business, which should be contracted
at arms length (market conditions);

XIII the purchase, sale, disposal of or creation of lien on any asset of the Company or any other
investment by the Company in an individual amount or cumulated over a fiscal year in excess of the
amount in Reais equivalent to US$ 100,000.00 (one hundred million U.S. Dollars) or in excess of an
amount equal to 6% (six per cent) of the net worth (patrimnio lquido) of the Company as
determined in its latest annual balance sheet, whichever is the higher;

XIV - the approval of request by the Company of self-bankruptcy or of protection under any
bankruptcy or reorganization law;

XV the approval of any delisting of shares of the Company for trading on stock exchanges or filing
for new listings;

XVI the approval of any change in the Company's dividend policy;

XVII - the approval of any financial arrangement, including the lending or borrowing by the
Company of funds and the issuance of non-convertible debentures, in excess of an individual
amount equal to two (2) times EBITDA of the preceding twelve (12) months; and

XVIII - the approval of any joint venture of the Company with a third parties involving an individual
investment or cumulated over a fiscal year in excess of the amount equivalent in Reais to US$
100,000,000 (one hundred million U.S. Dollars) or in excess of an amount equal to six (6) percent of
the net worth (patrimnio lquido) of the Company as determined in its latest annual balance
sheet, whichever is the higher.

7
ARTICLE 10 Any resolution of the General Shareholders Meeting shall be taken by the approval
of shareholders representing at least the absolute majority of the present shareholders entitled to
vote, except if qualified quorum is required by law.

ARTICLE 11 The Annual Shareholders Meeting shall have the attributions set forth in the law
and shall take place during the first four months following the end of each fiscal year.

Sole Paragraph - Whenever necessary, the General Shareholders Meeting may be installed
extraordinarily, and may be carried out subsequently with the Annual Shareholders Meeting.

CHAPTER IV

MANAGEMENT

ARTICLE 12 - The Company shall be managed by a Board of Directors and an Executive Officers
Committee.

First Paragraph - The term of office of the members of the Board of Directors and the Executive
Officers Committee shall be up to 3 (three) years, reelection being permitted.

Second Paragraph - The Directors and the Executive Officers shall take office by signing their
oaths in the Book of Minutes of the Board of Directors or of the Executive Officers Committee, as
the case may be.

Third Paragraph - The term of office of the Directors and Executive Officers shall be extended until
their respective successors take office.

Fourth Paragraph - The minutes of the meetings of the Board of Directors and of the Executive
Officers Committee shall be record in the proper book, which shall be signed by the present
Directors and Executive Officers, as the case may be.

8
 Section I

Board of Directors

ARTICLE 13 - The Board of Directors shall consist of at least 3 (three) and no more than 18
(eighteen) members, all of whom must be shareholders of the Company, elected and removed by
the General Shareholders' Meeting.

Sole Paragraph - Considering the provisions of article 14, in the event of absence of any Director,
the absent Director shall appoint other Director, among other members of the Board of Directors,
the Director who shall replace him. In the event of permanent vacancy of a Directors office, the
Chairman shall call a General Shareholders Meeting within 15 (fifteen) days from the date of the
occurrence of vacancy to fulfill such position permanently, until the end of the relevant term in office.

ARTICLE 14 - The Board of Directors shall have a Chairman, appointed by the General
Shareholders' Meeting.

First Paragraph - In the event of absence of the Chairman of the Board of Directors, he shall
appoint other Director to replace him, who will perform the Chairmans duties. In the event of
permanent vacancy of the Chairman, any of the Directors shall call a General Shareholders
Meeting within 15 (fifteen) days from the date of vacancy, for the appointment of the new Chairman
of the Board of Directors in permanent manner, until the end of the relevant term in office.

Second Paragraph In case of a temporary absence or impediment of the remaining members of

the Board of Directors, said members shall be replaced by any other member appointed to that
effect in writing by the absent member. In this case, besides his/her own vote, the Board Member
who is to replace the absent Board Member, shall also cast the vote of the member who has been
replaced.

ARTICLE 15 - The Board of Directors shall ordinarily meet at least once every month, to review the
financial and other results of the Company for the preceding month and to review and follow-up of
the annual operating plan, and shall extraordinarily meet whenever necessary.

First Paragraph - The Chairman shall call the meetings of the Board of Directors, by his or her
initiative or at the written request of any Director. Failure by the Chairman to call any meeting within

9
7 (seven) calendar days from the date of receipt of the request by any Director shall allow such
Director to call the meeting.

Second Paragraph The calls for the meetings of the Board of Directors shall be made in writing,
either by telex, facsimile or letter, at least 7 (seven) days prior to the date of each meeting, shall
specify time and place and comprise a detailed agenda of the meeting. Any proposal of resolutions
and all necessary documentation related thereto shall be at the Board of Directors disposal at the
Companys head office. The meetings shall be held regardless the respective call notice in case of
attendance of all Directors in office at such time, or by the prior written consent of the absents
Directors.

Third Paragraph The presence of at least 10 (ten) members of the Board of Directors shall be
required for the installation of a meeting of the Board of Directors.

Fourth Paragraph The Chairman of the Board of Directors, in each meeting of the Board of
Directors, may invite members of the Advisory Board of the Company as guests, who may express
their opinions and participate in the discussions, without the right to vote.

ARTICLE 16 - The Board of Directors meetings shall be presided by its Chairman, or in its latter's
absence, by other Director indicated by him.

Sole Paragraph The resolutions of the Board of Directors shall be taken by majority of ayes
cast by its members, and in case of a draw, the Chairman of the Board shall cast the tie braking
vote, except as regards to the matters in which there is a conflict of interests, in which case the
Chairman shall abstain from voting. Board members may partake of the meetings of the Board of
Directors through e-conferencing, through video-conferencing or through any other means of
electronic communications, being construed as attending the meeting and being required to confirm
their vote through a written representation forwarded to the Chairman of the Board by letter, by
facsimile or by e-mail right after the end of the meeting. Once said representation has been
received, the Chairman of the Board shall have been fully empowered to sign the minutes of the
meeting in the name of said board member.

ARTICLE 17 - The Board of Directors shall have an Executive Secretary, appointed by majority of
the Directors, whose duties shall be defined in the meeting at which he is appointed.

10
ARTICLE 18 - In addition to the powers provided for in the applicable law, the Board of Directors
shall have the powers to:

a) set forth the general guidelines of the Company's business;

b) appoint and remove the Executive Officers of the Company, establishing their duties and titles;

c) supervise action of the Executive Officers of the Company, examine, at any time, the records and
books of the Company, request information on agreements executed or to be executed and on any
other acts or matters;

d) call the General Shareholders' Meeting;

e) issue an opinion on the report of the management, the accounts of the Executive Officers
Committee and the financial statements of the Company;

f) approve the issuance of shares of any type or class up to the limit of the authorized capital and
establish the respective price and payment conditions;

g) appoint and remove the independent public accountants;

h) issue an opinion on any and all proposals of the Executive Officers Committee to be submitted to
the General Shareholders Meetings;

i) authorize the acquisition of shares of the Company for purposes of cancellation or maintenance in
treasury;

j) develop, jointly with the Executive Officers Committee, and approve a profit sharing and additional
benefits program for the members of the management bodies and for the employees of the
Company (Profit Sharing Program);

k) define the share of Company's profits to be allocated to the Profit Sharing Program in due
compliance with the applicable legal provisions, these By-laws and the Profit Sharing Program in
effect at such time. The amounts expensed or accrued in each fiscal year by way of profit sharing in
addition to granting option to purchase Companys stock shall be limited up to 15% (fifteen per cent)

11
of the profit recorded in each fiscal year after the pertinent deductions have been effected in
accordance with Article 189 of Law No. 6404/76;

l) set forth the number of shares to be issued under the stock option plan previously approved by
the General Shareholders Meeting, provided that the limit established in item "l" above is duly
observed;

m) set up Committees, that shall be responsible for making proposals or recommendations and
giving their opinions to the Board of Directors and set forth its respective attributions, in accordance
with the provisions of these By-laws ;

n) previously authorize the acquisition, sale, disposal or creation of any lien on any asset, including
any real estate, of the Company or any other investments made by the Company in an individual
amount or cumulated over a fiscal year in excess of the amount in Reais equivalent to US$
20,000,000 (twenty million U.S. Dollars) or in excess of an amount equal to 1% (one percent) and
up to 6% (six percent) of the net worth (patrimnio lquido) of the Company as determined in its
latest annual balance sheet, whichever is the higher;

o) approve any financial arrangement involving the Company, including the lending or borrowing of
funds and the issuance of non-convertible and unsecured debentures, in excess of an individual
amount equivalent to 0,5 (one half) and up to 2 (two) times EBITDA of the preceding 12 (twelve)
months;

p) previously authorize the joint venture of the Company with third parties involving an individual
investment or cumulated over a fiscal year up to the amount equivalent in Reais to US$
100,000,000 (one hundred million U.S. Dollars) or up to an amount equal to 6% (six percent) of the
net worth (patrimnio lquido) of the Company as determined in its latest annual balance sheet,
whichever is the higher to be submitted to the General Shareholders Meetings; and

q) previously approve any and all agreement or amendment in any agreement, directly or indirectly,
between the Company and/or its affiliates and any of its controlling shareholders or their relatives,
members of its management bodies and their affiliates, except from those matters under regular
course of business, which shall be executed under market conditions (arms-length) to be submitted
to the General Shareholders Meetings;

12
ARTICLE 19 - The Company shall set up four (4) Social Committees to wit: (i) the Audit Committee;
(ii) the Human Resources and Remuneration Committee; (iii) the Finance Committee; and (iv) the
Development and Innovation Committee; which shall have the function to elaborate proposals or to
effect recommendations to the Board of Directors as regards their specific areas of performance.
The Board of Directors may set up other Committees besides the aforementioned ones

First Paragraph - Each Special Committee shall be composed of 3 (three) to 5 (five) members for a
term of office of 3 (three) years, reelection being permitted. The members of each of the Special
Committees shall be appointed by the Board of Directors, solely among its members and shall also
designate the President of each Special Committee..

Second Paragraph - In the event of absence of any member of a Special Committee, the absent
member shall appoint other Director to replace him. In the event of permanent vacancy, the
Chairman shall within 7 (seven) days as of the occurrence of vacancy call a Board of Directors
Meeting for the appointment of the new member of the Special Committee to end the relevant term
in office. There shall be no prohibition on the appointment of a member to more than one Special
Committee in the same term of office.

Third Paragraph - The Special Committees shall hold meetings whenever called by the Chairman,
by his or her own initiative or at the written request of any member of any Special Committee.
Failure by the Chairman to call any meeting of any Special Committee requested by any of its
members within 7 (seven) days from the date of receipt of the request by any member allows such
member to call the meeting.

Forth Paragraph - The attributions of each Special Committee shall be set forth by the Board of
Directors.

Section II

Executive Officers Committee (Diretoria)

ARTICLE 20 - The Executive Officers Committee (Diretoria) shall be composed of at least 2 (two)
and no more than 14 (fourteen) members, shareholders or not, resident in Brazil, appointed and

13
removed by the Board of Directors, one (1) being the Chief Executive Officer and the others
Executive Officers.

ARTICLE 21 The Executive Officers shall be in charge of the general duties set forth in these by-
laws and those establish by the Board of Directors and shall keep mutual corporation among
themselves and assist each other in the performance of their duties and functions.

First Paragraph The duties and titles of each Executive Officer, shall be established by the
Board of Directors.

Second Paragraph - In the event of absences, occasional impairments and vacancy, the Executive
Officers shall be replaced in the following manner:

a) in the event of absences and occasional impairments of the CEO, he shall be replaced by other
Executive Officer indicated by him and in the event of permanent vacancy, the Board of Directors
shall appoint the CEOs substitute within 30 (thirty) days, who shall complete the term of office of
the CEO;

b) in the event of absences and occasional impairments of the remaining Executive Officers, they
shall be replaced by the CEO and, in the event of permanent vacancy, the Board of Directors shall
appoint the Executive Officers substitute within 15 (fifteen) days, who shall complete the term of
office of the substituted Executive Officer.

ARTICLE 22 - The Executive Officers Committee shall meet upon call of its CEO or of half of its
Executive Officers in office.

Sole Paragraph - The minimum quorum required for the installation of a meeting of the Executive
Officers Committee is the presence of at least 1/3 (one third) of the Executive Officers in office at
such time. The resolutions of the Executive Officers Committee shall be approved by the majority of
the votes. In the event of a tie in connection of any matter subject to the Executive Officers
approval, such matter shall be submitted to the Board of Directors.

ARTICLE 23 - In addition to the duties that may be attributed to the Executive Officers Committee
by the General Shareholders Meeting and by the Board of Directors, and without prejudice to the
other legal duties, the Executive Officers Committee shall have the power to:

14
I - manage the Companys business and ensure compliance with these by-laws;

II ensure that the Companys purpose is carried out;

III - approve all plans, programs and general rules of operation, management and control for the
development of the Company, in accordance with the guidelines determined by the Board of
Directors;

IV - prepare and submit to the Annual Shareholders Meeting a report on the corporate business
activities, including the balance sheet and financial statements required by law for each fiscal year,
as well as the respective opinions of the Audit Committee, as the case may be;

V guide all Company's activities under the guidelines set forth by the Board of Directors and
appropriate to the fulfillment of its purposes;

VI suggest investment and operating plans or programs to the Board of Directors;

VII - authorize the opening and closing of branches, agencies or depots and/or institute delegations,
offices and representations in any location of the national territory or abroad;

VIII render an opinion on any matter to be submitted to the Board of Directors approval; and

IX - develop and carry out, jointly with the Board of Directors, the Employee Profit Sharing Program.

ARTICLE 24 The Chief Executive Officer, in particular, is entitled to:

a) plan, coordinate, conduct and manage all Companys activities, as well as perform all executive
and decision-making functions;

b) carry out the overall supervision of all Companys activities, coordinating and guiding the other
Executive Officers activities;

c) call, install and preside the meetings of the Executive Officers Committee;

15
d) coordinate and conduct the process of approval of the annual/pluriannual budget and of the
investment and expansion plans together with the Board of Directors; and

e) suggest functions and respective candidates for the Executive Officers positions of the Company
and submit such suggestion to the Board of Directors approval.

ARTICLE 25 - It is incumbent upon the Executive Officers to assist and support the CEO in the
administration of the Company, in accordance with duties determined by the Board of Directors and
perform all acts necessary for the regular Companys activities, as long as these acts have been
duly authorized by the Board of Directors.

ARTICLE 26 - The Executive Officers shall represent the Company actively and passively, in court
and outside courts and before third parties, performing and signing all acts that result in obligations
to the Company.

First Paragraph For the granting of powers-of-attorney, the Company shall be represented by 2
(two) Executive Officers, acting jointly, of whom one must always be the CEO or others Executive
Officers to be appointed by the Board of Directors, and all powers-of-attorney shall a validity term,
except for powers-of-attorney granted for judicial purposes, in addition to the description of the
powers granted which may cover any and all acts, including those related to banking operations;

Second Paragraph - In case of acts that entail any kind of acquisition, sale, disposal or creation of
any lien on any Companys asset, including any real estate, as well as, for the granting of powers-
of-attorney for the practice of such acts, the Company is required to be represented jointly by three
(3) Executive Officers of whom one must always be the CEO and the others Executive Officers to
be appointed by the Board of Directors.

Third Paragraph - The Company shall be considered duly represented:

a) jointly by two Executive Officers of whom one must always be the CEO or other Executive Officer
to be appointed by the Board of Directors;

b) jointly by one Executive Officer to be appointed by the Board of Directors, and an attorney-in-
fact, when so determined by the respective power -of -attorney and in accordance with the powers
contained therein;

16
c) jointly by two attorneys-in-fact, when so determined by the respective power of attorney and in
accordance with the powers contained therein;

d) solely by an attorney-in-fact or Executive Officer, in specific cases, when so determined by the

respective power of attorney and in accordance with the powers contained therein.

CHAPTER V

ADVISORY BOARD

ARTICLE 27 - The Company may have an Advisory Board, on a non-permanent basis, with up to
13 (thirteen) members, shareholders or not, appointed by the General Shareholders Meeting.

First Paragraph - The members of the Advisory Board shall have a term of office of 3 (three) years,
reelection being permitted, and may receive the compensation set forth by the General
Shareholders Meeting.

Second Paragraph The Advisory Board, when installed, shall meet ordinarily once every six
months and extraordinarily whenever called by the Chairman of the Board of Directors.

Third Paragraph - The call notices for the meetings of the Advisory Board shall appoint the agenda
to be discussed, as well as the place, date and time of the meetings, and shall be sent by mail or
facsimile, at least 5 (five) days prior to the meeting.

Fourth Paragraph - The resolutions of the Advisory Board shall be record in the proper book,
which shall be signed by the present members.

ARTICLE 28 - It is incumbent upon the Advisory Board to:

a) recommend to the Board of Directors measures to be taken to ensure the preservation and
development of Company business and activities; and

b) render opinion on any matters submitted to them by the Board of Directors.

17
 CHAPTER VI

FISCAL COUNCIL

ARTICLE 29 - The Fiscal Council shall exist on a non-permanent basis and shall be installed by the
General Shareholders' Meeting, which shall appoint its members when necessary.

Sole Paragraph - The members of the Fiscal Council and their alternates shall perform their
positions up to the first Annual Shareholders' Meeting held after their respective appointment,
reelection being permitted.

ARTICLE 30 - The Fiscal Council shall be composed of no less than 3 (three) and up to 5 (five)
effective members and the same number of alternates, residents in the country, shareholders or
not, all of then qualified in accordance with the legal provisions.

ARTICLE 31 - The appointed Fiscal Council shall have the powers and duties conferred upon then
by law.

ARTICLE 32 - The compensation of the members of the Fiscal Council shall be fixed by the
General Shareholders' Meeting in which they are appointed, with due observance of the legal limit.

CHAPTER VII

CORPORATE YEAR AND FINANCIAL STATEMENTS

ARTICLE 33 - The fiscal year ends on December 31 of each year, when the balance sheet and
financial statements required by applicable law shall be prepared.

ARTICLE 34 - The Company may, at the discretion of the Executive Officers Committee, prepare
quarterly or semi-annual balance sheets.

18
 CHAPTER VIII

PROFIT DESTINATION

ARTICLE 35 Upon the preparation of the balance sheet, the following rules shall be observed
with respect to the distribution of the profits:

I - from the profits of the fiscal year shall be deducted, before any allocation of net income, the
accumulated losses and the provision of the income tax;

II - After deducting the portions described in item I above, the portion to be distributed in the form of
employee profit sharing shall be deducted, as determined by the Board of Directors, in compliance
with the Profit Sharing Program and under the terms and according to the limits provided in items "j"
and "k" of Article 18 herein;

III - in due compliance with the terms and limits established in paragraphs of Article 152 of Law No.
6404/76 and the limit established in item k of Article 18 herein, the amount corresponding to the
managers in the Companys profits shall be deducted, as determined by the Board of Directors, in
compliance with the Profit Sharing Program;

IV - the remaining net profits shall have the following destination:

a) 5% (five per cent) shall be allocated to the legal reserve fund until such reserve reaches the limit
of 20% (twenty per cent) of the Capital Stock;

b) amounts to the formation of the reserve for contingencies reserve, if so decided by the General
Shareholders Meeting;

c) 25% (twenty five per cent) shall be allocated to the payment of the mandatory dividends pursuant
to First Paragraph below, in accordance with the provisions contained in first paragraph of Article 5
herein;

19
d) the profit not provisioned in the reserve described in Second Paragraph below and not allocated
in accordance with the provisions of Article 196 of Law No. 6404/76 shall be distributed as
additional dividends.
First Paragraph The mandatory dividends shall be calculated and paid in accordance with the
following rules:

a) the basis for calculation of the dividends payable shall be the net profit of the fiscal year, less the
amounts allocated to the legal reserve and the contingency reserves and plus the amount obtained
from the reversion of the reserves of contingencies formed in the previous fiscal year;

b) the payment of the dividend calculated in accordance with the provisions of the previous item
may be limited to the amount of the net profit effectively realized of the fiscal year for that has
ended pursuant to the law, provided that the difference is registered as reserve for profits to be
realized;

c) the profits registered in the reserve for profits to be realized, when accrued and if such profits
have not been absorbed by the losses in the subsequent fiscal years, shall be increased to the first
declared dividends after such realization.

Second Paragraph It is hereby created, the Reserve for Expansion, which purpose shall ensure
resources for financing additional investments in fixed assets and working capital and to which shall
be allocated up to 100% of the remaining profits after the deductions and destinations established
in items "a", "b" and "c" of item IV above. The total amount provisioned in such reserve shall nor
exceed the total amount of the Companys Capital Stock.

Third Paragraph - If duly authorized by the Board of Directors, the Company may elect to distribute
interim dividends, ad referendum by the General Shareholders Meeting.

Fourth Paragraph - The Company may elect to pay or credit interests as remuneration of its own
capital calculated on the accounts of the net worth, in due observance of the rate and limits
determined by law.

ARTICLE 36 The amount of dividends shall be placed at the shareholders disposition within a
maximum term of 60 (sixty) days as from the date of their allotment, and may be monetarily
adjusted, if so determined by the Board of Directors, subject to the applicable legal provisions.

20
ARTICLE 37 - The financial statements and accounts of the Company shall be audited on an
annual basis by internationally recognized independent accountants.
CHAPTER IX

LIQUIDATION

ARTICLE 38 - The Company shall be liquidated in the cases provided by law, and the General
Shareholders Meeting shall determine the form of liquidation, appoint the liquidator and the
members of the Fiscal Council, which shall operate during the liquidation, and establish their
compensation.

CHAPTER X

FINAL PROVISIONS

ARTICLE 39 The values in U.S.Dollars mentioned herein shall be exclusively used as reference
for monetary update and shall be converted in Brazilian Reais using the average exchange rate for
the U.S. Dollar published by the Central Bank of Brazil.

ARTICLE 40 - The cases not regulated in these by-laws shall be solved in conformity with current
applicable legislation.

ARTICLE 41 - The present by-laws shall come into effect as of the date of its approval by the
General Shareholders Meeting.

So Paulo, April 30, 2008

21
 EXHIBIT 5.1

STOCKHOLDERS AGREEMENT OF BARCELONA COMRCIO

VAREJISTA E ATACADISTA S.A.

By the present act under private signature and within the law,

1. SEVILHA EMPREENDIMENTOS E PARTICIPAES LTDA., a private

limited company, established in the city of So Paulo, State of So Paulo, at
Av. Brigadeiro Luiz Antnio, 3.172, 2 andar, Jardim Paulista, enrolled at
CNPJ/MF (National Corporate Taxpayer Registry) under no. 07.146.013/0001-12
("SEVILHA"), represented within its by-laws by its managers Enas Csar
Pestana Neto and Aymar Giglio Junior;

and

2. RODOLFO JUNJI NAGAI, Brazilian, married, trader, resident and domiciled in

the City of So Paulo, State of So Paulo, at Rua Manilha, 60,
bearing the Identity Card (R.G.) no. 5.662.214-SSP/SP, enrolled at the Individual
Taxpayer Registry under no. 569.893.008-25 ("RODOLFO"); and

3. LUIZ FUMIKAZU KOGACHI, Brazilian, married, trader, resident and

domiciled in the City of So Paulo, State of So Paulo, at Rua Manilha, 43,
bearing the R.G. no. 13.950.538, enrolled at the Individual Taxpayer Registry
under no. 075.351.338-27 ("LUIZ"),

RODOLFO and LUIZ being hereinafter referred to, individually and indistinctly
as "Original Partner", and jointly as "Original Partners",

SEVILHA, RODOLFO and LUIZ being hereinafter referred to, individually and
indistinctly as "Stockholder", and jointly as "Stockholders";

And further, in the capacity of intervening consenting parties,

4. BARCELONA COMRCIO VAREJISTA E ATACADISTA S.A., a joint

stock company established in the city of So Paulo, State of So Paulo, at
Av. Brigadeiro Luiz Antnio, 3.172, 3 andar, Jardim Paulista, enrolled at
CNPJ/MF under no. 07.170.943/0001-01 ("Company"), represented, within its by-
laws by its officers LUIZ and Luiz Antonio Martins Amarante;

5. ASSAI COMERCIAL E IMPORTADORA LTDA., a private limited

company established in the city of So Paulo, State of So Paulo, at Rua
Manilha, 42, enrolled at CNPJ/MF under no. 46.499.224/0001-90 ("Assai"),
represented within its by-laws by its manager Luiz Fumikazu Kogachi;

6. COMPANHIA BRASILEIRA DE DISTRIBUIO, a joint stock company,

established in the city of So Paulo, State of So Paulo, at Av. Brigadeiro Luiz
Antnio, 3.172, Jardim Paulista, enrolled at CNPJ/MF under no.
47.508.411/0001-56 (GPA), represented within its by-laws by its officers
Cssio Casseb Lima and Enas Csar Pestana Neto; and

7. S SUPERMERCADOS LTDA., a private limited company, established in the

city of So Paulo, State of So Paulo, at Av. Brigadeiro Luiz Antnio, 3.172,
Jardim Paulista, enrolled at CNPJ/ under no. 01.545.828/0001-98 ("S"),
represented within its by-laws by its officers Enas Csar Pestana Neto and
Aymar Giglio Junior,

WHEREAS:
I. the Stockholders shall hold 4,010,000 common shares, all registered shares and
with no face value, representing 100% of the total voting capital of the
Company on the Closure Date;

II. GPA holds 93.4% of the shares to the capital of S which,

in turn, holds 99.99% of the shares to the capital of SEVILHA; and

III. the Stockholders are willing, upon the execution of a stockholders

agreement, within the terms and for the purposes of Article 118 of Act no.
6.404/76, to set forth the conditions to govern the purchase and sale, the
exercising of the proper right to vote of the shares issued by the Company and
the exercising of the control power of the Company over its current controlled
companies and other partnerships it might come to control;

NOW, THEREFORE, the Stockholders have agreed to be bound by the present

Stockholders Agreement ("Agreement"), to be governed by the following terms and
conditions:

1 - DEFINITIONS AND CONSTRUCTION

1.1. For all purposes and effects of the present Agreement, the following
expressions and terms in capital letters shall have the meanings specified below:

1.1.1. "Stockholder(s)" shall have the meaning assigned at the preamble hereof
and includes the authorized successors and assigns of the signatories hereunder.

1.1.2. "Affiliated" shall mean, with regard to a party, any legal entity which is its
Controlling Company, Controlled Company, company under the common Control of
its Controlling Company or funds or entities incorporated and managed by the
Stockholder or by a company under the common control with the Stockholder, or
direct descendents or heirs of natural person Stockholders.

1.1.3. "Alienate" or "Alienation'' shall mean to sell, barter, donate, grant to the capital,
lend or otherwise assign, alienate or transfer, under any pretense, whether directly or
indirectly, in whole or in part, or also commit to perform any one of any such acts, to
pledge, give as collateral security, chattel mortgage or any other form of
guarantee, or usufruct.

1.1.4. Probable Contingencies shall mean the Company contingencies to be identified at the
latest balance sheet audited by the independent auditor and with legal counsel identifying them
as probable loss.

1.1.5. "Agreement of Purchase and Sale" shall mean the Agreement of Purchase and
Sale of Shares, entered into on this date by and between Rodolfo Junji Nagai and
Luiz Fumikazu Kogachi, as sellers, and Sevilha Empreendimentos e Participaes
Ltda., as buyer.

1.1.6. "Controlled Company (ies)", with regard to any Stockholder, shall mean the
legal entity (entities) or investment fund(s) under the Control of a Stockholder.

1.1.7. "Controller(s)" shall mean the natural person(s) or legal entity (ies), or the
investment fund administrator holding the Control of a legal entity or investment
fund.

1.1.8. "Control" shall mean the power, direct or indirect, to determine the
management, selection of the majority of the managers and the lines of action of a
legal entity or an investment fund, whether (i) through the ownership of over 50%
of the voting capital of this legal entity or of the investment fund shares; (ii)
through the right to elect the majority of the managers of this legal entity or appoint
the investment fund administrator; (iii) by contract; or (iv) in any other way.

1.1.9. DGAV" shall mean the general administrative expenses and expenses with
current sales of the Company, including, but not limited to, expenses with
advertising, personnel, rent and Operational Leasing, pursuant to the Accounting
Practices adopted by GPA.

1.1.10. "Closure Date" shall have the meaning indicated in Article 4.1 of the
Agreement of Purchase and Sale of Shares.

1.1.11. "Net Debt" shall mean (i) the financial liability of the Company (including
current liability, long-term liability and debts related to Financial Leasing, even if
not accounted for), less (ii) available funds (cash, bank deposits, cash in transit
and cash equivalents) and short-term temporary investments of the Company,
plus (iii) the Probable Contingencies, considering that the Company, on the date of
determination of the Net Debt, keeps its operating practices (supplier terms,
inventory turnover and accounts receivable from customers) aligned with those
adopted by it as of the present date and with those adopted in the market.

1.1.12. "IPCA" shall mean the National Amplified Consumer Price Index (IPCA)
supplied by IBGE - Instituto Brasileiro de Geografia e Estatstica (the Brazilian
Institute of Geography and Statistics).

1.1.13. "EBITDA" shall mean the profit before interests, taxes over the profit (income
tax and social contribution), depreciation and amortization and non-operating income,
determined according to the Accounting Practices adopted by GPA.

1.1.13. (a) Financial Leasing shall mean the leasing for acquisition of assets, the useful lifetime
of which, according to the current Income Tax legislation, is equal to, or higher than, five (5)
years.
1.1.13.(b) "Operational Leasing" shall mean the leasing for acquisition of assets,
the useful lifetime of which, according to the current Income Tax legislation, is less
than five (5) years.

1.1.14. "DGAV Margin" shall mean DGAV divided by the Net Sales of the
Company; provided, however, that, for purposes of calculation of the DGAV
Margin the net sales should be excluded, as well as the expenses of stores opened
within the period of nine (9) months immediately prior to the date of calculation of
the DGAV Margin.

1.1.15, "EBITDA Margin" shall mean EBITDA divided by the Net Sales of the
Company; provided, however, that, for purposes of calculation of the EBITDA
Margin the Net Sales should be excluded as well as the DGAV of stores opened
within the period of twelve (12) months immediately prior to the date of calculation
of EBITDA Margin.

1.1.16. "Options to Purchase or to Sell" shall mean the Option to Purchase, the
Ordinary Option to Sell and the Extraordinary Option to Sell, jointly.

1.1.17. "Sale Price" shall mean the price for corresponding share, as applicable,
provided in this Agreement (including also, as provided in Articles 9 through 11),
(i) the greatest of (a) seven (7) times the EBITDA, the Net Debt being
discounted, and (b) thirty five point sixteen percent (35.16%) of the Net Sales of
the Company for the 12 civil months immediately prior to the date of exercising
of the Option to Sell or to Purchase, as the case may be, discounting the Net Debt,
provided that the EBITDA Margin within the period is equal to, or over, 4.625%;
if less than 4.625% always apply item (a) of this Article 1.1.17; or (ii) the Final Price
for Acquisition, as defined in the Agreement of Purchase and Sale, paid by
SEVILHA, per share, to acquire, on the Closure Date, shares corresponding to sixty
percent (60%) of the Total and Voting Capital of the Company, as set forth in the
Agreement of Purchase and Sale entered into on this date, the Probable
Contingencies of the Company being deducted, the equity interest of the Original
Partners being adjusted by the time of exercising of the respective Options to
Purchase or to Sell and adjusted, as of this date and up to the date in which the Sale
Price becomes due, by applying the IPCA increased by 6.5% per year deducted
from dividends and interests over the equity capital paid to the Original Partners
from the Closure Date up to the date of exercising of the Option to Purchase or to
Sell, dividend and interests over the equity capital, these also adjusted, as of the
date of their respective payment up to the date of the exercising of the Option to
Purchase or to Sell, by applying the IPCA increased by 6.5% a year, as indicated in
the respective Article, including with regard to application of any discounts or
goodwill. The Sale Price shall be, in any event, calculated by taking as basis the
audited financial statements of the Company, relating to the twelve (12) civil
months immediately prior to the date of exercising of the respective Option to
Purchase or to Sell, as applicable, especially determined for this purpose, to be
delivered within up to ninety (90) days counted from the date of exercising of the
Option.
1.1.17.1 The percentage provided in item (i), (b), of article 1.1.17 above has been
determined based on the accounting statements for September 30th, 2007 and shall be
adjusted according to accounting statements for October 31st, 2007, observing the
Accounting Practices adopted by GPA.

1.1.18. "Accounting Practices adopted by GPA" shall mean the accounting

practices adopted by GPA by that time, provided that any such practices meet the
accounting principles generally accepted in Brazil. In the event of any discrepancy
between the accounting practices adopted by GPA and the accounting principles
generally accepted in Brazil, the latter should prevail over the first.

1.1.19. "Special Check Report" shall mean the report to be prepared by the audit
firm hired by the Company, in the form and within the term as set forth in this
Agreement, containing the following information:

(i) the Company EBITDA corresponding to the six (6) months prior to the
closure date of the respective annual or half-yearly balance sheet compared
to the EBITDA of the same period in the previous corporate year;

(ii) the EBITDA Margin, the results relating to the stores opened by the Company
within the six (6) months prior to the closure date of the respective balance
sheet being excluded from the same;

(in) the Net Debt of the Company;

(iv) the comparison between the gross sales of the same stores during the six
months prior to the closure date of the respective annual or half-yearly
balance sheet, as the case may be, and the six months of the same period of
the previous corporate year; and

(v) the DAGV Margin, the results relating to the stores opened by the Company
within the six (6) months prior to the closure date of the respective balance
sheet being excluded from the same.

1.1.20. ''SELIC shall mean the rate determined in the Special Liquidation and
Custody System (SELIC) and obtained upon the calculation of the weighted and
adjusted average rate of the financing operations for one day, guaranteed by public
federal bonds and run in the referred system or in assets clearing and liquidation
houses, by way of committed operations.

1.1.21. "Gross Sales" shall mean sales of products and services, net from returns and
canceled sales.

1.1.22. Net Sales shall mean Gross Sales less the taxes applicable over sales and
services.

1.2. For all purposes and intents hereof, the following expressions and terms in
capital letters shall have the meanings assigned to them in the following sections or
items herein:
 "Connected Shares" Article 3.1

"Agreement" Preamble

"CAFGV" Article 15.1

"By-laws" Article 2.1

"GPA" Preamble

"LUIZ" Preamble

"Option to Purchase" Article 9.1

"Extraordinary Option to Sell" Article 11.1

"Ordinary Option to Sell" Article 10.1

"Extraordinary Option-to-Sell Exercising Term" Article 11.2

"Ordinary Option-to-Sell Exercising Term" Article 10.2

"Offer Price" Article 5.2

"RODOLFO" Preamble

"Original Partners" Preamble

1.3. The headers and titles hereof are inserted herein for reference purposes only
and should not limit or govern the articles, items or paragraphs concerned.

1.4. The terms "include", "including" and similar terms should be construed as if
being accompanied by the expression "for example".

1.5. Whenever the context so requires, references in this Agreement to the

singular should include the plural and vice-versa, and the masculine gender should
include the feminine and vice-versa.

1.6. References to legal provisions should be construed as references to any such

provisions as respectively modified, expanded or consolidated and as effective on
the date of execution hereof. Furthermore, they should include any provisions of
which they are consolidations (whether or not with modifications) and any decrees,
regulations or other normative acts edited within the law concerned.

1.7. The language in all parts hereof should, in all events, be construed in a simple
way, pursuant to its fair meaning, rather than strictly on behalf of, or against, any
of the Stockholders or the Company.

2. CAPITAL AND BY-LAWS

2.1. The Company is governed by its by-laws, the Stockholders committing to, at
the Closure Date, perform the acts and execute the documents as may be required
for altering the by-laws so as to reflect the provisions contained herein,
including the insertion of provision on issuance of class or kind of redeemable
shares ("By-laws").
2.2. In the event of conflict between the By-laws and this Agreement, provisions
hereof shall prevail with regard to the Stockholders, the Stockholders committing,
in this case, to hold a Stockholders General Meeting in order to amend the By-laws
within the least possible term, so as to eliminate the conflict.

2.3. The share capital of the Company is, on the date of execution of this
Agreement, R$4.010.000,00, divided into 4,010,000 common shares, all
registered and with no face value, and shall be, on the Closure Date, distributed as
follows between the Stockholders:
Stockholders No. of Shares Held Total and Voting Capital %
SEVILHA 2,406,000 60%
Rodolfo 1,443,600 36%
Luiz 160,400 4%
TOTAL 4,010,000 100%

2.4. The shares issued by the Company shall grant to their holders the rights and
advantages provided for in the By-laws.

3. CONNECTED SHARES

3.1. The present Agreement connects all shares issued by the Company and held
by the Stockholders on the Closure Date, or which may be held by them in the
future (by reason of check or acquisition under any pretense, donation, descent,
subscription, bonuses, splits, grouping, exercising of preferential right in
purchase and sale or by any other way), which shall be subject to all provisions
hereof, the shares referred to in this Article 3.1 being hereinafter referred to jointly
as "Connected Shares".

3.1.1. The preferential rights in the subscription arising out of the ownership of
Connected Shares or the securities convertible into or swappable for Connected
Shares or which entitle to their subscription or purchase are included, for the
purposes hereof, in the concept and definition of Connected Shares.

3.1.2. The Stockholder who, for any reason, comes to hold new shares issued by
the Company, after the present date, which are Connected Shares, should have the
Company, within a term of ten (10) days counted from the date of the respective
operation, note and enter in its corporate books the fact that any such new shares
are Connected Shares and subject to the terms hereof, without detriment to the right
of the Company to do it directly.
4. RESTRICTIONS TO THE TRANSFER OF CONNECTED SHARES

4.1. Owing to the exclusive nature of GPA association, by means of its controlled
company SEVILHA, with the Original Partners, the Stockholders and/or Intervening
Consenting Parties are forbidden from alienating, directly or indirectly, to any
natural person, company, consortium, association, cooperative, foundation, trust,
entity without legal personality or any other entity or organization, any Connected
Shares, for the duration hereof.

4.2. Without detriment to provision of Article 4.1 above, each Stockholder shall be
entitled to perform chattel mortgage of a Connected Share to each one of the
members of the Board of Directors who come to be appointed by him, provided that
the respective assignment agreement includes the granting, to the respective
Stockholder, of usufruct over the Connected Share, the adviser keeping just
the tenancy, and assures to the respective Stockholder the full right to, for the
purposes of provision of article 114 of Act no. 6.404/76, exercise the voting right at
the Stockholders General Meetings of the Company without any restriction
whatsoever, including for any subject matter which, by virtue of law or of this
Agreement, depends on approval by a qualified quorum. The assignment
agreement should further provide that the ownership of the Connected Share by
the member shall be dissolved, within the law, on the date of expiration of the
term of office, within provisions of Art. 1.359 of the Brazilian Civil Code. The
restrictions on the transfer of Connected Shares provided herein, including in
Article 4.1 above, shall not be applicable to the Alienation referred to in this
Article 4.2.

4.3. Restriction provided in Article 4.1 above shall not be applicable to:

(i) alienation of shares issued by GPA, provided that the Alienation of shares
issued by GPA is not intended for implementing operation of Alienation of
Connected Shares or, in any other way, of a material portion of assets used
by the Company, in terms forbidden by this Agreement;

(ii) transfer of GPA Control, provided that not intended for implementing
operation of Alienation of Connected Shares or, in any other way, of a
material portion of the assets used by the Company, in the terms forbidden
by this Agreement;

(iii) alienation of shares held by GPA, or any of its Affiliated Companies, or, in
any other way, of a material portion of the assets used by the Company,
provided that any such Alienation has, as condition precedent to its
effectiveness, the exercising of the Option to Purchase of the Original
Partners shares at the Sale Price and the payment at the price relating to said
option, observing provision of Article 9.4 below without which the Alienation
shall not be allowed;
(iv) Acquisition of Connected Shares by the Company itself; or

(v) Alienation of Connected Shares performed by and between SEVILHA and

one of its Affiliated Companies provided that:

i. the Affiliated Company states, prior to the Alienation, in writing, to

the other Stockholders and the Company management, its unconditional
and irrevocable adhesion to the Agreement, thus becoming an integrating
party to the group the alienor pertained to, being henceforth jointly with
the alienor, as if being a single Stockholder;

ii. the Affiliated Company being Controlled by the Stockholder, this

commits in writing, through a letter addressed to the other Stockholders
and to the Company management, not to transfer or allow transfer to
third parties, under any pretense or in any way, including by reason of
company operation of merger, incorporation or split-up or other with
similar effect, directly or indirectly, the Control of the Affiliated
Company; and

iii. the Affiliated Company Controlling the Stockholder or a company under

the common Control of its Controlling Company, the Stockholder, final
Controller of the Affiliated Company commits in writing through a letter
addressed to the other Stockholders and to the Company management, not
to transfer or allow transfer to third parties, under any pretense or in
any way, including by reason of company operation of merger,
incorporation or split-up, or other with similar effect, directly or
indirectly, of the Control of the Affiliated Company.

(vi) the Alienation of Connected Shares performed between the Original Partners
and a direct descendent or heir, provided that the Stockholder, in the
respective assignment act, includes the granting, to the respective
Stockholder, of lifelong usufruct, irrevocable and irreversible over the
Connected Shares, the Affiliated Company remaining the assign of just the
tenancy, and assures to the respective Stockholder the full right to, for the
purpose of article 114 of Act no. 6.404/76, exercise the voting right at the
Stockholders General Meetings of the Company with no restriction
whatsoever, including for any issue which, by virtue of law or due to this
Agreement, shall depend on the approval by a qualified quorum. In the event
of death of the tenant assign, the consolidation of ownership of the Connected
Shares should occur on behalf of the usufructuary.

4.4. In the event of any Alienation of Connected Shares allowed within Article
4.3(iii) and 4.3(vi), (i) the alienor shall remain jointly and severally responsible for
the obligations of the applicant(s) and of his/her respective successors with regard to
any such Connected Shares; and (ii) references in this Agreement to the original
underwriter Stockholder shall be hereby understood as being applicable to the
respective assigns pursuant to the terms authorized herein.
5- CONSTITUTION OF BURDEN

5.1. The Connected Shares may not be pledged, given as collateral, chattel
mortgage or any other form of guarantee, or in usufruct, except for the
collateral given within the Agreement of Purchase and Sale, entered into by
and between the Stockholders on this date and provision of Articles 4.2 and 4.3(vi)
above.

5.2. If the Connected Shares are attached, in whole or in part, the Stockholder
owing the attached Connected Shares shall be bound to immediately notify this fact
to the Company and to the other Stockholders. In this case, it shall be considered that
an offer for alienation of the totality of the attached Connected Shares has been done
to the other Stockholders by the Stockholder whose Connected Shares have been
attached, within provisions of this Article 5, if the attachment is not terminated
within a term of sixty (60) days counted from its constitution. In this case, the
offer price shall be the Sale Price set up based on item (i) of Article 1.1.17, less a
discount of thirty percent (30%) ("Offer Price"), the remaining Stockholders, if
interested in exercising the right to purchase the attached Connected Shares, being
vested in all powers to, within provisions and the term of article 668 of the
Brazilian Code of Civil Procedure, request the substitution of the attached
Connected Shares by cash.

5.3. If the attached Connected Shares cannot be released from the attachment by
means of deposit of the Offer Price relating to the shares then attached, the
other Stockholders shall be entitled to request the substitution of the
Connected Shares attached by cash or by other guarantee judicially accepted,
by depositing the full value of credit charged in the foreclosure within which the
attachment has occurred or by offering the other guarantee accepted in court. In both
events, it shall be considered, at the act of substitution of the attachment or release
of the Connected Shares, as the case may be, and irrespectively of any judicial or
extrajudicial notification, that the right of any such Stockholders to acquire the
totality of the Connected Shares subjected to the attachment has been exercised, at
the Offer Price.

5.4. Should (i) the credit secured by the attachment of Connected Shares be less
than the Offer Price, the Stockholders exercising the respective rights to purchase
any such Connected Shares commit to pay the difference between the Offer Price
and the credit secured by the attachment of the Connected Shares to the
Stockholder originally owning them; or (ii) the credit secured by the
attachment of the Connected Shares be higher than the Offer Price and the
Stockholders who had exercised the respective rights to purchase any such
Connected Shares have deposited the full value of the credit for purposes of
release of the Connected Shares and exercise of referred right to purchase, the
Stockholder originally owning them commits to pay to the first ones, the
difference between the value deposited and the Offer Price, in both cases
increased by interests corresponding to the variation of SELIC rate up to the
date of actual payment, within Art. 406 of the Brazilian Civil Code. The
Stockholders agree that the creditor Stockholder, within this item, shall be in
charge of collecting from the debtor Stockholder, within the foreclosure, using
this Agreement as cognovit note.

5.5. Without detriment to provision of this Article 5, upon the occurrence of

attachment of Connected Shares owned by the Original Partners, provisions of
Article 8.15.1, with regard to the indication of the Chief Executive Officer; of
8.3, with regard to the indication of the Chairman of the Board; and of 8.12,
with regard to the qualified quorum for approval of given subject matters
provided therein shall no longer be applicable, as of the expiration of the term
of sixty (60) days set forth in Article 5.2 above, without de-constitution of the
respective attachment.

5.5.1. Without detriment to provision in this Article 5, the attachment of the

Connected Shares owned by SEVILHA having occurred, the Original Partners
shall have the Option to Sell, GPA committing to purchase the shares the
option refers to, at the Offer Price.

5.6. Alienation of Connected Shares or the constitution of any lien other than
that provided in Articles 4 and 5 hereof shall have no validity, and the
Company should not register them.

6. ACCOUNTING AND AUDIT

6.1. The Company accounting shall follow the standards and regulations required to
meet the requirements imposed by the Brazilian legislation applicable to the open
capital companies, pursuant to the rules and regulations of the CVM Comisso de
Valores Mobilirios (Securities Commission).

6.1.1. GPA may request to the Company, and the Company should present to GPA,
all necessary additional information so that GPA may comply with its open-capital
company obligations both in Brazil and abroad, as applicable, provided, however,
that the additional costs incurred by the Company as a result of any such foreign
demands shall be born entirely by GPA.

6.2. The Company shall be audited by an audit firm registered at the CVM
Comisso de Valores Mobilirios (Securities Commission), among the three (3)
following: PricewaterhouseCoopers, Ernst & Young, and KPMG, save for any
cases of conflict of interest, and should meet the GPA information disclosure
standards, as well as whatever is necessary for the performance, by GPA, of its
open-capital company obligations with shares traded in Brazil and in the United
States of America, provided that any such obligations do not imply additional
costs to the Company. If the Company incurs additional costs for this purpose, any
such costs shall be entirely born by GPA. Recognition of revenues for accounting
purposes shall meet the standards applicable to open-capital companies.

6.3. The Stockholders commit to have the audit firm hired by the Company to
present to the Stockholders and to the Company, within up to sixty (60) days
following the date of closing of the half-yearly or annual balance sheet, as the case
may be, the Special Check Report.
6.4. The Stockholders and the Board of Directors Members designated by the
Stockholders should determine and authorize the Company Executive Officers to
perform any and all acts required for the actual performance of provision in this
Article 6.

7. EXERCISING OF THE VOTING RIGHT

7.1. Strategic decisions related to the Company should aim at the Company
maintenance and growth. For that purpose, each Stockholder commits to vote at the
Stockholders General Meetings and issue opinion or have their respective
representatives issue opinion, as the case may be, at the meetings of the Board of
Directors or of other consulting bodies of the Company, according to provisions
hereof.

8. COMPANY MANAGEMENT AND ADVISORY COMMITTEES

8.1. The Company management shall be performed by experienced, qualified

professionals, the Stockholders committing to always appoint qualified professionals,
with unquestionable reputation and character, to fulfill the positions of the Board of
Directors and of the Executive Officers of the Company, as well as to assure that
the members of the Board of Directors appointed by them fully comply with all
provisions hereof, within the limits set forth in Act no. 6.404/76 and by all other
legal provisions applicable.

8.1.1. The Stockholders acknowledge and agree, hereby, that Luiz Antonio Martins
Amarante, Mauricio de Seabra Cerrutti, LUIZ, and Flvio Luis Kuba are
professionals meeting the requests of Article 8.1 above.

8.2. The Company shall be managed by a Board of Directors and by a Executive

Officers, which shall be in charge of fulfilling the duties and attributions set forth
in the By-laws, observing provisions hereof and of the law.

8.3. The Company Board of Directors shall consist of seven (7) permanent
members, with a term of office of three (3) years, reelection being allowed, all
elected by the General Meeting, which shall also indicate who of the Board of
Directors Members elected shall fulfill the position of Chairman of the Board.
SEVILHA shall be in charge of appointing four (4) members and the Original
Partners shall appoint three (3) members, and among these latter the Chairman of
the Board shall be appointed, who, during the term hereof, should be necessarily,
Rodolfo, except in the event of (i) resignation, (ii) permanent disability, (iii) death or
(iv) in the events provided in Article 8.3.2, below, in which case the Chairman of the
Board shall be appointed by SEVILHA.

8.3.1. The Stockholders commit to exercise their voting rights arising out of their
respective Connected Shares so as to elect as members of the Board of Directors the
individuals appointed within provisions of Article 8.3 above.

8.3.2. SEVILHA may demand the removal from office of the Chairman of the
Board, with provision of Article 8.3 above no longer being applicable with regard to
appointment of the Chairman of the Board by the Original Partners:

(i) In the event of absence of the Chairman of the Board in more than 1/3 of
the Board of Directors meetings called together during a given corporate
 year. The limit of 1/3 provided for in this item having been reached, the
Chairman of the Board may be absent if authorized by the Chairman of the
Board of GPA, Mr. Ablio Diniz, or any other person replacing him in this
position, in which case any such absence shall not be computed for the
purposes of this item (i). This item shall not be applicable in the event of
death of RODOLFO; or

(ii) If, for two consecutive semesters, any of the parameters indicated below
is verified, individually, according to the respective Special Check
Report, irrespectively of any opinion from the Board of Directors or the
General Meeting:

i. if the EBITDA Margin of the Company identified in the Special Check

Report used for purposes of exercising of the option is less than 4%; or

ii. if the value of sales of the Company stores, within a period of six (6)
months, indicated at the Special Check Report, is less than 7.5% or more
when compared to the sales of the same stores of the Company within
the period of six (6) months started and ended in the same months of the
year immediately before (e.g. the purpose of the Special Check Report
being the period between January 1st and June 30, 2009, the period to be
considered for purposes of comparison shall be that between January 1st
and June 30th, 2008); and the value of monthly sales, for the two periods,
shall be adjusted monetarily by applying the IPCA variation up to the last
month of the latest period, excluding, for purposes of provisions herein,
any stores which have not been fully operating within the two periods
compared; or

iii. if the Net Debt of the Company identified in a given Special Check Report
is greater than twice the EBITDA identified in the same Special Check
Report, except if approved by the Board of Directors; or

iv. if the DGAV Margin exceeds by 10% the value equal to 12.3% of the Net
Sales. The percentage set forth in this item has been determined based on
the accounting statements for September 30th, 2007 and shall be adjusted
according to accounting statements for October 31st, 2007.
8.4. The General Meeting shall set up the annual global compensation of the
Company managers, the Chief Executive Officer shall be in charge of setting
the individual amounts and the Human Resources Committee shall be in
charge of approving and submitting them to the Board of Directors.

8.5. In the event of removal from office, resignation, substitution or any other
event which results in vacancy of the duty of any member integrating the
Company Board of Directors, and except if provided otherwise in this
Agreement, the Stockholder appointing any such member shall have the right
to appoint the respective substitute, the Stockholders committing to vote in
order to approve the election of the substitute so appointed.

8.5.1. In the event of removal from office or substitution of the Board of

Directors Member started by the Stockholder electing him, the member substituted
may not fulfill any other duty at the Company, even if appointed by other
Stockholder.

8.6. The Board of Directors attributions shall be only those expressly assigned to it
by law, by the By-laws of the Company or by this Agreement.

8.7. The Board of Directors shall gather, (a) monthly and ordinarily,
according to calendar to be disclosed always in the first month of each
corporate year by the Chairman of the Board, and (b) extraordinarily, whenever
required. The calling for the meetings should always be done by the Chairman of
the Board or by any other two Board of Directors Members, who shall indicate
in the calling instrument the date, place and time of the meeting.

8.7.1. The call should be sent to the members of the Board of Directors at least
seven (7) days prior to the date scheduled for the meeting at a first call, and at least
two (2) days prior to the date scheduled for the meeting at a second call. The
agenda and written materials to be discussed during the Board of Directors
meeting should be sent to the Board of Directors Members along with the call.

8.8. The Board of Directors meetings may be held by means of teleconference or

videoconference, provided that all members attending the session are able to hear
each other and are provided with copies of all written materials to be presented or
discussed during such meeting. The members participating in the meeting by
means of teleconference or videoconference within this Article shall be deemed as
duly present to such meeting.

8.8.1. Any Board of Directors Member, except for the Chairman of the Board, may
be represented by other member at the Board of Directors meetings, provided that
expressly indicated in writing, for this purpose, or he/she may vote by letter,
telegram, email or fax.
8.9. The Board of Directors meetings the purpose of which is the deliberation on
issues not listed in article 8.12 shall be installed, at a first call, in presence of the
majority of its members, and, at a second call, with any number of members.

8.9.1. The Board of Directors meetings the purpose of which is the deliberation on
any of the subject matters listed in Article 8.12, shall be installed, at a first and at a
second call, in presence of five (5) of its members, including the Chairman of the
Board, and, at a third call, with any number of members. The second and third calls
shall be object of new communication to the members within Article 8.7.1, sent
immediately after the date designated for the first and second calls, as
applicable.

8.10. The Chairman of the Board shall preside over the Board of Directors meetings,
when present, or, in his/her absence, any other member may do it, who shall appoint
one of the members to be the secretary.

8.11. The Board of Directors shall be in charge of deliberating on the subject

matters listed in this Article 8.11, without detriment to the other attributions set forth
in law:

(i) setting up the annual budget, the capital budget and the business plan;

(ii) Approving the job and wage plan for the Executive Officers, which should
be proposed by the Chief Executive Officer after hearing the
recommendation of the Human Resources Committee within Article 8.4
above;

(iii) approving the general guidelines of commercial expansion, purchase,

relationship with suppliers and of prices to be charged by the Company,
according to proposal from the Supervision Committee;

(iv) Previously issuing its opinion on any proposal to be submitted to the

General Meeting of the Company, including any alteration in the
Companys By-laws;

(v) approving the acquisition of equity interests by the Company or the

Company participation in consortia, joint ventures or any other type of
association;

(vi) approving the acquisition, alienation or constitution of lien, by the

Company, with regard to any of its fixed assets, trademarks or other
intellectual property rights;

(vii) approving the performance, by the Company, irrespectively of the budget

forecast, of (a) acquisitions or capital investments in projects the global value
of which within the corporate year is individually or collectively in excess of
R$2.500.000,00 or (b) de-investments of units or businesses representing
more than R$1.000.000,00;
(viii) approving the contracting of net financial indebtedness by the Company
which, individually or jointly with the other financial indebtedness
operations of the Company performed within a period of twelve (12)
months, result in a total Net Debt in excess of once the EBITDA, determined
according to the latest annual balance sheet approved;

(ix) approving the execution, by the Company, of contracts or agreements the

total value of which is in excess of one million Reais (R$l.000.000,00) or
the duration of which is over twelve (12) months;

(x) approving the granting, by the Company, to third parties, of loans and
guarantees for a value of over one million Reais (R$ l.000.000,00) ;

(xi) approving the transactions between the Company or the partnerships

Controlled by the Company and respective Affiliated Companies, or also
between the Company and Stockholders and/or their respective Affiliated
Companies, irrespectively of the value involved, including the acquisition
of establishments or fixed assets owned by GPA group;

(xii) Approving previously any repurchase operation for treasury, canceling or re-
placement in the market, redemption, amortization, involving shares issued
by the Company;

(xiii) approving previously the issuance of securities or other convertible bonds

by the Company;

(xiv) selecting any one among PricewaterhouseCoopers, Deloitte Touche

Tohmatsu, Ernst & Young, and KPMG, and removing from office the
external auditors of the Company, observing provision of Article 6 hereof; as
well as selecting and removing from office the legal and financial advisors
of the Company;

(xv) issuing prior opinion on proposal to be submitted to the General Meeting of

the Company for its liquidation or dissolution and for appointment or
substitution of the liquidator(s);

(xvi) approving the filing, by the Company, for self bankruptcy or judicial or
extrajudicial recovery within the applicable law;

(xvii) Issuing prior opinion on the merger, split-up or incorporation involving the
Company or transformation of its company type;

(xviii) Approving previously the Company filing or canceling of filing as open-

capital company before the Comisso de Valores Mobilirios (CVM);

(xix) approving acquisitions and/or investments by the Company which result in

the request for new contributions to the Company capital by the
Stockholders;
(xx) approving the filing of any action or the settlement in any action filed, which
involves the interests of the Company and/or the Company, the value involved
of which is in excess of R$2.500.000,00; or, irrespectively of the value
involved, if any such action is a criminal one or related to the reputation of any
Stockholder or its respective Affiliated Companies;

(xxi) Approving the adoption or modification of policies by the Company;

including, without limitation, compensation, environmental, financing and
insurance policies; and

(xxii) directing the vote to be cast by the legal representatives of the Company, with
regard to subject matters listed in this Article 8.12, at the Stockholders
General Meetings and/or meetings of partners and/or amendments to by-laws
of any partnership, association or other enterprises in which the Company is a
Stockholder, quota-holder or partner;

(xxiii) approving the execution, by the Company, of lease agreements the cost of
which is in excess of one per cent (1%) of the Gross Sales; and

(xxiv) Approving the distribution, or the proposal for any such distribution to
the General Meeting, of dividends and/or interests over the equity
capital, always being considered jointly, for a value over twenty-five
percent (25%) of the distributable profit.

8.12. Deliberations by the Board of Directors shall be made by majority of votes

of the presents, except with regard to the subject matters listed which shall
require, to be approved, the favorable vote of at least five (5) members of the
Board of Directors, one vote being obligatorily cast by the Chairman of the Board.
In the event of absence of the Chairman of the Board at the meeting called at a
third call, the approval of the subject matters shall be done by the majority of the
members attending the meeting:

(i) The prior approval of any amendment to the Companys By-laws;

(ii) the approval of granting, by the Company, to third parties, of loans and
guarantees the value of which is in excess of ten million Reais
(R$10.000.000,00);

(iii) the approval of transactions between the Company or the companies

Controlled by the Company and respective Affiliated Companies or
between the Company and Stockholders and/or their respective Affiliated
Companies, irrespectively of the value involved, including the acquisition
of establishments or fixed assets owned by GPA group;

(iv) the approval of (a) acquisition, alienation and constitution of lien, by the
Company, with regard to any of its fixed assets, trademarks or other
intellectual property rights, (b) investments or de-investments by the
Company, (c) acquisition of equity interests
 by the Company, or (d) the Company participation in consortia, joint
ventures or any other kind of association; in any of the events described
under items (a) to (d) above, the value of which represents 20% or more of
the Company assets at market value or, irrespectively of the value involved,
in the events of acquisition resulting in the demand for the Stockholders to
make new contributions to the Company capital;

(v) the prior approval of issuance of securities or other shares convertible into
shares by the Company, provided that the Net Debt of the Company
determined in the Special half-yearly Check Report is less than twice (2x) the
EBITDA;

(vi) the approval of filing, by the Company, for self-bankruptcy or judicial or

extrajudicial recovery within the applicable law;

(vii) the prior approval of the merger, split-up or incorporation involving the
Company, or also of the transformation of its company type;

(viii) the prior approval of proposal to be submitted to the General Meeting of the
Company for its liquidation or dissolution and for the appointment or
substitution of the liquidator(s); and

(ix) The prior approval of the Company filing or canceling of the filing as open-
capital company before the Comisso de Valores Mobilirios.

8.13. The Chairman of the Board shall be in charge of preparing monthly reports,
addressed to the Board of Directors of the Company and to the Audit Committee of
GPA, with regard to the activities developed within the period by the Supervision
Committee, chiefly on the purchase policy, the Company relationship with its
suppliers and the investments made.

8.14. The Board shall consist of up to eight (8) officers, residing in the country,
whether or not Stockholders, being one Chief Executive Officer, one
Financial Officer and one Operations Officer and the others with no specific
designation or with designation as assigned to them at the respective
appointment act, for a term of three years each, reelection being allowed.

8.15. The Company shall be represented actively and passively by the signature of
two officers, of which one shall be the Chief Executive Officer or the Financial
Officer, provided that the Financial Officer does not sign jointly with the
Operations Officer.

8.15.1. The Chief Executive Officer, as well as the other Officers, shall be
elected by the Board of Directors; provided, however, that the Chief Executive
Officer should be elected according to appointment by the Chairman of the Board to
fulfill this position and the Financial and Operations Officers shall be elected
according to appointment by SEVILHA to fulfill such positions, and the other
Officers shall be elected pursuant to appointment by the Chief Executive Officer. The
Stockholders should instruct the members of the Board of Directors appointed by
them so that they exercise their respective voting rights as defined by the
Stockholders.

8.15.2. The Original Partners may, provided that duly justified and no more than
twice in a same term of office of 3 years, in writing, request the removal of the
Financial Officer and of the Operations Officer by means of request addressed
to the Chairman of the Board. The Board of Directors should grant this request and
may not evaluate the merits of the request for substitution, without detriment to the
right of SEVILHA to always appoint the substitutes.

8.15.3. Every time any of the parameters referred to in Article 8.3.2 (ii) hereof is
verified, by the Special Check Report, for two semesters immediately
consecutive, SEVILHA may, within the ninety (90) days following the end of the
semester concerned, demand the substitution of the Chairman of the Board. To
that end, SEVILHA shall send notification to the members of the Company
Board of Directors, and the same should, within up to ten (10) days counted from
receipt of this notice, call together a General Meeting in order to deliberate about
the nomination of a new Chairman of the Board and appoint his substitute, with
provision of Article 8.3 no longer being applicable, with regard to nomination of the
Chairman of the Board, provisions of Article 8.15.1, with regard to nomination of
the Chief Executive Officer and provisions of Article 8.12, with regard to the
quorum qualified for approval of certain issues provided for therein.

8.16. The Board shall gather whenever the corporate interest so requires.

8.16.1. The Board meetings shall be called together by any Officer upon written
notification five (5) days ahead of time, specifying the agenda and the issues to
be submitted for deliberation.

8.16.2. The Board shall be entirely competent to deliberate about any issues the
competence of which is not exclusive of the Board of Directors, within this Agreement,
the By-laws or the applicable legislation.

8.17. The Company shall have, obligatorily, five committees to assist the Board
of Directors, namely:

(i) a Supervision Committee, integrated by the Chairman of the Board, the

Chief Executive Officer and the Financial Officer, who shall be in charge,
among other attributions, if any, set forth by the Board of Directors, of
proposing, for approval by the Board of Directors, the policies of
commercial expansion, purchasing, relationship with suppliers, of prices to
be charged by the Company Management, as well as for inspecting the
performance of any such policies by the Officers and managers, assuring
the good management practices and caring for the good administration
practices;
(ii) One Audit Committee, comprising 3 members, all integrating the Board of
Directors, with a term of office to match the term of office of the Board of
Directors Members, the reelection being allowed. The Audit Committee
Members shall be appointed by the Board of Directors, exclusively among
the members with experience and ability in accounting and finance. The
Audit Committee shall be in charge, among other attributions, if any,
assigned by the Board of Directors, of:

(a) assisting the Board of Directors in the performance of its audit and
inspection duties;

(b) recommending to the Board of Directors the audit companies to be

hired by the Company and supervising the activities of any such
companies;

(c) revising the annual or half-yearly financial statements of the

Company, reporting its conclusions periodically, at every semester, to
the Board of Directors;

(d) revising the in-house control systems of the Company, as well as

the audit, accounting and administration procedures, reporting its
conclusions periodically, at every semester, to the Board of
Directors; and

(e) revising and issuing its opinion on the terms and conditions, as
well as inspecting the performance of any contracts executed
by and between the Company and/or any of its controlled
companies and/or related parties, on the one hand, and any of its
stockholders, its respective related parties, on the other hand,
reporting its conclusions immediately to the Board of Directors.

(iii) one Finance Committee, comprising 3 members, all integrating the Board
of Directors, with a term of office which shall match the term of office of
the Board of Directors Members, with reelection being allowed. The Finance
Committee shall be in charge, among other attributions, if any, assigned by
the Board of Directors, of:

a. following up the work of the Executive Officers in reviewing the

cash flow and the capital structure of the Company;

b. following up, jointly with the Executive Officers, the

implementation and performance of the annual investment program;
and

c. Following up the average cost of the capital structure based on the

data supplied by the Executive Officers and suggesting structure
alterations, whenever required.
(iv) One Expansion Committee, comprising 3 members, all of which integrating
the Board of Directors, with a term of office matching the term of office of
the Board of Directors Members, with reelection being allowed. The
Expansion Committee shall be in charge, among other attributions, if any,
assigned by the Board of Directors, of:

i. examining the projects relating to business and technological

innovations;

ii. examining the market opportunities to reinforce the Company

growth strategy; and

iii. examining the expansion plans.

(v) one Human Resources Committee, comprising up to 3 members, all of

which integrating the Board of Directors, with term of office matching the
term of office of the Board of Directors Members, with reelection being
allowed. The Human Resources Committee shall be in charge, among other
attributions, if any, assigned by the Board of Directors, of:

i. appointing the Board of Directors candidates to Company Officers

and structuring the Company management succession plan;

ii. deliberating previously about the proposal for individual

compensation of the management, of the Statutory Audit
Committee Members, when the Statutory Audit Committee is
installed, and of the members of the Advisory Committees to be
presented to the General Meeting submitted by the Chief
Executive Officer; and

iii. issuing opinion, previously, about profit sharing programs,

performance bonus, etc.

8.17.2. The Supervision Committee shall gather, necessarily, at least once a month,
and it is sure that its meetings shall be installed in presence of the majority of its
members. The Chairman should attend at least two thirds (2/3) of the meetings of
such Committee, under the penalty of losing the right to appoint the Chief
Executive Officer of the Company, as per Article 8.15-1.

8.18. The Company shall be represented, judicially or extrajudicially, as per the By-
laws.

9. GPA OPTIONS TO PURCHASE

9.1. The Original Partners hereby grant, irreversibly and irrevocably, to GPA,
exclusive, irreversible and non-transferable option to purchase the totality and no less
than the totality, of the shares held by all and no less than all Original Partners, as per
provisions herein ("Option to Purchase"), in the following events:

(i) if the event provided in Article 8.3.2(ii) shall occur, at any moment
during the term hereof, GPA may exercise the Option to Purchase at the Sale
Price, which should be equal to the value obtained according to the application
of criterion indicated under item (i) of Article 1.1.17; or

(ii) in the event of occurrence, at any time during the term hereof, (a) of
 provision of Article 8.3.2(i) or (b) waiver, by RODOLFO, to the position of
Chairman of the Board of the Company or to the position of member of the
Supervision Committee, GPA may exercise the Option to Purchase at the Sale
Price, which should be equal to the lowest value of (x) the application of
criterion indicated under item (1) of Article 1.1.17, or (y) by applying twenty
percent (20%) discount to the result obtained from application of criterion
indicated under item (ii) of Article 1.1.17; or

(iii) in any other event, up to December 31st, 2011, GPA may exercise the Option
to Purchase at the Sale Price, which should be equal to the highest value of
(x) the application of criterion indicated under item (i) of Article 1.1.17, or (y)
the result obtained from application of criterion indicated under item (ii) of
Article 1.1.17, with twenty-five percent (25%) goodwill being applied; or

(iv) in any other event, from 2012 and up to 2014, between January lst and
January 15th of each calendar year, GPA may exercise the Option to
Purchase at the Sale Price, which should be equal to the value obtained
from application of criterion indicated under item (i) of Article 1.1.17; or

(v) in the event of death of RODOLFO, GPA may exercise, within up to thirty
(30) days counted from the event date, the Option to Purchase at the Sale
Price, which should be equal to the highest value of (x) the application of
criterion indicated under item (i) of Article 1.1.17, or (y) the result
obtained from the application of criterion indicated under item (ii) of
Article 1.1.17.

9.2. GPA shall exercise the Option to Purchase upon sending written notice to the
Original Partners, with copy to the Company, informing its intention to do so. Any
such notice should further inform the date, time and place of exercising intended,
except that the payment of the Sale Price and the consequent transfer of shares
resulting from exercising of the Option to Purchase should take place within up to
forty-five (45) days from the exercising date of the Option to Purchase and the Sale
Price should be adjusted by applying the variation of SELIC (Special Liquidation
and Custodial System) as of the date of exercising of the Option to Purchase up to
the day of actual payment.

9.3. The Option to Purchase being exercised by GPA, the Original Partners shall
commit to sell and GPA to buy the shares the option refers to, at the respective Sale
Price.
9.4. In the event that GPA, or any successor, within up to one hundred and
eighty (180) days, counted from the exercising of the Option to Purchase or
from the date of actual transfer of the shares, Alienates, directly or indirectly,
any equity interest in the Company or a substantial portion of its assets or of
any other company which comes to hold a substantial portion of the assets used
in the Company activity, GPA should (i) condition any such Alienation to the
payment, to the Original Partners, of the value equal to the difference between
the value, object of the Alienation, and the Sale Price, calculated pro rata; (ii)
make available to the Original Partners all documentation relating to the
Alienation, before performance of the Alienation, so as to allow the unrestricted
knowledge of all of its terms and conditions by the Original Partners; and (iii)
perform the payment set forth in the present article in the same conditions
contracted with the third party, within up to ten (10) business days counted from the
date in which GPA receives each payment.

9.5. As of the exercising date of the option, the Company shall no longer
distribute dividends, nor shall it approve payment of interests over the
equity capital or any type of similar compensation, and the shares transferred as
a result of the exercising of the Option shall be transferred along with everything
they represent, including earned surplus and non-distributed profits.

10. ORDINARY OPTION TO SELL OF THE ORIGINAL PARTNERS

10.1. GPA grants, hereby, irrevocably and irreversibly, to the original Partners,
exclusive, irreversible and non-transferable option to sell, jointly, the totality and no
less than the totality of shares held by the Original Partners, as per provisions
hereof (the "Ordinary Option to Sell"), at the Sale Price, which should be equal
to the value obtained by applying the criterion indicated under item (i) of Article
1.1.17.

10.2. The Ordinary Option to Sell may be exercised as of the fourth (4 th )

anniversary of the execution hereof, between January 1 st and January 15 th of
each calendar year, i.e., from 2012 to 2014 (the "Ordinary Option-to-Sell
Exercising Term").

10.3. The Original Partners shall exercise the Ordinary Option to Sell in a
single occasion, upon sending of written notice to GPA, within the Ordinary
Option-to-Sell Exercising Term, with copy to the Company, informing their
intention to do so. Any such notice should further inform the date, time and
place of exercising intended, except that the payment of the Sale Price,
calculated within Article 10.1, and the consequent transfer of shares, as a result of
the exercising of the Option to Sell should take place up to April 15th of the same
year of exercising of the Option to Sell.

10.4. Upon the exercising of the Ordinary Option to Sell by the Original Partners,
the Original Partners commit to sell and GPA to buy the shares the Ordinary Option
to Sell refers to, at the respective Sale Price.
11. EXTRAORDINARY OPTION TO SELL OF THE ORIGINAL PARTNERS

11.1. Without detriment to the Ordinary Option to Sell, granted within Article 10,
GPA grants, irrevocably and irreversibly, to the Original Partners,
exclusive, irreversible and non-transferable option to sell, jointly, the totality and
no less than the totality of the shares held by the Original Partners, at the Sale
price, at any time, provided that the permanent disability or death of
RODOLFO is verified (the "Extraordinary Option to Sell"), at the Sale Price, which
should be equal to the value obtained by applying the criterion indicated under item
(i) of Article 1.1.17.

11.2. The Extraordinary Option to Sell may be exercised by LUIZ jointly with (i)
RODOLFO conservator, or (ii) RODOLFO heirs, jointly, or also, (iii) RODOLFO
estate, represented by the administrator and provided that verification is provided of
the request for all judicial authorizations, if any, required for such, within up to
ninety (90) days, for one hundred and eighty (180) days from the date of
verification of the permanent disability or death of RODOLFO (the "Extraordinary
Option-to-Sell Exercising Term").

11.3. The grantees shall exercise the Extraordinary Option to Sell in a single
occasion, upon sending of written notice to GPA, within the Extraordinary
Option-to-Sell Exercising Term, with copy to the Company, informing their
intention to do so. Any such notice should further inform the date, time and place
of the intended exercising, except that the payment of the Sale Price, calculated
within Article 10.1 and the consequent transfer of Shares, as a result of the
exercising of the Option to Sell should take place observing provision of Article
12.1 (b).

12. OPTIONS TO PURCHASE OR TO SELL COMMON PROVISIONS

12.1. With regard to the Option to Purchase or to Sell provided in Articles 9, 10 or

11 above, the Original Partners and/or GPA, as applicable:

(a) the Option to Purchase or to Sell having been exercised, GPA is hereby
authorized by the Original Partners, to conduct accounting, fiscal and legal search
at Assai ("Search"), ASSAI committing to supply any and all documents
required and/or requested by GPA or its representatives for purposes of
Search, within no later than twenty (20) days counted from the date of receipt of
the totality of documents required and/or requested by GPA or its
representatives for Search purposes. The Search report should contain, with
reasonable detail, the description of the Probable Contingencies as well as the
market value and realization of the Assai assets, and be accompanied by all
documentation and work papers used by GPA and its auditors and advisors
for the analysis and preparation of the report and of the calculations described
therein, except for what has been supplied by ASSAI itself.
i. If any Probable Contingencies shall be identified in the Search report
and ASSAI and the Original Partners both disagree, in any aspects,
including with regard to the value of any such Probable Contingency,
ASSAI and the Original Partners may deliver to GPA, within up to ten
(10) days from the receipt of the report and of documentation to
accompany it, a notice informing each of its disagreements and the
justification for any such disagreements ("Notice of Disagreement").
Any such Notice of Disagreement should explain, with reasonable
detail, the position of ASSAI and of the Original Partners with regard to
the classification of the contingency concerned, as well as the amount
deemed adequate for the contingency identified. If no such Notice of
Disagreement shall be presented by Assai and by the Original Partners
timely, any Probable Contingency shall be considered as being accepted
by ASSAI and by the Original Partners.

ii. If the Parties shall fail to succeed in settling amicably the disputes
indicated in the Notice of Disagreement, then the Parties should jointly
hire a specialized company, among PricewaterhouseCoopers, Deloitte
Touche Tohmatsu, Ernst & Young, and KPMG, except for the cases of
conflict of interest, as mutually agreed upon, to settle the issues
indicated in the Notice of Disagreement ("Independent Accountant").
The Independent Accountant should conduct the review of the
contingency identified by the Search, of any written works related to it,
of the Notice of Disagreement and of any other documentation related
to the disputed items as the Independent Accountant, in his own
judgment, deems necessary. Additionally, the Independent Accountant
may conduct interviews or participate in presentations of the Assai
and/or of GPA as the Independent Accountant, in his own
judgment, deems necessary for settling the disputed items.

iii. The Independent Accountant should, as soon as possible, and in any

event within no later than fifteen (15) days counted from the date of
his hiring, deliver to Assai, GPA and to the Original Partners a
report ("Final Accountant Report"). In any such report, the
Independent Accountant should, after consideration of all subject
matters integrating the Notice of Disagreement, determine the values
to be classified as Probable Contingency. The Final Accountant
Report should set up, with reasonable detail, (a) the assessment of
the Independent Accountant with regard to each disputed item or
amounts specified in the Notice of Disagreement; except that the
Independent Accountant should consider only the disputed items in the
preparation of the Final Accountant Report, and (b) the market value and
the realization of the Assai assets on the date of completion of the
Search. The defeated party (i.e., the Original Partners and Assai, on the
one hand or GPA, on the other hand) should pay all fees and expenses
incurred by the Independent Accountant in providing his/her services.
If the issue is settled so as to share the responsibility between
Assai, on the one hand and GPA, on the other hand, the fees and
expenses incurred by the Independent Accountant in the provisioning
of his services shall be paid by the Original Partners and by GPA
according to the respective shares in the Company capital. The Final
Accountant Report shall be final and binding to GPA and to Assai and
shall be considered, for all legal purposes, as a final award. Therefore, it
 shall not be subject to review or to any other dispute resolution
procedure pursuant to Article 15 below.

iv. The Original Partners and ASSAI hereby commit, jointly and severally,
with express and irrevocable waiver of any benefit of order, division,
discussion or exoneration set forth in law, to indemnify and hold
harmless S and GPA, and any of their managers, partners,
stockholders, direct or indirect, representatives, advisors, officers,
employees, agents, Affiliated Companies and/or any one of their
successors and assigns from and against any and all losses, these being
understood as any liability (including with regard to taxes), loss,
damage, cost, expenses (including reasonable attorney fees and
disbursements performed, verified and reasonable), as well as from all
interests and penalties related therewith, if existing, originating from or
relating to any and all contingency provisioned or not in the balance
sheet of ASSAI, provided that classified as Probable Contingency as per
provision herein, of any nature whatsoever (fiscal, labor, welfare, of the
FGTS - Government Severance Indemnity Fund for Employees - civil,
environmental, etc.) relating, pertaining to or which affects the
Company monetarily, i n c l u d i n g , f o r e x a mp l e , t h o s e r e l a t i n g t o
j u d i c i a l o r a d mi n i s t r a t i v e p r o c e e d i n g s , a r i s i n g o u t o f a n y
action or omission, fact, event or circumstance, whether or
n o t a n y s u c h d e b t s o r o b l i g a t i o n s a r e k n o w n b y GPA and S
or have been disclosed to GPA and to S. The indemnity set forth in this
item shall be applicable to the Probable Contingencies of ASSAI, which
actually affect the Company monetarily.

v. If the value identified of the Probable Contingencies exceeds

the sum of (a) thirty million Reais (R$30.000.000,00), adjusted as of
this date according to the variation of IPCA (National Amplified
Consumer Price Index), plus (b) the market value and realization of
assets of ASSAI, then the amount of the Probable Contingencies
exceeding the sum of (a) and (b) shall be withheld from the price of
the Option to Sell and deposited in an escrow account on behalf of
the Original Partners for purposes of guarantee of indemnification.

vi. The Original Partners shall be entitled, at any time, to replace the
secured value, in whole or in part, with an unconditional bank
guarantee, for payment upon demand without consultation with the
issuer, issued by a first rate bank.

vii. The release, in whole or in part, of the amount deposited in the escrow
account shall be done, in sufficient value, in one or more occasions, on
behalf of the Company, whenever a final judgment has been issued, not
subject to appeal, which implies disbursement by the Company.

viii. The release of the amount deposited in the escrow account shall be
done, on behalf of the Original Partners, whenever the amount
deposited exceeds the maximum indemnifiable amount, and for the value
of any such surplus. For this purpose, tests shall be conducted jointly by
GPA, Original Partners and ASSAI at every six (6) months counted
from the date of execution hereof.

(b) commit to, on the date assigned for the exercise of the respective option, which may
 not be less than 60 days counted from the date of the respective notice of exercise,
so as to allow completion of the Search process detailed in Article 12.1 (a) above,
according to notice to be sent pursuant to this Agreement:

i. execute the respective shares transfer acts in the registered shares

transfer book of the Company in order to formalize the transfer of the
Connected Shares, all free and clear of any burden, claims, options,
preferential rights, liens or encumbrances of any nature, with all rights
inherent thereto, including the profit sharing, even if declared and
unpaid, and political rights; and

ii. Instruct the Company management to register the transfer of shares

in the Share Registry Book; and

iii. instruct the Company management to register the collateral of the

Connected Shares then transferred in the Share Registry Book, on
behalf of the Original Partners, until the Sale Price has been paid in
full, within the terms of item (c) below or GPA may contract an
unconditional bank guarantee for payment upon demand without
consultation with the issuer, with a first rate bank, for the value
corresponding to the balance of the Sale Price on behalf of the Original
Partners;

(c) grant, mutually, hereby and for the term hereof, irrevocable, irreversible and
exclusive powers for the specific purpose of, once the option has been exercised,
executing the share transfer acts referred to in Article 12.1 (b) (i), as well as
executing any and all other documents required for accomplishing the
transfer of the Connected Shares; except, however, that execution of the
respective Share transfer acts may be done provided that the other
obligations set forth herein have been complied with, including with
regard to the payment of the Sale Price and constitution
 of collateral of the shares transferred on behalf of the Original Partners, as
provided herein or the presentation of bank guarantee, as provided under item
12.1 (b) (iii);

(d) commit to pay the respective Sale Price in three (3) quadrimonthly, equal and
consecutive installments, the first of which being due on the date of formalization
of the shares transfer upon execution of transfer act in the Companys Registered
Share Transfer Book, and the others in the subsequent quarters, all of them, the
first included, being adjusted monetarily, by applying the variation of SELIC,
pro rata temporis, from the date of balance sheet used for calculating the Sale
Price and up to the date of the respective payments, against transfer of the Shares
to GPA, by means of Available Electronic Transfer - "TED", to the bank
accounts owned by the respective beneficiaries, to be timely informed;

(e) agree that, in consideration for the granting of the Options to Purchase and to
Sell, the grantees shall pay to the grantors, on this date, the total amount of one
hundred thousand Reais (R$100.000,00), in national currency, the parties being
given full acquittance and discharge, including by reason of offset of
reciprocal credits originating from the granting of the Options to Purchase and
to Sell, in the amounts offset by them;

(f) the Original Partners and GPA are hereby authorized to perform registration of
the Options to Purchase and to Sell provided for herein in the shares registry book
of the Company, for all legal purposes and intents, chiefly those set forth
under article 40 of Act no. 6.404/76;

(g) the Options to Purchase and to Sell and the rights, agreements, conditions and
obligations of the parties and of the Company resulting therefrom shall bind
and inure for the benefit of the Stockholders, the Company and its respective
successors, assigns and legal representatives; and

(h) without detriment to the specific events referred to herein for the exercise of
the Option to Purchase or of the Option to Sell, in the event of occurrence or
performance of the events described below by one or in relation to one of the
Stockholders and/or his/her respective Controllers, it is hereby agreed,
irrevocably and irreversibly, that (i) the Original Partners may exercise
immediately and at any time the Ordinary Option to Sell if the events have
occurred or performed by or in relation to GPA and/or its respective Controllers
or (ii) GPA may exercise immediately the Ordinary Option to Purchase if the
events have occurred or been performed by or in relation to one of the Original
Partners. In both cases, the Sale Price should be equal to the value obtained by
applying the criterion indicated under item (i) of Article 1.1.17:

(a) perform or undergo any act of bankruptcy or be subject to any

bankruptcy, insolvency, judicial or extrajudicial recovery, dissolution or
liquidation proceeding (whether or not voluntary), or any other analog
proceeding, adjudication of insolvency, in purpose or effects and any
such proceedings have not been contested in good faith or have an
administrator, receiver, administrative liquidator, liquidator or trustee
responsible for its property or assets, in whole or in part; or
(b) shall fail to pay its debts at their respective maturity, with
individual or global value in excess of ten million Reais
(R$10.000.000,00), and provided that any such debts had not been paid
when due or, if subject to protest, within the Brazilian legislation, any such
 protest has not been suspended or its effects have not otherwise been
suspended within a term of up to fifteen (15) days; or
(c) have a material or substantial portion of its assets subject
to attachment, which is not contested in good faith by the Stockholder; or
(d) shall fail to pay any amount or any value owed to the
Company, as per provisions hereof and/or of the By-laws; or
(e) shall fail to meet any provision hereof and shall fail to correct
any such default within a term of ten days counted from the receipt of written
notification to this effect from any complying Stockholder, without detriment
to other remedies and legal or contractual penalties applicable by reason
of default.

13. CONFIDENTIAL INFORMATION AND NON COMPETITION

13.1. The information of any nature on the business, projections, strategies,

operations and condition of the Company which come to be shared with (a) the
Stockholders or their representatives and/or (b) the members of the Board of
Directors and Executive Officers of the Company, should be handled by them in
absolute secrecy and reserve, and its use and/or spreading outside the
Company shall not be allowed, except for performing legal or regulatory
obligations the Stockholders are subject to.

13.2. During the term hereof, the Company should be the only vehicle of the
Stockholders and their Affiliated Companies with regard to the activities in the self-
service wholesale line of business in the food sector of the State of So Paulo. The
activities already developed by the Stockholders and their Affiliated Companies
before October 2007 of hypermarket, supermarket and shopping center may be
maintained and shall not configure breach of duty undertook within this Article
13.2.

13.3. If GPA wishes to develop or receives, from a third party, a proposal for
developing or acquiring a business involving self-service wholesale activities in the
food sector in other states of the Federative Republic of Brazil other than the State
of So Paulo (Business Opportunity), GPA should notify the Company
previously, informing the detailed conditions of the Business Opportunity, within
up to thirty (30) days following receipt of referred proposal. The Company shall
have thirty (30) days to inform its intention to exercise the right of first offer for
acquisition or participation in any such Business Opportunity (''Right of First
Offer"),

13.3.1. GPA commits to refrain from voting at the respective general meeting and
have its representatives at the Board of Directors refrain from voting at a meeting
the agenda of which is to deliberate on the exercise or non-exercise of the Right of
First Offer. Should the Company choose not to exercise the Right of First Offer or
should fail to exercise it in due time, GPA may freely contract with third parties,
without detriment to provision in this Article 13.

13.3.2. The Right of First Offer having been exercised in due time by the Company,
GPA commits to inform the third party of the exercise of the right of First Offer,
the Company committing to freely transact with the referred third party.

13.4. The Stockholders commit not to perform or allow its Affiliated Companies
to perform, whether directly or indirectly, any of the following acts, except if
allowed within provisions of articles 13.2 and 13.3, above:
(a) participate, directly or indirectly, in partnership, association, consortium,
joint venture or any other type of business the purpose of which is the self-
service wholesale activity in the food sector; provided, however, that the
activities performed by the centralized trade area responsible for purchasing
the goods and selling them to pre-filed and associated retail customers
("Business Center"), such as developed by GPA on this date shall not be
considered as breach of this Article 13.4;

(b) execute or render, directly or indirectly, any kind of services to partnerships,

associations, consortia, joint ventures or any other type of business the
purpose of which is the self-service wholesale activity in the food sector;
except, however, that the Business Center activities, such as developed by
GPA on this date shall not be considered as breach of this Article 13.4;

(c) induce or try to influence, directly or indirectly, any employee or service

provider of the Company or of its Affiliated Companies to terminate the
employment contract, services contract or any other contract whatsoever
executed with the Company or with its Affiliated Companies, as the case may
be; or

(d) induce or try to influence any natural person, corporation, company,

partnership, consortium, association, cooperative, trust, entity without legal
personality or any other entity or organization, employee, agent, distributor,
consultant, supplier or self-employed worker hired by the Company or by its
Affiliated Companies, or keeping businesses with these, to terminate, reduce or
deviate the businesses maintained with the Company or with its Affiliated
Companies, as applicable.
13.5. Provisions of items 13.2 to 13.4 hereof apply to any of the Stockholders
and their authorized successors while they hold, directly or indirectly, an
interest in the Company capital.

13.5.1. During the term hereof and for a period of five (5) years following the sale of
the totality of the respective direct or indirect interests in the Company capital, the
Original Partners may not participate in self-service wholesale and retail
activities in the food sector.

13.5.2. The failure to meet the obligation not to compete shall subject the defaulter
party to a non-compensation fine for the value of ten million Reais
(R$10.000.000,00), without detriment to the payment of losses and damages caused
by it.

14. EFFECTIVE DATE

14.1. The present Agreement is executed irrevocably and irreversibly and shall be
effective as of the Closure Date up to 12.31.2014, or while the Parties are
Stockholders of the Company, whichever comes first, except for the terms of non-
competition and indemnity, which shall survive, necessarily, as provided for in
Articles 13.5.1 and 12.1 (a), any such terms having been agreed freely by the
Stockholders as being sufficient for the maturation of their intended purposes,
binding the subscribing Stockholders, by themselves and by their successors
and assigns whatsoever, and the Company.

15. APPLICABLE LAW AND ARBITRATION

15.1. The present Agreement shall be governed and construed within the laws of the
Federative Republic of Brazil. All issues relating to construction and performance of
the obligations set forth herein shall be submitted to arbitration, pursuant to the rules
of the Getlio Vargas Foundation Arbitration Chamber (Cmara de Arbitragem da
Fundao Getlio Vargas - "CAFGV") y the PARTIES hereby expressly waiving
provision of the sole paragraph of Art. 49 of said rules, which should not be
applied in the event of adoption of arbitration court within this Agreement. In
the event of omission of the procedural rules of CAFGV in any procedural aspect,
any such rules shall be supplemented by the Brazilian procedural rules, namely: Act
no. 9.307, dated September 23rd , 1996, and the Brazilian Code of Civil Procedure.
The Arbitration Court shall comprise three arbitrators, two of them to be appointed
by the Stockholders at a prior meeting and the third, who shall preside over the
Arbitration Court, shall be appointed by the first two arbitrators appointed by the
Stockholders, who shall decide about the subject matters submitted to them by
majority of votes. The arbitration shall be held in the city of So Paulo, State of So
Paulo, Brazil, in Portuguese. The award issued by the Arbitration Court shall be final
and may be submitted to any competent court in order to determine its enforcement
and shall bind the Stockholders and the Company, which hereby waive expressly any
appeal. Notwithstanding that, each of the Stockholders and the Company reserve the
right to resort to the Judiciary aiming at:
 (i) assuring the institution of arbitration;

(ii) obtaining precautionary measures to protect rights

previously to the institution of arbitration, and any such
procedure to this effect shall not be considered as a waiver
of arbitration act as the sole means of resolution of disputes
chosen by the Stockholders and/or by the Company; and

(iii) enforcing any ruling of the Arbitration Court, including the

arbitration award.

15.1.1. In the event that the Stockholders or the Company resort to the
Judiciary, the Court of the Capital City of the State of So Paulo shall be
competent to examine any judicial proceeding.

15.2. The Stockholders acknowledge that the Company could be harmed

irreparably if the information on the arbitration proceeding adopted to settle
any disputes hereunder was disclosed. Therefore, the Stockholders hereby
commit not to disclose (or allow disclosure of) any information with respect
to any such arbitration proceeding (including on its existence), until the
arbitration award has been issued, unless (i) disclosure of any such
information is required by law or regulation or by reason of the open-capital
company condition of any Stockholder; (ii) the disclosure of any such
information is required by a governmental authority or by a competent
court order; or (iii) any such information becomes available to the general
public other than through disclosure by the Stockholders or their respective
Affiliated Companies.

16. SPECIFIC ENFORCEMENT

16.1. Without detriment to provision of Article 15 above, default or

non-performance of any of the obligations set forth herein shall entitle
the innocent Stockholder to demand the performance of the obligation,
within 3 of Article 118 of Act no. 6.404/76. Furthermore, it is hereby set
forth between the Stockholders that any payment of losses and damages
shall not constitute sufficient remedy against the default.

16.2. The vote cast at the Stockholders General Meetings against

provisions hereof shall have no validity whatsoever, and the Chairman of
the Stockholders General Meeting should refrain from computing it, as
per provision of 8 of Article 118 of Act no. 6.404/76.

16.3. The failure to comply with material obligations set forth herein which
are not subject, due to the nature thereof, to specific enforcement, shall
subject the defaulter party to a non compensation fine for the value of ten
million Reais (R$10.000.000,00), without detriment to the payment of
losses and damages caused by it. Provision of this Article 16.3 may not be
invoked with regard to the exercise of the voting right or to issuing of
opinion deviating from provisions hereof, the Stockholders acknowledging
that any such obligations are subject to specific enforcement.

16.3.1. The value of ten million Reais (R$10.000.000,00) referred to in Article

16.3 above should be corrected, as of the date of execution hereof, by the
accumulated variation of the General Price Index Market (IGP-M)
calculated by Fundao Getlio Vargas, or of other index with equivalent
base replacing it, within the shortest periodicity legally accepted.

17. NOTICES AND NOTIFICATIONS

17.1. All notifications and other communications between the

Stockholders and the Company should be in writing and sent to the
addresses indicated at the preamble hereof, through (i) Register of Deeds; (ii)
registered letter with acknowledgment of receipt; or (iii) any other means
with proof of receipt.

17.1.1. The notices delivered within this Article 17.1 shall be considered as
delivered: (i) by the time of delivery, if this is made in person; (ii) at the
receipt, if mailed or delivered through the Register of Deeds; (iii) two (2)
business days following timely delivery to the courier service, if a delivery
service is used; and (iv) if by fax or email, upon transmission
acknowledgment issued by the equipment itself.

17.1.2. All notices sent within Article 17.1 should be accompanied by a

copy to the following addressees (and the receipt of the copy shall not
configure delivery of notice for the purposes provided herein):

(i) If to the Original Partners, to:

Rodolfo Junji Nagai

Rua Manilha, 60
03445-050 So Paulo, SP
Phone: (55 11) 3411-5000
Fax: (55 11) 3411-5003
Email: rodolfo@assaiatacadista.com.br

Luiz Fumikazu Kogachi

Rua Manilha, 42
03445-050 So Paulo, SP
Phone: (55 11) 3411-5000
Fax: (55 11)3411-5003
Email: luizkogachi@assaiatacadista.com.br

With copy (which shall not constitute notice for the purposes
provided herein) to:

Souza, Cescon Avedissian, Barrieu e Flesch Advogados

Attn.: Marcos R. Flesch / Fabola C.L. Cammarota de Abreu
Rua Funchal, 418, 11 andar
04551-060 So Paulo, SP
Fax: (55 11) 3089-6565
Email: mflesch@scbf.com.br / fabreu@scbf.com.br

(ii) If to GPA, to:

Companhia Brasileira de Distribuio
 Attn.: Enas Pestana
Av. Brigadeiro Luiz Antnio, 3.172
01402-000 So Paulo, SP
Phone: (55 11) 3886-0014
Fax: (55 11) 3885-6441
Email: eneas.pestana@grupopaodeacucar.com.br

With copy (which shall not constitute notice for the purposes
provided herein) to:
Barbosa, Mssnich & Arago Advogados
Attn: Paulo Cezar Arago / Monique Mavignier
Av. Juscelino Kubitschek, 4 andar
04543-000 So Paulo, SP
Phone: (55 11) 3089-6500
Fax: (55 11) 3089-6565
Email: pca@bmalaw.com.br / monique@bmalaw.com.br

17.2. The party altering the address indicated at the preamble hereof should
promptly inform the new address to the other parties. Up to the sending of
any such information, the notices, communications, notifications and
interpellations sent to the address indicated at the preamble hereof shall
remain valid and effective.

17.3. Any notice or notification sent to one of the Stockholders or to the

Company should be transmitted by copy to the other Stockholders and to the
Company.

18. GENERAL PROVISIONS

18.1. If any provision herein shall be held to be ineffective, the other

provisions hereof shall remain in full force and effect, and in that case, the
Stockholders and the Company shall enter into negotiations in good faith,
aiming at replacing the ineffective provision with another which, to the
extent possible and reasonably, meets the purpose and effects desired.

18.2. No change, amendment or modification hereof shall be effective,

except in writing and with the signature of all Stockholders and the
Company.

18.3. This Agreement shall be filed at the Company headquarters, which shall
observe, comply and have comply with its provisions. In the Share Registry
Book, at the margin of the record of shares held by the Stockholders,
and in the respective certificates, certificate of shares or multiple
securities, the following wording shall be included: The shares
represented by the present Certificate (or by this record, as applicable),
including their transfer or burdening under any pretense or the exercise
of the voting right shall be subject to the burden and to the regime of
the Stockholders Agreement filed at the Company headquarters, dated
November 01 st , 1007, under the penalty of ineffectiveness of the
transfer, burdening or exercise of the voting right ("As aes
representadas por este Certificado (ou por este registro, conforme o caso), inclusive sua
transferncia ou onerao a qualquer titulo ou o exerccio do direito de voto esto
sujeitas ao nus e ao regime do Acordo de Acionistas arquivado na sede da
Companhia, datado de 01 de novembro de 2007, sob pena de ineficcia de
transferncia, onerao ou do exerccio do direito de voto").

18.3.1. The Company hereby files the Agreement within Act no. 6.404/76,
and commits to have it respected, fully complying with provisions thereof.

18.3.2. Each Stockholder names himself/herself as representative before the

Company for the purposes of 10 of Article 118 of Act no. 6.404/76.

18.4. No other act may be executed between the Stockholders regulating

any of the subject matters of this Agreement, and the Company is not
allowed to acknowledge the existence and validity of any such other
agreements.

18.5. The Company shall not be responsible for the performance of any
agreement altering the rights and obligations provided for herein, except
if the amendment document is executed by it or is sent to it to be filed.

18.6. The Company commits to immediately inform the Stockholders of any

agreement, fact or omission that could imply breach hereof, as well as to
take the required steps requested by a supervening law in order to keep this
Agreement valid and effective.

18.7. The Recitals hereof shall constitute an integrating and inseparable part
hereof for all legal purposes and effects, and should base and guide, whether
judicially or extrajudicially, any dispute whatsoever arising out of
provisions hereof.

19. TRANSIENT PROVISIONS

19.1. The Original Partners acknowledge that SEVILHA, by the time of

acquisition of shares representing 60% of the total, voting shares of the
Company, has determined goodwill in the acquisition of any such interest,
consisting of the expectation of future profitability, certified in appraisal
report for that purpose, determined by the difference between the price for
acquisition of said shares and their book value based on balance sheet or
accounting trial balance prepared on the date of execution of the
Agreement of Purchase and Sale.

19.2. Thus, the Original Partners hereby commit to vote favorably and to
execute all acts or company books as may be required to make feasible
the incorporation of SEVILHA by the Company, for a book value, so as to
enable the fiscal deduction by this latter, pursuant to the applicable fiscal
legislation rules, of the goodwill determined in the acquisition the
Agreement of Purchase and Sale of Shares refers to.

19.3. The Original Partners and SEVILHA hereby grant to each other,
within provisions of 7 of Art. 118 in Act no. 6.404/76, reciprocal power
of attorney, irrevocably, irreversibly and exclusively for the specific
purpose of, from the date of execution hereof and for an indeterminate
term, representing one another at the stockholders general meeting to be
called together in order to comply with provisions of this Article 19, and
voting favorably to the capitalization of reserve, issuance of redeemable
shares and redemption of shares provided for herein, and may further
execute the Stockholders Attendance Book and the Minutes Book of the
General Meetings of the Company.

19.4. The Original Partners hereby already agree that, should any other fiscal
credits exist also resulting from goodwill, the fiscal utilization of the
goodwill provided in this act shall have priority over any such other credits.

19.5. The Original Partners hereby agree that the portion of the income tax
and of the social contribution reduced by virtue of and as the fiscal credit is
being actually used shall correspond to a credit on behalf exclusively of the
stockholder directly or indirectly originating the goodwill.

19.6. In the event that the fiscal amortization of the goodwill generates
fiscal loss and negative basis of calculation of social contribution over
the net profit, the credit shall be constituted on behalf of the stockholder
originating the goodwill at the exact time from which the loss and the
negative basis start to be used. In this case, from the moment of generation
of the loss and the negative basis of calculation, the loss generated by
the goodwill amortization shall always be considered, as firstly used, for
the purpose of constitution of credit on behalf of the stockholder.

19.7. The credit so originated shall be transferred to the stockholder

directly or indirectly originating the goodwill upon (i) the proportional
capitalization of the goodwill reserve registered at the Company with the
consequent issuing of redeemable shares on behalf of said stockholder and
(ii) the subsequent redemption of shares then issued, for further canceling,
guaranteed by special reserve, capital reserve or profits (or absence of all
such reserves, of capital reduction, within art. 44, paragraph 1, of Act no.
6.404/76).

19.8. The redeemable Shares shall be issued at an issuing price

corresponding to the book value of the Shares then existing issued by the
Company, considering, for this purpose, the balance sheet prepared for
December 31 st, of the respective calendar year immediately before, the
Original Partners hereby already waiving, on behalf of the Stockholder
originating the goodwill, irreversibly and irrevocably, the exercise of
the respective preferential right referred to in the company legislation
and regulation.

19.9. Issuance of redeemable shares shall be deliberated and approved at the

ordinary general meeting approving the company balance sheet for each
corporate year, and redemption of the same shares should be effective
immediately, at the price of issuance, by the same time of deliberation of
issuance of redeemable shares.

19.10. GPA hereby commits to hold harmless and indemnify the

Company for any fiscal expense, cost, contingency or burden arising
out of fiscal deduction of the goodwill, incorporation of SEVILHA by the
Company, increase of capital shares and redemption of shares, and other steps
required for implementing provisions of this article 19.

19.11. The Parties hereby commit, on the Closure Date, to approve or arrange
for approval of the capital increase by the general meeting of the Company,
for the value of thirty million Reais (R$30.000.000,00), twenty-six million
Reais (R$26.000.000,00) of which shall be destined to the capital reserve
account which shall support, as per Article 19.3 above, the redemption of
the Company shares, the Parties committing not to capitalize any such reserve
and not to use it for any of the purposes provided in art. 200 of Act no.
6.404/76 other than for redemption.

19.12. Upon the incorporation of SEVILHA by the Company, the rights

and obligations of SEVILHA provided for herein, in the capacity of
Stockholder of the Company, shall be exercised by S; owing to that, as of
any such incorporation, any references to SEVILHA included herein,
whenever the context so allows, shall be construed as being references to
S.

IN WITNESS WHEREOF, the Stockholders and the Company execute the

present instrument in seven (7) counterparts with the same content and
format, along with two witnesses.

So Paulo, November 01 st , 2007.

(Signature) (Signature)

SERVILHA EMPREENDIMENTOS E RODOLFO JUNJI NAGAI

PARTICIPAES LTDA.

(Signature) (Signature)

LUIZ FUMIKAZU KOGACHI BARCELONA COMRCIO

ATACADISTA E VAREJISTA S.A.
Continuation of the Signature Page of the Stockholders Agreement of
Barcelona Comrcio Varejista e Atacadista S.A., executed on 11.01.2007.

(Signature) (Signature)
ASSAI COMERCIAL E COMPANHIA BRASILEIRA DE
IMPORTADORA LTDA. DISTRIBUIO

(Signature)
S SUPERMERCADOS LTDA.

Witnesses:
1. (Signature) 2. (Signature)
Name: Flvio Luis Kuba Name: Odete Ribeiro
ID Card (RG): 16.526.103 ID Card (RG): 10.361.164-2 SSP/SP
Individual Taxpayer Registry: Individual Taxpayer Registry:
126.407.668-13 997.224.458-04
 EXHIBIT 12.1
CERTIFICATION

I, Claudio Galeazzi, Chief Executive Officer, certify that:

1. I have reviewed this annual report on Form 20-F of COMPANHIA BRASILEIRA DE DISTRIBUIO
S.A.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements and other financial information included in this report
fairly present in all material respects the financial condition, results of operations and cash flows of the company as
of and for the periods presented in this report;
4. The company's other certifying officers and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:
a) designed such disclosure controls and procedures or caused such disclosure controls and
procedures to be designed under our supervision to ensure that material information relating to the
company, including its consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for externa1 purposes in
accordance with generally accepted accounting principles;
c) evaluated the effectiveness of the company's disclosure controls and procedures and presented
in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the
end of the period covered by this report based on such evaluation; and
d) disclosed in this report any change in the company's internal control over financial reporting
that occurred during the period covered by the annual report that has materially affected, or is reasonably
likely to materially affect, the company's internal control over financial reporting; and
5. The company's other certifying officers and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the company's auditors and to the audit committee of the company's
board of directors (or persons performing the equivalent function):
a) all significant deficiencies and material weaknesses in the design or operation of internal control
over financial reporting which are reasonably likely to adversely affect the company's ability to record,
process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a
significant role in the company's internal control over financial reporting.

Date: May 16, 2008

By: /S/ CLAUDIO GALEAZZI
President and Chief Executive Officer
 EXHIBIT 12.2
CERTIFICATION

I, Enas Csar Pestana Neto, Chief Financial Officer, certify that:

1. I have reviewed this annual report on Form 20-F of COMPANHIA BRASILEIRA DE DISTRIBUIO
S.A.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements and other financial information included in this report
fairly present in all material respects the financial condition, results of operations and cash flows of the company as
of, and for, the periods presented in this report;
4. The company's other certifying officers and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:
a) designed such disclosure controls and procedures or caused such disclosure controls and
procedures to be designed under our supervision to ensure that material information relating to the
company, including its consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for externa1 purposes in
accordance with generally accepted accounting principles;
c) evaluated the effectiveness of the company's disclosure controls and procedures and presented
in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end
of the period covered by this report based on such evaluation; and
d) disclosed in this report any change in the company's internal control over financial reporting
that occurred during the period covered by the annual report that has materially affected, or is reasonably
likely to materially affect, the company's internal control over financial reporting; and
5. The company's other certifying officers and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the company's auditors and to the audit committee of the company's
board of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control
over financial reporting which are reasonably likely to adversely affect the company's ability to record,
process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a
significant role in the company's internal control over financial reporting.

Date: May 16, 2008

By: /S/ ENAS CSAR PESTANA NETO
Chief Financial Officer
 EXHIBIT 13.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO
SECTION 906 OF THE U.S. SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of COMPANHIA BRASILEIRA DE DISTRIBUIO S.A. (the
"Company") on Form 20-F for the fiscal year ended December 31, 2007, as filed with the U.S. Securities and
Exchange Commission on the date hereof (the "Report"), I, Claudio Galeazzi, Chief Executive Officer, certify,
pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the U.S. Sarbanes Oxley Act of 2002, that
to the best of my knowledge:
(i) the Report fully complies with the requirements of section 13(a) or 15(d) of the U.S. Securities
Exchange Act of 1934; and
(ii) the information contained in the Report fairly presents, in all material respects, the financia1
condition and results of operations of the Company.

Date: May 16, 2008

By: /S/ CLAUDIO GALEAZZI
Name: Claudio Galeazzi
Title: Chief Executive Officer
 EXHIBIT 13.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO
SECTION 906 OF THE U.S. SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of COMPANHIA BRASILEIRA DE DISTRIBUIO S.A. (the
"Company") on Form 20-F for the fiscal year ended December 31, 2007, as filed with the U.S. Securities and
Exchange Commission on the date hereof (the "Report"), I, Enas Csar Pestana Neto, Chief Financial Officer,
certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the U.S. Sarbanes Oxley Act of
2002, that to the best of my knowledge:
(i) the Report fully complies with the requirements of section 13(a) or 15(d) of the U.S. Securities
Exchange Act of 1934; and
(ii) the information contained in the Report fairly presents, in all material respects, the financia1
condition and results of operations of the Company.

Date: May 16, 2008

By: /S/ ENAS CSAR PESTANA NETO
Name: Enas Csar Pestana Neto
Title: Chief Financial Officer
 Grupo Po de Acar Annual Report 2006
Grupo Po de Acar
Annual Report 2006

CBD RA06 Capa 2 ing.indd 1 6/27/07 4:05:43 PM

 PRESENTATION
Corporate prole 01
Credits
Mission, Vision, Pillars 02
Operating, Financial and Sustainability Highlights 04

COMMITMENT
Message from Management 06
Board of Executive Ofcers 10 GENERAL COORDINATION
Investor Relations
STRATEGY Instituto Po de Acar
Strategic focus 2006 14
Investments 18 TEXTS
Goals 2007 19 Silvia Martinelli (Mtb 39.545/SP)
Strategic planning 2010 21
GRAPHIC PROJECT AND DESKTOP PUBLISHING
RESULTS TheMediaGroup
Sales Performance 24
ANNUAL Operating Performance 28
Financial Performance (MD&A) 34
PHOTOS

REPORT 2006 Social Performance 38

Environmental Performance 42
Grupo Po de Acars Assets: page 06, 41, 43 and 44
Daniel Renault: page 13, 16, 19, 23, 25, 26, 31, 33 and 50
Daniel Rosa: page 10 (Cssio Casseb Lima),
page 11 (Maria Aparecida Fonseca) 12, 15, 20, 22, 37,
The information in this Report is presented DIFFERENTIALS 39, 46, 47, 53, 54, 57, 58, 60, 61 and 68
in an objective and direct manner, to provide a Operating 48 Maurcio Simonetti: page 10 and 11 (executive directors)
thorough view of the main results and projects Socioenvironmental 54
developed by Grupo Po de Acar during the Acknowledgement 56 PRINTING
scal year of 2006. For further details please refer People Management 57 RWA Grca
to online annual report 2006, available in the
website (www.cbd-ri.com.br/relatorioanual2006). TRANSPARENCY
Corporate Governance 62
Our shares as an investment 64
Risk Management 67

General Remissive Index GRI 69

Corporate Information 71

Financial Statements 2006 attachment

CBD RA06 Capa 2 ing.indd 2 6/27/07 4:05:45 PM


PRESENTATION
Prole
With a 13.3% market share and R$16.5 billion
total sales, Grupo Po de Acar is one of Brazils important average pricing performance indicator.
largest food retailers. Due to the characteristics
of the business and its capillarity there are 549
stores spread around 14 states from the Southern,
Southeastern, Midwestern and Northeastern
Regions and Distrito Federal, which add up to 1.2
million square meters of sales area , the Group is
present in the lives of many communities.
To ensure the supply at the stores, the Company
banks on a diversied logistic infrastructure, with
85% centralization and 19 distribution centers located
strategically in seven states. Another noteworthy feature
is the positioning and segmentation of the brand,
composed of a multiformat structure (balance of share
between supermarkets and hypermarkets), with stores
in the main markets of the country. In 2006, this share
was diversied with penetration in the convenience retail
segment, by means of the Extra Perto brand.
The strategy of Grupo Po de Acar is geared
toward the pursuit of gains of efciency, which allow it to
operate with lower expenses and greater competitiveness.
Listed on the So Paulo Stock Exchange (Bovespa) since
1995, and on the New York Stock Exchange since 1997
(ADR level III), the Company became part of the group of
listed companies that adhered to the new IGC Special
Corporate Governance Share Index level 1, which includes
companies with special Corporate Governance actions;
and was also included in the IBX-50 index, which includes
the 50 companies with the highest liquidity on Bovespa; in
2006, the Company was added on Ibovespa, Brazils most
Support to public policies of a social nature,
incentive to sports and cultural practices, encouragement
of ethical and solidary commerce and of conscientious
consumption are also initiatives present in the Groups
DNA and shared with the 63.6 thousand collaborators,
which make the Company the largest private employer
from the Brazilian retail segment.
02 Grupo Po de Acar

Share in
Mission
To ensure the best shopping experience for all our
Concept
turnover

Neighborhood
customers, at each one of our stores. supermarket with a focus
on consumers from the
A and B income groups, 22.1%

Vision Grupo Po de Acar desires to expand its market

offering the best food
service, product quality
and variety.
share in the Brazilian retail market and to become the
most admired company due to its protability, innovation,
efciency, social responsibility and contribution toward the CompreBem/Sendas is
16.4%
nations development. targeted at the working
woman, helping her facing
a big challenge: buying

Pillars everything her family

needs on a tighter budget.
8.1%

Customer: our reason for being

Grupo Po de Acar is geared toward its Hypermarket of the
Brazilian family, which
customers, making sure that each contact with its brands
offers differentiated
corresponds to a best experience and serves to build a customer care and
long-term relationship of loyalty. services, a modern and 51.2%
pleasant environment, a
broad range of food and
Our People non-food products at
People provided with better technical skills relative competitive prices.
to the market average, well trained and motivated to
face challenges, take risks and show innovating attitudes. Specialized in
electroelectronic products,
People who are fond of serving, who value respect in their the Extra/Eletro stores
relationship with customers, suppliers and partners, with also sell furniture
2.2%
an enthusiastic approach, regardless of the circumstances. and homeware items,
focusing especially on
the excellence of services
Command of technology delivered to consumers.
Attention to everything that goes on in the world,
assessing its usefulness and its return for our business, to
Proximity store that offers
take full advantage of these available technologies. a pleasant and convenient
shopping experience, with
Solid capital structure essential products and
services and a very clear
A capital structure that allows investments in our price-quality perception
Company, in our people and in our country, operating for consumers.
efciently to bring return to shareholders and long-term
sustainable growth.
 Annual Report 2006 03

Piau
4
19 2 Cear
1 Rio Grande do Norte
4 Paraba
10 2 Pernambuco
1 Alagoas
1 Sergipe
3 Bahia
Braslia 15
5

Gois 2 1

3 Minas Gerais
Mato Grosso do Sul 1

9 17 14 62 Rio de Janeiro
97 44 50 172 4 So Paulo
Paran 2 4

December 2006 Po de Acar Extra Extra Eletro CompreBem Sendas Extra Perto CBD
So Paulo 97 44 50 172 4 367
Rio de Janeiro 9 17 14 62 102
Cear 19 2 21
Braslia 15 5 20
Pernambuco 10 2 12
Paran 4 2 6
Paraba 4 4
Piau 4 4
Bahia 3 3
Minas Gerais 3 3
Gois 2 1 3
Mato Grosso do Sul 1 1
Rio Grande do Norte 1 1
Sergipe 1 1
Alagoas 1 1
Total Stores 164 83 50 186 62 4 549
Sales Area (m2) 221,383 629,091 33,713 225,829 107,355 613 1,217,984
04 Grupo Po de Acar

Operating and Financial Highlights

Income (millions of R$) 2002 2003 2004 2005 2006*
Gross sales 11,154 12,788 15,297 16,121 16,460
Net sales 9,455 10,806 12,565 13,413 13,880
Cost of Sales (6,809) (7,764) (8,891) (9,438) (9,908)
Gross Income 2,645 3,042 3,673 3,975 3,972
(1)
Ebitda 781 902 1,044 1,170 1,083
Net Income 245 226 370 257 220
Margins (%)
Gross Margin 28.0 28.2 29.2 29.6 28.6
Ebitda Margin 8.3 8.3 8.3 8.7 7.8
Net Margin 2.6 2.1 2.9 1.9 1.6
Productivity Ratios
Gross sales per m2/month (R$) 1,007 1,105 1,143 1,142 1,147
Gross sales per employee/month (R$) 16,907 22,874 25,057 25,379 26,587
Gross sales per check-out/month (R$) 125,677 138,013 146,801 150,532 151,186
Average Ticket (R$) 29.4 29.0 30.5 31.1 32.1
Financial indicators (thousands of R$)
Total assets 9,188 8,940 10,423 10,923 11,672
Shareholders equity 3,592 3,768 4,050 4,252 4,842
Capital Expenditures 1,096 571 561 889 857
Gross Debt 2,925 2,480 2,721 2,056 1,978
(2)
Net Debt 702 894 926 (26) 318
Net Debt /Shareholders' Equity (%) 49.8 39.8 35.0 8.7 14.4
Number of Employees 57,898 55,557 63,484 62,803 63,607
Market indicators
Number of shares (thousand) 113,186,139 113,442,239 113,522,239 113,667,915 113,771,378
Net income per share (R$/thousand shares) 2.17 1.99 3.26 2.26 1.93
Market cap (thousand of R$) (3) 6,168,645 7,986,334 7,798,978 8,741,063 8,529,440
Dividends (thousand of R$) 59,441 54,792 84,059 62,053 20,312
* Pro forma results (for further details, please refer to page 34).
(1) Earnings before Interests, Taxes, Depreciation and Amortization.
(2) Gross Debt Cash Receivables.
(3) Preferred shares price in the end of period multiplied by total shares.

Gross Sales per Business

Unit (%) 8.1% 2.2%

Extra
16.4%
Po de Acar
CompreBem
Sendas
51.2%
Extra Eletro
22.1%
 Annual Report 2006 05

Gross Sales (R$ million) Net Sales (R$ million) Ebitda (R$ million) and
Ebitda Margin (%)

16,460

13,880
16,121

13,413

1,170
15,297

12,565

1,083
1,044
10,806
12,788

902
9,455
11,154

781
8.3% 8.3% 8.3% 8.7% 7.8%

_02 _03 _04 _05 _06 _02 _03 _04 _05 _06 _02 _03 _04 _05 _06*

Net Income (R$ million) Number of Employees Gross Sales per Employee (R$)
and Net Margin (%)

63,607
63,484

62,803

26,587
25,379
25,057
57,898
370

22,874
55,557

16,907
257
245

226

220

2.6% 2.1% 2.9% 1.9% 1.6%

_02 _03 _04 _05 _06* _02 _03 _04 _05 _06 _02 _03 _04 _05 _06

Gross Sales per m2/month Market Capitalization (R$ million) Added Value (R$ million)

3,286
3,209
1,142

1,147
1,143

3,068

3,065
1,105

8.7
1,007

8.5
8.0

7.8

2,535
6.2

_02 _03 _04 _05 _06 _02 _03 _04 _05 _06 _02 _03 _04 _05 _06

* Pro forma
06 Grupo Po de Acar
COMMITMENT
Message from
Management
One of the periods highlights was the
Groups restructuring, which included the
creation and consolidation of a professional
structure that will support and lead to the
higher growth we plan to achieve over the
next years. We have made important changes
in our Executive Board, which will be essential
to the achievement of our goals, thus resulting
in higher protability and return.
Abilio Diniz
Chairman of the Board
2006 was a year of important adjustments for
Grupo Po de Acar. Despite strong deation in some
food products categories, we maintained our strategy
to achieve increased competitiveness and reduction of
expenses. These two features are crucial to support our
market share recovery and to trigger a virtuous cycle.
One of the highlights for the period was
the Companys restructuring process, shaping and
consolidating a professional base to support and drive
the accelerated growth expected for coming years. We
have promoted important changes in our executive
board, which will be essential to reach our goals, and,
consequently, greater protability and returns. We now
have a marketing executive ofcer, who consistently
guides and directs the actions in all our banners.
Additionally, the Commercial area was divided into

two different departments Food
products and Non-food products to
promote specic strategies according
to the prole and demand of each
of these segments, and, as a result,
boost our sales.
We also changed our stock
option program to a more aggressive
one, to ensure the alignment with the
goals of strategic planning, resulting
in a stronger commitment of the
management to the Companys
results and to the value of shares in
the market. Now, the performance
of 110 executives awarded with
the plan will be closely linked to
performance indexes, and to the
Return on Invested Capital (ROIC).
In practice, we reshaped both the
executives bonus and stock options
related to that bonus, pursuant to the
accomplishment of the established
targets, turning the compensation
package a more aggressive one when
compared to the market. Now, the
possibility of stock option gains is
100% of the annual bonus. Prior to the
review, the amount of stock options
an executive received was, on average,
only 6% of the annual bonus.
Annual Report 2006 07
At the year-end, the Group
opened 21 new stores including
4 Extra Perto units (8 stores in
the beginning of 2007), which
represented our entry in the
convenience retail segment, the
fastest-growing store format in the
country according to the Nielsen
research institute. This will give us a
greater exibility to expand our reach
to a public diverse from the ones we
have already reached through the
conventional formats. The expansion
of stores based on this new format
will be dened as we reach positive
results, conrming the underlined
plan. On the top of that, we expect
to open 10 new hypermarkets and 20
supermarkets for 2007.
08 Grupo Po de Acar
Even facing a sales scenario
which gave little room to expenses
dilution, we took some important
steps forward to increase the
investment in price competitiveness,
a fundamental move to gain market
share. We achieved important
reductions in operating expenses,
which totaled approximately R$120
million in the year. That reduction
was essential to improve the
competitiveness of the Company
as it became better suited for each
micro-market in which the stores are
located, and led to an improvement
in our image, an increase in customer
trafc and a recovery in food products
sales in the same store concept.
Another focus in 2006 was
the development of a long-term
strategic planning, allowing us to
match the short-term strategies
to in-depth planning for the next
four years, up to 2010. One of the
established targets is to reach a
signicant sales growth for the
coming years, reaching a gross sales
level, in real terms, of R$25 billion
by 2010, considering the opening of
150 new stores from 2006 to 2010.
Cost reduction, a main focus in 2006,
will continue. For 2007, our goal for
expenses over net sales is 20%.
Our expectation is that the
foundation laid now will continue
to yield even better results in the
coming years. We also expect a
signicant increase in non-food
product sales as a percentage of
total sales, due to several ongoing
initiatives in that area. One of
them is the consolidation of
category management process,
with the development of Solues
(Solutions) concept, which tries
to understand the consumers
shopping behavior by displaying
together products from different
categories related to each other by
a common theme (Home World,
Digital World, Entertainment World,
Baby World etc). Additionally, we
are strengthening sales through
e-commerce, and expanding global
sourcing and imports, which should
increase the assortment of products.
Throughout the year, we
worked as well in other important
fronts of our business. We
strengthened the relationship with
our main partner, the French group
Casino, aiming at sharing best
practices that may be adapted to our
reality, such as convenience stores,
which led to the Extra Perto project.
We also shared experiences and
explored synergies in international
trading and non-food areas.
 Annual Report 2006 09

Aiming at ensuring also invest in the modernization of

transparency to all our stakeholders,
we have been working intensely
to meet the requirements of the
Sarbanes-Oxley Act (SOX), by creating
new controls and adapting our
processes. In light of all initiatives we
have developed the creation of the
SOX committee, the SOX Agent in
the stores, Group 404 (comprised of
specialists), and the communication
process that will be intensied in 2007
we are condent to say that this
Market issue is no longer just a project, but a
sustainable theme for the Group.
our management systems, adopting
tools that will allow us to deepen
our knowledge about consumers
(Database Mining), measure
media return, and analyze price
elasticity, which will strengthen our
competitiveness.
All these initiatives lead
us to believe even more in our
mission: ensure the best shopping
experience for all of our clients in
each of our stores. We intend to
be the best shopping alternative
for consumers and the best

share Another important initiative

Throughout the year,
important advances allowed
the Group to strengthen price
competitiveness, which in turn
is critical to market share gains.
related to the Groups strategic goals
is the new level we have established
for ROIC (Return on Invested Capital),
which should increase from 10% to
investment for our shareholders,
reinforcing our commitment to social
responsibility and the importance
of our contribution to the countrys
development.
15% by 2010. In 2006, our ROIC was
10% and our goal in 2007 is to reach,
at least, 11%.
We can say that 2006 was
a year of expenses adjustments
and strengthened competitiveness,
whereas 2007 will be the year of
sales. To achieve our main goal
increase sales we will promote
a campaign based on awards and
incentives, primarily in the stores,
aiming at involving and motivating
employees to reach their sales
targets, with the participation of the
entire Company. At the same time, in
order to support the technical and
consistent decision making, we will
10 Grupo Po de Acar

Executive
Ofcers

Caio Mattar
Investments and Construction

We are working to reduce store

construction costs and to attain more
productivity, to thus ensure that the
Groups expansion plan is fullled.

Cssio Casseb Lima

Chief Executive Ofcer

In 2006, we reconciled the short and Jos Roberto Tambasco

long-term. We developed profound and serious
strategic planning for future years and the cost
cutting, which was the focal point of the period,
will continue.
Po de Acar
The redenition process of
discrepancies in prices, which were
adapted to the micro markets, brought
more competitiveness to the Po de
Acar stores. We will be consolidating
a policy of more constant, regular and
competitive prices.

Claudia Pagnano
Marketing
The integrated marketing concept
will reinforce brand positioning,
and will be oriented by the clients
needs, which must be reected in our
stores operation model.
Maria Aparecida Fonseca
Human Resource
To promote the full development
of our collaborators within every
scope, we seek to create a working
environment that supports individual
and collective development, in a
synergy with the business demands.
Enas Pestana
Chief Financial Ofcer
The expense reduction process was
implemented and consolidated during
the year by means of the deployment
of several initiatives and, particularly,
the strengthening of a culture of lower
expenses among the collaborators
of the Group, in pursuit of greater
efciency and competitiveness.
Pedro Janot
Non-Food Commercial
In 2007, we will seek to consolidate
the category management process,
strengthening e-commerce and
expanding supply, with an emphasis
on global sourcing.
Annual Report 2006 11
Hugo Bethlem
Extra and CompreBem/Sendas
With the consolidation of
CompreBem, the Company has a
growth outlook for the next years.
For Sendas, we expect to reach higher
productivity levels, and for Extra, we
will focus on the development of
non-food items and on the increase
in productivity.
Ramatis Rodrigues
Food Commercial
In our search for greater
competitiveness, we have made price
adjustments and started recovering
our sales and client trafc in our
stores.
I think Po de Acars great differential is customer service, since
employees are very helpful. In addition, the quality of services and
products has won my preference.
14 Grupo Po de Acar

STRATEGY
Strategic focus
2006
The strategic work and activity of Grupo
Po de Acar during the year was driven at
the achievement of two essential aspects that
will enable the Group to recover market share
and to initiate a virtuous cycle: efciency and
competitiveness.
The search for higher efciency through the
implementation of a cost-cutting program, aimed at
keeping in 2006 the same expense level in nominal
terms posted in the previous year, excluding non-
recurring expenses resulting from the restructuring, led
to the adoption of some projects that already presented
expressive results in the year.

Zero Based Budget (OBZ) R$46 million

Shared Services Center (CSC) and Purchase of non
saleable R$45 million
Maximum Efciency at Stores R$16 million
Other initiatives R$15 million

With the development of
these rst initiatives, the reductions
of operating expenses came to
a total R$120 million in the year,
which allowed the Group to attain
competitiveness that is satisfactory
in relation to competitors and
more appropriate in terms of the
market. But the quest for efciency
which involves a very strong
expense reduction process and
better negotiations with suppliers
will continue in the years to
come, especially in the corporate
area, where the expense reduction
potential is still signicant. The
Group expects to expound on the
organizational structure analysis
commenced in 2006 and that
resulted in the reduction of three to
two hierarchical levels to achieve a
structure that is more appropriate for
the Companys processes.
Annual Report 2006 15
The Balanced ScoreCard, or BSC,
will be introduced in 2007 to ensure
management monitoring and the
tracking of strategic planning. This
will permit the continuous evaluation
of the performance indicators. These
indicators will be important tools for
keeping track of targets established in
the strategic planning.
16 Grupo Po de Acar
An important step was the
creation of a new position for a
Marketing Executive Ofcer, which
the objective of creating synergies
between and among the banners and
of capitalizing on these synergies in a
more effective manner for the entire
Organization. Based on this concept,
the area assisted in the performance
of actions developed during the year
to increase competitiveness in all
the banners, respecting the specic
strategies of each business and
enabling the Group to reach a new
threshold of growth, established in
the strategic planning.
COMPETITIVENESS
The results attained with the
expense reduction process allowed
the Group to also start a series
of initiatives geared toward the
increase of competitiveness.
The reduction of price
discrepancies in all the formats
was one of the principal initiatives
executed. To this end the Group
created a pricing area, specialized
in the analysis and monitoring
of competitiveness which,
besides affording a higher level
of assertiveness in the strategy
implementation, also permitted a
better positioning of the banners
before competitors.
 Annual Report 2006 17

A comprehensive assortment increasing the ow of customers

review was also organized for the
elimination of slow-moving products
that have a low level of relevance in
sales. To attract and consolidate the
image of prices among consumers,
the Group adopted another strategic
action, with a differentiated price
policy in products that are more
important to the formation of image
to consumers, and positioning
them below the market average.
During the year, the promotional
calendar was also reinforced with
the performance of three major
marketing actions in the Po de
Acar, Comprebem/Sendas and
Extra banners, with the purpose of
at the stores. Finally, perishable
products were an important tool in
pursuit of an increase in the ow of
people at the stores.
The major differential of this
strategy is that all the initiatives
were adapted to the micro markets
of the stores, which indisputably
improved the Companys
competitiveness and made it
possible to achieve gains of image,
an increase of customer trafc and
the recovery of food sales in the
same stores concept, in spite of the
deation experienced by the sector
during the year.

Sales Breakdown Sales per Region Sales per Segment

Cash So Paulo Grocery
Credit cards Rio de Janeiro Perishables
Food vouchers Braslia Bazar
Post-dated checks Cear Electronics
Installment Bahia Textiles
Minas Gerais
Paran
3.1% 2.0% 1.2% 2.0% 1.9% Pernambuco
4.8% 4.1% 3.2% 3.0% 2.0%
Gois
6.5% 6.9% 7.1% 7.5% 8.0%
Outros
1.4%
31.9% 33.8% 36.5% 37.1% 38.6%
1.9% 1.3%
0.9% 2.5%
2.9% 10.1%
2.1%
6.1% 3.8%
13.9%
53.7% 53.2% 52.0% 50.4% 49.5% 43.9%

19.5%
60.1%
_02 _03 _04 _05 _06
29.6%
18 Grupo Po de Acar

Capital Expenditures
In 2006, the Group invested R$857.2 million,
a lower capex compared to R$888.5 million
invested in 2005.
Investments were divided as follows:
R$261.4 million in the opening of new stores;
R$182.6 million in the acquisition of strategic lands;
R$292.4 million in the remodeling and
upgrading of its stores, in every banner;
R$120.8 million in infrastructure
(technology, logistics and others).

R$ 857.2 The openings were more concentrated in the fourth

quarter. The Group inaugurated a total 21 stores, with
three Po de Acar, nine Compre/Bem, ve Extra and
Extra Perto units (convenience retail).
One of the highlights of the year were the
million partnerships developed with companies from other
segments (real estate, construction retail) for joint use
of the land of the stores, which permitted the dilution
Of the total amount invested by of land acquisition and construction costs, besides
Grupo Po de Acar in 2006, generating more trafc to the store.
a large portion was destined The quantity of gas stations at the stores was also
to stores remodeling and bolstered with the opening of eight units, which raises
upgrading. the total number of stations distributed at all the banners
of the Group to 55. At the same pace, 19 drugstores were
opened in 2006.

Capex in 2006 Investments planned for 2007 add up to around

Opening of new stores and land acquisitions R$1.0 billion and will be targeted as follows:
Store remodeling 28% for the renovation and modernization of stores;
Technology, logistics and others 55% for opening stores and for the purchase of
14.1% strategic land to ensure the growth established in
the Groups growth strategy;
17% earmarked for infrastructure
(technology, logistics and others).
51.8%

34.1%

Goals 2007
LEVERAGING OF SALES AND GREATER PROFITABILITY
Sales growth will be the major challenge for 2007.
Maintenance of the levels of competitiveness
attained, by banner, in 2006.
Consolidation of the reduction of expenses:
rationalization and dilution of corporate expenses,
increases of scale with advertising and logistics,
and productivity gains with CSC Central de
Servios Compartilhados (Shared Services Unit),
Purchase of Non Saleable Products, Maximum
Efciency at Stores.
Annual Report 2006 19
REINFORCEMENT IN NON-FOOD AND GLOBAL SOURCING
Consolidation of the category management
process, with the creation of the Solutions concept
(Home World, Ofce World etc), which seeks to
understand the form of shopping of consumers.
Enlargement of the assortment bolstered
by Global Sourcing.
Strengthening of ties with suppliers by means
of business development plans with mutual
growth goals.
20 Grupo Po de Acar
PRIVATE LABEL AND GLOBAL SOURCING
Consolidation of private label
as a tool to obtain the loyalty
of customers and to build
up business protability,
respecting the positioning of
the banners.
Private label should be act as
a tool for strengthening the
main assets of the Group, i.e.,
the banners.
ELECTRONIC COMMERCE
Adoption of new systems, to
support the growth estimated
for future years.
Expansion of the assortment
and of the payment methods.
Strengthening of integrated
services with the physical stores.
New communication strategy,
with reinforcement in
promotional actions in specic
media of the sector.
VIRA RIO PROJECT
Recovery of the Groups results
in the State of Rio de Janeiro.
Adoption of a decentralized
structure: operation will be
focused on the region and not
by banner.
More agility and autonomy
for local decisions, with
the consequent increase of
negotiation power geared
toward the maximization of
protability.
ORGANIC GROWTH
In line with the Groups
organic growth strategy, 30
inaugurations are planned for
2007, comprised of ve Po de
Acar, fteen CompreBem and
ten Extra stores.
To support this strategy
and to pave the way for
the inaugurations planned
for the next four years, and
subsequently, to ensure that the
milestone of 150 store openings
is reached, the Group structured
a master plan of expansion,
which dened, standardized
and documented the processes
involved in the opening of a
store from the search for and
acquisition of land through to
the inauguration.

Strategic
planning 2010
One of the Groups strategic challenges in
2006 was to make the immediatism of the retail
segment compatible with a structured plan for
future years, which resulted in the denition
of Strategic Planning up to 2010. One of the
most prominent targets set was signicant sales
growth, with gross sales of R$25 billion (deducting
inationary effects) at the end of the period and
the increase of return on invested capital (ROIC),
from 10% to 15%.
R$ 25.0
billion
By 2010, the Company expects
to reach an impressive increase
in gross sales, with a 10.0% to
15.0% ROIC.
Annual Report 2006 21
Seven major guidelines were dened to attain
these macro goals:
1 Strengthen the banners competitiveness.
2 Increase electronic commerce sales to
4.5% of total sales in 2010.
3 Expand the Non-Food share to 34% of gross sales.
4 Double the share of private label from 5% to 10%.
5 Intensify organic growth with the opening of 150
stores from 2006-2010 (average growth of 7% per
year of the sales area).
6 Intensify the pursuit of enhanced operating
efciency.
7 Invest in the attraction and retention of
talents at the Group, in line with the
Human Resource guidelines.
Extra has everything I need: cold cuts, fruits, vegetables, sh and a
good butchery. Apart from shopping, I get to nd many things in a
single place, and even enjoy a family ride.
24 Grupo Po de Acar

RESULTS
Sales Performance

The gross sales of Grupo Po de Acar Consolidated Gross Sales (R$ million)
exhibited growth of 2.1% in 2006, totaling R$16.5 2005
billion. Net sales recorded an increase of 3.5% in 2006 2.1%

relation to the prior year, attaining R$13.9 billion. Change (%)

16,460
16,121
-0.5% 4.9% 1.3% 2.7%
4,644
4,522
3,864
3,943

3,977
3,925

3,915
3,791

1Q 2Q 3Q 4Q year

In 2006, gross sales in the
same stores concept exhibited a
slight decrease of 0.1%, while net
sales recorded growth of 1.1%. This
performance is the result of the
impact of price deation on certain
food product categories (particularly
perishables and commodities) and
also of the lower prices practiced by
the Group for certain items.
Annual Report 2006 25
Non-food products
corresponded to 26.5% of the Groups
sales and the growth of this category
in the same stores concept was
12.6% in the year, out perfoming
the negative performance of 3.9%
of food products. The expressive
performance exhibited by non-food
is mainly a result of the performance
of the electroelectronics category
(with an emphasis on IT products),
which continued to present
signicant growth in the second half
of the year, and of a more suitable
product mix (improvements in the
assortment) offered at the stores.
26 Grupo Po de Acar

Although the food deation

had a negative impact on the sales
performance in 2006, the Group

26.5% expects sales in the same stores

Non-food products accounted
for 26.5% of CBDs total sales,
due to the consumer electronics
performance.
concept in 2007 to attain growth
above ination, on account of a
more favorable scenario for food,
supported by the competitiveness
strategy and by the continuity of
expressive growth in sales of non-
food products.
 Annual Report 2006 27

Po de Acar 2002 2003 2004 2005 2006

Gross Sales (R$ million) 3,729 4,045 4,044 3,930 3,645
Net Sales (R$ million) 3,037 3,435 3,315 3,245 3,092
Number of Stores 211 208 196 185 164
2
Sales Area (m ) 267,419 273,016 261,262 247,164 221,383
CompreBem 2002 2003 2004 2005 2006
Gross Sales (R$ million) 1,767 2,248 2,426 2,614 2,692
Net Sales (R$ million) 1,658 1,921 2,015 2,194 2,279
Number of Stores 175 172 165 176 186
Sales Area (m2) 219,026 211,517 197,111 214,500 225,829
Sendas 2002 2003 2004 2005 2006
Gross Sales (R$ million) - - 1,155 1,387 1,339
Net Sales (R$ million) - - 998 1,209 1,174
Number of Stores - - 63 66 62
2
Sales Area (m ) - - 113,165 119,987 107,355
Extra 2002 2003 2004 2005 2006
Gross Sales (R$ million) 5,249 6,174 7,354 7,885 8,419
Net Sales (R$ million) 4,432 5,195 5,997 6,532 7,050
Number of Stores 60 62 72 79 83
2
Sales Area (m ) 456,569 462,195 537,319 590,890 629,091
Extra Eletro 2002 2003 2004 2005 2006
Gross Sales (R$ million) 409 321 318 305 365
Net Sales (R$ million) 327 255 240 233 286
Number of Stores 54 55 55 50 50
Sales Area (m2) 36,709 35,973 35,892 33,713 33,713
Extra Perto * 2002 2003 2004 2005 2006
Number of Stores - - - - 4
2
Sales Area (m ) - - - - 613
CBD 2002 2003 2004 2005 2006
Gross Sales (R$ million) 11,154 12,788 15,297 16,121 16,460
Net Sales (consolidated R$ million) 9,454 10,806 12,565 13,413 13,880
Same-store sales growth (%) 4.0% 6.3% 5.1% 2.6% -0.1%
Number of Stores 500 497 551 556 549
Sales Area (m2) 979,723 982,701 1,144,749 1,206,254 1,217,984
Number of Employees 57,898 55,557 63,484 62,803 63,607
Number of Transactions (thousand) 405,375 439,108 517,401 522,734 511,947
*Sales is included in Extra Hypermarket.
28 Grupo Po de Acar

Operating
performance
The Group closed 2006 with 21 new stores PO DE ACAR
including 4 new Extra Perto units, marking its In view of the deation observed in food mainly
entrance in the convenience retail sector. in the categories of agricultural commodities the
strong competition in certain region and the closings
and conversions that occurred in 2006, the Po de
Acar banner closed the year 2006 with R$3.6 billion
Gross Sales Po de Acar (R$ million) of gross sales, down 7.3% in relation to 2005. Even with
this scenario, as from the 2nd half of 2006, the banner
exhibited a reversal of this downward trend in sales.
4,044
4,045

One of the factors that contributed to this

3,930
3,729

3,645

performance was the review process of discrepancies of

prices, which were adapted to the micro markets of the
stores. Moreover, the price reduction strategy (focused on
items of high notability) and the price and assortment
adaptations promoted in products from high-value
added categories (such as wines, coffees, cheeses etc) also
contributed to improve the consumers price perception.
These initiatives, in line with the Groups strategy, brought
_02 _03 _04 _05 _06 a little more increased competitiveness for the banner.
Another important action was the continuity of
the expense reduction process, initiated in 2005 with the

R$ 3.6 project for Maximum Efciency in Stores. In this case, the

major challenge was to accomplish signicant reductions
without forsaking quality in customer service, which is the
banners differential.
Portfolio adaptation was organized in order to
billion standardize the positioning of Po de Acar stores, with
3 store openings, 42 renovations and 3 convertions to
another banner. Two of the new stores Alphaville and
Po de Acars gross sales Nutico were opened following a development of the
started to recover in the second 3rd generation concept with a differential for the new
half of 2006. form of presentation of products to consumers: complete
shopping solutions, gourmet area, sushi bar etc.

Another initiative developed
was the pilot, at six stores, of
the new Programa Mais (More
Program), a program designed to be
self-sustainable, consolidating its
position as the main instrument of
brand loyalty and differentiation. The
program was developed going from
three basic assumptions: simplicity
and exibility of operation, relevance
to consumer and protability for the
banner.
In 2007, the group expects to
maintain a policy of more regular
prices, with fewer oscillations
to avoid substantial deviations,
including in offerings; to extend
the new Programa Mais (More
Program) to the other stores; and to
consolidate the Jeito de Ser e Atender
Po de Acar (Style of Working and model for the banner, with reduced
Serving) concept based on team
formation work with an emphasis
on differentiated customer service at
the stores.
COMPREBEM
For the CompreBem banner,
2006 was a year of growth and store
openings. Gross sales amounted to
R$2.7 billion, up 3.0% over 2005. A
total of nine stores were opened, the
highest number of inaugurations
performed in a single year, since the
brand was created.
It was also the year of
consolidation of the Supermercado
da Cidade (City Supermarket) model
of store, which acts as a small
hypermarket in regions that do not
have this kind of establishment. In
this format, the aim is to pursue the
development of non-food sales, as a
supplement to existing food sales.
The new format has already been
reinforced as an important operating
costs and higher yields, due to the
increase in sales of non-food products.
The slump in food sales
recorded by the sector during the
year was offset by the banner with
investments in perishables (technical
education and multiplication of
training sessions for collaborators)
and in non-food products (to
leverage same stores sales).
Another initiative to this effect was
the continuity of in&out actions
Annual Report 2006 29
(non-food products of considerable
consumption appeal, which are
sold at very aggressive prices and
with payment in installments), to
boost the low price image and to
encourage the sale of non-food items
that are not part of the stores mix.
The forecast for 2007 is
for maintenance of the pace of
growth of the banner, with organic
expansion: the Group is planning to
open 15 new stores, besides some
renovations and adaptations. The
work of expense reduction and
control will also be continued to
ensure more competitiveness and
protability for the operation.
Gross Sales CompreBem (R$ million)
2,692
2,614
2,426
2,248
1,767
_02 _03 _04 _05 _06
30 Grupo Po de Acar
SENDAS
To resume the pace of growth
recorded in the previous year, the
banner experienced a phase of
considerable adjustment of expenses,
the Groups most signicant, and of
pursuit of greater competitiveness.
Sendas gross sales reached the end
of the year totaling R$1.3 billion,
down 3.5% in comparison with 2005.
Although sales exhibited a negative
result, performance in the same
stores concept have been recovering
from the downtrend observed in the
rst months of 2006.
The challenge of the period
was to attain better productivity
ratios in several aspects to offset and
balance investments made in 2005
with the store relaunching.
In line with the Groups strategy,
the banner also felt the positive effects
of price repositioning, both in sales
and in brand image. This initiative,
added to the work of economists
which reinforce the image of price
to consumers had a repercussion at
Sendas with the start of important
sales recovery.
At the end of 2006, to Gross Sales Sendas (R$ million)
recover results in the State of Rio
de Janeiro, Grupo Po de Acar
commenced the deployment of Vira
1,387
1,339
Rio Project, created to guarantee the
1,155
strength of CBD in an increasingly
competitive district with very
peculiar characteristics, by means of
a new proposal of action, focused on
the autonomy of the operation and
nimbleness for decision making.
EXTRA HYPERMARKETS _04 _05 _06
Pushed by expressive sales of
electroelectronic goods presented
during the year, the banner recorded
growth of 6.8% in relation to 2005,
with gross sales of R$8.4 billion.
One of the highlights of
2006 was the consolidation of
regions process and the opening
of stores in new markets. Units
R$ 8.4
were inaugurated in Jundia (So billion
Paulo), with two stores in Recife
(Pernambuco), Ceilndia (Distrito
Federal) and So Jos dos Campos Extra Hipermercados gross
(So Paulo). sales were pushed by consumer
electronics impressive
performance.

In line with strategic planning,
a new organization was promoted
in non-food, based on the concept
of shopping solutions for customers
(Home World, Digital World,
Entertainment World, Baby World
etc), which assembles products from
different categories that are related
to the topic in the same space
inside the store. The Group expects
to understand the way consumers
shop to meet up their expectations,
facilitating the acquisition of certain
products, which will be gathered
in a single place. Three stores were
opened with this new layout and
another three stores already in place
were adapted in 2006.
Annual Report 2006 31
Extra also beneted from Gross Sales Extra (R$ million)
another strategy of the Group,
which seeks the development of the
homeware and textile categories,
8,419
7,885
based on adaptations in the
7,354
6,174
assortment, with an emphasis on
5,249
international trade (global sourcing).
The Group expects to promote
the sustainable development of
non-food, by combining various
actions: logistics, which will perfect
the supply response; IT, with the
adoption of specic programs _02 _03 _04 _05 _06
for the non-food categories; and
international trade, with innovative
products in relation to the national
market as top priority.
32 Grupo Po de Acar
Gross Sales Extra Eletro (R$ million) EXTRA ELETRO
The Extra-Eletro banner
exhibited expressive growth in
the year 2006, due to the strong
409
365 performance recorded by the electro
category at the Group. Gross sales
312
318
305
amounted to R$365.4 million, up
19.7% over the prior year. The banners
growth was above the sectors 8.5%
average growth, according to Eletros
(National Association of Electronics
Manufacturers).
_02 _03 _04 _05 _06 This performance is a result
of some decisive factors. During
the year the Group started to work
on improving the relationship with
customers, focusing on winning
over the public from classes C/D.
19.7 % Furthermore, improvements were
made in the assortment, with an
emphasis on IT products adapted
to the needs of this consumer.
The success of this strategy was
Extra Eletros gross sales grew supplemented by the participation
signicantly compared to the of FIC Financeira Ita CBD, which
previous year, with R$365.4 contributed to improve the nancing
million gross sales. image, based on the offering of
better credit rates and on the
development capacity of different
forms of payment.
EXTRA PERTO
To be part of the retail segment
that has grown the most in the
country in recent years that of stores
with up to four check-outs , Grupo
Po de Acar created Extra Perto a
new model of store, inspired by the
European convenience retail model.
At these stores, which have between
150 and 250 square meters of sales
area and two check-outs on average,
the idea is to work with the supplier
supermarket concept, to satisfy
essential needs for food products,
perishables and non-perishables, with
a fair price/quality ratio.
Three models of store were
dened neighborhood, pass-
through and work the facilities of
which vary according to the prole
of the audience from the region.
Four units were opened in 2006,
and by the end of the rst quarter
of 2007, another six stores will be
inaugurated. If the performance
of these units meet up with
the Companys expectations, an
expansion plan will be designed for
this new format.
The model presented positive
results until the end of 2006,
particularly as regards positioning
and the average purchase of
customers, ratifying the planning
developed by the Group.

EXTRA.COM.BR
In line with one of the goals
proposed in 2005 to restructure
the electronic commerce operation,
with an emphasis on non-food , the
Group advanced in the consolidation
of Extra.com.br. As part of this
process, the Group started to form a
team of specialists and professionals
from various areas of the Company:
marketing, commercial, logistics,
customer care and technology.
From that point on, operating
changes and improvements were
organized that afforded more
agility, speed and simplicity, and
thus ensured more commercial
aggressiveness. One example was
the unication and the expansion
of the customer service center (pre
and after sales), which has over 50
people responding to inquiries from
consumers. Another change with
positive impacts on the result was
the expansion and adaptation of the
assortment: the quantity of products
offered practically tripled. Dedicated
logistics, which banks on a specic
distribution center for electronic
commerce sales, with an area of
three thousand meters of storage
capacity, was also inaugurated.
With these initial initiatives,
Extra.com.br ended the year among
the top ve players of this market in
the country, with growth of 170% in
sales in relation to 2005.
Annual Report 2006 33
One of the goals proposed
for 2007 is to double the revenues
in relation to 2006. Accordingly,
several initiatives will be organized
that will enable Extra.com.br to earn
recognition as an important channel
for sales of electroelectronic products
and also of homeware and textile
goods. To support this growth the
Company is planning the adoption of
new systems; expansion of payment
methods; strengthening of services
integrated with the physical stores;
new communication strategy, with
reinforcement in promotional actions
in specic media of the sector (online
media, e-mail, search engines etc) and
in the catalogues of the Extra banner.
34 Grupo Po de Acar
Financial
Performance (MD&A)
In 2006, the Company focused on
achieving higher efciency levels and increased
competitiveness, two important features that
have allowed CBD to gain market share and
trigger a virtuous cycle. The Company promoted a
broad internal restructuring aiming at expenses
reduction, which, in turn, allows the transfer of
efciency gains converted into lower prices to end
consumers.
R$ 1,082.7
million
Pro forma Ebitda totaled R$1,082.7 million,
with an Ebitda Margin of 7.8%.
OPERATING PERFORMANCE
Operating results in 2006 were affected by the
following non-recurrent items:
The provision and payment for contingency,
accounted in 3Q, related to value-added (ICMS)
tax assessments for transactions of purchase,
industrialization and sales of soybeans exclusively
for exports, in the amount of R$96.8 million, of
which R$54.4 million affected Cost of Goods Sold
(COGS), and R$42.4 million affected nancial
expenses (related to nes and interest). Thus, the
total impact, net of income tax, on the net income
was R$74.9 million;
Nonrecurring expenses related to organizational
restructuring totaling R$56.9 million, of which
R$29.1 million impacted selling expenses, and
R$27.8 million impacted the general and
administrative expenses.
GROSS MARGIN
In 2006, the pro forma gross income remained
practically stable in relation to the gure recorded in the
previous year, totaling R$3,971.8 million as opposed to
R$3,975.3 million in 2005. The pro forma gross margin slid
from 29.6% in 2005 to 28.6% in 2006, as a consequence of
the strategy adopted by the Group during the year, which
was focused on the reduction of discrepancies and the
adoption of more aggressive prices in trafc-generating
products.
 Annual Report 2006 35

OPERATING EXPENSES In addition, for comparative

Pro forma operating expenses purposes, the total leases
amounted to R$2,889.2 million in expenditure was not relected in
2006, equivalent to 20.8% of net the prior year either. Therefore, if we
sales, practically the same sum were to deduct the R$83.4 million
reported in the prior year. During (referring to the 60 stores sold to
most of the year, expenses were Fundo Imobilirio Pennsula Real
negatively affected by the sales Estate Fund) the percentage of
scenario, which was not at all selling expenses would be 20.2%
favorable to dilution. (versus 20.9% in 2005). In this
manner, results of the actions in
pursuit of efciency and productivity
Consolidated Gross Prot gains, which will continue to be

3,975

3,972
3,674
Gross Prot (R$ million) pursued in 2007, can already be
Gross Margin (%) 3,042 observed (in the year).
2,645
2,247
2,101
1,567

EBITDA MARGIN
1,189

The pro forma Ebitda totaled

830
739
598

R$1,082.7 million in 2006, with

a margin of 7.8%, registering a
25.1% 25.2% 26.7% 27.1% 27% 27.5% 27.9% 28% 28.2% 29.2% 29.6% 28.6% downslide of 7.4% in relation to
_95 _96 _97 _98 _99 _00 _01 _02 _03 _04 _05 _06* 2005. The year was marked by
important adjustments for Grupo
*Pro Forma Po de Acar, which implemented
and consolidated various initiatives,
which have been essential for the
Consolidated Ebitda sales growth trend that has been
1,170

1,083
1,044

Ebitda (R$ million) reported since the end of 2006. If

Ebitda Margin (%)
902

we deduct the leases that were not

781

reected in the year 2005, the pro

634
604

forma Ebitda would have registered

423

a margin of 8.4% during the year

272
159

(versus 8.7% in 2005).

104
87

3.6% 3.6%
5.1% 6.2% 7.3% 7.9% 7.9% 8.3% 8.3% 8.3% 8.7% 7.8%

_95 _96 _97 _98 _99 _00 _01 _02 _03 _04 _05 _06*

*Pro Forma
36 Grupo Po de Acar
FINANCIAL RESULT
Financial revenues reached
R$382.8 million in 2006, versus
R$438.6 million in 2005, down 12.7%
on account of lower revenues with
nancial investments, resulting
mainly from lower interest rates
and from a highly promotional
environment for credit sales. During
the year, the Group recorded an even
greater downslide of 17%, in pro forma
nancial expenses, which came to
R$561 million, in comparison with
the R$675.5 million reported in 2005.
The lower interest rates of the period,
which slid from 19% to 15% in 2006,
were the main reasons for this result.
The pro forma net nancial
result in the year was negative by
R$178.2 million, an improvement of
24.8% in relation to the same period
of 2005. The net bank debt exhibited
growth of R$344.3 million from one
year to the next, growth that was
caused mainly by the reduction of
R$429.3 million in cash. The net bank
debt corresponded to 0.67 x Ebitda of
the year.
NON-OPERATING INCOME
The Group reviewed the
economical and nancial assumptions
that sustain the future realization
of goodwill of its afliated company
Sendas Distribuidora. With a basis
on this review, it was concluded that
provision would be necessary for partial
reduction of goodwill, which had a
net impact of R$268.9 million on the
consolidated balance sheet, recorded
in non-operating income. The net
non-operating income in the year also
includes write-offs of assets relating to
the closing of stores.
MINORITY INTEREST: SENDAS
DISTRIBUIDORA
R$ 219.7
During 2006, Sendas million
Distribuidora felt the positive
impacts of the price repositioning
and of the signicant adjustment Pro forma net income accounted
of expenses adopted by the Group. for 1.6% of the Companys net
Gross sales ended the year at revenue.
R$3,203.7 million, down 3.8% in
comparison with 2005, representing
19.5% of the Groups sales. Net sales
attained R$2,776.7 million in 2006.
Although sales in the same
stores concept accumulated a
downslide of 1.4% in 2006, the stores
of Rio de Janeiro already started to
shown signs of recovery from this
tendency in the rst months of 2007.
Aiming to recover the
performance in Rio de Janeiro, Grupo
Po de Acar deployed Vira Rio
Project. The initiative was created

to guarantee the force of CBD in a
district that is becoming more and
more competitive and with very
peculiar characteristics, by means of
a new proposal of action, focused on
the autonomy of operation and on
agility for decision making.
The gross margin of Sendas
Distribuidora attained 26.7% in
2006, down by 230 basis points in
comparison with the year 2005, due
to the lower prices practiced by the
Company since 2Q06.
Although operating expenses
were 6.5% lower in comparison
with the same prior-year period, the
sales scenario has not yet shown a
reaction in order to permit greater
Annual Report 2006 37
dilution of expenses in the year.
Hence the Ebitda margin of the
period was 3.9%, lower than the 5.4%
of 2005, mainly due to the lower
gross margin of the period.
NET INCOME
The pro forma net income of
2006 amounted to R$219.7 million
(1.6% of the net revenue) as opposed
to R$257 million (1.9% of the net
revenue) reported in 2005. This
downward trend was caused mainly
by the price reduction strategy, which
directly affected the gross margin,
and by the leases expenses that
become recurrent as from 4Q05.
38 Grupo Po de Acar
Social
Performance
Grupo Po de Acar mobilizes efforts
to contribute toward the strengthening
of community life as it believes that the
encouragement of participation of individuals
as agents that transform their own reality,
making use of the media available at the sites
where they are located, is an efcient mechanism
for minimizing social deciencies and the needs
that have not yet been completely fullled by
public policies.
R$ 8.7
million
Through the program Parcerias
contra o Desperdcio
Partnerships against Waste,
the donation of products good
for consumption but improper
for sale rose by 36.3%.
Therefore it utilizes its ample capilarity as a tool for
diffusion and mobilization of the practice of citizenship,
taking a stand as a partner of the community from the
vicinity of its stores for local development, always valuing
and respecting the specicities of each region.
INSTITUTO PO DE ACAR
Created in 1998 to orient the Companys social
investment, the track record of the Institute is often
confused with the history of evolution of social
responsibility in Brazil. Initially restricted to work driven
at the education of children and adolescents, the
Institute began to coordinate all the social investments
of the Group, forming a structure of more integrated
and articulated actions that, built up over the years,
contributed toward the social and environmental
development of communities where the Company is
active and directly beneted over 60 thousand children
and youths in the educational program.
Under the motto of Education for Ethics,
Protagonism and Autonomy, the educational program
continued making room in 2006 for the cooperation
of partner entities, potentializing the range of actions
developed at Casas do Instituto educational centers
maintained inside stores of the Group, comprised of
classrooms, computer laboratories and recreational areas.
PARTNERSHIPS
Another important contribution of Grupo Po de
Acar to local communities is its willingness to transfer
knowledge to multiplier agents, which broaden and
potentialize the radius of coverage of actions.

An example of this is the
partnership with the Municipal
Government of So Paulo for the
execution of Project Acordes at the
CEUs (Unied Education Center),
a musical education program that
included musical knowledge in the
daily lives of 2 thousand youths
between 7 and 17 years of age in
the period from 2003 to 2006.
Furthermore, 40 classes and four
orchestras were formed and over 50
performances were held.
INCENTIVE TO CULTURE
The careful look that Grupo
Po de Acar takes at local
communities, preserving the cultural
manifestations of each region, is
expressed in symbolic actions such
as the sponsorship since 2000 of one
of the most important Afro groups in
Brazil, Il Aiy, known internationally
for its social project, which caters
to over 2 thousand children in the
neighborhood of Liberdade, in
Salvador (Bahia).
Annual Report 2006 39
INCLUSION THROUGH SPORTS
The focus on the development
of actions that improve the quality of
life in communities in which Grupo
Po de Acar is established appears
in initiatives such as Super Copa,
a soccer championship targeted
at young boys between 13 and 16
years of age, living in regions that
contain CompreBem (in So Paulo)
and Sendas stores (in Rio de Janeiro).
Created in 2003, Super Copa serves
as a measure of socio-recreational
inclusion.
40 Grupo Po de Acar
In 2006, 8 thousand youths
signed up to take part in Super Copa.
Of these entrants, 1.2 thousand
were selected to compete in the
championship, which has become
an important attraction in local
communities.
After competing in the
championship, the boys with the
most outstanding performance are
chosen to attend the Po de Acar
Training Centers (So Paulo) and
Sendas (RJ) Soccer Club, by means
of which they have the chance to
develop as athletes and to take part
in games that are already an integral
part of the ofcial calendars of Soccer
Federations.
CAMPAIGNS
Aware that the construction
of a fairer society is everyones
responsibility, Grupo Po de
Acar maintains a series of social
mobilization actions in force that
involve the community and the
collaborators of the Company,
and encourages volunteer work,
reafrming its belief that it is
necessary to join forces to attain
common goals.
In 2006, this standpoint is
present mainly in the organization
of partnerships for the performance
of campaigns for canvassing warm
clothing at the Groups stores. All
told, the actions collected a volume
of 157 thousand warm garments.
QUALITY OF LIFE
In Grupo Po de Acar, the
concern with the health and the
quality of life of customers starts
with the stringency of the Companys
criteria of selection of products sold
at its stores, seeking excellence in
the fulllment of recommendations,
such as shelf life, hygiene in food
handling, adequate storage of
products and freshness of the
items sold.
Healthy eating
The Company believes that
its contribution to this goal lies in
the dissemination of values and
information about healthy and
pleasurable everyday practices, and
in the creation of opportunities so
that people can have experiences
that foster well-being and self-
development.
With this intention, in 2006
Grupo Po de Acar launched the
Healthy Eating Program, an itinerant
kitchen that offers cookery courses
at the CompreBem stores. Created
in partnership with the Municipal
Secretariat of Supply, of the
Municipal Government of So Paulo,
the program is composed of courses
given by nutritionists that transmit
to the audience notions of healthy
eating based on the food pyramid,
information about the importance
of hygiene in the preparation of food,
cooking techniques and recipes,
besides the tasting of dishes. In
2006, 10.8 thousand participants
took the course.
Practice of physical activities
Aware that physical wellness
depends to a large extent on
the everyday practice of physical
activities, the Group strives to
disseminate this value that is part of
the Companys DNA.
An example of this spirit is
the Po de Acar National Racing
Circuit, which contemplates 10-
kilometer races, besides the trials
of the Marathon Relay of So Paulo,
already in its 14th edition, and of the
Marathon Relay of Fortaleza, in its 5th
year of existence.
25.7%
In 2006, the use of reforested
wood to build stores increased
by 25.7%.

A similar effect of
dissemination and taking up of
sports by people can be observed
at the Extra Bike Brasil circuit,
created in 2003. Divided into 10
legs, assembling around 3 thousand
participants per leg, the trial has
already become one of the most
important events in Brazil in this
category. In 2006, the circuit was
held simultaneously in 10 Brazilian
cities on the same day.
As it considers the
professional athlete an icon that can
serve as an example especially to
children and youths, disseminating
values associated with sports,
such as team spirit, discipline and
excelling, the Group annually renews
its commitments of providing
sponsorship to professional athletes.
In 2006, 36 athletes from categories
such as the triathlon, athletics and
cycling, received support from the
Company.
Aware that sports can and
should be included in the lives of
people in any age bracket, the Group
encourages the practice of sports
among children and senior citizens
as well. In 2006 the Group organized
two Po de Acar Kids Races in
Parque Vila Lobos and in Ginsio do
Ibirapuera (both in So Paulo) for
children. The 2 thousand vacancies
were lled in record time. Caminhada
Viva Bem da Feliz Idade, (Live Well
Walk for Senior Citizens) was
organized in Perube and Jacare, and
assembled more than one thousand
participants per event.
Annual Report 2006 41
Contact with culture
Endeavoring to promote
quality of life as refers to the mental
dimension as well, Grupo Po de
Acar organizes and supports
initiatives involving democratization
of access to culture. In recent
years, the main focal point of these
actions has been the promotion and
performance of musical shows all
over Brazil.
In 2006, Po Music, which
takes leisure and culture to
populations from various parts of
Brazil, held shows in the cities of
Fortaleza, Braslia, Joo Pessoa and
Campinas, with an average audience
of 70 thousand people per show. Po
Music has already attracted over 600
thousand spectators in its 14 years of
existence.
42 Grupo Po de Acar
Environmental
Performance
This was the growth registered in the
quantity of disposable waste collected originating
from clients, which totaled 3.8 tonnes in the year.
26.6%
This was the growth registered
in the quantity of disposable
waste collected originating
from clients, which totaled
3.8 tonnes in the year.
This concern already appears in the process of
choice of the site of its stores. The Group adopts the
practice of conducting environmental liability tests in
the property acquisition process, ensuring that stores are
built on land that is safe from the environmental point of
view, practically eliminating the possibility of any problem
in the future. Whenever possible, the Company grants
preference to the employment of recyclable material in
items such as doors, partitions, wiring and PVC pipes.
The roofs of the new stores opened in 2006, for example,
have zenithal lighting in 6% of the total roof area,
which permits a signicant reduction in the electric
energy consumption.
The same responsibility in the installation of
the stores was transferred to the gas stations, with the
adoption of environmental impact monitoring in their
implementation. Continuing with the procedure adopted
in 2005, all the stations installed in 2006 received the
electronic fuel leakage monitoring system. Additionally,
stations opened in 2006 exhibit ecological tanks built of
steel, with double walls, covered inside and outside with a
berglass layer.
We present below some highlights in 2006:
Installation of a high output rainwater collection
and inltration system, which contributes
toward the reduction of ooding and damage
provoked by rain, in the region of the Extra
Jundia store (So Paulo).
Renovation and revitalization of the public square
close to the Extra Ceilndia store (Distrito Federal),
including the planting of trees and adaptation of
the local street system and of the underground
rainwater network.

Preservation of 5 thousand
square meters more than
provided in the legislation,
of the wooded land of the
Extra Benca store, in Recife
(Pernambuco), besides the
restoration of the mansion
that exists at the site.
Tree planting with the native
species Algodo do Par all
along the perimeter of the
parking lot of the Po de
Acar Dom Severino store, in
Teresina (Piau).
Annual Report 2006 43
Deployment of a rainwater
catchment for the Po de
Acar store in So Jos do Rio
Preto (So Paulo).
Preservation and maintenance
of a permeable stretch of 30
meters of the extension of the
stream located next to the
parking lot of the CompreBem
store of So Bernardo do
Campo (Sao Paulo), including
the planting of 300 trees.
44 Grupo Po de Acar
ENVIRONMENTAL AWARENESS
The Group permanently
invests in environmental awareness
programs targeted at all the
audiences with which it establishes
a relationship.
Among the most
comprehensive measures adopted to
this effect are the Recycling Stations,
a pioneer project in the Brazilian
retail market. Established in Po de
Acar stores since 2001, in 2006
they attained the milestone of 98
voluntary delivery posts, at which
over 14.8 tons of waste have already
been collected over these years.
Anchored to the broad concept of
shared responsibility, the project
is not limited to the collection of
material but goes much further,
functioning as a mechanism that
generates the involvement of the
entire chain ranging from the
industry, and the local governments
of the cities where the stores
are present, to consumers and
cooperatives of recyclable
material collectors ,
producing income and work.
Besides the Recycling Stations,
the internal and operating areas
of the Group are also involved in
the processes of awareness and
involvement.

EDUCATION FOR CONSCIOUS
CONSUMPTION
Contributing toward the
awareness of responsibility of
individual actions in the quality
of life of the planet has served
as a basis also for the initiatives
of education for conscious
consumption, geared mainly toward
children and youths.
A program that follows along
these lines is Po de Acar Kids, a
ludic space installed in two stores
from So Paulo, where children
learn about the operation of a
supermarket and obtain some idea
of conscious consumption.
14.8
tonnes
This was the total amount of
waste collected by the Recycling
Stations since 2001.
Annual Report 2006 45
Another program is Cidado
Kids em Ao, targeted at schools
and other teaching institutions,
whereby children and youths pay
monitored visits to the stores,
on which occasion they receive
information about the manufacture
and sale of products, besides
orientations about the importance
of recycling for the maintenance of
quality of life on the planet,
and others.
Along the same lines, the
Company maintains Escola Vai
ao Extra, geared toward children
between 5 and 12 years of age,
who receive information about the
operation of the consumption chain,
which allows them to develop their
rst notions of the role that each
party plays in the consolidation
of the concept of conscious
consumption.
I like to shop at CompreBem, because apart from being near
home, I can get to buy everything my family needs, for the
money I can pay. Stores are nice, the staff is helpful, and there
are always good offers.
48 Grupo Po de Acar
DIFFERENTIALS
Operating
To fulll its strategy of sustainable growth
with competitiveness, efciency and protability,
Grupo Po de Acar is mindful of the specic include the strategic planning of the Group, which
characteristics of the business and dedicates
special attention to certain areas, capable of a
transformation into important differentials in a
segment characterized by strong competition, like
the food retail segment in Brazil.
PRIVATE LABEL
Private label products are one of the topics that
intends to double the share of these items from 5% to
10% of sales by 2010. Besides boosting the image and
bringing protability and competitiveness to the banners,
private label function as an important tool for obtaining
consumer loyalty. The highlights in 2006 were:
Structural change
A far reaching structural change was organized
that integrated all around the company the products that
comprise the private label portfolio, which amount to over
3.5 thousand. This means, in practice, that private labels
are no longer treated as a separate area all commercial
processes are managed by the Groups Commercial
Area and all Marketing processes are managed by the

Marketing Area along with Private
Labels Development Area. This
movement will permit sharing on
a larger scale of expertise and of
strategy between and among areas,
which can contribute and better
understand the characteristics of
these products. Furthermore, the
involvement of the marketing area
will help to disseminate the concept
and the use of the private label in
the actions and in the marketing
strategies of the Group.
Taeq Rollout
The new brand Taeq was
launched with the mission of
disseminating the healthy life
concept, and received investments of
R$20 million in research, marketing
and development of products. Taeq is
more than a transversal brand of the
Group, i.e. present at all the banners,
it is a concept of healthy life with the
goal of becoming a Business Unit.
A total 100 items were launched in
2006, distributed in ve different
lines: nutrition, organics, sports,
beauty and home. The Group expects
to end 2007 with 350 items.
Reduction of shrinkage
In partnership with the Supply
Chain, logistic adaptations such as
the centralization of the supply of
private label from So Paulo, where the
majority of suppliers are concentrated
were developed that produced
Annual Report 2006 49
positive results like the reduction of
10% in the ratio of shrinkage of these
products on the supermarket shelves,
in several categories.
Innovation
During the year, in line with the
strategy of reinforcing the perception
of product quality, the Group
developed innovative packaging and
avors in various items.
The third private label
movement is expected to start in
2007, with the intensication of
premium products of differentiated
quality, to reinforce and disseminate
among consumers the perception
of attributes like quality, innovation
and accessible price. Actions with
products from Casino will also be
organized to expand and consolidate
this category, working with an
exclusive line of products from the
10.0 %
French Group in Brazil. By 2010, CBD intends to double
In pursuit of more adequate the participation of proprietary
costs and protability, the search products, which accounted for
for new suppliers will continue with 5.0% of total sales in 2006.
special attention to those of regional
scope, which can supply the Group in
different parts of the country. Another
challenge will be the intensication of
endomarketing, with the development
of product communication and tasting
actions, in order to create an internal
culture of consumption and quality
perception for the private labels of the
Group.
50 Grupo Po de Acar
INFORMATION TECHNOLOGY
One of the linchpins of the
Group, technology is more than just
a supporting area, as it acts as a
partner of the other areas, helping
in the consolidation of the various
strategic actions organized through
the year, such as:
Creation of CSC
The performance of the
technology, with the development
of specic systems, proved crucial
for the establishment of the Shared
Service Center (CSC) in 2006.
Adaptation to SOX
Alterations and adaptations in
practically all the internal systems of
the Group to the Sarbanes-Oxley Act.
Non-food
Development of new
functionalities and work tools for
non-food systems (homeware,
electro, textile) with the objective
of increasing productivity and
facilitating the management
of this category.
Electronic commerce
Creation of a new system for
extra.com.br (modernizations at the
website, introduction of new func-
tionalities, development of a new
supply system etc).
Po de Acar Mais
Formation of a new system
for the Po de Acar Mais
relationship program (site, kiosks,
card, call center).
Project GC
Development of tools
to support the category
management project that is
part of the Groups strategy and
includes better monitoring and
review of assortment, pricing and
nationalization of purchases.
Technological update
Exchange of 40% of the point
of sale equipment and specialized
printers (scal and of shelf label).

In 2007, the actions of the
area will be concentrated in six large
projects:
Loja do Futuro Po de Acar
(Store of the Future)
Several innovative technologies
such as the use of electronic labels on
supermarket shelves, wi- technology
all around the store, smart labels in the
wine section, scales that interact with
consumers, boxes with widescreen
screens etc., will be applied and tested
at this pilot store. This will be the rst
experience with the use of smart labels
with consumers.
Non-Food
Development of specic
management systems for these
businesses, to reach efciency and
effectiveness.
BI (Business Intelligence)
Large investments to
improve managerial decision tools,
implementing controls of indicators
based on BSC methodology.
Pricing
Implementation of a new
pricing tool, focused on price
elasticity.
Internet
Implementation of several
new functionalities, potentializing
the multichannel retail concept.
Financial
Implementation of Financial ERP.
SUPPLY CHAIN
Due to its capacity to add value
to the Business Units, by means of the
reduction of shrinkage, of costs and
of inventory investments, the Supply
Chain is an important differential
for the Group. In line with initiatives
developed organization-wide, in 2006
the area continued to focus on the
pursuit of lower expenses and the
improvement of the service level. The
principal activities developed with
these objectives were:
Regionalization
To reduce the shrinkage, the
transportation cost and the lead
time of products at the stores, CBD
increased the centralization of
products at the Regional
Distribution Centers.
New forms of transportation
Intensication of alternative
means of transport like coastal
navigation and railroad, with a
reduction of up to 40% in the
transportation cost.
Annual Report 2006 51
Optimization of eet use
Based on integration with
suppliers, the Group implemented
the back-haul system, which ensures
greater productivity of the eet that
renders service to the Company, as
instead of returning empty to the
distribution center after the delivery
of products at the store, the truck
returns loaded with products of a
given supplier.
Reduction of shrinkage
In 2007, the Group will invest
heavily in actions that enable it to
understand the causes of shrinkage
in the nal link of the retail supply
chain, the supermarket shelf. Two
streams were created for this
purpose that will be responsible
for measuring and combating
this shrinkage. The rst stream
will measure the shrinkage on
the shelves, with the view of the
customer.
1.5 %
With the optimization of eet
usage, carbon dioxide emissions
in goods transportation
dropped by 1.5%.
52 Grupo Po de Acar
As is the case of the exchange
of information with suppliers,
other actions with suppliers are the
product of Top Log, the relationship
program of Grupo Po de Acar
with its main suppliers that pursues
maximum logistic efciency in the
Supply Chain. The program reached
the end of 2006 with 108 participant
companies, accounting for 50% of
the Groups sales.
A new grocery Distribution
Center was also opened during the
year in Braslia, reducing the cost
with freight to deliver to stores
that were supplied by So Paulo.
Moreover, a new Center started
operating in So Paulo, dedicated to
the electronic commerce operation.
The forecast for 2007 and for
the years to come is that investments
will be concentrated in two areas:
expansion of storage capacity and
technology, to cut costs and to
ensure increased productivity and
accuracy in processes.
FINANCEIRA ITA-CBD
In 2006, the result of Financeira
Ita-CBD was affected by the high
default rate observed in the sector
and by the strong competition that
proved detrimental to the credit
environment for the market as a
whole. With a share of 13% in the
Groups sales, FIC ended the year with
a total 5.1 million customers, growth
of 27.5% in relation to 2005 (4 million
customers), and climbed from 308
units installed in the Groups stores in
2005 to 340 in 2006.
During the year, FIC continued
with the implementation and
consolidation of its product portfolio.
Private label cards ended the year
with a portfolio of 3.5 million
customers. New products and
services, such as sales in installments
with interest and personal loans, with
excellent performance in the year
2006, were also launched.
The receivables portfolio
at the end of the period attained
R$893 million, due to the products
traded at the Groups stores. In 2006,
the performance of FIC was in line
with planning, which forecasts the
breakeven of the operation at the end
of 2007.
Number of Clients (thousand)
Private-label cards
Co-branded cards
CDC (Consumer Loan)
Extended Guarantees
Personal Loan
Total
MANAGEMENT TOOLS
The adoption of management
tools in Grupo Po de Acar is
associated with the search for
sustained growth, reduction of
expenses and return on investments.
Some examples:
The Zero-Base Budget
methodology is utilized to assist in
the building of budgets going from
rational bases and real needs. The
tracking of results will be evaluated
by a matricial management model,
in which the directors-executives
are also henceforth accountable
for a specic package of expenses
with policies, processes, rules and
denitions.
Balanced ScoreCard is being
introduced to ensure the monitoring
of management and the tracking of
strategic planning. This scorecard will
permit the continuous evaluation
of performance indicators in the
nancial, market, internal process
and learning and knowledge
perspectives.
2006
3,493
91
519
863
127
5,093
 Annual Report 2006 53

KNOWLEDGE OF THE CONSUMER CERTIFICATIONS

To Grupo Po de Acar, In 2006, the grocery
understanding the yearnings of Distribution Center the largest
consumers is an important asset of the Group, with an area of 110
for being able to gain an edge over thousand square meters was
competitors. Accordingly, consumer certied by ISO 9001. And for the
knowledge surveys are conducted third year running, the chilled
periodically to fulll the requirements and frozen product distribution
and deal with the peculiarities of center maintained ISO 9001: 2000
customers, at different levels. A total of certication.
507,933 interviews were held in 2006
at the point of sale, with 13,463 door-
to-door personal interviews and 1,013
discussion groups. Over 42.7 million
purchase tickets are also analyzed per
month, permitting the evaluation of
customer shopping habits.
54 Grupo Po de Acar
Socioenvironmental
Aware of the social transformation potential
of the retail market, Grupo Po de Acar
adopts principles of equity and inclusion in its
business relations. This standpoint is materialized
through the constant search for sustainability
of consumption based on the encouragement
of awareness, mobilization and involvement of
the entire productive chain: suppliers, internal
audience, consumers and the community.
CARAS DO BRASIL
Following its principle of contributing to the
development of solidary and sustainable trade, since 2003,
Grupo Po de Acar has made room on its shelves for
textile, decoration and personal hygiene items, cosmetics
and toys, produced by small producers from several
regions of the country. Currently present in 37 stores,
Caras do Brasil (Faces of Brazil) products originate from
71 suppliers in 19 Brazilian states and are all the result of
the sustainable management of raw materials employed
in manufacturing. In 2006, the sales of these items were
up 45.2% over 2005, with an increase of 89.6% in average
sales per store.
 Annual Report 2006 55

Presented at a meeting of the ESTAO DA CIDADANIA

United Nations (UN), in Geneva, the Estao da Cidadania
project was considered an example of (Citizenship Station) was created
good practices. Moreover, it also received in 2006 in a historical patrimony
the international guarantee of the that is very dear to the population
Inter-American Development Bank (IDB), of Santos, the old Estao de Trem
which presented a study conducted by Sorocabana train station. The result
American researchers about Caras do of a partnership with the Secretariat
Brazil in Washington (USA). of Social Development of Santos
and the NGO Concidadania, Estao
IDB PARTNERSHIP da Cidadania de Santos has been
The commitment of Grupo operating since the month of August
Po de Acar with the development 2006, and has already performed a
of small and mid-sized suppliers series of events with an emphasis on
was reafrmed with the Companys the furtherance of citizenship in all
participation in a project that unites its dimensions, mobilizing around 5
Instituto Ethos de Responsabilidade thousand people in this period.
Social and IDB (Inter-American
Development Bank), the aim of which
is to implement social responsibility
measures at small and medium
Brazilian companies from the value
chain of strategic companies.
With this initiative, the
Group assumes the commitment of
45.2 %
identifying best practices, evaluating Caras do Brasil products
and equipping 15 small and medium sales recorded a 45.2%
members of its productive chain. At increase in 2006.
the end of the process, once all the
determinations and methodologies
suggested by Instituto Ethos and IDB
have been fullled, these suppliers
will receive the Da Melhor Natureza
(Of the Best Nature) seal, which will
henceforth identify their products.
56 Grupo Po de Acar
Acknowledgement
We present below the awards received by
Grupo Po de Acar in 2006, in recognition Melhores do Agronegcio 2006 (Best of
of the excellence of its operation and of its
socioenvironmental work and activity.
19.7 %
In 2006, 5,365 employees
were promoted, representing
a 19.7% growth.
As Empresas Mais Admiradas no Brasil (The Most
Admired Companies in Brazil) Edition 2006/
Magazine Carta Capital Supermarket Retail
Agribusiness) Magazine Globo Rural Category:
Wholesale and Retail
Guia Brasil 2006 Magazine Guia Quatro Rodas
(Automobile Guide Magazine) Contribution to
arts and crafts Caras do Brasil Program
Prmio DCI Empresas Mais Admiradas (Most
Admired Companies Award) Category: Retail
ll Prmio Integracin Latino Americano (Latin
American Integration Award) International
Chamber of Research and Social Integration
Prmio RH Cidado 2006 (HR Citizen Award)
Magazine Gesto & RH Po de Acar Group, for the
case entitled: Gente de Futuro (People of the Future)
Von Martius Environmental Award Third Place
Category: Humanity Caras do Brasil Project
Prmio Popai Brasil 2006 Award Gold Medal
Category: Permanent Trade Project, for the play:
Setting of Coffee Po de Acar
Prmio Popai Brasil 2006 Award Gold Medal
Category: Interactive Sistema Multimdia
Interativo Adega Po de Acar (Interactive
Multimedia System) Po de Acar
Prmio Popai Brasil 2006 Award Bronze Medal
Category: Permanent Trade Project, for the play:
Setting of Wine Po de Acar
Marcas de Sucesso 2006 (Brands of Success) Correio
Popular Category: Supermarket Po de Acar
Top of Mind Jornal Mogi News Extra
Hypermarkets
Top of Mind Jornal Tribuna de Santos Extra
Hypermarkets
Top of Brands 2006 UMSP 1st place Category:
Supermarket Extra Hypermarkets
 Annual Report 2006 57

People Management
The commitment of Grupo Po de Acar to The Group ended the year with a total staff of 63,607
the quality of life of people, in the broad sense of collaborators. Of these, 53,495 work at the stores, 3,800 at
the term, has initiatives geared toward the internal the Distribution Centers and 2,510 occupy corporate roles.
public as one of its main cornerstones. Promoting Throughout the year, 26,606 people were relocated while
the full development of collaborators is one of the 5,365 were promoted. The Company also hired 24,033 new
assumptions that guides the Companys people employees.
management policy, characterized by constant
effort in the creation of a work environment that
favors individual and collective development, in
synergy with the business demands.
58 Grupo Po de Acar

EDUCATION employees ranging from operators to With approximately 5

Grupo Po de Acar places directors, which required investments thousand people occupying leading
priority on efforts to further the of R$14 million. The Group was able roles, Grupo Po de Acar invests
education and the professional to maximize investments throughout permanently in the preparation of its
development of its collaborators. the year, increasing considerably the current and future leaders. In 2006,
In 2006, the group held 392,946 participation in training sessions, the Jeito CDB de Liderar (CDB Style of
hours of training, forming 285 new from 57,352 in 2005 to 61,457 in 2006, Leading) program, created with the
leaders and distributing over 1,600 although investments in 2006 were objective of developing the leaders
scholarships for graduation course smaller compared to those in 2005. necessary for the expansion of the
studies, offered to a variety of Company, had 15 new classes, with

300 participants. The sum of leaders
trained in 2005, when the program
was created, and in 2006, already
represents just over 50% of the
estimated total.
DIVERSITY
A pioneer in the promotion
of diversity as a factor that adds
social value to the business, Grupo
Po de Acar has deployed and
strengthened over the years its policy
of focusing attention on specic
audiences. In 2006, reecting the
attention that the Group pays to this
matter, a new area Diversity was
R$ 14.0
million
The Group invested R$14.0
million in employee capacity
development and training
programs.
Annual Report 2006 59
created within the area of Human
Resource management, especially
to cope with the development and
expansion of the range of actions in
this area.
QUALITY OF LIFE
Guaranteeing opportunities
for its collaborators to include
healthy practices in everyday life
that promote physical and mental
health is another commitment of
Grupo Po de Acar. For nine years
the Company has been holding the
Inuenza Vaccination Campaign.
In 2006, around 52,440 people,
were immunized.
For those that wish to include
physical activity in their daily routine,
the Company maintains a tness
center installed in the main ofce
building, visited by over 200 people
on a daily basis. And since 2005, 99
Po de Acar stores, 136 CompreBem
stores and 7 Distribution Centers
feature Espao Viva Melhor, theme
areas designed to allow collaborators
to take time off for rest, leisure
and relaxation.
 Grupo Po de Acar seeks to promote its employees full
development, maintaining its commitment to peoples quality
of life. Therefore, the Company is engaged in creating a work
atmosphere that promotes individual and group development,
aligned with the business demands.
62 Grupo Po de Acar

TRANSPARENCY
Corporate
Governance
Grupo Po de Acar has always strived
to perfect its Corporate Governance practices,
pursuing transparency, an increase in share
liquidity, shareholder value creation and the
stringent compliance with all the rules intended
for public companies:
adopts accounting standards and rules for
maintenance of registration of public companies at
CVM (Brazilian Securities Commission);
fullls all the determinations of SEC (Security and
Exchange Commission) for foreign companies listed
in the United States;
has participated since 2003, at Level I of Corporate
Governance of Bovespa (So Paulo Stock Exchange);
is on the IGC index, which groups companies with
differentiated corporate government actions of Bovespa;
has a Code of Ethics that regulates the conduct
of its collaborators with the Company, customers,
suppliers, competitors and other stakeholders;
adopts a Policy of Disclosure and Use of Relevant
Information and Preservation of Secrecy;

has an Advisory Board formed
by nine members, who are all
independent;
the Board of Directors is
formed by 15 members, with
four external directors;
the Board of Executive Ofcers
is composed of 11 professionals
from the market, with one
chief executive ofcer;
maintains four different
committees: Audit, Finance,
Human Resources and
Remuneration and Innovation
and Development.
Responses to inquiries from
investors are coordinated
by the Investor Relations
area, which also organizes
national and international
meetings, conferences and
appointments with investors.
SARBANES-OXLEY
To nalize the process of
adaptation to Sarbanes-Oxley
(SOX), the major challenge faced
by the Group was to reconcile the
requirements of the act with the
agility required by the retail market.
Furthermore, the work concluded
at the end of 2006 focused on
performing a quick and continuous
transition, transforming the
controls demanded by the act into
a sustainable project. The surveys
Annual Report 2006 63
carried out also permitted the review
of all the Groups processes, with the
identication of opportunities for
improvement. We present below the
main initiatives adopted:
creation of the SOX
Committee, of a permanent
nature and formed by
directors of the Business Units
and of the corporate areas;
establishment of the
gure of SOX Agent in the
administrative area and at all
the stores;
Sarbanes-
denition of Group 404 (in an
allusion to the number of the
law), formed by people with a
Oxley
more technical prole;
training at all the stores, The Companys great challenge
inclusion of the topic in was to align legal requirements
operating meetings and in the with the speed required in the
plenary meeting; retail segment.
strong communication work
with all the collaborators,
aiming to disseminate the
concept throughout the
Group.
64 Grupo Po de Acar
Our shares as
an investment
In 2006, the shares of Grupo Po de
Acar were included on Ibovespa, the most
important indicator of the average performance
of quotations of the Brazilian stock market. The
theoretical portfolio of the index is comprised
of the stocks that, all together, represented 80%
of the volume transacted on the So Paulo Stock
Exchange (Bovespa) in 2006. Moreover, since 2003,
the Group has formed an integral part of IBX-
50, an index that groups the 50 companies that
exhibit the highest liquidity ratios of Bovespa.
R$ 8.5
billion
This gure represents CBDs
market value. The Companys
shares were traded in 100.0% of
the trading sessions on Bovespa
and NYSE.
Since 1995, the shares of the Company, which strictly
complies with the USGAAP international standards of
accounting records, have been listed on Bovespa. In 1997 the
Level-III ADR (American Depositary Receipts) Program was
started at the New York Exchange (NYSE).
CAPITAL MARKET
In a scenario with appreciation of 32.9% registered
by Ibovespa in 2006, preference shares (PCAR4) exhibited
a slight recession of 2.5% in relation to the performance of
2005, ending the year quoted at R$75.0/thousand shares. The
total volume traded was R$2.8 billion.
Level-III ADRs (CBD) ended the year with an increase
in value of 3.9% in view of the 16.3% growth recorded by
the Dow Jones index in 2006. The shares presented a total
transacted volume of US$2.4 billion, ending the year quoted
at US$34.2/thousand shares.
The shares were transacted at 100% of the oors
of Bovespa and NYSE and the daily average presented was
R$11.2 million and US$9.5 million, respectively. At the end of
the year, the market value of Grupo Po de Acar was R$8.5
billion.
In the rst nine months of the year, with accumulated
devaluation of 27.0%, the share performance was inuenced
by the negative sales performance, which suffered the
impact of two factors: (i) deation of food product prices; (ii)
and the restructuring process implemented by the Company.
In the following quarter (4Q06), the recovery of sales
combined with the heavy investment in competitiveness,
supported by important reductions of expenses organized
in the restructuring process that started to produce results,
contributed toward the share performance, with valuation of
33.2% in the period.
 Annual Report 2006 65

STOCK OPTION at attracting and keeping highly

In 2006, the Group created qualied professionals within the
a new stock options plan, named Group, in addition to aligning those
Aes com Acar (Stocks with executives interests to shareholders
Sugar), more competitive than interests, encouraging performance
the previous plan, to assure total and assuring the continuity of the
alignment with the goals of management. Initially, the plans
CBD x Dow Jones base 100 strategic planning. This plan aims include 110 directors who, according
CBD to their performance, will receive
Dow Jones bonus and call options of Groups
200 shares, associated to performance
indicators, accomplishment of
150 targets and ROIC. The gains can
reach 100% of annual bonus. In the
100
previous plan, gains were on average
50 only 6% of annual bonus.

0 2002 2003 2004 2005 2006 DISTRIBUTION OF DIVIDENDS

With a basis on the net income
recorded in 2006, which amounted
CBD x Ibovespa base 100 to R$88.5 million, the Board of
PCAR4 Directors approved the payment to
Ibovespa stockholders of dividends in the total
300 amount of R$20.3 million. This sum
is equivalent to R$0.16903 per batch
250
of one thousand ON shares and
200 R$0.18594 per batch of one
thousand PN shares.
150

100

50

0 2002 2003 2004 2005 2006

66 Grupo Po de Acar

OWNERSHIP STRUCTURE
The capital stock of CBD, amounting to R$3,955 million, is represented by
113.8 billion shares: 49.8 billion ON (ordinary) and 63.9 billion PN (preference).
Control is shared between two principal stockholders, Abilio Diniz (50%) and
the French Casino Group (50%), by means of the holding company Wilkes,
created in May 2005. Free-oating shares represent 28.4%.

Shareholding positions in December 2006 (billions of shares)

Main Shareholders ON % PN % Total %
Wilkes* 47.0 94.3% - 0.0% 47.0 41.3%
Casino Group 0.0 0.0% 2.1 3.2% 2.1 1.8%
Abilio Diniz 1.4 2.8% 16.0 25.0% 17.4 15.3%
Diniz Family 1.4 2.8% 13.6 21.3% 15.0 13.2%
Others 0.0 0.1% 32.3 50.5% 32.3 28.4%
Total 49.8 100.0% 63.9 100.0% 113.8 100.0%
* 50% Abilio Diniz and 50% Casino Group.

Share Performance
2002 2003 2004 2005 2006
% per % per % per % per % per
Price Price Price Price Price
annum annum annum annum annum
PCAR4 (R$) 54.5 10.1 70.4 29.2 68.7 (2.4) 76.9 11.9 74.97 (2.5)
CBD (US$) 15.3 (30.5) 25.15 64.4 25.6 1.8 32.9 28.5 34.17 3.9
Ibovespa 11,268 (17.0) 22,236 97.3 26,196 17.8 33,455 27.7 44,473 32.9
Dow Jones 8,342 (16.8) 10,454 25.3 10,783 3.2 10,718 (0.6) 12,463 16.3
US$ (R$) 3.5333 52.3 2.8892 (18.2) 2.6544 (8.1) 2.3407 (11.8) 2,138 (8.7)

Average daily traded volume CBD (US$ thousand) PCAR4 (R$ thousand)
2002 1,832 1,789
2003 2,375 2,563
2004 3,287 3,349
2005 5,426 5,841
2006 9,457 11,196
 Annual Report 2006 67

Risk Management
Grupo Po de Acar supports its work and
activity with a series of analyses and procedures
aimed at minimizing the vulnerability of its
operations and the impact of variables on the
business performance. The risks to which the
Company is subject can be divided into Operating
(market, product, structural, technological)
and Financial (credit and default, liquidity
and foreign exchange).
OPERATING RISKS
Market
Grupo Po de Acar faces the heated
competition of the retail market with some differentials:
nationalization of purchase and category management
processes; multiformat structure; services and products
adapted to the needs of each audience; private label,
with an emphasis on higher value-added items; quality
of services; economy of scale; and broad distribution
network.

R$ 845.7 Structural
Besidse keeping its facilities and equipment covered
by insurance policies, Grupo Po de Acar permanently
monitors the situation of each unit, with stringent control
over all operations. The physical integrity of customers and
million collaborators that circulate around the stores is guaranteed
by the Risk Engineering department, responsible for
identifying possible situations of risk and for managing the
Receivables in FIDC execution priority of mitigation actions.
(Receivables Fund)
were R$845.7 million on Technology
December 31, 2006. The domain of technology is one of the linchpins
of the Group, which continuously invests in upgrades and
modernization, pursuing maximum return and control of
the various operations involved in the business.
68 Grupo Po de Acar
FINANCIAL
Credit and default
The credit risk of the Group,
which sells directly to consumers,
is minimized on account of the
large customer portfolio and of
control procedures that monitor the
payment capacity of consumers.
Furthermore, with the creation of
FIC Financeira Ita CBD, credit
risks are now being managed by the
new company, which has developed
a specic model of analysis and
concession. The risks of accepting
sight drafts and future-dated (post-
dated) checks are minimized with the
adoption of safety procedures such Foreign Exchange
as: prior registration of customers To protect the obtainment
and online inquiries to information of funds in dollars, the Group
services. utilizes swap contracts for reais/CDI
(Interbank Deposit Certicate) in
Liquidity 100% of these transactions, which
To recompose working capital are executed in the same timeframes
that sustains installment sales to as the transaction ows.
consumers, the Group assigns part
of these receivables to Po de Acar
Fundo de Investimentos em Direitos
Creditrios (FIDC - Credit Receivables
Fund). The balance of FIDC on
December 31, 2006 was R$854,7
million in credit receivables.
 Annual Report 2006 69

General Remissive Index GRI

Economic Performance Indicators Annual Results
Aspects: Economic Performance
1;2;4;5;8;9;14;18;24;
Direct economic value generated and distributed, including revenues, operating costs, employee 25;26;29;30;32;34;
EC1 remuneration, donations and other investments in the community, accrued prot and payments to 35;36;37;38;39;40;
capital providers and governments 41;42;43;44;45;49;54;
55;64;65;66;67;68
Aspect: Market Presence
Procedures for local hiring and proportion of top management members recruited in the local
EC7 57;59
community in relevant operating units
Aspect: Indirect Economic Impacts
EC9 Identication and description of signicant indirect economic impacts, including the impacts scope 16;17;28

Environmental Performance Indicators

Aspect: Material
EN1 Utilization of materials per weight or per volume 44
EN2 Percentage of utilized materials resulting from recycling 44
Aspects: Energy
EN5 Energy saved thanks to improvements, without conservation and efciency 42
Aspects: Emissions, efuents and waste
EN22 Total waste weight, per type and disposal method 44
Aspects: Products and services
EN26 Initiatives to mitigate the environmental impacts of products and services and the scope of these impacts 1
Aspect: General
EN30 Total environmental protection investment and expenditures, per type 42;43;45

Performance Indicators Relative to Labor Practices and Proper Work

Aspect: Job
LA1 Headcount, per job type, labor contract and region 4;57;58;59
Aspect: Labor Health and Security
Education program, training, counseling, prevention and risk control in progress,
LA8 58;59
to assist employees, their families or community members in case of serious diseases
Aspect: Training and Education
LA10 Training hours average per year and per employee, discriminated by functional category 29;58;59
Programs aimed at competence management and continuous learning,
LA11 58;59
supporting the continuity of workers employability and retirement
LA12 Percentage of employees receiving performance and career evolution analyses on a regular basis 7;58;59
70 Grupo Po de Acar

Performance Indicators Relative to Human Rights

Aspects: Investment Practices and Purchase Processes
Percentage and total number of signicant investment contracts including
HR1 55;51;52
human right clauses or clauses that were submitted to human rights evaluations
Percentage of outsourced companies and critical suppliers that were
HR2 1;51;52;55
submitted to evaluations relating to human rights and adopted measures
Total quantity of hours of employee training on policies and procedures relative to human rights aspects that
HR3 51;52;55
are relevant to the operations, including the percentage of employees receiving training
Aspect: Child Labor
Operations presenting a child labor potential risk, and the measures
HR6 51;52;55
adopted to contribute to the abolition of child labor
Aspect: Hard Work or Slave-Like Work
Operations presenting a signicant hard work or slave-like work risk, and the measures adopted to
HR7 51;52;55
contribute to the eradication of hard work or slave-like work
Percentage of security personnel submitted to training on the policies or procedures adopted by the
HR8 51;52;55
organization relating to human rights aspects that are relevant to the operations

Social Performance Indicators Relating to the Society

Aspect: Community
Nature, scope and efciency of any programs and practices, aimed at evaluating and generating the impact of 38;39;40;41;42;43;
SO1
the operations on the communities, including the coming in line, operation and close down of operations 44;45;54;55;56
Aspect: Corruption
SO3 Percentage of employees who received training on the organizations anticorruption policies and procedures 1
Aspect: Conformity
Monetary value of signicant nes and total number of non-monetary sanctions resulting from
SO8 34
nonconformities with laws and regulations

Performance Indicators Relative to Product Responsibility

Aspect: Client Health and Safety
Aspect: Product and Service Labeling
PR5 Client-satisfaction related practices, including results from client satisfaction surveys 28;29;33;53
Aspect: Marketing Communication
Adhesion Programs relative to marketing communication laws, norms and voluntary codes, including
PR6 50;53
publicity, promotion and sponsorship
 Annual Report 2006 71

Corporate
Information

BOARD MEMBERS EXECUTIVE BOARD

Honorary Chairman Chief Executive Ofcer

Valentim dos Santos Diniz Cssio Casseb Lima

Chairman Chief Financial Ofcer

Abilio Diniz Enas Csar Pestana Neto

Board Members Food Commercial

Ana Maria Falleiros dos Santos Diniz DAvila Ramatis Rodrigues
Candido Botelho Bracher
Francis Andr Mauger Non-Food Commercial
Gerald Dinu Reiss Pedro Janot
Geyze Marchesi Diniz
Hakim Laurent Aouani Extra and CompreBem/Sendas
Henri Philippe Reichstul Hugo A. Jordo Bethlem
Jean-Charles Henri Naouri
Joo Paulo Falleiros dos Santos Diniz Investments and Construction
Maria Silvia Bastos Marques Caio Racy Mattar
Michel Alain Maurice Favre
Pedro Paulo Falleiros dos Santos Diniz Marketing
Xavier Michel Marie Jacques Desjobert Claudia Pagnano

Po de Acar
Jos Roberto Coimbra Tambasco

Human Resource
Maria Aparecida Fonseca
 Annual Report 2006 72

INVESTOR RELATIONS Investor Relations Consulting

MZ Consult
Managing Board Avenida das Naes Unidas, 12.995 20 andar
Daniela Sabbag Brooklin CEP: 04578-000
So Paulo SP Brazil
Analysts Tel.: 55 11 3186-3777/3799
Marcel Rodrigues da Silva Fax: 55 11 3186-3776
Frederico Lorenzo Monteiro E-mail: mz.cbd@mz-ir.com
Andr Amorim
Tickers
Support Bovespa: PCAR4
Samantha Conde NYSE (level III ADR): CBD

Address Independent auditors

Av. Brigadeiro Lus Antnio, 3.172 Ernest & Young
Jardim Paulista CEP: 01402-901
So Paulo SP Brazil Depositary banks
Tel.: 55 11 3886-0421 In Brazil
Fax: 55 11 3884-2677 Banco Ita
E-mail: cbd.ri@paodeacucar.com.br Rua Boa Vista, 176 4 andar
CEP: 01014-913 So Paulo SP
The publications about quarterly results, monthly sales
performance, annual reports and 20F Form may be In the U.S.
requested from the Investor Relations department or at The Bank of New York
the IR website of Grupo Po de Acar (www.cbdri.com.br). 101 Barclay Street 22 West
New York, NY 10286 USA
 PRESENTATION
Corporate prole 01
Credits
Mission, Vision, Pillars 02
Operating, Financial and Sustainability Highlights 04

COMMITMENT
Message from Management 06
Board of Executive Ofcers 10 GENERAL COORDINATION
Investor Relations
STRATEGY Instituto Po de Acar
Strategic focus 2006 14
Investments 18 TEXTS
Goals 2007 19 Silvia Martinelli (Mtb 39.545/SP)
Strategic planning 2010 21
GRAPHIC PROJECT AND DESKTOP PUBLISHING
RESULTS TheMediaGroup
Sales Performance 24
ANNUAL Operating Performance 28
Financial Performance (MD&A) 34
PHOTOS

REPORT 2006 Social Performance 38

Environmental Performance 42
Grupo Po de Acars Assets: page 06, 41, 43 and 44
Daniel Renault: page 13, 16, 19, 23, 25, 26, 31, 33 and 50
Daniel Rosa: page 10 (Cssio Casseb Lima),
page 11 (Maria Aparecida Fonseca) 12, 15, 20, 22, 37,
The information in this Report is presented DIFFERENTIALS 39, 46, 47, 53, 54, 57, 58, 60, 61 and 68
in an objective and direct manner, to provide a Operating 48 Maurcio Simonetti: page 10 and 11 (executive directors)
thorough view of the main results and projects Socioenvironmental 54
developed by Grupo Po de Acar during the Acknowledgement 56 PRINTING
scal year of 2006. For further details please refer People Management 57 RWA Grca
to online annual report 2006, available in the
website (www.cbd-ri.com.br/relatorioanual2006). TRANSPARENCY
Corporate Governance 62
Our shares as an investment 64
Risk Management 67

General Remissive Index GRI 69

Corporate Information 71

Financial Statements 2006 attachment

CBD RA06 Capa 2 ing.indd 2 6/27/07 4:05:45 PM

 Grupo Po de Acar Annual Report 2006
Grupo Po de Acar
Annual Report 2006

CBD RA06 Capa 2 ing.indd 1 6/27/07 4:05:43 PM

 Grupo Po de Acar
Financial Statements 2006
December 31, 2006 and 2005

with Report of Independent Auditors

CBD DF06 Capa ing.indd 1 6/27/07 4:06:05 PM

Index
Balance Sheets 02
Statements of Income 04
Statements of Changes in Shareholders Equity Parent Company 05
Statements of Changes in Financial Position 06
Statements of Changes in Cash Flow 08
Statements of Added Value 10
Notes to the Financial Statements 11
Report of Independent Auditors 56
02 Grupo Po de Acar

BALANCE SHEETS
December 31, 2006 and 2005
(In thousands of Reais)

Parent Company Consolidated

2006 2005 2006 2005
ASSETS
Current assets
Cash and banks 146,869 108,726 247,677 168,603
Marketable securities 381,785 621,906 1,033,834 1,542,234
Trade accounts receivable 756,359 664,420 1,621,592 1,416,726
Inventories 944,147 835,921 1,231,963 1,115,286
Recoverable taxes 256,306 257,739 378,849 270,389
Deferred income and social contribution taxes 101,794 66,807 238,676 84,745
Prepaid expenses and others 100,037 81,924 125,825 106,545
Total current assets 2,687,297 2,637,443 4,878,416 4,704,528

Noncurrent assets
Long-term assets
Receivables securitization fund 164,034 186,051 - -
Trade accounts receivable - - 334,247 293,529
Recoverable taxes 94,459 108,310 95,970 205,847
Deferred income and social contribution taxes 557,558 36,303 837,676 383,584
Amounts receivable from Related parties 578,884 778,281 245,606 4,519
Judicial deposits 180,542 188,807 234,901 228,969
Others 14,091 32,975 17,634 32,975
Total noncurrent assets 1,589,568 1,330,727 1,766,034 1,149,423

Permanent assets
Investments 1,116,870 1,099,114 79,557 62,355
Property and equipment 3,569,815 3,119,896 4,241,040 3,861,714
Intangible assets 413,822 538,472 630,945 1,083,501
Deferred charges 76,063 61,199 76,281 61,691
Total permanent assets 5,176,570 4,818,681 5,027,823 5,069,261
Total noncurrent assets 6,766,138 6,149,408 6,793,857 6,218,684

Total assets 9,453,435 8,786,851 11,672,273 10,923,212

See accompanying notes.
 Financial Statements 2006 03

Parent Company Consolidated

2006 2005 2006 2005
LIABILITIES
Current liabilities
Accounts payables to suppliers 1,694,683 1,333,731 2,027,268 1,654,234
Loans and nancing 511,321 375,866 871,321 422,614
Debentures 414,761 17,979 414,761 17,979
Payroll and related charges 146,988 129,096 173,010 157,639
Taxes and social contributions payable 53,602 74,411 68,675 89,753
Dividends proposed 20,312 62,053 20,312 62,053
Amounts payable to related parties - 40,655 - -
Financing for purchase of xed assets and others 169,664 112,821 248,562 165,159
Total current liabilities 3,011,331 2,146,612 3,823,909 2,569,431

Non-current liabilities
Loans and nancing 139,597 550,061 1,382,152 1,952,450
Debentures - 401,490 - 401,490
Taxes payable in installments 248,163 300,563 261,101 313,471
Provision for contingencies 1,153,228 1,011,039 1,209,463 1,076,911
Provision for capital deciency of subsidiary 43,673 55,014 - -
Others 15,316 69,700 25,105 69,700

Total noncurrent liabilities 1,599,977 2,387,867 2,877,821 3,814,022

Minority interest - - 128,416 287,387

Shareholders equity
Capital 3,954,629 3,680,240 3,954,629 3,680,240
Capital reserves 517,331 - 517,331 -
Revenue reserves 370,167 572,132 370,167 572,132
4,842,127 4,252,372 4,842,127 4,252,372
Total liabilities and shareholders equity 9,453,435 8,786,851 11,672,273 10,923,212

Net equity per thousand shares of capital R$ 42.56 37.41

See accompanying notes.
04 Grupo Po de Acar

STATEMENTS OF INCOME
Years ended December 31, 2006 and 2005
(In thousands of Reais, except earnings per thousand shares)

Parent Company Consolidated

2006 2005 2006 2005

Gross operating revenue 11,905,981 11,339,629 16,460,296 16,120,963

Taxes on sales (1,932,528) (1,989,057) (2,579,893) (2,707,567)

Net sales revenue 9,973,453 9,350,572 13,880,403 13,413,396

Cost of goods sold (7,171,308) (6,598,305) (9,962,965) (9,438,126)

Gross prot 2,802,145 2,752,267 3,917,438 3,975,270

Operating expenses (income)

Selling 1,729,753 1,524,542 2,418,929 2,300,026
General and administrative 353,266 326,135 527,145 505,652
Depreciation and amortization 399,922 456,186 547,943 625,281
Taxes and charges 52,888 35,592 84,923 63,150
Financial expenses 429,011 514,494 603,388 683,571
Financial income (271,664) (365,490) (382,761) (446,722)
Equity results (27,436) (47,576) 53,197 16,190
2,665,740 2,443,883 3,852,764 3,747,148
Operating income 136,405 308,384 64,674 228,122

Non-operating income (17,008) 35,799 (323,229) 32,131

Income (loss) before income and social contribution

and employees prot sharing 119,397 344,183 (258,555) 260,253
Income and social contribution taxes (20,452) (77,064) (1,472) (52,994)
Income (loss) before employees prot sharing 98,945 267,119 (260,027) 207,259
Employees prot sharing (13,421) (10,129) (13,421) (14,453)
Minority interest - - 358,972 64,184
Net income for the year 85,524 256,990 85,524 256,990

Outstanding shares (per thousand shares) at the year end 113,771,378 113,667,916
Net income for the year per thousand shares 0.75 2.26
See accompanying notes.
 Financial Statements 2006 05

STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY PARENT COMPANY

Years ended December 31, 2006 and 2005
(In thousands of Reais)

Revenue reserves
Goodwill
special Retention Retained
Capital reserve Legal Expansion Unrealized of earnings earnings Total
Balances at
December 31, 2004 3,509,421 - 105,948 147,937 4,069 283,615 - 4,050,990

Capital increase
Capitalization of reserves 164,374 - - (147,937) - (16,437) - -
Payment of capital 6,445 - - - - - - 6,445
Appropriation of reserve - - - 240,460 - (240,460) - -
Realization of reserve - - - - (4,069) - 4,069 -
Net income for the year - - - - - - 256,990 256,990
Legal reserve - - 12,849 - - - (12,849) -
Dividends proposed - - - - - - (62,053) (62,053)

Income retention reserve - - - - - 186,157 (186,157) -

Balances at
December 31, 2005 3,680,240 - 118,797 240,460 - 212,875 - 4,252,372

Capital increase
Capitalization of reserves 267,177 - - (240,460) - (26,717) - -
Payment of capital 7,212 - - - - - 7,212
Appropriation of reserve - - - 167,542 - (167,542) - -

Merger of parent company - 517,331 - - - - - 517,331

Net income for the year - - - - - - 85,524 85,524
Legal reserve - - 4,276 - - - (4,276) -
Dividends proposed - - - - - - (20,312) (20,312)

Income retention reserve - - - - - 60,936 (60,936) -

Balances at
December 31, 2006 3,954,629 517,331 123,073 167,542 - 79,552 - 4,842,127
See accompanying notes.
06 Grupo Po de Acar

STATEMENTS OF CHANGES IN FINANCIAL POSITION

Years ended December 31, 2006 and 2005
(In thousands of Reais)

Parent Company Consolidated

2006 2005 2006 2005
Financial resources were provided by
Operations
Net income for the year 85,524 256,990 85,524 256,990
Expenses (income) not affecting working capital
Depreciation and amortization 399,922 456,186 547,943 625,281
Residual value of permanent asset disposals 44,586 1,002,823 84,014 1,022,612
Interest and indexation charges on long-term items 83,467 175,324 184,093 417,519
Provision for contingencies 89,562 44,234 94,010 51,855
Deferred income and social contribution taxes (3,961) 34,156 63,202 (19,660)
Realization of deferred gain (Note 9 (d)) (58,151) (30,807) (58,151) (49,447)
Equity results (27,436) (47,576) 53,197 16,190
Provision for property and equipment write-offs and losses 6,535 - 12,685 -
Provision for goodwill amortization - - 268,886 -
Minority interest - - (358,972) (64,184)
620,048 1,891,330 976,431 2,257,156
Shareholders
Capital increase 7,212 6,445 7,212 6,445
Increase in special godwill reserve (Note 18) 37 37 -
Third parties
Loans, nancings and other liabilities 6,400 69,172 6,400 642,389
Transfer to current assets 299,400 22,776 57,758 113,104
Total funds provided 933,097 1,989,723 1,047,838 3,019,094
 Financial Statements 2006 07

Parent Company Consolidated

continued 2006 2005 2006 2005
Financial resources were used for
Additions to investments 1,732 - 70,444 -
Additions to property and equipment 783,276 727,168 854,295 888,518
Additions to intangible assets 3,687 11,210 3,687 31,798
Additions to deferred charges 28,512 64,190 28,640 64,295
Additions to other non-current assets - 507,554 - 235,775
Dividends proposed 20,312 62,053 20,312 62,053
Transfer to current liabilities 910,443 483,943 1,151,050 643,137
Total funds used 1,747,962 1,856,118 2,128,428 1,925,576
Increase (decrease) in net working capital (814,865) 133,605 (1,080,590) 1,093,518

Statements of increase (decrease) in net working capital

Current assets
At end of year 2,687,297 2,637,443 4,878,416 4,704,528
At beginning of year 2,637,443 2,722,440 4,704,528 4,290,000
49,854 (84,997) 173,888 414,528
Current liabilities
At end of year 3,011,331 2,146,612 3,823,909 2,569,431
At beginning of year 2,146,612 2,417,441 2,569,431 3,248,421
864,719 (270,829) 1,254,478 (678,990)
Increase (decrease) in net working capital (814,865) 185,832 (1,080,590) 1,093,518
See accompanying notes.
08 Grupo Po de Acar

STATEMENTS OF CHANGES IN CASH FLOW

Years ended December 31, 2006 and 2005
(In thousands of Reais)

Parent Company Consolidated

Periods ended in
2006 2005 2006 2005
Cash ow from operating activities
Net income for the year 85.524 256.990 85.524 256.990
Adjustment for reconciliation of net income
Deferred income tax (38,652) (29,615) (90,729) (80,867)
Residual value of permanent asset disposals 30,796 (29,224) 70,223 (13,689)
Net gains from shareholding dilution (58,151) (38,140) (58,151) (56,780)
Depreciation and amortization 399,922 456,186 547,943 625,281
Interest and monetary variations, net of payments 136,138 12,091 375,519 153,071
Equity results (27,436) (47,576) 53,197 16,190
Provision for contingencies 89,562 44,234 94,010 51,855
Provision for property and equipment write-offs and losses 6,535 - 12,685 -
Provision for goodwill amortization - - 268,886 -
Minority interest - - (358,972) (64,184)

(Increase) decrease in assets

Accounts receivable (90,449) (200,823) (226,079) 19,971
Advances to suppliers and employees 4,182 (3,873) 3,755 (3,767)
Inventories (104,040) (25,677) (116,677) (25,638)
Recoverable taxes 24,098 47,027 13,065 49,844
Other assets 2,614 190,192 (14,794) 55,503
Related parties 185,478 (355,915) (39,079) (3,627)
Judicial deposits 11,232 (7,632) 5,159 (30,919)

Increase (decrease) in liabilities

Suppliers 353,747 94,615 373,034 108,785
Payroll and related charges 17,372 8,352 15,371 7,382
Income and social contribution taxes payable (152,232) (31,289) (165,468) (30,163)
Other accounts payable 55,673 12,175 89,133 28,242

Net cash generated in operating activities 931,913 352,098 937,555 1,063,480

 Financial Statements 2006 09

Parent Company Consolidated

Periods ended in
continued 2006 2005 2006 2005
Cash ow from investing activities
Net cash in subsidiaries merger 1,090 - - -
Receipt of amortization of PAFIDC quotas 28,509 - - -
Increase in investments (1,732) - (4,107) -
Acquisition of property and equipment (756,649) (715,673) (827,665) (878,047)
Increase in deferred assets (28,512) (64,174) (28,640) (64,295)
Increase in intangible assets (3,807) (11,210) (1,322) (31,798)
Capital increase in subsidiaries - - (70,444) -
Sale of property and equipment 13,790 1,032,047 13,790 1,036,301

Net cash ow generated (used) in

investing activities (747,311) 240,990 (918,388) 62,161

Cash ow from nancing activities

Capital increase 7,212 6,445 7,212 6,445
Capital reserve increase 37 - 37 -
Financings
Funding and renancing 81,967 289,666 199,549 899,814
Payments (413,743) (829,086) (593,238) (1,411,474)
Payment of dividends (62,053) (89,059) (62,053) (89,059)

Net cash used in nancing activities (386,580) (622,034) (448,493) (594,274)

Net increase (decrease) in cash, banks and

marketable securities (201,978) (28,946) (429,326) 531,367

Cash, banks and marketable securities at end of year 528,654 730,632 1,281,511 1,710,837
Cash, banks and marketable securities at beginning of year 730,632 759,578 1,710,837 1,179,470

Changes in cash, banks and marketable securities (201,978) (28,946) (429,326) 531,367
Cash ow suplemental information
Interest paid on loans and nancings 112,018 418,187 113,568 547,343
10 Grupo Po de Acar

STATEMENTS OF ADDED VALUE

Years ended December 31, 2006 and 2005
(In thousands of Reais)

Parent Company Consolidated

Periods ended at
2006 % 2005 % 2006 % 2005 %
Revenues
Sales of goods 11,905,981 11,339,629 16,460,296 16,120,963
Credit write-offs (14,835) (29,156) (15,622) (36,888)
Non-operating (17,008) 35,799 (323,229) 32,131
11,874,138 11,346,272 16,121,445 16,116,206
Inputs acquired from third parties
Cost of goods sold (8,617,840) (8,095,872) (11,946,357) (11,508,064)
Materials, energy, outsourced
services and others (862,229) (758,955) (1,238,972) (1,186,831)

Gross added value 2,394,069 2,491,445 2,936,116 3,421,311

Retentions
Depreciation and amortization (408,721) (459,691) (559,592) (630,283)

Net added value produced

by the Company 1,985,348 2,031,754 2,376,524 2,791,028

Received in transfer
Equity results 27,436 47,576 (53,197) (16,190)
Minority interest - - 358,972 64,184
Financial income 271,664 365,490 382,761 446,722

Total added value

to be distributed 2,284,448 100.0 2,444,820 100.0 3,065,060 100.0 3,285,744 100.0
Distribution of added value
Personnel and related charges (936,629) 41.0 (864,785) 35.4 (1,259,446) 41.1 (1,221,736) 37.2
Taxes, fees and contributions (580,873) 25.4 (640,899) 26.2 (728,459) 23.8 (819,878) 25.0
Interest and rents (681,422) 29.8 (682,146) 27.9 (991,631) 32.3 (987,140) 30.0
Dividends (20,312) 0.9 (62,053) 2.5 (20,312) 0.6 (62,053) 1.9

Prot retention 65,212 2.9 194,937 8.0 65,212 2.2 194,937 5.9
 Financial Statements 2006 11

NOTES TO THE FINANCIAL STATEMENTS

December 31, 2006 and 2005
(in thousands of Reais)

1. Operations

Companhia Brasileira de Distribuio (Company or CBD) operates primarily as a retailer of food, clothing,
home appliances and other products through its chain of hypermarkets, supermarkets, specialized and department
stores principally under the trade names Po de Acar, Extra, Barateiro, Comprebem, Extra Eletro, Sendas
and Extra Perto. At December 31, 2006, the Company had 549 stores in operation (556 stores December 31,
2005), of which 396 are operated by the Parent Company, and the remaining by its subsidiaries, six of them being
operated by the subsidiary Novasoc Comercial Ltda. (Novasoc) 45 by S Supermercados Ltda. (S) and 102 stores
by Sendas Distribuidora S.A. (Sendas Distribuidora).

a) Sendas Distribuidora
Sendas Distribuidora operations began at February 1, 2004 through the Investment and Partnership
Agreement, entered into in December 2003 with Sendas S.A. (Sendas). This subsidiary concentrates retailing
activities of the Company and of Sendas in the entire state of Rio de Janeiro. The Company is performing a
restructuring process, with a view to improving its operational results (Note 11 (i)).

b) Partnership with Ita

At July 27, 2004, a Memorandum of Understanding was signed between Banco Ita Holding Financeira S.A.
(Ita) and the Company with the objective of setting up Financeira Ita CBD S.A. (FIC). FIC structures and trades
nancial products, services and related items to CBD customers on an exclusive basis (see Note 9 (d)).
The Company has 50% shareholding of the FIC capital through its subsidiary Miravalles Empreendimentos e
Participaes S.A. (Miravalles).

c) Casino joint venture agreement

At May 3, 2005, the Diniz Group and the Casino Group (headquartered in France) incorporated Vieri
Participaes S.A. (Vieri), which became the parent company of CBD, whose control is shared by both group of
shareholders.
At December 4, 2006, the merger of Vieris shareholders equity, composed of investment in CBD and respective
goodwill was concluded, bringing benets to CBD. This merger operation was approved at the General Meeting
held at December 20, 2006. Due to the merger, the Company cancelled shares issued thereby owned by Vieri and
consequently issued, in equal number, Companys new common shares, all non-par, registered shares on behalf of
Wilkes Participaes S.A. (Wilkes), sole Vieris shareholder at the time of merger. Wilkes was incorporated to operate
as Grupo Po de Acars holding company.
12 Grupo Po de Acar

The accounting records of merger process maintained for corporate and tax purposes show specic
accounts related to goodwill, provision, respective amortization and reversal of provision established and tax credit
(Note 17 (b) (ii)).

2. Basis of Preparation and Presentation of the Financial Statements

The individual and consolidated nancial statements are presented in thousands of Reais, unless otherwise
indicated and was prepared in accordance with the accounting practices adopted in Brazil and with the procedures
issued by the Brazilian Securities Commission (CVM) and by the Brazilian Institute of Accountants (IBRACON).
The conclusion of the preparation of these nancial statements was authorized at the board of executive
ofcers Meeting, held at March 12, 2007.
In view of the implementation of guidelines established by IBRACON for presentation and disclosure of
nancial statements dened in Accounting Standards and Procedures (NPC) 27 issued at October 3, 2005, some
items of the balance sheet for the year ended December 31, 2005 were reclassied in order to comply with these
guidelines and allow the comparison.
With the purpose of providing additional information, the following is presented: (a) statement of cash ow,
prepared in accordance with NPC 20/99 issued by IBRACON; and (b) statement of added value, in accordance with
Resolution of Accounting Federal Council CFC 1,010 as of January 21, 2005.
Certain assets, liabilities, revenues and expenses are determined on the basis of estimates when preparing
the nancial statements. Accordingly, the nancial statements of the Company and the consolidated nancial
statements include various estimates, among which are those relating to calculation of allowance for doubtful
accounts, depreciation and amortization, asset valuation allowance, realization of deferred taxes, contingencies and
other estimates. Actual results may differ from those estimated.
Signicant accounting practices and consolidation criteria adopted by the Company are shown below:

a) Cash and cash equivalents

Cash and cash equivalents include the cash and checking account balances.

b) Marketable securities
Securities are recorded at cost, accrued of earnings veried up to the balance sheet date and not exceeding
the market value. The marketable securities are redeemable within 90 days as from the balance sheet date.

c) Accounts receivable
Accounts receivable are stated at estimated realizable values. An allowance for doubtful accounts is
provided in an amount considered by Management to be sufcient to meet probable future losses related to
uncollectible accounts. The setting up of provision is mainly based on the historic average of losses, in addition to
specic accounts receivable deemed as uncollectible.
Customer credit nancing is generally for a term of up to 24 months. Interest is recorded and allocated as
nancial income during the nancing period.
 Financial Statements 2006 13

The Company carries out securitization operations of its accounts receivable with a special purpose entity,
over which it has shared control, the PAFIDC (Po de Acar Fundo de Investimento em Direitos Creditrios) .

d) Inventories
Inventories are carried at the lower of cost or market value, whichever is the shorter. The cost of inventories
purchased directly by the stores is based on the last purchase price, which approximates the First In, First Out
(FIFO) method. The cost of inventories purchased through the warehouse is recorded at average cost, including
warehousing and handling costs.

e) Other current and non-current assets

Other assets and receivables are stated at cost, including, when applicable, contractual indexation accruals,
net of allowances to reect realizable amounts, if necessary.

f) Investments
Investments in subsidiaries are accounted for by the equity method, and provision for capital deciency is
recorded, when applicable. Other investments are recorded at acquisition cost.

g) Property and equipment

These assets are shown at acquisition or construction cost, monetarily restated until December 31, 1995,
deducted from the related accumulated depreciation, calculated on a straight-line basis at the rates mentioned in
Note 10, which take into account the economic useful lives of the assets or the leasing term, in case of leasehold
improvements, whichever is shorter.
Interest and nancial charges on loans and nancing obtained from third parties directly or indirectly
attributable to the process of purchase, construction and operating expansion, are capitalized during the
construction and refurbishment of the Companys and its subsidiaries stores in conformity with CVM Deliberation
193. The capitalized interest and nancial charges are appropriated to results over the depreciation periods of the
corresponding assets.
Expenditures for repairs and maintenance that do not signicantly extend the useful lives of related asset
are charged to expense as incurred. Expenditures that signicantly extend the useful lives of existing facilities and
equipment are added to the property and equipment value.

h) Intangible assets
Intangible assets include premium derived from the acquisition of companies and amounts related
to acquisition of commercial rights and outlets. These amounts are supported by appraisal reports issued by
independent experts, based on the expectation of future protability, and are amortized in accordance with
projected protability over a maximum period of ten years.
14 Grupo Po de Acar

i) Deferred charges
The expenditures related to the implementation of projects and development of new products and business
models we recorded based on feasibility studies and are amortized for a term not exceeding ve years.

j) Other current and non-current liabilities

These liabilities are stated at known or estimated amounts including, when applicable, accrued charges and
interest or foreign exchange variations.

k) Derivative nancial instruments

The Company uses derivative nancial instruments to reduce its exposure to market risk resulting from
uctuations in interest and foreign currency exchange rates. In the case of asset instruments, these are accounted
for at the lower of cost or market value, whichever is the shorter.

l) l) Taxation
Revenues from sales and services are subject to taxation by State Value-Added Tax ICMS, Services Tax
ISS, Social Contribution Tax on Gross Revenue for Social Integration Program - PIS and Social Contribution Tax on
Gross Revenue for Social Security Financing COFINS at rates prevailing in each region and are presented as sales
deductions in the statement of income.
The credits derived from non-cumulative PIS and COFINS are shown deducted from cost of goods sold in
the statement of income. The debits derived from nancial income and credits derived from nancial expenses are
shown deducted in these proper items of the statement of income.
The advances or amounts subject to offsetting are shown in the current and non-current assets, in
accordance with the estimate for their realization.
The taxation on income comprises the income and social contribution taxes, which are calculated based on
taxable income (adjusted income), at rates applicable according to the prevailing laws 15%, accrued of 10% over
the amount exceeding R$240 yearly for income tax and 9% for social contribution tax.
Deferred and income and social contribution tax assets were recorded under the item Deferred income and
social contribution taxes from tax losses, negative basis of social contribution and temporary differences, taking
into account the prevailing rates of said taxes, pursuant to the provisions of CVM Deliberation 273, as of August 20,
1998 CVM Ruling 371, as of June 27, 2002, and taking into account the history of protability and the expectation of
generating future taxable income based on a technical feasibility study, approved by the Board of Directors.
 Financial Statements 2006 15

m) Provision for contingencies

Provision for contingencies is set up based on legal counsel opinions, in amounts considered sufcient to
cover losses and risks considered probable.
As per CVM Deliberation 489/05, the Company adopted the concepts established in NPC 22 on Provisions,
Liabilities, Gains and Losses on Contingencies when setting up provisions and disclosures on matters regarding
litigation and contingencies (Note 16).

n) Revenues and expenses

Revenues from sales are recognized when customer receives/withdraws the goods. Financial income arising
from credit sales is accrued over the credit term. Expenses and costs are recognized on the accruals basis. Volume
bonuses and discounts received from suppliers in the form of product are recorded as zero-cost additions to
inventories and the benet recognized as the product is sold. Costs of goods include stock and handling costs in
the warehouses.

o) Earnings per share

The calculation was made based on the number of outstanding shares at the balance sheet date as if net
income of the year was fully distributed. Earnings may be distributed, used for capital increase purposes, or to
compose the prot reserve for expansion, based on capital budget.

p) Allocation of net income

The nancial statements reect the Board of Directors proposal to allocate the net income for the year in
the assumption of its approval by the Annual General Meeting.

q) Consolidated nancial statements

The consolidated nancial statements were prepared in conformity with the consolidation principles
prescribed by the Brazilian Corporate Law and CVM Ruling 247, and include the nancial statements of the
Company and its subsidiaries Novasoc, S, Sendas Distribuidora, PAFIDC, Auto Posto MFP Ltda. (Auto Posto
MFP), Auto Posto Sigua Ltda. (Auto Posto Sigua), PA Publicidade Ltda. (PA Publicidade), Loureno & Cia. Ltda.
(Loureno) and Versalhes Comrcio de Produtos Eletroeletrnicos Ltda. (Versalhes). The direct or indirect
subsidiaries, included in the consolidation, and the percentage of parent companys interest comprise:
16 Grupo Po de Acar

Interest % in
2006 2005
Novasoc 10.00 10.00
S 91.92 91.92
Sendas Distribuidora 42.57 42.57
PAFIDC 19.40 19.40
Versalhes 90.00 90.00
PA Publicidade 99.99 -
Auto Posto MFP 99.99 99.99
Auto Posto Sigua 99.99 99.99
Loureno 99.99 -

Although the Companys interest in Novasoc is represented by 10% of Novasocs quotas of interest, Novasoc
is included in the consolidated nancial statements as the Company effectively has control over a 99.98%
benecial interest in Novasoc. The other members have no effective veto or other participating or protective rights.
Under the bylaws of Novasoc, the appropriation of its net income does not need to be proportional to the quotas of
interest held in the company.
The subsidiary Sendas Distribuidora was fully consolidated, in accordance with the shareholders agreement,
which establishes the operating and administrative management by CBD.
The proportional investment of the Parent Company in the income of the investee, the balances payable and
receivable, revenues and expenses and the unrealized prot originated in transactions between the consolidated
companies were eliminated in the consolidated nancial statements.

3. Marketable Securities
The marketable securities at December 31, 2006 and 2005 earn interest mainly at the Interbank Deposit
Certicate (CDI) rate.
 Financial Statements 2006 17

4. Trade Accounts Receivable

a) Breakdown

Parent Company Consolidated

2006 2005 2006 2005
Current
Resulting from sales through
Credit card companies 222,182 213,333 299,272 283,800
Customer credit nancing 28 5,455 30 6,044
Sales vouchers and others 49,437 38,513 63,422 51,288
Credit sales with post-dated checks 19,921 43,061 28,699 59,996
Accounts receivable subsidiaries 134,121 139,817 - -
Allowance for doubtful accounts (12,329) (3,785) (12,597) (4,736)
Resulting from Commercial Agreements 342,999 228,026 397,098 263,556
756,359 664,420 775,924 659,948

Accounts receivable PAFIDC - - 845,668 758,070

Allowance for doubtful accounts - - - (1,292)
- - 845,668 756,778

756,359 664,420 1,621,592 1,416,726

Non-current
Trade accounts receivable Paes Mendona - - 334,247 293,529
- - 334,247 293,529

Customer credit nancing accrues pre-xed interest from 2.92% to 4.99% (from 2.99% up to 4.99% in 2005),
and with payment terms of up to 24 months. Credit card sales are receivable from the credit card companies in
installments not exceeding 12 months. Credits sales settled with post-dated checks bear interest of up to 6.5% per
month (6.5% in 2005) for settlement in up to 90 days. Credit sales are recorded net of unearned interest income.
Accounts receivable from subsidiaries relate to sales of merchandise by the Company, to supply the
subsidiaries stores. Sales of merchandise by the Companys warehouses to subsidiaries were substantially carried
out at cost.
18 Grupo Po de Acar

b) Accounts Receivable PAFIDC

The Company carries out securitization operations of its credit rights, represented by customer credit
nancing, credit sales with post-dated checks and credit card company receivables, to PAFIDC.
The volume of operations was R$7,299,680 in 2006 (R$6,750,149 in 2005), in which the responsibility for
services rendered and subordinated interests was retained. The securitization costs of such receivables amounted
to R$139,485 and R$99,364, recognized as nancial expenses in income for 2006 and 2005, respectively. Services
rendered, which are not remunerated, include credit analysis and the assistance by the collection department to
the funds manager.
The outstanding balance of these receivables at December 31, 2006 and 2005 was R$845,668 and R$756,778,
respectively, net of allowance.

c) Accounts receivable Paes Mendona

Accounts receivable Paes Mendona relate to credits deriving from the payment of liabilities performed
by the subsidiary Novasoc. Pursuant to contractual provisions, these accounts receivable are monetarily restated
and guaranteed by Commercial Rights of certain stores currently operated by CBD. Maturity of accounts receivable
is linked to lease agreements, mentioned in Note 9 (b) (i).

d) Accounts receivable under commercial agreements

Accounts receivable under commercial agreements result from current transactions carried out between the
Company and its suppliers, having the volume of purchases as benchmark.

e) Allowance for doubtful accounts

The allowance for doubtful accounts is based on average actual losses in previous periods complemented by
Managements estimates of probable future losses on outstanding receivables:

Parent Company Consolidated

Resulting from 2006 2005 2006 2005
Customer credit nancing - (1,967) - (2,110)
Credit sales with post-dated checks (101) (253) (106) (481)
Corporate sales (12,120) (1,289) (12,319) (1,538)
Other acccounts receivable (108) (276) (172) (607)
(12,329) (3,785) (12,597) (4,736)
Accounts receivable PAFIDC - - - (1,292)
(12,329) (3,785) (12,597) (6,028)
 Financial Statements 2006 19

5. Inventories

Parent Company Consolidated

2006 2005 2006 2005
Stores 594,592 520,586 817,501 741,255
Warehouses 349,555 315,335 414,462 374,031
944,147 835,921 1,231,963 1,115,286

Inventories are stated, net of provisions for shortage of inventories and obsolescence.

6. Recoverable Taxes
The balances of taxes recoverable at December 31, 2006 and 2005 refer basically to credits from IRRF
(Withholding Income Tax), PIS (Social Contribution Tax on Gross Revenue for Social Integration Program), COFINS
(Social Contribution Tax on Gross Revenue for Social Security Financing) and ICMS (State Value-Added Tax):

Parent Company Consolidated

2006 2005 2006 2005
Current
Income tax and tax on sales 256,306 244,471 378,849 257,121
Others - 13,268 - 13,268
256,306 257,739 378,849 270,389
Non-current
Taxes on sales 94,459 108,310 95,970 205,847
94,459 108,310 95,970 205,847

Total of taxes recoverable 350,765 366,049 474,819 476,236

7. Po de Acar Receivables Securitization fund PAFIDC

PAFIDC is a receivables securitization fund formed in compliance with CVM Rulings 356 and 393 for the
purpose of acquiring the Company and its subsidiaries trade receivables, arising from sales of products and
services to their customers through use of credit cards, post-dated checks, sales vouchers and installment
purchase booklets.
PAFIDC has a predetermined duration of ve years, renewable for an additional ve-years period, beginning
in October 2003. The capital structure of the fund is composed of 80.6% senior quotas (80.6% in 2005) held by
third parties and 19.4% subordinated quotas (19.4% in 2005) held by the Company.
20 Grupo Po de Acar

The net assets of PAFIDC at December 31, 2006 and 2005 are summarized as follows:

2006 2005
Assets
Available funds 75,689 168,107
Accounts receivable 845,668 758,070
Allowance for doubtful accounts - (1,292)
Total assets 921,357 924,885

Liabilities
Accounts payable 193 222
Shareholders equity (*) 921,164 924,663
Total liabilities 921,357 924,885
(*) Includes (mandatory) redeemable quotas of interest in the amount of R$734,124 on December 31, 2006 (R$738,612 in 2005).

The subordinated quotas were attributed to the Company and are recorded in the non-current assets as
participation in the securitization fund, the balance of which at December 31, 2006 was R$164,034 (R$186,051
December 31, 2005). The retained interest in subordinated quotas represents the maximum exposure to loss under the
securitization transactions.
The series A senior quotas reached benchmark protability of 103.0% of CDI Interbank Deposit Certicate,
variable interest interbank fee, from rst subscription of quotas to February 20, 2004, and 105.0% of CDI after such date;
the series B senior quotas were remunerated at 101.0% of CDI. The remaining balance of results will be attributed to the
subordinated quotas. The series B senior quotaholders will redeem at June 23, 2007 the principal amount of R$71,100
in each redemption, updated by the reference yield, and will redeem the remaining balance of R$167,893 (R$311,241
December 31, 2005) at the end of the funds term. The series A quotaholders will redeem their quotas only at the end
of the funds term, the amount of which at December 31, 2006 corresponds to R$495,131 (R$427,371 December 31, 2005)
(Note 13).
Subordinated quotas are non-transferable and registered, and were issued in a single series. The Company will
redeem the subordinated quotas only after the redemption of senior quotas or at the end of the funds term. Once the
senior quotas have been remunerated, the subordinated quotas will receive the balance of the funds net assets after
absorbing any loss on the credit rights transferred to the fund and any losses attributed to the fund. Their redemption
value is subject to credit, prepayment, and interest rate risks on the transferred nancial assets.
The holders of senior quotas have no recourse against the other assets of the Company in the event customers
default on the amounts due. As dened in the agreement between the Company and PAFIDC, the transfer of credit
rights is irrevocable, non-retroactive and the transfer is denitive and not enforceable against the Company.
 Financial Statements 2006 21

The PAFIDC nancial statements for the years ended at December 31, 2006 and 2005 were audited by
other independent auditors and are consolidated into the Companys nancial statements. In the year ended at
December 31, 2006, total assets and net income of this investee represent 7.9% and 39.2%, respectively, in relation
to the Companys consolidated nancial statements (8.5% and 10.7% of total assets and net income, respectively,
compared to the Companys consolidated nancial statements in the year ended at December, 31, 2005).

8. Balances and Transactions with Related Parties

Balances

Accounts Intercompany
receivable Trade commissions receivable Proposed
Company (payable) receivable payable) (payable) dividends
Po de Acar Industria e Comrcio S.A. (PAIC) 898 - - -
Wilkes - - - (7,946)
Casino Guichard Perrachon (Casino) - - - (385)
Pennsula Participaes Ltda. (Pennsula) 12,528 - - (478)
Onyx 2006 Participaes - - - (1,906)
Rio Plate Empreendimentos e Participaes - - - (377)
Sendas S.A. - - 17,824 -
Novasoc 28,271 4,013 - -
S 49,392 445,708 - -
Sendas Distribuidora 52,543 (17,743) 90,792 -
Versalhes (97,936) 12,022 - -
Auto Posto Sigua - 267 - -
Auto Posto MFP - 795 - -
Loureno (1,137) - - -
FIC 16,626 - - -
Others - 8,580 - (685)
Balance at 12.31.2006 61,185 453,642 108,616 (11,777)
Balance at 12.31.2005 23,661 737,626 428,224 (32,615)
22 Grupo Po de Acar

8. Balances and Transactions with Related Parties continued

Transactions held during the year ended at December 31, 2006

Services
rendered Net sales Net nancial Dividends
Company and rents (purchases) income paid
PAIC (4,320) - - -
Casino (6,271) - - 8,572
Pennsula (69) - - 1,458
Vieri - - - 16,902
Onyx 2006 Participaes - - - 3,561
Rio Plate Empreendimentos e Participaes - - - 1,272
Fundo de Invest. Imob. Pennsula (111,539) - - -
Novasoc 8,919 185,585 - -
S 16,233 431,587 - -
CIPAL 576 40,706 - -
Sendas Distribuidora 121,750 248,525 32,237 -
Versalhes - (401,088) - -
Loureno - (949) - -
FIC 31,135
Others (15,359) - - 850
Balance at 31.12.2006 41,055 504,366 32,237 32,615
Balance at 31.12.2005 86,098 734,556 41,727 65,305

Accounts receivable and sale of goods relate to the supply of stores, mainly of Novasoc, S, CIPAL, Sendas
Distribuidora and Versalhes, by the Companys warehouse and were made at cost; the remaining transactions,
described below, are carried out at usual market prices and conditions. The trade commission contracts are subject
to an administration fee.

(i) Leases
CBD leases 21 properties from the Diniz Group. Payments under such leases in 2006 totaled R$15,180
(R$14,695 in 2005), including an additional contingent lease based on 0.5% to 2.5% of revenues from stores.
Sendas Distribuidora leases 57 properties from the Sendas Group and 7 properties from CBD. In 2006, the
total lease payments amounted to R$29,466 and R$4,989, respectively (R$34,678 and R$4,871 in 2005, respectively),
including an additional contingent lease based on 0.5% to 2.5% of revenues from stores. In September 2005, the
amount of R$10,509 was advanced to Sendas S.A. regarding the lease of 7 stores, which will be amortized in
37 installments.
 Financial Statements 2006 23

The leases were taken out under terms similar to those that would have been established if they had been
taken out with non-related parties.

(ii) Fundo de Investimento Imobilirio Pennsula leases

At October 3, 2005, nal agreements were entered into referring to the sale of 60 Company and subsidiary
properties to a real estate fund named Fundo de Investimento Imobilirio Pennsula (Note 10). The properties sold
were leased back to the Company for a twenty-year term, renewable for two further consecutive periods of ten
years each. CBD was granted a long-term lease agreement for all properties that were part of this operation, in
addition to periodic reviews of the minimum rent amounts. In addition, CBD has the right to exit individual stores
before termination of the lease term, in case of the company be no longer interested in maintaining such leases.
The total amount paid under these leases in 2006 was R$114,943, of which R$111,539 was paid by CBD R$2,951
paid by Novasoc and R$453 paid by S (in 2005 R$29,006, R$28,395 paid by CBD, R$535 paid by Novasoc and R$76
paid by S). These amounts include an additional contingent lease based on 2.0% of revenues from stores.

(iii) Right of use of the Goodlight brand

The Company paid the amount of R$179 in 2006 (R$228 in 2005) for the right of use of the Goodlight
brand, owned by Mrs. Luclia dos Santos Diniz, minority shareholder of the Company. As from October 1, 2006,
the Company will no longer hold the exclusive rights of use of this brand, and there are no encumbrances for the
Company foreseen in the agreement for the use of rights of such brand.

(iv) Apportionment of corporate expenses

The corporate services, such as purchases, treasury, accounting, human resources and Shared Services Center
(CSC) rendered to subsidiaries and afliated companies are passed on by the cost amount effectively incurred
with such services.

(v) Technical Assistance Agreement with Casino

In CBD Board of Directors meeting held on July 21, 2005, a Technical Assistance Agreement was signed
with Casino, whereby, through the annual payment of US$2,727, Casino shall provide services to CBD related to
technical assistance in the human resources, own brands, marketing and communications, global campaigns
and administrative assistance areas. This agreement is effective for seven years, with automatic renewal for an
indeterminate term. This agreement was approved in the Extraordinary General Meeting held at August 16, 2005.
In 2006, CBD paid R$6,271 (R$2,003 in 2005), in connection with the services provided for in such agreement.
24 Grupo Po de Acar

9. Investments

a) Information on investments at December 31, 2006 and 2005

2006

Shares/ Shareholders
quotas of Holding (direct or Paid-in equity (capital Net income (loss)
interest held indirect) % capital deciency) for the year
Novasoc 1,000 10.00 10 (43,307) 11,285
S 1,133,990,699 91.92 1,233,671 1,212,288 16,833
Sendas Distribuidora 450,001,000 42.57 835,677 23,603 (625,060)
Miravalles 42,250 50.00 260,888 158,502 (105,902)
Nova Saper 36,362 99.99 0 100 -
Versalhes 10,000 90.00 10 (358) 113
Auto Posto MFP 14,999 99.99 15 304 289
Auto Posto Sigua 29,999 99.99 30 (44) (74)
PA Publicidade 9,999 99.99 10 433 333
Loureno 1,905,615 99.99 1,906 1,496 (136)

2005

Shares/ Shareholders
quotas of Holding (direct Paid-in equity (capital Net income (loss)
interest held or indirect) % capital deciency) for the year
Novasoc 1,000 10.00 10 (54,592) (2,365)
S 1,133,990,699 91.92 1,233,671 1,195,455 58,902
Sendas Distribuidora 450,001,000 42.57 835,677 648,663 (111,759)
Miravalles 30,000 50.00 120,000 124,005 (32,473)
Nova Saper 36,362 99.99 0 100 -
Versalhes 10,000 90.00 10 (471) (481)
Auto Posto MFP 14,999 99.99 15 15 -
Auto Posto Sigua 29,999 99.99 30 30 -
 Financial Statements 2006 25

b) Change in investments

Conso-
Parent Company lidated

Sendas
Distri- Nova Lou-
Novasoc S buidora Saper Cipal reno Others Total Total

Balances at
December 31, 2004 - 809,737 24,587 101 - - 104 834,529 78,545

Additions - 236,845 - - - - - 236,845 -

Write-offs - - (22,633) - - - - (22,633) -
Equity results (2,365) 52,281 (1,954) - - - 46 48,008 (16,190)

Transfer to capital
deciency 2,365 - - - - - - 2,365 -
Balances at
December 31, 2005 - 1,098,863 - 101 - - 150 1,099,114 62,355
Additions - - - - - 1,632 100 1,732 70,444
Write-offs - - - - - - - - (45)
Equity results 11,285 15,473 - - 170 (136) 644 27,436 (53,197)
Merger of the subsidiary - - - - 4,908 - 100 5,008 -

Transfer to net assets - - - - (5,078) - - (5,078) -

Transfer to capital
deciency (11,285) - - - - - (57) (11,342) -
Balances at
December 31, 2006 - 1,114,336 - 101 - 1,496 937 1,116,870 79,557

(i) Novasoc Novasoc has, currently, 16 lease agreements with Paes Mendona with a ve-years term, which
may be extended twice for similar periods through notication to the leaseholder, with nal maturity in
2014. During the term of the contract, the shareholders of Paes Mendona cannot sell their shares without
prior and express consent of Novasoc. Paes Mendona is by contract fully and solely responsible for all and
any tax, labor, social security, commercial and other liabilities. The payments of annual leases by operating
lease amounted to R$8,919 in 2006 (R$8,707 in 2005), including an additional contingent lease based on
0.5% to 2.5% of revenues from stores.
26 Grupo Po de Acar

Under Novasoc by-laws, the distribution of its net income need not be proportional to the holding of each
shareholder in the capital of the Company. As per members decision, the Company holds 99.98% of Novasocs
results as from 2000.
At December 31, 2006, the subsidiary Novasoc recorded capital deciency. With a view to the future
operating continuity and economic feasibility of such subsidiary, assured by the parent company, the Company
recorded R$43,307 (R$54,592 in 2005), under Provision for capital deciency to recognize its obligations before
creditors.
(ii) S S holds a direct interest in Miravalles, corresponding to 50% of total capital. Investment at
Miravalles indirectly represents investment at FIC (Note 9 (d)).
(iii) Mergers and acquisitions At October 20, 2006 the Company acquired all the quotas of the company
Loureno, headquartered in the city of Brotas, state of So Paulo, by the amount of R$4,117, merging 1
new store into its operational assets.

c) Investment agreement CBD and Sendas

In February 2004, based on the Investment and Association Agreement, the companies CBD and Sendas S.A.
constituted, by means of transfer of assets, rights and obligations, a new company known as Sendas Distribuidora
S.A., with the objective of operating in the retailing market in general, by means of the association of operating
activities of both networks in the state of Rio de Janeiro. CBDs indirect interest in Sendas Distribuidora at
December 31, 2006 corresponded to 42.57% of total capital. It is incumbent upon CBDs Board of Executive Ofcers
to conduct the operating and administrative management of Sendas Distribuidora, in addition to its prevailing
decision when electing or removing executive ofcers.
Pursuant to its Shareholders Agreement, Sendas S.A. may at any time as from February 1, 2007 exercise the
right to barter its paid-in shares or a portion thereof, for preferred shares of CBD. At December 31, 2006, Sendas S.A.
held 42.57% shareholding in the total capital of Sendas Distribuidora, 23.65% of which already paid-in and 18.92% to
be paid-in.
Should Sendas S.A. exercise such right to barter, CBD will comply with the obligation, by means of one
of the following:
i) To conduct the share barter trade for the value of transfer (*);
ii) To purchase the shares on which the barter rights have been exercised in cash, for the value of transfer (*);
iii) To adopt any corporate procedure (CBD capital increase, merger of shares as per article 252 of the
Corporate Law, or any other);
(*) Value of transfer will be the value of the paid-in shares (23.65% at December 31, 2006 and 2005), which
must the higher between the two options below, limited to CBDs market value:
Price of shares calculated based on the companys valuation to be calculated by acknowledged
investment bank;
Price of shares calculated based on the companys valuation, equivalent to 40% on
gross sales of Sendas Distribuidora in the 12 months preceding the acquisition date.
 Financial Statements 2006 27

CBDs Preferred shares, issued to meet the barter, only may be sold according to the following dates:
Between February 1, 2007 and January 31, 2010: 1/3 of CBD preferred shares;
Between February 1, 2010 and January 31, 2013: 1/3 of CBD preferred shares; and
As from February 1, 2013: the remaining CBD preferred shares still held by Sendas S.A.

At September 16, 2005, Sendas S.A. and CBD and its subsidiaries entered into the 2nd Addendum and
Ratication of Shareholders Agreement of Sendas Distribuidora, which resolved on:
The adoption of new proportionality when appointing Board of Directors members, being CBD then
entitled to appoint 7 out of the 13 members to be elected;
Restrict the veto right of Sendas S.A. only as to the amendment to the purpose of the Company;
The postponement of the additional term (second term) of payment of class A preferred shares not paid-
in by Sendas S.A., for a period to end at February 28, 2014. During this second term, the payment only may
be made in cash, especially by means of utilization of dividends paid by the Company to Sendas S.A. After
such term, should payment do not occur, such shares will be cancelled.

At October 19, 2006, Sendas S.A. manifested in writing to CBD the wish to exercise the put option, pursuant
to Clause 6.7 of Sendas Distribuidora Shareholders Agreement, related to the transfer of equity control. CBD,
understanding that a sale of control was not held, sent a counter-notice to Sendas S.A.
At October 31, 2006, CBD was notied by the Cmara de Conciliao e Arbitragem da Fundao Getulio Vargas
FGV (Chamber of Conciliation and Arbitration of the Getulio Vargas Foundation) that Sendas S.A. has led an appeal
and brought the matter to arbitration, authority expected to discuss such matter.
At January 5, 2007, Sendas S.A. notied CBD, expressing the exercise of right to swap the totality of paid-up
shares owned thereby with preferred shares of CBDs capital stock, provided for in Clause 6.9.1 of Shareholders
Agreement of Sendas Distribuidora, subjecting the effectiveness of swap to the award of arbitration mentioned above
not to acknowledge the put exercise right on the part of Sendas.
At March 13, 2007, CBD and Sendas entered into an Arbitration Commitment, commencing the
arbitration proceeding.

(i) CADE (Administrative Council for Economic Defense)

On March 5, 2004, Sendas Distribuidora shareholders entered into an Operation Reversibility
Agreement related to the association between CBD and Sendas S.A. in the state of Rio de Janeiro. This
agreement establishes conditions to be observed until the nal decision on the association process,
such as: a) the continuance, totally or partially, of the stores under Sendas Distribuidora responsibility;
b) maintenance of the work posts in accordance with the average gross revenue by employee of the ve
largest supermarket chains; c) non-reduction of the term of current lease agreements.
Shareholders are waiting for the conclusion of the process, however, based on the opinion of their
legal advisors and on the normal procedural steps of the process, they believe that the association will be
approved by the CADE.
28 Grupo Po de Acar

(ii) Capital subscription by the AIG Group

At November 30, 2004, shareholders of Sendas Distribuidora and investment funds of the AIG
Group (AIG) entered into an agreement through which AIG invested the amount of R$135,675 in Sendas
Distribuidora, by means of subscription and payment of 157,082,802 class B preferred shares, issued by
Sendas Distribuidora, representing 14.86% of its capital. AIG has waived its rights to receive dividends,
until November 30, 2008.
After this operation, the Company, through its subsidiary S, now holds 42.57% of the Sendas
Distribuidora total capital.
According to the above mentioned agreement, CBD and AIG mutually granted reciprocal call
and put options of the shares purchased by AIG in Sendas Distribuidora, which may be exercised within
approximately four years.
Upon exercising the referred options, the shares issued by Sendas Distribuidora to AIG will
represent a put against CBD which may be used to subscribe up to three billion preferred shares to be
issued by CBD in a future capital increase.
The price of the future issuance of CBD preferred shares will be set based on market value at the
time of issuance, and the intention is allowing the payment by AIG in the maximum quantity referred
to above. If the AIG value of Sendas Distribuidoras shares results in more than the value of three billion
shares of CBD, CBD will pay the difference in cash.
The exit of AIG from Sendas Distribuidora is dened based on the Exit Price, the calculation is
based on the Earnings Before Interest, Tax, Depreciation and Amortization EBITDA, EBITDA multiple and
the net nancial indebtedness of Sendas Distribuidora. This exit price will give AIG the right to purchase
CBD preferred shares according the criteria below:
Should the exit price be lower than the equivalent to two billion CBD preferred shares (at market
value on the occasion), the number of shares to be issued will be dened by the exit price divided by
the CBD preferred share market value;
Should the exit price exceed the equivalent to two billion CBD preferred shares (at market value on the
occasion), the number of shares to be issued will be, at CBD discretion, a minimum of two billion shares
and a maximum of three billion shares, and the difference between the exit price and the amount
equivalent to the number of CBD preferred shares issued (dened by CBD) will be paid in cash.
At December 31, 2006, total AIG shareholding represented a credit of R$151,157 (R$97,212
December 31, 2005), which, converted to the average quotation of the last week of December 2006 of CBD
shares in the So Paulo Stock Exchange (BOVESPA), would be equivalent to a total of 2,181,516,928 shares
(1,328,390,000 shares December 31, 2005) of the Company (1% of its capital).
 Financial Statements 2006 29

d) Investment agreement CBD and Ita

Miravalles, a company set up in July 2004 and owner of exploitation rights of the Companys nancial
activities, received funds from Ita related to capital subscription, which then started to hold 50% of such company.
Also in 2004, Miravalles set up Financeira Ita CBD S.A. FIC, with capital stock of R$150,000. It is a company which
operates in structuring and commercialization of nancial products and services exclusively to CBD customers.
At December 22, 2005, an amendment to the partnership agreement between CBD, Ita and FIC was
signed, and the clauses referring to meeting of performance goals, initially established, were changed. By such
amendment, the meeting of goals and the guarantee account are not longer tied, and nes for non compliance
of said goals were set out. In 2006, the Company recognized the remaining amount of R$58,151 (R$38,140 in 2005)
under non-operating results, due to the fulllment of certain performance goals during the year.
This partnership is effective for 20 years, and may be extended for an indeterminate term. The operational
management of FIC is under the responsibility of Ita.
The Miravalles nancial statements for the years ended at December 31, 2006 and 2005 were audited by
other independent auditors. In the year ended at December 31, 2006, total assets and net result of operations of
said investee represent 8.5% and 62.2 % respectively, in relation to the Companys consolidated nancial statements
(0.6% and 6.3% of total assets and net income, respectively) when compared to the Companys consolidated
nancial statements in the year ended at December 31, 2005.

10. Property and Equipment

Parent Company
Annual depreciation rates 2006 2005

Weighted Accumulated
Nominal average Cost depreciation Net Net
Land 552,928 - 552,928 402,289
Buildings 3.33 3.33 2,051,714 (392,534) 1,659,180 1,482,597
Leasehold improvements * 6.9 1,217,197 (446,054) 771,143 611,098
Equipment 10 a 33 16.6 801,292 (462,834) 338,458 338,440
Installations 20 a 25 20.0 393,300 (308,007) 85,293 81,101
Furniture and xtures 10 10 181,191 (77,160) 104,031 100,613
Vehicles 20 20 20,328 (12,782) 7,546 1,265
Construction in progress - - 35,627 - 35,627 99,240
Other 10 10 33,482 (17,873) 15,609 3,253
5,287,059 (1,717,244) 3,569,815 3,119,896
Annual average depreciation rate % 5.38 6.60
30 Grupo Po de Acar

10. Property and Equipment continued

Consolidated
2006 2005

Accumulated
Cost depreciation Net Net
Land 594,585 - 594,585 440,850
Buildings 2,134,831 (406,579) 1,728,252 1,553,401
Leasehold improvements 1,757,599 (643,469) 1,114,130 989,372
Equipment 996,800 (553,921) 442,879 462,664
Installations 528,526 (391,132) 137,394 139,309
Furniture and xtures 268,182 (105,081) 163,101 165,287
Vehicles 21,062 (13,105) 7,957 1,408
Construction in progress 37,115 - 37,115 106,170
Other 33,518 (17,891) 15,627 3,253

6,372,218 (2,131,178) 4,241,040 3,861,714

Annual average depreciation rate % 5.92 7.32

* Leasehold improvements are depreciated based on the lower of the estimated useful life of the asset or the lease term of agreements, whichever is shorter.

At October 3, 2005, the Company concluded the sale of 60 properties (28 Extra hypermarkets and 32 Po de
Acar supermarkets), the book residual value of which was R$1,000,834 (Company) and R$1,017,575 (Consolidated),
to the Fundo Pennsula, and the Company received the amount of R$1,029,000. The result of R$11,425 from the
sale of properties was recorded as non-operating result. The properties sold were leased to the Company for a
twenty-years term, and may be renewed for another two consecutive periods of ten years each (Note 8(ii)). On
account of such sale, the Company paid upon the execution of stores leasing agreements, the amount of R$25,517
corresponding to the fee of adhesion to the long-term agreements, recorded in deferred charges and it is being
amortized for the effectiveness period of the leasing agreements.

a) Additions to property and equipment

Parent Company Consolidated

Period ended at
2006 2005 2006 2005
Additions 738,073 685,702 806,564 842,308
Capitalized interest 48,108 41,466 50,632 46,210
786,181 727,168 857,196 888,518
 Financial Statements 2006 31

Additions made by the Company relate to purchases of operating assets, acquisition of land and buildings
to expand activities, construction of new stores, modernization of existing warehouses, improvements of various
stores and investment in equipment and information technology.
The Company engaged specialized consultants, who during the period between April and October 2006,
carried out the physical inventory of assets classied as equipment, furniture and xtures, as well as leasehold
improvements in all the facilities of the groups companies. In addition, the Company set up a provision for the
realization of assets referring to the leasehold improvements. The differences identied at the end of physical
inventory and the provision for realization, which amounted to R$24,045, were recorded in contra account to results
of respective companies under the non-operating expense item.

11. Intangible Assets

Parent Company Subsidiaries Consolidated

Balance at December 31, 2004 656,962 555,805 1,212,767

Additions 11,210 20,588 31,798

Transfer from property and equipment - (8,525) (8,525)
Transfer from investments - 18,639 18,639
Amortization (115,832) (41,478) (157,310)
Write-off (13,868) - (13,868)

Balance at December 31, 2005 538,472 545,029 1,083,501

Additions 3,687 - 3,687

Addition by merger 1,228 (1,228) -
Amortization (114,516) (57,792) (172,308)
Provision for goodwill reduction (i) - (268,886) (268,886)
Write-off (15,049) - (15,049)

Balance on December 31, 2006 413,822 217,123 630,945

Upon the acquisition of subsidiaries, the amounts originally recorded under investments as goodwill based
mainly on expected future protability , were transferred to intangible assets, and will be amortized over periods
consistent with the earnings projections on which they were originally based, limited for ten years.
32 Grupo Po de Acar

(i) Provision for goodwill reduction Sendas Distribuidora S.A.

The Company reviewed the economic and nancial assumptions sustaining the future realization of
goodwill of its subsidiary company Sendas Distribuidora. Based on this review, we concluded the need of provision
for partial reduction of goodwill, the net effect of which on the consolidated was R$268,886, recorded under the
non-operating result item (Note 22). The deferred tax credits were fully provisioned (Note 17 (b)).

12. Deferred Charges

Parent Company Subsidiaries Consolidated

Balance at December 31, 2004 25,198 16,285 41,483

Additions 64,190 105 64,295

Amortization (28,189) (15,898) (44,087)

Balance at December 31, 2005 61,199 492 61,691

Additions 28,512 128 28,640

Transfer to property and equipment (2,905) 3 (2,902)
Amortization (10,743) (405) (11,148)

Balance at December 31, 2006 76,063 218 76,281

Regarding expenses with specialized consulting fees, incurred during the development and implementation
of strategic projects, we point out:
Categories management;
Maximum efciency in supermarket stores;
Implementation of CSC;
Implementation of procurement center of materials and indirect services.

The pre-operational expenditures are also represented by costs incurred in the development of new products
by means of creation of Brand TAEQ, which aims at serving the well-being segment and a new business model
convenience retail or neighborhood supermarket Extra Perto.
 Financial Statements 2006 33

13. Loans and Financing

Parent Company Consolidated

Annual nancial charges 2006 2005 2006 2005
Short-term
In local currency
BNDES (ii) TJLP + 1 to 4.1% 89,571 128,693 89,571 128,693
Working capital (i) TJLP + 1.7 to 3.5% of the CDI 7,542 352 7,542 352

Weighted average rate of 104.0% of CDI

Working capital (i) (104% in 2005) - - 22,752 146
PAFIDC quotas (iii) Senior B 101% of CDI - - 71,100 -
In foreign currency With swap for Brazilian Reais
BNDES (ii) exchange variation + 3.5 to 4.1% 15,069 21,051 15,069 21,051
Working capital (i) Weighted average rate 103.4%
of CDI (103.3% in 2005) 390,420 214,456 651,231 257,234
Imports US Dollar exchange variation 8,719 11,314 14,056 15,138

511,321 375,866 871,321 422,614

Long-term
In local currency
BNDES (ii) TJLP + 1 to 4.1% 113,524 198,730 113,524 198,730
Working capital (i) TJLP + 1.7 to 3.5% 6,401 62 6,401 62
PAFIDC quotas (iii) Senior A 105% of CDI (103.0% 2005) - - 495,131 427,371
Senior B 101% of CDI (101.0% 2005) - - 167,893 311,241
In foreign currency With swap for Brazilian Reais
BNDES (ii) exchange variation + 3.5 to 4.1% 19,672 37,804 19,672 37,804

Weighted average rate 103.9%

Working capital (i) of CDI (103.8% in 2005) - 313,465 579,531 977,242

139,597 550,061 1,382,152 1,952,450

The Company uses swaps operations to switch obligations from xed interest rate in U.S. Dollar to Brazilian
Real related to CDI (oating) interest rate. The Company entered, contemporaneously with the same counterparty,
into cross-currency interest rate swaps and has treated the instruments on a combined basis as though the loans
were originally denominated in Reais and accrued interest at oating rates.
The annualized CDI benchmark rate at December 31, 2006 was 15.0% (18.0% at 12/31/2005).
34 Grupo Po de Acar

(i) Working capital nancing

Obtained from local banks and part of it is used to fund customer credit (the remaining balance
not granted to PAFIDC), or originated from needs of nancing of CBD growth. This is made without
guarantees, but endorsed by CBD in case of Sendas Distribuidora.

(ii) BNDES credit line

The line of credit agreements, denominated in Reais, with the Brazilian National Bank for Economic
and Social Development (BNDES), are either subject to the indexation based on TJLP rate (long-term
rate), plus annual interest rates, or are denominated based on a basket of foreign currencies to reect
the BNDES funding portfolio, plus annual interest rates. Financing is paid in monthly installments after a
grace period, as mentioned below.
The Company cannot offer any assets as collateral for loans to other parties without the
prior authorization of BNDES and is required to comply with certain debt covenants, calculated on
the consolidated balance sheet, in accordance with Brazilian GAAP, including: (i) maintenance of a
capitalization ratio (shareholders equity/total assets) equal to or in excess of 0.40; and (ii) maintenance
of a current ratio (current assets/current liabilities) equal to or in excess of 1.05. Management effectively
controls and monitors covenants, which were fully performed. The parent company offered pledges as a
joint and several liable party for settlement of the agreements.

At December 31

Number of
Grace period monthly
Contract date Annual nancial charges in months installments Maturity 2006 2005
January 13, 2000 TJLP + 3.5% 12 72 January 2007 885 11,300
November 10, 2000 TJLP + 1 to 3.5% 20 60 May 2007 18,849 62,959
November 10, 2000 Basket of currencies + 3.5% 20 60 July 2007 4,154 12,324
November 14, 2000 TJLP + 2.0% 20 60 June 2007 1,358 4,002
April 16, 2001 TJLP + 3.5% - 60 April 2006 - 1,870
April 16, 2001 Basket of currencies + 3.5% - 60 April 2006 - 477
March 12, 2002 Basket of currencies + 3.5% 12 48 March 2007 161 883
April 25, 2002 TJLP + 3.5% 6 60 October 2007 8,521 18,425
April 25, 2002 Basket of currencies + 3.5% 6 60 October 2007 1,179 2,832
November 11, 2003 Basket of currencies + 4.125% 14 60 January 2010 29,246 42,339
November 11, 2003 TJLP + 4.125% 12 60 November 2009 163,604 215,834
November 11, 2003 TJLP+ 1.0% 12 60 November 2009 9,879 13,033
237,836 386,278
 Financial Statements 2006 35

In the event the TJLP exceeds 6% per annum, the excess is added to the principal. In 2006 and 2005, R$4,732
and R$10,684, respectively, were added to the principal.

(iii) Redeemable PAFIDC quotas of interest

As per Ofcial Memorandum CVM/SNC/SEP 01/2006, the Company reclassied the amounts under the
caption Redeemable PAFIDC quotas of interest, due to their characteristics, to the Loans and nancing group of
accounts (Note 7).
Characteristics of the PAFIDC quotas of interest:

Types of quotas Number Yield Redemption date

Senior A 5,826 105% of CDI 7/4/2008
Senior B 4,300 101% of CDI 7/4/2008

(iv) Maturities long-term

2006
Parent Company Consolidated
2008 75,073 441,903
2009 63,737 727,333
2010 787 212,916
139,597 1,382,152

14. Debentures

a) Breakdown of outstanding debentures:

Annual
Outstanding nancial
Type securities charges 2006 2005
5th issue 1st series Floating 40,149 CDI + 0.95% 414,761 419,469
Total 414,761 419,469

Non-current liabilities - (401,490)

Current liabilities 414,761 17,979
36 Grupo Po de Acar

b) Debenture operation:

Number of
debentures Value

At December 31, 2004 150,607 593,969

Amortization of principal Sendas rst series (10,550) (131,746)
Amortization of principal fourth issue (99,908) (43,466)
Net interest from payments - 712

At December 31, 2005 40,149 419,469

Net interest from payments - (4,708)

At December 31, 2006 40,149 414,761

c) Additional information
The fourth issue debentures, single series, in the amount of R$47,063 were paid in the third
quarter of 2005.
Sendas debentures rst series, in the amount of R$139,499 were paid in the rst quarter of 2005.

Fifth issue at October 4, 2002, shareholders approved the issue and public placement limited to R$600,000
of 60,000 non-convertible debentures. The Company received proceeds of R$411,959, for 40,149 non-convertible
debentures issued from the rst series. The debentures are indexed to the average rate of Interbank Deposits
(DI) and accrue annual spread of 1.45% payable every six months. The rst series was renegotiated on September
9, 2004, to accrue interest of CDI plus an annual spread of 0.95% as from October 1, 2004 which is payable
semi-annually, beginning at April 1, 2005 and ending at October 1, 2007. The debentures will not be subject to
renegotiation until maturity at October 1, 2007. The Company is in compliance with debt covenants provided for in
the 5th issue, calculated over the consolidated balance sheet, in accordance with the accounting practices adopted
in Brazil: (i) net debt (debt less cash and cash equivalents and accounts receivable) not higher than the balance of
shareholders equity; (ii) maintenance of a ratio between net debt and EBITDA (Note 23), less than or equal to four.
 Financial Statements 2006 37

15. Taxes and Social Contribution Payable

These are composed of the following:

Parent Company Consolidated

2006 2005 2006 2005
Taxes and social contribution payable
Taxes paid in installments 50,288 46,245 52,553 48,230
PIS and COFINS payable 3,287 16,072 6,583 25,014
Provision for Income Tax and Social Contribution 27 12,094 9,539 16,509
53,602 74,411 68,675 89,753

The Company waived certain claims and legal actions, opting to join the Special Tax Payment Installments
Program (PAES), pursuant to Law 10,680/2003. These installment payments are subject to the Long-Term Interest
Rate TJLP and may be payable in up to 120 months.
The amounts payable in installments were as follows:

Parent Company Consolidated

2006 2005 2006 2005
Current
INSS 35,668 33,475 35,799 33,598
PAES 14,620 12,770 16,754 14,632
50,288 46,245 52,553 48,230
Non-current
INSS 196,172 217,583 196,895 218,388
PAES 51,991 82,980 64,206 95,083
248,163 300,563 261,101 313,471
38 Grupo Po de Acar

16. Provision for Contingencies

Provision for contingencies is estimated by management, supported by its legal counsel. Such provision
was set up in an amount considered sufcient to cover losses considered probable by the Companys legal counsel,
as shown below:

Parent Company

Reversals/ Monetary
2005 Additions payments restatement 2006
Tax claims
COFINS and PIS 873,285 26,737 - 75,979 976,001
Other 6,741 26,159 (20,913) 3,878 15,865
Labor 42,419 12,922 (23,407) 8,354 40,288
Civil and other 88,594 23,744 (2,126) 10,862 121,074

Total 1,011,039 89,562 (46,446) 99,073 1,153,228

Consolidated

Reversals/ Monetary
2005 Additions payments restatement 2006
Tax claims
COFINS and PIS 921,963 19,577 (9,862) 79,642 1,011,320
Other 9,013 27,876 (23,765) 3,970 17,094
Labor 44,567 15,766 (26,367) 8,742 42,708
Civil and other 101,368 30,791 (6,372) 12,554 138,341

Total 1,076,911 94,010 (66,366) 104,908 1,209,463

a) Taxes
Tax-related contingencies are indexed to the SELIC (Central Bank Overnight Rate), (14.9% in 2006 and 19.1% in
2005) and are subject, when applicable, to nes. In all cases, both interest charges and nes, when applicable, have
been computed with respect to unpaid amounts and are fully accrued.
 Financial Statements 2006 39

COFINS and PIS

In 1999, the rate for COFINS increased from 2% to 3%, and the tax base of both COFINS and PIS was extended
in 1999 to encompass other types of income, including nancial income. The Company is challenging the increase
in contributions of COFINS and the extension of base of such contributions. Provision for COFINS and PIS includes
unpaid amounts, monetarily restated, resulting from the lawsuit led by the Company and its subsidiaries,
claiming the right to not apply Law 9,718/98, permitting it to determine the payment of COFINS under the terms
of Complementary Law 70/91 (2% of revenue) and of PIS under Law 9,715/98 (0.65% of revenue) as from February 1,
1999. The lawsuits are in progress at the Regional Federal Court, and up to this moment, the company has not been
required to make judicial deposits.
As the calculation system of such contributions started to use the non-cumulative tax principle, starting
by PIS as from December 1, 2002, with the Law 10,637/02 and COFINS, as from February 2004 by means of Law
10,833/03, the Company and its subsidiaries then started to apply said rules, as well as, to question with the
Judiciary Branch, the extension of tax base of such contributions, aiming at continuing its application by the
concept of sales results, as well as the appropriation of credits not accepted by laws and that the Management
understands to be subject to appropriation, such as nancial expenses and third parties expenses. The provision
recorded in the balance sheet includes the unpaid installment, monetarily restated. In addition, the company
challenges the limit of percentage and the term for appropriation of COFINS credit over the initial inventory carried
with the Law 10,833/03, recording in its balance sheet the difference of appropriated credit under such rule by
virtue of judicial authorization. There are no judicial deposits for such discussions.
The Company has another discussion stemming from the merged company Cia. Pernambucana de
Alimentos CIPAL, as to the tax base applied to PIS and COFINS contributions. We discuss the application of gross
income as tax base, booking in its balance sheet the restated difference between the amounts paid and the basis
provided for by Law 9,718/98, in the amount of R$7,606. Said discussion has no judicial deposit.
The subsidiary S obtained on September 22, 2006, nal favorable ruling regarding the questioning linked to
the broadening of COFINS and PIS tax base, as provided for by Law 9,718/98. Thus, provisions were reversed in the
amount of R$8,874 and R$921, respectively, on that date.

Other
The Company and its subsidiaries have other tax contingencies, which after analysis of its legal counsels,
were deemed as probable losses: a) lawsuit questioning the non-levy of IPI over codsh imports, which awaits
decision by appellate court judge; b) federal administrative assessment about the restatement of equity
accounts by an index higher than that accepted by tax authorities, which awaits decision by administrative
appellate court judge (Summer Plan); c) administrative assessment referring to the collection of debts of
withholding IRPJ (corporate income tax), PIS and COFINS, which also awaits decision by administrative appellate
court judge; d) administrative assessment due to offsetting of INSS credit veried by the company under
the viewpoint of undue payment over allowance not provided for by-law, in progress in administrative lower
court. The amount recorded in accounting books for such issues is R$17,094. The Company has no judicial
deposits related to such issues.
40 Grupo Po de Acar

b) Labor claims
The Company is party to numerous lawsuits involving disputes with its employees, primarily arising from
layoffs in the ordinary course of business. At December 31, 2006, the Company recorded a provision of R$42,708
(R$44,567 at December 31, 2005) for contingencies related to labor claims, which are in progress mostly at lower
courts (nearly 80%). Management, assisted by its legal counsels, evaluates these contingencies and provides for
losses where probable and reasonably estimable, bearing in mind previous experiences in relation to the amounts
sought. Labor claims are indexed to the TR (Referential Interest Rate) (2.0% in 2006 and 2.8% in 2005) plus 1%
monthly interest. The earmarked judicial deposits amount is R$36,715.

c) Civil and other

The Company is a defendant, at several judicial levels, in lawsuits of civil natures, among others. The
Companys Management sets up provisions in amounts considered sufcient to cover unfavorable court decisions
when its internal and external legal counsel consider losses to be probable.
Among these lawsuits, we point out the following:
The company brought a writ of mandamus in order to be entitled to not pay the contributions provided
for by Complementary Law 110/2001 related to the FGTS (Government Severance Indemnity Fund for
Employees) nancing. The company obtained a preliminary injunction recognizing the right of not paying
such contributions. Subsequently, this preliminary injunction was reversed, determining the judicial
deposit of unpaid amounts during the effectiveness period of the preliminary injunction. The enforceability
of tax credit is suspended in view of appeal led, which awaits decision by the Regional Federal Court. The
amount accrued is R$43,156 (R$32,102 at December 31, 2005) and the Company effected a R$4,061 judicial
deposit, protecting the period in which it was not covered by the preliminary injunction.
The Company is challenging the constitutionality of the contribution to SEBRAE and requested, by means
of a writ of prevention, the payment of the restated credit of amounts paid, through the offsetting of the
balances payable to SESC (Social Service for Trade) and SENAC (National Service for Commercial Training).
The company was granted the right of not paying the falling due contributions, in as much as it provides
for the judicial deposits, as usual. The writ of prevention was led and the Companys legal advisors have
obtained a Declaratory Action at lower court of appeals maintaining the proceeding. The accrued amount
is R$31,122 (R$24,386 at December 31, 2005), and judicial deposit in the amount of R$30,825.
The Company by means of a writ of mandamus is challenging the constitutionality of the FUNRURAL (Rural
Workers Assistance Fund) for companies located in urban areas. The lawsuit is in progress at the Regional
Federal Court and the amount of the provision is R$30,516 (R$27,219 at December 31, 2005). There is no
judicial deposit for such proceeding.
The Company les and answers various lawsuits in which it requests the review of lease amounts paid by
the stores. In these lawsuits, the judge determines a provisional lease amount, which then is paid by the
stores, until report and decision dene the nal lease amount. The set up provision of difference between
the amount originally paid by the stores and that dened provisionally in these lawsuits. At December 31,
2006 the accrual amount for these lawsuits is R$11,507 (R$8.144 at December 31, 2005).
 Financial Statements 2006 41

d) Possible losses
The Company has other contingencies which have been analyzed by the legal counsel and deemed as
possible but not probable; therefore, have not been accrued, at December 31, 2006, as follows:
INSS (Social Security Tax) the Company was served notice regarding the non-levy of payroll charges on
benets granted to its employees, and the loss, considered possible, amounts to R$106,117 (R$121,572 at
December 31, 2005). This lawsuit is under discussion in the administrative lower court and there is no
judicial deposit.
Income tax the Company was served tax assessment notice in relation to exclusion from the IRPJ
(Corporate Income Tax) tax base of accounts payable regarding certain taxes with suspended enforceability,
which, from the tax authorities point of view, should not have been excluded, which awaits decision by
administrative appellate court judge and possible loss concerning said notice amounts to R$40,088
(R$36,985 at December 31, 2005), with no judicial deposit up to this moment.
Other contingencies They are related to lawsuits under the civil court scope, special civil court, Consumer
Protection Agency PROCON (in many states), Weight and Measure Institute IPEM, National Institute of
Metrology, Standardization and Industrial Quality INMETRO and National Health Surveillance Agency
ANVISA, in great majority related to suits for damages, amounting to R$52,404 (R$25,483 at December 31,
2005). There are also (a) other lawsuits related to the FINSOCIAL (Tax for Social Security Financing) at the
amount of R$18,495; (b) administrative assessments related to divergences veried in Statement of federal
tax debits and credits DCTF and Statement of economic and scal information of legal entities DIPJ, lack
of payment and offsetting questioned for the purposes of IRPJ, PIS, COFINS and FINSOCIAL in the amount
of R$42,917, which await decision in administrative lower and appellate courts; (c) and tax assessments
notices in the State level, regarding the use of ICMS credits related to electricity, suppliers believed to be
disreputable by the tax authorities, among others, that are in progress in administrative lower court and
amount to R$104,235 (R$70,393 at December 31, 2005). For these and other lawsuits with non-signicant
individual amounts, there are no judicial deposits.

The Company was served notice in a State level as to the ICMS, related to purchase, manufacturing and sale
transactions for export purposes of soybean and its byproducts, in which, in the tax authorities understanding, the
circulation of goods did not take place. The amount of such notices was R$450,611 (updated as of September 30, 2006)
including ne and interest rates, and the loss was deemed by our legal counsel as possible and remote.
On October 17, 2006, the Company obtained partial won on this matter by the Tax Court (Tribunal de Impostos
e Taxas TIT), which reduced the total amount to R$266,909, updated until October 31, 2006. On October 31, 2006,
Companys management opted to adhere to the state tax amnesty program, ruled by Law 12,399/06, sanctioned by the
So Paulo State Governor, which granted, partial and substantially, amnesty on the payment of ne and interest for
scal debts deriving from taxable events related to the ICMS, which took place until December 31, 2005. In this way, the
Company settled the payment of the full amount of debts, on October 31, 2006, which after the 90% granted reduction
in the amount of nes and of 50% in the amount of interests, reached the nal sum of R$96.771.
42 Grupo Po de Acar

In accordance with the systematical interpretation of the sole paragraph of article one, of Law 12,399/06, above
mentioned, the taxpayers adhesion to such amnesty program does not implicate in waiver of rights, thus, not allowing
its use as reasoning or grounds to the questioning of any other scal demand.
Regarding the Federal level, the Company was served notice regarding these operations, in relation to PIS, COFINS
and income tax. The installment was classied by our legal counsel as probable, which has been accrued, amounting to
R$7,485 and as possible, amounting to R$161,191. Such lawsuits are being discussed in the administrative level and there
are no judicial deposits related to them.
ICMS In December 2006, after the conclusion of the inspection process for the year 2001, the Company
was served notice by the So Paulo State Treasury.
The tax assessment refers to the recovery of tax replacement pursuant to the Ordinance CAT
17/99. The tax authorities understood that the Company was not complying with ordinances 63/99 and
99/05 dealing with ancillary liabilities to recovery. According to our attorneys, the possible losses amount
to R$226,659.

Occasional adverse changes in the expectation of risk of the referred to lawsuits may require that additional
provision for contingencies be set up.

e) Appeal and judicial deposits

The Company is challenging the payment of certain taxes, contributions and labor-related obligations
and has made court escrow deposits (restricted deposits) of equivalent amounts pending nal legal decisions, in
addition to collateral deposits related to provisions for judicial suits.

f) Guarantees
The company has granted collaterals to some lawsuits of civil, labor and tax nature, as shown below:

Lawsuits Real Estate Equipment Guarantee Total

Tax 361,362 1,470 72,108 434,940
Labor 7,246 3,191 23,980 34,417
Civil and other 11,605 616 12,293 24,514
Total 380,213 5,277 108,381 493,871

g) Tax audits
In accordance with current legislation in Brazil, federal, state and municipal taxes and payroll charges are
subject to audit by the related authorities, for periods that vary between 5 and 30 years.
 Financial Statements 2006 43

17. Income and Social Contribution Taxes

a) a) Income and social contribution tax reconciliation

Parent Company Consolidated

2006 2005 2006 2005
Income (loss) before income taxes 119,397 344,183 (258,555) 260,253
Employees prot sharing (13,421) (10,129) (13,421) (14,453)

Income (loss) before adjusted

income and social contribution taxes 105,976 334,054 (271,976) 245,800

Income and social contribution taxes at nominal rate (26,494) (83,514) 89,752 (71,282)

Income tax incentive 2,659 2,862 3,562 3,076

Equity results and provision for capital

deciency of subsidiary 6,860 11,893 (18,085) (5,269)
Unrealized capital gains - - 78,961 -
Provision for the unpayment of deferred income tax assets - - (161,196) -

Other permanent adjustments and social

contribution rates, net (3,477) (8,305) 5,534 20,481
Effective income tax (20,452) (77,064) (1,472) (52,994)

Income tax for the year

Current (59,400) (106,679) (92,200) (133,861)
Deferred 38,948 29,615 90,728 80,867

Income tax and social contribution expenses (20,452) (77,064) (1,472) (52,994)
Effective rate (19.3) (23.1) 0.5 (21.6)
44 Grupo Po de Acar

b) Breakdown of deferred income and social contribution taxes

Parent Company Consolidated

2006 2005 2006 2005
Deferred income and social contribution tax assets

Tax losses (i) 12,862 - 298,332 251,307

Provision for contingencies 51,354 35,694 65,294 50,131
Provision for hedge and levied on a cash basis 25,915 16,120 80,188 42,329
Allowance for doubtful accounts 13,399 5,621 13,490 5,944
Goodwill in non-merged companies 21,360 16,692 79,433 84,360
Goodwill in merged company (ii) 517,294 - 517,294 -
Provision for goodwill reduction (Note 11)(i) - - 161,196 -
Deferred gains from shareholding dilution, net 1,518 17,425 1,518 17,425
Other 15,650 11,558 20,803 16,833
659,352 103,110 1,237,548 468,329
Allowance for losses - - (161,196)
Total deferred income tax assets 659,352 103,110 1,076,352 468,329

Current assets 101,794 66,807 238,676 84,745

Noncurrent assets 557,558 36,303 837,676 383,584
Total deferred income tax assets 659,352 103,110 1,076,352 468,329

(i) At December 31, 2006, in compliance with CVM Ruling 371, the Company and its subsidiaries recorded
deferred income and social contribution taxes arising from tax loss carryforwards and temporary
differences in the amount of R$659,352 (R$103,110 at December 31, 2005) in the Parent Company and
R$1,076,352 (R$468,329 at December 31, 2005) in Consolidated.
Recognition of deferred income and social contribution tax assets refer basically to tax loss
carryforwards, acquired from S, and those generated by the subsidiary Sendas Distribuidora, realization
of which, following restructuring measures, was considered probable, except for the provision for goodwill
reduction, as presented above.

(ii) At December 20, 2006, at Extraordinary General Meeting, the Companys shareholders approved the
merger operation of its parent company Vieri.
Said merger aimed at streamlining the corporate structure comprised by Casino Group and Diniz
Group, CBD and its subsidiaries will result in nancial and tax benets to CBD, as shown below:
 Financial Statements 2006 45

The goodwill originally recorded by Vieri Brasil and attributed to the expectation of CBDs future results,
deriving from the acquisition of shares issued by CBD, in the amount of R$2,061,951, which after the merger
is then amortized on a tax basis within ten years by CBD, pursuant to the prevailing tax laws and without
impact on CBDs ow of dividends.
Vieri, in compliance with CVM Ruling 349, set up a provision, prior to its merger by CBD, in the amount of
R$1,546,463, corresponding to the difference between the goodwill value and the tax benet resulting from
its amortization, so that CBD merged only the asset corresponding to the tax benet derived from the
goodwill amortization to be deductible for tax purposes. Said provision will be reversed in same proportion
in which the goodwill is amortized by CBD, therefore, not affecting the results of its operations.
The goodwill special reserve set up at CBD, as a result of such merger, as provided for by provision in
paragraph 1 of article 6 of the CVM Ruling 319, will be at the end of each scal year and to the extent in
which the tax benet to be determined by CBD, as a result of goodwill amortization, represents an effective
decrease of taxes paid by CBD, purpose of capitalization at CBD, to the benet of controlling shareholders,
without prejudice to the preemptive right ensured to other CBDs shareholders in the subscription of
capital increase resulting from said capitalization, all pursuant to article 7, caput and paragraphs 1 and 2 of
CVM Ruling 319.
The merger by CBD of Vieris assets and liabilities at December 20, 2006, resulted in an addition to the
Companys shareholders equity, corresponding to the goodwill special reserve, as outlined in the Note 18 (c)
as follows:

Incorporated
Balances
Cash 37
Goodwill of merged parent company 2,061,951
Provision for shareholders equity entirety (1,546,463)
Deferred income tax 1,806
Total net assets 517,331

The provision for maintenance of shareholders equity entirety accounts for 75% of goodwill value merged.
Such provision aims at preserving the ow of net income distribution to shareholders, neutralizing the effects of
goodwill amortization in the ow of dividends to be paid in the future.
In order to enable a better presentation of the nancial statements, the goodwill net value less provision
of R$515,488, which substantially represents the tax credit balance, plus the amount of R$1,806, was classied as
deferred income tax.
The Company prepares annual studies of scenarios and generation of future taxable income, which are
approved by Management and by the Board of Directors, indicating the capacity of beneting from the tax credit
set up.
46 Grupo Po de Acar

Based on such studies, the Company estimates that the recovery of tax credits will occur in up to ten years,
as follows:

2006
Parent Company Consolidated
2007 101,794 237,673
2008 34,496 63,889
2009 95,826 129,156
2010 144,830 181,938
2011 to 2014 282,406 463,696
659,352 1,076,352

18. Shareholders Equity

a) Capital
Authorized capital comprises 200,000,000,000 shares approved at the Extraordinary General Meeting held on
June 22, 2005. Fully subscribed and paid-up capital is comprised at December 31, 2006 of 113,771,378,433 (113,667,915,433
at December 31, 2005) registered shares with no par value, of which 49,839,925,688 (49,839,925,688 at December 31,
2005) shares are common and 63,931,452,745 (63,827,989,745 December 31, 2005) are preferred shares.
Breakdown of capital stock and share volume:

Share volume in thousands

Capital stock Preferred shares Common shares
At December 31, 2004 3,509,421 50,051,428 63,470,811

Transfer - 13,630,885 (13,630,885)

Capitalization of
prot reserves 164,374 - -
Stock option (Note 18(g))
Series VII 6,445 145,677 -
At December 31, 2005 3,680,240 63,827,990 49,839,926

Capitalization of prot reserves

Stock option (Note 18(g)) 267,177 - -

Series VII 7,120 101,400 -

Series IX 92 2,063 -
At December 31, 2006 3,954,629 63,931,453 49,839,926
 Financial Statements 2006 47

b) Share rights
The preferred shares are non-voting and have preference with respect to the distribution of capital in the
event of liquidation. Each shareholder has the right pursuant to the Companys by-laws to receive a proportional
amount, based on their respective holdings to total common and preferred shares outstanding, of a total dividend
of at least 25% of annual net income determined on the basis of nancial statements prepared in accordance
with Brazilian GAAP, to the extent prots are distributable, and after transfers to reserves as required by Brazilian
Corporation Law, and a proportional amount of any additional dividends declared. Beginning in 2003, the preferred
shares are entitled to receive a dividend 10% greater than that paid to common shares.
The Companys by-laws provide that, to the extent funds are available, minimum non-cumulative
preferred dividend to the preferred shares in the amount of R$0.15 per thousand preferred shares and dividends
to the preferred shares shall be 10% higher than the dividends to common shares up to or, if determined by the
shareholders, in excess of the mandatory distribution.
Management is required by the Brazilian Corporation Law to propose dividends at year-end, at least, until
the amount of mandatory dividend, which can include the interest attributed to equity, net of tax.

c) Capital reserve goodwill special reserve

This reserve was set up as a result of the corporate restructuring process outlined in Note 1 (c), in contra
account to the merged net assets and represents the amount of future tax benet to be earned by means
of amortization of goodwill merged. The special reserve portion corresponding to the benet earned may be
capitalized at the end of each scal year to the benet of the controlling shareholders, with the issue of new shares.
The capital increase will be subject to the preemptive right of non-controlling shareholders, in the proportion of
their respective interest, by type and class, at the time of the issue, and the amounts paid in the year related to such
right will be directly delivered to the controlling shareholder, pursuant to provision in CVM Ruling 319/99.
At December 31, 2006, the tax benet recorded derived from the goodwill merged was R$517,331 and will be
used in the capital increase, upon the realization of reserve.

d) Revenue reserve
(i) Legal reserve the legal reserve is formed based on appropriations from retained earnings of 5% of annual
net income, before any appropriations, and limited to 20% of the capital.
(ii) Expansion reserve was approved by the shareholders to reserve funds to nance additional capital
investments and xed and working capital through the appropriation of up to 100% of the net income
remaining after the legal appropriations and supported by capital budget, approved at meeting.
(iii) Prot retention the balance at December 31, 2006 is available to the Shareholders General Meeting
for allocation.
48 Grupo Po de Acar

e) Dividends proposed

At March 12, 2006, the Management proposed for resolution of the Annual General Meeting AGO,
dividends to be distributed, calculated as follows:

2006 2005
Net income for the year 85,524 256,990
Realization of prot reserves - 4,069
Legal reserves (4,276) (12,849)

Tax base of dividends 81,248 248,210

Minimum mandatory dividend 25% 20,312 62,053

(R$ 0.51689 per one thousand common shares) - 25,762

(R$ 0.56857 per one thousand preferred shares) - 36,291

(R$ 0.16903 per one thousand common shares) 8,425 -

(R$ 0.18594 per one thousand preferred shares) 11,887 -

f) Employees prot sharing plan

As provided for by the Companys by-laws, the Companys Board of Directors approved in meeting held on
November 29, 2006, the distribution of the amount of R$13,421 (R$14,453 at December 31, 2005).

g) Preferred stock option plan

The Company offers a stock option plan for the purchase of preferred shares to management and employees.
The exercise of options guarantees the beneciaries the same rights granted to the Companys other shareholders.
The management of this plan was attributed to a committee designated by the Board of Directors.
The option price for each lot of shares is, at least, 60% of the weighted average price of the preferred shares
traded in the week the option is granted. The percentage may vary for each beneciary or series.
The right to exercise the options is acquired in the following manner and terms: (i) 50% in the last month of
the third year following the option date (1st tranche); and (ii) 50% in the last month of the fth year following the
option date (2nd tranche), with the condition that a certain number of shares will be restricted as to sale until the
date the beneciary retires.
The price of option from the date of concession to the date of exercise thereof by the employee is updated
by reference to the General Market Price Index IGP-M variation, less dividends attributed for the period.
Information on the stock option plans is summarized below:
 Financial Statements 2006 49

Number of shares Price on the date of Price of concession

(per thousand) concession on 12/31/2006
Options in force
Series VI March 15, 2002 412,600 47.00 71.84
Series VII May 16, 2003 499,840 40.00 45.35
Series VIII April 30, 2004 431,110 52.00 57.10
Series IX April 15, 2005 494,545 52.00 52.16
Series X July 7, 2006 450,735 66.00 67.56
2,288,830
Options exercised
Series VII December 13, 2005 (145,677)
Series VI April 7, 2006 (101,400)
Series VII June 9, 2006 (2,063)
Cancelled options (569,234)
Balance of options in force 1,470,456
Options not granted 1,929,544
Current balance of the option plan 3,400,000

At February 23, 2006, series V was cancelled, not existing any conversion. At March 31, 2005 series IV was
ended, not existing any conversion. At March 31, 2004 series III was exercised, capitalized and ended. Series I and II
ended in 2001 and 2002, respectively.
At December 31, 2006, the Companys preferred shares quotation on the So Paulo Stock Exchange was
R$74.97 per thousand shares.
The table below shows the effects on net income if the Company had recognized the expense related to the
granting of stock option, applying the market value method, as required by Ofcial Memorandum CVM/SNC/SEP
N 01/2006 paragraph 25.9:

2006 2005

Shareholders Shareholders
Net income equity Net Income equity
At December 31 85,524 4,842,127 256,990 4,252,372
Expense related to share-based
compensation to employees determined
according to market value method, net of
income tax (4,885) (4,885) (3,544) (3,544)
At December 31 (Pro forma) 80,639 4,837,242 253,446 4,248,828
50 Grupo Po de Acar

The market value of each option granted is estimated on the granting date, by using the options pricing
model Black-Scholes taking into account: expectation of dividends of 1.42% in 2006, 1.46% in 2005, expectation of
volatility of nearly 37.2% in 2006, 38.9% in 2005, non-risk weighted average interest rate of 6.6% in 2006, 9.2% in
2005 and expectation of average life of four years.

New option plan of preferred shares

The Extraordinary General Meeting held on December 20, 2006, approved the amendment to the Companys
Stock Option Plan, approved by the Extraordinary General Meeting held at April 28, 1997.
As from 2007, the granting of preferred stock option plan to management and employees will take place
as follows:
Shares will be classied into two types: Silver and Gold, and the quantity of Gold-type shares may be
decreased and/or increased (reducer or accelerator), at discretion of the Plan Management Committee, in the
course of 35 months following the granting date.
The price for each Silver-type thousand shares will correspond to the average of closing price of negotiations
of CBDs preferred shares occurred over the last 20 trading sessions of BOVESPA, prior to the date on which the
Committee resolves on the granting of option, with negative goodwill of 20%. The price per each Gold-type
thousand shares will correspond to R$0.01. In both bases, the prices will not be restated.
The acquisition of rights to the options exercise will occur as follows in the following term: as from the 36th
month to 48th month as from the start date dened as the date of the adhesion agreement of respective series
or fulllment of any suspensive condition of its effectiveness to be dened by the Committee, the beneciary will
acquire the right to exercise: a) 100% of granting of Silver-type shares; b) the quantity of lots of Gold-type shares to
be determined by the Committee, after the compliance with granting conditions.
Up to date, there was no granting of this new plan. The series of previous plan continue in force until the
respective maturity dates.
 Financial Statements 2006 51

19. Net Financial Income

Parent Company Consolidated

2006 2005 2006 2005
Financial expenses
Financial charges BNDES 41,296 39,827 41,935 39,879
Financial charges Debentures 62,527 80,931 62,527 87,499
Financial charges on contingencies and taxes 103,716 133,437 112,937 140,876
Swap operations 54,628 151,545 138,547 240,939
Receivables securitization 105,059 76,170 139,485 99,364
CPMF and other bank services 61,785 28,813 80,903 43,708
Other nancial expenses - 3,771 27,054 31,306
Total nancial expenses 429,011 514,494 603,388 683,571

Financial revenues
Interest on cash and cash equivalents 127,641 135,731 231,647 232,825
Financial discounts obtained 52,979 73,799 58,092 81,422
Financial charges on taxes and judicial deposits 33,023 65,719 51,095 73,082
Interest on installment sale 25,724 39,906 39,669 50,593
Interest on loan 32,237 41,727 2,198 24
Other nancial revenues 60 8,608 60 8,776
Total nancial revenues 271,664 365,490 382,761 446,722

Net nancial balance (157,347) (149,004) (220,627) (236,849)

20. Financial Instruments

a) General considerations
Management considers that risk of concentration in nancial institutions is low, as operations are limited to
traditional, highly-rated banks and within limits approved by the Management.

b) Concentration of credit risk

The Companys sales are direct to individual customers through post-dated checks, in a small portion of
sales (2% of yearly sales). In such portion, the risk is minimized by the large customer base. These receivables are
also mostly sold to PAFIDC without right of recourse.
The advances to suppliers are made only to selected suppliers. We do not have credit risk with suppliers,
since we discount only own payments of goods already delivered.
52 Grupo Po de Acar

In order to minimize credit risk from investments, the Company adopts policies restricting the marketable
securities that may be allocated to a single nancial institution, and which take into consideration monetary limits
and nancial institution credit ratings.

c) Market value of nancial instruments

Estimated market value of nancial instruments at December 31, 2006 approximates market value, reecting
maturities or frequent price adjustments of these instruments, as shown below:

Parent Company Consolidated

Book Market Book Market
Assets
Cash and cash equivalents 146,869 146,869 247,677 247,677
Marketable securities 381,785 381,785 1,033,834 1,033,834
Receivables securitization fund 164,034 164,034 - -
692,688 692,688 1,281,511 1,281,511

Liabilities
Loans and nancings 650,918 650,831 2,253,473 2,266,064
Debentures 414,761 415,376 414,761 415,376
1,065,679 1,066,207 2,668,234 2,681,440

Market value of nancial assets and of current and non-current nancing, when applicable, was determined
using current interest rates available for operations carried out under similar conditions and remaining maturities.
In order to translating the nancial charges and exchange variation of loans denominated in foreign
currency into local currency, the Company contracted swap operations, pegging the referred to charges to the CDI
variation, which reects market value.

d) Currency and interest rate risk management

The utilization of derivative instruments and operations involving interest rates aims at protecting the
results of assets and liabilities operations of the Company, conducted by the nance operations area, in accordance
with the strategy previously approved by management.
The cross-currency interest rate swaps permit the Company to exchange xed rate interest in U.S. Dollars
on short-term and long-term debt (Note 13) for oating rate interest in Brazilian Reais. As of December 31, 2006,
the U.S. Dollar-denominated short-term and long-term debt balances of R$1,279,559 (US$598,483) (R$1,308,469
US$559,008 at December 31, 2005), include nancing of R$1,265,503 (US$591,910) (R$1,293,331 US$552,540 at
December 31, 2005), the weighted average interest rates of 5.1% per annum (5.5% p.a. at December 31, 2005) which
are covered by oating rate swaps, linked to a percentage of the CDI in Brazilian Reais, calculated at weighted
average rate of 103.6% of CDI (103.7% of CDI at December 31, 2005).
 Financial Statements 2006 53

21. Insurance Coverage (not audited)

Coverage at December 31, 2006 is considered sufcient by management to meet possible losses and is
summarized as follows:

Insured assets Risks covered Amount insured

Property, equipment and inventories Named risks 5,577,635
Prot Loss of prot 1,335,000
Cash Theft 43,460

The Company also holds specic policies covering civil and management liability risks in the amount of
R$160,410 (R$147,330 at December 31, 2005).

22. Non-Operating Results

Parent Company Consolidated

2006 2005 2006 2005
Expenses
Net effect of allowance for goodwill reduction (Note 11 (i)) - - 268,886 -
Results in the property and equipment write-off (*) 30,119 2,268 68,585 17,803
Judicial deposits write-off 25,844 - 25,844 -
Allowance for losses other receivable 22,570 19,801 22,570 28,086
Provision for recovery of assets and other 5,435 8,784 4,289 7,271
Total non-operating expenses 83,968 30,853 390,174 53,160

Revenues
Achievement of performance goal (Note 9 (d)) 58,151 38,140 58,151 38,140
Gains by corporate dilution - - - 18,640
Interest reversal on performance goal 7,260 27,172 7,260 27,172
Other 1,549 1,340 1,534 1,339
Total non-operating revenues 66,960 66,652 66,945 85,291

Non operating balance (17,008) 35,799 (323,229) 32,131

(*) In 2006, R$19,960 was included referring to results of physical inventory Note 10.
54 Grupo Po de Acar

23. Statement of LAJIDA Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA) (not audited)

Parent Company Consolidated

2006 2005 2006 2005

Operating income 136,405 308,384 64,674 228,122

(+) Net nancing expenses 157,347 149,004 220,627 236,849

(+) Taxes and fees 52,888 35,592 84,923 63,150
(+) Equity accounting (27,436) (47,576) 53,197 16,190
(+) Depreciation and amortization 399,922 456,186 547,943 625,281

EBITDA 719,126 901,590 971,364 1,169,592

Net sales revenue 9,973,453 9,350,572 13,880,403 13,413,396
% EBITDA 7.2% 9.6% 7.0% 8.7%

24. Encumbrances, Eventual Liabilities and Commitments

The Company has commitments assumed with leaseholders of various stores already contracted at
December 31, 2006, in the amount of R$109,264 (parent company) and R$125,242 (consolidated), as follows:

2006
Parent Company Consolidated
2007 8,989 10,027
2008 8,916 9,813
2009 7,051 7,948
2010 3,961 4,857
2011 3,236 4,132
From 2012 on 77,111 88,465
109,264 125,242
 Financial Statements 2006 55

25. Subsequent Events which do not Give Rise to Supplementary Adjustments

a) 6th issue of simple debentures

At February 16, 2007, the Company led with CVM the request of registration of 6th public issue of Simple
Debentures, not convertible into shares, with the following characteristics:
Quantity: 80,000 debentures;
Unit face value: R$10,000.00;
Date of issue on: 3/1/2007;
Maturity Date: 3/1/2013;

The rst series will be subscribed by the par value accrued of pro-rate interest, in cash in domestic currency;
The second series will be earmarked for rollover of partial/total debt stemming from debentures of the
Companys 5th issue, applying a negative goodwill over the face value, which will be determined by means of
Bookbuilding Procedure;
The remuneration will be interest incurring on the face value, based on the average rate of one-day Interbank
Deposits DI based on a year of 252 days, calculated and disclosed by CETIP Clearing House for the Custody and
Financial Settlement of Securities.

b) Granting of nancial support BNDES

In the rst half-year of 2006, CBD requested nancial support to BNDES related to its investments program.
Such request was led by mid 2006 when documents started to be analyzed.
In meeting held at March 8, 2007 the BNDES executive board authorized the granting of nancial support
requested in the amount of R$187,330, with grace period of six months and 60 months for amortization, with
interest rates varying between 2.7% and 3.2% above TJLP.
The nancial support granted has a 60-day term to be contracted by CBD and will support total investments
already made by the Company with the opening of 15 new stores and support in the modernization of various
existing stores.
56 Grupo Po de Acar

A free translation from Portuguese into English of Report of Independent Auditors on nancial statements prepared in Brazilian
currency in accordance with the accounting practices adopted in Brazil

REPORT OF INDEPENDENT AUDITORS

To the Board of Directors and Shareholders

Companhia Brasileira de Distribuio

1. We have audited the accompanying balance sheets of Companhia Brasileira de Distribuio and the consolidated balance
sheets of Companhia Brasileira de Distribuio and its subsidiaries as of December 31, 2006 and 2005, and the related
statements of income, shareholders equity and changes in nancial for the years then ended. These nancial statements
are the responsibility of the Companys management. Our responsibility is to express an opinion on these nancial
statements. The nancial statements of the investees Po de Acar Fundo de Investimento em Direitos Creditrios and
Miravalles Empreendimentos e Participaes S.A. for the years ended December 31, 2006 and 2005 were audited by other
independent auditors. Our audit opinion, regarding assets, liabilities and results of operations of said investees is based
exclusively on the audit opinion of those independent auditors.
2. We conducted our audits in accordance with generally accepted auditing standards in Brazil, which comprised:
(a) the planning of our work, taking into consideration the materiality of balances, the volume of transactions
and the accounting and internal control systems of the Company and its subsidiaries; (b) the examination, on
a test basis, of documentary evidence and accounting records supporting the amounts and disclosures in the
nancial statements; and (c) an assessment of the accounting practices used and signicant estimates made by
Company management, as well as an evaluation of the overall nancial statement presentation.
3. In our opinion, and based on our audit and on the opinion of the other independent auditors, the nancial
statements referred to in the rst paragraph present fairly, in all material respects, the nancial position of
Companhia Brasileira de Distribuio and the consolidated nancial position of Companhia Brasileira de
Distribuio and subsidiaries at December 31, 2006 and 2005, and the results of operations, changes in shareholders
equity and changes in nancial position for those years, in conformity with accounting practices adopted in Brazil.
4. Our audit was performed for the purpose of issuing an opinion on the nancial statements referred to in the rst
paragraph. The consolidated statements of cash ows and statement for added values for the years ended December
31, 2006 and 2005, prepared in accordance with the accounting practices adopted in Brazil, are presented to provide
supplementary information on the Company and investees, despite not being a required component of the nancial
statements. These statements were submitted to the audit procedures described in the second paragraph and, in our
opinion are fairly stated in all material respects in relation to the nancial statements taken as a whole.

So Paulo, March 15, 2006.

ERNST & YOUNG Sergio Citeroni

Auditores Independentes S.S. Accountant CRC-1SP170652/O-1
CRC-2SP015199/O-6