Financial Statements Brasil Brokers Participações S.A. March 31, 2018 With Independent Auditor s Report

Transcription

1 Financial Statements Brasil Brokers Participações S.A. March 31, 2018 With Independent Auditor s Report

2 Brasil Brokers Participações S.A. Financial Statements March 31, 2018 Table of Contents Officers statement on the Financial Statements... 2 Officers statement on the Independent Auditor s Report... 3 Independent Auditor s Report... 4 Financial Statements Statement of financial position Statement of income for the year Statement of changes in equity Statement of value added Statement of comprehensive income Statement of cash flow...19 Management Report Notes to the financial statements... 23

3 Officers Statement on the Financial Statements The executive officers of Brasil Brokers Participações S.A., inscribed in the Ministry of Finances under corporate taxpayer s ID (CNPJ) no / , with head office at Avenida Luis Carlos Prestes, nº 230, Subsolo, salas 104 a 106, Barra da Tijuca, in the city and state of Rio de Janeiro, for the purpose of Article 25 of CVM Instruction 480 of December 7, 2009, hereby declare that they reviewed, discussed and agreed with the information contained in the financial statements for the fiscal year ended March 31, Rio de Janeiro, May 8, Brasil Brokers Participações S.A Board of Executive Officers

4 Officers Statement on the Independent Auditor s Report The executive officers of Brasil Brokers Participações S.A., inscribed in the Ministry of Finances under corporate taxpayer s ID (CNPJ) no / , with head office at Avenida Luis Carlos Prestes, nº 230, Subsolo, salas 104 a 106, Barra da Tijuca, in the city and state of Rio de Janeiro, for the purpose of Article 25 of CVM Instruction 480 of December 7, 2009, hereby declare that they reviewed, discussed and agreed with the opinions expressed in the Independent Auditor s Report on the financial statements for the fiscal year ended March 31, Rio de Janeiro, May 8, Brasil Brokers Participações S.A Board of Executive Officers

5 Brasil Brokers Participações S.A. Interim Financial Information (ITR) and Interim Financial Information Review Report March 31, 2018

6 Contents Page Interim financial and interim financial information review report 3 Interim financial information 5 Notes to the interim financial information for the period ended March 31,

7 3 Independent auditor s review report on the interim financial information Grant Thornton Auditores Independentes Rua Voluntários da Pátria, 89 5º andar Botafogo Rio de Janeiro RJ Brasil T To: To the Shareholders and Management of Brasil Brokers Participações S.A. Rio de Janeiro RJ Introduction We have audited the parent company and consolidated interim financial information of Brasil Brokers Participações S.A ( Company ), contained in the Interim Financial Information Form (ITR) for the quarter ended March 31, 2018, which comprise the statement of financial position as at March 31, 2018 and the statements of operations, comprehensive income, changes in equity and cash flows for the three-month periods then ended including the summary of the main accounting policies and other explanatory information. The Company s Management is responsible for the preparation of this parent company and consolidated interim financial information in accordance with Technical Pronouncement CPC 21 (R1) - Interim Financial Reporting and international standard IAS 34 Interim Financial Reporting, issued by the International Accounting Standards Board (IASB), as well as for the fair presentation of this information consistently with the standards issued by the Brazilian Securities and Exchange Commission (CVM), applicable to the preparation of the Interim Financial Information Form ITR. Our responsibility is to express an opinion on this interim financial information based on our review. Scope of review We carried out our review in accordance with Brazilian and international standards on review of interim financial information (NBC TR 2410 Review of interim financial information performed by the auditor of the entity and ISRE 2410 Review of interim financial information performed by the independent auditor of the entity, respectively). A review of interim financial information consists of making inquiries, primarily to people in charge of financial and accounting matters, and applying analytical procedures and other review procedures. The scope of a review is substantially less than an audit carried out in accordance with audit standards and, consequently, it did not enable us to have assurance that we were aware of all significant matters that might be identified in an audit. Therefore, we do not express an audit opinion.

8 4 Conclusion on the parent company and consolidated interim financial information Based on our review, we are not aware of any fact that would lead us to believe that the parent company and consolidated interim financial information included in the Interim Financial Information Form - ITR referred to above was not prepared, in all material respects, in accordance with CPC 21 (R1) and IAS 34, applicable to the preparation of the Interim Financial Information Form - ITR and presented in accordance with the standards issued by the Brazilian Securities and Exchange Commission (CVM). Other matters Interim statements of value added We have also reviewed the parent company and consolidated interim statements of value added (DVA) for the three-month period ended March 31, 2018, prepared by the Company s Management, which is required to be presented in the interim financial information by the Brazilian Securities and Exchange Commission (CVM) standards, applicable to the preparation of the Interim Financial Information Form - ITR, and deemed as supplementary information by the International Financial Reporting Standards (IFRS) that do not require the presentation of the statements of value added (DVA). These interim statements were submitted to the same review procedures previously described and, based on our review, we are not aware of any fact that would lead us to believe that they were not properly prepared, in all material respects, in accordance with the parent company and consolidated interim financial information taken as a whole. Rio de Janeiro, May 4, Ana Cristina Linhares Areosa CT CRC RJ /O-3 Grant Thornton Auditores Independentes CRC SP /O-1 S RJ

9 To Grant Thornton Auditores Independentes Address: Rua Voluntários da Pátria, 89 5º Andar, Botafogo Rio de Janeiro - Brasil Rio de Janeiro, May 04, 2018 Review of the Quarterly Earnings Release - Quarter ended on March 31, 2018 Dear Sirs: This representation letter concerns your review of the interim, individual and consolidated information, known as Quarterly Earnings Release (ITR) for the quarter ended on March 31, 2018, including the consolidated balance sheet of Brasil Brokers Participações S.A., on March 31, 2018, the consolidated statements of income and comprehensive income, the changes in shareholders equity and the cash flows and the statement of added-value for the three-month period ended, and the Notes, including a summary of the main accounting practices and other explanations, with the purpose to issue a conclusion regarding any fact that may lead to the believe that this interim financial statement has not been prepared, in all material, in compliance with CPC 21 (R1) and IAS 34, which are applicable to the preparation of Quarterly Earnings Release (ITR) and presented in accordance with the standards issued by the Brazilian Securities and Exchange Commission. For identification purposes, the Quarterly Earnings Release (ITR) examined by you have the following basic amounts: March 31, 2018 Parent Company R$ thousand December 31, 2017 Consolidated R$ thousand March 31, 2018 December 31, 2017 Current asset 35,466 59,928 61,563 86,595 Non-current assets 317, , , ,447 Current liabilities 7,076 6,225 51,818 55,251 Non-current liabilities 107, ,834 65,799 68,007 Shareholders Equity 238, , , ,784 Loss of R$12,668 and R$11,631 for the periods ended on March 31, 2018 and on March 31, 2017, respectively:

10 We recognize our responsibility for the due presentation of this interim information in accordance with the standards issued by the Brazilian Securities and Exchange Commission (CVM), applicable to the preparation of the Quarterly Earnings Release (ITR). We confirm, based on our best knowledge and criteria, the following representations: Interim Financial Information: 1. The above mentioned interim financial information was prepared and presented in compliance with CPC 21 (R1) and IAS 34 applicable to the preparation of Quarterly Earnings Release (ITR) and presented in accordance with the standards issued by the Brazilian Securities and Exchange Commission. 2. We have fulfilled our responsibilities, as established under the proposal, for the preparation and presentation of the Quarterly Earnings Release (ITR) in compliance with CPC 21 (R1) and IAS 34 applicable to the preparation of Quarterly Earnings Release (ITR) and presented in accordance with the standards issued by the Brazilian Securities and Exchange Commission. 3. There were no material changes in the Company s operations after the date of its most recent audit report on the Company s financial statements prepared in compliance with the accounting practices adopted in Brazil (CPC), of May 4, 2018, until the date of this letter, that impact the Quarterly Earnings Release (ITR). 4. The same accounting policies and calculation methods were adopted in the Quarterly Earnings Release (ITR) when compared to the Company s last annual financial statements prepared in accordance with CPC for the year ended on December 31, The measurement methods and the main assumptions used to obtain the accounting estimates, including those measured at fair value, are reasonable. 6. All events occurred after the date of Quarterly Earnings Release (ITR) up to the date of the review report, for which the CPC requires adjustment or disclosure, were adjusted or disclosed. 7. The other effects from misstatements not corrected were immaterial, both individually and in the aggregate, for the Quarterly Earnings Release (ITR) taken as a whole. The summary of these items is included in this representation letter (Exhibit I). Information provided: 2

11 7. We provide: Access to all information that we know that are relevant for the preparation of the interim financial information, such as records, documents and other matters; Additional information requested for the purpose of the review; and Unrestricted access to the Company s people to obtain evidence. 8. All relevant transactions have been properly recorded in the accounting records and are reflected in the interim information. 9. We acknowledge our responsibility for the internal control as required to ensure that the preparation of the interim financial information has no material misstatement resulting from fraud or error. In particular, we acknowledge our responsibility for planning, implementing and maintaining the internal control to prevent and detect fraud and error. We disclose to you the results of our risk assessment, which concluded that the interim information is free from material misstatement resulting from fraud. We understand that the term fraud includes the Misappropriation of assets, that is, the theft of an entity s assets. This is usually followed by false or misleading records or documents that hide the fact that the assets are missing or that they have been pledged without the due authorization. We also understand that the term fraudulent financial report involves the intentional misrepresentation, omitting figures or disclosures in the interim financial information that misleads the users of the financial statements. 11. We disclose to you all information related to: (a) Fraud or suspected fraud that we have knowledge of and which affect the Company, involving: the Management; employees who play a significant role in the internal control; or others, in which the fraud would have a material effect on the accounting information. (b) Alleged or suspected fraud affecting the Company s accounting information, reported by employees, former employees, analysts, regulators or others. 12. We disclose to you all known cases of non-compliance or suspected non-compliance with laws and regulations, the effects of which should be considered in the preparation of the interim information. 3

12 In addition, we hereby inform that we have duly accounted and disclosed in the interim financial information, in accordance with CPC, all lawsuits or claims, actual or possible, with effects that must be considered in the preparation of quarterly information. 13. We have disclosed to you the identity of all related parties of the Group and of the Company and all significant changes concerning the related parties and transactions that we have knowledge of since the last financial statement, for the year ended December 31, All changes in relations with related parties and transactions were duly accounted for in accordance with CPC 05 (R1). We use the definitions of related parties and transactions with related parties set forth by CPC 05 (R1). 14. We disclose to you all material information to prepare the interim information in compliance with the continuity assumption. 15. We make available all accounting books, supporting documents and minutes of shareholders meetings, of the meetings of the Board of Directors and of the Executive Board, or summary of recent meetings with no minutes drawn-up yet. The last minutes were issued on the following dates: Minutes of Shareholders Meeting - ESM - of May 12, 2016 ASM - of April 30,

13 16. In addition to the facts disclosed in the interim financial information, we have no knowledge of: a. conflicts of interest involving the Management or its graduate employees. b. onerous contracts, such as contracts in which the unavoidable costs to meet the obligations under the contract exceed the economic benefits expected from the contract, including losses arising from purchase and sale commitments; and 17. In addition to the facts already disclosed in the interim information, we have no plans or intentions that could materially affect the accounting balances or the classification of assets and liabilities. 18. The following information was duly recorded and, when appropriate, duly disclosed in the interim financial information: guarantees, in writing or verbal, for which the entity is contingently liable; and buyback agreements and options for assets previously sold. 19. The Company owns all its assets, which are free and clear of any liens or encumbrances. We are no knowledge of mortgages, pledges or guarantees related to these assets, in addition to those already disclosed in the interim information. 20. We have complied with all contractual requirements that could have a material effect on the interim financial information in case of non-compliance. 21. We confirm that we have made available to you all information on the Company s risk exposures arising from financial instruments and the origin of those exposures, including a description of our purposes, policies and procedures to manage the risks from financial instruments and the methods used to measure the risks. 22. The presentation and disclosure of fair value measurements of assets and liabilities are in accordance with the accounting practices adopted in Brazil. The assumptions used reflect our intent and ability to carry out specific courses of action on behalf of the entity that are relevant to the measurement or disclosure of the fair value. Respectfully, 5

14 Claudio Hermolin CEO Andreas Yamagata CFO Evelyn Veloso Trindade CRC RJ /O-4 Exhibit I Trademarks and patents The Company has recorded in its intangible assets an amount of R$3,019 thousand referring to Trademarks and patents. However, in the first quarter of 2018, it was not carried out a study to verify impairment, which leads to uncertainties on the realization of the balance. The accounting entry is explained below: Nature Amount (R$) D Results 3,019 C Intangible assets 3,019. 6

15 ASSETS BRASIL BROKERS PARTICIPAÇÕES S.A. Statement of Financial Position as of March 31, 2018 and December 31, 2017 (in thousands of Reais) LIABILITIES AND EQUITY Notes Parent Company Consolidated Notes Parent Company Consolidated Mar/18 Dec/17 Mar/18 Dec/17 Mar/18 Dec/17 Mar/18 Dec/17 Current Assets: Current Liabilities: Cash and cash equivalents 5 26,673 52,161 32,101 57,284 Trade accounts payable 1, ,688 3,849 Trade accounts receivable 6 2, ,632 13,384 Payroll, provisions and social contributions 1,975 1,620 5,699 4,308 Advances to suppliers Court payments in installments 13 1,767 1,120 8,328 12,577 Recoverable taxes 2,872 3,717 4,100 5,416 Taxes and contributions payable ,362 3,230 Dividends and IOE receivable 15 1,998 1, Advances from clients Prepaid expenses ,741 2,561 Dividends payable Receivables - Resale of companies Provision for contingencies ,493 22,293 Other receivables ,847 6,866 Amounts to be transferred from lease operations - - 2,114 2,147 Other payables 802 2,046 4,103 6,077 Total current assets: 35,466 59,928 61,563 86,595 Total current liabilities: 7,076 6,225 51,818 55,251 Non-current assets: Non-current liabilities: Long-term assets Long-term liabilities Trade accounts receivable Available-for-sale plots of land Provision for contingencies ,708 64,716 Recoverable taxes 10,279 10,279 12,024 12,024 Provision for investment losses ,407 98, Receivables from related parties 15 47,057 35, Other payables 3,414 3,526 3,091 3,291 Judicial deposits 9 15,908 8,243 27,977 19,889 Receivables - Resale of companies 7 1,457 2,031 1,457 2,031 Others receivables 1,365 1,236 5,330 4,814 76,066 57,522 47,798 39,912 Total non-current liabilities: 107, ,834 65,799 68,007 Equity: 18 Investments in subsidiaries , , Capital stock 590, , , ,437 Property and equipment 11 3,542 3,662 15,495 16,368 Capital reserve 43,478 43,478 43,478 43,478 Intangible assets: Accumulated losses (292,453) (279,609) (292,453) (279,609) Indefinite useful life 12 3,019 3, , ,595 Treasury shares (23,717) (23,717) (23,717) (23,717) Finite useful life 12 6,515 7,149 6,892 7,572 Stock option reserve Transactions with non-controlling interests (79,528) (79,528) (79,528) (79,528) 241, , , ,535 Company's equity: 238, , , ,116 Non-controlling shareholders - - 1,484 1,668 Total non-current assets: 317, , , ,447 Total equity: 238, , , ,784 Total assets 352, , , ,042 Total liabilities and equity 352, , , ,042

16 BRASIL BROKERS PARTICIPAÇÕES S.A. Statement of operations for the periods ended March 31, 2018 and 2017 (In thousands of Reais, except for basic and diluted earnings per share) Parent Company Consolidated Notes Mar/18 Mar/17 Mar/18 Mar/17 Net revenue 19 3, ,443 18,807 Cost of services rendered 20 (919) - (2,498) (799) Gross result 3, ,945 18,008 Operating costs, expenses and income: Administrative expenses 21 (5,245) (4,734) (26,975) (27,620) Management fees 15 (455) (315) (1,735) (764) Depreciation and amortization (953) (975) (2,369) (2,512) Other operating income (expenses) 24 (1,161) 164 (2,186) (342) Equity income 10 (9,318) (7,945) - - Operating loss before financial result (14,090) (13,261) (13,320) (13,230) Financial expenses 22 (59) (20) (412) (210) Financial income 23 1,305 1,606 1,382 2,390 Financial result 1,246 1, ,180 Loss before income tax and social contribution (12,844) (11,675) (12,350) (11,050) Income tax expense (228) (418) Social contribution expense (90) (163) Loss for the period (12,844) (11,675) (12,668) (11,631) Loss attributed to controlling shareholders (12,844) (11,675) (12,844) (11,675) Profit attributed to non-controlling partners Loss per share in Reais (basic and diluted) ( ) ( ) Average number of shares (outstanding) 247, ,865 The notes are an integral part of these financial statements.

17 Brasil Brokers Participações S.A. Statement of changes in equity for the periods ended March 31, 2018 and December 2017 Capital reserve (in thousands of Reais) Profit reserve Acumulated Acquisition of Total equity of Noncontrolling consolidated Total Goodwill Treasury Stock option losses / Call option of noncontrolling interest controlling non- Capital stock controlling reserve shares reserve retained shareholders shareholders equity Note 18 earnings interest Balances on December 31, ,437 43,478 (23,717) - (174,204) (42,470) (32,811) 290,713 10, ,324 Capital increase 70, ,000-70,000 Write-off of non-controlling interest due to business combination (6,763) (6,763) Transactions with non-controlling shareholders (4,247) - (4,247) (443) (4,690) Dividend payment (1,964) (1,964) Stock option reserve Subsidiary adjustment effect Result for the period (106,160) - - (106,160) 227 (105,933) Balances on December 31, ,437 43,478 (23,717) 55 (279,609) (46,717) (32,811) 251,116 1, ,784 Capital increase Write-off of non-controlling interest due to business combination Transactions with non-controlling interests (231) (231) Dividend payment (129) (129) Stock option reserve (30) (30) - (30) Subsidiary adjustment effect Result for the period (12,844) - - (12,844) 176 (12,668) Balances on March 31, ,437 43,478 (23,717) 25 (292,453) (46,717) (32,811) 238,242 1, ,726 The notes are an integral part of these financial statements.

18 BRASIL BROKERS PARTICIPAÇÕES S.A. Statement of value added for the periods ended March 31, 2018 and 2017 (in thousands of Reais) Parent Company Consolidated Mar/18 Mar/17 Mar/18 Mar/17 REVENUE Sales of services 4, ,022 21,825 Other revenues Allowance for doubtful accounts/reversal - - (324) 101 4, ,739 22,090 Materials, energy, outsourced services and other (1,823) (898) (14,540) (13,651) (1,823) (898) (14,540) (13,651) GROSS VALUE ADDED 2,796 (263) 11,199 8,439 Depreciation and amortization (953) (975) (2,369) (2,512) (953) (975) (2,369) (2,512) NET VALUE ADDED GENERATED BY THE COMPANY 1,843 (1,238) 8,830 5,927 Equity in the earnings of subsidiaries (9,318) (7,945) - - Financial income 1,305 1,606 1,851 2,744 (8,013) (6,339) 1,851 2,744 TOTAL VALUE ADDED TO DISTRIBUTE (6,170) (7,577) 10,681 8,671 DISTRIBUTION OF VALUE ADDED Personnel and charges (3,572) (3,437) (10,913) (10,162) Payroll and charges (2,409) (2,421) (6,764) (6,969) Management fees (455) (315) (1,735) (764) FGTS (153) (168) (448) (499) Benefits (555) (533) (1,966) (1,930) Taxes, fees and contributions (1,357) (808) (6,489) (6,141) Federal (619) (650) (2,437) (2,552) Municipal (681) (115) (3,805) (3,251) Other (57) (43) (247) (338) Value distributed to capital providers (1,745) 147 (5,947) (3,999) Interest (14) (464) (330) Rental (510) 14 (2,984) (2,959) Other (1,235) 147 (2,499) (710) Value distributed to shareholders 12,844 11,675 12,668 11,631 Non-controlling interest in retained earnings - - (176) (44) Loss for the period 12,844 11,675 12,844 11,675 Total 6,170 7,577 (10,681) (8,671) The notes are an integral part of these financial statements.

19 BRASIL BROKERS PARTICIPAÇÕES S.A. Corporate taxpayer's ID (CNPJ): / Statement of comprehensive income as of March 31, 2018 and 2017 (in thousands of Reais) Parent Company Consolidated Mar/18 Mar/17 Mar/18 Mar/17 Loss for the period (12,844) (11,675) (12,668) (11,631) Other comprehensive income Comprehensive income for the period (12,844) (11,675) (12,668) (11,631) Attributed to the Company's partners (12,844) (11,675) (12,844) (11,675) Attributed to non-controlling partners - gross result The notes are an integral part of these financial statements.

20 BRASIL BROKERS PARTICIPAÇÕES S.A. Statement of cash flows for the periods ended March 31, 2018 and 2017 (in thousands of Reais) CASH FLOW Parent Company Consolidated From operating activities Mar/18 Mar/17 Mar/18 Mar/17 Loss for the period before taxes (12,844) (11,675) (12,350) (11,050) Adjustments to reconcile loss and net cash provided by operating activities: Depreciation ,422 1,730 Amortization Equity income 9,318 7, Allowance for doubtful accounts (101) Adjustment to the market value - receivables - - (137) (93) Long-term financial expenses (480) (346) - 8 Stock option result (30) - (30) - Adjust net loss (3,083) (3,101) (9,824) (8,724) Changes in assets and liabilities Trade accounts receivable (1,961) (19) (1,666) 6,755 Recoverable taxes , Receivables from related parties (11,488) (3,931) - - Other receivables 1 (1,687) 433 (2,328) Other long-term assets (10,174) 2,187 (7,655) 1,310 Trade accounts payable 1, (2,410) 1,319 Litigation risks (53) (168) (1,808) (3,034) Payroll and social charges payable , Taxes and contributions payable 54 (158) (1,186) (2,151) Advances from clients - (569) 30 (677) Other current liabilities (1,246) 103 (2,007) 425 Prepaid expenses 88 (296) (180) (1,407) Other long-term liabilities (110) - (200) 46 (21,961) (3,733) (13,942) 812 Net cash used in activities (25,044) (6,834) (23,766) (7,912) From investing activities Securities - 8,719-10,315 Advances for future capital increase (245) Additions to property and equipment (117) (4) (1,206) (36) Additions to intangible assets (82) (724) (82) (890) Dividends received Net cash provided by/used in investing activities (444) 7,991 (1,288) 9,389 From financing activities with third parties Accounts payable - acquisition of companies - (221) - (221) Net cash used in financing activities with third parties - (221) - (221) From financing activities with shareholders Non-controlling interest - - (129) (1,091) Net cash provided by financing activities with shareholders - - (129) (1,091) Increase (decrease) in cash and cash equivalents (25,488) 936 (25,183) 165 Cash and cash equivalents at the beginning of the period 52,161 2,381 57,284 10,587 Cash and cash equivalents at the end of the period 26,673 3,317 32,101 10,752 The notes are an integral part of these financial statements.

21 1 MANAGEMENT REPORT Dear Shareholders, Clients and Investors, For Brasil Brokers, 2018's first quarter was marked by a reversal of the downward trend in real estate purchase and sale numbers. For first time since 2012, the Company has posted annual growth in Potential Sale Value (PSV) and it was the third consecutive quarter of growth in number of units sold. Volume launches was up in the beginning of the year, especially in São Paulo, mostly due to lower average ticket products. There is still heated demand for smaller floor-space low-income products, as shown by our VSL (Velocity over Launches) ratio of 43% in the 1Q18 over 38% in Gradual growth of business was associated with progress made on Brazil's main macroeconomic indicators, such as better financing conditions and lower volumes of stocks in the Primary Market. Underlining the importance of our business diversification strategy, Net Revenues grew 19% on 1Q17, while our PSV of own operations in the period was 2%. Note that the volume of loans originated through our financial services platform for sales and distribution reached R$ 211 million, which was 270% up on the same period of the previous year. Lines of business classed as complementary, i.e. those other than traditional Primary and Secondary Markets, accounted for 42% of revenues in the early part of the year. To make structure increasingly more efficient, we have invested R$ 2.5 million over the last 12 months to deploy and customize new support systems that will deliver productivity gains for our back office. We held a few renegotiating rounds for rental agreements and supplier contracts in general, mainly Information Technology, Telecommunications and Legal Advice. We must also mention the first effects of our Digital Transformation process that added functionalities to our website in the last few months in order to enhance customer experiences when searching, browsing and interacting. We have also leveraged use of data intelligence to offer more precise opportunities and reformulated our marketing strategy to improve our positioning on search portals and in social media channels. As a result, 1Q18 s number of visits to our website more than doubled against 4Q17 s and the number of pages browsed per visit was up 17% on the same period while average length of stay per visit rose from 5 to 7 minutes. We launched our B2B portal for large-asset segment sales, such as corporate floors and malls, thus building closer relationships with our customers. This segment has huge growth potential since many assets pose attractive commercial conditions for long-term investors. In February, we created a new business unit called UNIQUE exclusively to sell luxury properties in Rio de Janeiro. With its own brand and concept, UNIQUE stands out for its edge hi-tech tools such as Virtual Tours, 3D printers and artificial intelligence systems, with special customer service from the firm's partners as their sales executives. We would like to mention that cases involving labor and employment claims showed better results. Our success rate in 2018 YTD has shown a significantly improvement compared to 2017's. We are beginning to get more rulings ordering claimants to pay losing party and bad-faith litigation costs. In addition to a higher success rate, another unmistakable sign of a better outlook is that the average number of new claims filed per month was down 53% from

22 2 Finally, the Company's cash position was negatively affected by a total of R$ 7.3 million held in Brasil Brokers bank accounts was frozen on March due to provisional execution in a civil-liability case being heard by the 5th Panel of the Manaus district in the state of Amazonas. The court of first instance authorized blocking the account on the grounds that this amount was required for alimony expenses. Brasil Brokers objected and obtained a ruling to suspend its effects which was issued by the chief judge of the Court of Amazonas on March 28, Given this decision, our legal advisors believe the frozen funds must be returned to the company until higher instances analyze the merits of the case. Management 2

23 1. Operations. Brasil Brokers Participações S.A. Brasil Brokers Participações S.A. ( Brasil Brokers or Company ) is a Joint-stock Company domiciled in Brazil, with shares traded on the São Paulo Stock Exchange (BM&FBOVESPA), whose corporate purpose is to hold interest in companies that operate in the real estate brokerage and consulting market. The Company s headquarters are located at Avenida Luiz Carlos Prestes, nº 230, salas 104, 105 and 106 of 1º subsolo, Barra da Tijuca, in the city and state of Rio de Janeiro. On March 31, 2018, the Company, through its subsidiaries, has a presence in the states of Rio de Janeiro, São Paulo, Rio Grande do Sul, Minas Gerais, Bahia, Goiás, Pará, Mato Grosso and Espírito Santo, as well as operating in other states through its subsidiaries Primaz Empreendimentos Imobiliários Ltda and Rede Morar Ltda. Real estate brokerage services cover the sale of residential units, lots, residential condominiums, shopping malls, commercial units, flats and hotels. The Company began a new model, as a service provider through associated real estate brokers. This franchise will operate in Rio Grande do Norte. On January 4, 2018, two new group companies were formed: Unique Brasil Brokers Ltda and BBRK Consultoria e Capital Ltda. Unique Brasil Brokers will offer clients a better service, focusing on high-end properties. BBRK Capital will advise property developers on how to access the market through the sale of receivables. 2. Significant accounting policies. The parent company and consolidated interim financial information was prepared and has been stated in accordance with the accounting practices adopted in Brazil and the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB), which, in Brazil, comprise the translations by the Brazilian Accounting Pronouncements Committee (CPC). In order to ensure their proper reporting and disclosure pursuant to the standards previously mentioned, we implemented the internal controls necessary to guarantee that the preparation of these financial statements is free from any relevant distortion. The interim financial information of the Company and its subsidiaries is presented in Brazilian reais, which is the Company s functional currency. The interim financial information of Brasil Brokers and its subsidiaries, as indicated in Note 10, was prepared with the support of several evaluation bases for accounting estimates. The accounting estimates used in the preparation of the financial statements were supported by objective and subjective factors, based on Management s judgment to determine the amount appropriate to be registered in them. 1

24 Important items subject to these estimates and assumptions include the selection of the useful life of property and equipment and its recoverability of operations, evaluation of financial assets at fair value and adjusted to present value, credit risk analysis to determine the allowance for doubtful accounts and the analysis of other risks in order to establish other provisions, including the provisions for contingent liabilities civil, labor and tax. The settlement of transactions using these estimates may result in amounts substantially different from those recorded in the interim financial information due to the probabilities inherent to the use of estimates. The Company reviews its estimates and assumptions at least on an annual basis. The Company s interim financial information is presented pursuant to technical guideline CPC 07, which addresses basic requirements to be met in the preparation and disclosure of financial information, especially the data contained in the notes. Management confirms that all the relevant information related to its interim financial information is being disclosed and corresponds to the data used by it in its activities. The disclosure of this interim financial information was approved by the Executive Board on May 4, Business combination Business combinations are recognized using the acquisition method. The acquisition cost is the sum of the transferred consideration, assessed based on the fair value at the date of acquisition, and the amount of minority interest in the acquired company. For each business combination, the acquirer shall measure the minority interest of the acquired company at fair value or based on its interest in the acquiree s net assets. Cost directly attributable to the acquisition shall be recorded as expenses when incurred. When acquiring a business, the Company assesses the financial assets and liabilities assumed with the purpose of classifying and allocating them in accordance with the contractual terms, economic circumstances and applicable conditions at the acquisition date. This includes the separation, by the acquiree, of embedded derivatives in host contracts in the acquiree. Initially, goodwill is measured as the surplus of the payment for net assets acquired (identifiable net assets acquired or liabilities assumed). If the payment is smaller than the fair value of assets acquired, the difference shall be recognized as gain in the statement of income. 2

25 After the initial recognition, goodwill is measured at cost, less impairment losses. For purposes of impairment tests, goodwill acquired in a business combination is, as of the acquisition date, allocated to each of the cash generating units expected to benefit from the combination s synergy, regardless of other assets or liabilities of the acquiree to be attributed to these units Non-controlling interests For each business combination, the Group measures any non-controlling interest in the acquiree, using one of the following criteria: - at fair value; or - at the proportionate interest in acquiree s identifiable net assets, which are generally measured at fair value. Changes in the Group s interest in a subsidiary not resulting in loss of control are recognized as transactions with non-controlling interests in their position as shareholders. Adjustments to non-controlling interest are based on a proportionate amount of the subsidiary s net assets. There is no adjustment in the goodwill for future profitability and no gain or loss is recognized in the profit for the year Investments in subsidiaries The Company s investments in its subsidiaries are evaluated based on the equity accounting method. A subsidiary is an entity over which the Company exercises significant influence. Based on the equity accounting method, investments in subsidiaries are accounted for in the Parent Company s statement of financial position at cost, plus changes after shareholding acquisition in the subsidiary. Goodwill related to the subsidiary is included in the investments book value, which is not amortized. Given that goodwill based on future yield comprise the book value of investments in subsidiaries (which is not recorded separately), it is not separately tested for impairment. The statement of income reflects the portion of the subsidiary s operation results. When a change is directly recognized in the subsidiary s equity, the Company will recognize its portion in the variations and will disclose this fact, when applicable, in the statement of changes in equity. The unrealized gains and losses, resulting from transactions between the Parent Company and the subsidiary, are eliminated according to the interest held in the subsidiary. 3

26 After applying the equity accounting method, the Company determines whether it is necessary to recognize any additional impairment on the Company s investment in its subsidiary. At each closure date of the balance sheet, the Company determines if there is clear evidence that investments in subsidiaries recorded impairment losses. If so, the Company calculates the impairment amount as the difference between the subsidiary s recoverable value and its book value and recognizes the amount in the Parent Company s statement of income Revenue recognition Revenue is recognized to the extent that economic benefits are likely to be generated for the Company and when it can be measured reliably. Revenue is measured by applying the fair value of the consideration received, excluding discounts, rebates and taxes or charges on sales. The Company has evaluated revenue transactions in accordance with specific criteria to determine whether it is acting as an agent or principal, and it ultimately concluded that it is acting as principal in all its revenue agreements Income tax and social contribution on profit These are calculated according to the Corporate Income Tax (IRPJ) and Social Contribution on Profit (CSLL) effective rates. The Company chose to use the taxable income regime, a method that considers the settlement of tax losses and negative basis of social contribution for purposes of determining liabilities. Therefore, additions of temporary non-deductible expenses to book income or exclusions of temporary nontaxable revenue, considered for the calculation of current taxable income, generate tax credits or debits, pursuant to Note 14. Regarding its subsidiaries, the Company annually evaluates future projections in order to adjust each subsidiary to the most efficient tax regime: taxable income or presumed profit, as allowed by the tax legislation. Under the presumed profit regime, the income tax provision is recorded on a quarterly basis at the rate of 15%, with a 10% surplus (on the portion that exceeds R$60 of profit per quarter), applied on the 32% basis of service revenue. CSLL is calculated using the 9% rate on the 32% basis of service revenue. Financial revenue and other revenues are fully taxed according to effective IRPJ and CSLL rates. 4

27 2.5. Financial Assets Financial assets are classified as financial assets at fair value through profit or loss, loans and receivables, held-for-trading investments, as applicable. The Company classifies its financial assets at their initial recognition, when they become part of the instrument s contract provisions. The Company s financial assets include cash and cash equivalents, financial investments, trade receivables and call option of non-controlling interest. Subsequent measurement The measurement of financial assets depends on their classification, which may be as follows: Financial assets at fair value through profit or loss a) Cash and cash equivalents Cash and cash equivalents are maintained to meet short-term cash commitments. The Company considers as a cash equivalent any financial investment that can be immediately translated into a known cash amount and is subject to an insignificant risk of change in value. b) Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments not quoted in an active market. After the initial measurement, these financial assets are recorded at amortized cost, by using the effective interest method minus impairment losses. The amortized cost is calculated taking into consideration any discount or premium on the acquisition and the fees or costs, when incurred. The amortization of the effective interest method is included in the financial revenue line of the statement of income. Impairment losses are recognized as financial expense also in the statement of income. c) Accounts receivable from clients Trade receivables are stated at the nominal value of securities, which are subject to adjustment to present value. An allowance for doubtful accounts is recorded and calculated based on estimates sufficient to cover possible losses in the realization of trade receivables, considering the history of payment of each client in relation to their situation. 5

28 2.6. Adjustments of assets and liabilities to present value Monetary assets and liabilities are adjusted to their present value at the initial record of the transaction, taking into consideration the contractual cash flow, the explicit interest rate - in certain cases implicit - of the respective assets and liabilities and the rates practiced in the market for similar transactions. This interest is relocated to the financial revenues and expenses account in the income group of accounts by using the method of effective interest rate in relation to the contractual cash flows Property and equipment Property and equipment are recognized at the cost of acquisition. The depreciation of the properties is calculated by the straight-line method using rates mentioned in note 11, which takes into account the estimated economic useful life of the assets Intangible assets Intangible assets acquired separately are measured in the initial recognition at the acquisition cost. The cost of intangible assets acquired in a business combination corresponds to the fair value at the acquisition date. After its initial recognition, intangible assets are presented at cost, less accumulated amortization and losses and recoverable value. Internally-generated intangible assets, except for capitalized development costs, are not capitalized and its expenses are recorded in the statement of income for the year they are incurred. Intangible assets are mainly represented by: software, trademark license and goodwill from future profitability and future additional revenues, pegged to business combinations of the Company and its subsidiaries. Intangible assets with finite useful lives are accrued throughout their economic useful life and evaluated regarding impairment losses whenever there is evidence of loss in the asset s economic value. The term and method for the amortization of intangible assets with finite useful lives are reviewed at least at the end of each fiscal year. Changes in the finite useful life or in the consumption expected of future economic benefits of these assets are accounted for through changes in the amortization term or method, depending on the case, and are treated as changes in accounting estimates. The amortization of intangible assets with finite useful lives is recorded in the statement of income as cost or expenses related to the use of intangible assets. Intangible assets with indefinite useful lives are not amortized; however, they are annually tested for impairment, whether individually or at the level of cash generating unit. The indefinite useful life evaluation is annually revised to determine if this evaluation continues to be reasonable. In the contrary, changes in the useful life, from undefined to defined, are conducted prospectively. 6

29 2.9. Other assets and liabilities (current and non-current) Assets are recognized in the statements of financial position when it is probable that their future economic benefits will be generated in behalf of the Company and their cost or value may be measured with assurance. Liabilities are recognized in the statement of financial position when the Company has a legal or constituted obligation as result of an event in the past, for which it is probable that an economic resource be required in order to settle it. They are increased, when applicable, by the corresponding charges and inflation adjustments or translations adjustments incurred. Provisions are recorded based on the best estimates Management can make of the risks involved. The assets and liabilities are classified as current when their realization or liquidation will probably occur in the following twelve months. Otherwise, they are stated as noncurrent assets and liabilities Statements of cash flow and value added Statements of cash flow were prepared and are presented in compliance with CVM Resolution 641 of October 7, 2010, which approved technical pronouncement CPC 3 (R2) Statement of Cash Flow. Statements of value added were prepared and are presented in compliance with CVM Resolution 557 of November 12, 2008, which approved technical pronouncement CPC 9 Statement of Value Added Standards, Amendments and Interpretations IASB has published or amended the following accounting pronouncements, guidelines or interpretations, which must be adopted in subsequent periods: a) Effective for periods beginning on or after January 1, 2019: IFRS 16/CPC 06(R2) Leases: It establishes new standards to account for leases. Under this new rule, lessees are required to recognize the liability for future payments and the right to use the leased asset for practically all leases, including operating leases, except for certain short-term leases or leases for low value assets that may be outside the scope of this new standard. The criteria for recognizing and measuring leases in the lessors' financial statements are substantially maintained. IFRS 16 replaces IAS 17 - Leases and related interpretations. In Brazil, these changes are treated as a revision of CPC 06. 7

30 2.12. Segment reporting Primary and secondary segment information (see note 25), which reported to the Group s CEO, the main operating decision-maker, includes items directly attributable to the segment. There is no allocation of assets, liabilities and expenses by segment in this decision-making process, given that these are corporate items and/or shared service structures Earnings per share Basic earnings per share is calculated by dividing profit or loss for the fiscal year attributed to the Company s shareholders by the weighted average number of shares during the same period. Diluted earnings per share is calculated by dividing net profit attributed to holders of common and preferred shares of the Company by the weighted average number of common and preferred shares, respectively, which would be issued in the conversion of all potential common shares into their respective shares, with dilutive effects. 3. Consolidated interim financial information. The consolidated interim financial information is composed of the interim financial information of the Company and its subsidiaries, as follows: Interest (%) Corporate Mar/18 Dec/17 Name Abreu Brokers Serviços Imobiliários Ltda Abyara Brokers Intermediação Imobiliária Ltda Ágil Negócios Imobiliários Ltda Bamberg Assessoria Imobiliária Ltda Basimóvel Consultoria Imobiliária Ltda BBRK Consultoria e Capital Ltda Brasil Brokers Assessoria e Consultoria Imobiliária Ltda Brito Amoedo Imobiliária Ltda Chão E Teto Consultoria Imobiliária Ltda Frema Consultoria Imobiliária Ltda Global Consultoria Imobiliária Ltda LBR Brokers Negócios Imobiliários Ltda Marcos Koenigkan Consultoria Imobiliária S.A MF Consultoria Imobiliária Ltda Morumbi Brokers Administração de Bens e Serviços Ltda Niterói Administradora de Imóveis Ltda Noblesse Consultoria Imobiliária Ltda Pactual Negócios Imobiliários Ltda Pointer Consultoria Imobiliária S.A Primaz Empreendimentos Imobiliários Ltda Rede Morar Ltda Tropical Corretora e Consultoria Imobiliária Ltda Unique Brasil Brokers Ltda

31 For equity held by the Company, which is not wholly owned, control or material influence is determined for consolidation purposes. However, Brasil Brokers, as the parent company, must approve the main operating decisions of these subsidiaries. Once started, the operations will only be used by the Company. Based on these facts and circumstances, the Management establishes that Brasil Brokers is the parent company of these entities, and, therefore, they are consolidated in its financial information. Subsidiaries are fully consolidated from the date of acquisition, being the date that the Company takes control. The financial information of the subsidiaries is prepared for the same reporting period as the parent company using consistent accounting policies. A change in interest held in a subsidiary that does not result in loss of control is recorded as a transaction between shareholders in equity. 3.1 Main consolidation procedures 1) Elimination of asset and liability balances between consolidated companies; 2) Elimination of the equity on capital, reserves, accumulated profits (losses) of subsidiaries; 3) Non-controlling interest is recorded on a separate line in the consolidated interim financial information; 4) Accounting policies are applied evenly in all consolidated companies and comply with those used in the previous year; 5) For the purposes of consolidation, the Management used as criteria IFRS 10/CPC 36 (R2), which introduces an exclusive control model to define if an investment should be consolidated. 4. Use of estimates. In the preparation of this interim financial information, the Company used assumptions to recognize estimates to account for certain assets, liabilities and other transactions, such as provisions for contingent liabilities civil, labor and tax, allowance for doubtful accounts and classification as current and non-current, among others. Amounts are confirmed when the event, which caused the estimate to be used, is realized. It may differ from amounts recognized in this interim financial information. Management regularly reviews these estimates and assumptions on a timely basis. 9

32 a) Fair value of financial instruments When the fair value of a financial asset or liability carried in the statement of financial position cannot be derived from an active market, it is calculated using valuation techniques, including the discounted cash flow method. Data used for these methods is based on market data, when possible. However, if this is not feasible, a degree of judgment is required to establish the fair value. This judgment considers data used such as liquidity or credit risk, as well as volatility. Changes in assumptions may impact the fair value of financial instruments. b) Provision for tax, civil and labor risks The Company recognizes a provision for tax, civil and labor claims. The probability of loss includes an assessment of available evidence, hierarchy of laws, former court decisions available, most recent court decisions and their relevance to the legal system, and the evaluation of legal advisors. These provisions are reviewed annually and adjusted for changes in circumstances, such as applicable limitation period, findings of tax inspections or additional exposure identified based on new matters or court decisions. c) Impairment testing Pursuant to CPC 01 Impairment of Assets, Management annually tests the carrying amount of assets to determine whether there is any indication of impairment from events or changes in economic, operating or technological circumstances. If such evidence is identified the Company calculates the recoverable value of the asset. If the carrying amount exceeds the recoverable value, a provision for impairment is recorded, adjusting the net book value to the recoverable value, when applicable. Assumptions used to determine the value of assets are based on the evaluation or indication that the carrying amount value exceeds its recoverable amount. These indications consider the obsolescence of the asset, the significant or unexpected decrease in its market value, changes in the macroeconomic scenario in which the Company operates and changes in interest rates that could impact future cash flows of cash-generating units. The main assets tested for annually by the Company are the intangible assets with indefinite useful lives. 10

33 5. Cash and cash equivalents. Bank accounts and cash balances earn interest at floating rates based on daily bank deposit rates. Short-term deposits are made for periods ranging from one day to three months, depending on the immediate cash needs of the Company and its subsidiaries. On March 31, 2018 and December 31, 2017, cash and cash equivalents are impacted as follows: Parent Company Consolidated Description Mar/18 Dec/17 Mar/18 Dec/17 Cash Bank accounts ,241 Investments 26,553 52,113 31,092 55,958 Total 26,673 52,161 32,101 57,284 In March 2018, the investments are substantially represented by financial investments in a fixed income investment fund, remunerated at a rate of 100% of CDI. 6. Trade and other receivables. These comprise: Parent Consolidated Company Description Mar/18 Dec/17 Mar/18 Dec/17 Accounts receivable from clients 2, ,752 21,810 Allowance for doubtful accounts - - (7,797) (7,929) Present value adjustment - - (73) (103) Total 2, ,882 13,778 Current 2, ,632 13,384 Non-current The portion of non-current trade and other receivables subject to present value adjustments was calculated using an average discount rate of 6.40% p.a. In March 31, 2018 (6.90% p.a. in December 31, 2017), equivalent to the Selic rate. 11

34 Aging of the trade and other receivables is as follows: Aging of trade receivables Consolidated Description Mar/18 Dec/17 Falling due from 01 to 60 days 6,844 5,276 Falling due from 61 to 90 days 1,127 1,059 Falling due from 91 to 180 days 1,458 1,664 Falling due from 181 to 360 days 1,289 1,483 Falling due over 360 days Total falling due 10,969 9,876 Overdue from 01 to 60 days 2,229 2,724 Overdue from 61 to 90 days Overdue from 91 to 180 days 1,707 1,111 Overdue from 181 to 360 days 2,013 2,094 Overdue over 360 days 5,386 5,405 Total overdue 11,783 11,934 Total 22,752 21,810 Below is the aging for overdue amounts not included in allowance for doubtful accounts (ADA): Consolidated Description Mar/18 Dec/17 Overdue from 01 to 60 days 2,158 2,649 Overdue from 61 to 90 days Overdue from 91 to 180 days 1, Total overdue not included in the ADA 4,103 4,159 Below, a breakdown of allowance for doubtful accounts: Consolidated Opening ADA Result Writeoffs Closing balance balance Dec/17 (12,388) (690) 5,149 (7,929) Mar/18 (7,929) (324) 456 (7,797) The Company monitors and analyzes its receivables. Invoices overdue by more than 10 days are sent to the collection department, which contacts debtors to renegotiate terms and amounts. The allowance for doubtful accounts is based on receivables that are overdue for more than 180 days and other receivables from individual clients who have at least one receivable or installment overdue for more than 180 days. 12

35 7. Receivables - Resale of companies. In the last four years, the Company resold some of its subsidiaries to former partners, generating receivables in each one of these operations. Amounts as of March 31, 2018 and December 31, 2017 are as follows: Missau, Galvão e Silva Planej.e Vendas Imob. Ltda. Parent Company Consolidated Mar/18 Dec/17 Mar/18 Dec/ O2 Negócios Imobiliários Ltda Redentora Consultoria Imobiliária Ltda. 1,226 1,802 1,226 1,802 2,150 2,747 2,160 2,763 Current Non-current 1,457 2,031 1,457 2, Real estate and property held for sale. These comprise: Consolidated Description Mar/18 Dec/17 Real estate and land The Company s subsidiaries received real estate and land as part of payment for commission on real estate brokerage. Real estate and land were booked at their fair value on the transaction date, equal to the value of the service provided. The Company's subsidiaries do not intend to keep these assets, and they are currently held for sale. Throughout the year 2017 sales of these assets were realized. Market Value tests were performed on the remaining assets and no items to be provisioned were identified. 13

36 9. Judicial deposits These refer to appeal bonds for labor, civil and tax claims, recorded at the restated amount, as follow: Mar/18 Judicial deposits Labor claims Civil claims Tax claims Brasil Brokers Participações S.A. 2,390 13, ,908 Total - Parent Company 2,390 13, ,908 Abreu Brokers Serviços Imobiliários Ltda Abyara Brokers Intermediação Imobiliária Ltda. 2, ,141 Ágil Negócios Imobiliários Ltda Basimóvel Consultoria Imobiliária Ltda Brito Amoedo Imobiliária Ltda Chão E Teto Consultoria Imobiliária Ltda Frema Consultoria Imobiliária Ltda. 1, ,644 Global Consultoria Imobiliária Ltda. 2, ,221 LBR Brokers Negócios Imobiliários Ltda MF Consultoria Imobiliária Ltda Niterói Administradora de Imóveis Ltda Noblesse Consultoria Imobiliária Ltda Primaz Empreendimentos Imobiliários Ltda Rede Morar Ltda Tropical Corretora e Consultoria Imobiliária Ltda. Total Total - Consolidated 11,431 16, ,977 14

37 Dec/17 Labor claims Civil claims Tax claims Total Brasil Brokers Participações S.A. 2,331 5, ,245 2,331 5, ,245 Abreu Brokers Serviços Imobiliários Ltda Abyara Brokers Intermediação Imobiliária Ltda. 2, ,068 Ágil Negócios Imobiliários Ltda Basimóvel Consultoria Imobiliária Ltda Brito Amoedo Imobiliária Ltda Chão E Teto Consultoria Imobiliária Ltda Frema Consultoria Imobiliária Ltda. 1, ,492 Global Consultoria Imobiliária Ltda. 2, ,271 LBR Brokers Negócios Imobiliários Ltda MF Consultoria Imobiliária Ltda Niterói Administradora de Imóveis Ltda Noblesse Consultoria Imobiliária Ltda Primaz Empreendimentos Imobiliários Ltda Rede Morar Ltda Tropical Corretora e Consultoria Imobiliária Ltda Total 11,027 8, , Investments. a) Information on subsidiaries on March 31, 2018 Investments in subsidiaries, under the equity accounting method, are assessed according to the investees statements of financial position on the reference date of March 31, The Company has shareholders and/or quotaholders agreements with all subsidiaries. The Company has a representative on the Board of Directors and/or Board of Executive Officers of the subsidiaries actively participating in all strategic business decisions. The subsidiaries use the same accounting policies as the Company, described in Note 2, when applicable. 15

38 Balance of investments comprises the following: Parent Company Description Mar/18 Dec/17 Investments 6,611 7,564 Goodwill paid on acquisition of subsidiaries 221, ,331 Total 227, Changes in the year: Investments Description Mar/18 Dec/17 Opening balances 7,564 16,810 Additions (*) Capital Reduction(**) - (489) Dividends distributed - (7,287) Equity in the earnings of subsidiaries (953) (2,455) Total (*)2017 Refers to the acquisition of 30% of Morumbi (R$130), acquisition of 15% of Bamberg (R$207), acquisition of 22.5% of Libório (R$104) and capital increase of R$33 in Brito e Amoedo and R$511 in Niterói. (**)2017 Capital reduction of R$19 in Niterói, R$270 in BBRK LTDA and R$200 in Bamberg. Provision for excess of liabilities over assets Description Mar/17 Dec/17 Opening balances 98,886 72,867 Additions (*) (3,844) (24,515) Equity in the earnings of subsidiaries 8,365 50,534 Closing balances 103,407 98,886 (*)2018 Refers to capital increases of R$469 in Noblesse, R$13 in Pointer, R$2,153 in Abyara and R$964 in Niterói Advance for Future Capital Increase at BBRK Ltda (R$245) Refers to capital increases of R$248 in Abreu, R$7,061 in Noblesse, R$982 in Frema, R$2,321 in Ética, R$2,373 in Basimóvel and R$4,818 in Pointer Advance for Future Capital Increase of R$5,455 in Abyara R$989 in Niterói and R$268 in Brasil Brokers Participação Administração Ltda.. Goodwill Parent Company Intangible assets Consolidated Mar/18 Dec/17 Mar/18 Dec/17 Opening balances 221, , , ,657 Write-off of non-controlling interest due to business (6,763) combinations Impairment loss (*) - (16,438) - (16,438) Closing balances 221, , , ,456 (*) See Note 11.

39 16

40 Mar/18 Dec/17 Mar/17 Investment Interest (%) Equity Investment Profit (Loss) For the year Noncontrolling shareholder Equity in the earnings of subsidiaries Investment Equity in the earnings of subsidiaries Agil Negocios Imobiliários Ltda (296) - (296) 754 (344) Bamberg Assessoria Imobiliária Ltda Chão e Teto Consultoria Imobiliária Ltda (71) - (71) 314 (87) Niterói Administradora de Imóveis Ltda (1,051) (6) (1,051) LBR Brokers Negócios Imobiliários Ltda (47) (55) Pactual Negócios Imobiliários Ltda (47) - (47) 928 (53) Primaz Empreendimentos Imobiliários Ltda (19) (123) (143) 158 (191) Rede Morar Ltda (623) - (623) 707 (127) Tropical Corretora E Consultoria Imob. Ltda ,141 3,141 (68) - (68) 3,209 (61) Total 6,780 6,611 (1,747) (176) (1,918) 7,564 (48) Mar/18 Dec/17 Mar/17 Profit Provision for excess of liabilities over assets Provision for (Loss) Noncontrolling the excess of earnings of Equity in Provision for Equity in the Interest Equity excess of for the (%) liabilities year shareholder earnings of liabilities over subsidiaries over assets subsidiarie s assets Abreu Brokers Serviços Imobiliários Ltda. 100 (2,361) (2,361) (20) - (20) (2,338) (309) Abyara Brokers Intermediacao Imobiliaria Ltda. 100 (33,123) (26,272) (1,979) - (1,979) (26,448) (1,145) BBRK Consultoria e Capital Ltda. 80 (1) Brasil Brokers Assessoria E Cons. Imob Ltda. 100 (813) (300) (341) - (341) (203) - Brito Amoedo Imobiliária Ltda. 100 (486) (486) (359) - (359) (127) (163) Basimovel Consultoria Imobiliária Ltda. 100 (10,823) (10,823) (1,465) - (1,465) (9,359) (943) Frema Consultoria Imobiliária Ltda. 100 (21,697) (21,697) (705) - (705) (20,992) (2,929) Global Consultoria Imobiliária Ltda. 100 (30,276) (30,276) (997) - (997) (29,279) (550) MF Consultoria Imobiliária Ltda. 100 (9,511) (9,511) (625) - (625) (8,886) (898) Noblesse Consultoria Imobiliária Ltda. 100 (684) (684) (485) - (485) (669) (747) Pointer Consultoria Imobiliária S.A. 100 (326) (326) (9) - (9) (329) (14) Morumbi Brokers Adm. De Bens E Serv. Ltda. 100 (414) (414) (158) - (158) (256) (199) Unique Brasil Brokers Ltda. 100 (257) (257) (257) - (257) - - Total (110,772) (103,407) (7,420) - (7,400) (98,886) (7,897) (103,992) (96,796) (9,167) (176) (9,318) (91,322) (7,945) 17

41 Additional information about the subsidiaries: Mar/18 Net revenue Investment Interest (%) Number of shares held Assets Liabilities Equity Agil Negocios Imobiliários Ltda ,468 2,783 2, Bamberg Assessoria Imobiliária Ltda ,727,600 1, Chão e Teto Consultoria Imobiliária Ltda ,998 1,967 1, LBR Brokers Negócios Imobiliários Ltda ,360,464 1, Niterói Administradora de Imóveis Ltda ,999 4,464 6, ,477 Pactual Negócios Imobiliários Ltda ,849, Primaz Empreendimentos Imobiliários Ltda ,783 1,098 1, Rede Morar Ltda ,583, ,726 Tropical Corretora E Consultoria Imob. Ltda ,153,563 10,079 6,938 3,141 2,389 Total 24,815 20,310 6,780 8,542 Provision for excess of liabilities over assets Interest (%) Mar/18 Number of shares held Assets Liabilities Equity Net revenue Abreu Brokers Serviços Imobiliários Ltda , ,621 (2,360) - Abyara Brokers Intermediação Imobiliária Ltda ,500,963 12,411 45,535 (33,123) 3,488 Basimovel Consultoria Imobiliária Ltda ,999 4,298 15,122 (10,824) 719 BBRK Consultoria e Capital Ltda (1) - Brasil Brokers Assessoria E Cons. Imob Ltda ,042, (813) - Brito Amoedo Imobiliária Ltda ,657,037 1,332 1,818 (486) 385 Frema Consultoria Imobiliária Ltda ,609,722 7,595 29,292 (21,697) 2,521 Global Consultoria Imobiliária Ltda ,538,690 3,784 34,060 (30,276) - Marcos Koenigkan Consultoria Imobiliária S.A ,345, MF Consultoria Imobiliária Ltda ,827 4,922 14,433 (9,511) 2,146 Morumbi Brokers Adm. De Bens E Serv. Ltda , ,096 (414) 408 Noblesse Consultoria Imobiliária Ltda ,560,440 1,152 1,837 (684) 274 Pointer Consultoria Imobiliária S.A , (326) - Unique Brasil Brokers Ltda , (257) - Total 37, ,006 (110,772) 9,941 62, ,316 (103,992) 18,483 18

42 Below, the goodwill on acquisition of investments during the Company s activities: Description Abyara Brokers Intermediação Imobiliária Ltda. Bamberg Brokers Assessoria Imobiliária Ltda. Frema Consultoria Imobiliária Ltda. Global Consultoria Imobiliária Ltda. LBR Brokers Negócios Imobiliários Ltda. Marcos Koenigkan Consultoria Imobiliária S/A. Morumbi Brokers Adm. De Bens E Serviços Ltda. Pointer Consultoria Imobiliária S.A. Equity on purchase date Month of acquisiti on Percenta ge acquired Amount of investment on acquisition date Goodwil l on acquisiti on date (Tax) Asset recovery adjustment Amortization Transactio ns involving shareholde rs Total Parent Company in Mar/18 Minorities on the basis of Business combination Consolidat ed Total in Mar/18 37 nov/ , ,671 (18,531) (3,876) - 188, , Mar/ ,471 (11,918) - - 1,553-1, Mar/ ,541 (2,888) (2,255) - 25,398-25, May/ ,681 (13,825) (856) Aug/ ,699 (2,936) - (2,700) 2,063 1,125 3, Feb/ ,110 (5,604) (506) Dec / ,248 (7,100) - (2,095) 4,053-4, Mar/ ,526 (5,994) (532) Total 61, ,947 (68,796) (8,025) (4,795) 221,331 1, ,456 In compliance with the accounting practices, introduced by the conformity of Brazilian accounting principles with the international standards (Law 11,638/07), the Company started to make adjustments to its goodwill, deriving from acquisition of subsidiaries, thus, generating a difference between the value of accounting goodwill and goodwill amortization for tax purposes (goodwill on the acquisition date), accepted for future deductibility by the Brazilian Internal Revenue Service. In the ownership structure of subsidiaries, the managers of the companies have one (1) quota entitled to a disproportionate interest in the income. This disproportional distribution added to the proportional interest came to R$176 in March 2018 (R$44 in March 2017) and was recorded under non-controlling interest in the income statement. Goodwill impairment testing using expected future profitability and intangible assets with indefinite useful lives. The fair market value of the acquisition was supported by an independent report and goodwill is based on expected future profitability. The impairment test is carried out annually and periodically reviewed if there are indicators of impairment. It is applied individually for each acquired company using the procedures described in CPC

43 For impairment test purposes, goodwill on acquisition of companies and goodwill with an indefinite useful life was allocated to its respective cash-generating unit. The recoverable amount was calculated using the value in use from cash projections taken from financial budgets approved by the Company s Management for the next five years. The projected cash flow aims at reflecting the continuing development of operations taking into consideration investments made and results expected to be obtained over the coming years. Goodwill was calculated as a result of acquisition of investments coming from estimated future profitability of the next 10 years, based on a real discount rate of 14.8%, with perpetuity. The main assumptions used to estimate the value in use are described on Note 12. The Company recorded impairment losses of R$16,438 in the subsidiaries on December 31, In 2018, the Company did not record any impairment loss. 20

44 11. Property and equipment. Property and equipment are broken down as follows: Parent Company % - annual depreciatio n rate Dec/16 Additions Depreciation in the year Dec/17 Additions Writeoffs Writeoffs Depreciation in the period Mar/18 Leasehold improvements (*) 1, , ,592 Accumulated (101) - - (318) (419) - - (79) (496) depreciation Leasehold improvements - Net 1, (318) 1,173 - (79) 1,096 Equipment, furniture and fixtures 10 1, , ,130 Accumulated (807) - - (113) (920) - - (29) (949) depreciation Equipment, furniture and fixtures - Net (113) (29) 181 Facilities Accumulated depreciation 10 1, , ,248 (40) - - (125) (165) - - (31) (196) Facilities - Net 1, (125) 1, (31) 1,052 IT equipment 20 4, (5) - 4, ,149 Accumulated depreciation IT equipment - Net (2,688) - 2 (420) (3,106) - - (98) (3,204) 1, (3) (420) (98) 945 Works of art Total property and equipment (*) It depends on contract duration. 4, (3) (976) 3, (237) 3,542 21

45 Consolidated Leasehold improvements % - annual depreciatio n rate Dec/16 Addition s Depreciation in the year Dec/17 Addition s Writeoffs Writeoffs Depreciation in the period Mar/18 (*) 37, (367) - 38, (520) - 38,339 Accumulated depreciation (31,990) (2,452) (34,148) - 6 (500) (34,642) Leasehold improvements balance 5, (73) (2,452) 3, (514) (500) 3,697 Equipment, furniture and fixtures 10 20, (349) - 20, (122) - 20,670 Accumulated depreciation (12,520) (2,005) (14,287) - - (467) (14,754) Equipment, furniture and fixtures balance 8, (111) (2,005) 6, (122) (467) 5,916 Facilities 10 8, (254) - 8, (28) - 8,536 Accumulated depreciation (3,609) (867) (4,364) - 11 (209) (4,562) Facilities balance 5, (142) (867) 4, (17) (209) 3,974 Vehicles (85) Accumulated depreciation (387) (35) 85 (11) (348) - - (3) (351) Vehicles balance (11) (3) 2 IT equipment 20 20, (165) - 20, (10) - 20,979 Accumulated depreciation (18,124) (1,191) (19,177) - 6 (243) (19,414) IT equipment balance 2, (27) (1,191) 1, (4) (243) 1,565 Works of art Total property and equipment 21,857 1,390 (353) (6,526) 16,368 1,206 (657) (1,422) 15,495 (*) It depends on contract duration. 22

46 12. Intangible assets Intangible assets are broken down as follows: Parent Company % - annual amortizatio n rate Dec/16 Additio ns Amortization in the year Dec/17 Addition s Writeoffs Writeoffs Amortization in the period Mar/18 Indefinite useful life 3, , ,019 Trademarks and patents - 3, , ,019 Trademarks and patents balance 3, , ,019 Finite useful life 7,711 2,360 - (2,922) 7, (716) 6,515 Software licenses (*) 19,402 2, , ,844 Accumulated amortization (12,227) - - (2,821) (15,098) - - (690) (15,788) Software licenses balance 7,125 2,360 - (2,821) 6, (690) 6,056 Trademarks Accumulated amortization (306) - - (76) (382) - - (19) (401) Trademarks balance (76) (19) 357 Non-competition Accumulated amortization (116) - - (25) (141) - - (7) (148) Non-competition balance (25) (7) 102 Client portfolio Total intangible assets 10,730 2,360 - (2,922) 10, (716) 9,534 (*) It depends on each license duration. 23

47 Consolidated % - annual amortizatio n rate Dec/16 Addition s Writeoffs Amortization in the year Dec/17 Addition s Amortization in the period Mar/18 Indefinite useful life 248,801 - (23,206) - 225, ,595 Trademarks and patents - 3,144 - (5) - 3, ,139 Trademarks and patents balance Goodwill in investment 3,144 - (5) - 3, ,139 (***) 312,890 - (6,763) - 306, ,127 Accumulated amortization (8,192) (8,192) - - (8,192) Transactions involving shareholders (4,795) (4,795) - - (4,795) Write-off by impairment test (54,246) - (16,438) - (70,684) - - (70,684) Goodwill balance (*) 245,657 - (23,201) - 222, ,456 Finite useful life 8,156 2, (3,132) 7, (947) 6,892 Software licenses (**) 23,683 2,517 (85) - 26, ,382 Accumulated amortization (16,111) (3,033) (19,028) - (922) (19,950) Software licenses balance 7,572 2, (3,033) 7, (922) 6,432 Trademarks Accumulated amortization (308) - - (74) (382) - (19) (401) Trademarks balance (74) (19) 357 Non-competition Accumulated amortization (116) - - (25) (141) - (6) (147) Non-competition balance (25) (6) 103 Total intangible assets - 256,957 2,517 (23,176) (3,132) 233, (947) 232,487 (*) Subject to annual asset impairment testing. (**) It depends on each license duration. (***) Write-off of minority goodwill in the acquisition of interest Morumbi (R$3,524), Bamberg (R$274) and Libório (R$2,965). Impairment test The Company carries out goodwill impairment testing annually (or in interim periods, if there is any indication of impairment) under CPC 01, which was last done on Sunday, December 31, The main assumptions used to estimate the value in use are: Revenues Projected revenue between 2018 and 2027 considering the estimated growth of the real estate brokerage business and increased perpetuity. 24

48 Operating costs and expenses Projected costs and expenses were based on historical data for performance and revenue growth and on the cost and expense reduction plan. Capital investments Investments in capital was estimated considering acquisitions of new units and improvements. Key assumptions were based on the Company s historical data and reasonable macroeconomic assumptions based on the financial market outlook, documented and approved by the Company s Management. On December 31, 2017, the Company recorded impairment of R$16,438 in the parent company and, in 2018, the Company did not record any impairment loss. 13. Court payments in installments. The Company has recorded court payments in installments due to labor settlements in its statement of financial position. The table below shows the figures as of March 31, 2018 and December 31, 2017: Court payments in installments Mar/18 Dec/17 Brasil Brokers Participações S.A. 1,767 1,120 Total Parent Company 1,767 1,120 Abyara Brokers Intermediação Imobiliária Agil Negócios Imobiliários Ltda Basimovel Consultoria Imobiliária Ltda ,693 Frema Consultoria Imobiliária Ltda. 1,172 1,961 Global Consultoria Imobiliária Ltda. 3,154 4,410 LBR Brokers Negócios Imobiliários Ltda. 3 - MF Consultoria Imobiliária Ltda Morumbi Brokers Administração de Bens e Serviços Ltda. - 2 Tropical Corretora e Consultoria Imobiliária Ltda. 1,182 2,298 Total Consolidated 8,328 12,577 25

49 Notes to the interim financial information as of March 31, Taxes and contributions payable. These comprise: Parent Company Consolidated Description Mar/18 Dec/17 Mar/18 Dec/17 ISS PIS COFINS IRPJ CSLL Withholding taxes and contributions Other Total ,362 3, Related-party transactions. Related-party transactions mainly refer to loans between the Company and its subsidiaries remunerated at CDI rate variations. The Company is the parent company and has significant influence on all subsidiaries. Related-party transactions and businesses are at arm s length for the corresponding types of transactions, or upon adequate compensation, given the nature of each transaction. 26

50 15.1. Loans receivable These comprise: Loans receivable Parent Company Assets Maturity Mar/18 Dec/17 Abreu Brokers Serviços Imobiliários Ltda. 2/28/ Agil Negócios Imobiliários Ltda. 3/29/ Basimóvel Consultoria Imobiliária Ltda. 3/29/2019 4,553 2,841 Brasil Brokers Participação Administração Ltda. 8/23/ Brito Amoedo Imobiliária Ltda. 3/29/ Frema Consultoria Imobiliária Ltda. 3/29/2019 5,457 4,381 Global Consultoria Imobiliária Ltda. 3/31/ ,669 8,620 MF Consultoria Imobiliária Ltda. 3/29/2019 4,381 3,719 Morumbi Brokers Administração De Bens E Serviços 3/29/ Ltda. Primaz Empreendimentos Imobiliários Ltda. 3/29/ Tropical Corretora E Consultoria Imobiliária Ltda. 3/29/2019 1, Total 30,348 21,979 Loans receivable the long-term balances are loans to subsidiaries used for working capital. The Company has a loan agreement for these loans and amounts are restated at the CDI rate plus 1% p.a. On March 31, 2018 was recorded an interest income of R$480 (R$354 March 2017) Dividends and interest on equity receivable These comprise: Parent Company Dividends and IOE Assets receivable Mar/18 Dec/17 Avance Negócios Imobiliários S.A BB Américas 2007 Consult. Imob Ltda Brasil Brokers Assessoria Imobiliária Ltda Global Consultoria Imobiliária Ltda Lbr Brokers Negócios Imobiliários Ltda Niterói Administradora de Imóveis Ltda Total non-current 1,998 1,998 Dividends and IOE receivable relates to dividends payable to the Company in

51 15.3. Key management compensation The Company s Management received R$455 until March 31, 2018 (R$315 in March 2017) as base compensation, as set out by the Board of Directors Shared services The Company has shared services related to the apportionment of common expenses incurred by related parties, including expenses with the group s administrative structure, which are being shared among the companies through apportionment criteria that take into account, for example, the actual past use of a given shared resource by each related party, the number of employees of each party that will have access to a given shared resource and measurement of the actual use of a given shared resource. They are supported by the parent company and passed on to its subsidiaries. Shared services Parent Company Assets Mar/18 Dec /17 Abreu Brokers Serviços Imobiliários Ltda Abyara Brokers Intermediação Imobiliária Ltda. 1, Agil Negócios Imobiliários Ltda Bamberg Planejamento Empreendimentos Imobiliários Ltda. 7 5 Basimóvel Consultoria Imobiliária Ltda. 3,725 3,272 Brasil Brokers Ltda Brito e Amoedo Imobiliária Ltda Chão E Teto Consultoria Imobiliária Ltda Frema Consultoria Imobiliária Ltda. 2,734 2,218 Global Consultoria Imobiliária Ltda. 1,998 1,880 LBR Brokers Negócios Imobiliários Ltda MF Consultoria Imobiliária Ltda. 3,563 3,197 Morumbi Brokers Administração de Bens e Serviços Ltda Niterói Administradora de Imóveis Ltda Noblesse Consultoria Imobiliária Ltda Pointer Consultoria Imobiliária S.A. 5 6 Primaz Empreendimentos Imobiliários Ltda Rede Morar S. A Tropical Corretora e Consultoria Imobiliária Ltda Unique Brasil Brokers Ltda Total 16,709 13,754 28

52 16. Income tax and social contribution. Consolidated income tax and social contribution mostly comes from assumed profit, which is calculated by applying a tax rate directly on services revenue. Most of the subsidiaries and the Parent Company calculate their income tax and social contribution through the taxable profit method. Income Tax and Social Contribution expenses payable are calculated by the Company as follows: Parent Company Consolidated Income tax and social contribution Mar/18 Mar/17 Mar/18 Mar/17 Service revenues taxed based on presumed profit ,275 32% rate on service provisions ,368 Other revenues Calculation basis of companies taxed based on Presumed Profit ,684 method Calculation basis of companies taxed based on Taxable Profit (12,843) (11,675) Equity in the earnings of subsidiaries 9,318 7, Calculation basis combined by method (3,525) (3,730) 753 1,866 34% combined rate of income tax and social contribution - - (256) (635) Permanent differences added (excluded) at calculation basis - - (62) 54 Income tax and social contribution expense - - (318) (581) Income tax and social contribution based on the real profit method are calculated at a 15% rate, a 10% surcharge on the taxable income exceeding R$240 for the income tax and a 9% rate on the taxable income for the social contribution on net income, tax loss and social contribution tax loss carryforwards are considered limited at 30% of real profit. Income tax and social contribution based on the presumed profit method are paid on a quarterly basis on the gross revenue, considering the presumed percentage, in the form and at rates provided for in applicable laws (estimated basis of 15% and 9% on sales, income tax and social contribution, respectively, which is added to other financial income). 29

53 17. Provisions for contingent liabilities civil, labor and tax. Below, the breakdown of provisions for contingent liabilities civil, labor and tax of the Company and its subsidiaries classified as a probable loss by our legal counsels: Consolidated Labor Tax Civil Total Balance on 12/31/ , ,875 87,009 Realization (1,471) - (337) (1,808) Balance on 3/31/ , ,538 85,201 Current 22,493 Non-current 62,708 Lawsuits considered as possible losses by the Company s legal counsels were not provisioned for and were composed of: Possible loss Mar/18 Dec/17 Labor 27,802 27,802 Tax 90,950 90,950 Civil 39,719 39,719 Total 158, ,471 a) Labor lawsuits Labor lawsuits mainly refer to employment relationship and other payments claimed by former associate brokers. Based on best practices in the real estate brokerage market and on the opinion of its legal advisors, the Company's management believes that with the enactment of the Labor Reform and the consolidation of interpretations of Law 13,097/15, which amended Law 6,530/78 and formalized the existence of the associated real estate broker, devoid of any link with brokerage firm, including those of a labor and social security nature, will help the judges understand the nature of the existing partnership between the Company and the associated professionals. b) Civil lawsuits Civil lawsuits mainly refer to claims for the refund of brokerage commissions earned in real estate launches. Supported by the best real estate brokerage market practices and the opinion of its legal advisors, the Company s Management believes that all commissions received, regardless of the nature and the type of the property object of the transaction, are in accordance with the Brazilian Civil Code and agreements duly signed between the contracting parties. 30

54 c) Tax lawsuits Tax lawsuits mainly refer to deficiency notices issued by the Internal Revenue Service, due to the alleged failure to collect taxes, including social security contributions and income tax on our associated brokers compensation (individual taxpayers). These payments are made directly by the contracting clients and are not effected through the Company. Supported by the opinion of its legal counsels and by precedents related to the issue, the Company s Management believes that these deficiency notices are groundless and that Law 13,097/15, which amended Law 6,530/78, will help competent authorities better interpret the issue. 18. Equity. a) Capital stock On March 31, 2018 and December 31, 2017, the Company s capital stock was represented by 255,902,664 non-par, registered, common shares. In August 2017, the Company increased its share capital by seventy million reais (R$70,000), from the current R$533,662 to R$603,662, through the private issue of up to sixty-three million, sixty-three thousand, sixty-three (63,063,063) new registered book-entry common shares with no par value, at the issue price of one real and eleven centavos (R$1.11) per share. The share capital presented in the financial statements excludes costs of R$13,225 for issuing shares in 2011, amounting to R$590,437. The table below shows the changes in the number of Company shares: Number of shares R$ Balance on 12/31/ ,902, ,662 Balance on 3/31/ ,902, ,662 31

55 b) Subscription warrant Within the authorized capital limit, the Board of Directors can resolve to issue a subscription warrant. c) Stock option plans At the Extraordinary General Meeting held on December 12, 2014, the Company's Stock Option Plan was approved for managers and employees of the Company and its direct or indirect subsidiaries. The aforementioned Plan is managed by the Board of Directors, with the Chief Executive Officer being responsible for designating the beneficiaries to whom the options will be granted. The stock options granted within the terms of the Plan will total, at most, nine million, six hundred and forty-one thousand (9,641,000) common shares issued by the Company. If the Company s existing number of shares increases or decreases as a result of share-based payments, share splits or reverse splits, the maximum number of shares to be granted within the terms of the Plan will be automatically adjusted accordingly. The requirement to acquire the right of the Plan is linked with goals related to the performance of employees and managers of the Company, used to establish objective criteria for electing beneficiaries or determining the number of options to be assigned to them, and their permanence in the Company. On October 1, 2017, the contracts related to the Stock Option Program were signed. The vesting period will be up to three months. The beneficiaries of the Stock Option Plan may exercise their options within two years of the grant date, after vesting. Once the Options are exercised, in full or in part, the Exercise Price will be paid by the Beneficiary, in full and in cash, on the date of subscription or acquisition of the Shares in national currency, restated by the IPCA as of the date of signature of the Contract. The weighted average exercise price of stock options was R$1.11. The fair value of call options (R$0.19) was calculated using the Black-Scholes option pricing model. The 42% volatility used in the model was based on the BM&FBovespa's three-month annualized volatility, specific to Brazil Brokers. The number of shares granted in the period was two million, five hundred and sixty-six thousand, nine hundred and seventeen (2,566,917), equivalent to the grant amount of R$2,

56 Notes to the interim financial information as of March 31, 2018 The effect related to the recognition of share-based payment in Equity and in Profit or Loss on March 31, 2018 was R$25 and R$30, respectively. No call option was exercised by March 31, d) Loss per share As required by CPC 41 (Earnings per share), the table below presents a reconciliation of loss and the average weighted number of outstanding shares with amounts used to calculate the basic and diluted loss per share: Basic and diluted loss per share: Parent Company Mar/18 Mar/17 Loss for the period available for common shares (12,844) (11,675) Weighted average number of outstanding common shares (in thousands) 247, ,865 Basic and diluted loss per share (R$) ( ) ( ) There were no other transactions involving common shares or potential common shares on the reporting date. e) Capital reserve During the first half of 2008, the Company sold part of its treasury shares through the acquisition of new companies. The transaction gave a positive result of R$25,486 and was recorded as a capital reserve. In February 2011, the Company received one hundred seventy-three thousand and two hundred sixty-six (173,266) non-par, registered common shares as a part of the debt settlement from the founding Triumphe partners, incurring a partial reversal of the acquisition amount of R$2,015. As part of the payment for Frema in April, the Company transferred one million, eight hundred forty-five thousand and nine hundred eighty (1,845,980) shares to the founding partners, giving a positive result of R$15,319; in May, the Company received twenty thousand and one (20,001) common shares from the founding partners of Rede Morar as part of the acquisition price adjustment of the subsidiary, while five hundred sixtyfour thousand (564,000) shares, amounting to R$4,145 were transferred to the founding partners of Jairo Rocha to settle the Company s acquisition of the subsidiary. These transactions total R$43,478 to the Capital Reserve of the Company. 33

57 f) Treasury shares The number and balance of shares held by the Company are detailed below: Description Balance on 12/31/2017 Balance on 3/31/2018 Number of treasury shares Value of treasury shares Market value of treasury shares 7,973,663 23,717 7,894 7,973,663 23,717 3,987 The price of the BBRK shares closed at fifty centavos (R$0.50) on March 31, g) Capital management With regard to capital management, the Company does not raise funds through borrowings or debentures. Our growth is through retained profit and raising funds through follow-on offerings. This policy is unchanged from last year. 19. Net revenue. Parent Company Consolidated Net revenue Mar/18 Mar/17 Mar/18 Mar/17 Service Revenue 4, ,771 23,182 Cancellations - (20) (750) (1,357) Tax on services (658) (91) (3,578) (3,018) Net revenue 3, ,443 18, Cost of services rendered. Parent Company Consolidated Cost of services rendered Mar/18 Mar/17 Mar/18 Mar/17 Launch commissions - - (237) (126) Freelance commissions - - (4) (9) Lease commissions - - (11) (11) Real estate loan commissions (919) - (2,247) (649) Other costs (4) Total (919) - (2,498) (799) 34

58 21. General and administrative expenses. Parent Company Consolidated General and administrative expenses Mar/18 Mar/17 Mar/18 Mar/17 Payroll and related charges (4,064) (4,436) (12,692) (13,135) Occupancy Expenses (876) (404) (6,475) (7,521) Outsourced Services (1,817) (1,481) (7,108) (6,662) Shared Services 1,636 1, Allowance for doubtful accounts - - (324) 101 Other expenses (124) (76) (376) (403) Total (5,245) (4,734) (26,975) (27,620) 22. Financial expenses. Parent Company Consolidated Financial expenses Mar/18 Mar/17 Mar/18 Mar/17 Present value adjustment - trade receivables Financial discounts granted - - (16) (23) Banking expenses (1) (8) (153) (144) Tax on Financial and Credit Transactions (IOF/IOC) (1) (3) (156) (71) Interest paid to suppliers (57) (1) (109) (26) Other financial expenses - (8) (8) (39) Total (59) (20) (412) (210) 23. Financial income. Parent Company Consolidated Financial income Mar/18 Mar/17 Mar/18 Mar/17 Discounts Interest on tax credits - SELIC interest rate Interest on loan agreements - subsidiaries and shareholders Interest on bank payment slips Other financial income Income from financial investments ,478 Total 1,305 1,606 1,382 2,390 35

59 24. Other net operating income and expenses. Parent Company Consolidated Other net operating income and expenses Mar/18 Mar/17 Mar/18 Mar/17 Provision for civil lawsuits Provision for labor lawsuits ,471 4,273 Civil losses - - (900) (538) Labor losses (1,213) - (3,064) (4,401) Reimbursements of accredited brokers Other operating income Other operating expenses - (4) (144) (363) Total (1,160) 164 (2,186) (342) 25. Financial instruments and risk management. The Company and its subsidiaries use financial instruments to invest available funds. Risk is managed by defining cautious strategies aimed at liquidity, profitability and safety. The control policy actively monitors contracted rates against current market rates. The main asset financial instruments commonly used by the Company and its subsidiaries is recorded under Cash and cash equivalents under normal market conditions. This instrument is recognized under criteria set out in Note 5. The Company limits exposure to credit risk associated with banks and financial investments by investing through reputable financial institutions considered low risk by market analysts. As for trade receivables, the Company limits its exposure to credit risk by selling to a broad client base and performing continuous credit analysis. Up to March 31, 2018, there was no concentration of relevant credit risk associated to customers. 36

60 25.1. Risk related to financial instruments. Below, the outstanding position referring to financial instruments on March 31, 2018 and December 31, 2017: Parent Company Consolidated Financial Instruments Measurement Mar/18 Dec/17 Mar/18 Dec/17 Financial assets Loans and receivables Cash and cash equivalents Amortized cost 26,673 52,161 32,101 57,284 Trade accounts receivable Amortized cost 2, ,882 13,778 Loans and other receivables from related parties Amortized cost 30,348 21, Payables acquisition of companies Amortized cost 2,150 2,747 2,160 2,763 Total financial assets 61,171 76,926 49,143 73,828 Financial liabilities Other financial liabilities Trade accounts payable Amortized cost 2, ,688 3,849 Other payables Amortized cost 4,216 5,752 9,308 9,368 Total financial liabilities 6,759 6,617 14,996 13,217 The Company s financial transactions are made by the finance department following a cautious strategy, aiming safety, profitability and liquidity as approved by the executive board and the shareholders. The fair value of receivables does not differ significantly from book values since they are adjusted for inflation according to market rates Risk related to financial instruments The Company is exposed to the following risks arising from financial instruments: Market Risk; Liquidity Risk; Credit Risk. Below, information on the Company s exposure to each of the above-mentioned risks, the Company's purposes, and risk and capital measurement policies and processes. 37

61 Market risk Market risk refers to the impact of market price variations, such as exchange rates, interest rates and share prices, on the Company's gains or value of its interest in financial instruments. Market risk management is intended to manage and control the exposures to market risks, within the acceptable parameters, and at the same time to optimize return. a) Interest rate risk The Company is exposed to floating interest rates, mainly fluctuations in the CDI interest rate from yields that remunerates its financial investments in Bank Deposit Certificate and fixed investment funds contracted in Brazilian reais and interest receivable on loans at CDI +1% p.a. The exposure to interest rate risk on the Company s financial position in December 2017 was R$55,958, which reflects the financial investments balance. On March 31, 2018, the exposure was R$31,092. Three different scenarios were defined to check the sensitivity of the index on the financial investments to which the Company was exposed to on March 31, A projection for CDI for the next 12 months was based on projections made by financial institutions, which averaged 6.39% up to March 2018 and defined as the probable scenario. Based on this scenario, 25% and 50% variations were calculated. For each scenario, the Company calculated the gross financial income, not considering the impact of tax on the income from the investment: Mar/18 Dec/17 Transaction Risk Probable Scenario MTM Possible Scenari o 25% Remote Scenari o 50% Probable Scenario MTM Possible Scenario 25% Remote Scenari o 50% Income from investments CDI fall 1,990 1, ,861 2,896 1,931 Status for Investments , ,958 b) Other Price Risks The call and put options were exercised in 2017, ending the existing price risks related to this type of operation. 38

62 Liquidity risk The Company manages liquidity risk based on cash flows, maintaining a strong capital structure and low leverage. Moreover, the Company monitors its assets and liabilities to mitigate risks from potential mismatches. Credit risk Financial instruments that may subject the Company to concentrated credit risk mainly consist of amounts in banks, financial investments (especially government securities) and trade receivables. The trade receivables balance is distributed among several clients. Parent Company Consolidated Mar/18 Dec/17 Mar/18 Dec/17 Cash and cash equivalents 26,673 52,161 32,101 57,284 Receivables 2, ,882 13,778 Total Credit Risk 28,673 52,200 46,983 71,062 Policies for recording allowance for doubtful accounts and collecting outstanding bonds not yet due are disclosed in Note 6. Market value of financial instruments The carrying amount of financial instruments, mainly represented by financial investments and financing are shown on the statements of financial position on March 31, 2018 and December 31, 2017 by approximate market value values, considering similar operations. 26. Insurance. The Company has insurance policy coverage for assets subject to loss, considering the nature of their activity. Insurance policies are in force and premiums duly paid. The adequacy of insurance coverage is not included in the scope of the audit, which was assessed and evaluated by Management. 39

63 Insurance coverage is detailed below: Sector Main coverage Maximum annual coverage Multi-risk assets Fire, lightning, explosion, electrical damage, theft and covering furniture and equipment in the establishment. 16,800 Civil liability of the Executive Officers and Management Cost of defense and damages from financial losses caused to third parties due to errors or omissions in the management duties. 10, Segment reporting. The Company basically operates in two segments within the real estate brokerage market. The most representative segment is the primary market, which comprises the sale of real estate projects, or new properties. The second segment is the secondary market, which focus on the sale of finished properties, which were already launched. Other revenues derive from lease, real estate loans, sale of land and others. The Company provides services to property developers, property buyers and sellers, comprising the sale of buildings, residential units, lots, housing condominiums, shopping malls, commercial units, flats and hotels. The Company s decision-making process does not consider the allocation of assets, liabilities and expenses, given that they are corporate items and most of them belong to service sharing and cannot be specifically allocated to a certain segment. Statement of Gross Revenue by Business Segment: Mar/18 % on Total Mar/17 % on Total Primary Market gross 11,013 41% 11,935 51% Secondary Market gross 4,670 17% 5,063 22% Real State Loans - gross 7,379 28% 2,124 9% Corporate gross 240 1% - 0% Other revenues 3,469 13% 4,060 18% Total Gross Revenue 26, % 23, % 40

64 28. Subsequent Event. On April 4, 2018, the Company called an Extraordinary General Meeting to sign a new agreement for the provision of a real estate loan brokerage services with Banco Bradesco S.A., successor of HSBC Bank Brasil S.A. following its merger, for a further three (3) years, until The purpose of the new agreement is to allow the Company to receive commission on the monthly volume of real estate loans signed. Board of Directors: Felipe Gottlieb Eduardo de Castro Magalhães Marques Luis Henrique de Moura Gonçalves Sidney Victor da Costa Breyer Guilherme Mexias Aché Board of Executive Officers: Claudio Hermolin Andreas Yamagata Renato Telles da Silva Lobo Accountant: Evelyn Veloso Trindade CRC RJ /O-4 41