REGISTRATION WITH CVM SHOULD NOT BE CONSTRUED AS AN EVALUATION OF THE COMPANY. COMPANY MANAGEMENT IS RESPONSIBLE FOR THE INFORMATION PROVIDED.

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1 REGISTRATION WITH CVM SHOULD NOT BE CONSTRUED AS AN EVALUATION OF THE COMPANY. COMPANY MANAGEMENT IS RESPONSIBLE FOR THE INFORMATION PROVIDED IDENTIFICATION 1 - CVM CODE 2 - COMPANY NAME 3 - CNPJ (Corporate Taxpayer s ID) BRASILAGRO CIA BRAS PROPRIEDADES AGRICOL / NIRE (Corporate Registry ID) HEADQUARTERS 1 - ADDRESS AVENIDA BRIG FARIA LIMA, O ANDAR 2 - DISTRICT ITAIM BIBI 3 - ZIP CODE CITY SÃO PAULO 5 - STATE SP 6 - AREA CODE TELEPHONE TELEPHONE TELEPHONE TELEX AREA CODE FAX FAX FAX pedro.faria@brasil-agro.com INVESTOR RELATIONS OFFICER (Company Mailing Address) 1- NAME PEDRO DE ANDRADE FARIA 2 - ADDRESS AVENIDA BRIG FARIA LIMA, O ANDAR 3 - DISTRICT ITAIM BIBI 4 - ZIP CODE CITY SÃO PAULO 6 - STATE SP 7 - AREA CODE TELEPHONE TELEPHONE TELEPHONE TELEX AREA CODE FAX FAX FAX pedro.faria@brasil-agro.com DFP REFERENCE AND AUDITOR INFORMATION YEAR 1 DATE OF THE FISCAL YEAR BEGINNING 2 DATE OF THE FISCAL YEAR END 1 Last 09/23/ /30/ Next to last 3 Last but two 4 - INDEPENDENT ACCOUNTANT PRIECEWATERHOUSECOOPERS AUDITORES INDEPENDENTES 5 - CVM CODE TECHNICIAN IN CHARGE JAIR REDUZINO ALLGAYER 7 - TECHNICIAN S CPF (INDIVIDUAL TAXPAYER S REGISTER)

2 IDENTIFICATION 1 - CVM CODE COMPANY NAME 3 - CNPJ (Corporate Taxpayer s ID) BRASILAGRO CIA BRAS PROPRIEDADES AGRICOL / CAPITAL STOCK Number of Shares (in thousands) Paid-in Capital 1 06/30/ Common 584, Preferred Total 584, Treasury Stock 4 - Common Preferred Total COMPANY PROFILE 1 - TYPE OF COMPANY Commercial, Industry and Others Types of Company 2 - STATUS Operational 3 - NATURE OF OWNERSHIP Foreign 4 - ACTIVITY CODE 1210 Agriculture (Sugar, Alcohol and Sugar Cane) 5 - MAIN ACTIVITY AGRIBUSINESS (AGRICULTURAL PROD, CATTLE RAISING AND EXPLORATION) 6 - CONSOLIDATION TYPE Total COMPANIES NOT INCLUDED IN THE CONSOLIDATED FINANCIAL STATEMENTS 1 - ITEM 2 - CNPJ (Corporate Taxpayer s ID) 3 - COMPANY NAME CASH DIVIDENDS 1 - ITEM 2 - EVENT 3 - APPROVAL 4 - DIVIDEND 5 - DATE OF PAYMENT 6 - TYPE OF SHARE 7 - AMOUNT PER SHARE INVESTOR RELATIONS OFFICER 1 DATE 07/30/ SIGNATURE 2

3 IDENTIFICATION 1 - CVM CODE COMPANY NAME 3 - CNPJ (Corporate Taxpayer s ID) BRASILAGRO CIA BRAS PROPRIEDADES AGRICOL / BALANCE SHEET - ASSETS (in thousands of reais) 1 - CODE 2 - DESCRIPTION 3 06/30/ Total Assets 554, Current Assets 380, Cash and Cash Equivalents 378, Cash and Banks FIQ Agro Investments 377, Credits 1, Sundry Advances Fiscal and tax credits 1, Other Credits Inventories Others Long-Term Assets Sundry Credits Credit with Related Parties Affiliates Subsidiaries Other Related Parties Others Permanent Assets 174, Investments 173, In Affiliates In Subsidiaries 173, Foreign Subsidiary - Brasilagro Co. 86, Foreign Subsidiary - Brasilagro Int. 86, Other Investments Property, plant and equipment Assets in Use subject to Depreciation Deferred Assets 1, Research and Development Expenditures General Pre-Operating Expenditures

4 IDENTIFICATION 1 - CVM CODE COMPANY NAME 3 - CNPJ (Corporate Taxpayer s ID) BRASILAGRO CIA BRAS PROPRIEDADES AGRICOL / BALANCE SHEET - LIABILITIES (in thousands of reais) 1 - CODE 2 DESCRIPTION 3 06/30/ Total Liabilities 554, Current Liabilities 1, Loans and Financings Debentures Suppliers Taxes, Fees and Contributions Withholding Income Tax on Service Provision Withholding Contributions on Service Provision Dividends Payable Provisions Sundry Fees of IPO payable Debts with Related Parties Partners Checking Account Payable Others Payroll and Social Charges Payable Long-Term Liabilities Loans and Financings Debentures Provisions Debts with Related Parties Others Deferred Income Shareholders Equity 553, Paid-in Capital 584, Shares and Quotas - Country Shares and Quotas - Abroad Shares and Quotas CBLC 583, Capital Reserves Revaluation Reserves Own Assets Subsidiaries/Affiliates Profit Reserves Legal Statutory For Contingencies Unrealized Income Profit Retention Special for Non-Distributed Dividends Other Profit Reserves Retained Earnings/Accumulated Loss (30,914) 0 0 4

5 01.01 IDENTIFICATION 1 - CVM CODE COMPANY NAME 3 - CNPJ (Corporate Taxpayer s ID) BRASILAGRO CIA BRAS PROPRIEDADES AGRICOL / INCOME STATEMENT (in thousands of reais) 1 - CODE 2 DESCRIPTION 3 09/23/2005 to 6/30/ Gross Revenue from Sales and/or Services Gross Revenue Deductions Net Revenue from Sales and/or Services Cost of Goods and/or Services Sold Gross Income Operating Expenses/Income (30,914) Selling General and Administrative (32,943) Administrative Expenses (115) Personnel Expenditures (389) Depreciation and Amortization Expenses (47) Share Placement Expenditures (32,392) Financial 9, Financial Income 12, FIQ Agro Exclusive Fund Earnings 12, Financial Expenses (2,698) Banking Expenses and Charges (2,698) Other Operating Income Other Operating Expenses Equity in the Earnings of Subsidiary and Associated Companies (7,568) Equity on Foreign Subsidiaries Exchange Variation on Investments Abroad (7,751) Operating Income (30,914) Non-Operating Income Revenues Expenses Income Before Tax/Holdings (30,914) Provision for Income Tax and Social Contribution Deferred Income Tax Statutory Holdings/Contributions Holdings Contributions Reversal of Interest on Own Capital Income/Loss for the Period (30,914) 0 0 No. SHARES, EX-TREASURY (in thousands) 584, EARNINGS PER SHARE LOSS PER SHARE ( ) 5

6 01.01 IDENTIFICATION 1 - CVM CODE COMPANY NAME 3 - CNPJ (Corporate Taxpayer s ID) BRASILAGRO CIA BRAS PROPRIEDADES AGRICOL / STATEMENT OF CHANGES IN FINANCIAL POSITION (in thousands of reais) 1 - CODE 2 DESCRIPTION 3 09/23/2005 to 06/30/ Sources 584, Of Operations Income/Loss for the Year Amounts not Affecting Working Capital Depreciation and Amortization Of Shareholders 584, Paid-in Capital Private Subscr 1, Paid-in Capital Public Offering 583, Of Third Parties Investments 205, Loss for the Period 30, Depreciation and Amortization of Deferred Assets (47) Equity in the Earnings of Subsidiary and Associated Companies Exchange Variation on Investments (7,751) In Long Term Assets Investments in Foreign Subsidiaries 180, Property, plant and equipment Deferred Assets 1, Increase/decrease in the Working Capital 378, Changes in current assets 380, Current assets at the beginning of the year Current assets at the end of the year 380, Changes in current liabilities 1, Current liabilities at the beginning of the year Current liabilities at the end of the year 1,

7 01.01 IDENTIFICATION 1 - CVM CODE COMPANY NAME BRASILAGRO CIA BRAS PROPRIEDADES AGRICOL 3 - CNPJ (Corporate Taxpayer s ID) / STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY FROM 09/23/2005 TO 06/30/2006 (in thousands of reais) 1 - CODE 2 - DESCRIPTION 3 CAPITAL STOCK 4 CAPITAL RESERVES 5 REVALUATION RESERVES 6 PROFIT RESERVES 7 - ACCRUED PROFIT/LOSS 8 - TOTAL SHAREHOLDER S EQUITY 5.01 Opening Balance Adjustments of Previous Years Increase/Decrease in Capital Stock 584, , Paid-in Capital Shares and Country Paid-in Capital Shares and Ex Quotas Paid-in Capital Shares and CBLC Quotas 583, , Realization of Reserves Treasury Shares Income/Loss for the Year (30,914) (30,914) 5.07 Allocations Others Closing Balance 584, (30,914) 553,310 7

8 IDENTIFICATION 1 - CVM CODE COMPANY NAME 3 - CNPJ (Corporate Taxpayer s ID) BRASILAGRO CIA BRAS PROPRIEDADES AGRICOL / CONSOLIDATED BALANCE SHEET - ASSETS (in thousands of reais) 1 - CODE 2 DESCRIPTION 3 06/30/ Total Assets 554, Current Assets 553, Cash and Cash Equivalents 537, Cash and Banks Financial Investments 537, Credits 15, Marketable Securities 14, Sundry Credits 1, Inventories Others Long-Term Assets Sundry Credits Credit with Related Parties Affiliates Subsidiaries Other Related Parties Others Permanent Assets 1, Investments In Affiliates In Subsidiaries Other Investments Property, plant and equipment Deferred Assets 1,

9 IDENTIFICATION 1 - CVM CODE COMPANY NAME 3 - CNPJ (Corporate Taxpayer s ID) BRASILAGRO CIA BRAS PROPRIEDADES AGRICOL / CONSOLIDATED BALANCE SHEET - LIABILITIES (in thousands of reais) 1 - CODE 2 DESCRIPTION 3 06/30/ Total Liabilities 554, Current Liabilities 1, Loans and Financings Debentures Suppliers Taxes, Fees and Contributions Dividends Payable Provisions Sundry Fees Payable Debts with Related Parties Partners Checking Account Payable Others Payroll and Social Charges Payable Long-Term Liabilities Loans and Financings Debentures Provisions Debts with Related Parties Others Deferred Income Minority Interest Shareholders Equity 553, Paid-in Capital 584, Capital Reserve Revaluation Reserve Own Assets Subsidiaries/Affiliates Profit Reserves Legal Statutory For Contingencies Unrealized Income Profit Retention Special for Non-Distributed Dividends Other Profit Reserves Retained Earnings/Accumulated Loss (30,914) 0 0 9

10 01.01 IDENTIFICATION 1 - CVM CODE COMPANY NAME 3 - CNPJ (Corporate Taxpayer s ID) BRASILAGRO CIA BRAS PROPRIEDADES AGRICOL / CONSOLIDATED INCOME STATEMENT (in thousands of reais) 3 09/23/ CODE 2 DESCRIPTION 4 5 to 06/30/ Gross Revenue from Sales and/or Services Gross Revenue Deductions Net Revenue from Sales and/or Services Cost of Goods and/or Services Sold Gross Income Operating Expenses/Income (30,914) Selling General and Administrative (32,943) Administrative Expenses (115) Personnel Expenditures (389) Depreciation and Amortization Expenditures (47) Share Placement Expenditures (32,392) Financial 9, Financial Income 12, Interest on Financial Investments 12, Financial Expenses (2,698) Banking Expenses and Charges (2,698) Other Operating Income Other Operating Expenses Equity in the Earnings of Subsidiary and Associated Companies (7,751) Equity on Foreign Subsidiaries Exchange Variation on Investments Abroad (7,751) Operating Income (30,914) Non-Operating Income Revenues Expenses Income Before Tax/Holdings (30,914) Provision for Income Tax and Social Contribution Deferred Income Tax Statutory Holdings/Contributions Holdings Contributions Reversal of Interest on Own Capital Minority interests Income/Loss for the Period (30,914) 0 0 No. SHARES, EX-TREASURY (in thousands) 584, EARNINGS PER SHARE LOSS PER SHARE ( ) 10

11 01.01 IDENTIFICATION 1 - CVM CODE COMPANY NAME 3 - CNPJ (Corporate Taxpayer s ID) BRASILAGRO CIA BRAS PROPRIEDADES AGRICOL / CONSOLIDATED STATEMENT OF CHANGES IN FINANCIAL POSITION (in thousands of reais) 1 - CODE 2 DESCRIPTION 3 09/23/2005 to 06/30/ Sources 584, Of Operations Income /Loss for the Year Amounts not Affecting Working Capital Of Shareholders 584, Paid-in Capital Private Subscr 1, Paid-in Capital Public Offering 583, Of Third Parties Investments 32, Loss for the Period 30, Depreciation and Amortization of Deferred Assets (47) Long-Term Assets Property, Plant and Equipment Deferred Assets 1, Increase/Decrease in the Working Capital 551, Changes in Current Assets 553, Current Assets at the Beginning of the Year Current Assets at the End of the Year 553, Changes in Current Liabilities 1, Current Liabilities at the Beginning of the Year Current Liabilities at the End of the Year 1,

12 REPORT OF INDEPENDENT AUDITORS - UNQUALIFIED To the Management and Shareholders BrasilAgro Companhia Brasileira de Propriedades Agrícolas 1 We have examined the balance sheet of BrasilAgro Companhia Brasileira de Propriedades Agrícolas and the consolidated balance sheet of BrasilAgro Companhia Brasileira de Propriedades Agrícolas and its subsidiaries on and the related statements of income, of changes in shareholders equity and of changes in financial position of BrasilAgro Companhia Brasileira de Propriedades Agrícolas and the related consolidated statements of income and of changes in financial position for the year ended on, prepared under the responsibility of the Company s management. Our responsibility is to express an opinion on these financial statements. 2 Our exams were conducted in accordance with the audit standards applicable in Brazil, which require them to be performed with the objective of proving the adequate presentation of the financial statements in all the material aspects. Therefore, our exams comprised, among other procedures: (a) the planning of the works, considering the relevance of balances, the volume of transactions and the accounting and internal control systems of the companies, (b) the verification, based on tests, of the evidences and records that support the accounting values and information disclosed, and (c) the evaluation of the most representative accounting practices and estimates adopted by the Companies management, as well as the presentation of the financial statements taken as a whole. 3 In our opinion, the financial statements referred to in paragraph (1) present fairly, in all material aspects, the equity and financial position of BrasilAgro Companhia Brasileira de Propriedades Agrícolas and of BrasilAgro Companhia Brasileira de Propriedades Agrícolas and its subsidiaries on and the result of operations, the changes in shareholders equity and in financial position of BrasilAgro Companhia Brasileira de Propriedades Agrícolas for the year ended on, as well as the consolidated result of operations and the consolidated changes in financial position of this year, in accordance with the accounting practices adopted in Brazil. São Paulo, August 18, 2006 PricewaterhouseCoopers Auditores Independentes CRC 2SP000160/O-5 Jair Reduzino Allgayer Accountant CRC 1SP108476/O-3 12

13 MANAGEMENT REPORT Dear Shareholders: In compliance with the legal and statutory provisions, we submit to your appreciation the Financial Statements referring to the year ended on. The objective of BrasilAgro is to explore opportunities in the Brazilian agricultural real estate market. The Business Plan of the Company contemplates the acquisition and lease of selected rural properties, which tend to offer an attractive opportunity for agricultural production and real estate valuation. In May 2006, BrasilAgro concluded the IPO and primary public distribution of shares process, with the global issue of 583,200 common shares at the price of R$1,000.00/share. The Company posted a negative accumulated net income of R$30.9 million in the year. Such result has been directly influenced by the IPO process, which resulted in total expenses of R$32.4 million. On, the Company shows total assets in the amount of R$555 million, R$551.6 million of which represent cash and cash equivalents and high liquidity financial investments. The shareholders equity in the year represents R$553.3 million. The resources arising from the primary issuance of shares are being totally used in the acquisition and development of properties for the production of agricultural commodities, such as sugar cane, soybean, corn, cotton, forests and cattle raising. We are positioning ourselves by taking advantage of the opportunities in the Brazilian agricultural sectors, which have been showing a quick development. The Brazilian agriculture and cattle raising sector kept being impacted by a combination of appreciated exchange, low prices of agricultural commodities and high actual interest rates that pressure the profitability of producers and, as a consequence, negatively influence the price of lands. The negative conjuncture of very important markets, such as cattle raising and grains, contrasts with the expansion moment of the forestry and sugar cane segments. This scenario keeps favoring the execution of our business plan. During the year, the Company has taken important steps in the sense of strengthening its team of professionals, as well as structuring its operations. We have obtained significant advances in the search and analysis of opportunities related to the acquisition of agricultural properties. In an event subsequent to the year ended on June 30, BrasilAgro announced the execution of purchase and sale agreements, through which it commits itself to acquire rural properties located in the States of Piauí and Goiás. Such acquisitions represent a total amount of R$69,1 million. The performance of the acquisitions depends on the fulfillment of some conditions established in the agreement. The initiatives taken during this year and the perspectives related to the business opportunities being explored by the Company make us quite optimistic regarding the achievement of our objectives. We remain at your entire disposal for any additional information. São Paulo, August 18, 2006 Pedro de Andrade Faria Investor Relations Officer 13

14 11.01 NOTES TO THE FINANCIAL STATEMENTS 1 Business Overview The Company was incorporated by decision of the General Meeting of Incorporation held on September 23, 2005 (incorporation date) and has as purpose to explore opportunities in the Brazilian agricultural real estate market. According to the bylaws, the corporate purpose is: (a) exploration of agriculture, cattle raising and forestry activities of any kind and nature as well as directly or indirectly related services; (b) import and export of agricultural products and inputs and related to the cattle raising activity, (c) purchase, sale and/or leasing of properties, lands, buildings and real estate in rural and urban areas, (d) real estate intermediation involving any type of operations, (e) investment, as a partner, in other companies, either civil or commercial, and in business undertakings of any nature, in Brazil and/or abroad, either directly or indirectly related to the purposes described herein and (f) management of own and third parties assets. Since its incorporation the Company implemented activities necessary for the achievement of its corporate purpose, involving, among other actions, the analysis and discussion of its business plan and strategy, which include the definition of the financing source of its activities. The expenses incurred in this period were recorded in deferred assets. From the beginning of the implementation of its strategy, which includes the obtainment of financial resources for such purposes, the expenditures incurred have been recognized in the result, including expenditures with the placement of shares in the initial public offering of shares concluded on May 9, 2006 (date of the closure announcement). Also as part of its business strategies, the available financial resources are invested in financial investments with the purpose of ensuring the maintenance of the amount of resources obtained for the achievement of the Company s corporate purpose, and have been generating revenues for the Company, which are considered recurrent. 2 Presentation of the financial statements and main accounting practices The financial statements, presented by the Company, refer to the period from September 23, 2005, date of incorporation, to, date of the closure of the fiscal year, and they do not contain, therefore, comparative information of previous periods. The Company s financial statements were prepared and are being presented in conformity with the accounting practices adopted in Brazil, based on the provisions contained in the Corporate Law and in the rules issued by the Brazilian Securities and Exchange Commission - CVM. 14

15 11.01 NOTES TO THE FINANCIAL STATEMENTS In the preparation of the financial statements, it is necessary to use estimates to record certain assets, liabilities and other transactions. The financial statements include estimates referring to sundry provisions as well as to the amortization period of the deferred assets. The actual results may present variations in relation to the estimates. Summary of main accounting practices (a) Determination of income The revenues and expenses are recognized in compliance with the accrual basis. (b) Cash and cash equivalents The cash and cash equivalents in foreign currency are converted to the amount of the domestic currency, to the foreign exchange rate effective on the balance sheet date. The balances in cash and banks are presented in the Parent Company s financial statements as well as the investment in quotas of the exclusive fund FIQ Agro which, in turn, holds quotas in the exclusive investment fund FIM Guardian which, in turn, holds investments in fixed income securities, redeemable in a period shorter than 90 days. In addition to the balances described above, investments in banks (deposit certificates and purchase and sale commitments) which have the same liquidity characteristics and which are redeemable in a maximum term of 90 days as from the balance sheet date are presented as Cash and cash equivalents in the consolidated. Investments in banks are valued at the initial investment amount plus contractual interest up to the balance sheet date. (c) Marketable Securities They are represented by securities of the Brazilian federal government, valued at their estimated market value on the balance sheet date. (d) Sundry credits They are presented at the cost or realization value including, when applicable, earnings, variations in the foreign exchange rates and variations in the accrued rates. (e) Investments The interest in foreign subsidiaries is evaluated by the equity method of accounting, and the foreign exchange variation in the shareholders equity is recorded in an account in the income for the year. The accounts of the balance sheet and the income 15

16 11.01 NOTES TO THE FINANCIAL STATEMENTS for the year are converted into domestic currency at the foreign exchange rates effective on the date of the financial statements, under the terms of CVM resolution no. 28/86. (f) Property, plant and equipment These are stated at the acquisition cost, minus depreciation calculated based on the annual rates that take into consideration the time of the useful life of the assets. (g) Deferred assets The amounts accounted for in deferred assets were recorded at the historical cost of acquisition and formation. The expenditures incurred during the Company s incorporation and organization phase were appropriated to deferred assets and are being amortized by the estimated term of five years. (h) Rights and obligations The obligations and charges, known or calculable, are recorded by amounts restated up to the balance sheet date. The contingent liabilities resulting from labor, social security, tax, contractual, operational and administrative and judicial pleading obligations are provisioned by their estimate value when the probability of loss is considered probable. On the balance sheet date, the Company did not identify contingencies with probability of loss, either probable, possible or remote. 3 Consolidated financial statements The consolidated financial statements were prepared according to the consolidation principles set forth in the corporate law, and complementary provisions of CVM and comprise the financial statements of the Company and its subsidiaries and exclusive investment funds which are specific purpose entities ("EPE's"), in which the Company keeps control of the activities, directly or indirectly. The consolidated companies, their country and the interest in the total capital are presented as follows: Entity Country Interest - % Brasilagro International LLC ("International") United States 100 Brasilagro Global Corporation ("Global") British Virgin Islands 100 FIQ Agro Fund (Exclusive) Brazil 100 FIM Guardian Fund (Exclusive) (*) Brazil 100 (*) The total quotas of FIM Guardian Fund are held by FIQ Agro Fund. 16

17 11.01 NOTES TO THE FINANCIAL STATEMENTS In the consolidated financial statements the investments among the Companies, the equity in the income, as well as the assets and liabilities balances, the revenues and expenses resulting from the operations among the consolidated companies were eliminated. 4 Cash and cash equivalents and marketable securities Parent Company Consolidated Cash and cash equivalents Cash and banks Time deposits in banks abroad 173,328 Time deposits in banks in Brazil 261,088 Purchase and sale commitments 102,832 FIQ Agro Fund 377, , ,552 Marketable securities Federal government securities 14,041 14,041 The investments in time deposits in banks in Brazil and in purchase and sale commitments, held by FIM Guardian Fund, have contractual maturities, until April 2011 and November 2022, respectively. The banks ensure the Company the redemption right of the total investments, without any penalty, in a period shorter than 90 days of the initial investment. 5 Information about consolidated entities (a) Information about investments in FIQ Agro and FIM Guardian Funds FIQ Agro Fund FIM Guardian Fund Quantity of quotas 369,211, ,625,851 Interest of the Company - % Net equity on - R$ thousand 377, ,171 (*) The total quotas of FIM Guardian Fund are held by FIQ Agro Fund. 17

18 11.01 NOTES TO THE FINANCIAL STATEMENTS (b) Information about investment in subsidiaries International Global Total Interest of the Company - % Addition for incorporation of the subsidiary 91,394 89, ,896 Equity in the earnings of subsidiary and associated companies Foreign exchange variation for the year (4,822) (2,929) (7,751) Investment at the end of the year 86,714 86, ,328 6 Deferred assets On March 31, 2006, the Company had accounted for in deferred assets expenditures incurred since its incorporation, including the amounts of expenditures to appropriate referring to the process of initial public offering of shares, which were reclassified to the account in the current assets in the expenditures to appropriate item, and recognized as expenses in view of the closure of the initial public offering of shares in the quarter ended on. The expenditures to appropriate which have been accounted for in this account until March 31, 2006, as well as other expenditures referring to the initial public offering of shares totaling R$32,392 were recognized as expenses in the income in a specific line. The breakdown of deferred assets on March 31 and is presented in the following table: March 31, 2006 Expenditures to appropriate referring to the initial public offering process 1,275 Other amounts accounted for in deferred assets 1,216 1,551 Accumulated amortization (47) 2,491 1,504 18

19 11.01 NOTES TO THE FINANCIAL STATEMENTS 7 Shareholders equity (a) Capital stock on The capital stock on is comprised of 584,224 thousand common shares. According to the Bylaws the capital stock is exclusively comprised of common shares. (b) Evolution of the capital stock On September 23, 2005, the Company s capital payment in the amount of R$1,000, by means of the issuance of 1,000 common shares, was approved at an Extraordinary General Meeting. On this same date, the Company s founding shareholders subscribed 1,000 common shares, and on September 23, 2005, 100 common shares were paidup. They also invested in several following stages the total amount of R$1,024, corresponding to 1,024 common shares in the amount of R$1, each share, once there was the reverse split of shares at the ratio of 1 new share for each 1,000 existing shares. On May 4 and 9, 2006, the Company raised, by means of an initial public offering, coordinated by Credit Suisse S.A., the amounts of R$518,400 and R$ 64,800 respectively, issuing 583,200 new common shares at the amount of R$1, each share. The Company s shares are listed on Bovespa s Novo Mercado (New Market). (c) Distribution of income The Company s Bylaws set forth that: (i) The allocation of the income for each year will follow this order: 5%, at least, for the legal reserve, which shall not exceed 20% of the capital stock. In the year in which the balance of the legal reserve plus the amounts of the capital reserve exceeds 30% of the capital stock, the allocation of part of the net income for the year for the legal reserve will not be mandatory; The portion referring to mandatory dividends in each year may not be lower than 25% of the annual adjusted net income, as provided for in article 202 of the Brazilian Corporate Law; The remaining portion of the adjusted net income may be allocated to the Investment and Expansion Reserve based on the capital budget approved by the General Meeting, pursuant to article 196 of the. 19

20 11.01 NOTES TO THE FINANCIAL STATEMENTS (ii) (iii) (iv) (v) The profit reserve balance, except for unrealized profit reserves and reserves for contingencies, may not exceed the capital stock amount. In the event this maximum limit is reached, the General Meeting may resolve on the excess allocation either to capital payment or increase or distribution of dividends. The General Meeting may grant the members of Board of Directors and of the Board of Executive Officers a profit sharing, after accumulated losses and the provision for income tax and social contribution are deducted, in the legal cases, form and limits. Upon a proposal by the Board of Executive Officers, approved by the Board of Directors, by reference of the Annual General Meeting, the Company may pay or credit interest to shareholders, as compensation of their own capital, pursuant to applicable law. The Company may prepare midyear balance sheets, or in shorter periods, and declare, upon the Board of Directors resolution: the payment of dividend or interest on own capital to the account of profit as determined in the midyear balance sheet, imputed to the mandatory dividend amount, if any; the distribution of dividends in periods shorter than six months, or interest on own capital, imputed to the mandatory dividend amount, if any, provided that the dividend paid in each six-month period of the fiscal year does not exceed the legal reserves amount; the payment of interim dividend or interest on own capital to the account of retained earnings or profit reserve existing in the last annual or midyear balance sheet will be imputed to the mandatory dividend amount, if any. (d) Shareholders agreement On March 24, 2006, Cresud S.A.C.I.F. Y A., Tarpon Investimentos S.A., Tarpon Agro LLC, Cape Town LLC and Elie Horn ( Signatory Shareholders ) entered into a shareholders agreement the main characteristics of which are summarized as follows: (i) (ii) (iii) Binding of 80% of shares owned by the Signatory Shareholders to the agreement; The Signatory Shareholders undertake to vote together in block certain matters contemplated by the agreement at the General Meeting; The Board of Directors members elected by the Signatory Shareholders shall vote in accordance with the Signatory Shareholders joint decision on certain matters within the Board of Directors jurisdiction; 20

21 11.01 NOTES TO THE FINANCIAL STATEMENTS (iv) (v) The Signatory Shareholders shall be entitled to preemptive rights for the acquisition of shares or rights of a signatory shareholder who intends to dispose his/her interest; The agreement shall remain effective for 25 years or until the Signatory Shareholders interest, jointly, is equal to zero, whichever occurs first. (e) Subscription bonus On March 15, 2006, the Board of Directors approved the issuance of 512,000 share subscription bonuses: 256,000 for the first issuance and 256,000 for the second issuance, which were delivered to the founding shareholders, in the proportion of their interest in the Company s capital stock on the issuance date of the subscription bonuses. Each one of the issuances of the subscription bonuses grants their holders the right to the subscription of shares issued by the Company, in the amount equivalent to 20% of its capital stock, after the increase resulting from the full exercise of the subscription bonuses of each issuance. The Subscription Bonuses of the 1 st issuance grant their holders, as from the dates on which they become liable of exercise, the right to the subscription of shares issued by the Company by means of the payment of the price per share practiced in the initial public offering, subject to certain restatement and adjustment rules. The Subscription Bonuses of the 1 st issuance were issued in 3 tranches, which were exclusively different as to the date on which the right to subscribe the shares granted by them starts. The Subscription Bonuses of the 1 st issuance/1 st tranche may be exercised as from the end of the 12 th month counted from the date of their issuance and have as purpose a total of 85,336 Subscription Bonuses. The Subscription Bonuses of the 1 st issuance/2 nd tranche may be exercise as from the end of the 24 th month counted from the date of their issuance and has as purpose a total of 85,332 Subscription Bonuses. The Subscription Bonuses of the 1 st issuance/3 rd tranche may be exercised as from the end of the 36 th month counted from the date of their issuance and have as purpose a total of 85,332 Subscription Bonuses. Exceptionally, the Subscription Bonuses of the 1 st issuance may be exercised by their holders in the assumptions of transfer of the Company s control or acquisition of material interest, as defined under the terms of the Bonuses. Each set of 1,000 Subscription Bonuses of the 1 st issuance gives the right to the subscription of one (1) share issued by the Company when its attribution takes place. The Subscription Bonuses of the 2 nd issue grant their holders the right to subscribe shares issued by the Company for up to 15 years counted from the publication date of the closure announcement of the initial public offering of shares and exclusively in the assumptions of transfer of control or acquisition of material interest in the Company, as defined under the terms of the Bonuses. In such assumptions public offerings of acquisition of all outstanding shares of the Company must be presented. For the 21

22 11.01 NOTES TO THE FINANCIAL STATEMENTS subscription of shares purpose of Subscription Bonuses of the 2 nd issuance, their holders will be obligated to pay the same price per share practiced in the referred public offerings of acquisition of shares of the Company. Each set of 1,000 Subscription Bonuses of the 1 st issuance gives the right to the subscription of one (1) share issued by the Company when its attribution takes place. 8 Financial income and expenses The financial income in the statements of the Parent Company corresponds to the earnings resulting from the financial investments in the exclusive fund FIQ Agro. The financial income in the Consolidated statements corresponds to the earnings of the investments made by FIM Guardian Fund, as well as to the earnings of investments accrued by the financial investments made by its foreign subsidiaries. The financial expenses correspond to the expenses with the provisional contribution on financial transactions (CPMF). 9 Income tax and social contribution (a) For the year The fiscal year for purposes of determination of the income tax and social contribution is the calendar year which differs from the fiscal year which ends on June 30 of each year. The Company, in the period ended on December 31, 2005 was in its preoperational phase and, therefore, did not obtain taxable income or tax loss. In the half year ended on the Company obtained tax loss in the amount of R$23,330, represented by the accounting loss for the year (R$30,914), deducted from the result of equity interest, including foreign exchange variation on investments abroad (R$7,568) and from the non-deductible amortization (R$16). (b) Deferred charges The Company has, as mentioned above, tax loss and negative calculation basis of the social contribution to offset with future taxable income, and its compensation is limited to 30% of the taxable income determined in each future base period. Considering that the Company is in the initial phase of operations, not having, as a consequence, a history of determination of taxable income, the management chose not to recognize, on an accounting basis, the corresponding tax credit (deferred income tax and social contribution), the amount of R$7,

23 11.01 NOTES TO THE FINANCIAL STATEMENTS 10 Related parties (a) On March 15, 2006, the Company entered into a consulting agreement with Paraná Consultora de Investimentos S.A. ("Paraná"), a company specialized in consulting in the agricultural and cattle raising sector, under indirect control of the Company s shareholder, Tarpon BR S.A (company controlled by the shareholders Tarpon Investimentos S.A. and by Mr. Elie Horn), and of the following related parties: Consultores Asset Management S.A. and Mr. Alejandro Elsztain. The main conditions set forth in the referred agreement are: (i) the agreement will be effective for an indeterminate term and may be terminated 6 months in advance, (ii) as compensation Paraná will annually received 1% of the Company s capital stock and (iii) in the event of termination of the agreement by the Company, without just cause, a fine of R$4,316 must be paid to Paraná, restated by the Broad Consumer Price Index (IPC- A). The first payment to be made by the Company is estimated for August 2006 and corresponds, according to contractual amendment as of August 17, 2006, to services to be carried out from July 1, 2006 to June 30, In the year no amounts in relation to this agreement were accounted for. (b) The main balances related to the operations with related parties on arise from expenditures during the Company s incorporation and organization phase and other costs, which were paid by the shareholders and that may be reimbursed by their effective cost or used for capital increase, as follows: Checking account with partners Cresud S.A. 437 (c) The Company has a physical, administrative and operational structure sharing agreement with Tarpon Investimentos S.A., by means of which it undertakes to pay certain expenditures of the real estate where it is headquartered, such as rent, maintenance services, cleaning, telephony, electric power, technology, condominium and other maintenance expenditures. The amounts paid in the year totaled R$ Insurance Considering the nature of the activities developed until the end of the year, the management did not contract insurance on. 23

24 11.01 NOTES TO THE FINANCIAL STATEMENTS 12 Financial instruments The Company evaluated its assets and liabilities in relation to the market and/or realization values, by means of available information and evaluation methodologies set forth by the management. Valuation of financial instruments The main assets and liabilities instruments of the Company on are descried as follows, as well as the criteria used for their valuation/evaluation: (a) Cash and banks, financial investments and marketable securities The amounts accounted for are close to the realization amounts. (b) Investments These are investments in associated companies, recorded by the equity method of accounting, which have strategic interest for the Company s operations. (c) Risk related to foreign exchange rate This risk arises from the possibility of the Company incurs in losses due to fluctuations in foreign exchange rates, which reduce invested nominal values. On the company had assets and liabilities denominated in US dollar in the amount of US$80,085 thousand respectively, and there was no instrument to protect this exposure on this date. 13 Subsequent event On August 11, 2006, Purchase and Sale Commitments were entered into, by means of which the Company undertook to acquire rural properties located in the States of Piauí and Goiás, as long as complying with certain conditions set forth in the agreement. In the event one or more conditions set forth are not complied with, especially the satisfactory conclusion of the general audit, the Company may renegotiate the prices initially agreed or, at its exclusive discretion, it may terminate the Purchase and Sale Commitments, without any burden or penalty. 24

25 11.01 NOTES TO THE FINANCIAL STATEMENTS (a) Property in the State of Piauí (unaudited by PricewaterhouseCoopers Auditores Independentes) The property is located between the municipalities of Tasso Fragoso and Baixa Grande do Ribeiro. The total area declared is 32,375 hectares, 30,187 hectares of which are titled and the other 2,188 hectares are being regulated by means of a georeferencing process. The estimated cultivatable area is 23,000 hectares, around 16,000 hectares out of which have already been opened and have their environmental licenses approved. The property also has 3,000 hectares dedicated to the cultivation of soybean and rice. The Company intends to develop in these properties plantations of grains and cotton. The price initially agreed was R$42.5 million, or the equivalent to R$1,313/ha. The payment will be made in two installments: the first one in cash and the second one in the twelfth month subsequent to the payment of the first installment. Additionally, the Company entered into a second Purchase and Sale agreement with the current owners referring to a glebe of land adjacent to the first area. The total area currently fully covered by native wood, is 13,764 hectares. The Company intends to use this area for a future expansion of the project of grains and cotton to be implemented in the region. The price initially agreed was R$15.5 million or R$1,126/ha. The payment is subject to the effective regulation of the dominion and possessory documentation of this property and will be made in two installments: the first one when the documentation of the area is totally regulated and the second one in the twelfth month subsequent to the payment of the first installment. (b) Property in the State of Goiás (unaudited by PricewaterhouseCoopers Auditores Independentes) The property is located near the municipality of Chapadão do Céu and 1,000 km from one of the main ports of the country. The total area is 2,443 hectares, around 1,773 hectares out of which are currently dedicated to the cultivation of soybean and grains. The Company intends to develop in this property initially the culture of grains and cotton, and subsequently change to sugar cane plantation, after the installation of industrial projects for sugar cane processing in the region. There is a potential of significant valuation of these properties due to the installation of the processing units in the region. The price initially agreed was 488,000 sacks of soybean (nearly R$11.1 million), or the equivalent to 200 sacks/ha or R$4,540/has. The payment will be made in three 25

26 11.01 NOTES TO THE FINANCIAL STATEMENTS installments: the first one in cash (38.52% of the total amount), the second one in the twelfth month subsequent to the payment of the first installment (30.74% of the total amount) and the third one in the twenty fourth month subsequent to the payment of the first installment (30.74% of the total amount). * * * 26

27 IDENTIFICATION 1 - CVM CODE COMPANY NAME 3 - CNPJ (Corporate Taxpayer s ID) BRASILAGRO CIA BRAS PROPRIEDADES AGRICOL / TABLE OF CONTENTS GROUP TABLE DESCRIPTION PAGE IDENTIFICATION HEADQUARTERS INVESTOR RELATIONS OFFICER (Company Mailing Address) DFP REFERENCE AND AUDITOR INFORMATION CAPITAL STOCK COMPANY PROFILE COMPANIES NOT INCLUDED IN THE CONSOLIDATED FINANCIAL STATEMENTS CASH DIVIDENDS INVESTOR RELATIONS OFFICER BALANCE SHEET - ASSETS BALANCE SHEET - LIABILITIES INCOME STATEMENT STATEMENT OF CHANGES IN FINANCIAL POSITION STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY FROM 09/23/2005 TO 06/30/ CONSOLIDATED BALANCE SHEET - ASSETS CONSOLIDATED BALANCE SHEET - LIABILITIES CONSOLIDATED INCOME STATEMENT CONSOLIDATED STATEMENT OF CHANGES IN FINANCIAL POSITION REPORT OF INDEPENDENT AUDITORS UNQUALIFIED MANAGEMENT REPORT NOTES TO THE FINANCIAL STATEMENTS 14/26 27