LOJAS AMERICANAS S.A. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005 (In thousands of Reais, except for the amounts per number of shares)

1 OPERATIONS

Lojas Americanas operates 237 consumer product retail stores (2005 – 193 stores) in the main State capitals and cities throughout Brazil, of which 205 are traditional stores and 32 are express model stores, as well as 3 distribution centers. The Company also operates (i) in electronic commerce, through its direct subsidiary B2W – Companhia Global do Varejo, which offers the Americanas.com, Submarino and Shoptime sites (the latter also offers the option of making purchases through its TV shopping channel and catalogue) and (ii) provides registry information services and negotiates bank financing through its subsidiary Facilita Serviços e Propaganda S.A., to the jointly controlled company FAI - Financeira Americanas Itaú S.A. Crédito, Financiamento e Investimento (Americanas Taií).

As from May, 2006, the commercialization of financial products and services is the responsibility of the jointly controlled company FAI – Financeira Americanas Itaú S.A. Crédito, Financiamento e Investimento, previously named PLATY PARTICIPAÇÕES S.A. Previously, the credit operations were carried out by Facilita Serviços e Propaganda S.A., and the fundings were carried out by a Banco Itaú S.A. company

As indicated in note 9, on December 13, the Extraordinary Stockholders' Meeting of Americanas.com S.A. – Comércio Eletrônico approved the merger with Submarino S.A., with the consequent extinguishment of the two companies and the creation of a new company called B2W– Companhia Global do Varejo, which consolidated the operations of the merged companies. Lojas Americanas S.A became the holder of 53.25% of the voting share capital in the new company, and the controlling stockholder.

2 PRESENTATION OF THE FINANCIAL STATEMENTS

The financial statements have been prepared in conformity with accounting practices followed in Brazil and in accordance with the complementary regulations of the Brazilian Securities Commission (CVM). These financial statements incorporate the alterations introduced by the following accounting norms: (i) Accounting Norms and Procedures 27 (NPC 27) – Presentation and Declarations, issued by the Instituto dos Auditores Independentes do Brasil - Ibracon, on October 3, 2005, approved by CVM Decision no. 488, of the same date; and (ii) – Accounting Norms and Procedures 22 (NPC 22) - Provisions, Liabilities, Contingent Liabilities and Contingent Assets, issued by Ibracon, on October 3, 2005, approved by CVM Decision no. 489, of that same date. In the financial statements for the financial year ended December 31, 2005, submitted for purposes of comparison, a number of items were reclassified to comply with said CVM decisions, and to allow the users to make comparisons with the current financial year. The main alterations resulting from the application of these Decisions were as follows:

• Presentation of long-term items under assets and liabilities;

• Highlight of intangible assets.

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3 SIGNIFICANT ACCOUNTING POLICIES

(a) Accounting estimates

When preparing the financial statements it is necessary to use estimates and judgments to account for certain assets, liabilities and other transactions. Accordingly, the financial statements include various estimates of the useful lives of fixed assets, the return on benefits to be achieved with the deferred assets, expectation of realization of deferred income tax and social contribution, reserves for contingent liabilities, provisions related to income tax and other items. Although they represent the best estimates and judgments of management, the actual results could differ from these estimates.

(b) Results of operations

Income and expenses are recognized on the accrual basis.

(c) Foreign currency

Assets and liabilities in foreign currency are translated into Brazilian Reais using monetary exchange conversion rates prevailing at the end of the year. The differences arising from this translation are recognized in the statement of income. For subsidiary companies abroad, assets and liabilities were translated into Reais at exchange rates prevailing at year end.

(d) Current and long-term assets

Temporary cash investments, primarily fixed-income securities, are stated at cost, including accrued income up to the balance sheet dates, not exceeding market value.

The provision for possible defaults on payments was set up in an amount considered adequate by management to meet any losses on the realization of these credits.

Inventories are stated at average purchase price, not exceeding market value or replacement cost. When applicable, provisions for losses on inventories are recorded based on Management judgment and estimates considering historical information.

Other assets are stated at realizable values and include, when applicable, accrued income and monetary variations up to the balance sheet date.

Deferred income taxes on tax loss carry-forwards and temporary differences are determined in accordance with CVM Instruction 371 of June 27, 2002. This calculation takes into consideration the profitability record of the Company and expectation of generation of future taxable income, based on technical studies approved annually by the Board of Directors.

(e) Investments

Investments made in subsidiary, jointly-controlled and associated companies are recorded by the equity method.

A provision has been set up for losses on interests in companies with unsecured liabilities, classified under Noncurrent liabilities - Long-term liabilities.

Other permanent investments are valued at acquisition cost less provisions for devaluation, when applicable.

7

(f) Property and equipment

Property and equipment are carried at acquisition cost. Depreciation is calculated by the straight-line method at the rates mentioned in note 10 and takes into consideration the useful life of these assets.

(g) Intangible assets

Goodwill arising from future income is amortized over a period of up to 10 years.

Intangible assets are carried at acquisition cost. Amortization is calculated on the straight-line basis at the rates mentioned in Note 11.

(h) Deferred charges

Deferred charges comprise expenses related to information technology projects (mainly implementation of SAP- Retail Program), refurbishment and opening of stores and distribution centers, projects related to the electronic commerce segment and other Company projects that are amortized on the straight-line basis at the rates mentioned in Note 12, based on the opening date of the stores or project termination dates.

Amortization of installations and leasehold improvements is based on the respective lease contract terms.

(i) Current and long-term liabilities

Loans and financing contracted in foreign currency are restated at the exchange rates in force on the balance sheet date and include accrued contractual interest. Loans and financing in Brazilian currency, including debentures, are monetarily restated in accordance with contractual rates.

Provisions are recorded in the financial statements when the Company is under a legal obligation, as a result of a past event and when economic resources will probably be required to liquidate an obligation. Provisions are recorded at amounts based on the best estimates of the risk involved.

Income tax and social contribution provisions are calculated at the effective tax rates of (i) 15% plus a surtax of 10% of taxable income in excess of R$ 240 for income tax and (ii) 9% of taxable income for social contribution and include, when applicable, income generated abroad by the subsidiary Klanil Services Ltd. and Louise Holdings Ltd. and take into account the use of tax losses carryforwards to a limit to 30% of taxable income.

Other accounts are stated at known or estimated amounts including, when applicable, financial charges and monetary or exchange variations accrued up to the balance sheet date.

(j) Consolidation criteria

The consolidated financial statements have been prepared in accordance with the consolidation principles established by Brazilian Corporate Law and CVM Instruction No. 247/96, and include the financial statements of the parent company, Lojas Americanas S.A., and of the subsidiaries, jointly-controlled subsidiary (consolidated proportionally) and associated companies, as described in Note 9, and the exclusive investment funds described in Note 4, in accordance with CVM Instruction No. 408.

Accounting practices were consistently applied to all the consolidated companies and are also consistent with the accounting procedures applied in the previous year.

8 The following are eliminated in consolidation:

• asset and liability balances between consolidated companies;

• participation in capital, reserves and accumulated profits of controlled companies;

• income and expense, as well as unrealized profits, when applicable, of business transactions between the companies;

• highlighting of the value of minority interests in the consolidated financial statements, when applicable.

With the merger of Americanas.com S.A. – Comércio Eletrônico and Submarino S.A., and the consequent creation of B2W – Companhia Global do Varejo (note 9), the consolidated financial statements took into consideration the financial results of Americanas.com S.A. – Comércio Eletrônico from January 1, 2006 to December 13, 2006 and the results of B2W – Companhia Global do Varejo from December 13 to 31, 2006, as well as the Balance Sheet of B2W – Companhia Global do Varejo as of December 31, 2006. The minority interests were highlighted in relation to the results for the period December 13 to 31, 2006 and the Balance Sheet of B2W – Companhia Global do Varejo, at a ratio of 46.75%.

Pursuant to CVM Instruction No. 247/96, of the Brazilian Securities Commission (Comissão de Valores Mobiliários), the consolidation of Vitória Participações S.A. took place in proportion to the stake of the controlling stockholder in that company's share capital (50%), as the company's share control is split, as established in a joint agreement between the stockholders of the jointly-held subsidiary.

The main groups of the financial statements of Vitória Participações S.A. as of 31st December, taking into consideration the shareholding participation, are:

Balance Sheets 2006 2005

Cash and cash equivalents 190,915 208,432 Other assets 8,167 Investments 21,973

212,888 216,599 Taxes, contributions and other accounts payable 1,125 8,647 Shareholders' equity 211,763 207,952

212,888 216,599

Statements of Income 2006 2005

Operating income 25,481 12,381

Net income 16,827 8,031

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4 TEMPORARY CASH INVESTMENTS

Parent Company Consolidated 2006 2005 2006 2005

Bank Deposit Certificates - BDCs 20,471 25,118 20,471 25,118

Fixed-Income Funds and Securities 262,591 180,303 399,534 217,204

Exclusive Investment Funds 224,042

Fixed-Income Funds - Abroad 271,089 238,334 271,401 276,673

Debentures 30,393 221,295 208,377

584,544 443,755 1,136,743 727,372

LONG-TERM (30,242)

SHORT-TERM 584,544 443,755 1,136,743 697,130

Bank Deposit Certificates yield an average rate of 100% of the CDI (interbank deposit rate) and a portion was pledged as guarantee for the loan from the National Bank for Economic and Social Development (BNDES).

Fixed-Income Investment Securities refer to Treasury Bills (LFTs) and National Treasury Notes (NTNs) and Fixed- Income Investment Funds refer mainly to quotas held in investment funds administered by top financial institutions.

Exclusive Investment Funds, registered in the subsidiary B2W – Companhia Global do Varejo, refer to 100% of the quotas of exclusive investment funds, set up in the form of open condominium with an indefinite duration and with tax neutrality, resulting in benefits for the subsidiary. Investments in exclusive investment funds have daily liquidity. Management of the portfolios of the exclusive funds are undertaken by outside administrators, following investment policies determined by the Company.

Fixed-Income Investment Funds abroad refer basically to federal bonds issued by the Austrian Government, yielding interest of up to 84.5% of the CDI, and are held as guarantee for working capital debts.

Debentures were issued by a top financial institution, registered at present value, remunerated at 101.45% of the CDI and 100% of the DI Cetip Over, parent company and consolidated, respectively, and may be redeemed at any time at their updated amount.

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5 TRADE ACCOUNTS RECEIVABLE

Parent Company Consolidated 2006 2005 2006 2005

Credit cards 431,753 392,040 1,431,893 732,074 Credit card prepayments (55,892) (108,310) (421,630) (121,512)

375,861 283,730 1,010,263 610,562

Electronic debits and checks 11,204 7,247 17,614 7,247 Clients financing 91,207 Other 11,256 7,903 86,568 18,482

398,321 298,880 1,205,652 636,291 Allowance for doubtful accounts (2,655) (2,099) (31,996) (3,759)

395,666 296,781 1,173,656 632,532

Credit card operations may be paid in up to 12 installments. The credit risk of the Company and its subsidiaries is minimized to the extent that the credit card administration companies act as intermediaries for the portfolio of receivables. Consequently, the risk of default on payments is transferred to the credit card administrators.

The Company discounts credit card receivables with the banks or the credit card administrators, in order to create working capital. In this operation, the Company delivers the receivables in guarantee of fund raising.

Customer financing refers to the commercialization of products and services by the joint subsidiary FAI - Financeira Americanas Itaú S.A. Crédito, Financiamento e Investimento.

The allowance for doubtful accounts, except in FAI - Financeira Americanas Itaú S.A. Crédito, Financiamento e Investimento, considers the average loss over the last twelve months, adjusted in accordance with management estimates of probable losses on accounts not yet due. Receivables overdue for more than 180 days are considered uncollectible and, consequently, are written off against the allowance for doubtful accounts. Of the balance of R$31,996 recorded in the consolidated statements as of December 31, 2006, R$ 26,918 refer to allowances recorded by the joint subsidiary FAI - Financeira Americanas Itaú S.A. Crédito, Financiamento e Investimento.

In the case of FAI - Financeira Americanas Itaú S.A. Crédito, Financiamento e Investimento, the amount of the allowance for doubtful accounts is recorded at an amount considered sufficient to cover any losses in accordance with the provisions of article 5 of CMN Resolution no. 2.682, of December 21, 1999, as amended by article 2 of CMN Resolution no. 2.697 of February 24, 2000, which considers the classification of the operation for delay at a minimum risk level of A. Credit write-offs are effected 360 days after credit becomes overdue or after 540 days in the case of operations with over 36 months still to run.

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6 INVENTORIES

Parent Company Consolidated 2006 2005 2006 2005

Merchandise

- At stores 424,151 351,921 427,725 351,921

- At distribution centers 58,999 63,070 316,284 154,000

Supplies and packaging 3,558 4,752 4,235 5,711

486,708 419,743 748,244 511,632

7 RECOVERABLE TAXES

Parent Company Consolidated 2006 2005 2006 2005

ICMS (state value-added tax) 19,038 26,925 23,240 26,925 IPI (tax on industrialized products) 20,000 20,000 IRRF (withholding income tax) 2,102 1,995 6,189 2,028 COFINS (tax for social security financing) 6,037 IRPJ (corporate income tax prepayment) 4,901 CSLL (social contribution on net income prepayment) 2,097

Social security contributions and other 66 7,149 1,381 10,496

21,206 56,069 43,845 59,449

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8 DEFERRED INCOME TAX AND SOCIAL CONTRIBUTION

(a) Presentation

In accordance with CVM Instruction No. 371, of June 27, 2002, and based on technical viability studies that show the capacity of the Company and its subsidiaries' to generate future taxable income, management reviewed and adjusted tax credits arising from income tax losses, negative social contribution bases and temporary differences that will only be taxable or deductible on meeting the requirements of the tax legislation.

(b) Composition of tax credits

Parent Company Consolidated 2006 2005 2006 2005 Assets

Deferred income tax:

- Tax losses 45,791 81,707 83,243 114,045

- Temporary differences 10,891 18,149 30,352 21,885

56,682 99,856 113,595 135,930

Deferred social contribution:

- Tax losses [Negative basis] 49,825 25,432 63,569 37,301

- Temporary differences 3,921 6,534 10,814 7,878

53,746 31,966 74,383 45,179

110,428 131,822 187,978 181,109

LONG-TERM (74,686) (125,056) (142,584) (169,552)

SHORT-TERM 35,742 6,766 45,394 11,557

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(c) Expectation of realization

Over the past few years, the Company and its subsidiaries have shown significant development in their main operational and financial indicators. This improvement results from a thorough review of the Company's management strategy, with a view to increasing the synergy between the various corporate areas and suppliers. The new management strategy permitted cost structure optimization, together with a better performance margin on sales.

The estimated realization of deferred tax credits determined in each year, based on future taxable income adjusted to present value, is as follows:

Parent company Consolidated 2007 35,742 45,394 2008 74,686 83,149 2009 10,469 2010 10,067 2011 12,888 2012 14,921 2013 7,353 2014 1,246 2015 1,246 2016 1,245 110,428 187,978

The Company was awarded a favorable ruling in a lawsuit that was judged in the fourth quarter of 2005, claiming the right to offset payments of other taxes managed by the Federal Revenue Agency - SRF, against tax credits resulting from income tax losses and negative social contribution bases. The right to update the tax credits in accordance with the variation of the Selic index was also recognized.

In September 2006, the Federal Revenue Agency - SRF recognized the right assured by the court, by approving the Tax Credit Request. Accordingly, in 2006 the Company booked the effects of the SELIC variation on the tax credits and wrote off against these updated tax credits the PIS/COFINS payments recorded in the course of the legal process. These were booked under long-term liabilities – Taxes payable, while the Company awaited final judgment of the suit and the approval of the Federal Revenue Agency.

The updating of the tax credits was recorded as Financial Income and the effect on the Company's net income in 2006 was approximately R$ 68,000, net of taxes and other expenses of bringing the suit.

The segregation between short and long-term takes into account the use of these tax credits to liquidate income tax and social contribution, and in payment of other taxes managed by the Federal Revenue Agency – SRF, such as PIS – Employees’ profit participation program and COFINS – Tax for social security financing.

14 (d) Reconciliation of nominal and effective rates

The reconciliation of nominal and effective income tax and social contribution rates for the year ended December 31, 2006 is presented below:

2006 2005 Parent Conso- Parent Conso- company lidated company lidated Net income for the year before income tax, social contribution and profit-sharing 177,559 180,436 183,081 175,717

Nominal rate 34% 34% 34% 34%

Income tax and social contribution at nominal rate (60,370) (61,348) (62,248) (59,744)

Effects of exclusions (additions) on net accounting income:

- Equity in subsidiaries and joint subsidiaries

. Exchange variation 1,247 1,247 (2,800) (2,800)

. Equity participation (10,119) (11,162)

. Capital gain due to variation in percentage participation 712 712 68,000 68,000

- Loss on subsidiary abroad (16,365) (23,234)

- Reversal of provision on which no tax credit was recognized previously 4,182 4,182

- Interest on capital paid 7,122 7,122 6,120 6,120

- Interest on capital received (146)

- Statutory participations of employees 2,380 2,380 3,400 3,400 - Tax credits constituted (net of R$ 13,100, written off in Americanas.com S.A. – Comércio Eletrônico in view of the termination of the company on December 13, 2006) 23,105 24,800

- Other exclusions, net 7,808 (5,396) 1,903 2,641

Income tax and social contribution at effective rate (47,038) (44,361) 3,067 19,183

The interest on capital paid was accounted for as financial expenses because of specific fiscal regulation and reversed before net income for the year, in accordance with Brazilian Securities Commission (CVM) instructions. It is not included in the statement of income, as it has no effect on the net income for the year, except for the tax effects recognized under the heading income and social contribution taxes.

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9 INVESTMENTS

Parent company Consolidated 2006 2005 2006 2005

Subsidiaries 256,366 80,684

Jointly-controlled subsidiary 211,762 207,952

Other investments at cost 680 748

468,128 289,316 748

(a) Corporate Restructuring

In 2006, the Company restructured the interests in subsidiaries abroad, in order to simplify their corporate and tax structures. As a result of this restructuring, as from the first quarter of 2006, the indirect subsidiaries Louise Holdings Limited and Americanas.com S.A. – Comércio Eletrônico, and the related goodwill, became direct subsidiaries of Lojas Americanas S.A..

The transfer of participations between Lojas Americanas S.A. and the subsidiaries was effected through the liquidation of intercompany loans and payments of dividends declared by subsidiaries abroad.

On May 26, 2006, as part of the corporate restructuring of subsidiaries abroad, the capital of Americanas.com was decreased and its share interest in the subsidiary Americanas.com S.A. – Comércio Eletrônico was transferred to the parent company, Lojas Americanas S.A..

With a view to the integration and synergy of the operating and administrative activities of the parent company, Lojas Americanas S.A. and the subsidiary Americanas.com S.A – Comércio Eletrônico, Extraordinary Stockholders' Meetings held on July 14, 2006 by Americanas.com S.A – Comércio Eletrônico and August 7, 2006 by the parent company Lojas Americanas S.A., approved the absorbtion of the subsidiary's shares by the parent company, thereby converting Americanas.com S.A – Comércio Eletrônico into a wholly-owned subsidiary of Lojas Americanas S.A..

In order to determine the exchange ratios of Americanas.com S.A – Comércio Eletrônico shares for common and preferred Lojas Americanas S.A. shares, an accounting appraisal was prepared by independent specialists, based on March 31, 2006, as well as economic-financial appraisal reports of the respective Companies, prepared by a top investment bank, based on the discounted cash flow method.

In view of the results of the above-mentioned valuations, the Board of Directors and the stockholders of the respective companies approved the substitution of one common share in Americanas.com S.A – Comércio Eletrônico for 405.686100836 Lojas Americanas S.A. shares, namely 151.532463804 common shares and 254.153637032 preferred shares. Consequently, the capital of the subsidiary was increased by R$16,199, with the issue of 2,171,991,176 common shares and 3,642,912,173 preferred shares.

16 (b) New Investments

B2W – Companhia Global do Varejo

An Extraordinary Stockholders' Meeting held on December 13, 2006 by Americanas.com S.A – Comércio Eletrônico, a wholly-owned subsidiary of Lojas Americanas S.A., approved the following decisions: a) An increase of R$ 175,000 in the Company's capital, fully subscribed and paid up at the time by Lojas Americanas S.A., the sole stockholder, R$ 120,276 in cash and R$ 54,724 by using a credit held by the parent company against the subsidiary. b) The merger of the Company with Submarino S.A., a publicly-held company, resulting in termination of the two companies and the setting up of a new company (B2W).

The merger of Americanas.com S.A – Comércio Eletrônico and Submarino S.A. resulted in the termination of the two companies and the forming of a joint-stock company, the shares of which will be listed in the special segment of the São Paulo Stock Exchange – BOVESPA, as soon as the registration as a publicly-held company has been obtained from the Brazilian Securities Commission – CVM.

The new company that resulted from the merger was set up with the net assets of Americanas.com S.A – Comércio Eletrônico and Submarino S.A, as of September 30, 2006, appraised based on audited financial statements, adjusted to the merger date (December 13, 2006), and is called B2W – Companhia Global do Varejo.

As a result of the merger and the contribution of the net assets of Americanas.com S.A – Comércio Eletrônico and Submarino S.A to B2W – Companhia Global do Varejo, the stockholders of Americanas.com S.A – Comércio Eletrônico and Submarino S.A subscribed and paid up the initial capital of B2W – Companhia Global do Varejo.

The substitution ratio of the common shares previously held by the stockholders of Americanas.com S.A – Comércio Eletrônico and Submarino S.A, in terms of the number of shares received by these stockholders at the time of establishment of the initial capital of B2W, was based on the reports issued by the investment banks contracted by the two companies, which decided that the substitution ratio in accordance with the parameters informed is equitable for the stockholders of both companies. Each common share of Submarino S.A. outstanding on the date of the Stockholders' Meeting that set up B2W was substituted by 1 (one) common registered share without par value of B2W and 1 (one) redeemable preferred share, which will be cancelled immediately after redemption. Each common share of Americanas.com outstanding on the date of the Stockholders' Meeting that set up B2W was substituted by 0.8 of a common registered share without par value of B2W. After the merger and approval of the redemption of the preferred shares initially subscribed, Lojas Americanas S.A. became the holder of shares representing 53.25% of the total and voting capital of B2W. The liability of R$ 441,047 for the redemption of the preferred shares is recorded in Long- term assets - Accounts payable - redemption of preferred shares.

With the substitution of the investment corresponding to 100% of the participation in the capital of Americanas.com S.A – Comércio Eletrônico by the investment in B2W – Companhia Global do Varejo, corresponding to 53.25% of the total and voting capital of the new company, Lojas Americanas S.A. constituted goodwill of R$ 110,465, as shown below, which will be amortized over up to 10 years.

17 Investment in Americanas.com as of December 13, 2006

Equity accounting 271,768

Goodwill not amortized 31,902

303,670 Participation in B2W – Companhia Global do Varejo (53.25% of R$359,553) (193,205)

Goodwill (Note 11) 110,465

Shoptime

In 2005, the Company acquired, though its indirect subsidiary Americanas.com S.A. Comércio Eletrônico, the equivalent of 44% of the capital of TV Sky Shop S.A. and 98.85% of the capital of Shoptime S.A., which owns 56% of the capital of TV Sky Shop S.A. The final amount paid was R$ 116,983, including goodwill of R$ 74,932 and R$ 59,547, respectively (in 2006, the goodwill calculated in 2005 was adjusted by R$ 826) – Note 11.

Subsequently, also in 2005, the indirect subsidiary Americanas.com S.A. - Comércio Eletrônic increased the capital of TV Sky Shop S.A., using the balance of an intercompany loan, in the amount of R$ 8,504, and accordingly, its participation and that of Shoptime S.A. in TV Sky Shop S.A. changed to 47.25% and 52.75%, respectively.

The goodwill on these acquisitions is based on technical reports of the expectation of future profitability of these companies. Goodwill amortization is recorded in accordance with the duration of profitability projections, which are revised annually and do not exceed ten years.

Vitória Participações S.A. e FAI - Financeira Americanas Itaú S.A. Crédito, Financiamento e Investimento (Americanas Taií)

On April 27, 2005, Lojas Americanas S.A. and Banco Itaú Holding Financeira S.A. set up a joint subsidiary to act as a financial institution, named FAI - Financeira Americanas Itaú S.A. Crédito, Financiamento e Investimento (previously Platy Participações S.A.).

On February 23, 2006, the Brazilian Central Bank - BACEN granted authorization for the financial institution to start operations, which it did in May 2006, operating exclusively in structuring and commercialization of financial products and services and related services for the customers of Lojas Americanas S.A., Americanas Express, Americanas.com S.A. Comércio Eletrônico (now B2W) and TV Sky Shop S.A., for a period of 20 years, renewable automatically for an indefinite period.

This association lead to the incorporation of Vitória Participações S.A., parent company of FAI, with capital held 50% by Lojas Americanas S.A. and 50% by Banco Itaú Holding Financeira S.A.. The initial social capital of FAI is R$80,002.

On April 27, 2005, Banco Itaú Holding Financeira S.A. made a financial contribution of R$400,000 to Vitória Participações S.A., of which R$3 was allocated to the capital account and the difference, as goodwill, to a capital reserve account, based on the forecast of the company's future profitability . As a result of this subscription, Lojas Americanas recognized a capital gain of R$200,000 in April 2005, recorded as non-operating income.

18 The association agreement establishes target performance goals for Lojas Americanas S.A. and Americanas.com S.A. - Comércio Eletrônico, to be attained in a maximum of 6 (six) years. It was also determined that Lojas Americanas S.A. will pay a penalty if these goals are not achieved. The Company recorded a provision of R$ 13,500, recorded as non-operating expenses, to cover fines if the goals are not met. This provision is reviewed and adjusted periodically, if necessary, in line with achievement of these goals.

In order to guarantee the contractual fines in the event the goals are not met, Lojas Americanas will transfer to Banco Itaú, or to any of its affiliates, credit rights held with REDECARD, up to 120% of the total value of the penalties, updated monthly in accordance with the variation of the CDI.

In addition to the agreement entered into in 2005, an agreement was signed on December 29, 2006 between Lojas Americanas S.A. and Banco Itaú S.A. for the commercialization of financial products and services, exclusively for customers of the Shoptime stores, for an indefinite period. On account of this agreement, Banco Itaú Holding Financeira S.A. acquired a 50% interest in the capital of Pandora Participações S.A., a wholly-owned subsidiary of Lojas Americanas S.A., by means of a financial contribution of R$ 68,500, paid up on January 10, 2007, generating a capital gain of R$34,250 to be recorded in 2007.

Rescission of Commercial Partnership agreement Lojas Americanas / Unibanco and Banco Fininvest

Due to the new association and exclusivity rights with Banco Itaú Holding Financeira S.A. signed on April 27, 2005, the Commercial Partnership Agreement entered into with Unibanco - União de Bancos Brasileiros S.A. and Banco Fininvest S.A. in December 2003 was canceled on April 26, 2005, subjecting Lojas Americanas to payment of R$44,774, recorded as non-operating expenses in 2005. In 2006, the Company recorded an additional cost of R$ 24,712 for the rescission of the Commercial Partnership Agreement with Unibanco, comprising a Bank Credit Certificate, signed on November 13, 2006, to be liquidated in monthly and consecutive installments as from November 13, 2006, updated at 103.65% of the CDI variation. The principal obligation was recorded in nonoperating income (expense), and updating in financial income (expense).

19 (c) Changes in investments of the Parent company:

Total 289,316 (35,575) (1,023) 16,199 2,093 175,000 (78,563) (29,764) 3,664 126,781 468,128

(680) Other 680

ções S.A. Vitória Participa 3,810 211,762 207,952

Ltd. Louise Holdings (69,051) (27,838) 683 96,206

g Ltda. Ame- Lojas Home ricanas Shoppin 3,327 (1,526) 1,801

Lojas a S.A. nas da America Amazôni 281 (281)

Servi- Klanil ces Ltd. 24.013 (35.660) (19.104) (105) 30.856

e nda S.A. Facilita Serviços Propaga 53,344 1,898 55,242

B2W – Com- panhia Global Varejo 193,205 6,118 199,323

o cio com .S.A. canas. Ameri- Comér- Eletrônic 70,244 16,199 2,093 175,000 (271,768) 8,232

America nas. com 69,136 (343) (70,244) (1,635) 3,086 Balances as of December 31, 2005 Transfer of investments Decrease in capital / Disposal Transfer of Investments Share merger Capital gain due to change in percentage participation Increase of capital Acquisition of investment Equity accounting . Profit sharing . Exchange Variation Provision for loss on investment Balances as of December 31, 2006

20 (b) Information on related parties

% Stock- Net Partici- holders' Income Balances Income pation Capital equity (loss) Assets (liabilities) (expenses), net 2006 2005 2006 2005

Direct subsidiaries Americanas.com S.A. – Comércio Eletrônico(1) 100.0% 250,458 271,809 11,909 48,859 11,765 12,779 B2W – Companhia Global do Varejo 53.25% 105,515 374,316 11,489 106 Lojas Americanas da Amazônia S.A. 100.0% 2,288 (53) 281 272 Lojas Americanas Home Shopping Ltda. 100.0% 6,877 1,801 (1,526) (1,679) (1,679) Facilita Serviços e Propaganda S.A. 100.0% 28,975 55,242 1,898 (45,927) (48,980) 6,836 1,721 Klanil Services Ltd. 100.0% 22,145 (30,856) (19,209) Louise Holdings Ltd. 100.0% 11 (96,206) (27,155) Pandora Participações S.A. 100.0% 1 (1) Jointly-controlled investment Vitória Participações S.A. (2) 50.0% 16,736 423,452 7,621 Indirect subsidiaries 8M Participações Ltda. 53.25% 2,661 1,921 (740) Cheyney Financial S.A. 100.0% 8,001 (19,361) (18,567) FAI - Financeira Americanas Itaú S.A. Crédito, Financiamento e Investimento (2) e (4) 50.0% 69,981 43,946 (26,035) 7,284 2,488 Ingresso.com S.A. 53.25% 5,015 4,105 (1053) Submarino Finance Promotora de Crédito Ltda. 26.63% 2,005 (1,001) (3,006)

Submarino Viagens e Turismo Ltda. 44.73% 3,922 2,184 (1,738) TV Sky Shop S.A. 53.25% 151,612 28,966 23,402 9 2

Related company São Carlos Empreendimentos e Participações S.A. (3) (7,926) (1,373) (19,854) (18,120)

21 (1) Information from the financial statements as of December 13, 2006, basis for the merger. (2) The financial statements were examined by other independent auditors. (3) Recorded as Other accounts payable in the balance sheet and as Selling expenses in the statement of income. (4) Recorded as Accounts receivable from customers in the balance sheet and as Selling expenses in the statement of income.

The main inter-company transactions are contracted at normal market rates, terms and amounts for transactions of the same type and refer to:

• Assets and liabilities arising from intercompany operations, recorded in loans;

• Net income and expense derived from interest on loans, sale of goods and refunds as a result of apportionment of common administrative expenses;

• Operations with the related company relating to real estate rentals.

10 PROPERTY AND EQUIPMENT

Parent company Consolidated 2006 2005 2006 2005 Annual depreciation Accumulated and depreciation Accumulated amortization and depreciation/ rate Cost amortization Net Net Cost amortization Net Net

Facilities 10% to 20% 111,219 (57,968) 53,251 45,240 146,911 (77,604) 69,307 47,769

Machinery and equipment 10% to 40% 137,399 (85,790) 51,609 39,560 153,278 (89,425) 63,853 49,270

Leasehold improvements 10% to 40% (*) 208,028 (97,249) 110,779 83,748 221,097 (103,283) 117,814 84,134

Vehicles 20% 2,560 (2,093) 467 290 2,560 (2,093) 467 290 459,206 (243,100) 216,106 168,838 523,846 (272,405) 251,441 181,463 Construction in progress and other 165 165 1,821 7,719 (1,187) 5,832 28,654

459,371 (243,100) 216,271 170,659 531,565 (274,292) 257,273 210,117

(*) Calculated based on the respective terms of the rental agreements.

22

11 INTANGIBLE ASSETS

Parent company Consolidated 2006 2005 2006 2005 Accumulated Accumulated Cost Amortization Net Net Cost Amortization Net Net

Goodwill 110,465 (522) 109,943 249,635 (8,260) 241,375 168,285

Software license 23,436 (16,217) 7,219 5,943 77,071 (41,305) 35,766 5,943

Other 4,906 (933) 3,973

133,901 (16,739) 117,162 5,943 331,612 (50,498) 281,114 174,228

As described in note 9 the goodwill on investments acquisitions (B2W and the indirect subsidiary TV Sky Shop S.A.) whose economical basis for future profitability, are amortized in up to 10 years. Other intangibles are amortized in up to 5 years.

12 DEFERRED CHARGES

Parent company Consolidated 2006 2005 2006 2005 Accumulated Accumulated Cost amortization Net Net Cost amortization Net Net

Pre-operating expenses – new stores and information technology projects 76,954 (42,914) 34,040 23,651 118,044 (44,278) 73,766 24,232

Information Technology 93,454 (56,864) 36,590 44,685 162,622 (69,509) 96,113 54,142

Distribution and logistics 4,018 4,018 79 4,018 4,018 6,310

Other 19,680 (8,559) 11,121 8,417 24,719 (9,288) 15,431 12,447

194,106 (108,337) 85,769 76,832 309,403 (123,075) 186,328 97,131 Amortization is calculated by the straight-line method at a rate of 20 % p.a.

23

13 LOANS AND FINANCING

Parent company Consolidated Object Annual charges Final Maturity 2006 2005 2006 2005

IN LOCAL CURRENCY

BNDES (Refurbishing and Interest of 5.75% 04/15/2008 (1) 5,059 8,699 14,409 8,699 opening of new stores and above the TJLP expansion of IT systems) Interest of 4.25% 04/15/2008 (1) 374 716 374 716 above the variation in the basket of currencies TJLP + 2.8% 09/15/2011 83,325 83,325

Working capital Interest of up to 109% 11/01/2010 248,780 105,593 680,341 193,349 of the CDI

IN FOREIGN CURRENCY

Opening of new stores Interest of 4.75% + 05/15/2015 75,799 82,898 75,799 82,898 (IFC) Libor

Opening of new stores - Interest of 4.45% + 06/15/2010 (1) 33,403 47,004 Floating Rate Note (FRN) Libor Working capital Exchange variation + 03/21/2011 503,266 365,810 636,785 681,811 interest of 6.31% + Libor and/or CDI of up to 109.0%

916,603 563,716 1,524,436 1,014,477

LONG-TERM (532,159) (337,919) (756,433) (522,682)

SHORT-TERM 384,444 225,797 768,003 491,795

24

Long-term financing by maturity year:

Parent company Consolidated 2006 2005 2006 2005 2007 21,383 61,786 2008 254,664 160,260 457,412 267,200 2009 101,514 33,045 111,537 43,448 2010 99,425 56,452 104,387 83,469 2011 45,743 33,045 52,284 33,045 2012 8,804 9,638 8,804 9,638 2013 8,804 9,638 8,804 9,638 2014 8,804 9,638 8,804 9,638 2015 4,401 4,820 4,401 4,820 532,159 337,919 756,433 522,682

(1) The Company and its subsidiaries are subject to certain debt covenants established in the financing agreements. These covenants also include the maintenance of certain minimum financial ratios, calculated on an annual basis. The Company is in compliance with the debt covenants.

Guarantees

The financing is guaranteed by Bank Deposit Certificates – CDBs totaling R$ 19,024, fixed-income investments abroad, amounting to R$ 271,089, liens on financed machinery and equipment, letter of guarantee and promissory notes.

14 DEBENTURES

On February 2, 2004, the Company received an amount of R$ 203,054 arising from the second public debentures issue, approved at a meeting of the Board of Directors held on November 25, 2003, as shown below:

Annual Type of Outstanding Value at Financial Issue Date Issue Debentures Issue Date Charges 2006 2005

1st series 01/01/2004 Public 10,000 R$ 100,000 CDI + 0.9% 107,220 109,740

2nd series 01/01/2004 Public 10,000 R$ 100,000 CDI + 0.9% 107,221 112,439

214,441 222,179

LONG-TERM (199,934) (199,934)

SHORT-TERM 14,507 22,245

25 As from the Meeting of Lojas Americanas S.A. Debenture Holders held on October 5th, 2005, the debentures have the following characteristics:

• Form & type: simple, registered, subordinated and book-entry debentures, not convertible into shares; • Face value: the debentures will have a unit face value of R$ 10 (ten thousand Reais); • Guarantee: no guarantees; • Maturity: 1st and 2nd series will be amortized in three equal and consecutive annual installments, the first of which comes due on January 1, 2009; • Price, subscription and payment: the debentures were subscribed at their unit face value, plus remuneration on a pro rata basis from the issue date to the subscription date; • Financial index: the ratio of the consolidated EBITDA to the consolidated financial results for the previous 12 months may not be less than 2.0 ; • Remuneration: 1st and 2nd series will bear interest equal to the average daily overnight deposit rate in unrelated financial institutions, on a two hundred and fifty-two business day basis, published by CETIP (Clearinghouse for the Custody and Financial Settlement of Securities), plus an annual rate of 0.9%, paid semiannually and annually, respectively. • Disclosure: information of interest to debentures holders is published in the Official Gazette of the State of Rio de Janeiro (Diário Oficial do Estado do Rio de Janeiro) and Jornal Valor Econômic. • Limits and financial indices: in the case of default of the contractual clauses, the Fiduciary Agent shall call a General Meeting of the Debenture Holders to decide on the early maturity of the debentures. After the Meeting, the Fiduciary Agent shall declare the early expiration of all obligations attached to the debentures, unless Debenture Holders representing at least 75% of the debentures in circulation decide against early maturity. • Premiums: premiums of 0.25% of the unit face value of both debenture series are payable as from the last quarter of 2005, in the event of failure to comply, individually or collectively, with the financial limits and indexes established in the deed of issue, and a meeting of the Debenture Holders decides not to declare the early maturity of the debentures on each failure to comply with the indexes .

15 TAXES AND CONTRIBUTIONS (CURRENT)

Parent company Consolidated

2006 2005 2006 2005 State value-added tax on sales and services – ICMS 63,545 56,750 79,314 65,423

Tax for social security financing – COFINS 20,159 21,957 24,555 25,386 Social Integration Program - PIS 5,015 4,134 6,002 4,842 Education Allowance and Work Accident Insurance – SAT 6,996 7,344 6,996 9,362

Income tax and social contribution 11,735 6,759

Other 1,526 1,139 5,590 3,489

97,241 91,324 134,192 115,261

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16 LONG-TERM TAXES AND CONTRIBUTIONS

The Company is contesting in court the limit of 30% of taxable annual income on the offset of tax loss carryforwards, and provisionally obtained a preliminary injunction to offset 100% of the balance. The Company is recording a provision for the portion in excess of the 30% legal limit, to cover potential overturning of the injunction or an unfavorable outcome in the suit.

The Company filed a write of mandamus to ensure the right to use / offset in full PIS/COFINS (taxes on revenue) credits derived from operations necessary for the normal performance of its economic activities, without the limits established in article 3 of Law 10.833/03 and obtained authorization in respect of COFINS. A provision was recorded for amounts offset in excess of the legal limits, pending final judgment of the suit.

The Company and its subsidiaries are also applying for approval of credits offset against PIS and COFINS, and is questioning in court the legality of the collection of certain taxes, such as Workers’ Compensation Insurance (SAT) payable to the National Institute of Social Security (INSS), education allowance and the increase in the FGTS rate.

A provision has been recorded for unpaid amounts, based on a legal process, and is restated at the SELIC rate, as shown below:

Parent company Consolidated 2006 2005 2006 2005

Income tax and social contribution 91,738 64,052 94,741 67,055

Tax for Social Security financing – COFINS 21,838 85,200 25,961 90,693

Social Integration Program - PIS 10,417 1,902 12,504

Education Allowance and Work Accident Insurance – SAT 48,297 39,986 48,895 39,986

Other 1,547 34 2,655

161,873 201,202 171,533 212,893

The Company and its subsidiaries have enrolled in the special federal taxes and social security debt financing plans introduced by Law 10.637/02 and Law 10.684/03. The debts covered by this financing are PIS, COFINS, Education allowance and Work Accident Insurance – SAT payments and credits offset not approved by the Federal Revenue Agency. The debts instituted by Law 10.684/03 are being consolidated by the appropriate agencies, for future confirmation of enrollment in the financing program. The monthly installments are liquidated in accordance with legal timeframes.

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17 PROVISION FOR CONTINGENCIES

Parent company Consolidated 2006 2005 2006 2005

Tax 11,875 7,807 12,165 10,409

Labor 11,015 9,647 11,111 10,309

Civil 1,575 771 1,691 1,224

Contractual fines 13,500 25,800 13,500 25,800

Other 1,021 1,088 3,480 8,088

38,986 45,113 41,947 55,830

Long-term (29,948) (39,028) (32,493) (40,748)

Current 9,038 6,085 9,454 15,082

The Company and its subsidiaries are parties to lawsuits and administrative proceedings in courts and government agencies involving tax, labor, civil and other matters. Management has monitoring procedures of judicial and administrative actions conducted by their own legal department and external lawyers. When legally required, judicial deposits are made (R$37,817 and R$36,228 parent company as of December 31, 2006 and 2005 and R$47,442 and R$43,797 consolidated as of December 31, 2006 and 2005). These are not linked to provisions for contingencies recorded as of December 31, 2006 and 2005.

Based on the opinion of its legal advisers, on analyses of outstanding claims and, in labor cases, on prior experience relating to amounts claimed, Management set up a provision for an amount considered sufficient to cover potential losses in suits in progress.

The Company has other administrative/legal tax contingencies of approximately R$ 237,400 (R$ 169,525 in 2005) parent company and R$ 245.800 consolidated (R$ 176,860 in 2005). As the Company’s legal counsel, classified the chances of losses as possible, no provision was recorded for these contingencies.

As mentioned in Note 9, the Company set up a provision of R$ 13,500, as of December 31, 2006, to cover payment of a penalty for noncompliance with the targets established in the association agreement with Banco Itaú Holding Financeira S.A. This provision is evaluated in accordance with attainment of targets and adjusted as required.

The main claims are as follows:

STATE VALUE-ADDED TAX ON SALES AND SERVICES - ICMS

- Disallowance of tax credits recorded by the Company on operations with suppliers declared unfit by the State Treasury Office after the date of the commercial transaction. Approximate amount: R$ 24,850.

- Disallowance, for certain of the Company's establishments, of tax credits derived from restatement of ICMS credit balances determined between July 1992 and June 1997. This procedure was followed by all the establishments, but

28 was not challenged by the State Treasury in the majority of states. Favorable decisions have been given in cases where the tax procedure was questioned. Approximate amount: R$ 62,100.

- Disallowance of tax credits derived from the difference between the ICMS charged in accordance with the mark-up estimated by the state and the ICMS that would be due taking into account the mark-up actually used, in the commercialization of products subject to the tax substitution system. Approximate amount: R$36,700.

- Disallowance of tax credits recorded on goods entering the Distribution Centers (CDs) for use and subsequent transfer to the stores. On transfer to the stores, the CDs debit themselves for the ICMS. Approximate amount: R$8,600.

- Collection of ICMS on the import of an aircraft for leasing. Approximate amount: R$11,990.

TAX FOR SOCIAL SECURITY FINANCING - COFINS

- Disallowance of offsetting of Social Contribution on Billings - Finsocial against a COFINS payment. The Finsocial credits derived from overpayment of the tax. Approximate amount: R$30,100.

CORPORATE INCOME TAX AND SOCIAL CONTRIBUTION ON INCOME – IRPJ AND CSLL

- Disallowance of the deductibility of the portion of the cost of goods sold that originated from suppliers declared unfit by the Federal Revenue Agency after the date of the transaction with the Company. Approximate amount: R$33,400.

a) Changes in the Provision for Contingencies - Parent company:

Parent company

2005 Additions Reversals Utilization 2006

Tax 7,807 8,600 (4,532) 11,875

Labor 9,647 5,600 (4,232) 11,015

Civil 771 1,800 (996) 1,575

Contractual fines 25,800 (12,300) 13,500

Restructuring and Other 1,088 (67) 1,021

TOTAL 45,113 16,000 (12,300) (9,827) 38,986

In 2006, several states introduced tax amnesties by issuing laws offering considerable financial advantages in return for settlement of tax debts, even those classified as having remote or possible chances of success, in view of the savings on attorneys' fees and the cost of letters of guarantee.

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18 STOCKHOLDERS’ EQUITY

(a) Capital

Capital comprises 28,168,910,589 common registered book-entry shares and 47,245,526,785 preferred registered book-entry shares, as of December 31, 2006.

(b) Changes in capital stock

Number of book-entry shares, without par value

Common Preferred registered shares registered shares Total

As of December 31, 2004 25,775,235,072 42,182,518,198 67,957,753,270

Capital increase 221,684,341 390,027,414 611,711,755

As of December 31, 2005 25,996,919,413 42,572,545,612 68,569,465,025

Capital increase 2,171,991,176 4,672,981,173 6,844,972,349

As of December 31, 2006 28,168,910,589 47,245,526,785 75,414,437,374

Extraordinary and Special Stockholders' Meetings held on September 19, 2006 approved a proposal to amend the company's bylaws to:

- Attribute to the preferred and common shares of minority stockholders the right to be included in public offers of disposal of control, under the conditions laid down in article 254-A of Law 6.404/76, thereby guaranteeing a price equal to 100% of the amount paid for shares with voting rights held by the controlling block; and to

- Withdraw the right of the preferred shares to receive cash dividends 10% (ten percent) greater than those paid on the ordinary shares. The purpose of the amendments is to align the interests of all the stockholders of the companies.

The shares subscribed and paid up in the first half-year under the Stock Options Plan (note 19) are entitled to 100% of the dividends declared in the year, while shares subscribed and paid up in the second half-year are entitled to 50% of the dividends declared in the year.

30

(c) Treasury stock

In accordance with CVM Instructions No. 10/80 and No. 268/97, the Board of Directors approved, at a meeting held on June 4, 2003, the Company's new Share Repurchase Program aimed at keeping shares in treasury or subsequently canceling them. The program provides for the repurchase of up to 1,078,894,232 registered common book-entry shares, and 3,650,532,342 registered preferred book-entry shares.

The Share Repurchase Program has been extended every 365 (three hundred and sixty-five) days since its publication, in order for the Company to effectively reach the authorized repurchase level. As of December 31, 2006, the Company had already repurchased 745,676,514 registered common book-entry shares and 1,413,619,893 registered preferred book-entry shares.

As of December 31, 2006, the Company held common and preferred registered book-entry shares in treasury at an average cost per thousand shares of R$ 45.73 (R$ 35.42 in 2005) and R$ 36.08 (R$ 26.00 in 2005), respectively.

Changes in treasury shares:

Number of book-entry shares, without par value

Registered Registered Common Shares Preferred Shares Total Balance ( R$ )

As of December 31, 2004 537,140,091 949,294,652 1,486,434,743 39,769

Acquisition of shares 70,930,336 180,334,910 251,265,246 11,134

As of December 31, 2005 608,070,427 1,129,629,562 1,737,699,989 50,903

Acquisition of shares 137,606,087 283,990,331 421,596,418 34,203

As of December 31, 2006 745,676,514 1,413,619,893 2,159,296,407 85,106

Market value as of December 31, 2006 per thousand shares R$ 107.00 R$ 119.50

(d) Profit sharing

In accordance with the Company's bylaws, employees are entitled to an annual participation of up to 6% of net income, net of any accumulated losses; management's profit sharing scheme is based on criteria approved each year by the Board of Directors.

(e) Reserve for future investments

This reserve is based on capital budgets submitted for approval at the Stockholders' General Meeting and is intended to finance the Company's future investment plans.

31

(f) Dividends and Interest on Capital

An Extraordinary Meeting of the Board of Directors held on March 06, 2006 approved the payment of extraordinary dividends as from April 3, 2006, of a gross amount of R$60,000 (net amount of R$56,250), debited to the revenue reserve for future investments account in the Financial Statements as of December 31, 2005, R$35,000 in the form of extraordinary dividends and R$21,250 as interest on capital, already net of withholding income tax at the rate of 15% on the gross amount of R$25,000. The distribution of dividends per thousand shares is shown below:

Registered Registered preferred common shares shares

EXTRAORDINARY DIVIDENDS

Entitled to full dividends R$ 0.493173 R$ 0.542491

INTEREST ON CAPITAL

- GROSS

Entitled to full dividends R$ 0.352267 R$ 0.387494

- NET OF WITHHOLDING INCOME TAX

Entitled to full dividends R$ 0.299427 R$ 0.329370

(g) Interim dividends

An Extraordinary Meeting of the Board of Directors held on November 27, 2006 approved the payment of interim dividends of R$ 50,000 as from December 18, 2006, calculated on the income for the period ended September 30, 2006, at R$ 0.682454 per thousand registered common and preferred shares.

32

(h) Calculation of dividends and interest on capital (at year end)

According to Company bylaws, shareholders are entitled to a minimum mandatory dividend of 25% of net income for the year, calculated in accordance with Brazilian corporate law.

The calculation of dividends for the year is shown below:

2006 2005

Net income for the year 123,521 176,148

Statutory reserve ( 5% of net income for the year) (6,176) (8,807)

Dividend calculation base 117,345 167,341

Minimum mandatory dividend 29,336 44,250

Dividends in the form of interest on capital 18,000

Withholding income tax – IRRF on interest on capital (2,700)

15,300

Interim dividends 50,000 42,000

Total dividends paid 50,000 57,300

Dividends in excess of the minimum mandatory dividend 20,664 13,050

19 EMPLOYEES’ BENEFITS

The Company offers its executives a share option plan, The nature, conditions, amounts and prices of the plan are presented below, as required by CVM Resolution No. 371/00:

Share Option Plan

This plan provides for the subscription of common and preferred shares. Payment for the shares can be made in a lump sum or in installments, with own funds or funds derived from the net amount of the share of annual net income assigned to the buyers (officers). These shares guarantee the buyers the same rights as those held by the other shareholders. The unpaid installments as of December 31, 2006 amount to R$ 58,745 (R$ 29,050 in 2005) and are recorded in long-term assets; in accordance with contractual clauses, these amounts are monetarily restated and accrue interest of 6% p.a. The contracts contain repurchase clauses, which come into effect once the employment relationship is terminated. Presented below is a statement of the plans offered and the subscription prices adjusted in accordance with the contractual clauses.

33

Quantities in thousands of shares PLANS 2001 2003 2005 Total

Registered Registered Registered Registered Registered Registered Common Preferred Preferred Preferred Common Preferred Shares Shares Shares Shares Shares Shares

As of December 31, 2005 206,959 364,120 26,042 1,036,269 206,959 1,426,431

- Subscription (1,800) (1,028,269) (1,030,069)

- Cancellation (206,959) (364,120) (206,959) (364,120)

As of December 31, 2006 24,242 8,000 32,242

Subscription price R$ 19.01 R$ 39.54

According to contractual clauses, the 2001, 2003 and 2005 plans are valid until August 2, 2006, September 15, 2008, and September 13, 2010, respectively. The plans are cancelled at the end of the validity term.

20 FINANCIAL INSTRUMENTS

The Company uses financial instruments to hedge its assets and liabilities. The risks of these operations are managed through specific instruments in compliance with policies and limits previously discussed by Company committees. The main risk factors are listed below:

(a) Cash and banks, temporary financial investments, trade accounts receivable, other short-term assets and accounts payable

The book values are approximately the realizable values.

(b) Loans and financing

Loans and financing are subject to interest at normal market rates, as mentioned in Note 13. The book values of loans and financing are approximately the market values.

The exchange variation over loans and financing amounted R$46,421 (R$60,118 in 2005) parent company and R$50,016 (R$66,621 in 2005) consolidated, recorded as a credit in financial expenses.

(c) Exchange and interest rate risks

These risks refer to the effect of fluctuations in the Libor and exchange rates on foreign currency loans. The Company uses derivative operations as protection against these fluctuations, in order to avoid potential losses. As of December 31, 2006, the derivatives position was as follows:

34

• Swap

Swap positions maturing up to March 2010 amount to R$ 378,660 (R$ 267,776 in 2005) parent company and R$ 686,732 (R$ 549,911 in 2005) consolidated, with a differential payable of R$ 47,201 (R$ 15,876 in 2005), parent company and R$ 355,273 (R$ 91,323 in 2005) consolidated, recorded in the Loans and financing – working capital account. The principal swap operations with financial institutions are registered with the Clearing House for Custody and Financial Settlement of Securities (CETIP) and there are no significant differences between book and market values.

These operations generated a loss for the year of R$ 58,831 (R$ 29,338 in 2005) parent company and R$ 129,078 (R$ 104,785 in 2005) consolidated, recorded as financial expense.

(d) Credit risk

Credit risk is minimized by the fact that approximately 55% (43% - Consolidated) of the Company’s sales are paid in cash and the remainder with credit cards administered through third parties and by the jointly controlled company FAI – FINANCEIRA AMERICANAS ITAÚ S,A, CRÉDITO, FINANCIAMENTO E INVESTIMENTO. The Company has allowances for doubtful accounts in an amount management considers sufficient to cover possible losses.

21 INSURANCE COVERAGE

The Company holds insurance policies for inventories and fixed assets, as well as theft. The amounts are considered sufficient to cover possible losses. The coverage as of December 31, 2006 is shown below:

Insured assets Risk coverage Value of insurance - R$

Inventories, property and equipment Fire and miscellaneous risks 1,280,178 Inventories, property and equipment Loss of profit 249,674 Civil liability Up to 15,000 Cash Theft 500

35

22 NON-OPERATING INCOME (EXPENSE)

In 2006, the non-operating income (expense) consisted mainly of the capital gain on the change in the share interest in Americanas.Com.S.A. – Comércio Eletrônico (R$ 2,093), the additional cost in respect of the termination of the Commercial Partnership Agreement with Banco Fininvest S.A (R$ 24,712), and adjustments to provisions and other expenses.

In 2005, the non-operating income (expense) consisted mainly of: (i) capital gain of R$ 200,000 due to the change in percentage participation in the jointly-controlled subsidiary Vitória Participações S.A resulting from the Association Agreement with Banco Itaú Holding Financeira S.A.; (ii) the provision for penalties and other expenses related to the above-mentioned Association Agreement, in the amount of R$ 29,400; (iii) payment of penalties and provision for other expenses relating to the rescission of the Commercial Partnership Agreement entered in December 2003, with Unibanco – União de Bancos Brasileiros S.A. and Banco Fininvest S.A., amounting to R$ 51,774; (iv) adjustment of provisions and other expenses.

23 SUBSEQUENT EVENT

On January 24, 2007, Lojas Americanas S.A. entered into an agreement with Unibanco Empreendimentos e Participações S.A. for the acquisition of BWU Comércio e Entretenimento S.A. and signed a license agreement with Blockbuster International, Inc. for the use of the BLOCKBUSTER® trademark for a period of 20 years. BWU exploits the development and sub-franchising in Brazil of the rental and sale of DVDs, games and VHS tapes under the BLOCKBUSTER® trademark.

The strategic objective of this operation is to accelerate the Company's expansion process and the opportunity for growth by expanding the new products and services offered to customers. As a result of the transaction, 127 new stores (32 thousand m2) will be added to the Lojas Americanas chain, equivalent to an increase of 54% in the number of stores. The stores acquired are located in high movement areas, with access to classes A and B, and their layout and size are compatible with the format of the Americanas Express stores.

Additionally, the license to use the BLOCKBUSTER® trademark in Brazil for a period of 20 years will permit the continuity of the rental and sale of DVDs, games and VHS tapes, and the use of the BLOCKBUSTER® trademark in the sale in the stores of certain products, as previously authorized by the licensor.

The transaction cost was R$ 186.2 million, payable on May 24, 2007, subject to the normal adjustments made in this type of transaction, after accounting and tax due diligence on the balance sheet of the transfer of the operations from the seller to the purchaser.

The operation is subject to ratification by a Meeting of the Stockholders of Lojas Americanas, in accordance with article 256 of Law 6.404/76, and dissenting stockholders, if any, are assured of the right to withdraw, pursuant to §2 of article 256 , with repayment based on the equity value of the share.

The BLOCKBUSTER® chain of stores is the largest video rental chain in Brazil and has been operating in Brazil since 1995 through the company BWU. The company currently has around 330 thousand active customers and 1,200 employees.

36

24 OTHER INFORMATION

(a) The Company's headquarters are located at Rua Sacadura Cabral 102, Saúde, Rio de Janeiro-RJ, CEP 20.081-902. Lojas Americanas S.A. shares are traded on the São Paulo Stock Exchange (LAME3 – Registered Common Shares and LAME4 – Registered Preferred Shares).

(b) The subsidiary B2W – Companhia Global do Varejo will be listed in the New Market segment of the São Paulo Stock Exchange - BOVESPA, ensuring the highest level of corporate governance in Brazil. Shares of Submarino continue to be regularly traded on the São Paulo Stock Exchange – BOVESPA, under Trading Code SUBA3, in the New Market segment, pending registration of B2W as a publicly-held company with the Brazilian Securities Commission – CVM and approval of B2W application for listing in the New Market segment of the São Paulo Stock Exchange – BOVESPA. Management of the companies involved will advise the market in due course as to implementation of the new Business Code of B2W in the New Market segment, as well as all the measures required for implementation of the merger.

25 EXPLANATION ADDED FOR TRANSLATION INTO ENGLISH

The accompanying financial statements are presented in conformity with Brazilian accounting practices (Note 3). Certain accounting practices followed by the Company that conform to those accounting practices applied in Brazil may not conform to generally accepted accounting principles in other countries where these financial statements may be used.

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